Exhibit F
---------
==============================================================================
STOCKHOLDERS AGREEMENT
NORTEK HOLDINGS, INC.
Dated as of [ ], 2002
==============================================================================
TABLE OF CONTENTS
Page
ARTICLE I
RESTRICTIONS ON TRANSFER OF COMPANY STOCK...........................................................2
1.1 General Restriction on Transfer by Stockholders................................2
1.2 Permitted Transferees..........................................................2
ARTICLE II
RIGHTS OF MANAGEMENT TO SELL........................................................................5
2.1 Management Stockholders' Right to Sell.........................................5
2.2 Notice.........................................................................5
2.3 Payment........................................................................6
2.4 Termination of Right to Sell...................................................6
2.5 Postponement, etc..............................................................6
ARTICLE III
PURCHASES BY THE COMPANY............................................................................7
3.1 Right to Purchase Shares from Management Stockholders..........................7
3.2 Notice.........................................................................8
3.3 Payment........................................................................8
3.4 Postponement, etc..............................................................8
ARTICLE IV
PURCHASE PRICE......................................................................................9
4.1 Fair Market Value..............................................................9
(a) Appraisal.............................................................9
(b) Fair Market Value.....................................................9
(c) Notice to Stockholders...............................................10
(d) Withdrawal of Exercise Following Appraisal...........................10
4.2 Carrying Value................................................................10
4.3 Certain Defined Terms.........................................................11
(a) Cause................................................................11
(b) Good Reason..........................................................11
(c) Disability...........................................................12
ARTICLE V
PROHIBITION ON PURCHASES...........................................................................13
5.1 Prohibited Purchases..........................................................13
ARTICLE VI
SALES TO THIRD PARTIES.............................................................................15
6.1 General.......................................................................15
6.2 Intentionally Omitted.........................................................15
6.3 Agreements to Be Bound........................................................15
6.4 Involuntary Transfers.........................................................15
6.5 Tag and Drag Along Rights.....................................................16
(a) Tag-Along Rights......................................................16
(b) Drag-Along Rights.....................................................19
(c) Attorney Fees.........................................................23
ARTICLE VII
REGISTRATION RIGHTS................................................................................23
7.1 Registration Rights...........................................................23
ARTICLE VIII
CHARTER DOCUMENTS AND BOARD OF DIRECTORS...........................................................23
8.1 Charter Documents.............................................................23
8.2 Board of Directors............................................................23
ARTICLE IX
TERMINATION........................................................................................28
9.1 Cessation of Ownership of Company Stock.......................................28
9.2 Other Termination Events......................................................28
ARTICLE X
MISCELLANEOUS PROVISIONS...........................................................................29
10.1 Stock Certificate Legend......................................................29
10.2 Option Plan...................................................................29
10.3 New Management Stockholders...................................................29
10.4 Fee...........................................................................30
10.5 Certain Transactions..........................................................30
10.6 No Other Arrangements or Agreements...........................................30
10.7 Amendment and Modification....................................................31
10.8 Assignment....................................................................31
10.9 Recapitalizations, Exchanges, etc. Affecting the Company Stock................32
10.10 Transfer of Company Stock.....................................................32
10.11 Further Assurances............................................................33
10.12 Governing Law.................................................................33
10.13 Invalidity of Provision.......................................................33
10.14 Notices.......................................................................33
10.15 Headings; Execution in Counterparts...........................................34
10.16 Entire Agreement; Effect on Certain Other Agreements..........................34
10.17 Injunctive Relief.............................................................35
10.18 Attorneys' Fees...............................................................35
10.19 Third Party Beneficiaries.....................................................35
10.20 Sales to Competitors..........................................................35
10.21 Improper Transfer.............................................................36
10.22 Third Party Investors.........................................................36
10.23 Persons.......................................................................36
10.24 Options.......................................................................36
10.25 ▇▇▇▇▇▇▇.......................................................................36
10.26 Other Agreements..............................................................37
10.27 Company Stock.................................................................37
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of [ ], 2002, among Nortek
Holdings, Inc., a Delaware corporation (the "Company"),* ▇▇▇▇▇ Investment
Associates VI, L.P., a Delaware limited liability partnership ("KIA VI"), KEP
VI, LLC, a Delaware limited liability company ("KEP VI"),** Third Party
Investors (as defined in Section 10.21 herein) and the stockholders and
optionholders of the Company listed in the Schedule of Management Stockholders
attached hereto (such management stockholders and optionholders, together with
any persons who become parties to this Agreement pursuant to Sections 10.2 and
10.3 of this Agreement and each of their respective permitted transferees who
agree to be bound by the terms of this Agreement in accordance with Sections
1.2(b) and 6.3 hereof, are referred to herein, collectively, as the
"Management Stockholders"). Such Schedule shall be updated from time to time
to include each Management Stockholder who becomes a party to this Agreement
after the date hereof. KEP VI and KIA VI, together with their affiliates and
transferees, in each case, to the extent they own stock of the Company, are
hereinafter referred to collectively as the "▇▇▇▇▇ Group" and the ▇▇▇▇▇ Group,
the Third Party Investors and the Management Stockholders are hereinafter
referred to collectively as the "Stockholders".
WHEREAS, the Company, Nortek, Inc., a Delaware corporation and a
direct wholly owned subsidiary of the Company ("Nortek"), and K Holdings,
Inc., a Delaware corporation, entered into an Agreement and Plan of
Recapitalization dated as of June 20, 2002 (the "Recapitalization Agreement"),
pursuant to which the parties agreed, upon the terms and subject to the
conditions set forth therein, to consummate the Transactions (as defined
therein);
WHEREAS, after the consummation of the Transactions on the date
hereof (the "Closing"), the Company shall have (i) [ ] shares of class A
common stock, par value $1.00 per share, of the Company (the "Common Stock")
issued and outstanding, of which [ ] shares of Common Stock will be owned by
Third Party Investors and [ ] shares of Common Stock will owned by Management
Stockholders and (ii) [ ] shares of series B convertible preference stock, par
value $1.00 per share, of the Company (the "Series B Preference Stock," and,
together with the Common Stock, the "Company Stock") issued and outstanding,
of which [ ] shares will be owned by the ▇▇▇▇▇ Group; and
--------
* Since this Agreement will be executed at Closing, after the Holding
Company Merger has been completed, Nortek has not been included as a
party to this Agreement
** It is currently expected that, as permitted under the
Recapitalization Agree ment, K Holdings will assign its right to
acquire equity of the Company to these ▇▇▇▇▇ entities.
WHEREAS, the Stockholders believe it to be in their respective
best interests and in the best interests of the Company that they enter into
this Agreement providing for certain rights and restrictions with respect to
the shares of Company Stock owned by them or their permitted transferees.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER
OF COMPANY STOCK.
1.1 General Restriction on Transfer by Stockholders. (a) Prior to
the closing of a bona fide public offering pursuant to an effective
registration statement, other than a registration statement on Form S-4 or S-8
or any successor forms and other than a registration statement registering the
sale of shares of Common Stock only to employees of the Company (a
"Registration"), under the Securities Act of 1933 (the "Act"), filed after the
Closing that covers shares of Common Stock (an "IPO"), no shares of Company
Stock now or hereafter owned by any Stockholder or any interest therein may,
directly or indirectly, be sold, assigned, mortgaged, transferred, pledged,
hypothecated or otherwise disposed of or transferred (collectively
"Transferred"), except for (i) Transfers pursuant to Section 1.2 to the
applicable transferees specified therein (a "Permitted Transferee"), (ii)
sales of shares of Company Stock to the Company or to members of the ▇▇▇▇▇
Group, or to their designees pursuant to Article II or III or (iii) Transfers
by any member of the ▇▇▇▇▇ Group to any Person of shares of Company Stock,
provided that such Transfers shall comply with Article VI to the extent
expressly provided therein.
(b) The period of time from the date of this Agreement until the
consummation of an IPO shall hereinafter be referred to as the "Restricted
Period".
1.2 Permitted Transferees. (a) Subject to paragraph (b) of this
Section 1.2:
(i) Subject to Section 6.5(a), the members of the
▇▇▇▇▇ Group may Transfer any shares of Company Stock or any interest
therein or their rights to subscribe for the same to any of their
affiliates (as defined in Section 1.2(c));
(ii) any Management Stockholder may Transfer any
shares of Company Stock or any interest therein or his rights to
subscribe for the same, if any, (A) to a trust, partnership, limited
liability company or corporation the beneficiaries, partners, members
or stockholders of which are such Management Stockholder, his spouse,
parents, members of his immediate family or his lineal descendants,
provided that the foregoing shall be subject to the limitation that
the Company's Board of Directors (the "Board") acting in good faith
does not conclude that such Transfer together with all other
Transfers made after the Closing could result in or create a
"significant risk" that the Company may become subject to, or after
any Registration will continue by reason thereof to be subject to,
the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the registration
requirements of the Investment Company Act of 1940 (the "40 Act") and
provided, further that a Management Stockholder shall give advance
notice to the Company in the event of any Transfer to any permitted
transferee set forth in this clause (A), (B) in case of his death, by
will, by transfer in trust or by the laws of intestate succession to
executors, trustees, administrators, testamentary trustees, legatees
or beneficiaries, or (C) with the prior written consent of the Board
and the ▇▇▇▇▇ Group, to any transferee; and
(iii) any Third Party Investor may Transfer any
shares of Company Stock or any interest therein or its rights to
subscribe for the same to any of its affiliates (as defined in
Section 1.2(c));
In addition to the foregoing, any transferee of a Stockholder described above
may Transfer shares of Company Stock back to such Stockholder or to another
Permitted Transferee of such Stockholder. For the purposes of this Section
1.2, a "significant risk", as referred to above, shall be deemed to arise when
the number of "holders of record" (as determined in accordance with the
Exchange Act and the rules and regulations thereunder or the registration
requirements of the 40 Act) is greater than 80% of the number of "holders of
record" that would cause the application or continued application of the
informational requirements of the Exchange Act under the then existing
circumstances.
(b) Any Transfer of shares of Company Stock made pursuant to
paragraph (a) of this Section 1.2 to a Permitted Transferee shall be permitted
and shall be effective only if such Permitted Transferee shall agree in
writing to be bound by the terms and conditions of this Agreement in the same
manner and capacity as its transferor, unless such Permitted Transferee is
already a Stockholder, pursuant to an instrument of assumption reasonably
satisfactory in form and substance to the Company and the ▇▇▇▇▇ Group.
(c) An "affiliate" of, or a person "affiliated" with, a specified
person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the person specified. In addition, in the case of any member of the
▇▇▇▇▇ Group, the term "affiliate" shall be deemed to include, without
limitation, (1) any partner of such member of the ▇▇▇▇▇ Group or (2) any
limited partner of any blind investment fund organized by or at the direction
of the ▇▇▇▇▇ Group (collectively, the "▇▇▇▇▇ Funds") or (3) any director,
officer, partner or employee of ▇▇▇▇▇ & Company, L.P. ("▇▇▇▇▇") or any of its
affiliates (excluding any limited partner of the ▇▇▇▇▇ Funds), any individual
retirement account of any such partner, director, officer or employee, any
family member of any such partner, director, officer or employee, or any trust
or family partnership for the benefit of any such partner, director, officer
or employee or family member thereof. In the case of the Third Party
Investors, affiliate shall be deemed to include any partner or member of such
Person or any director, officer or employee of such Person, any individual
retirement account of any such partner, director, officer or employee, any
family member of any such partner, director, officer or employee or any trust
or family partnership for the benefit of any such partner, director, officer
or employee or family member thereof. For purposes of Section 6.5(a) hereof,
Permitted Transferees shall exclude (i) any Person specified in clause (2)
above (other than any such person who is also described in clause (3) above),
except with respect to a Transfer for value involving a liquidation of a ▇▇▇▇▇
Fund or a redemption, in whole or in part, of a limited partner's interest in
a ▇▇▇▇▇ Fund, (ii) any ▇▇▇▇▇ Fund other than KIA VI or KEP VI and (iii) the
Company or any of its subsidiaries.
(d) Any action to be taken under this Agreement by members of the
▇▇▇▇▇ Group may be taken on their behalf by the members of the ▇▇▇▇▇ Group
holding a majority of the Company Stock held by the ▇▇▇▇▇ Group in the
aggregate or by such other person as is designated by such majority holders to
act on behalf of the ▇▇▇▇▇ Group.
ARTICLE II
RIGHTS OF MANAGEMENT TO SELL
2.1 Management Stockholders' Right to Sell. Subject to the
provisions of this Article II and Article V, each Management Stockholder
(other than the persons set forth on Exhibit B hereto) shall have the right to
sell to the Company, and the Company shall have the obligation to purchase
(or, in the event that such purchase is not made by the Company, members of
the ▇▇▇▇▇ Group (or their designee(s), which designees shall become parties
hereto in accordance with the terms hereof) shall have the option, but not the
obligation, within 10 days of such failure to purchase by the Company, to
purchase) from such Management Stockholder, all, but not less than all, of
such Management Stockholder's shares of Company Stock:
(a) at the fair market value of such shares, as determined
pursuant to Section 4.1 ("Fair Market Value") if the employment of such
Management Stockholder with the Company and all subsidiaries thereof is
terminated as a result of (i) the retirement of such Management Stockholder
upon or after reaching the age of 65 or, if different, the Company's normal
retirement age ("Retirement"), (ii) the death or Disability (as defined in
Section 4.3) of such Management Stockholder, (iii) the termination by the
Company of such employment of such Management Stockholder without Cause (as
defined in Section 4.3), or (iv) the resignation of such Management
Stockholder for Good Reason (as defined in Section 4.3); and
(b) at the lesser of (i) the Fair Market Value of such shares, and
(ii) the Carrying Value (as defined in Section 4.2) of such shares if such
Management Stockholder's employment with the Company and all subsidiaries
thereof is terminated as a result of the resignation of such Management
Stockholder without Good Reason; provided, however that no Management
Stockholder shall have the right to sell such Management Stockholder's shares
to the Company in the circumstances specified in this clause (b) unless such
Management Stockholder is party to an employment agreement with the Company
that expressly provides for the right to sell such shares to the Company in
such circumstances.
2.2 Notice. If any Management Stockholder intends to sell shares
of Company Stock pursuant to Section 2.1, he (or his estate, as the case may
be) shall give the Company and the ▇▇▇▇▇ Group notice of such intention not
more than 30 days or, in the case of a termination under clause (ii) of
Section 2.1(a), 90 days, after the occurrence of the event giving rise to such
Management Stockholder's right to sell his shares of Company Stock and shall
therein specify the number of shares of Company Stock such Management
Stockholder owns and, subject to Section 2.3, is selling to the Company.
2.3 Payment. (a) Subject to Article V and Section 2.5, payment for
shares of Company Stock sold by a Management Stockholder pursuant to Section
2.1 shall be made on the date that is the 15th business day following the date
of the determination of Fair Market Value pursuant to Section 4.1 or the
determination of Carrying Value pursuant to Section 4.2, as applicable.
(b) Any payments based on Fair Market Value required to be made by
the Company under this Section 2.3 shall accrue interest at 6% simple interest
per annum from the date of the exercise of the right to sell set forth in this
Article II (or in the case of shares acquired upon the exercise of employee
stock options, which shares have been held for less than six months from the
exercise of such options and are sold pursuant to clause (i), (iii) or (iv) of
Section 2.1(a) (the "Delayed Sale Shares"), from the six-month anniversary of
such exercise of such options (such date, the "Delayed Sale Share
Anniversary")) to the date the Company (or the ▇▇▇▇▇ Group or their
designee(s)) makes such payments.
2.4 Termination of Right to Sell. A Management Stockholder's right
to sell to the Company and the Company's obligation to purchase such
Management Stockholder's shares of Company Stock pursuant to Section 2.1 shall
terminate on the closing of an IPO.
2.5 Postponement, etc. The date of payment and closing of any
purchase and sale under this Article II may be postponed to the extent
necessary to permit such purchase and sale under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended, and the regulations
promulgated thereunder (the "HSR Act"). No party shall be required to
consummate any purchase and sale under this Article II until such time as such
transaction would not cause such party to violate applicable law, other than
violations which would not have a direct or indirect material adverse effect
on such party. Notwithstanding anything to the contrary in this Article II, in
no event shall any sale of Delayed Sale Shares occur prior to the Delayed Sale
Share Anniversary; provided, that in the event that Delayed Sale Shares are to
be sold, then (x) the Company (or the members of the ▇▇▇▇▇ Group, or their
designee(s), which designees shall become parties hereto in accordance with
the terms hereof), as the case may be) will, at its option, either delay the
purchase of all shares held by such Management Stockholder or delay only the
purchase of the Delayed Sale Shares, until a date that shall not be earlier
than the Delayed Sale Share Anniversary and (y) if pursuant to the foregoing
clause (x) the purchase of all shares held by such Management Stockholder is
delayed, then notwithstanding Section 2.3(b) above, no interest shall accrue
prior to the Delayed Sale Share Anniversary with respect to any shares held by
such Management Stockholder.
ARTICLE III
PURCHASES BY THE COMPANY
3.1 Right to Purchase Shares from Management Stockholders. Subject
to all provisions of this Article III, the Company shall have the right to
purchase (and, if the Company does not exercise such right by giving notice
within the 45-day period referred to in Section 3.2, the members of the ▇▇▇▇▇
Group (or their designee(s), which designees shall become parties hereto in
accordance with the terms hereof) shall have the right by giving notice not
later than the end of the succeeding 10-day period to purchase) from a
Management Stockholder (other than the persons set forth on Exhibit B hereto),
and such Management Stockholder shall have the obligation to sell to the
Company (or the members of the ▇▇▇▇▇ Group or their designee(s) if such right
is exercised by the ▇▇▇▇▇ Group or their designee(s)), all, but not less than
all, of such Management Stockholder's shares of Company Stock:
(a) at the Fair Market Value of such shares if such Management
Stockholder's employment with the Company and all subsidiaries thereof is
terminated as a result of (i) the termination by the Company of such
employment without Cause, (ii) the resignation of such Management Stockholder
for Good Reason, (iii) the Retirement of such Management Stockholder, or (iv)
the death or Disability of such Management Stockholder;
(b) at the lesser of (i) the Fair Market Value of such shares, and
(ii) the Carrying Value of such shares if such Management Stockholder's
employment with the Company and all subsidiaries thereof is terminated as a
result of the resignation of such Management Stockholder without Good Reason;
and
(c) at the lesser of the Fair Market Value and Carrying Value of
such shares, if such Management Stockholder's employment with the Company and
all subsidiaries thereof is terminated as a result of the termination by the
Company of such employment with Cause.
3.2 Notice. If the Company desires to purchase shares of Company
Stock from a Management Stockholder pursuant to Section 3.1, it shall notify
such Management Stockholder (or his estate, as the case may be) not more than
45 days after the occurrence of the event giving rise to the Company's right
to acquire such Management Stockholder's shares of Company Stock. If the
Company does not deliver such notice within such 45-day period and the members
of the ▇▇▇▇▇ Group (or their designee(s)) desires to purchase such shares,
then the members of the ▇▇▇▇▇ Group (or their designee(s)) shall notify such
Management Stockholder (or his estate, as the case may be) not later than the
end of the succeeding 10-day period.
3.3 Payment. (a) Subject to Section 3.4 and Article V, payment for
shares of Company Stock purchased pursuant to Section 3.1 shall be made on the
date that is the 15th business day following the date of the determination of
Fair Market Value pursuant to Section 4.1 or the determination of Carrying
Value pursuant to Section 4.2, as applicable.
(b) Any payments based on Fair Market Value required to be made by
the Company under this Section 3.3 shall accrue interest at 6% simple interest
per annum on the amounts not paid from the date of the exercise of the right
to purchase set forth in this Article III (or in the case of shares acquired
upon the exercise of employee stock options, which shares have been held for
less than six months from the exercise of such options and are purchased
pursuant to clause (i), (ii) or (iii) of Section 3.1(a) (the "Delayed Purchase
Shares"), from the six-month anniversary of such exercise of such options
(such date, the "Delayed Purchase Share Anniversary")) to the date the Company
(or the members of the ▇▇▇▇▇ Group or their designee(s)) makes such payments.
3.4 Postponement, etc. The date of payment and closing of any
purchase and sale under this Article III may be postponed to the extent
necessary to permit such purchase and sale under the HSR Act. No party shall
be required to consummate any purchase and sale under this Article III until
such time as such transaction would not cause such party to violate applicable
law, other than violations which would not have a direct or indirect material
adverse effect on such party. Notwithstanding anything to the contrary in this
Article III, in no event shall any purchase of Delayed Purchase Shares occur
prior to the Delayed Purchase Share Anniversary; provided, that in the event
that Delayed Purchase Shares are to be purchased, then (x) the Company (or the
members of the ▇▇▇▇▇ Group or their designee(s)), as the case may be) will, at
its option, either delay the purchase of all shares held by such Management
Stockholder or delay only the purchase of the Delayed Purchase Shares, until a
date that shall not be earlier than the Delayed Purchase Share Anniversary and
(y) if pursuant to the foregoing clause (x) the purchase of all shares held by
such Management Stockholder is delayed, then notwithstanding Section 3.3(b)
above, no interest shall accrue prior to the Delayed Purchase Share
Anniversary with respect to any shares held by such Management Stockholder.
ARTICLE IV
PURCHASE PRICE
4.1 Fair Market Value.
(a) Appraisal. The Company shall, at the request of the ▇▇▇▇▇
Group, engage, to the extent practicable, on an annual basis or otherwise from
time to time as required, an independent valuation consultant or appraiser of
recognized national standing (an "Appraiser") satisfactory to the ▇▇▇▇▇ Group
and the Company (it being agreed that Houlihan, Lokey, ▇▇▇▇▇▇ & Zukin, Inc. is
satisfactory to the ▇▇▇▇▇ Group and the Company) to appraise the Fair Market
Value of the shares of Company Stock as of the last day of the fiscal year
then most recently ended or as of any more recent date (the "Appraisal Date")
and to prepare and deliver a report to the Company describing the results of
such appraisal (the "Appraisal").
(b) Fair Market Value. For the purposes of this Agreement, the
"Fair Market Value" of any share of Company Stock being purchased by or sold
to the Company, the ▇▇▇▇▇ Group or their respective designees, pursuant to
this Agreement shall be the fair market value of the entire Company Stock
equity interest of the Company taken as a whole, divided by the number of
outstanding shares of Company Stock, all calculated on a fully diluted basis,
without additional premiums for control or discounts for minority interests or
restrictions on transfer, and shall be determined by Appraisal as of the
applicable date of termination of employment with the Company (or in the case
of Delayed Sale Shares or Delayed Purchase Shares, on the last day of the
month in which the Delayed Sale Share Anniversary or the Delayed Purchase
Share Anniversary occurs) or the date of transfer to an Involuntary Transferee
(as defined in Section 6.4) (each of such dates, a "Determination Date"),
which Appraisal the Company shall have caused to have been undertaken, in
accordance with Section 4.1(a), promptly but no later than 30 days following
(i) the date of receipt by the Company of the notice described in Section 2.2
(in the case of purchases of Company Stock pursuant to Article II), (ii) the
date on which the Company gives the notice described in Section 3.2 (in the
case of purchases by the Company of Company Stock pursuant to Article III) or
the date on which the ▇▇▇▇▇ Group gives the notice described in Section 3.1
(in the case of purchases of Company Stock by the members of the ▇▇▇▇▇ Group
(or their designees) pursuant to Section 3.2) and (iii) the date of receipt by
the Company of the Notice described in Section 6.4 or the time by which the
▇▇▇▇▇ Group have to exercise their rights under Section 6.4 (in each case, the
case of purchases of Company Stock pursuant to Section 6.4) and
notwithstanding the foregoing, (iv)(a) the Delayed Sale Share Anniversary, in
the case of Delayed Sale Shares or (b) the Delayed Purchase Share Anniversary,
in the case of Delayed Purchase Shares; provided, however, that the Fair
Market Value will be determined as of the most recent existing Appraisal
unless (i) in the Company's judgment there has been a material change in the
Company, its operations or its value since such existing Appraisal or the
Board determines that a new appraisal is advisable, in which case the Company
may, in its sole discretion, order an additional Appraisal or (ii) a
determination of Fair Market Value is being made with respect to (x) Delayed
Sale Shares or Delayed Purchase Shares or (y) shares acquired upon the
exercise of employee stock options which shares have been held for at least
six months from the exercise of such options and the most recent existing
Appraisal occurred during the first six months that such shares were held,
then the Company shall order an additional Appraisal under Section 4.1(a) for
the purpose of determining the Fair Market Value of such shares; provided
further, that, until the one year anniversary of the date hereof, the Fair
Market Value shall be equal to the Redemption Price (as defined in the
Recapitalization Agreement) and no such Appraisal need be undertaken.
(c) Notice to Stockholders. After notice has been given pursuant
to Section 2.2, 3.2 or 6.4, the Company shall promptly deliver a copy of the
letter as to value included with the most recent existing Appraisal or any
Appraisal thereafter received, as the case may be, to the ▇▇▇▇▇ Group and to
each Stockholder whose Company Stock is to be purchased pursuant to Section
2.1, 2.6, 3.1, 3.5 or 6.4.
(d) Withdrawal of Exercise Following Appraisal. Any party to this
Agreement who has exercised its option either to purchase or sell shares of
Company Stock, pursuant to Article II or Article III, may withdraw its notice
or demand to purchase or sell such shares within 10 business days following
the receipt of the letter referred to in Section 4.1(c) or the determination
of the Fair Market Value as set forth in Section 4.1(b).
4.2 Carrying Value. For the purposes of this Agreement, "Carrying
Value" of any share of Company Stock being purchased by the Company shall be
equal to the price paid by the selling Management Stockholder for any such
share ("Cost"), less the amount of dividends paid to such Management
Stockholder in respect of any such share. Notwithstanding anything to the
contrary herein, (i) in the case of any share of Common Stock that was issued
in exchange for any share of Series B Preference Stock outstanding prior to
the Closing pursuant to the Share Exchange (as defined in the Recapitalization
Agreement), Cost shall be deemed to be the Redemption Price, and the Carrying
Value shall be calculated as set forth above commencing from the date of the
Closing through the date of purchase by the Company pursuant to Article II or
III and (ii) in the case of any share of Common Stock that was issued upon the
exercise of any stock option issued prior to the Closing or issued in exchange
for option issued prior to the Closing ("Pre-existing Option"), Cost shall be
deemed to be the Redemption Price and the Carrying Value shall be calculated
as set forth above.
4.3 Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings ascribed to them below (which meanings
shall be independent of and unaffected by the meanings of similar terms used
in any employment contracts between the Company and Management Stockholders,
in the event such latter meanings differ from those following):
(a) Cause. With respect to any Management Stockholder who is party
to an employment agreement with the Company, the term "Cause", if defined in
such employment agreement, shall have the meaning set forth therein. For all
other purposes, the term "Cause" used in connection with a termination of
employment of a Management Stockholder shall mean a termination of such
Management Stockholder's employment by the Company or any of its subsidiaries
due to (i) the continued willful failure, after reasonable advance written
notice specifying details of such failure, by such Management Stockholder
substantially to perform his duties with the Company or any of its
subsidiaries (other than any such failure resulting from incapacity due to
reasonably documented physical or mental illness), or (ii) the engaging by
such Management Stockholder in fraudulent, willful or bad faith conduct that
causes, or in the good faith judgment of the Board may cause, harm (financial
or otherwise) material to the Company or any of its subsidiaries or harm
material to the conduct of such Management Stockholder's employment,
including, without limitation, the improper or unlawful disclosure of material
secret, proprietary or confidential information of the Company or any of its
subsidiaries.
(b) Good Reason. With respect to any Management Stockholder who is
party to an employment agreement with the Company, the term "Good Reason", if
defined in such employment agreement, shall have the meaning set forth
therein. For all other purposes, a termination of a Management Stockholder's
employment with the Company or any of its subsidiaries shall be for "Good
Reason" if such Management Stockholder voluntarily terminates his employment
with the Company or any of its subsidiaries as a result of either of the
following:
(i) without the Management Stockholder's prior
consent, a material reduction by the Company or any of its
subsidiaries in his current salary, other than any such reduction
which is part of a general salary reduction or other concessionary
arrangement affecting all employees or affecting the group of
employees of which the Management Stockholder is a member; or
(ii) the taking of any action by the Company or any
of its subsidiaries that would substantially diminish the aggregate
value of the benefits provided him under the Company's or any such
subsidiary's medical, health, accident, disability, life insurance,
thrift and retirement plans in which he was participating on the date
of his execution of this Agreement, other than any such reduction
which is (A) required by law, (B) implemented in connection with a
general concessionary arrangement affecting most employees or
affecting substantially the entire group of employees of which the
Management Stockholder is a member, (C) generally applicable to all
beneficiaries of such plans or (D) a result of a decrease in the
value of the Company or its equity; or
(iii) a substantial and material reduction in his
then current duties, authority or responsibilities.
(c) Disability. With respect to any Management Stockholder who is
party to an employment agreement with the Company, the term "Disability", if
defined in such employment agreement, shall have the meaning set forth
therein. For all other purposes, the termination of the employment of any
Management Stockholder by the Company or any of its subsidiaries shall be
deemed to be by reason of a "Disability" if, as a result of such Management
Stockholder's incapacity due to reasonably documented physical or mental
illness, such Management Stockholder shall have been unable for more than six
months within any 12 month period to perform his duties with the Company or
any of its subsidiaries on a full time basis and within 30 days after written
notice of termination has been given to such Management Stockholder, such
Management Stockholder shall not have returned to the full time performance of
his duties. The date of termination in the case of a termination for
"Disability" shall be the last day of the aforementioned 30- day period.
ARTICLE V
PROHIBITION ON PURCHASES
5.1 Prohibited Purchases. Notwithstanding anything to the contrary
herein, the Company shall not be obligated to purchase any shares of Company
Stock from a Management Stockholder pursuant to Section 2.1 and shall not
exercise any right to purchase shares from Management Stockholders pursuant to
Section 3.1, in each case, to the extent (i) the Company is prohibited from
purchasing such shares (or incurring debt to finance the purchase of such
shares), or the Company is unable to obtain funds to pay for such shares from
a subsidiary of the Company, in any case by reason of any debt instruments,
including, but not limited to, the Nortek Indentures, the Bridge Facility and
the Bank Facility (each as defined below) or other agreements (collectively,
the "Agreements") entered into by the Company or any of its subsidiaries or by
applicable law, (ii) an event of default under any Agreement has occurred and
is continuing or a condition exists which would, with notice or lapse of time
or both, result in an event of default under any Agreement or (iii) the
purchase of such shares (including the incurrence of any debt which in the
judgment of the Board is necessary to finance such purchase) or the
distribution of funds to the Company by a subsidiary thereof to pay for such
purchase (A) could in the judgment of the Board result in the occurrence of an
event of default under any Agreement or create a condition which would or
might, with notice or lapse of time or both, result in an event of default
under any Agreement, (B) would, in the judgment of the Board, be imprudent in
view of the financial condition (present or projected) of the Company and its
subsidiaries, taken as a whole, or the anticipated impact of the purchase (or
of the obtaining of funds to permit the purchase) of such shares on the
Company's or any of its subsidiaries' ability to meet their respective
obligations, including under any Agreement, or to satisfy and make their
planned capital and other expenditures and projections or (C) could, in the
judgment of the Board, constitute a fraudulent conveyance or transfer by the
Company or a subsidiary thereof or render the Company or a subsidiary thereof
insolvent under applicable law or violate limitations in applicable corporate
law on repurchases of stock or payment of dividends or distributions. If
shares of Company Stock which the Company has the right or obligation to
purchase on any date exceed the total amount permitted to be purchased on such
date pursuant to the preceding sentence (the "Maximum Amount"), the Company
shall purchase on such date only that number of shares of Company Stock up to
the Maximum Amount (and shall not be required to purchase more than the
Maximum Amount) in such amounts as the Board shall in good faith determine,
applying the following order of priority:
(a) first, the shares of Company Stock of all Management
Stockholders whose shares of Company Stock are being purchased by the Company
by reason of termination of employment due to death or Disability up to the
Maximum Amount and, to the extent that the number of shares of Company Stock
that the Company is obligated to purchase from such Management Stockholders in
the aggregate exceeds the Maximum Amount, such shares of Company Stock, up to
the Maximum Amount, pro rata among such Management Stockholders on the basis
of the number of shares of Company Stock held by each of such Management
Stockholders that the Company is obligated or has the right to purchase;
(b) second, to the extent that the Maximum Amount is in excess of
the amount the Company purchases pursuant to clause (a) above, the shares of
Company Stock of all Management Stockholders whose shares of Company Stock are
being purchased by the Company by reason of termination of employment without
Cause or due to Retirement or resignation for Good Reason up to the Maximum
Amount and, to the extent that the number of shares of Company Stock that the
Company is obligated to purchase from such Management Stockholders in the
aggregate exceeds the Maximum Amount, such shares of Company Stock, up to the
Maximum Amount, pro rata among such Management Stockholders on the basis of
the number of shares of Company Stock held by each of such Management
Stockholders that the Company is obligated or has the right to purchase; and
(c) third, to the extent the Maximum Amount is in excess of the
amounts the Company purchases pursuant to clauses (a) and (b) above, the
shares of Company Stock of all other Management Stockholders whose shares of
Company Stock are being purchased by the Company up to the Maximum Amount and,
to the extent that the number of shares of Company Stock that the Company is
obligated to purchase from such Management Stockholders in the aggregate
exceeds the Maximum Amount, the shares of Company Stock, up to the Maximum
Amount, of such Management Stockholders in such order of priority and in such
amounts as the Board in its sole discretion shall in good faith determine to
be appropriate under the circumstances.
For purposes of this Agreement, (x) "Nortek Indentures" shall mean the
indentures related to the following notes of Nortek: (1) 8 7/8% senior notes
due August 1, 2008; (2) 9 1/8% senior notes due September 1, 2007; (3) 9 1/4%
senior notes due March 15, 2007; and (4) 9 1/8% senior subordinated notes due
June 15, 2011 and (y) the "Bridge Facility" shall mean the bridge facility to
be provided pursuant to the commitment letter, dated as of June 20, 2002, by
and among ▇▇▇▇▇, UBS AG, Stamford Branch and UBS Warburg LLC. The "Bank
Facility" shall mean the bank facility to be provided pursuant to the
commitment letter, dated as of May 31, 2002 by and among Nortek, Fleet Capital
Corporation and Fleet Securities, Inc.
Notwithstanding anything to the contrary contained in this
Agreement, if the Company is unable to make any payment when due to any
Management Stockholder under this Agreement by reason of this Article V, the
Company shall make such payment at the earliest practicable date permitted
under this Article V and any such payment shall accrue simple interest (or if
such payment is accruing interest at such time, shall continue to accrue
interest) at 6% per annum from the date such payment is due and owing to the
date such payment is made; provided, however, that such interest shall be
reduced by the amount of any interest otherwise accruing on such payment by
the Company by reason of the definition of "Carrying Value" set forth in
Section 4.2. All payments of interest accrued hereunder shall be paid only at
the date of payment by the Company for the shares of Company Stock being
purchased.
ARTICLE VI
SALES TO THIRD PARTIES
6.1 General. An "Excluded Transaction" shall mean any Transfer
pursuant to an IPO.
6.2 Intentionally Omitted.
6.3 Agreements to Be Bound. Notwithstanding anything contained in
this Section 6, any Transfer (other than in connection with a transaction
which constitutes a Change in Control (as defined herein)) to a third party or
any Involuntary Transfer (as defined in Section 6.4) to an Involuntary
Transferee (as defined in Section 6.4) shall be permitted under the terms of
this Agreement only if such third party or Involuntary Transferee, as the case
may be, shall agree in writing to be bound by the terms and conditions of this
Agreement in the same manner and capacity as its transferor pursuant to an
instrument of assumption reasonably satisfactory in form and substance to the
Company; it being understood that any transferee of a member of the ▇▇▇▇▇
Group shall constitute a member of the ▇▇▇▇▇ Group for all purposes of this
Agreement, including Section 1.2(d) hereof.
6.4 Involuntary Transfers. In the case of any transfer of title or
beneficial ownership of shares of Company Stock, other than an Excluded
Transfer, upon default, foreclosure, forfeit, divorce, court order, or
otherwise than by a voluntary decision on the part of a Stockholder (an
"Involuntary Transfer"), the Company shall have the right to purchase such
shares pursuant to this Section 6.4 or, if the Company fails to exercise such
right, the ▇▇▇▇▇ Group (or its designees, which designees shall become parties
hereto in accordance with the terms hereof) shall have such right. Upon the
Involuntary Transfer of any shares of Company Stock, such Stockholder shall
promptly (but in no event later than two days after such Involuntary Transfer)
furnish written notice (the "Notice") to the Company and the ▇▇▇▇▇ Group
indicating that the Involuntary Transfer has occurred, specifying the name of
the person to whom such shares have been transferred (the "Involuntary
Transferee") and giving a detailed description of the circumstances giving
rise to, and stating the legal basis for, the Involuntary Transfer. Upon the
receipt of the Notice, and for 30 days thereafter, the Company (or its
designee(s)) shall have the right (and in the event the Company fails to
exercise such right within such 30 day period then, until the later of (i)
five days from the end of such 30 day period and (ii) 10 days from the day the
▇▇▇▇▇ Group receives notification from the Company that it is declining to
exercise such right, the ▇▇▇▇▇ Group (and its designee(s)) shall have the
right) to purchase, and the Involuntary Transferee shall have the obligation
to sell, all, but not less than all, of the shares of Company Stock acquired
by the Involuntary Transferee for a purchase price equal to (subject to the
following paragraph) the lesser of (i) the Fair Market Value of such shares of
Company Stock on the date of transfer to the Involuntary Transferee and (ii)
the amount of the indebtedness or other liability that gave rise to the
Involuntary Transfer plus the excess, if any, of the Carrying Value of such
shares of Company Stock over the amount of such indebtedness or other
liability that gave rise to the Involuntary Transfer.
Notwithstanding the foregoing, the Board may, for good cause shown
by the Stockholder who made the Involuntary Transfer, determine that payment
of a purchase price equal to the Fair Market Value of such shares of Company
Stock on the date of transfer to the Involuntary Transferee would be
appropriate under the circumstances, and direct that payment be made in such
amount.
6.5 Tag and Drag Along Rights.
(a) Tag-Along Rights. None of the members of the ▇▇▇▇▇ Group
shall, in any one transaction or any series of related transactions, Transfer
for value any shares of Company Stock in an amount which when taken together
with all previous (or substantially simultaneous) Transfers by all of the
members of the ▇▇▇▇▇ Group would exceed 5% of the Company Stock held by all
such members of the ▇▇▇▇▇ Group at the time of the transaction in question
(which in the case of a series of related transactions is the most current
transaction in such series), except pursuant to an Excluded Transaction, a
Transfer to a Permitted Transferee (as limited by Section 1.2(c)) or pursuant
to Section 6.5(b), to the Company or any of its subsidiaries or to any third
party or parties (a "Third Party"), unless the Management Stockholders, the
Third Party Investors, and their respective Permitted Transferees
(collectively, the "Offerees"), are offered the right, at the option of each
Offeree, to include in such Transfer to the Third Party such number of shares
of Company Stock owned by each such Offeree as determined in accordance with
this Section 6.5(a). If any member of the ▇▇▇▇▇ Group receives from a Third
Party a bona fide offer or offers to Transfer, or proposes to Transfer to a
Third Party, shares of its or their Company Stock, in excess of such 5%
threshold, such member (the "Transferor") shall give written notice (the
"Tag-Along Notice") to each of the Offerees, setting forth the consideration
per share to be paid by such Third Party and the other material terms and
conditions of such transaction. The Tag-Along Notice shall offer the Offerees
the opportunity to participate in the proposed Transfer of shares to the Third
Party according to the terms and conditions of this Section 6.5(a) and for the
same type of consideration and for an amount of consideration per share not
less than that offered to the Transferor by the Third Party and on terms and
conditions (other than, in the case of members of the ▇▇▇▇▇ Group, any
management, advisory or transaction fees payable to them or their affiliates)
no less favorable to such Offerees than the terms and conditions offered to
the Transferor by the Third Party. At any time within 15 days after its
receipt of the Tag-Along Notice, each of the Offerees may irrevocably (but
subject to the terms and conditions of such offer) accept the offer included
in the Tag-Along Notice for up to such number of shares of Company Stock as is
determined in accordance with the provisions of this Section 6.5(a) by
furnishing written notice of such acceptance to the Transferor. Promptly
following such acceptance by an Offeree, each such Offeree shall deliver to
the Transferor the certificate or certificates representing the shares of
Company Stock to be Transferred pursuant to such offer by such Offeree,
together with a limited power-of-attorney authorizing the Transferor to sell
or otherwise dispose of such shares of Company Stock pursuant to the proposed
Transfer to the Third Party. In addition, each such Offeree shall also execute
all other documents required to be executed in connection with such
transaction; provided, that in the event that (x) the Offeree is required to
provide any representations or warranties in connection with such transaction,
each Offeree shall only be required to represent and warrant as to its or his
title to its or his Company Stock to be Transferred and such holder's
authority, power, and right to enter into and consummate such transaction
without violating any other agreement or legal requirement and other matters
relating to such holder, or (y) the Offeree is required to provide any
indemnities in connection with such transaction (other than in respect of
representations and warranties referenced to in the preceding clause (x)),
then each Offeree shall only be required to provide the same indemnities as
the ▇▇▇▇▇ Group and shall not be liable for more than his or its pro rata
share (based upon the amount of consideration to be received by all Offerees
and the Transferor in such transaction) of any liability for indemnity and
such liability shall not exceed the total purchase price received by such
Offeree in such transaction; provided that, with respect to the foregoing
representations or warranties in the preceding clause (x) above given by the
Offerees, an Offeree may be liable for any and all losses resulting from a
breach of such representations or warranties and there shall be no cap by
reason of this Agreement on the liability of the relevant Offeree with respect
to breaches of such representations or warranties.
Each Offeree who shall have irrevocably accepted the offer in the
Tag Along Notice shall have the right to participate in the proposed Transfer
to the Third Party by Transferring in connection therewith shares of Company
Stock equal to the product of (x) the total number of shares to be acquired by
the Third Party, times (y) a fraction, the numerator of which shall be the
total number of shares of Company Stock owned by such Offeree, and the
denominator of which shall be the total number of shares of Company Stock
owned by the ▇▇▇▇▇ Group plus the total number of shares of Company Stock
owned by all Offerees that have accepted the offer included in the Tag-Along
Notice. The maximum number of shares of Company Stock that may be Transferred
by each Offeree to the Third Party in accordance with this Section 6.5(a)
shall be the total number of shares of Company Stock then owned by such
Offeree.
If within 15 days after the receipt of the Tag-Along Notice, any
Offeree has not accepted the offer contained in the Tag-Along Notice, such
Offeree will be deemed to have waived any and all rights with respect to, or
to participate in, the Transfer of Company Stock described in the Tag-Along
Notice. The Transferor shall have 45 days following such delivery in which to
Transfer Company Stock held by it plus any Company Stock of any Offerees who
accept the offer described in the Tag-Along Notice in accordance with the
provisions of this Section 6.5(a), in the aggregate not more than the amount
of Company Stock described in the Tag-Along Notice, for an amount and type of
sales price consideration per share not more favorable to the Transferor than
was set forth in the Tag-Along Notice, provided that the type of consideration
to be received by the Transferor may be different than the type set forth in
the Tag-Along Notice so long as (i) it is not materially more favorable to the
Transferor than to the Offerees and (ii) if the consideration to be received
by the Offerees is different than that set forth in the Tag Along Notice, each
Offeree may rescind its acceptance of the offer contained in the Tag Along
Notice within five days of receipt of notice of such change in the type of
consideration; provided further, that no recision shall effect the number of
shares which each accepting Offeree shall have the right to Transfer pursuant
to the preceding paragraph and the Transferor may increase the number of
shares to be Transferred by it by the number of shares subject to such
rescission. If, at the end of 60 days following the delivery of the Tag-Along
Notice, the Transferor has not completed the Transfer of Company Stock of the
Transferor and Company Stock of any Offeree, the Transferor shall return to
such Offeree all certificates representing shares of Company Stock which such
Offeree delivered for Transfer pursuant to this Section 6.5(a), and all the
restrictions on sale or other disposition contained in this Agreement with
respect to Company Stock owned by the Transferor shall again be in effect,
including the requirement to give notice hereunder.
Except as may otherwise be agreed to by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("RLB")
with respect to Management Stockholders, all Offerees whose shares of Company
Stock are to be Transferred in accordance with this Section 6.5(a) shall
receive the consideration in respect of their shares substantially
simultaneously with the receipt by the Transferor of the consideration in
respect of the shares of Company Stock of the Transferor.
For purposes of this Section 6.5(a) only, all stock options held
by each Offeree which are exercisable at the time of delivery of the Tag-Along
Notice, or which would become exercisable by reason of the Transfer after
giving effect to this Section 6.5(a), shall be treated as Company Stock
hereunder (including, without limitation, for purposes of determining the
extent to which an Offeree may participate in a proposed Transfer pursuant to
the second paragraph of this Section 6.5(a)); provided, that each Offeree, in
order to participate in any proposed Transfer in this Section 6.5(a), shall
exercise any such stock options held by such Offeree the shares of Company
Stock in respect of which such Offeree desires to Transfer pursuant to this
Section 6.5(a), in accordance with the terms and subject to the conditions of
applicable stock option plan, prior to the consummation of any such Transfer
pursuant to this Section 6.5(a); provided, further, that, to the extent
practicable and to the extent doing so would not adversely affect the Company,
the Transferor or the ability to consummate the Transfer, the Transferor and
the Company shall use their reasonable efforts to cause any such proposed
Transfer to be structured so as to facilitate the delivery to any Offeree
holding stock options of the difference between the per share consideration
being paid in such Transfer and the exercise price in respect of each such
stock options being Transferred pursuant to this Section 6.5(a) (in lieu of
the delivery of the exercise price in respect of such stock options to the
Company).
(b) Drag-Along Rights. If any member or members of the ▇▇▇▇▇ Group
shall, individually or collectively, propose to Transfer at least 75% of all
shares of Company Stock collectively owned by the ▇▇▇▇▇ Group at the time of
the transaction in question to a Third Party, then (in addition to the rights
of the Management Stockholders, the Third Party Investors, and their
respective Permitted Transferees to participate in such Transfer pursuant to
Section 6.5(a) hereof) the members of the ▇▇▇▇▇ Group, may, at their option,
require the Management Stockholders, the Third Party Investors, and their
respective Permitted Transferees (collectively, the "Remaining Holders") to
include in such Transfer to the Third Party such number of shares of Company
Stock owned by each of them, as determined in accordance with this Section
6.5(b); provided that if the members of the ▇▇▇▇▇ Group send the Drag-Along
Notice referred to below, Section 6.5(a) shall not apply to the Transfer.
The members of the ▇▇▇▇▇ Group shall give written notice (the
"Drag- Along Notice") of the exercise of their rights pursuant to this Section
6.5(b) to each of the Remaining Holders, setting forth the sales price
consideration per share to be paid by the Third Party and the other material
terms and conditions of such transaction, including the number of shares to be
included therein. The Drag-Along Notice shall state that the Remaining Holders
shall be required to participate in the proposed Transfer of shares to the
Third Party according to the terms and conditions of this Section 6.5(b) and
for the same type of consideration and for an amount of consideration per
share not less than that offered to any member of the ▇▇▇▇▇ Group by the Third
Party and on terms and conditions (other than, in the case of members of the
▇▇▇▇▇ Group, any management, advisory or transaction fees payable to them or
their affiliates) no less favorable to such Remaining Holders than the terms
and conditions offered to any member of the ▇▇▇▇▇ Group by the Third Party.
Within 15 days following the receipt of the Drag-Along Notice, each of the
Remaining Holders shall deliver to a representative of the ▇▇▇▇▇ Group
designated in the Drag-Along Notice certificates representing all shares of
Company Stock held by such Remaining Holder, duly endorsed, together with all
other documents required to be executed in connection with such transaction.
In the event that any Remaining Holder should fail to deliver such
certificates to the ▇▇▇▇▇ Group, the Company shall cause the books and records
of the Company to show that such shares are bound by the provisions of this
Section 6.5(b) and that such shares may be Transferred only to the Third
Party.
Each Remaining Holder shall be required to participate in the
proposed Transfer to the Third Party by Transferring in connection therewith
shares of Company Stock equal to the product of (x) the total number of shares
to be acquired by the Third Party, times (y) a fraction, the numerator of
which shall be the total number of shares of Company Stock owned by such
Remaining Holder, and the denominator of which shall be the total number of
shares of Company Stock owned by the ▇▇▇▇▇ Group plus the total number of
shares of Company Stock owned by all Remaining Holders in the aggregate. The
maximum number of shares of Company Stock that may be Transferred by each
Remaining Holder to the Third Party in accordance with this Section 6.5(b)
shall be the total number of shares of Company Stock then owned by such
Remaining Holder.
If, within 90 days after the members of the ▇▇▇▇▇ Group gave the
Drag-Along Notice, they shall not have completed the Transfer of all the
shares of Company Stock of the ▇▇▇▇▇ Group and the Remaining Holders in
accordance with this Section 6.5(b), the ▇▇▇▇▇ Group shall return to each of
the Remaining Holders all certificates representing shares of Company Stock
that such Remaining Holder delivered for Transfer pursuant hereto and that
were not purchased pursuant to this Section 6.5(b); provided that the ▇▇▇▇▇
Group shall be permitted, but not obligated, to complete the sale by all
non-defaulting Remaining Holders if one or more of the Remaining Holders
default; provided further that completion of the sale by the ▇▇▇▇▇ Group
and/or such Remaining Holders shall not relieve a defaulting Remaining Holder
of liability for its breach.
The obligations of the Remaining Holders pursuant to this Section
6.5(b) are subject to the satisfaction of the following conditions:
(i) if any Stockholder is given an option as to the
form and amount of consideration to be received, all Stockholders
will be given the same option;
(ii) no Remaining Holder shall be required to make
any out-of-pocket expenditure prior to the consummation of such
transaction (excluding expenditures for its own postage, copies, etc.
and the fees and expenses of its own counsel and other advisors
retained by it, which amounts shall be the sole responsibility of
such Remaining Holder in any event (other than pursuant to Section
6.5(c) herein)), and no Remaining Holder shall be obligated to pay
more than its or his pro rata share (based upon the consideration to
be received in such transaction) of expenses (in comparison to the
amount of expenses being borne by all other holders participating in
a Transfer pursuant to this Section 6.5(b)) incurred by the Company
or for the benefit of all Stockholders, provided that a Remaining
Holder's liability for its or his pro rata share of such allocated
expenses shall in no event exceed the total purchase price received
by such Remaining Holder in such transaction; and
(iii) in the event that (x) the Remaining Holders
are required to provide any representations or warranties in
connection with such transaction, each Remaining Holder shall only be
required to represent and warrant as to its or his title to its or
his Stock to be Transferred and such holder's authority, power, and
right to enter into and consummate such transaction without violating
any other agreement or legal requirement and other matters relating
to such holder, or (y) the Remaining Holders are required to provide
any indemnities in connection with such transaction (other than in
respect of representations and warranties referenced to in the
preceding clause (x)), then each Remaining Holder shall only be
required to provide the same indemnities as the ▇▇▇▇▇ Group and shall
not be liable for more than his or its pro rata share (based upon the
amount of consideration to be received in such transaction by all
Remaining Holders and members of the ▇▇▇▇▇ Group) of any liability
for indemnity and such liability shall not exceed the total purchase
price received by such Remaining Holder in such transaction;
provided that, with respect to the foregoing representations or
warranties in the preceding clause (x) given by the Remaining
Holders, a Remaining Holder may be liable for any and all losses
resulting from a breach of such representations or warranties and
there shall be no cap by reason of this Agreement on the liability of
the relevant Remaining Holder with respect to breaches of such
representations or warranties.
To the extent practicable, all Remaining Holders whose shares of
Company Stock are to be Transferred in accordance with this Section 6.5(b)
shall receive the consideration in respect of their shares substantially
simultaneously with the receipt by the ▇▇▇▇▇ Group of the consideration in
respect of the shares of Company Stock of the ▇▇▇▇▇ Group Transferred, except
that all Management Stockholders whose shares of Company Stock are to be
Transferred in accordance with this Section 6.5(b) shall receive the
consideration in respect of their shares (except as may be agreed to between
the Company and RLB on behalf of such Management Stockholders) simultaneously
with the receipt by the Transferor of the consideration in respect of the
shares of Company Stock of the Transferor.
For purposes of this Section 6.5(b) only, all stock options held
by each Remaining Holder which are fully exercisable at the time of the
Drag-Along Notice, or which would become exercisable by reason of the Transfer
after giving effect to this Section 6.5(b), shall be treated as Company Stock
(including, without limitation, for purposes of determining the extent to
which a Remaining Holder is required to participate in a proposed Transfer
pursuant to the third paragraph of this Section 6.5(b)); and each Remaining
Holder in connection with the exercise of drag-along rights by the ▇▇▇▇▇ Group
pursuant to this Section 6.5(b) shall immediately prior to such proposed
Transfer exercise any such stock options held by such Remaining Holders, the
shares of Company Stock in respect of which are required to be Transferred
pursuant to this Section 6.5(b), in accordance with the terms and subject to
the conditions of the applicable stock option plan, prior to the consummation
of any such Transfer pursuant to this Section 6.5(b); provided, further, that,
to the extent practicable and to the extent doing so would not adversely
affect the Company, any member of the ▇▇▇▇▇ Group or the ability to consummate
the Transfer, the ▇▇▇▇▇ Group and the Company shall use their reasonable
efforts to cause any such proposed Transfer to be structured so as to
facilitate the delivery to any Remaining Holder holding stock options of the
difference between the per share consideration being paid in such Transfer and
the exercise price in respect of each such stock options being Transferred
pursuant to this Section 6.5(b) (in lieu of the delivery of the exercise price
in respect of such stock options to the Company).
Notwithstanding anything herein to the contrary, this Section
6.5(b) shall be of no force or effect and the ▇▇▇▇▇ Group may not exercise
their rights under this Section 6.5(b) until after the six month anniversary
of the Closing (assuming that, at such time, this Agreement is in existence
and Stockholders hereunder continue to hold capital stock of the Company).
(c) Attorney Fees. The Company shall pay the reasonable fees and
expenses of one counsel selected by the Management Stockholders holding a
majority of the shares of Company Stock held in the aggregate by all
Management Stockholders (and reasonably acceptable to the ▇▇▇▇▇ Group) to
represent the Third Party Investors and Management Stockholders, unless such
counsel has a conflict of interest that would prevent such counsel from
representing both the Management Stockholders and the Third Party Investors in
which case the Company shall pay the reasonable fees and expenses of one
counsel selected by the Management Stockholders by a majority vote (and
reasonably acceptable to the Company) to represent the Management Stockholders
and one counsel selected by the Third Party Investors by a majority vote (and
reasonably acceptable to the Company) to represent the Third Party Investors,
in each Transfer of shares of Company Stock held by them pursuant to Sections
6.5(a) or 6.5(b) hereof.
ARTICLE VII
REGISTRATION RIGHTS AGREEMENT
7.1 Registration Rights. Concurrently with the execution of this
Agreement the parties hereto are also entering into a registration rights
agreement (the "Registration Rights Agreement") in the form attached as
Exhibit A. The parties hereto agree that any additional members of the ▇▇▇▇▇
Group, Third Party Investors and Management Stockholders who become parties
hereto shall also be added as parties thereto.
ARTICLE VIII
CHARTER DOCUMENTS AND
BOARD OF DIRECTORS
8.1 Charter Documents. The Company has previously furnished to the
Stockholders copies of its certificate of incorporation and by-laws, each as
in effect on the date hereof (the "Charter Documents"). From and after the
date hereof, each Stockholder shall vote its shares of voting stock of the
Company, at any regular or special meeting of stockholders of the Company or
in any written consent executed in lieu of such a meeting of stockholders, and
shall take all actions necessary, to ensure that the Charter Documents do not,
at any time, conflict with the provisions of this Agreement.
8.2 Board of Directors. (a) Subject to provisions of Section
8.2(i) below, the Stockholders agree and understand that immediately following
the consummation of the Transactions, the Board will consist of a number of
directors between five and eleven (as determined by the ▇▇▇▇▇ Group), two of
whom shall be designated by RLB and the remainder of whom shall be persons
designated by the ▇▇▇▇▇ Group (and who may be members of the ▇▇▇▇▇ Group or
affiliates thereof); provided that if RLB designates himself as a director he
shall have the right to serve as Chairman of the Board so long as he is a
director; provided further, that RLB's rights pursuant to this Section 8.2
(other than Section 8.2(i)), shall terminate as such time as he no longer owns
in excess of [10%] of the outstanding shares of Common Stock of the Company
(such percentage to be computed by including as outstanding Common Stock all
outstanding options, calculated on a treasury method basis). Immediately
following the consummation of the Transactions, subject to the preceding
sentence, the number of directors of the Company and the persons who will
serve as such shall be determined in accordance with the Charter Documents and
applicable law and may change from time to time.
(b) The Stockholders shall vote their shares of voting stock to
implement the foregoing, and to elect the directors nominated in accordance
with Section 8.2(i), at any regular or special meeting of the stockholders of
the Company called for the purpose of filling positions on the Board, or in
any written consent executed in lieu of such a meeting of stockholders, and
shall take all lawful actions as may be reasonably necessary to ensure the
election to the Board of the Nominees. The nominees of the ▇▇▇▇▇ Group and
RLB, including nominees pursuant to Section 8.2(i) hereof, are referred to
herein as the "▇▇▇▇▇ Nominees" and the "▇▇▇▇▇▇ Nominees", respectively, and
are collectively referred to herein as the "Nominees" and individually as a
"▇▇▇▇▇ Nominee", "▇▇▇▇▇▇ Nominee" or "Nominee", as the case may be. Subject to
any applicable rules to the contrary of the Securities and Exchange Commission
or any national securities exchange or NASDAQ, RLB shall have the right to
participate in all committees of the Board, except the audit committee, so
long as he is a member of the Board.
To effectuate the provisions of Section 8.2, the Secretary of the
Company, or if there be no Secretary such other officer of the Company as the
Board may appoint to fulfill the duties of Secretary (the "Secretary"), shall
not record any vote or consent contrary to or inconsistent with the terms of
this Section 8.2(a) and 8.2(b).
(c) If, prior to his or her election to the Board pursuant to
Section 8.2(a), 8.2(b) or 8.2(i), any ▇▇▇▇▇ Nominee or ▇▇▇▇▇▇ Nominee shall be
unable or unwilling to serve as a director of the Company, the members of the
▇▇▇▇▇ Group or RLB, as the case may be, shall be entitled to nominate a
replacement (the selection of which shall be consistent with Section 8.2(a),
8.2(b) or 8.2(i), as applicable) who shall then be a Nominee for purposes of
this Section 8.2. If, following election to the Board pursuant to Section
8.2(a), 8.2(b) or 8.2(i), any Nominee shall resign or be removed or be unable
to serve for any reason prior to the expiration of his or her term as a
director of the Company, the members of the ▇▇▇▇▇ Group, if such Nominee was a
▇▇▇▇▇ Nominee, or RLB, if such Nominee was a ▇▇▇▇▇▇ Nominee, shall within 30
days of such event, notify the Board in writing of a replacement Nominee (the
selection of which shall be consistent with Section 8.2(a), 8.2(b) or 8.2(i),
as applicable), and each Stockholder shall vote its shares of voting stock, at
any regular or special meeting called for the purpose of filling positions on
the Board, or in any written consent executed in lieu of such meeting of
stockholders, and shall take all actions necessary (including, without
limitation, using its best efforts to cause its Nominee(s) to elect such
replacement Nominee as herein provided), to ensure the election to the Board
of such replacement Nominee to fill the unexpired term of the Nominee whom
such new Nominee is replacing. If the members of the ▇▇▇▇▇ Group shall fail to
so notify the Board with respect to any ▇▇▇▇▇ Nominee, the Board, in its sole
discretion, may nominate any other person to fill the vacancy. Any ▇▇▇▇▇
Nominee may be removed by the ▇▇▇▇▇ Group, except that with respect to reasons
other than for Cause (as defined in Section 8.2(e)) a ▇▇▇▇▇ Nominee nominated
pursuant to Section 8.2(i) hereof may be removed prior to an Elimination Event
only if the holders of a majority of the outstanding shares of Series B
Preference Stock consent in writing to such removal (and no meeting of
stockholders need to be held to effect any such removal), and any ▇▇▇▇▇▇
Nominee may be removed by RLB, except that with respect to reasons other than
for Cause, a ▇▇▇▇▇▇ Nominee nominated pursuant to Section 8.2(i) hereof may be
removed prior to an Elimination Event only if the holders of a majority of the
outstanding shares of Common Stock consent in writing to such removal (and no
meeting of stockholders need to be held to effect any such removal), and each
Stockholder hereby agrees to vote all of the shares of voting stock owned or
held of record by such Stockholder for, or to take all actions by written
consent in lieu of any such meeting, necessary to cause, any such removal.
(d) If the ▇▇▇▇▇ Group so requests, each Stockholder hereby agrees
to vote all of the shares of voting stock owned or held of record by such
Stockholder for, or to take all actions by written consent in lieu of any such
meeting necessary to cause, the removal (with or without cause) of any
director designated by RLB and elected pursuant to Section 8.2 (other than
Section 8.2(i)) if during such director's term as director, RLB ceases to own
in excess of [10]% of the outstanding shares of Common Stock of the Company
(such percentage to be computed by including as outstanding Common Stock all
outstanding options, calculated on a treasury method basis).
(e) Each Stockholder hereby agrees that any director shall be
removed with Cause only if the holders of a majority of the outstanding shares
of voting stock held by Stockholders consent in writing to such removal (and
no meeting of stockholders need to be held to effect any such removal);
provided, however, that with respect to any Independent director elected
pursuant to Section 8.2(i) hereof, such director may be removed for Cause only
if the holders of a majority of the outstanding shares of either Series B
Preference Stock or Common Stock, depending upon whether RLB or the ▇▇▇▇▇
Group nominated such director, consent in writing to such removal (and no
meeting of stockholders need to be held to effect any such removal). Solely
for the purposes of this Section 8.2(e), "Cause" shall mean the commission by
a director of an act of fraud or embezzlement against the Company or any of
its subsidiaries or a conviction for a felony (or a plea of nolo contendere or
guilty plea thereto) of such director.
(f) In order to effectuate the provisions of this Article VIII,
each Stockholder hereby agrees that when any action or vote is required to be
taken by such Stockholder pursuant to this Agreement, such Stockholder shall
use its reasonable best efforts, if a special or annual meeting of
stockholders of the Company is not called, to execute or cause to be executed
a consent in writing in lieu of any such meetings pursuant to Section 228(a)
of the General Corporation Law of the State of Delaware to effectuate such
stockholder action.
(g) In order to effectuate the provisions of this Section 8.2 and
in addition to and not in lieu of Sections 8.2(a) through (f) hereof, the
Management Stockholders and Third Party Investors (and any of their respective
Permitted Transferees thereof which own Common Stock subject to this
Agreement) hereby grant to the ▇▇▇▇▇ Group a proxy to vote at any annual or
special meeting of stockholders all of the shares of voting stock owned or
held of record by such stockholder and subject to this Agreement solely for
(i) the election of all directors designated in accordance with Section 8.2(a)
and Section 8.2(i) and (ii) the removal of directors in accordance with
Sections 8.2(c), 8.2(d) and 8.2(e).
(h) With respect to any business combination, merger,
consolidation, stock swap or sale of all or substantially all of the assets of
the Company or similar transaction involving the Company, if the members of
the ▇▇▇▇▇ Group so direct and such transaction results in a Change in Control
(as defined below), then each of the Stockholders shall use its respective
best efforts to vote in favor of such proposed transaction all of the shares
of Common Stock owned or held of record by such Stockholder, at each regular
or special meeting of the stockholders of the Company called for the purpose
of voting on such matter, or in any written consent executed in lieu of such a
meeting of stockholders, and shall take all actions reasonably necessary, to
ensure that all necessary stockholder approvals for such transaction are
obtained; provided that (A) the conditions set forth in subclauses (i), (ii)
and (iii) of the third to last paragraph of Section 6.5(b) hereof are
satisfied with respect to such transaction and (B) such Stockholder is to
receive the same type and amount of consideration per share not less than that
to be received by the members of the ▇▇▇▇▇ Group and on terms and conditions
(other than, in the case of members of the ▇▇▇▇▇ Group, any management,
advisory or transaction fees payable to them or their affiliates) no less
favorable to such Stockholders than the terms and conditions to be received by
the members of the ▇▇▇▇▇ Group in the transaction.
(i) Notwithstanding anything herein to the contrary, until the
occurrence of the Elimination Event (as defined in the certificate of
designation with respect to the Series B Preference Stock (the "Nortek
Holdings COD")), the Stockholders agree and understand that (i) the Board of
Directors shall consist of five directors (or such other number of directors
as is agreed to between the ▇▇▇▇▇ Group and RLB), (ii) RLB, on behalf of the
holders of Common Stock, shall nominate 51% of the number of directors to be
elected at any meeting duly called to elect directors generally; provided,
however, that if 51% of such number of directors is not a whole number, then
RLB shall be entitled to nominate the next higher whole number of directors to
be elected at such meeting; provided further that at least one-third (or such
next higher whole number) of the number of such RLB nominated directors shall
be Independent (as defined in the Charter Amendment (as defined in the
Recapitalization Agreement)) and any such Independent director nominated by
RLB shall be subject to the approval of the ▇▇▇▇▇ Group, such approval not to
be unreasonably withheld, (iii) the ▇▇▇▇▇ Group, on behalf of the holders of
Series B Preference Stock, shall be entitled to nominate the remaining
directors to be elected at such meeting for the election of directors
generally; provided, however, that at least one-half (or such next higher
whole number) of the number of such ▇▇▇▇▇ nominated directors shall be
Independent and any such Independent director nominated by the ▇▇▇▇▇ Group
shall be subject to the approval of RLB, such approval not to be unreasonably
withheld, (iv) the parties hereto (including, without limitation, the Company)
shall take such actions as are necessary so that the Board of Directors of
Nortek is comprised entirely of the same individuals as the Board of Directors
of Nortek Holdings, (v) the ▇▇▇▇▇ Group or RLB, as the case may be, shall
inform the other party upon becoming aware that their Independent director
Nominee is not Independent; and (vi) if the Person serving as an Independent
▇▇▇▇▇ Nominee or Independent ▇▇▇▇▇▇ Nominee ceases to be Independent of ▇▇▇▇▇
or RLB, as the case may be, during the time such Person is serving as a
director, then at the request of the other party, the ▇▇▇▇▇ Group or RLB, as
the case may be, shall reasonably promptly replace such Person as a director
with another nominee who satisfies any applicable independence requirements.
Upon the occurrence of an Elimination Event, this clause 8.2(i) shall have no
further force and effect and the provisions of Section 8.2(a) and 8.2(b)
(other than the references to Section 8.2(i) therein) shall immediately apply
and each Stockholder agrees to take all actions necessary to cause the Board
of Directors to be constituted in accordance therewith at such time, and from
and after such time one of the ▇▇▇▇▇▇ Nominees (selected by RLB prior thereto,
or if not so selected by RLB, such ▇▇▇▇▇▇ Nominee that is Independent) shall
be deemed a ▇▇▇▇▇ Nominee for all purposes of this Agreement (including,
without limitation, for purposes of removal).
(j) Whenever any Person is elected to the Board in accordance with
this Agreement, the parties hereto agree that they shall use their best
efforts to cause their Nominees on the Board to take such action, to the
extent they are reasonably able to do so, in connection with such election to
avoid the occurrence of a "Change of Control" under the Nortek Notes
Indentures (as defined in the Recapitalization Agreement).
ARTICLE IX
TERMINATION
9.1 Cessation of Ownership of Company Stock. Any party to, or
Person who is subject to, this Agreement which ceases to own shares of Company
Stock or any interest therein shall cease to be a party to, or Person who is
subject to, this Agreement and thereafter shall have no rights or obligations
ereunder.
9.2 Other Termination Events. Notwithstanding anything to the
contrary contained herein, every provision of this Agreement, other than the
provisions contained in Article VII and Section 10.4, shall terminate upon the
earlier of (i) the closing of an IPO and (ii) a Change in Control; provided,
however, that in the event that following any such Change in Control any
Stockholder (other than a Third Party Investor) continues to own in excess of
25% of the equity in the Company held by it immediately after the Closing (as
defined in the Recapitalization Agreement), such Stockholder shall continue to
have any rights it had prior to such Change in Control pursuant to Sections
6.5(a) and 6.5(b) hereof and such Sections shall survive such Change in
Control for so long as any such Stockholder continues to have such stated
percentage of equity in the Company held by it immediately after the Closing.
For purposes of this Agreement, a "Change in Control" shall mean the earlier
to occur of (i) such time as the ▇▇▇▇▇ Group, (A) no longer owns at least 25%
of the shares of Company Stock held by it immediately after Closing and (B) in
the aggregate owns a lesser number of shares of Company Stock than that of at
least one other stockholder and its affiliates of the Company or (ii) any
business combination, merger, consolidation, stock swap, stock sale or sale of
all or substantially all of the assets of the Company or similar transaction
involving the Company in which (A) the Stockholders cease to own 50% of either
the outstanding voting power and Company Stock of the Company or the surviving
entity and (B) at least one other stockholder and its affiliates of the
Company owns in excess of 50% of the number of outstanding shares of Company
Stock held in the aggregate by the ▇▇▇▇▇ Group.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Stock Certificate Legend. A copy of this Agreement shall be
filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing shares of Company Stock owned by the
Stockholders shall bear upon its face the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (A) IN COMPLIANCE WITH
THE STOCKHOLDERS AGREEMENT, DATED AS OF [ ], 2002 AND (B) UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL TO THE HOLDER, WHICH COUNSEL MUST
BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO
THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS."
All Stockholders shall be bound by the requirements of such legend
to the extent that such legend is applicable. Upon a registration under the
Act of any shares of Company Stock or sale of any shares of Company Stock
pursuant to Rule 144 or any other exemption from registration where the
removal of the legend is appropriate, the certificate representing such shares
shall be replaced, at the expense of the Company, with certificates not
bearing the legend required by this Section 10.1.
10.2 Option Plan. If the Company establishes a stock option plan
(the "Option Plan") the Company shall have the right, but not the obligation,
to require that optionees thereunder be required to become parties to this
Agreement upon exercise of options granted thereunder and that they will be
"Management Stockholders" hereunder with respect to such shares.
10.3 New Management Stockholders. Each of the Stockholders hereby
agrees that the Company may require that any employee of the Company or any of
its subsidiaries who after the date of this Agreement is offered shares of
Company Stock or employee stock options shall, as a condition precedent to the
acquisition of such shares of Company Stock or options, become a party to this
Agreement by executing the same and delivering it to the Company at its
address specified in Section 10.14. Upon such execution and delivery, such
employee shall be a "Management Stockholder" for all purposes of this
Agreement.
10.4 Fee. The parties hereto acknowledge and agree that at the
Closing ▇▇▇▇▇ will be paid a fee of $10.5 million and that the Company and
▇▇▇▇▇ will enter into a financial advisory agreement and related
indemnification agreement (which agreements may be amended from time to time
in accordance with Section 10.5 hereof to the extent applicable) pursuant to
which ▇▇▇▇▇ will provide financial advisory services to the Company each year
following the Closing until the Company and ▇▇▇▇▇ mutually agree to terminate
such arrangement.
10.5 Certain Transactions. The ▇▇▇▇▇ Group agrees that, except as
contemplated hereby or by the Recapitalization Agreement or by any of the
other agreements contemplated hereby or thereby, during such time as RLB owns
in excess of [5%] of the outstanding shares of Company Stock of the Company
(such percentage to be computed by including as outstanding Company Stock all
outstanding options, calculated on a treasury method basis), without the prior
approval of either (i) RLB or (ii) a majority of the members of the Board who
are not officers, directors (excluding outside directors of portfolio
companies) or employees of ▇▇▇▇▇ or any of its affiliates, the Company shall
not (x) effect any transactions between the Company and any member of the
▇▇▇▇▇ Group or any of their affiliates, (y) Transfer any equity securities of
any subsidiary of the Company to any member of the ▇▇▇▇▇ Group or any of their
affiliates, or (z) Transfer any assets of the Company or any subsidiary of the
Company to any member of the ▇▇▇▇▇ Group or any of their affiliates, other
than, in any case of clauses (x) and (z), purchases and sales of inventory in
the ordinary course of business and other customary commercial transactions on
an arms' length basis involving portfolio companies of ▇▇▇▇▇ and its
affiliated investment funds.
10.6 No Other Arrangements or Agreements. Except for the Voting
Agreement and the Exchange Agreements (each as defined in the Recapitalization
Agreement), each Management Stockholder hereby represents and warrants to each
other Stockholder that, except, if applicable, for any option plan of the
Company and the written options issued thereunder, he has not entered into or
agreed to be bound by any other arrangements or agreements of any kind with
any other party with respect to the shares of Company Stock, including, but
not limited to, arrangements or agreements with respect to the acquisition,
disposition or voting of shares of Company Stock (whether or not such
agreements and arrangements are with the Company, other Stockholders or
holders of Company Stock that are not parties to this Agreement). Except for
the Voting Agreement and the Exchange Agreements, each of the members of the
▇▇▇▇▇ Group and each other Stockholder represents and warrants to each other
Stockholder that it has not entered into or agreed to be bound by any voting
agreements with respect to its shares of Company Stock.
10.7 Amendment and Modification. This Agreement may be amended,
modified or supplemented only with the written consent of (i) the ▇▇▇▇▇ Group
and (ii) if such amendment modifies (A) any provision of this Agreement (x) in
a manner substantially adverse to the Management Stockholders, the
Stockholders owning a majority of the outstanding Company Stock (such
percentage to be computed by including as outstanding Company Stock all
outstanding options, calculated on a treasury method basis) owned by all
Management Stockholders and (y) in a manner substantially adverse to the Third
Party Investors, the Stockholders owning a majority of the outstanding Company
Stock (such percentage to be computed by including as outstanding Company
Stock all outstanding options, calculated on a treasury method basis) owned by
all Third Party Investors (B) any other Section of this Agreement, the Company
and Stockholders owning a majority of the outstanding Company Stock.
Notwithstanding anything to the contrary herein, the ▇▇▇▇▇ Group may add any
additional third party to this Agreement or eliminate any such additional
third party (other than any third party that is part of the ▇▇▇▇▇ Group) from
this Agreement as the ▇▇▇▇▇ Group sees fit, subject to the consent of such
affected party. Upon receipt of the consents required by this Section 10.7,
the Company shall notify all Stockholders promptly after such amendment,
modification or supplement shall take effect.
10.8 Assignment.*** The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that none of the Company, the Third Party Investors or any Management
Stockholder shall assign any of its rights or obligations pursuant to this
Agreement without the prior written consent of the ▇▇▇▇▇ Group and, for so
long as the Management Stockholders own in excess of 10% of the outstanding
shares of Company Stock of the Company (such percentage to be computed by
including as outstanding Company Stock all outstanding options, calculated on
a treasury method basis), the members of the ▇▇▇▇▇ Group shall not assign its
rights or obligations pursuant to this Agreement, other than to its Permitted
Transferees and to persons who agree to be bound by this Agreement, without
the prior written consent of the Management Stockholders owning a majority of
the Company Stock owned by all Management Stockholders at such time. In the
case of Permitted Transferees, third parties and Involuntary Transferees, such
Permitted Transferees, third parties or Involuntary Transferees, as the case
may be, shall be deemed the Stockholder hereunder for purposes of obtaining
the benefits or enforcing the rights of such Stockholder hereunder; provided,
however, that no Permitted Transferee, third party or Involuntary Transferee,
as the case may be, shall derive any rights under this Agreement unless and
until such Permitted Transferee, third party or Involuntary Transferee, as the
case may be, has delivered to the Company a valid undertaking to become, and
becomes, bound by the terms of this Agreement to which the transferring
Stockholder is subject.
--------
*** It isunderstood that this Agreement shall be appropriately modified
consistent with Section 8.5 (b) of the Recapitalization Agreement in the
event that the Recapitalization Agreement is modified pursuant to such
provision.
10.9 Recapitalizations, Exchanges, etc. Affecting the Company
Stock. Except as otherwise provided herein, the provisions of this Agreement
shall apply to the full extent set forth herein with respect to (i) the shares
of Company Stock and (ii) any and all shares of capital stock of the Company
or any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise), which may be issued in respect of, in exchange
for, or in substitution for the shares of Company Stock by reason of any stock
dividend, split, reverse split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. Except as otherwise
provided herein, this Agreement is not intended to confer upon any person,
except for the parties hereto, any rights or remedies hereunder.
10.10 Transfer of Company Stock. If at any time the Company
purchases any shares of Company Stock pursuant to this Agreement, the Company
may pay the purchase price determined under this Agreement for the shares of
Company Stock it purchases by wire transfer of funds or Company check in the
amount of the purchase price, and upon receipt of payment of such purchase
price or, pursuant to Section 2.3, Section 3.3 or Article V, any portion
thereof, the selling Stockholder shall deliver to the Company the certificates
representing the number of shares of Company Stock being purchased in a form
suitable for transfer, duly endorsed in blank, and free and clear of any lien,
claim or encumbrance. In the event that any Stockholder refuses or otherwise
fails to deliver, in accordance with the preceding sentence, certificates
representing the number of shares of Company Stock being purchased, the shares
of Company Stock purchased from such Stockholder shall (notwithstanding such
refusal or failure) be deemed, upon receipt by such Stockholder of the
purchase price therefor, to not be outstanding for any purposes.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not be required to make any payment for shares of Company Stock purchased
hereunder until delivery to it of the certificates representing such shares.
If the Company is purchasing less than all the shares of Company Stock
represented by a single certificate, the Company, after making such purchase,
shall deliver to the selling Stockholder a certificate for any unpurchased
shares of Company Stock.
10.11 Further Assurances. Each party hereto or Person subject
hereto shall do and perform or cause to be done and performed all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or Person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
10.12 Governing Law. This Agreement and the rights and obligations
of the parties hereunder and the persons subject hereto shall be governed by,
and construed and interpreted in accordance with, the law of the State of
Delaware, without giving effect to the choice of law principles thereof.
10.13 Invalidity of Provision. The invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
10.14 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon (i) receipt, when
delivered via personal delivery, (ii) transmitter's confirmation of a receipt
of a facsimile transmission, when delivered via such transmittal, (iii)
confirmed delivery by a standard overnight carrier or (iv) receipt, as
evidenced by certification or registration, when mailed in the United States
by certified or registered mail at the following addresses (or at such other
address for a party as shall be specified by notice given hereunder):
(a) If to the Company, to it at:
Nortek Holdings, Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & Company, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to a Management Stockholder, as listed on the
signature page hereto, or, if not so listed, to it at its
address as reflected in the stock records of the
Company, or as such Management Stockholder shall
designate to the Company in writing, with a copy to
▇▇▇▇▇ at its address indicated below (provided that any
such designation shall be effective only upon receipt
thereof).
(c) If to a member of the ▇▇▇▇▇ Group, to it at:
c/▇ ▇▇▇▇▇ & Company, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to a Third Party Investor, as listed on
the signature page hereto, or, if not so
listed, to it at its address as reflected
in the stock records of the Company, or as
such Third Party Investor shall designate
to the Company in writing, with a copy to
▇▇▇▇▇ at its address indicated above
(provided that any such designation shall
be effective only upon receipt thereof).
10.15 Headings; Execution in Counterparts. The headings and
captions contained herein are for convenience and shall not control or affect
the meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
10.16 Entire Agreement; Effect on Certain Other Agreements. This
Agreement, the Registration Rights Agreement, the Option Plan, the RLB
Employment Agreement, the Preemptive Rights Agreement, the Holding Company
Merger Agreement and the Exchange Agreements (each, if not defined herein, as
defined in the Recapitalization Agreement) with the Company entered into by
the Management Stockholders embody the entire agreement and understanding of
the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings relating to the shares of Company Stock, other than those
expressly set forth or referred to herein, in the Registration Rights
Agreement, or in any Exchange Agreements with the Company or any option plan
of the Company or any written option issued thereunder. This Agreement
supersedes all prior agreements and understandings among the parties with
respect to such subject matter.
10.17 Injunctive Relief. The shares of Company Stock cannot
readily be purchased or sold in the open market, and for that reason, among
others, the Company and the Stockholders shall be irreparably damaged in the
event this Agreement is not specifically enforced. Each of the parties
therefore agrees that in the event of a breach of any provision of this
Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of this Agreement. Such
remedies shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the Company or the Stockholders may have.
Each Stockholder hereby irrevocably submits to the non-exclusive jurisdiction
of the state and federal courts in New York and Delaware for the purposes of
any suit, action or other proceeding arising out of or based upon this
Agreement or the subject matter hereof. Each Stockholder hereby consents to
service of process by mail made in accordance with Section 10.14.
10.18 Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover such reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other relief
to which it or they may be en titled, as may be ordered in connection with
such proceeding.
10.19 Third Party Beneficiaries. The headings and captions
contained herein are for convenience of reference only and shall not control
or affect the meaning or construction of any provisions hereof. Except as
otherwise expressly provided herein, the covenants, agreements and other
provisions contained in this Agreement are for the sole benefit of the parties
hereto and their permitted successors and assigns, and they shall not be
construed as conferring, and are not intended to confer, any rights, remedies
or other benefits hereunder on any other persons. Neither this Agreement nor
any purchase or sale of Company Stock shall create, or be construed or deemed
to create, any right of employment in favor of a Management Stockholder or any
other person by the Company or any subsidiary of the Company.
10.20 Sales to Competitors. Notwithstanding anything to the con
trary in this Agreement (other than Section 6.5(a) and 6.5(b)), the Third
Party Investors may not, without the prior written consent of the ▇▇▇▇▇ Group
and the Company, Transfer any shares of Company Stock that the Third Party
Investors beneficially own to any Person that competes with or is engaged in
any lines of business of the Company whether or not so competing or engaged in
the same geographic area as the Company.
10.21 Improper Transfer. Any attempt to Transfer any shares of
Company Stock not in material compliance with this Agreement shall be null and
void and neither the Company nor any transfer agent shall give any effect in
the Company's stock records to such attempted Transfer.
10.22 Third Party Investors. Each of the Stockholders hereby
agrees that the Company may require that any party, other than an employee of
the Company or any of its subsidiaries (who is dealt with in Section 10.3),
who immediately prior to or substantially contemporaneously with the Closing
purchases shares of Company Stock (or shares which were converted into Company
Stock in the Transactions), shall become a party to this Agreement by
executing the same and delivering it to the Company at its address specified
in Section 10.14. For all purposes of this Agreement, upon such execution and
delivery, such party shall be deemed to be a "Third Party Investor" and
collectively, with other similar persons, the "Third Party Investors."
10.23 Persons. For all purposes of this Agreement, "Person" means
an individual, corporation, partnership, limited liability partnership,
limited liability company, association, trust or any unincorporated
organization.
10.24 Options. Except as otherwise expressly provided herein, any
Management Stockholder who owns any options to acquire Company Stock will not
have any rights or obligations with respect thereto under this Agreement prior
to the exercise of such options.
10.25 ▇▇▇▇▇▇▇. Nortek Holdings and Nortek, jointly and severally,
agree to indemnify and hold RLB harmless from any and all claims, liabilities,
losses, damages, expenses, amounts paid in settlement and any and all other
amounts incurred or payable by RLB or on RLB's behalf in connection with or
arising out of the letter from The ▇▇▇▇▇▇▇ Group, Ltd., dated May 22, 2001
(the "▇▇▇▇▇▇▇ Letter") or any matter to which the ▇▇▇▇▇▇▇ Letter refers.
Nortek Holdings and Nortek, jointly and severally, agree to advance expenses
to RLB upon demand in connection with RLB's investigation and defense of any
matter with respect to which RLB is entitled to indemnification as provided in
this Section 10.25.
10.26 Other Agreements. Nothing in this Agreement shall limit the
ability of the Company to enter into any agreement with any Management
Stockholder or any other employee with respect to the purchase and/or sale of
the shares of Company Stock and/or options exercisable into Company Stock on
terms different than as set forth in this Agreement.
10.27 Company Stock. All references herein to a number or
percentage of shares of Common Stock or Company Stock held by a Person shall
be calculated by treating the shares of Common Stock underlying all shares of
Series B Preference Stock as being outstanding (regardless of whether such
shares could be converted into Common Stock at such time) other than for
purposes of Article VIII hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
NORTEK HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
▇▇▇▇▇ INVESTMENT
ASSOCIATES VI, L.P.
By: ▇▇▇▇▇ ▇▇ VI, LLC,
General Partner
By:
-----------------------------------
Managing Member
KEP VI, LLC
By:
-----------------------------------
[Management Stockholders]
By:
-----------------------------------
The undersigned, by its signature below hereby becomes a party to
the Stockholders Agreement, dated as of [ ], 2002, among Nortek Holdings, Inc.
and certain of its stockholders (the "Stockholders Agreement") pursuant to
Section 10.3 thereof and agrees to be bound by the terms of the Stockholders
Agreement and, for all purposes thereof, to be a "Management Stockholder".
IN WITNESS WHEREOF, the undersigned has executed this instrument
as of the day of , 2002.
___________________________
Signature
___________________________
Print Name