EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is made and entered into
as of [____], 2002, by and among Nortek Holdings, Inc., a Delaware corporation
("Nortek Holdings" or the "Company"), K Holdings, Inc., a Delaware corporation
("K Holdings"), and [____] (the "Stockholder").
WHEREAS, Nortek, Inc., a Delaware corporation and a wholly owned
subsidiary of Nortek Holdings ("Nortek"), Nortek Holdings and K Holdings, have
entered into an Agreement and Plan of Recapitalization, dated as of June 20,
2002, as amended on September 16, 2002 and November 20, 2002 (the
"Recapitalization Agreement"), pursuant to which the parties thereto have
agreed, upon the terms and subject to the conditions set forth therein, to
consummate the Transactions (as defined therein);
WHEREAS, as of the date hereof, the Stockholder is (i) the record
and beneficial owner of, and has the sole right to vote and dispose of [____]
shares of common stock, par value $1.00 per share, of the Company (the "Common
Stock") and [____] shares of special common stock, par value $1.00 per share,
of the Company (the "Special Common Stock," and together with the Common
Stock, the "Shares") and (ii) the owner of options (the "Options") to acquire
[____] shares of Common Stock and options to acquire [____] shares of Special
Common Stock, of which the Stockholder desires to "roll over" options to
acquire [____] shares of Common Stock and [____] shares of Special Common
Stock (those Options being "rolled-over" being collectively referred to as the
"Exchange Options"); it being understood that the term "Shares" shall not
under any circumstances or for any purpose under this Agreement be deemed to
refer to or include shares of Common Stock or Special Common Stock the
beneficial ownership of which may be attributed to the Stockholder, or which
the Stockholder has the right to vote, solely as a result of his serving as a
trustee with respect to an employee benefit plan of the Company (collectively,
"Benefit Plan Shares");
WHEREAS, subject to the conditions set forth herein, (1)
immediately prior to the Effective Time (as defined in the Recapitalization
Agreement), the Stockholder desires to exchange each Share (the "Share
Exchange") held by him, and Nortek Holdings desires to issue to the
Stockholder in exchange therefor, one share of Series B convertible preference
stock, par value $1.00 per share, of Nortek Holdings (the "Nortek Holdings
Preference Stock"), and (2) immediately after the Reclassification (as defined
in the Recapitalization Agreement), the Stockholder desires to have each
Exchange Option cancelled and converted (the "Option Exchange") into an option
(each, a "New Option") to acquire shares of class A common stock, par value
$1.00 per share, of Nortek Holdings (the "Class A Common Stock") pursuant to
the terms of the Nortek Holdings, Inc. 2002 Stock Option Plan (the "Option
Plan");
WHEREAS, subject to the conditions set forth herein, immediately
after the Option Exchange, the Stockholder desires to sell, and K Holdings
desires to purchase from the Stockholder, [____](1) shares of Nortek Holdings
Preference Stock (the "Management Stock Purchase") for a price per share (the
"Management Purchase Price") equal to the Redemption Consideration (as defined
in the Recapitalization Agreement); and
WHEREAS, pursuant to the Nortek Holdings COD (as defined in the
Recapitalization Agreement), immediately after the Reclassification but prior
to the Redemption (each, as defined in the Recapitalization Agreement) each
outstanding share of Nortek Holdings Preference Stock held by Management
Holders (as defined in the Nortek Holdings COD) shall automatically be
converted into one fully paid and nonassessable share of Class A Common Stock;
NOW, THEREFORE, in consideration of the mutual promises,
covenants, representations and warranties contained herein, the Stockholder,
the Company and K Holdings hereby agree as follows:
1. Share Exchange.
(a) Immediately prior to the Effective Time, the Stockholder shall
assign, transfer, convey and deliver [____] shares of Common Stock and [____]
shares of Special Common Stock to the Company and, in exchange therefor, the
Company shall issue and deliver to the Stockholder [____](2) shares of Nortek
Holdings Preference Stock. If any Shares are held in "street name" by the
Stockholder, such Stockholder agrees to arrange for appropriate transfer to
the Company hereunder. Immediately prior to the Share Exchange, the Company
shall cause the Nortek Holdings COD to be executed and filed with the
Secretary of State of the State of Delaware as provided in the Delaware
General Corporation Law and to be effective at such time as is specified in
the Recapitalization Agreement.
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(1) Insert number of shares being sold in transaction (i.e., not
being rolled over).
(2) Insert total number of shares held by Management Stockholder.
(b) In the event that the Share Exchange is consummated and the
Reclassification (as defined in the Recapitalization Agreement) is not
consummated and the Recapitalization Agreement is terminated in accordance
with its terms, then promptly following such termination, the Stockholder
shall assign, transfer, convey and deliver to the Company the number of shares
of Nortek Holdings Preference Stock received by the Stockholder pursuant to
clause (a) above and, in exchange therefor, the Company shall issue and
deliver to the Stockholder the number of shares of Common Stock and Special
Common Stock exchanged by the Stockholder for such shares of Nortek Holdings
Preference Stock pursuant to clause (a) above.
2. Option Exchange. Stockholder agrees that, immediately after the
Reclassification, each Exchange Option held by the Stockholder shall be
cancelled, and in exchange therefore, shall be converted into a New Option to
purchase the number of shares of Class A Common Stock equal to the number of
shares of Common Stock and Special Common Stock subject to the related
Exchange Option immediately prior to the Effective Time with an exercise price
equal to the exercise price with respect to the related Exchange Option. Each
New Option shall be subject to the terms and conditions of the Option Plan and
the applicable stock option agreement. The Company and Stockholder agree to
take all corporate and other action as shall be necessary to effectuate the
foregoing.
3. Management Stock Purchase. Immediately following the Option
Exchange, the Stockholder shall assign, transfer, convey and deliver to K
Holdings (or its permitted designees) [____](3) shares of Nortek Holdings
Preference Stock by delivery of a certificate or certificates evidencing such
Shares duly endorsed to K Holdings (or its permitted designees) or accompanied
by such stock powers duly executed in favor of K Holdings (or its permitted
designees), with all necessary stock transfer stamps affixed, and K Holdings
(or its permitted designees) shall pay to the Stockholder an amount equal to
the Management Purchase Price per share of Nortek Holdings Preference Stock
being purchased by K Holdings (or its permitted designees), for an aggregate
purchase price of $[____].(4)
4. Closing. The closing of the transactions contemplated by this
Agreement shall take place at the offices of Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, Four Times Square, New York, concurrently with the Closing of the
Transactions (each as defined in the Recapitalization Agreement), with such
transactions intended to be consummated in the order specified in the recitals
to the Recapitalization Agreement but substantially concurrently with each
other.
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(3) Insert number of shares being sold in transaction (i.e., not being
rolled over).
(4) Insert (number of shares being sold in transaction (i.e., not being
rolled over) multiplied by $46).
5. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants as follows:
(a) Binding Agreement. The Stockholder has the capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The Stockholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of the Stockholder, enforceable against the Stockholder in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(b) Ownership of Shares and Options. The Stockholder is the record
and "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, which meaning will apply for all purposes of this
Agreement) of the number of Shares set forth in the recitals hereto and is the
owner of the number of Exchange Options set forth in the recitals hereto, in
each case free and clear of any security interests, liens, charges,
encumbrances, equities, claims, options or limitations of whatever nature and
free of any other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of the Shares or Exchange Options).
Except as provided for in the Recapitalization Agreement and the Transactions,
there are no outstanding options or other rights to acquire from the
Stockholder, or obligations of the Stockholder to sell or to dispose of, any
Shares or Exchange Options. As of the date of this Agreement, the number of
Shares and Options set forth in the recitals hereto represent all of the
shares of capital stock of the Company beneficially owned by the Stockholder,
other than Benefit Plan Shares.
(c) No Conflict. Neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor the
performance of the Stockholder's obligations hereunder will (a) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation, or acceleration) under any contract, agreement, instrument,
commitment, arrangement or understanding, or result in the creation of a
security interest, lien, charge, encumbrance, equity or claim with respect to
the Stockholder's Shares or Exchange Options, or (b) require any material
consent, authorization or approval of any person other than a governmental
entity, or (c) violate or conflict with any writ, injunction or decree
applicable to the Stockholder or the Stockholder's Shares, Exchange Options,
Nortek Holdings Preference Stock to be received by Stockholder or Class A
Common Stock to be received by Stockholder upon conversion thereof.
(d) Federal Securities Laws Matters. The Stockholder acknowledges
receipt of advice from the Company that (i) the shares of Nortek Holdings
Preference Stock (and the Class A Common Stock issuable upon conversion
thereof) have not been registered under the Securities Act of 1933 (the
"Securities Act"), (ii) the shares of Nortek Holdings Preference Stock must be
held indefinitely and the Stockholder must continue to bear the economic risk
of the investment in the shares of Nortek Holdings Preference Stock (and the
Class A Common Stock issuable upon conversion thereof), unless such shares of
Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon
conversion thereof) are subsequently registered under the Securities Act, or
an exemption from such registration is available, (iii) it is not anticipated
that there will be any public market for the shares of Nortek Holdings
Preference Stock (and the Class A Common Stock issuable upon conversion
thereof) in the foreseeable future, (iv) Rule 144 promulgated under the
Securities Act will not initially be available with respect to the sales of
the shares of Nortek Holdings Preference Stock (and the Class A Common Stock
issuable upon conversion thereof), and neither Nortek nor Nortek Holdings has
made any covenant to make such rule available and such rule is not anticipated
to be available in the foreseeable future, (v) when and if the shares of
Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon
conversion thereof) may be disposed of without registration in reliance upon
Rule 144, such disposition can be made only in limited amounts and in
accordance with the terms and conditions of such rule, (vi) if the exemption
afforded by Rule 144 is not available, public sale of the shares of Nortek
Holdings Preference Stock (and the Class A Common Stock issuable upon
conversion thereof) without registration will require the availability of an
exemption under the Securities Act, and (vii) a notation may be made in the
appropriate records of the Company indicating that the Nortek Holdings
Preference Stock (and the Class A Common Stock issuable upon conversion
thereof) is subject to restrictions on transfer and, if the Company should in
the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect
to the shares of Nortek Holdings Preference Stock (and the Class A Common
Stock issuable upon conversion thereof).
(e) Stockholder Status. Either (i) the Stockholder is an
"accredited investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act or (ii) (A) the Stockholder's financial situation is such
that the Stockholder can afford to bear the economic risk of holding the
shares of Nortek Holdings Preference Stock (and the Class A Common Stock
issuable upon conversion thereof) for an indefinite period of time, (B) the
Stockholder can afford to suffer complete loss of his investment in the shares
of Nortek Holdings Preference Stock (and the Class A Common Stock issuable
upon conversion thereof), (C) the Stockholder's knowledge and experience in
financial and business matters are such that the Stockholder is capable of
evaluating the merits and risks of the Stockholder's investment in the shares
of Nortek Holdings Preference Stock (and the Class A Common Stock issuable
upon conversion thereof), and (D) the Stockholder understands and has taken
cognizance of all the risk factors related to the purchase of the shares of
Nortek Holdings Preference Stock (and the Class A Common Stock issuable upon
conversion thereof).
6. Representations and Warranties of the Company. Nortek Holdings
represents and warrants as follows:
(a) Corporate Form. Nortek Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now
conducted.
(b) Corporate Authority, etc. Nortek Holdings has all requisite
corporate power and authority to enter into this Agreement and perform all of
its obligations hereunder and to carry out the transactions contemplated
hereby and Nortek Holdings has all requisite corporate power and authority to
issue the shares of Nortek Holdings Preference Stock (and the Class A Common
Stock issuable upon conversion thereof). The shares of Nortek Holdings
Preference Stock (and the Class A Common Stock issuable upon conversion
thereof), when issued, delivered and paid for in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable. As of
the date hereof, there were no shares of Nortek Holdings Preference Stock
issued and outstanding.
(c) Actions Authorized. Nortek Holdings has taken all corporate
actions necessary to authorize it to enter into this Agreement and perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Nortek Holdings and,
assuming due authorization, execution and delivery of this Agreement by the
Stockholder and K Holdings, constitutes a legal, valid and binding obligation
of Nortek Holdings enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(d) Required Filings and Approvals. Other than as provided for in
the Recapitalization Agreement and the disclosure schedules thereto, the
execution and delivery of this Agreement by Nortek Holdings and the
consummation of the transactions contemplated hereby by Nortek Holdings do not
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority on the part of Nortek Holdings,
other than the filings, registrations or qualifications (i) that may be
required under Regulation D under the Securities Act, (ii) that may be
required under the state securities laws or "blue sky" laws of any state of
the United States of America that may be required to be made or obtained, all
of which Nortek Holdings will comply with prior to the date of the Closing
(iii) the filing of the Nortek Holdings COD with the Secretary of State of the
State of Delaware, or (iv) the failure of which to make or obtain, in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect (as defined in the Recapitalization Agreement).
(e) No Conflicts. Other than as provided for in the
Recapitalization Agreement and the disclosure schedules thereto, none of the
execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby, by Nortek Holdings will conflict with
the respective certificate of incorporation or the by-laws of Nortek Holdings
or, except as would not be reasonably expected to have a Company Material
Adverse Effect, result in any breach of, or constitute a default under any
contract, agreement or instrument to which Nortek or Nortek Holdings is a
party or by which it or any of its respective assets is bound.
7. Representations and Warranties of K Holdings. K Holdings
represents and warrants as follows:
(a) Corporate Form. K Holdings is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted.
(b) Corporate Authority. K Holdings has all requisite corporate
power and authority to enter into this Agreement and perform all of its
obligations hereunder and to carry out the transactions contemplated hereby.
(c) Actions Authorized. K Holdings has taken all corporate actions
necessary to authorize it to enter into this Agreement and perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by K Holdings and,
assuming due authorization, execution and delivery of this Agreement by the
Stockholder and the Company, constitutes a legal, valid and binding obligation
of K Holdings enforceable in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(d) No Conflicts. Other than as provided for in the
Recapitalization Agreement and the disclosure schedules thereto, none of the
execution, delivery or performance of this Agreement by K Holdings or the
consummation of the transactions contemplated hereby will conflict with the
certificate of incorporation or the by-laws of K Holdings or, except as would
not be reasonably expected to have a K Holdings Material Adverse Effect (as
defined in the Recapitalization Agreement), result in any breach of, or
constitute a default under any contract, agreement or instrument to which K
Holdings is a party or by which it or any of its assets is bound.
(e) Required Filings and Approvals. Other than as provided for in
the Recapitalization Agreement and the disclosure schedules thereto, the
execution and delivery of this Agreement by K Holdings and the consummation of
the transactions contemplated hereby by K Holdings do not require a consent,
approval or authorization of, or filing, registration or qualification with,
any governmental authority on the part of K Holdings, other than the filings,
registrations or qualifications the failure of which to make or obtain, in the
aggregate, will not have a K Holdings Material Adverse Effect (as defined in
the Recapitalization Agreement).
(f) Equity Financing. K Holdings (and its permitted designees) has
available to it, subject to the satisfaction of the conditions set forth in
Sections 6.1 and 6.3 of the Recapitalization Agreement, sufficient funds to
deliver $389,091,466 of the funds necessary to consummate the Transactions.
(g) Capitalization of K Holdings. As of the date of this
Agreement, the authorized capital stock of K Holdings consists of 1,000,000
shares of common stock, par value $.01 per share (the "K Holdings Common
Stock"), of which 100 shares were issued and outstanding. As of the date of
this Agreement, 85 shares of K Holdings Common Stock have been issued to Xxxxx
Investment Associates VI, L.P., a Delaware limited partnership, and 15 shares
of K Holdings Common Stock have been issued to KEP VI, LLC, a Delaware limited
liability company.
8. Conditions Precedent. The conditions to the Company's
obligations hereunder may not be waived without the prior written consent of K
Holdings.
(a) The obligations of the Stockholder and the Company to
consummate the Share Exchange are subject to (1) the conditions set forth in
Section 6.1 and Section 6.2 of the Recapitalization Agreement being satisfied
or waived on or prior to the Closing and (2) the conditions set forth in
Section 6.3 of the Recapitalization Agreement being satisfied or waived on or
prior to the Closing.
(b) The obligations of K Holdings to consummate the Management
Stock Purchase are subject to the conditions set forth in Section 6.1, Section
6.2 and Section 6.3 of the Recapitalization Agreement being satisfied or
waived on or prior to the Closing.
(c) The obligations of Stockholder to consummate the Management
Stock Purchase are subject to the Share Exchange having been effected and K
Holdings (or its permitted designees) having effected, or concurrently with
the Management Stock Purchase effecting, the K Stock Purchase (as defined in
the Recapitalization Agreement), provided that if Stockholder was required to
effect the Share Exchange (and the conditions to Stockholder's obligations set
forth in Section 8(a) have been satisfied (or would be satisfied concurrently
therewith)) and failed to do so, this condition shall be deemed to be
satisfied.
(d) The obligations of the parties to consummate the Option
Exchange are subject to the Reclassification having been effected.
9. Miscellaneous.
(a) Binding Effect; Benefits. This Agreement shall be binding upon
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to
this Agreement and their respective successors or permitted assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or
any provision contained herein. No party shall have liability for any breach
of any representation or warranty contained herein, except for any knowing or
intentional breach thereof.
(b) Amendments. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the Stockholder and K Holdings, and such written
modification, amendment, alteration or supplement shall not require the
consent of the Company; provided, however, that any modification, amendment,
alteration or supplement to the obligations of the Company with respect to the
Share Exchange or Option Exchange, to the extent it imposes obligations on the
Company that are applicable prior to the consummation of the Reclassification
or in the event the Reclassification is not consummated or to the extent it
would cause a condition to the closing of the transactions contemplated by the
Recapitalization Agreement not to be satisfied or give rise to a right of
termination thereunder, shall require the consent of the Company; it being
further understood that this Agreement shall be appropriately modified
consistent with Section 8.5(b) of the Recapitalization Agreement in the event
such agreement is modified pursuant to such provision.
(c) Assignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or the Stockholder without the prior written
consent of K Holdings; it being understood that K Holdings may assign its
rights hereunder to the same extent that it may assign its rights under the
Recapitalization Agreement.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof).
(e) Counterparts. This Agreement may be executed by facsimile and
in two or more counterparts, each of which shall be deemed to be an original,
but all of which together shall constitute one and the same instrument.
(f) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein are not affected in any
manner materially adverse to any party hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner.
(g) Waiver. Any party to this Agreement may waive any condition to
their obligations contained herein.
(h) Termination. This Agreement shall terminate on the earlier of
(i) the termination of the Recapitalization Agreement in accordance with its
terms and (ii) the agreement of K Holdings, the Company and the Stockholder to
terminate this Agreement. Termination shall not relieve any party from
liability for any intentional breach of its obligations hereunder committed
prior to such termination.
IN WITNESS WHEREOF, Nortek Holdings, K Holdings, and the
Stockholder have executed this Agreement as of the date first above written.
Nortek Holdings, Inc.
By:
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K Holdings, Inc.
By:
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[ ]
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(Signature of Stockholder)
