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Exhibit 7
NON-COMPETE AND TERMINATION AGREEMENT
THIS NON-COMPETE AND TERMINATION AGREEMENT (this "Agreement"), dated as of
July 24, 1997, is made and entered into by Nortek, Inc., a Delaware corporation
("Parent"), Ply Gem Industries, Inc., a Delaware corporation (the "Company") and
Xxxxxxx X. Xxxxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, NTK Sub, Inc. ("Sub") and the
Company are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"; capitalized
terms used and not defined herein have the respective meanings ascribed to them
in the Merger Agreement), pursuant to which Sub will be merged with and into the
Company (the "Merger");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that Executive agree, and Executive has agreed,
to enter into this Agreement;
WHEREAS, but for his obligations under this Agreement, subsequent to the
closing of the Merger, Executive would not otherwise be bound by any contractual
obligations restricting his ability to compete with the Company;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT AGREEMENT. Executive hereby represents and warrants that his
employment relationship with the Company is pursuant to and governed by the
Employment Agreement dated July 17, 1986, between Executive and the Company, as
amended on October 15, 1987; June 2, 1990; February 19, 1991; November 3, 1992;
December 23, 1992; December 31, 1994; June 10, 1995; August 1, 1995; April 30,
1996; December 27, 1996; and April 11, 1997, a true and correct copy of which
has been furnished to Parent (the "Employment Agreement").
2. TERMINATION OF EMPLOYMENT AGREEMENT. Effective as of the Effective Time
(a) Executive hereby tenders his resignation as an officer and director of the
Company and each of its Subsidiaries, and (b) the Employment Agreement shall be
terminated in full without any further action on the part of the Company or
Executive. Except as expressly provided in this Agreement (including the
exceptions set forth in Section 4(a)), from and after the date of termination of
the Employment Agreement, Executive shall not be entitled to receive any further
wages, compensation or benefits arising pursuant to the Employment Agreement or
his
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employment relationship with the Company or any of its Subsidiaries (including,
without limitation, compensation previously deferred by the Executive under the
terms of the Employment Agreement or otherwise and which become due on or after
the date hereof) and Executive shall not be entitled to any post termination
wages, compensation or benefits (including, without limitation, severance pay,
deferred compensation payments, nonqualified supplemental executive retirement
plan payments, vacation pay or sick pay). As liquidated damages for the
termination of the Employment Agreement, the Company hereby agrees to pay
Executive immediately after the Effective Time, by means of wire transfer of
immediately available funds, a sum in the amount of $22,592,150; PROVIDED,
HOWEVER, that the amount of $22,592,150 shall be reduced by any amounts advanced
(except for the amounts on Annex II) to the Executive as bonus for 1997 under
the terms of his Employment Agreement prior to the Effective Time. Except as
provided in paragraph 5 hereof and as described in Annex II, the Executive
hereby waives any and all rights to recover amounts of salary or bonus deferred
by him in accordance with the April 11, 1997 amendment to the Employment
Agreement.
3. FORGIVENESS OF INDEBTEDNESS. Effective as of the termination of the
Employment Agreement, the Company hereby forgives in its entirety and hereby
releases all of its rights in respect of the indebtedness described on Annex II
attached hereto including, without limitation all principal and interest that
may be due and owing or that may become due and owing thereunder. An amount
equal to $11,407,850 of the indebtedness forgiven hereunder shall be in
consideration of the termination of the Employment Agreement as provided in
Section 2. The remainder of the indebtedness forgiven hereunder shall be in
consideration of the noncompetition agreement provided in Section 7.
Notwithstanding the foregoing, any indebtedness owed to the Company or any of
its Subsidiaries by Executive and which is not described on Annex II shall not
be released pursuant to this Section 3 and shall remain in full force and effect
notwithstanding the terms of any other agreement or arrangement between the
Company or any of its Subsidiaries and Executive to the contrary. Except with
respect to interest that may hereafter accrue on the indebtedness described on
Annex II, from and after the date of this Agreement, if Executive should after
the date of this Agreement borrow any additional funds from, or incur any
additional indebtedness to, the Company or any of its Subsidiaries, then the
cash payment to be paid to Executive pursuant to Section 1 shall be reduced on a
dollar for dollar basis by the amount of such additional borrowing or
indebtedness; PROVIDED that, in no event shall Executive incur such additional
borrowing or indebtedness in excess of $1,000,000.
4. RELEASE OF CLAIMS.
(a) RELEASE BY EXECUTIVE. Effective as of the Effective Time, Executive
hereby releases and discharges the Released Parties from all Claims and Damages,
including those related to, arising from, or attributed to (i) his employment
with, and membership on the Boards of Directors for, the Company and its
Subsidiaries and resignations therefrom, (ii) the Employment Agreement, and
(iii) all other acts or omissions related to any matter at any time prior to and
including the date of termination of the Employment Agreement; except that this
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release shall not include Executive's (A) entitlement to continued group medical
coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"), (B) vested accrued Benefits in the Company's qualified
employee benefit plans described in Annex III attached hereto, (C) rights
arising under the Merger Agreement, (D) rights of Executive arising under this
Agreement, and (E) his right to be reimbursed for reasonable out-of-pocket costs
and expenses incurred after the date of this Agreement and prior to the
Effective Time in connection with services rendered by Executive to, or on
behalf of, the Company. Executive understands and expressly agrees that, unless
specifically excluded from this release, this release extends to all Claims and
Damages of every nature and kind, known or unknown, suspected or unsuspected,
past or present, whether or not these Claims and Damages were set forth in any
writing, and that all such Claims and Damages are hereby expressly settled or
waived.
(b) LIMITATION. Nothing herein shall be interpreted as obligating the
Company, Purchaser or Parent to pay, make reimbursement for or otherwise assume
responsibility for any Taxes imposed on Executive or for any other amount
relating to any of Executive's Tax obligations or liabilities.
(c) DEFINITIONS. As used in this Section 4, the following terms shall have
meanings set forth below:
(i) "Claims" means all theories of recovery of whatever nature,
whether known or unknown, and now recognized by the law or equity of any
jurisdiction, based on acts, omissions or other matters occurring on or
before the date the parties sign this Agreement. This term includes,
without limitation, lawsuits, petitions, complaints, causes of action,
charges, indebtedness, losses, claims, liabilities, and demands, whether
arising in equity or under the common law or under any contract (including,
without limitation, the Employment Agreement), statute, regulation or
ordinance. This term also includes, without limitation, any Claim of
discrimination (based on age or any other factor) under any statute or law
(including, without limitation, the Age Discrimination in Employment Act,
29 U.S.C. ss. 621, et seq.; Title VII of the Civil Rights Act of 1964, 42
U.S.C. ss. 2000e, et seq.; and the Americans with Disabilities Act, 42
U.S.C. ss. 12101, et seq.), and all Claims asserted by Executive, in
writing or otherwise, or which could be asserted, by Executive.
(ii) "Damages" means all elements of relief or recovery of whatever
nature, whether known or unknown, which are recognized by the law or equity
of any jurisdiction. This term includes, without limitation, actual,
incidental, indirect, consequential, compensatory, liquidated, exemplary,
and punitive damages; rescission, attorneys' fees; interest; costs;
equitable relief; and expenses.
(iii) "Released Parties" means and includes the Company and its
Subsidiaries, and all of the foregoing entities' past, present and future
shareholders,
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directors, officers, employees, agents, insurance carriers, employee
benefit plans (and such plans' fiduciaries, trustees, administrators and
representatives), predecessors, successors, assigns, executors,
administrators, attorneys and representatives, in both their corporate and
individual capacities.
5. SALARY. Executive shall be paid his regular salary of $228,598 per
month, less lawful taxes and withholdings, to and through the date of
termination of the Employment Agreement in accordance with the Company's
customary payroll practices.
6. CONFIDENTIALITY.
(a) PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE SECRETS.
Executive acknowledges that the business of the Company and its Subsidiaries is
highly competitive and that certain confidential contracts, books, records, and
documents, confidential technical information concerning their services, pricing
techniques, and computer system and software, and other confidential information
(such as credit and financial data) concerning their customers and business
affiliates, all comprise confidential business information and trade secrets
which are valuable, special, and unique assets which the Company and its
Subsidiaries use in their business to obtain a competitive advantage over their
competitors. (All such information belonging to the Company and its Subsidiaries
and not publicly available is jointly referred to herein as "Confidential
Information and Trade Secrets.") Effective as of the Effective Time, Executive
agrees that all Confidential Information and Trade Secrets are the exclusive,
confidential, and proprietary information and property of the Company and,
except as necessary to perform the consulting services to be provided hereunder,
will not be used by Executive for any other purpose or in any other manner.
Executive further acknowledges that protection of such Confidential Information
and Trade Secrets against unauthorized disclosure and use is of critical
importance to the Company and its Subsidiaries in maintaining their competitive
position. Executive hereby agrees that he will not make any unauthorized
disclosure of any such Confidential Information and Trade Secrets, or make any
unauthorized use thereof. In the event that Executive is requested pursuant to,
or required by, applicable law or regulation or by legal process to disclose any
Confidential Information and Trade Secrets, Executive agrees to use his
reasonable efforts to provide the Company with prompt notice of such request(s)
to enable the Company to seek an appropriate protective order; provided,
however, that Executive shall not be prohibited from complying with any such
request unless an appropriate protective order is in place.
(b) Scope of Prohibited Activities; Remedies. Executive acknowledges
that the scope of prohibited activities, and time of duration of the provisions
of this Section 6 are reasonable and are no broader than are necessary to
protect the goodwill and legitimate business interests of the Company and its
Subsidiaries. Executive also acknowledges that the provisions of this Section 6
do not and will not impose any unreasonable burden on Executive. Executive
further acknowledges that a violation of this Section 6 will cause irreparable
damage to the Company and its Subsidiaries, entitling them to an injunction and
other equitable relief
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in a court of competent jurisdiction against Executive. In addition, the Company
and its Subsidiaries shall be entitled to whatever other remedies they may have
at law, including, without limitation, reasonable attorneys fees and costs
incurred by the Company and its Subsidiaries in enforcing the terms of this
Section 6.
7. NON-COMPETITION AGREEMENT.
(a) NON-COMPETITION. Except as expressly permitted herein, effective
as of the Effective Time Executive agrees that he shall not, until 11:59 p.m. on
the second anniversary of the Effective time:
(i) directly or indirectly own, engage in, manage, operate, join,
control, or participate in the ownership, management, operation, or control
of, or be connected as a stockholder, director, officer, employee, agent,
partner, joint venturer, member, beneficiary, or otherwise with, any
corporation, limited liability company, partnership, sole proprietorship,
association, business, trust, or other organization, entity or individual
which in any way competes with the Company or any of its Subsidiaries in
the business of manufacturing, marketing or distributing wood or vinyl
windows or doors or vinyl siding or in any other material business activity
that the Company or any of its Subsidiaries is conducting as of the date of
this Agreement (a "Competing Business") in the United States; PROVIDED,
HOWEVER, that the Executive may own, directly or indirectly, securities of
any entity traded on any national securities exchange or listed on the
National Association of Securities Dealers Automated Quotation System that
is a Competing Business if Executive does not, directly or indirectly, own
10% or more of any class of equity securities, or securities convertible
into or exercisable or exchangeable for 10% or more of any class of equity
securities, of such entity;
(ii) during the term of non-competition, use Executive's access
to, knowledge of, or application of Confidential Information and Trade
Secrets to perform any material duty for any Competing Business; it being
understood and agreed to that this clause (ii) shall be in addition to and
not be construed as a limitation upon the covenants in clause (i) hereof;
(iii) directly or indirectly aid, abet, or otherwise assist in a
material way any individual, business, or other organization or entity that
is a Competing Business in the United States;
(iv) directly or indirectly request or advise any present or
future customers or suppliers of the Company or any of its Subsidiaries to
cancel any contracts with the Company or any of its Subsidiaries or curtail
their dealings with the Company or any of its Subsidiaries;
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(v) directly or indirectly request or advise any present or
future service provider or financial resource of the Company or any of its
Subsidiaries to withdraw, curtail, or cancel the furnishing of such service
or resource to the Company or any of its Subsidiaries; or
(vi) directly or indirectly hire, attempt to hire, or contact or
solicit with respect to hiring any then significant employee of the Company
or any of its Subsidiaries, or otherwise induce or attempt to influence any
employee of the Company to terminate his or her employment.
(b) NON-COMPETITION FEE. In consideration of the non-competition
agreement described in this Section 7, the Company hereby agrees to forgive the
portion of the indebtedness (as reduced by the amount thereof allocated to the
termination of Executive's Employment Agreement as described in Section 2) owed
to the Company by Executive as described in Section 3.
(c) SCOPE OF PROHIBITED ACTIVITIES; REMEDIES. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of this Section 7 are reasonable in nature and are no broader than are
necessary to maintain the confidentiality and the goodwill of the Company's
proprietary information, plans and services and to protect the other legitimate
business interests of the Company. Executive also acknowledges that the
provisions of this Section 7 do not and will not impose any unreasonable burden
on Executive. Executive further acknowledges that violation of this Section 7
will cause irreparable damage to the Company and its Subsidiaries, entitling
them to an injunction and other equitable relief in a court of competent
jurisdiction against Executive. In addition, the Company and its Subsidiaries
shall be entitled to whatever other remedies they may have at law, including,
without limitation, reasonable attorneys fees and costs incurred by the Company
and its Subsidiaries in enforcing the terms of this Section 7.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Executive agrees that this Agreement and he
obligations hereunder shall be binding upon his heirs, guardians, administrators
or successors.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party.
(c) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
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changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Executive: At the addresses set forth on signature pages hereto
copy to: Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
If to Parent: Nortek, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
copy to: Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Xx., Esq.
Telecopy: (000) 000-0000
If to the Company: Ply Gem Industries, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Telecopy: (000) 000-0000
copy to: Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished
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to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto; PROVIDED that in the event of Executive's death
then, the benefits to be received by Executive hereunder shall inure to his
successors and heirs.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding
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shall be brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein); PROVIDED, HOWEVER, that
such consent to jurisdiction is solely for the purpose referred to in this
paragraph (l) and shall not be deemed to be a general submission to the
jurisdiction of said Court or in the State of Delaware other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(o) TAX REPORTING. As may be appropriate, the Company shall report
the payments made hereunder by filing the appropriate 1099 or other appropriate
forms for these amounts.
9. TERMINATION. This Agreement shall terminate upon the termination of
the Merger Agreement without any further action on the part of any party hereto.
10. NEW AGREEMENTS. In the event the Company gives Parent the notice
contemplated by Section 8.1(i) of the Merger Agreement, then the Company and
Executive shall, within the time period specified in clause (ii) of such Section
8.1(i), extend to Parent, in connection with any adjustments in the terms and
conditions of the Merger Agreement that Parent may propose pursuant to clause
(ii) of such Section 8.1(i), an opportunity to enter into such agreements or
arrangements (with respect to Executive and his then existing agreements and
arrangements with the Company) as specified in such notice on terms and
conditions no less favorable to Parent as those specified in such notice.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
Address:
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Nortek, Inc.
/s/ Xxxxx X. Xxxxxxxx
By: ______________________________________
Xxxxx X. Xxxxxxxx
Name: ____________________________________
Vice President, General Counsel
Title: ___________________________________
Ply Gem Industries, Inc.
/s/ Xxxxxxx X. Xxxxxxx
By: ______________________________________
Xxxxxxx X. Xxxxxxx
Name: ____________________________________
Executive Vice President
Title: ___________________________________
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NORTEK
July 28, 1997
By Facsimile
------------
Xx. Xxxxxxx X. Xxxxxxxxx
Ply Gem Industries, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Xx. Xxxxxxxxx:
Reference is hereby made to the Non-Compete and Termination Agreement
dated as of July 24, 1997 (the "Xxxxxxxxx Agreement") among you, Nortek, Inc., a
Delaware corporation ("Nortek"), and Ply Gem Industries, Inc., a Delaware
corporation ("Ply Gem").
In the Xxxxxxxxx Agreement, paragraph (i) 2 included three references, (ii)
4(a) included two references, (iii) 6(a) included one reference, and (iv) 7(a)
included two references to the term "Effective Time". We hereby confirm the term
"Effective Time" in such eight places shall be deemed deleted and replaced with
the term "consummation of the Offer." All other terms and conditions of the
Xxxxxxxxx Agreement are hereby confirmed.
Very truly yours,
NORTEK, INC.
By:/s/ Xxxxx X. Xxxxxxxx
-----------------------------
Xxxxx X. Xxxxxxxx
Vice President/General Counsel
[NORTEK LETTERHEAD]
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Agreed to and Accepted by:
PLY GEM INDUSTRIES, INC.
BY:/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
Chairman
/s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxxx
