-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RpjBV+CexMc8RYq8Gc9jGSRvgJciTai1got1uH9xfSz6N7bY5c1THpWLXyWBX5yr RZ6LSiIG3fSLOfzqRXp+lw== 0000950134-99-000552.txt : 19990201 0000950134-99-000552.hdr.sgml : 19990201 ACCESSION NUMBER: 0000950134-99-000552 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 33 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NCI BUILDING SYSTEMS INC CENTRAL INDEX KEY: 0000883902 STANDARD INDUSTRIAL CLASSIFICATION: PREFABRICATED METAL BUILDINGS & COMPONENTS [3448] IRS NUMBER: 760127701 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-14315 FILM NUMBER: 99516421 BUSINESS ADDRESS: STREET 1: 7301 FAIRVIEW CITY: HOUSTON TEXAS STATE: TX ZIP: 77041 BUSINESS PHONE: 7134667788 MAIL ADDRESS: STREET 1: 7301 FAIRVIEW STREET 2: P O BOX 40220 CITY: HOUSTON STATE: TX ZIP: 77041 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL COMPONENTS INCORPORATED DATE OF NAME CHANGE: 19600201 10-K405 1 FORM 10-K FOR FISCAL YEAR END OCTOBER 31, 1998 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-14315 NCI BUILDING SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 76-0127701 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 7301 Fairview Houston, Texas 77041 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (713) 466-7788 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 par value Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant on January 4, 1999, was $414,275,401. The number of shares of common stock of the registrant outstanding on January 4, 1999, was 18,182,534. DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Parts I and II of this Annual Report is incorporated by reference from the registrant's 1998 Annual Report to Shareholders, and information required by Part III of this Annual Report is incorporated by reference from the registrant's definitive proxy statement for its annual meeting of shareholders to be held on March 17, 1999. ================================================================================ 2 PART I ITEM 1. BUSINESS. GENERAL NCI Building Systems, Inc. (the "Company" or "NCI") is one of North America's largest integrated manufacturers of metal products for the building industry, with 38 manufacturing and distribution facilities located in 18 states and Mexico. The Company sells metal components as well as complete metal building systems, offering one of the most extensive metal product lines in the building industry with well-recognized brand names. Management believes that the Company's leading market positions and strong track record of growth and profitability have resulted from its focus on improving manufacturing efficiency, controlling overhead costs, developing new markets and successfully identifying and integrating strategic acquisitions. In May 1998, the Company acquired Metal Building Components, Inc. ("MBCI") for an aggregate of $593 million (the "MBCI Acquisition"), thereby doubling its revenue base, becoming the largest domestic manufacturer of nonresidential metal components and significantly improving its product mix. The Company's sales and income from operations were $675.3 million and $81.4 million, respectively, for the fiscal year ended October 31, 1998. Metal Components. With a market share at least twice that of its largest competitor, the Company is the largest domestic supplier of metal components to the nonresidential building industry. The Company designs, manufactures, sells and distributes one of the widest selections of metal roof and wall systems, overhead doors, fascia, mansard and various trim accessories for commercial, industrial, architectural, agricultural and residential construction and repair and retrofit uses. The Company is also one of the largest independent providers of hot roll and light gauge metal coil coating and painting services and products. The Company coats and paints hot roll coil metal for use in its own metal components manufacturing, as well as processing hot roll coil metal and toll coating light gauge metal for use by third parties. The Company markets its metal components products and coating and painting services nationwide primarily through a direct sales force under several brand names, including "Metal Building Components," "American Building Components," "DBCI," "MBCI," "Metal Coaters," "Metal-Prep" and "DOUBLECOTE." The Company's sales of metal components and coating and painting services were $257.1 million, or 38% of total sales, for the fiscal year ended October 31, 1998. Metal Building Systems. The Company is one of the largest domestic suppliers of metal building systems. The Company designs, manufactures and markets metal building systems, self-storage building systems and metal home framing systems for commercial, industrial, agricultural, governmental, community service and residential uses. The Company markets these systems nationwide through authorized builder networks totaling over 1,200 builders and a direct sales force under several brand names, including "Metallic Buildings," "Mid-West Steel Buildings," "A & S Buildings," "All American Systems," "Steel Systems" and "Mesco." The Company's sales of metal building systems were $418.2 million, or 62% of total sales, for the fiscal year ended October 31, 1998. Prior to their combination, NCI and MBCI both demonstrated strong growth in sales and income from operations. NCI achieved a five-year compound annual growth rate of 38.9% and 49.6%, respectively, in sales and income from operations for its five fiscal years ended October 31, 1997. MBCI achieved a five-year compound annual growth rate of 15.3% and 16.2%, respectively, in sales and income from operations for its five fiscal years ended December 31, 1997. The Company was founded in 1984 and was reincorporated in Delaware on December 31, 1991. Its principal offices are located at 7301 Fairview, Houston, Texas 77041 and its telephone number is (713) 466-7788. Unless indicated otherwise, references herein to the Company include its predecessors and its subsidiaries. 3 INDUSTRY OVERVIEW The building industry encompasses a broad range of metal products, principally composed of steel, sold through a variety of distribution channels for use in diverse applications. These metal products include metal components and complete metal building systems. Metal Components. Manufacturers of metal components for the building industry supply pre-formed components, including roof and wall panels, doors, partitions, related trim, accessories and other metal components used in metal building systems and other repair, retrofit and new construction applications for commercial, industrial, agricultural and residential uses. Metal components are used in a wide variety of construction applications, including purlins and girts, roofing, walls, doors, trim and other parts of traditional commercial, industrial, agricultural and residential buildings as well as in architectural applications and complete metal building systems. Management estimates the metal components market (including roofing applications) to be a multi-billion dollar market, although market data is limited. Metal components are used to a greater extent in repair and retrofit applications than in new construction of metal building systems and, therefore, management believes that the metal components business exhibits less cyclicality than the metal building systems business. Management believes that metal products have gained and continue to gain a greater share of new construction and repair and retrofit markets due to increasing acceptance and recognition of the benefits of metal products in building applications. Metal roofing accounts for a significant portion of the overall metal components market, but a relatively small percentage (approximately 5%) of the large commercial roofing market estimated at over $20 billion annually. As a result, management believes that significant opportunities exist for metal roofing, with its advantages over conventional roofing materials, to increase its overall share of this market. Metal roofing systems have several advantages over conventional roofing systems, including the following: o Lower Lifecycle Cost. The total cost over the life of metal roofing systems is lower than that of conventional roofing systems for both new construction and retrofit roofing. For new construction, the cost of installing metal roofing is greater than the cost of conventional roofing. Yet, the longer life and lower maintenance costs of metal roofing make the cost more attractive. For retrofit roofing, although installation costs are 60-70% higher for metal roofing due to the need for a sloping support system, the lower ongoing costs more than offset the initial expenditure. o Increased Longevity. Metal roofing systems generally last for 20 years without requiring major maintenance or replacement, compared to five to ten years for conventional roofs. The cost of leaks and roof failures associated with conventional roofing can be very high, including damage to building interiors and disruption of the functional usefulness of the building. Metal roofing prolongs the intervals between costly and time-consuming repair work. o Attractive Aesthetics and Design Flexibility. Metal roofing systems allow architects and builders to integrate colors and geometric design into the roofing of new and existing buildings, providing an increasingly fashionable means of enhancing a building's aesthetics. Conventional roofing material is generally tar paper or a gravel surface, and building designers tend to conceal roofs made with such materials. Metal Building Systems. Metal building systems consist of structural beams and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. Metal building systems manufacturers design an integrated system that meets applicable building code requirements. These systems consist of primary structural framing, secondary structural members (i.e., purlins and girts) and covering for roofs and walls. Over the last fifteen years, metal building systems have significantly increased penetration of the market for non-residential low rise structures and are being used in a broad variety of other applications. According to the Metal Building Manufacturers Association, reported sales of metal building systems have increased from approximately $1.5 2 4 billion in 1993 to $2.5 billion in 1997. The Company believes this increase has resulted primarily from (i) the significant cost advantages offered by these systems, (ii) increased architectural acceptance of metal building systems for construction of commercial and industrial building projects, (iii) advances in design versatility and production processes and (iv) a strong general economic environment. The Company believes the cost of a metal building system generally represents approximately 15-20% of the total cost of constructing a building, which includes land cost, labor, plumbing, electrical, heating and air conditioning systems installation and interior finish. Technological advances in products and materials, as well as significant improvements in engineering and design techniques, have led to the development of structural systems that are compatible with more traditional construction materials. Architects and designers now often combine a metal building system with masonry, glass and wood exterior facades in order to meet the aesthetic requirements of customers while preserving the inherent characteristics of metal building systems. As a result, the uses for metal building systems now include office buildings, showrooms, retail stores, banks, schools, warehouses, factories and distribution centers, government and community centers for which aesthetics and architectural features are important considerations of the end users. In its marketing efforts, the Company and other major manufacturers generally emphasize the following characteristics of metal building systems to distinguish them from other methods of construction: o Shorter Construction Time. In many instances, it takes less time to construct a metal building than other building types. In addition, because most of the work is done in the factory, the likelihood of weather interruptions is reduced. o More Efficient Material Utilization. The larger metal building systems manufacturers use computer-aided analysis and design to fabricate structural members with high strength-to-weight ratios, minimizing raw materials costs. o Lower Construction Costs. The in-plant manufacture of metal building systems, coupled with automation, allows the substitution of less expensive factory labor for much of the skilled on-site construction labor otherwise required for traditional building methods. o Greater Ease of Expansion. Metal building systems can be modified quickly and economically before, during or after the building is completed to accommodate all types of expansion. Typically, a building system can be expanded by removing the end or side walls, erecting new framework and adding matching wall and roof panels. o Lower Maintenance Costs. Unlike wood, metal will not deteriorate because of cracking, rot or insect damage. Furthermore, factory-applied roof and siding panel coatings resist cracking, peeling, chipping, chalking and fading. CONSOLIDATION Over the last several years, there has been consolidation in the metal components and metal building systems industry, which includes a large number of small local and regional firms. Management believes that this industry will continue to consolidate, driven by the needs of manufacturers to increase manufacturing capacity, achieve greater process integration and add geographic diversity in order to meet customers' product and delivery needs, improve production efficiency and manage costs. PRODUCTS AND MARKETS The Company's product lines consist of metal components for the building industry and metal building systems. The Company's sales, respectively, for the periods indicated attributable to these product lines were approximately as follows: 3 5
YEAR ENDED OCTOBER 31, ------------------------------------------------------------------------------------------- 1994 1995 1996 1997 1998 --------------- --------------- --------------- --------------- --------------- (IN MILLIONS) Metal building systems ... $126.7 75.5% $173.9 74.3% $213.0 64.0% $246.6 60.5% $418.2 62.0% Metal components ......... 41.1 24.5% 60.3 25.7% 119.9 36.0% 161.2 39.5% 257.1 38.0% ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total revenues ........... $167.8 100% $234.2 100% $332.9 100% $407.8 100% $675.3 100% ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Metal Components. The Company's metal components consist of individual components, including secondary structural framing, covering systems and associated metal trims, that are sold directly to contractors or end users for use in the building industry, including the construction of metal buildings. The Company also stocks and markets metal component parts for use in the maintenance and repair of existing buildings. Specific component products consist of end and side wall panels, roof panels, purlins, girts, partitions, header panels and related trim and screws. The Company believes it offers the widest selection of metal components in the building industry. Purlins and girts, which are medium gauge, roll formed steel components, are supplied to builders for secondary structural framing. The Company custom produces purlins and girts for its customers and offers the widest selection of sizes and profiles of purlins and girts in the United States. Covering systems, consisting of wall and roof panels, protect the rest of the structure and the contents of the building from the weather, while also contributing to the structural integrity of the building. The Company's metal roofing products are attractive and durable. The Company uses standing seam roof technology to replace traditional built-up and single-ply roofs as well as to provide a distinctive look to new construction. The Company manufactures and designs metal roofing systems for sales to regional metal building manufacturers, general contractors and subcontractors. The Company believes it has the broadest line of standing seam roofing products in the building industry. The Company has also developed and patented a retrofit metal panel, Retro-R(R), that is used to replace wall and roof panels of metal buildings. Retro-R(R) can be installed over the top of existing metal panels to remodel or preserve a standing structure. Although metal roofing is somewhat more expensive than traditional roofing in upfront costs, its durability and low maintenance costs make metal roofing a lower cost roofing product after the first 10 years. The Company manufactures overhead doors and interior and exterior doors for use in metal and other buildings. The Company is one of the largest suppliers in the U.S. of roll-up doors to builders of self-storage facilities. The Company provides its own metal coating and painting products and services for use in component manufacturing. As a toll coater of hot roll steel coils, the Company also provides pre-painted hot roll coils to manufacturers of metal building systems and metal components. Either a customer provides coils through its own supply channels, which are processed by the Company, or the Company purchases hot roll coils and processes them for sale as a packaged product. The Company also pre-paints light gauge steel coils for steel mills, which supply the painted coils to various industrial users, including manufacturers of metal building systems, metal components and lighting fixtures. The Company's metal coating and painting operations apply a variety of paint systems to metal coils. The process generally includes cleaning and painting the coil and slitting it to customer specifications. The Company believes that pre-painted metal coils are a better quality product, environmentally cleaner and more cost-effective than painted metal products prepared in other manufacturers' in-house painting operations. Painted metal coils also offer manufacturers the opportunity to produce a broader and more aesthetically pleasing range of products. 4 6 Metal Building Systems. Metal building systems consist of structural beams and panels that are welded and roll formed in a factory and shipped to a construction site complete and ready for assembly. The Company designs an integrated metal building system that meets customer specifications and allows easy on-site assembly by the builder or independent contractor. Metal building systems typically consist of three systems: o Primary Structural Framing. Primary structural framing, fabricated from heavy-gauge steel, supports the secondary structural framing, roof, walls and all externally applied loads. Through the primary framing, the force of all applied loads is structurally transferred to the foundation. o Secondary Structural Framing. Secondary structural framing consists of medium-gauge, roll-formed steel components called purlins and girts. Purlins are attached to the primary frame to support the roof. Girts are attached to the primary frame to support the walls. The secondary structural framing is designed to strengthen the primary structural framing and efficiently transfer applied loads from the roof and walls to the primary structural framing. o Covering Systems. Covering systems consist of roof and wall panels. These panels not only lock out the weather but also contribute to the structural integrity of the overall building system. Roof and siding panels are fabricated from light-gauge, roll-formed steel. Accessory components complete the metal building system. These components include doors, windows, gutters and interior partitions. SALES, MARKETING AND CUSTOMERS Metal Components. The Company sells metal components directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and other customers under the brand names "Metal Building Components," "American Building Components" and "MBCI." Roll-up doors, interior and exterior doors, interior partitions and walls, header panels and trim are sold directly to contractors and other customers under the brand names "Doors & Building Components" or "DBCI." These components also are produced for integration into self storage and metal building systems sold by the Company. The Company markets its components products within four product lines: (i) commercial/industrial; (ii) architectural; (iii) wood frame builders; and (iv) residential. Customers include regional metal building systems manufacturers, general contractors, subcontractors, roofing installers, architects and end-users. Commercial and industrial businesses are heavy users of metal components and metal buildings systems. Standing seam roof and architectural customers are growing in importance. As metal buildings become a more acceptable building alternative and aesthetics become an increasingly important consideration for end users of metal buildings, the Company believes that architects are participating in metal building design and purchase decisions to a greater extent. Wood frame builders also purchase the Company's metal components through distributors, lumberyards, cooperative buying groups and chain stores for various uses, including agricultural buildings. Residential customers are generally contractors building upscale homes that require an architect-specified product. The Company's metal components sales operations are organized into four geographic regions. Each region is headed by a general sales manager supported by individual plant sales managers. Each local sales office is located adjacent to a manufacturing plant and is staffed by a direct sales force responsible for contacting customers and architects and a sales coordinator who supervises the sales process from the time the order is received until it is shipped and invoiced. The regional and local focus of the Company's customers requires extensive knowledge of local business conditions. The Company provides its customers with product catalogs tailored to its product lines, which include product specifications and suggested list prices. Certain of the Company's catalogs are available on-line through the Internet, which enables architects and other customers to download drawings for use in developing project 5 7 specifications. Customers place orders via telephone or facsimile to a sales coordinator at the regional office who enters it onto a standard order form. The form is then sent via computer to the plant and downloaded automatically to the production machines. The Company has a small number of national accounts for its coating and painting products and services and relies on a single sales manager. The Company's metal coating joint venture has an independent sales force. Metal Building Systems. The Company sells metal building systems to builders nationwide under the brand names "Metallic Buildings," "A&S Buildings" and "Mesco." The Company markets metal building systems through an in-house sales force to authorized builder networks of over 1,200 builders. The Company markets metal building systems under the brand name "Mid-West Steel Buildings" directly to contractors in Texas and surrounding states using an in-house sales force. The Company also sells metal building systems under the name "All American Systems" and various private labels. The Company's authorized builder networks consist of independent general contractors which market the Company's Metallic Buildings, A&S Buildings and Mesco products to end users. Most of the Company's sales of metal building systems outside of Texas and surrounding states are through its authorized builder networks. The Company relies upon maintaining a satisfactory business relationship for the continued receipt of job orders from its authorized builders and does not consider the builder agreements to be material to its business. During fiscal 1998, the Company's largest customer for metal building systems accounted for less than 2% of the Company's total sales. The Company enters into an agreement with an authorized builder, which generally grants the builder the non-exclusive right to market the Company's products in a specified territory and which is cancelable by either party on 60 days notice. The agreements do not prohibit the builder from marketing metal building systems of other manufacturers. The Company establishes an annual sales goal for each builder and provides to the builder sales and pricing information, design and engineering manuals, drawings and assistance, application programs for estimating and quoting jobs and advertising and promotional literature. The Company also defrays a portion of the builder's advertising costs and provides volume purchasing and other pricing incentives to encourage them to deal exclusively or principally with the Company. The builder is required to maintain a place of business in its designated territory, provide a sales organization, conduct periodic advertising programs and perform construction, warranty and other services for customers and potential customers. An authorized builder usually is hired by an end user to erect a metal building system on the customer's site and provide general contracting and other services ancillary to the completion of the project. The Company sells its products to the builder, which generally includes the price of the building as a part of its overall construction contract with its customer. MANUFACTURE AND DESIGN Metal Components. The Company operates 37 facilities used for manufacturing of metal components for the building industry, including its metal coating and painting operations. The Company believes this broad geographic penetration gives it an advantage over its components competitors because major elements of a customer's decision are the speed and cost of delivery from the manufacturing facility to the product's ultimate destination. With the exception of the Company's architectural and standing seam products, the Company is not involved in the design process for the components it manufactures. The Company also owns a fleet of trucks to deliver its products to its customers in a more timely manner than most of its competitors. The Company's doors, interior partitions and other related panels and trim products are manufactured at dedicated plants in Georgia, Texas and Arizona. The products are roll-formed or fabricated at each plant using roll-formers and other metal working equipment. Orders are processed at the Georgia plant and sent to the appropriate plant, which is generally determined in a manner to obtain the lowest shipping cost. 6 8 Metal Coating and Painting. The Company operates two metal coating and painting facilities for hot rolled, medium gauge steel coils and two metal coating and painting facilities for painting light gauge steel coils. These facilities primarily service the needs of the Company, but the Company also processes steel coils at these facilities for other manufacturers. Metal coating and painting processes involve applying various types of chemical treatments and paint systems to flat rolled continuous coils of metal, including steel and aluminum, giving the coils a baked-on finish that both protects the metal and makes it more attractive. Initially, various metal substrates in coil form are flattened, cleaned and pretreated. The metal is then coated, oven cured, cooled, recoiled and packaged for shipment. Slitting and embossing services can also be performed on the coated metal prior to shipping pursuant to customer specifications. Hot roll steel coils typically are used in the production of secondary structural framing of metal buildings and other structure applications. Painted light gauge steel coils are used in the manufacture of products for building exteriors, metal doors, lighting fixtures and appliances. The Company's metal coating operation is one of only two metal coaters in the United States to receive the Supplier Excellence Award from Bethlehem Steel Corporation. The Company is a joint venture partner in two metal coating operations. The Company owns 50% of an existing metal coating joint venture with a processing plant in Jackson, Mississippi for painting light gauge steel coils. The Company also owns 50% of a new joint venture, which has acquired land in Granite City, Illinois and is building a hot rolled coil coating facility that is expected to commence operations in early 1999. The new facility will be used to slit and coat hot rolled coils of medium gauge steel for use in manufacturing purlins and girts. The Company has agreed to purchase a substantial portion of its production requirements for that product from the new joint venture. Metal Building Systems. After the Company receives an order, the Company's engineers design the metal building system to meet the customer's requirements and to satisfy applicable building codes and zoning requirements. In order to expedite this process, the Company uses computer-aided design and engineering systems to generate engineering and erection drawings and a bill of materials for the manufacture of the metal building system. The Company employs approximately 185 engineers and draftsmen in this area. Once the specifications and designs of the customer's project have been finalized, the manufacturing process of frames and other building systems begins at one of the Company's six manufacturing facilities in Texas, Georgia, South Carolina or Tennessee or its joint venture facility in Mexico. The fabrication of the primary structural framing consists of a process in which rigid steel plates are punched and sheared and then routed through an automatic welding machine and sent through further fitting and welding processes. The secondary structural framing and the covering subsystem are roll-formed steel products that are manufactured at the Company's full manufacturing facilities as well as its components plants. In roll forming, pre-finished coils of steel are unwound and passed through a series of progressive forming rolls which form the steel into various profiles of medium-gauge structural shapes and light-gauge sheets and panels. Once manufactured, structural framing members and covering systems are shipped to the job site for assembly. The Company generally is not responsible for any on-site construction. The time elapsed between the Company's receipt of an order and shipment of a completed building system has typically ranged from four to eight weeks, although delivery can extend somewhat longer if engineering and drafting requirements are extensive. The Company owns 51% of a joint venture, which began operation of a framing facility in Monterrey, Mexico in July 1997. The Company purchases substantially all of the framing systems produced by the Mexico joint venture. RAW MATERIALS The principal raw material used in the manufacture of the Company's metal building systems and component products is steel. Components are fabricated from common steel products produced by mills including bars, plates, sheets and galvanized sheets. During the 1998 fiscal year, the Company purchased an aggregate of approximately 80% of its steel requirements from National Steel Corporation and Bethlehem Steel Corporation. No other steel supplier 7 9 accounted for more than 10% of the combined steel purchases for the same period. The Company believes concentration of its steel purchases among a small group of suppliers that have mills and warehouse facilities in close proximity to the Company's facilities enables it, as a large customer of those suppliers, to obtain better service and delivery. These suppliers generally maintain an inventory of the types of materials required by the Company, enabling the Company to utilize a form of "just-in-time" inventory management with regard to raw materials. The Company does not have any long-term contracts for the purchase of raw materials. A prolonged labor strike against one of its principal domestic suppliers could have a material adverse effect on the Company's operations. Alternative sources, however, including foreign steel, are currently believed to be sufficient to maintain required deliveries. BACKLOG At October 31, 1998, the total backlog for orders for the Company's products believed by the Company to be firm was $137 million. This compares with a total backlog for NCI's products of $110 million at October 31, 1997 and for MBCI's products of $16.1 million at December 31, 1997. The increases in backlog reflect the results of the marketing activities of the Company and market demand. Backlog primarily consists of metal building systems. Job orders generally are cancelable by customers at any time for any reason and, occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. None of the backlog at October 31, 1998 currently is scheduled to extend beyond October 31, 1999. WARRANTIES The Company provides a limited warranty on all fabricated products. This warranty generally provides for repair or replacement of fabricated and roll-formed materials, but does not include the cost of field installation. The Company also passes through to its customers certain warranties it receives on paint coatings, which vary from three to 20 years, and the 20-year warranties it receives on galvalume coated steel. To respond to certain competitive situations, the Company may provide a limited weather tightness warranty of up to 20 years covering potential leakage on certain roofing systems offered by the Company. The Company has not experienced any significant claims under any of its warranties. COMPETITION The Company competes with a number of other manufacturers of metal components and metal building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis, although the Company believes that at least four other manufacturers of metal building systems and several manufacturers of metal components have nationwide coverage. In addition, the Company and other manufacturers of metal components and metal building systems compete with alternative methods of building construction, which may be perceived as more traditional, more aesthetically pleasing or having other advantages. Competition is based primarily on price, speed of construction, quality of builder/dealer networks, the ability to provide added value in the design and engineering of buildings and, among manufacturers of metal components and metal building systems, service, quality and delivery times. REGULATORY MATTERS The Company's operations are subject to a wide variety of federal, state and local laws and regulations governing, among other things, emissions to air, discharges to waters, the generation, handling, storage, transportation, treatment, and disposal of hazardous substances and other materials and health and safety matters. Laws protecting the environment generally have become more stringent than in the past and are expected to continue to do so. Environmental laws and regulations generally impose "strict liability," which means that in some situations the Company 8 10 could be exposed to liability for cleanup costs, and "toxic tort" or other damages as a result of conduct that was lawful at the time it occurred or conduct of, or conditions caused by, prior operators or other third parties, regardless of fault on the part of the Company. The Company believes it is in substantial compliance with all environmental standards applicable to its operations. There can be no assurance, however, that cleanup costs, natural resource damages, criminal sanctions, "toxic tort" or other damages arising as a result of environmental laws and costs associated with complying with changes in environmental laws and regulations will not be substantial and will not have a material adverse effect on the Company's financial condition. From time to time, claims have been made against the Company under environmental laws. The Company has insurance coverage for certain environmental claims and certain locations after payment of the applicable deductible. The Company does not anticipate material capital expenditures to meet current environmental quality control standards. There can be no assurance that more stringent regulatory standards will not be established that might require such expenditures. The Company is also subject to federal, state and local laws and regulations governing occupational safety and health, including review by the federal Occupational Health and Safety Administration and similar state agencies. The Company believes it is in substantial compliance with applicable laws and regulations, and compliance does not have a material adverse affect on the Company's business. The metal building systems manufactured by the Company must meet zoning and building code requirements promulgated by local governmental agencies. PATENTS, LICENSES AND PROPRIETARY RIGHTS The Company has a number of United States patents and pending patent applications, including patents relating to metal roofing systems and metal overhead doors. The Company does not, however, consider patent protection to be a material competitive factor in its industry. The Company also has several registered trademarks and pending registrations in the United States. EMPLOYEES As of October 31, 1998, the Company had approximately 3,700 employees, of whom over 2,700 were manufacturing and engineering personnel. The Company regards its employee relations as satisfactory. The Company's employees are not represented by a labor union or collective bargaining agreement, although the United Steel Workers of America petitioned the National Labor Relations Board to be recognized as the collective bargaining representative of the production and maintenance employees of the Company's Tallapoosa, Georgia facility. An election for that purpose was held in January 1996 and the union lost the election to be recognized as the collective bargaining representative of such employees. Similar elections were held at the Company's Mattoon, Illinois facility in November 1997 and the Rancho Cucamongo, California facility in August 1998, and the United Steel Workers of America lost those elections. ITEM 2. PROPERTIES. The Company conducts manufacturing operations at the following facilities:
Square Owned Facility Products Feet or Leased - -------- -------- ------ --------- Chandler, Arizona Doors and related metal components 35,000 Leased Tomlinson, Arizona Metal components(1) 65,980 Owned Atwater, California Metal components(2) 85,700 Owned Rancho Cucamonga, California Metal coating and painting 98,000 Owned Tampa, Florida Metal components(3) 28,775 Owned
9 11
Square Owned Facility Products Feet or Leased - -------- -------- ------- --------- Adel, Georgia Metal components(1) 59,550 Owned Douglasville, Georgia Metal components(4) 110,536 Owned Douglasville, Georgia Doors and related metal components 60,000 Owned Marietta, Georgia Metal coating and painting 125,700 Owned Tallapoosa, Georgia Metal building systems(5) 246,000 Leased Metal components Nampa, Idaho Metal components(6) 42,900 Owned Mattoon, Illinois Metal components(2) 90,600 Owned Shelbyville, Indiana Metal components(6) 66,450 Owned Nicholasville, Kentucky Metal components(7) 41,280 Owned Monterrey, Mexico(8) Metal building systems(9) 64,125 Owned Jackson, Mississippi Metal components(2) 96,000 Owned Jackson, Mississippi(10) Metal coating and painting 363,200 Owned Omaha, Nebraska Metal components(7) 51,750 Owned Hobbs, New Mexico(11) Metal components(2) 60,800 Leased Rome, New York Metal components(6) 57,700 Owned Oklahoma City, Oklahoma Metal components(1) 59,695 Owned Chester, South Carolina Metal building systems(5) 124,000 Owned Metal components Caryville, Tennessee Metal building systems(5) 193,800 Owned Metal components Memphis, Tennessee Metal coating and painting 61,500 Owned Nesbitt, Tennessee Metal components(1) 71,720 Owned Ennis, Texas Metal components and studs 33,000 Owned Grand Prairie, Texas Metal components(1) 48,027 Owned Houston, Texas Metal components 97,000 Owned Houston, Texas Metal components(4) 209,355 Owned Houston, Texas Metal coating and painting 39,550 Owned Houston, Texas(12) Metal building systems(5) 382,000 Owned Metal components Doors Lubbock, Texas Metal components(1)(7) 64,320 Owned San Antonio, Texas Metal components(6) 52,360 Owned Southlake, Texas Metal building systems(5) 123,000 Owned Metal components Stafford, Texas Metal components 105,000 Leased Stafford, Texas(11) Metal components 56,840 Leased Salt Lake City, Utah Metal components(1) 93,150 Owned Colonial Heights, Virginia Metal components(1) 37,000 Owned
- ---------- (1) Secondary structures and covering systems. (2) Includes secondary structures and covering systems. (3) Covering products. (4) Full components product range. Includes 18,000 square feet used for the principal offices of the metal components and metal coaters divisions. (5) Primary structures, secondary structures and covering systems. (6) Covering systems. (7) Specialized products. (8) The Company owns a 51% interest in a joint venture that owns this facility. (9) Primary structures. (10) The Company owns a 50% interest in a joint venture that owns this facility. (11) Currently targeted for closure by the end of 1999. (12) Includes 33,600 square feet used for the Company's principal executive offices and the principal offices of the metal buildings division. 10 12 The Company also maintains several drafting office facilities and retail locations in various states. These additional facilities are subject to short-term leases. The Company has a facility in Jemison, Alabama that will be sold in early 1999. The Company believes that its present facilities are adequate for its current and projected operations. The Company has purchased approximately five acres of land in Houston, Texas upon which it plans to construct a new 60,000 square foot facility that will be used as the Company's principal executive offices and the principal offices of the metal buildings, metal components and metal coaters divisions. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in various legal proceedings that the Company considers to be in the normal course of business. Management believes that such litigation will not have a material adverse effect on the Company's results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. The information required by this Item is incorporated by reference from the Company's 1998 Annual Report to Shareholders, bottom of page 31, regarding the market for the common stock of the Company. ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is incorporated by reference from the Company's 1998 Annual Report to Shareholders, top of page 1. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is incorporated by reference from the following portions of the Company's 1998 Annual Report to Shareholders: Management's Discussion and Analysis of Results of Operations and Financial Condition, pages 28 through 30. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required by this Item is incorporated by reference from the Company's 1998 Annual Report to Shareholders, page 30. 11 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements and supplementary financial information are incorporated by reference from the indicated pages in the Company's 1998 Annual Report to Shareholders.
Pages of Annual Report to Shareholders --------------- Selected Quarterly Financial Data 31 Consolidated statements of income for each of the three years in the period ended October 31, 1998 18 Consolidated balance sheets at October 31, 1998 and 1997 19 Consolidated statements of shareholders' equity for each of the three years in the period ended October 31, 1998 20 Consolidated statements of cash flows for each of the three years in the period ended October 31, 1998 21 Notes to consolidated financial statements 22-26 Report of independent auditors 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III The information required by Items 10 through 13 of Part III is incorporated by reference from the indicated pages of the Company's definitive proxy statement for its annual meeting of shareholders to be held on March 17, 1999.
Pages of Proxy Statement --------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. 3-7 ITEM 11. EXECUTIVE COMPENSATION. 8-15 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 1-3 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 17
12 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: 1. Consolidated financial statements (see Item 8). 2. Consolidated financial statement schedules. Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are inapplicable or the requested information is shown in the financial statements or noted therein. 3. Exhibits. 3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 3.2 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 3.3 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and incorporated by reference herein) 3.4 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 2.4 to the Company's registration statement on Form 8-A filed with the Securities and Exchange Commission on July 20, 1998 and incorporated by reference herein) *3.5 Certificate of Amendment to Restated Certificate of Incorporation of the Company 3.6 Amended and Restated By-Laws of the Company, as amended through February 5, 1992 (filed as Exhibit 3.2 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.1 Form of certificate representing shares of Company's common stock (filed as Exhibit 1 to the Company's registration statement on Form 8-A filed with the Securities and Exchange Commission on July 20, 1998 and incorporated by reference herein) 4.2 Stock Registration Agreement, dated April 10, 1989, between the Company and Equus II Incorporated, formerly Equus Investments II, L.P. (filed as Exhibit 4.2 to the Company's registration statement no. 33-45612 and incorporated by reference herein) *4.3 Credit Agreement, dated March 25, 1998 (the "Credit Agreement"), by and among the Company, NationsBank, N.A. (as successor in interest to NationsBank of Texas, N.A.), as administrative agent ("NationsBank"), NationsBanc Montgomery Securities LLC, as arranger and syndication agent, Swiss Bank Corporation, as documentation agent ("Swiss Bank"), and the several lenders named therein 13 15 *4.4 First Amendment to Credit Agreement, dated May 1, 1998, among the Company, NationsBank, Swiss Bank and the parties named therein *4.5 Second Amendment to Credit Agreement, dated May 5, 1998, among the Company, NationsBank, Swiss Bank and the parties named therein *4.6 Master Assignment and Acceptance, dated as of May 6, 1998, among NationsBank, Swiss Bank and the several lenders named therein *4.7 Facility A Notes (Revolving Credit), dated May 6, 1998, of the Company in favor of lenders named therein *4.8 Facility B Notes (Term Loan), dated May 6, 1998, of the Company in favor of lenders named therein *4.9 Facility C Notes (364-day Revolving Facility), dated May 6, 1998, of the Company in favor of lenders named therein *4.10 Guaranty, dated May 1, 1998, between NationsBank and A&S Building Systems, L.P. *4.11 Guaranty, dated May 1, 1998, between NationsBank and NCI Building Systems, L.P. *4.12 Guaranty, dated May 1, 1998, between NationsBank and NCI Holding Corp. *4.13 Guaranty, dated May 1, 1998, between NationsBank and NCI Operating Corp. *4.14 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components Holding, Inc. *4.15 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Holding, Inc. *4.16 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components, L.P. (formerly MBCI Operating, L.P.) *4.17 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Operating, L.P. *4.18 Guaranty, dated May 13, 1998, between NationsBank and Metal Coaters of California, Inc. *4.19 Pledge Agreement, dated May 1, 1998, between the Company and NationsBank *4.20 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp. and NationsBank *4.21 Pledge Agreement, dated May 13, 1998, between the Metal Coaters Holding, Inc. and NationsBank *4.22 Assignment of Partnership Interests, dated May 1, 1998, between NCI Operating Corp. and NationsBank *4.23 Assignment of Partnership Interests, dated May 1, 1998, between NCI Holding Corp. and NationsBank 14 16 *4.24 Assignment of Partnership Interests, dated May 1, 1998, between Metal Building Components Holding, Inc. and NationsBank *4.25 Assignment of Partnership Interests, dated May 1, 1998, between Metal Coaters Holding, Inc. and NationsBank *4.26 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of the Company *4.27 Note Pledge Agreement, dated May 5, 1998, between the Company and NationsBank 4.28 Loan Agreement "A," dated September 1, 1991, between the City of Mattoon and the Company (filed as Exhibit 4.11 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.29 $250,000 Promissory Note A, dated October 31, 1991, in favor of the City of Mattoon executed by the Company (filed as Exhibit 4.12 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.30 Loan Agreement "B," dated September 1, 1991, between the City of Mattoon and the Company (filed as Exhibit 4.13 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.31 $250,000 Promissory Note B, dated January 20, 1992, in favor of the City of Mattoon executed by the Company (filed as Exhibit 4.14 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.32 Stock Retention and Registration Agreement, dated November 13, 1995, by and between the Company, Doors & Building Components, Inc., and David B. Curtis (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, and incorporated by reference herein) 4.33 7% Convertible Subordinated Debenture dated April 1, 1996, Due April 1, 2001, between NCI Building Systems, Inc. and John T. Eubanks (filed as Exhibit 4.15 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996, and incorporated by reference herein) 4.34 Rights Agreement, dated June 24, 1998, between the Company and Harris Trust and Savings Bank (filed as Exhibit 2 to the Company's registration statement on Form 8-A and incorporated by reference herein) 10.1 Employment Agreement, dated April 10, 1989, between the Company and Johnie Schulte, Jr. (filed as Exhibit 10.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 10.2 Amendment to Employment Agreement, dated February 21, 1992, between the Company and Johnie Schulte, Jr. (filed as Exhibit 10.1.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) *10.3 Amended and Restated Bonus Program, as amended and restated on December 11, 1998 15 17 *10.4 Amended and Restated Nonqualified Stock Option Plan, as amended and restated on December 12, 1996 10.5 Form of Employee Stock Option Agreement (filed as Exhibit 4.3 to the Company's registration statement no. 33-52080 and incorporated by reference herein) 10.6 Form of Director Stock Option Agreement (filed as Exhibit 4.4 to the Company's registration statement no. 33-52080 and incorporated by reference herein) 10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to the Company's registration statement no. 33-52078 and incorporated by reference herein) 10.8 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein) 10.10 Purchase Agreement, dated September 7, 1994, between NCI Building Systems, L.P., Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated October 14, 1994 and incorporated by reference herein) 10.11 Amendment to Purchase Agreement, dated October 14, 1994, between NCI Building Systems, L.P., Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated October 14, 1994 and incorporated by reference herein) 10.12 Form of Mesco Metal Buildings Agreement (filed as Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 and incorporated by reference herein) 10.13 Asset Purchase Agreement, dated October 13, 1995, by and among Doors & Building Components, Inc., David B. Curtis, DBCI Acquisition Corp. and the Company (filed as Exhibit 2 to the Company's Current Report on Form 8-K dated November 13, 1995 and incorporated by reference herein) 10.14 Asset Purchase Agreement, dated April 1, 1996, by and among Anderson Industries, Inc., Charles W. Anderson, Thomas L. Anderson, Jr., John T. Eubanks, Robert K. Landon, NCI Building Systems, L.P. and the Company (filed as Exhibit 2 to the Company's Current Report on Form 8-K dated April 1, 1996 and incorporated by reference herein). 10.15 Employment Agreement, dated April 1, 1996, between the Company and John T. Eubanks (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 and incorporated by reference herein) 10.16 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited and the Company, and joined therein for certain purposes by BTR plc (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 16 18 10.17 Letter Agreement, dated May 4, 1998, by and among the Company, BTR Australia Limited and BTR plc, amending the Stock Purchase Agreement (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) *13 1998 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7 and 8 of this Form 10-K, the 1998 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K. *21 List of Subsidiaries *23 Consent of Ernst & Young LLP *27 Financial Data Schedule - ---------- * Filed herewith (b) Reports on Form 8-K. (i) The Company's Current Report on Form 8-K dated May 4, 1998, and filed with the Commission on May 19, 1998, with respect to the MBCI Acquisition, as amended by Current Report on Form 8-K/A filed with the Commission on July 20, 1998, and Current Report on Form 8-K/A, Amendment No. 2, filed with the Commission on August 5, 1998 and Current Report on Form 8-K/A, Amendment No. 3, filed with the Commission on August 25, 1998. (ii) The Company's Current Report on Form 8-K dated and filed with the Commission on August 21, 1998, with respect to the Company's audited consolidated financial statements. "This Annual Report contains forward-looking statements concerning the business and operations of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and other factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and other patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic activities accretive to earnings, and general economic conditions affecting the construction industry, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations." 17 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 15th day of January, 1999. NCI BUILDING SYSTEMS, INC. By: /s/ Johnie Schulte, Jr. -------------------------------------------- Johnie Schulte, Jr., Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 29th day of January, 1999.
Name Title ---- ----- /s/ Johnie Schulte, Jr. Chief Executive Officer and Director - ------------------------------------ (principal executive officer) Johnie Schulte, Jr. /s/ Robert J. Medlock Executive Vice President and Chief Financial Officer - ------------------------------------ (principal accounting and financial officer) Robert J. Medlock /s/ Thomas C. Arnett Director - ------------------------------------ Thomas C. Arnett /s/ William D. Breedlove Director - ------------------------------------ William D. Breedlove /s/ Gary L. Forbes Director - ------------------------------------ Gary L. Forbes /s/ A.R. Ginn Director - ------------------------------------ A.R. Ginn /s/ Leonard F. George Director - ------------------------------------ Leonard F. George /s/ Kenneth W. Maddox Director - ------------------------------------ Kenneth W. Maddox Director - ------------------------------------ Robert N. McDonald /s/ C.A. Rundell, Jr. Director - ------------------------------------ C. A. Rundell, Jr. /s/ Daniel D. Zabcik Director - ------------------------------------ Daniel D. Zabcik
18 20 NCI BUILDING SYSTEMS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
=========================================================================================================== Balance at Additions Balance Beginning Charged to Costs at End Description of Period and Expenses Deductions(1) of Period - ----------------------------------------------------------------------------------------------------------- Year ended October 31, 1998: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges....... $1,498,000 $2,625,000 $1,802,000 $2,321,000 - ----------------------------------------------------------------------------------------------------------- Year ended October 31, 1997: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges....... $1,629,000 $1,223,000 $1,354,000 $1,498,000 - ----------------------------------------------------------------------------------------------------------- Year ended October 31, 1996: Reserves and allowances deducted from asset accounts: Allowance for uncollectible accounts and backcharges....... $1,340,000 $ 681,000 $ 392,000 $1,629,000 ===========================================================================================================
- ---------- (1) Uncollectible accounts, net of recoveries. 19 21 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 3.2 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 3.3 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and incorporated by reference herein) 3.4 Certificate of Amendment to Restated Certificate of Incorporation of the Company (filed as Exhibit 2.4 to the Company's registration statement on Form 8-A filed with the Securities and Exchange Commission on July 20, 1998 and incorporated by reference herein) *3.5 Certificate of Amendment to Restated Certificate of Incorporation of the Company 3.6 Amended and Restated By-Laws of the Company, as amended through February 5, 1992 (filed as Exhibit 3.2 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.1 Form of certificate representing shares of Company's common stock (filed as Exhibit 1 to the Company's registration statement on Form 8-A filed with the Securities and Exchange Commission on July 20, 1998 and incorporated by reference herein) 4.2 Stock Registration Agreement, dated April 10, 1989, between the Company and Equus II Incorporated, formerly Equus Investments II, L.P. (filed as Exhibit 4.2 to the Company's registration statement no. 33-45612 and incorporated by reference herein) *4.3 Credit Agreement, dated March 25, 1998 (the "Credit Agreement"), by and among the Company, NationsBank, N.A. (as successor in interest to NationsBank of Texas, N.A.), as administrative agent ("NationsBank"), NationsBanc Montgomery Securities LLC, as arranger and syndication agent, Swiss Bank Corporation, as documentation agent ("Swiss Bank"), and the several lenders named therein *4.4 First Amendment to Credit Agreement, dated May 1, 1998, among the Company, NationsBank, Swiss Bank and the parties named therein
22 *4.5 Second Amendment to Credit Agreement, dated May 5, 1998, among the Company, NationsBank, Swiss Bank and the parties named therein *4.6 Master Assignment and Acceptance, dated as of May 6, 1998, among NationsBank, Swiss Bank and the several lenders named therein *4.7 Facility A Notes (Revolving Credit), dated May 6, 1998, of the Company in favor of lenders named therein *4.8 Facility B Notes (Term Loan), dated May 6, 1998, of the Company in favor of lenders named therein *4.9 Facility C Notes (364-day Revolving Facility), dated May 6, 1998, of the Company in favor of lenders named therein *4.10 Guaranty, dated May 1, 1998, between NationsBank and A&S Building Systems, L.P. *4.11 Guaranty, dated May 1, 1998, between NationsBank and NCI Building Systems, L.P. *4.12 Guaranty, dated May 1, 1998, between NationsBank and NCI Holding Corp. *4.13 Guaranty, dated May 1, 1998, between NationsBank and NCI Operating Corp. *4.14 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components Holding, Inc. *4.15 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Holding, Inc. *4.16 Guaranty, dated May 1, 1998, between NationsBank and Metal Building Components, L.P. (formerly MBCI Operating, L.P.) *4.17 Guaranty, dated May 1, 1998, between NationsBank and Metal Coaters Operating, L.P. *4.18 Guaranty, dated May 13, 1998, between NationsBank and Metal Coaters of California, Inc. *4.19 Pledge Agreement, dated May 1, 1998, between the Company and NationsBank *4.20 Pledge Agreement, dated May 1, 1998, between NCI Holding Corp. and NationsBank *4.21 Pledge Agreement, dated May 13, 1998, between the Metal Coaters Holding, Inc. and NationsBank
23 *4.22 Assignment of Partnership Interests, dated May 1, 1998, between NCI Operating Corp. and NationsBank *4.23 Assignment of Partnership Interests, dated May 1, 1998, between NCI Holding Corp. and NationsBank *4.24 Assignment of Partnership Interests, dated May 1, 1998, between Metal Building Components Holding, Inc. and NationsBank *4.25 Assignment of Partnership Interests, dated May 1, 1998, between Metal Coaters Holding, Inc. and NationsBank *4.26 Promissory Note, dated May 5, 1998, of NCI Holding Corp. in favor of the Company *4.27 Note Pledge Agreement, dated May 5, 1998, between the Company and NationsBank 4.28 Loan Agreement "A," dated September 1, 1991, between the City of Mattoon and the Company (filed as Exhibit 4.11 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.29 $250,000 Promissory Note A, dated October 31, 1991, in favor of the City of Mattoon executed by the Company (filed as Exhibit 4.12 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.30 Loan Agreement "B," dated September 1, 1991, between the City of Mattoon and the Company (filed as Exhibit 4.13 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.31 $250,000 Promissory Note B, dated January 20, 1992, in favor of the City of Mattoon executed by the Company (filed as Exhibit 4.14 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 4.32 Stock Retention and Registration Agreement, dated November 13, 1995, by and between the Company, Doors & Building Components, Inc., and David B. Curtis (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995, and incorporated by reference herein) 4.33 7% Convertible Subordinated Debenture dated April 1, 1996, Due April 1, 2001, between NCI Building Systems, Inc. and John T. Eubanks (filed as Exhibit 4.15 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996, and incorporated by reference herein)
24 4.34 Rights Agreement, dated June 24, 1998, between the Company and Harris Trust and Savings Bank (filed as Exhibit 2 to the Company's registration statement on Form 8-A and incorporated by reference herein) 10.1 Employment Agreement, dated April 10, 1989, between the Company and Johnie Schulte, Jr. (filed as Exhibit 10.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 10.2 Amendment to Employment Agreement, dated February 21, 1992, between the Company and Johnie Schulte, Jr. (filed as Exhibit 10.1.1 to the Company's registration statement no. 33-45612 and incorporated by reference herein) *10.3 Amended and Restated Bonus Program, as amended and restated on December 11, 1998 *10.4 Amended and Restated Nonqualified Stock Option Plan, as amended and restated on December 12, 1996 10.5 Form of Employee Stock Option Agreement (filed as Exhibit 4.3 to the Company's registration statement no. 33-52080 and incorporated by reference herein) 10.6 Form of Director Stock Option Agreement (filed as Exhibit 4.4 to the Company's registration statement no. 33-52080 and incorporated by reference herein) 10.7 401(k) Profit Sharing Plan (filed as Exhibit 4.1 to the Company's registration statement no. 33-52078 and incorporated by reference herein) 10.8 Form of Metallic Builder Agreement (filed as Exhibit 10.10 to the Company's registration statement no. 33-45612 and incorporated by reference herein) 10.9 Form of A&S Builder Agreement (filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated by reference herein) 10.10 Purchase Agreement, dated September 7, 1994, between NCI Building Systems, L.P., Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated October 14, 1994 and incorporated by reference herein)
25 10.11 Amendment to Purchase Agreement, dated October 14, 1994, between NCI Building Systems, L.P., Ellis Building Components, Inc., Tony Ellis and Ronald Ellis (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated October 14, 1994 and incorporated by reference herein) 10.12 Form of Mesco Metal Buildings Agreement (filed as Exhibit 4.13 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 and incorporated by reference herein) 10.13 Asset Purchase Agreement, dated October 13, 1995, by and among Doors & Building Components, Inc., David B. Curtis, DBCI Acquisition Corp. and the Company (filed as Exhibit 2 to the Company's Current Report on Form 8-K dated November 13, 1995 and incorporated by reference herein) 10.14 Asset Purchase Agreement, dated April 1, 1996, by and among Anderson Industries, Inc., Charles W. Anderson, Thomas L. Anderson, Jr., John T. Eubanks, Robert K. Landon, NCI Building Systems, L.P. and the Company (filed as Exhibit 2 to the Company's Current Report on Form 8-K dated April 1, 1996 and incorporated by reference herein). 10.15 Employment Agreement, dated April 1, 1996, between the Company and John T. Eubanks (filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 and incorporated by reference herein) 10.16 Stock Purchase Agreement, dated March 25, 1998, by and among BTR Australia Limited and the Company, and joined therein for certain purposes by BTR plc (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) 10.17 Letter Agreement, dated May 4, 1998, by and among the Company, BTR Australia Limited and BTR plc, amending the Stock Purchase Agreement (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated May 19, 1998 and incorporated by reference herein) *13 1998 Annual Report to Shareholders. With the exception of the information incorporated by reference into Items 5, 6, 7 and 8 of this Form 10-K, the 1998 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K. *21 List of Subsidiaries *23 Consent of Ernst & Young LLP *27 Financial Data Schedule
- ---------- * Filed herewith EX-3.5 2 CERTIFICATE OF AMENDMENT TO RESTATED CERT. OF INC. 1 EXHIBIT 3.5 CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF NCI BUILDING SYSTEMS, INC. Pursuant to the provisions of Section 242 of the General Corporation Law of the State of Delaware, NCI Building Systems, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify: FIRST: That the Board of Directors of the Corporation, at a meeting duly called pursuant to Section 141(f) of the General Corporation Law of the State of Delaware, adopted the following resolutions setting forth and declaring advisable the following proposed amendment to the Restated Certificate of Incorporation of the Corporation: A. Article Fourth, Section 1 of the Restated Certificate of Incorporation of the Company is hereby amended by deleting in its entirety the first sentence of Article Fourth, Section 1 of the Restated Certificate of Incorporation and adding the following revised text: "FOURTH. SECTION 1. Capitalization. The Corporation is authorized to issue Fifty-One Million (51,000,000) shares of capital stock. Fifty Million (50,000,000) of the authorized shares shall be common stock, one cent ($0.01) par value each ("Common Stock"), and One Million (1,000,000) of the authorized shares shall be preferred stock, one dollar ($1.00) par value each ("Preferred Stock")." SECOND: That at a special meeting of stockholders held on September 29, 1998 and duly called pursuant to Section 222 of the General Corporation Law of the State of Delaware, a majority of the stockholders approved the foregoing amendment in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of said corporation shall not be reduced under or by reason of said amendment. FIFTH: In accordance with Section 103(d) of the General Corporation Law of the State of Delaware, this amendment shall become effective as of the filing hereof. 2 IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to its Restated Certificate of Incorporation to be executed by a duly authorized officer on this 29th day of September, 1998. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock ------------------------------------- Robert J. Medlock, Vice President and Chief Financial Officer 2 EX-4.3 3 CREDIT AGREEMENT DATED MARCH 25, 1998 1 EXHIBIT 4.3 =============================================================================== CREDIT AGREEMENT AMONG NCI BUILDING SYSTEMS, INC., BORROWER NATIONSBANK OF TEXAS, N.A., ADMINISTRATIVE AGENT NATIONSBANC MONTGOMERY SECURITIES LLC, ARRANGER AND SYNDICATION AGENT SWISS BANK CORPORATION, DOCUMENTATION AGENT AND THE LENDERS NAMED HEREIN $600,000,000 MARCH 25, 1998 =============================================================================== 2
TABLE OF CONTENTS Page ---- SECTION 1 DEFINITIONS AND TERMS..........................................1 1.1 Definitions....................................................1 1.2 Number and Gender of Words....................................11 1.3 Accounting Principles.........................................11 SECTION 2 COMMITMENT....................................................12 2.1 Facilities A, B and C.........................................12 2.1.1 Facility A...........................................12 2.1.2 Facility B...........................................12 2.1.3 Facility C...........................................12 2.2 Loan Procedure................................................13 2.3 LC Subfacility................................................13 2.4 Termination of Revolving Facilities...........................16 SECTION 3 TERMS OF PAYMENT..............................................16 3.1 Notes and Payments............................................16 3.2 Interest and Principal Payments...............................16 3.3 Interest Options..............................................19 3.4 Quotation of Rates............................................19 3.5 Default Rate..................................................19 3.6 Interest Recapture............................................19 3.7 Interest Calculations.........................................19 3.8 Maximum Rate..................................................19 3.9 Interest Periods..............................................20 3.10 Conversions...................................................20 3.11 Order of Application..........................................20 3.12 Right of Set-off..............................................21 3.13 Adjustments...................................................21 3.14 Booking Loans.................................................21 3.15 Increased Cost and Reduced Return.............................21 3.16 Limitation on Types of Loans..................................23 3.17 Illegality....................................................23 3.18 Treatment of Affected Loans...................................23 3.19 Compensation..................................................24 3.20 Taxes.........................................................24 3.21 Extensions and Conversions of Facility C Termination Date.....26 3.22 Replacement Lender............................................26 SECTION 4 FEES..........................................................26 4.1 Treatment of Fees.............................................26 4.2 Underwriting and Administrative Fees..........................27 4.3 LC Fees.......................................................27 4.4 Commitment Fee................................................27
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Page ---- SECTION 5 SECURITY......................................................27 5.1 Guaranty......................................................27 5.2 Collateral....................................................27 5.3 Additional Security and Guaranties............................27 SECTION 6 CONDITIONS PRECEDENT..........................................28 6.1 General.......................................................28 6.2 Supplements to Schedules......................................28 SECTION 7 REPRESENTATIONS AND WARRANTIES................................29 7.1 Purpose of Credit Facility....................................29 7.2 Corporate Existence, Good Standing, Authority and Compliance..29 7.3 Subsidiaries..................................................29 7.4 Authorization and Contravention...............................29 7.5 Binding Effect................................................29 7.6 Financial Statements; Fiscal Year.............................30 7.7 Litigation....................................................30 7.8 Taxes.........................................................30 7.9 Environmental Matters.........................................30 7.10 Employee Plans................................................31 7.11 Properties; Liens.............................................31 7.12 Location......................................................31 7.13 Government Regulations........................................31 7.14 Transactions with Affiliates..................................31 7.15 Debt..........................................................31 7.16 Material Agreements...........................................31 7.17 Insurance.....................................................31 7.18 Labor Matters.................................................31 7.19 Solvency......................................................32 7.20 Trade Names...................................................32 7.21 Intellectual Property.........................................32 7.22 Full Disclosure...............................................32 7.23 Acquisition...................................................32 SECTION 8 AFFIRMATIVE COVENANTS.........................................33 8.1 Items to be Furnished.........................................33 8.2 Use of Proceeds...............................................34 8.3 Books and Records.............................................34 8.4 Inspections...................................................34 8.5 Taxes.........................................................34 8.6 Payment of Obligations........................................34 8.7 Expenses; Indemnification.....................................34 8.8 Maintenance of Existence, Assets, and Business................35 8.9 Insurance.....................................................36 8.10 Preservation and Protection of Rights.........................36 8.11 Environmental Laws............................................36
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Page ---- 8.12 Subsidiaries..................................................36 SECTION 9 NEGATIVE COVENANTS............................................36 9.1 Taxes.........................................................36 9.2 Payment of Obligations........................................36 9.3 Employee Plans................................................36 9.4 Debt..........................................................36 9.5 Liens.........................................................37 9.6 Transactions with Affiliates..................................37 9.7 Compliance with Laws and Documents............................37 9.8 Loans, Advances and Investments...............................37 9.9 Dividends and Distributions...................................38 9.10 Sale of Assets................................................38 9.11 Mergers and Dissolutions......................................38 9.12 Assignment....................................................38 9.13 Fiscal Year and Accounting Methods............................38 9.14 New Businesses................................................38 9.15 Government Regulations........................................38 9.16 Tax Sharing Agreements........................................39 SECTION 10 FINANCIAL COVENANTS...........................................39 10.1 Minimum Net Worth.............................................39 10.2 Maximum Leverage Ratio........................................39 10.3 Maximum Senior Debt Ratio.....................................39 10.4 Minimum Fixed Charge Coverage Ratio...........................40 SECTION 11 DEFAULT.......................................................40 11.1 Payment of Obligation.........................................40 11.2 Covenants.....................................................40 11.3 Debtor Relief.................................................40 11.4 Judgments and Attachments.....................................41 11.5 Government Action.............................................41 11.6 Misrepresentation.............................................41 11.7 Ownership of Other Companies..................................41 11.8 Default Under Other Agreements................................41 11.9 LCs...........................................................41 11.10 Validity and Enforceability of Loan Documents.................41 11.11 Change of Control.............................................41
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Page ---- SECTION 12 RIGHTS AND REMEDIES...........................................42 12.1 Remedies Upon Default.........................................42 12.2 Company Waivers. ............................................42 12.3 Performance by Agent..........................................42 12.4 Not in Control................................................43 12.5 Course of Dealing.............................................43 12.6 Cumulative Rights.............................................43 12.7 Application of Proceeds.......................................43 12.8 Diminution in Value of Collateral.............................43 12.9 Certain Proceedings...........................................43 SECTION 13 AGREEMENT AMONG LENDERS.......................................43 13.1 Appointment, Powers, and Immunities of Agent..................43 13.2 Reliance by Agent.............................................44 13.3 Defaults......................................................44 13.4 Rights as Lender..............................................44 13.5 Indemnification...............................................45 13.6 Non-Reliance on Agent and Other Lenders.......................45 13.7 Resignation of Agent..........................................45 13.8 Relationship of Lenders.......................................45 13.9 Collateral Matters............................................46 13.10 Benefits of Agreement.........................................46 SECTION 14 MISCELLANEOUS.................................................46 14.1 Headings......................................................46 14.2 Nonbusiness Days; Time........................................47 14.3 Communications................................................47 14.4 Form and Number of Documents..................................47 14.5 Exceptions to Covenants.......................................47 14.6 Survival......................................................47 14.7 Governing Law.................................................47 14.8 Invalid Provisions............................................47 14.9 Venue; Service of Process; Jury Trial.........................48 14.10 Amendments, Consents, Conflicts and Waivers...................48 14.11 Multiple Counterparts.........................................49 14.12 Successors and Assigns; Assignments and Participations........49 14.13 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances.................................................51 14.14 Entirety......................................................51
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SCHEDULES AND EXHIBITS ---------------------- Schedule 1 Addresses, Commitments and Wiring Information Schedule 6 Conditions Precedent Schedule 7.2 Jurisdictions of Incorporation and Business Schedule 7.3 Corporate Structure Schedule 7.7 Material Litigation Schedule 7.9 Environmental Matters Schedule 7.11 Permitted Liens Schedule 7.12 Chief Executive Offices Schedule 7.14 Material Transactions with Affiliates Schedule 7.15 Permitted Debt Schedule 7.20 Trade Names Schedule 9.8 Existing Investments Exhibit A Facility A Note (Revolving Credit) Exhibit B Facility B Note (Term Loan) Exhibit C Facility C Note (364-day Revolving Facility) Exhibit D Guaranty Exhibit E Loan Request Exhibit F Conversion Request Exhibit G LC Request Exhibit H Compliance Certificate Exhibit I Assignment and Acceptance Exhibit J Pledge Agreement Exhibit K Assignment of Partnership Interests Exhibit L Legal Opinion
(v) 7 CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of March 25, 1998, among NCI Building Systems, Inc., a Delaware corporation ("Borrower"), the Lenders (defined below), NationsBank of Texas, N.A., as Administrative Agent for itself and the other Lenders ("Agent"), NationsBanc Montgomery Securities LLC, as Arranger and Syndication Agent, and Swiss Bank Corporation, as Documentation Agent. Borrower has requested Lenders to extend credit not to exceed an aggregate principal amount of $600,000,000, to be allocated as follows: A. A revolving facility of up to $200,000,000 ("Facility A"); B. A term loan in the principal amount of up to $200,000,000 ("Facility B"); and C. A 364-day revolving facility of up to $200,000,000 ("Facility C"). Lenders are willing to extend the requested credit on the terms and conditions of this Agreement. Accordingly, the undersigned agree as follows: SECTION 1 DEFINITIONS AND TERMS. 1.1 Definitions. As used in the Loan Documents: ACQUISITION means the purchase by Borrower of the stock of Amatek pursuant to the Purchase Agreement. ADJUSTED EURODOLLAR RATE means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent to be equal to the sum of (a) the quotient obtained by dividing (i) the Eurodollar Rate for such Eurodollar Loan for such Interest Period by (ii) 1 minus the Reserve Requirement for such Eurodollar Loan for such Interest Period, plus (b) the Applicable Margin. AFFILIATE of a Person means any other individual or entity who directly or indirectly controls, or is controlled by, or is under common control with, that Person. For purposes of this definition, "control," "controlled by," and "under common control with" mean possession, directly or indirectly, of power to direct (or cause the direction of) management or policies (whether through ownership of voting securities, or other ownership interests, by contract, or otherwise). AGENT means NationsBank of Texas, N.A., a national banking association, and its successor or successors as agent for Lenders under this Agreement. AGREEMENT means this Credit Agreement, as amended, supplemented or restated from time to time. AMATEK means Amatek Holdings, Inc., a Texas corporation. APPLICABLE LENDING OFFICE means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Agent 8 and the Borrower by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained. APPLICABLE MARGIN means, on any day, the interest margin over the Base Rate or the Eurodollar Rate, as the case may be, based on the ratio of Funded Debt to EBITDA, as follows:
========================================================================================== RATIO OF FUNDED DEBT APPLICABLE APPLICABLE TO EBITDA MARGIN FOR MARGIN FOR BASE RATE EURODOLLAR LOANS LOANS - ------------------------------------------------------------------------------------------ Greater than 3.75 to 1.0 0.500% 2.000% - ------------------------------------------------------------------------------------------ Less than or equal to 3.75 to 1.0, but greater than 0.250% 1.750% 3.25 to 1.0 - ------------------------------------------------------------------------------------------ Less than or equal to 3.25 to 1.0, but greater than 0% 1.375% 2.5 to 1.0 - ------------------------------------------------------------------------------------------ Less than or equal to 2.5 to 1.0, but greater than 0% 1.000% 2.0 to 1.0 - ------------------------------------------------------------------------------------------ Less than or equal to 2.0 to 1.0 0% 0.750% ==========================================================================================
The ratio of Funded Debt to EBITDA is determined from the Current Financials and any related Compliance Certificate. EBITDA is calculated for the most recently-completed four fiscal quarters of Borrower (using pro forma combined information for the Companies and Amatek and its Subsidiaries for any fiscal period (or portion thereof) of Borrower prior to the Acquisition included in the calculation) and Funded Debt is calculated as of the last day of such four fiscal quarter period. The Applicable Margin, as adjusted to reflect such calculations, shall become effective on the first day following the last day of the four fiscal quarter period for which such calculation is made, notwithstanding that Current Financials are delivered, and the calculations are actually made, at a later date. If Borrower fails to timely furnish to Agent the Current Financials and any related Compliance Certificate or, if for some other reason, a new Applicable Margin for a current period cannot be calculated, then the Applicable Margin in effect on the last day of the last four fiscal quarter period for which EBITDA was calculated shall remain in effect until a new Applicable Margin can be calculated, which new Applicable Margin shall become effective as provided in the immediately preceding sentence. Notwithstanding the foregoing, the ratio of Funded Debt to EBITDA shall be deemed to be (a) less than 2.00 to 1.0 until consummation of the Acquisition, and (b) thereafter, greater than 3.75 to 1.0, in each case, until delivery of Current Financials (and any related Compliance Certificate) for the fiscal quarter of Borrower ending July 31, 1998. APPLICABLE PERCENTAGE means, on any day, the commitment fee percentage applicable under Section 4 based on the ratio of Funded Debt to EBITDA, as follows (calculated in accordance with the definition of "Applicable Margin"): 2 9
=============================================================================== RATIO OF FUNDED DEBT APPLICABLE TO EBITDA PERCENTAGE - ------------------------------------------------------------------------------- Greater than 3.75 to 1.0 0.500% - ------------------------------------------------------------------------------- Less than or equal to 3.75 to 1.0, but greater than 3.25 to 1.0 0.500% - ------------------------------------------------------------------------------- Less than or equal to 3.25 to 1.0, but greater than 2.5 to 1.0 0.375% - ------------------------------------------------------------------------------- Less than or equal to 2.5 to 1.0, but greater than 2.0 to 1.0 0.300% - ------------------------------------------------------------------------------- Less than or equal to 2.0 to 1.0 0.250% ===============================================================================
ASSIGNMENT OF PARTNERSHIP INTERESTS means an assignment substantially in the form of EXHIBIT K. BASE RATE means, for any day, the rate per annum equal to the sum of (a) the higher of (i) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (ii) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. BASE RATE LOANS means Loans that bear interest at rates based upon the Base Rate. BORROWER is defined in the preamble to this Agreement. BUSINESS DAY means (a) for all purposes, any day other than Saturday, Sunday, and any other day that commercial banks are authorized by Law to be closed in Texas or New York and (b) for purposes of any Eurodollar Loan, a day that satisfies the requirements of clause (a) and is a day that commercial banks are open for domestic or international business in London. CAPITAL LEASE means any capital lease or sublease that has been capitalized on a balance sheet. CODE means the Internal Revenue Code of 1986, as amended, and related rules and regulations. COLLATERAL is defined in SECTION 5.2. COMMITMENT USAGE means, at any time, for each Lender, the sum of its Facility A Commitment Usage, its Facility B Principal Debt, and its Facility C Principal Debt. COMMITMENT means the amounts (which are subject to reduction and cancellation as provided in this Agreement) stated beside a Lender's name for Facility A, Facility B and Facility C on SCHEDULE 1 as most recently amended under this Agreement. COMPANY or COMPANIES means, at any time, Borrower and each of its Subsidiaries. COMPLIANCE CERTIFICATE means a certificate substantially in the form of EXHIBIT H and signed by a Responsible Officer. 3 10 CONTINUE, CONTINUATION, and CONTINUED shall refer to the continuation pursuant to SECTION 3.9 or SECTIONS 3.15 through 3.19 of a Loan of one Type as a Loan of the same Type from one Interest Period to the next Interest Period. CONVERT, CONVERSION, and CONVERTED shall refer to a conversion pursuant to SECTION 3.10 or Sections 3.15 through 3.19 of one Type of Loan into another Type of Loan. CONVERSION REQUEST means a request substantially in the form of EXHIBIT F. CURRENT FINANCIALS means, at any time, the consolidated Financial Statements of Borrower and its Subsidiaries most recently delivered to Agent under SECTIONS 8.1(a) or 8.1(b), as the case may be. DEBT means (without duplication), for any Person, (a) all obligations required by GAAP to be classified upon such Person's balance sheet as liabilities, (b) liabilities secured (or for which the holder of the Debt has an existing Right, contingent or otherwise, to be so secured) by any Lien existing on property owned or acquired by that Person, (c) obligations that have been (or under GAAP should be) capitalized for financial reporting purposes, and (d) all guaranties, endorsements and other contingent obligations with respect to obligations of others of the types described in clauses (a), (b) and (c) above. DEBTOR RELIEF LAWS means Title 11 of the U.S. Code and all other applicable state or federal liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments or similar Laws affecting creditors' Rights in effect from time to time. DEFAULT is defined in SECTION 11. DEFAULT RATE means an annual rate of interest equal from day to day to the lesser of (a) the rate otherwise applicable under this Agreement (or if no rate is otherwise specified by this Agreement, then the Base Rate plus the Applicable Margin) plus 2% and (b) the Maximum Rate. DETERMINING LENDERS means any combination of Lenders holding more than (a) 51% of the Total Commitments, if no Principal Debt or LC Exposure is outstanding, or (b) 51% of the Total Commitment Usage if any Principal Debt or LC Exposure is outstanding. DISTRIBUTION means, with respect to any shares of any capital stock or other equity securities or other interests issued by a Person, (a) the retirement, redemption, purchase or other acquisition for value of those securities by such Person, (b) the declaration or payment of any dividend on or with respect to those securities by such Person, (c) any loan or advance by that Person to, or other investment by that Person in, the holder of any of those securities, and (d) any other payment by that Person with respect to those securities. EBITDA means, in respect of any period, the following (calculated on a consolidated basis for the Companies in accordance with GAAP): net income before interest expenses, Taxes, non-cash operating charges (such as depreciation and amortization expense), non-cash charges in respect of pension and retiree benefits, and extraordinary gains and losses; provided that, with respect to Amatek and its Subsidiaries, EBITDA shall include amounts expended for corporate overhead and executive employee compensation 4 11 during the three fiscal quarters of Amatek preceding the Acquisition and the fiscal quarter of Amatek in which the Acquisition is consummated. EMPLOYEE PLAN means an employee pension benefit plan covered by Title IV of ERISA and established or maintained by any Company. ENDING CALENDAR MONTH is defined in SECTION 3.9. ENVIRONMENTAL LAW means any Law that relates to the pollution or protection of the environment or to Materials of Environmental Concern. ERISA means the Employee Retirement Income Security Act of 1974, as amended, and related rules and regulations. EURODOLLAR LOANS means Loans that bear interest at rates based upon the Adjusted Eurodollar Rate. EURODOLLAR RATE means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, that if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). EXISTING BANK DEBT means all obligations of the Companies under the Credit Agreement dated as of March 12, 1993, as amended. FACILITIES means Facility A, Facility B and Facility C. FACILITY A is defined in the preamble to this Agreement. FACILITY A COMMITMENT means, at any time, the sum of all Commitments for all Lenders under Facility A (as reduced or canceled under this Agreement) then in effect. FACILITY A COMMITMENT USAGE means, at any time, the sum of the Facility A Principal Debt plus the LC Exposure. FACILITY A NOTE means a promissory note substantially in the form of EXHIBIT A. FACILITY A PRINCIPAL DEBT means, at any time, the unpaid principal balance of all Loans under Facility A. 5 12 FACILITY A TERMINATION DATE means the earlier of (a) July 1, 2003, and (b) the effective date that Lenders' commitments to lend under Facility A are otherwise canceled or terminated in accordance with this Agreement. FACILITY B is defined in the preamble to this Agreement. FACILITY B COMMITMENT means, at any time, the sum of all Commitments for all Lenders under Facility B (as reduced or canceled under this Agreement) then in effect. FACILITY B MATURITY DATE means the earlier of (a) July 1, 2003, or (b) the acceleration of maturity of Facility B in accordance with SECTION 12 of this Agreement. FACILITY B NOTE means a promissory note substantially in the form of EXHIBIT B. FACILITY B PRINCIPAL DEBT means, at any time, the unpaid principal balance of all Loans under Facility B. FACILITY C is defined in the preamble to this Agreement. FACILITY C COMMITMENT means, at any time, the sum of all Commitments for all Lenders under Facility C (as reduced or canceled under this Agreement) then in effect. FACILITY C NOTE means a promissory note substantially in the form of EXHIBIT C. FACILITY C PRINCIPAL DEBT means, at any time, the unpaid principal balance of all Loans under Facility C. FACILITY C TERMINATION DATE means, for each Lender, the earlier of (a) the date 364 days after the date on which the Acquisition is consummated (subject to extensions and conversions of such Lender's Loans for Facility C under Section 3.21), but in no event later than July 1, 2003, and (b) the effective date that Lenders' commitments to lend under Facility C are otherwise canceled or terminated in accordance with this Agreement. FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Agent (in its individual capacity) on such day on such transactions as determined by Agent. FINANCIAL HEDGE means a swap, collar, floor, cap, or other contract between any Company and any Lender, which is intended to reduce or eliminate the risk of fluctuations in interest rates and which is legal and enforceable under applicable Law. 6 13 FINANCIAL STATEMENTS of a Person means balance sheets, profit and loss statements, reconciliations of capital and surplus, and statements of cash flow prepared (a) according to GAAP, (b) except as stated in Section 1.3, in comparative form to prior year-end figures or corresponding periods of the preceding fiscal year, as applicable, and (c) on a consolidated basis if that Person had any consolidated Subsidiaries during the applicable period. FUNDED DEBT means, when determined, the following (calculated on a consolidated basis for the Companies in accordance with GAAP): (a) all obligations for borrowed money (whether as a direct obligor on a promissory note, bond, debenture or other similar instrument, a reimbursement obligor on an LC or other letter of credit, a guarantor, or otherwise) plus (b) all Capital Lease obligations. FUNDING LOSS, means, without duplication, (a) the administrative or reemployment costs customarily charged by a Lender when (i) Borrower fails or refuses (for any reason other than such Lender's failure to comply with this Agreement) to take any Loan that it has requested under this Agreement, or (ii) Borrower prepays or pays any Loan or Converts any Loan to a Loan of another Type, in each case, before the last day of the applicable Interest Period, plus (b) an amount equal to the excess of the amount of interest that would have accrued on the Loan at the elected interest rate during the remainder of the applicable Interest Period (but for such failure, refusal, payment, prepayment or Conversion) over the amount of interest that would accrue on the same Type of Loan for an interest period of the same duration as the remainder of the applicable Interest Period. GAAP means generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board that are applicable on the date of this Agreement. GUARANTORS means A&S Building Interests, Inc., a Texas corporation (f/k/a A&S Building Systems, Inc.), A&S Building Systems, L.P., a Texas limited partnership, NCI Building Systems, L.P., a Texas limited partnership, NCI Holding Corp., a Delaware corporation, NCI Operating Corp., a Nevada corporation, and any future domestic Subsidiary of Borrower (including, without limitation, Amatek and its domestic Subsidiaries upon consummation of the Acquisition and delivery of Guarantees under Section 8.12). GUARANTY means a guaranty substantially in the form of EXHIBIT D. INTEREST PERIOD is determined in accordance with SECTION 3.9. LAWS means all applicable statutes, laws, treaties, ordinances, rules, regulations, permits, orders, writs, injunctions, decrees, judgments, opinions and interpretations of any Tribunal. LC means a letter of credit (in such form as shall be customary in respect of obligations of a similar nature) (a) existing on the date hereof and issued by NationsBank in connection with the Existing Bank Debt, or (b) issued by Agent under this Agreement and under an LC Agreement. LC AGREEMENT means a letter of credit application and agreement (in form and substance satisfactory to Agent) submitted by Borrower to Agent for a letter of credit for the account of any Company. LC EXPOSURE means, at any time (without duplication) the sum of (a) the aggregate undrawn and uncancelled portions of all outstanding LCs plus (b) the aggregate unpaid reimbursement obligations of 7 14 Borrower under drawings or drafts under any LC, excluding Loans to fund such reimbursement obligations under SECTION 2.3(c). LC REQUEST means a request substantially in the form of EXHIBIT G. LENDER LIENS means Liens in favor of Lenders, or Agent on behalf of Lenders, securing any of the Obligation. LENDERS means the financial institutions named on the attached SCHEDULE 1 or on the most recently amended SCHEDULE 1, if any, delivered by Agent under this Agreement, and, subject to this Agreement, their respective successors and assigns (but not any Participant who is not otherwise a party to this Agreement). LIEN means any lien, mortgage, security interest, pledge, assignment, charge, title retention agreement or encumbrance of any kind and any other arrangement for a creditor's claim to be satisfied from assets or proceeds prior to the claims of other creditors or the owners. LITIGATION means any action by or before any Tribunal. LOAN means (without duplication) any amount disbursed by (a) one or more Lenders to or on behalf of Borrower under the Loan Documents, whether such amount constitutes an original disbursement of funds, the Continuation of an amount outstanding under Facility A, Facility B or Facility C, or the financing of an LC reimbursement obligation under Facility A, or (b) any Lender in accordance with, and to satisfy the obligations of any Company under, any Loan Document. LOAN DATE means for any Loan the date for which funds are requested by Borrower. LOAN DOCUMENTS means (a) this Agreement, certificates and reports delivered under this Agreement, and exhibits and schedules to this Agreement, (b) the Notes, Guarantees, Security Documents and other agreements, documents and instruments in favor of Agent or Lenders (or Agent on behalf of Lenders) ever delivered in connection with or under this Agreement or otherwise delivered in connection with all or any part of the Obligation (excluding financial projections), (c) all LCs and LC Agreements, (d) any Financial Hedge between any Company and any Lender (or any Affiliate of any Lender), and (e) all renewals, extensions and restatements of, and amendments and supplements to, any of the foregoing. LOAN REQUEST means a request substantially in the form of EXHIBIT E. MATERIAL ADVERSE EVENT means (a) any Default, or (b) any circumstance or event that, individually or collectively with other circumstances or events, reasonably is expected to result in any (i) impairment of the ability of Borrower (individually) or the Companies (as a whole) to perform any payment or other material obligations under any Loan Document, (ii) impairment of the ability of Agent or any Lender to enforce (A) any of the material obligations of Borrower (individually) or the Companies (as a whole) under this Agreement, or (B) any of their respective material Rights under the Loan Documents, or (iii) material and adverse effect on the financial condition of Borrower (individually) or the Companies (as a whole) as represented to Lenders in the Current Financials. MATERIAL AGREEMENT means, for any Person, any agreement (excluding purchase orders for material or inventory in the ordinary course of business) to which that Person is a party, by which that Person is 8 15 bound, or to which any assets of that Person may be subject, and that is not cancelable by that Person upon 30 or fewer days' notice without liability for further payment other than nominal penalty, and that requires that Person to pay more than $5,000,000 during any 12-month period. MATERIALS OF ENVIRONMENTAL CONCERN means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenals, urea-formaldehyde insulation, asbestos, pollutants, contaminants, radioactive materials, and any other substances of any kind, whether or not such substance is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or could give rise to liability under any Environmental Law. MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for a Lender, the maximum non-usurious amount and the maximum non-usurious rate of interest that, under applicable Law, such Lender is permitted to contract for, charge, take, reserve or receive on the Obligation. MBCI means Metal Buildings Components, Inc., an indirect wholly-owned subsidiary of Amatek. MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which any Company (or any Person that, for purposes of Title IV of ERISA, is a member of Borrower's controlled group or is under common control with Borrower within the meaning of Section 414 of the Code) is making, or has made, or is accruing, or has accrued, an obligation to make contributions. NATIONSBANK means NationsBank of Texas, N.A. NET WORTH means, when determined, total assets minus total liabilities (in each case calculated on a consolidated basis for the Companies in accordance with GAAP). NOTES means all outstanding and unpaid Facility A Notes, Facility B Notes and Facility C Notes. OBLIGATION means all present and future indebtedness and obligations, and all renewals, increases and extensions thereof, or any part thereof, now or hereafter owed to Agent or any Lender by any Company under any Loan Document, together with all interest accruing thereon, fees, costs and expenses (including, without limitation, all attorneys' fees and expenses incurred in the enforcement or collection thereof) payable under the Loan Documents or in connection with the protection of Rights under the Loan Documents. OTHER TAXES is defined in SECTION 3.20. PARTICIPANT is defined in SECTION 14.12(e). PAYMENT TAXES is defined in SECTION 3.20. PBGC means the Pension Benefit Guaranty Corporation, or any successor thereof, established under ERISA. PERMITTED DEBT means Debt described on Schedule 7.15. PERMITTED LIENS means Liens described on Schedule 7.11. 9 16 PERSON means any individual, entity or Tribunal. PLEDGE AGREEMENT means a Pledge Agreement substantially in the form of EXHIBIT J. POTENTIAL DEFAULT means the occurrence of any event or the existence of any circumstance that would, upon notice or lapse of time or both, become a Default. PRIME RATE means the per annum rate of interest established from time to time by NationsBank as its prime rate, which rate may not be the lowest rate of interest charged by NationsBank to its customers. PRINCIPAL DEBT means, at any time, the unpaid principal balance of all Loans. PRINCIPAL OFFICE means the principal office of NationsBank, presently located at 901 Main Street, Dallas, Texas 75202. PRO RATA and PRO RATA PART means, when determined for any Lender, (a) if there is no Principal Debt or LC Exposure, the proportion (stated as a percentage) that such Lender's Commitment bears to the Total Commitment, or (b) if there is any Principal Debt or LC Exposure, the proportion (stated as a percentage) that the sum of (i) the Principal Debt owed to such Lender and (ii) and (without duplication) the LC Exposure of such Lender, bears to the (x) aggregate Principal Debt owed to and (y) (without duplication) the LC Exposure of all Lenders. PURCHASE AGREEMENT means the Stock Purchase Agreement (and all schedules and exhibits) between Borrower and BTR Australia Limited, a company organized under the laws of Australian, and joined in for certain limited purposes, by BTR plc, dated as of March 25, 1998. PURCHASER is defined in SECTION 14.12(b). REGISTER is defined in SECTION 14.12(c). REPLACEMENT LENDER is defined in SECTION 3.22. REPRESENTATIVES means representatives, officers, directors, employees, attorneys and agents. RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Adjusted Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. RESPONSIBLE OFFICER means the chairman, president, chief executive officer, chief financial officer, chief operating officer, chief accounting officer, any vice president, controller or treasurer of Borrower. 10 17 RIGHTS means rights, remedies, powers, privileges and benefits. SCHEDULE means one of the Schedules attached to this Agreement, as amended or supplemented pursuant to SECTION 6.2. SECURITY DOCUMENTS means, collectively, the Pledge Agreements, the Assignments of Partnership Interests, and any other security agreement, mortgage, deed of trust or other agreement or document, together with all related financing statements, stock powers, etc., in form and substance satisfactory to Agent and its legal counsel, executed and delivered by any Person in connection with this Agreement to create a Lender Lien on any of its real or personal property, as amended, supplemented or restated. SENIOR DEBT means, when determined, the Obligation and all other Funded Debt, except for Debt which is contractually subordinated or junior in right of payment to the Obligation. SOLVENT means, as to a Person, that (a) the aggregate fair market value of its assets exceeds its liabilities, (b) it has sufficient cash flow to enable it to pay its Debts as they mature, and (c) it does not have unreasonably small capital to conduct its businesses. SUBSIDIARY OF ANY PERSON means any entity of which greater than 50% (in number of votes) of the stock (or equivalent interests) is owned of record or beneficially, directly or indirectly, by that Person. TAXES means, for any Person, taxes, assessments or other governmental charges or levies imposed upon it, its income, or any of its properties, franchises or assets. TERMINATION DATE means, as applicable, the Facility A Termination Date, the Facility B Maturity Date, or the Facility C Termination Date. TOTAL COMMITMENT means, at any time, the sum of the Facility A Commitment, the Facility B Commitment, and the Facility C Commitment. TOTAL COMMITMENT USAGE means, at any time, the sum of the Facility A Commitment Usage, the Facility B Principal Debt, and the Facility C Principal Debt. TRIBUNAL means any (a) local, state or federal judicial, executive, or legislative instrumentality or agency, (b) private arbitration board or panel, or (c) central bank. TYPE means any type of Loan (i.e., a Base Rate Loan or Eurodollar Loan). U.S. means United States of America. 1.2 Number and Gender of Words. The singular includes the plural where appropriate and vice versa, and words of any gender include each other gender where appropriate. 1.3 Accounting Principles. Under the Loan Documents, unless otherwise stated, (a) GAAP determines compliance with financial covenants, (b) otherwise, all accounting principles applied in a current period must be comparable in all material respects to those applied during the preceding comparable period, 11 18 and (c) while Borrower has any consolidated Subsidiaries, all accounting and financial terms and compliance with financial covenants must be on a consolidated basis, as applicable. SECTION 2 COMMITMENT. 2.1 Facilities A, B and C. Subject to the provisions in the Loan Documents, each Lender severally and not jointly agrees to lend to Borrower under Facility A, under Facility B and under Facility C on the following conditions: 2.1.1 Facility A. Each Lender agrees to lend Borrower its Pro Rata Part of one or more Loans under Facility A, which Borrower may borrow, repay and reborrow under this Agreement. Loans under Facility A are subject to the following conditions: (a) Each Loan under Facility A must occur on a Business Day and no later than the Business Day immediately preceding the Facility A Termination Date; (b) Each Loan under Facility A must be in an amount not less than (i) $500,000 or a greater integral multiple of $100,000 (if a Base Rate Loan), or (ii) $5,000,000 or a greater integral multiple of $1,000,000 (if a Eurodollar Loan); and (c) When determined, (i) the Facility A Commitment Usage may not exceed the Facility A Commitment, (ii) no Lender's Pro Rata Part of the Facility A Commitment Usage may exceed such Lender's Commitment for Facility A, and (iii) the Facility A Commitment Usage, when aggregated with the Facility B Principal Debt and the Facility C Principal Debt, may not exceed the Total Commitment. 2.1.2 Facility B. Each Lender agrees to lend to Borrower its Pro Rata Part of a single Loan under Facility B, which, after it has been prepaid, may not be reborrowed. The Loan under Facility B is subject to the following conditions: (a) The Loan under Facility B must occur on or before July 1, 1998; (b) The Loan must be in an amount equal to the Facility B Commitment; and (c) (i) The Facility B Principal Debt may not exceed the Facility B Commitment; (ii) no Lender's Pro Rata Part of the Facility B Principal Debt may exceed such Lender's Commitment for Facility B; and (iii) the Facility B Principal Debt, when aggregated with the Facility A Commitment Usage and the Facility C Principal Debt, may not exceed the Total Commitment. 2.1.3 Facility C. Each Lender agrees to lend to Borrower its Pro Rata Part of one or more Loans under Facility C, which Borrower may borrow, repay and reborrow under this Agreement. Loans under Facility C are subject to the following conditions: (a) Each Loan under Facility C must occur on a Business Day and no later than the Business Day immediately preceding the Facility C Termination Date; 12 19 (b) Each Loan under Facility C must be in an amount not less than (i) $500,000 or a greater integral multiple of $100,000 (if a Base Rate Loan), or (ii) $5,000,000 or a greater integral multiple of $1,000,000 (if a Eurodollar Loan); and (c) When determined, (i) the Facility C Principal Debt may not exceed the Facility C Commitment, (ii) no Lender's Pro Rata Part of the Facility C Principal Debt may exceed such Lender's Commitment for Facility C, and (iii) the Facility C Principal Debt, when aggregated with the Facility A Commitment Usage and the Facility B Principal Debt, may not exceed the Total Commitment. 2.2 Loan Procedure. The following procedures apply to Loans: (a) Borrower may request a Loan by submitting to Agent a Loan Request. The Loan Request must be received by Agent no later than 12:00 noon on (i) the third Business Day preceding the Loan Date for any Eurodollar Loan or (ii) the Business Day preceding the Loan Date for any Base Rate Loan. Agent shall promptly notify each Lender of its receipt of any Loan Request and its contents. A Loan Request is irrevocable and binding on Borrower. (b) By 11:00 a.m. on the applicable Loan Date, each Lender shall remit its Pro Rata Part of each requested Loan by wire transfer to Agent pursuant to Agent's wire transfer instructions on SCHEDULE 1 (or as otherwise directed by Agent) in funds that are available for immediate use by Agent. Subject to receipt of such funds, Agent shall make such funds available to Borrower as directed in the Loan Request (unless it has actual knowledge that any applicable condition precedent either has not been satisfied by Borrower or has been waived by Determining Lenders). (c) Absent contrary written notice from a Lender, Agent may assume that each Lender has made its Pro Rata Part of the requested Loan available to Agent on the applicable Loan Date, and Agent may, in reliance upon such assumption (but is not required to), make available to Borrower a corresponding amount. If a Lender fails to make its Pro Rata Part of any requested Loan available to Agent on the applicable Loan Date, Agent may recover the applicable amount on demand (i) from that Lender, together with interest at the Federal Funds Rate for the period commencing on the date the amount was made available to Borrower by Agent and ending on (but excluding) the date Agent recovers the amount from that Lender, or (ii), if that Lender fails to pay its amount upon demand, then from Borrower, together with interest at an annual interest rate equal to the rate applicable to the requested Loan for the period commencing on the Loan Date and ending on (but excluding) the date Agent recovers the amount from Borrower. No Lender is responsible for the failure of any other Lender to make its Pro Rata Part of any Loan. 2.3 LC Subfacility. (a) Subject to the terms and conditions of this Agreement and applicable Law, Agent agrees to issue LCs under Facility A upon Borrower's delivery of an LC Request and a duly executed LC Agreement, each of which must be received by Agent no later than 10:00 a.m. on the third Business Day before the requested LC is to be issued; provided that the LC Exposure may not exceed $20,000,000 and the Facility A Commitment Usage may not exceed the Facility A Commitment. Each LC must expire no later than the earlier of 30 days before the Facility A Termination Date and 13 months after such LC's issuance (provided that LCs may be self-extending with up to 120 days cancellation notice by Agent to beneficiary). 13 20 (b) Immediately upon Agent's issuance of any LC (and as of the date of the initial Loan, with respect to existing LCs issued by NationsBank and included in the Existing Bank Debt), Agent shall be deemed to have sold and transferred to each other Lender, and each other Lender shall be deemed irrevocably and unconditionally to have purchased and received from Agent, without recourse or warranty, an undivided interest and participation (to the extent of such Lender's Pro Rata Part of the Facility A Commitment) in the LC and all applicable Rights of Agent in the LC (other than Rights to receive certain fees provided for in Section 4.3). Agent agrees to provide a copy of each LC to each other Lender upon request. However, Agent's failure to send a copy of an issued LC shall not affect the rights and obligations of Agent and Lenders under this Agreement. (c) To induce Agent to issue and maintain LCs, and to induce Lenders to participate in issued LCs, Borrower agrees to pay or reimburse Agent (i) within one (1) Business Day after Borrower receives notice from Agent that any draft or draw request has been properly presented under any LC, or, if the draft or draw request is for payment at a future date, within one (1) Business Day before the payment date specified in the draw request, the amount paid or to be paid by Agent and (ii) promptly, upon demand, the amount of any additional fees Agent customarily charges for confirming, negotiating or amending LC Agreements, for honoring drafts and draw requests, and taking similar action in connection with letters of credit. Borrower hereby requests and irrevocably authorizes Agent to fund Borrower's reimbursement obligations as a Base Rate Loan under Facility A, and the proceeds of the Facility A Base Rate Loan shall be advanced directly to Agent to pay Borrower's unpaid reimbursement obligations. If funds cannot be advanced under Facility A, then Borrower's reimbursement obligation shall constitute a demand obligation. Borrower's reimbursement obligations shall accrue interest (x) at the Base Rate plus the Applicable Margin from the date Agent pays the applicable draft or draw request through the date Agent is paid or reimbursed by Borrower and, (y) if funds are not advanced under Facility A, at the Default Rate from the date Agent pays the applicable draft or draw request through the date Agent is paid or reimbursed by Borrower. Borrower's obligations under this Section 2.3(c) are absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that Borrower may have at any time against Agent or any other Person. Agent shall promptly distribute reimbursement payments received from Borrower to all Lenders according to their Pro Rata Part of the Facility A Commitment. (d) Agent shall promptly notify Borrower of the date and amount of any draft or draw request presented for honor under any LC (but failure to give notice will not affect Borrower's obligations under this Agreement). Agent shall pay the requested amount upon presentment of a draft or draw request unless presentment on its face does not comply with the terms of the applicable LC. When making payment, Agent may disregard (i) any default or potential default that exists under any other agreement and (ii) obligations under any other agreement that have or have not been performed by the beneficiary or any other Person (and Agent is not liable for any of those obligations). Borrower's reimbursement obligations to Agent and Lenders, and each Lender's obligations to Agent, under this Section 2.3 are absolute and unconditional irrespective of, (1) the validity, enforceability, sufficiency, accuracy or genuineness of documents or endorsements (even if they are in any respect invalid, unenforceable, insufficient, inaccurate, fraudulent or forged), (2) any dispute by any Company with or any Company's claims, setoffs, defenses, counterclaims or other Rights against Agent, any Lender or any other Person, or (3) the occurrence of any Potential Default or Default. 14 21 (e) If Borrower fails to reimburse Agent as provided in SECTION 2.3(c) and funds are not advanced under Facility A to satisfy the reimbursement obligations, Agent shall promptly notify each Lender of Borrower's failure, of the date and amount paid, and of each Lender's Pro Rata Part of the unreimbursed amount. Each Lender shall promptly and unconditionally make available to Agent in immediately available funds its Pro Rata Part of the unpaid reimbursement obligation. Such funds are due and payable to Agent before the close of business on (i) the Business Day Agent gives notice to each Lender of Borrower's reimbursement failure if the notice is received by a Lender before 2:00 p.m. in the time zone where such Lender's Applicable Lending Office is located, or (ii) on the next succeeding Business Day after the Business Day Agent gives notice to each Lender of Borrower's reimbursement failure, if notice is received after 2:00 p.m. in the time zone where such Lender's Applicable Lending Office is located. All amounts payable by any Lender accrue interest at the Federal Funds Rate from the day the applicable draft or draw is paid by Agent to (but not including) the date the amount is paid by the Lender to Agent. (f) Borrower acknowledges that each LC is deemed issued upon delivery to the beneficiary or Borrower. If Borrower requests any LC be delivered to Borrower rather than the beneficiary, and Borrower subsequently cancels that LC, Borrower agrees to return it to Agent together with Borrower's written certification that it has never been delivered to the beneficiary. If any LC is delivered to the beneficiary under Borrower's instructions, Borrower's cancellation is ineffective without Agent's receipt of the LC and the beneficiary's written consent to the cancellation. (g) Agent will examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the LC. Each Lender and Borrower agree that, in paying any draft or draw under any LC, Agent has no responsibility to obtain any document (other than any documents expressly required by the respective LC) or to ascertain or inquire as to any document's validity, enforceability, sufficiency, accuracy or genuineness or the authority of any Person delivering it. Neither Agent nor its Representatives will be liable to any Lender or any Company for any LC's use or for any beneficiary's acts or omissions. Any action, inaction, error, delay or omission taken or suffered by Agent or any of its Representatives in connection with any LC, applicable draws, drafts or documents, or the transmission, dispatch or delivery of any related message or advice, if in conformity with applicable Laws and in accordance with the standards of care specified in the Uniform Customs and Practice for Documentary Credits (International Chamber of Commerce Publication 500), is binding upon the Companies and Lenders. Agent is not liable to any Company or any Lender for any action taken or omitted by Agent or its Representative in connection with any LC in the absence of gross negligence or willful misconduct. (h) On the Facility A Termination Date, upon a termination under SECTION 2.4, during the continuance of a Default under SECTION 11.3, or upon any demand by Agent during the continuance of any other Default, Borrower shall provide to Agent, for the benefit of Lenders, cash collateral in an amount equal to the then-existing LC Exposure. Any cash collateral provided by Borrower to Agent in accordance with this SECTION 2.3(h) shall be deposited by Agent in an interest bearing cash collateral account maintained with Agent at the office of Agent and invested in obligations issued or guaranteed by the U.S. and, upon the surrender of any LC, Agent shall deliver the appropriate funds on deposit in such collateral account to Borrower together with interest accrued on such funds. 15 22 (i) BORROWER SHALL PROTECT, INDEMNIFY, PAY, AND SAVE AGENT, EACH LENDER AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH ANY OF THEM MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE OF THE ISSUANCE OF ANY LC, ANY DISPUTE ABOUT IT, ANY CANCELLATION OF ANY LC BY BORROWER, OR THE FAILURE OF AGENT TO HONOR A DRAFT OR DRAW REQUEST UNDER ANY LC AS A RESULT OF ANY ACT OR OMISSION (WHETHER RIGHT OR WRONG) OF ANY PRESENT OR FUTURE TRIBUNAL. HOWEVER, NO PERSON IS ENTITLED TO INDEMNITY UNDER THE FOREGOING FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. (j) Although referenced in any LC, terms of any particular agreement or other obligation to the beneficiary are not incorporated into this Agreement in any manner. The fees and other amounts payable with respect to each LC are as provided in this Agreement, drafts and draws under each LC are part of the Obligation, and the terms of this Agreement control any conflict between the terms of this Agreement and any LC Agreement. 2.4 Termination of Revolving Facilities. Without premium or penalty, and upon giving at least 10 Business Days prior written and irrevocable notice to Agent, Borrower may terminate all or part of the unused portion of the Facility A Commitment or the Facility C Commitment. Each partial termination must be in an amount of not less than $5,000,000 or a greater integral multiple of $1,000,000, and shall be Pro Rata among all Lenders. Once all or a portion of the Facility A Commitment or the Facility C Commitment is terminated, it may not be increased or reinstated. SECTION 3 TERMS OF PAYMENT. 3.1 Notes and Payments. (a) (i) The Facility A Principal Debt shall be evidenced by the Facility A Notes, one payable to each Lender in the stated principal amount of its Commitment for Facility A. (ii) The Facility B Principal Debt shall be evidenced by the Facility B Notes, one payable to each Lender in the stated principal amount of its Commitment for Facility B. (iii) The Facility C Principal Debt shall be evidenced by the Facility C Notes, one payable to each Lender in the stated principal amount of its Commitment for Facility C. (b) Borrower must make each payment and prepayment on the Obligation, without offset, counterclaim, or deduction, to Agent's principal office in Dallas, Texas, in funds that will be available for immediate use by Agent by 12:00 noon on the day due. Payments received after such time shall be deemed received on the next Business Day. Agent shall pay to each Lender any payment to which that Lender is entitled on the same day Agent receives the funds from Borrower, if Agent receives the payment or prepayment before 12:00 noon, and otherwise before 12:00 noon on the following Business Day. If and to the extent that Agent does not make payments to Lenders when due, unpaid amounts due by Agent to such Lender shall accrue interest at the Federal Funds Rate from the due date until (but not including) the payment date. 16 23 3.2 Interest and Principal Payments. (a) Interest Payments. Accrued interest on each Eurodollar Loan is due and payable on the last day of its respective Interest Period. If any Interest Period with respect to a Eurodollar Loan is a period greater than three months, then accrued interest is also due and payable on the date three months after the commencement of the Interest Period. Accrued interest on each Base Rate Loan is due and payable on the last day of each fiscal quarter of Borrower (commencing July 31, 1998) and on the relevant Termination Date. (b) Principal Payments. (i) The Facility A Principal Debt is due and payable on the Facility A Termination Date. (ii) Principal payments on the Facility B Principal Debt are due and payable in quarterly installments commencing October 31, 1998, and continuing on the last day of each fiscal quarter of Borrower thereafter until the Facility B Maturity Date when the outstanding Facility B Principal Debt shall be due and payable, as follows: October 31, 1998 - $7,500,000 April 30, 2001 - $10,000,000 January 31, 1999 - $7,500,000 July 31, 2001 - $10,000,000 April 30, 1999 - $7,500,000 October 31, 2001 - $11,250,000 July 31, 1999 - $7,500,000 January 31, 2002 - $11,250,000 October 31, 1999 - $8,750,000 April 30, 2002 - $11,250,000 January 31, 2000 - $8,750,000 July 31, 2002 - $11,250,000 April 30, 2000 - $8,750,000 October 31, 2002 - $12,500,000 July 31, 2000 - $8,750,000 January 31, 2003 - $12,500,000 October 31, 2000 - $10,000,000 April 30, 2003 - $12,500,000 January 31, 2001 - $10,000,000 July 1, 2003 - $12,500,000
(iii) The Facility C Principal Debt owed to each Lender is due and payable on the Facility C Termination Date for such Lender. (c) Mandatory Prepayment. The Principal Debt is subject to mandatory prepayment from time to time as follows: (i) If the Facility A Commitment Usage ever exceeds the Facility A Commitment, or if the Facility C Principal Debt ever exceeds the Facility C Commitment, or if the sum of the Facility A Principal Debt, the Facility B Principal Debt and the Facility C Principal Debt, together with the LC Exposure, ever exceeds the Total Commitment, then Borrower shall immediately prepay the Principal Debt in the amount of that excess. (ii) Borrower shall prepay the Principal Debt in the amount of 100% of the cash proceeds (after selling expenses and taxes related thereto to the extent paid and any reserves for retained liabilities until such liabilities are extinguished) received by any Company from the disposition of any asset (including proceeds from the disposition of the stock of Subsidiaries and proceeds received as a result of any casualty (other than proceeds used by such Company to repair or replace such casualty in a like-kind manner) and including 17 24 installment payments under promissory notes or other non-cash consideration received by any Company for such asset), other than proceeds of dispositions permitted by SECTIONS 9.10(a), (b), (c), (d), (e) and (g), within three Business Days after receipt of such proceeds. (iii) Borrower shall prepay the Principal Debt in the amount of 100% of any Funded Debt incurred by any Company after the date hereof (net of underwriting discounts and commissions and other costs associated therewith), other than inter-Company Loans and Capital Lease obligations, simultaneously with the incurrence of such Debt. (iv) Borrower shall prepay the Principal Debt in the amount of 100% (if the ratio of Funded Debt, after giving effect to such prepayment, to EBITDA for the 12-month period ending on the last day of the immediately preceding month was greater than or equal to 3.50 to 1.00) or 50% (if such ratio was less than 3.50 to 1.00) of the cash proceeds (net of underwriting discounts and commissions and other costs associated therewith) received by any Company from the issuance and sale of equity securities (other than sales of Borrower's common stock to employees as a result of the exercise of any options with regard thereto) simultaneous with the receipt of such proceeds. Each prepayment under this SECTION 3.2(c) shall be accompanied by payment of any resulting Funding Loss and all accrued and unpaid interest on the principal amount prepaid. Subject to the provisions of SECTION 3.11, mandatory prepayments under this SECTION 3.2(c) shall be applied in the following order: first to the Facility C Principal Debt (and a matching reduction of the Facility C Commitment); second to installments of principal due under Facility B in the inverse order of maturity; and third to the Facility A Principal Debt (and a matching reduction of the Facility A Commitment). (d) Voluntary Prepayment. Borrower may voluntarily repay or prepay all or any part of the Principal Debt at any time without premium or penalty, subject to the following conditions: (i) Agent must receive Borrower's written payment notice by noon on (A) the third Business Day preceding the date of payment of a Eurodollar Loan and (B) the Business Day preceding the date of payment of a Base Rate Loan which shall specify the payment date, the facility or the subfacility under this Agreement being paid and the Type and amount of the Loan(s) to be paid, and which shall constitute an irrevocable and binding obligation of Borrower to make a repayment or prepayment on the designated date; (ii) each partial repayment or prepayment must be in a minimum amount of at least $5,000,000 or a greater integral multiple of $500,000 (if a Eurodollar Loan) and $500,000 or a greater integral multiple of $100,000 (if a Base Rate Loan); and (iii) each prepayment under this SECTION 3.2(d) shall be accompanied by payment of any resulting Funding Loss and all accrued and unpaid interest on the principal amount prepaid. 3.3 Interest Options. Except as specifically otherwise provided, Loans bear interest at an annual rate equal to the lesser of (a) the Base Rate plus the Applicable Margin or the Eurodollar Rate plus the Applicable Margin (in each case as designated or deemed designated by Borrower and, in the case of 18 25 Eurodollar Loans, for the Interest Period designated by Borrower), as the case may be, and (b) the Maximum Rate. Each change in the Base Rate and Maximum Rate is effective, without notice to Borrower or any other Person, upon the date of change. 3.4 Quotation of Rates. A Responsible Officer of Borrower may call Agent before delivering a Loan Request to receive an indication of the interest rates then in effect, but the indicated rates do not bind Agent or Lenders or affect the interest rate that is actually in effect when Borrower delivers its Loan Request or on the Loan Date. 3.5 Default Rate. If permitted by Law, all past-due Principal Debt, Borrower's past-due payment and reimbursement obligations in connection with LCs, and past-due interest accruing on any of the foregoing, bears interest from the date due (stated or by acceleration) at the Default Rate until paid, regardless whether payment is made before or after entry of a judgment. 3.6 Interest Recapture. If the designated interest rate applicable to any Loan exceeds the Maximum Rate, the interest rate on that Loan is limited to the Maximum Rate, but any subsequent reductions in the designated rate shall not reduce the interest rate thereon below the Maximum Rate until the total amount of accrued interest equals the amount of interest that would have accrued if that designated rate had always been in effect. If at maturity (stated or by acceleration), or at final payment of the Notes, the total interest paid or accrued is less than the interest that would have accrued if the designated rates had always been in effect, then, at that time and to the extent permitted by applicable Law, Borrower shall pay an amount equal to the difference between (a) the lesser of the amount of interest that would have accrued if the designated rates had always been in effect and the amount of interest that would have accrued if the Maximum Rate had always been in effect, and (b) the amount of interest actually paid or accrued on the Notes. 3.7 Interest Calculations. (a) Interest will be calculated on the basis of actual number of days elapsed (including the first day but excluding the last day) but computed as if each calendar year consisted of 360 days for Eurodollar Loans (unless the calculation would result in an interest rate greater than the Maximum Rate, in which event interest will be calculated on the basis of a year of 365 or 366 days, as the case may be), and 365 or 366 days, as the case may be, for Base Rate Loans. All interest rate determinations and calculations by Agent are conclusive and binding absent manifest error. (b) The provisions of this Agreement relating to calculation of the Base Rate and the Eurodollar Rate are included only for the purpose of determining the rate of interest or other amounts to be paid under this Agreement that are based upon those rates. Each Lender may fund and maintain its funding of all or any part of each Loan as it selects. 3.8 Maximum Rate. Regardless of any provision contained in any Loan Document or any document related thereto, it is the intent of the parties to this Agreement that neither Agent nor any Lender contract for, charge, take, reserve, receive or apply, as interest on all or any part of the Obligation any amount in excess of the Maximum Rate or the Maximum Amount or receive any unearned interest in violation of any applicable Law, and, if Lenders ever do so, then any excess shall be treated as a partial repayment or prepayment of principal and any remaining excess shall be refunded to Borrower. In determining if the interest paid or payable exceeds the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Loans as but a single extension of credit (and Lenders and 19 26 Borrower agree that is the case and that provision in this Agreement for multiple Loans is for convenience only), (b) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (c) exclude voluntary repayments or prepayments and their effects, and (d) amortize, prorate, allocate and spread the total amount of interest throughout the entire contemplated term of the Obligation. However, if the Obligation is paid in full before the end of its full contemplated term, and if the interest received for its actual period of existence exceeds the Maximum Amount, Lenders shall refund any excess (and Lenders may not, to the extent permitted by Law, be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving or receiving interest in excess of the Maximum Amount). If the Laws of the State of Texas are applicable for purposes of determining the "Maximum Rate" or the "Maximum Amount," then such terms refer to the "revised ceiling or bracket" from time to time in effect under V.T.C.A., Finance Code Section 1.001 et seq (West 1997). Borrower agrees that V.T.C.A., Finance Code Chapter 346 (which regulates certain revolving credit loan accounts and revolving tri-party accounts), does not apply to the Obligation, other than Section 346.004. 3.9 Interest Periods. When Borrower requests any Eurodollar Loan, Borrower may elect the applicable interest period (each an "INTEREST PERIOD"), which may be, at Borrower's option, and one, two, three or six months for Eurodollar Loans, subject to the following conditions: (a) the initial Interest Period for a Eurodollar Loan commences on the applicable Loan Date or Conversion date, and each subsequent Interest Period applicable to any Loan commences on the day when the next preceding applicable Interest Period expires; (b) if any Interest Period for a Eurodollar Loan begins on a day for which there exists no numerically corresponding Business Day in the calendar month at the end of the Interest Period ("ENDING CALENDAR MONTH"), then the Interest Period ends on the next succeeding Business Day of the Ending Calendar Month, unless there is no succeeding Business Day in the Ending Calendar Month in which case the Interest Period ends on the next preceding Business Day of the Ending Calendar Month; (c) no Interest Period for any portion of Principal Debt may extend beyond the scheduled repayment date for that portion of Principal Debt; and (d) there may not be in effect at any one time more than (i) 10 Interest Periods for the Eurodollar Loan portion of Facility A, (ii) one Interest Period for the Eurodollar Loan portion of Facility B, and (iii) 10 Interest Periods for the Eurodollar Loan portion of Facility C. 3.10 Conversions. Borrower may (a) on the last day of the applicable Interest Period Convert all or part of a Eurodollar Loan to a Base Rate Loan, (b) at any time Convert all or part of a Base Rate Loan to a Eurodollar Loan, and (c) elect a new Interest Period for a Eurodollar Loan. Any such Conversion is subject to the dollar limits and denominations of SECTION 2.1 and may be accomplished by delivering a Conversion Request to Agent no later than 10:00 a.m. (i) on the third Business Day before the Conversion date for Conversion to a Eurodollar Loan and the last day of the Interest Period, for the election of a new Interest Period, and (ii) one Business Day before the last day of the Interest Period for Conversion to a Base Rate Loan. Absent Borrower's notice of Conversion or election of a new Interest Period, a Eurodollar Loan shall be Converted to a Base Rate Loan when the applicable Interest Period expires. 3.11 Order of Application. (a) If no Default or Potential Default exists, any payment shall be applied to the Obligation in the order and manner as provided in this Agreement. (b) If a Default or Potential Default exists, any payment (including proceeds from the exercise of any Rights) shall be applied in the following order: (i) to all fees and expenses for which Agent or Lenders have not been paid or reimbursed in accordance with the Loan Documents (and if such payment is less than all unpaid or unreimbursed fees and expenses, then the payment shall 20 27 be paid against unpaid and unreimbursed fees and expenses in the order of incurrence or due date); (ii) to accrued interest on the Principal Debt; (iii) to any LC reimbursement obligations that are due and payable and that remain unfunded by any Loan under Facility A; (iv) to the remaining Obligation in the order and manner Determining Lenders deem appropriate; and (v) as a deposit with Agent, for the benefit of Lenders, as security for and payment of any subsequent LC reimbursement obligations. 3.12 Right of Set-off. Upon the occurrence and during the continuance of any Default, each Lender (and each of its Affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its Affiliates) to or for the credit or the account of Borrower against any and all of the obligations of Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify Borrower after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this SECTION 3.12 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. 3.13 Adjustments. If any Lender (a "BENEFITTED LENDER") shall at any time receive any payment of all or part of the Loans owing to it, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or Collateral received by any other Lender, if any, in respect of such other Lender's Loans owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans owing to it, or shall provide such other Lenders with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Borrower agrees that any Lender so purchasing a participation from a Lender pursuant to this SECTION 3.13 may, to the fullest extent permitted by Law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Person were the direct creditor of Borrower in the amount of such participation. 3.14 Booking Loans. To the extent permitted by Law, any Lender may make, carry or transfer its Loans at, to, or for the account of any of its branch offices or the office of any of its Affiliates. However, no Affiliate is entitled to receive any greater payment under SECTION 3.15 than the transferor Lender would have been entitled to receive with respect to those Loans. 3.15 Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable Law, or any change in any applicable Law, or any change in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Tribunal: 21 28 (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurodollar Loan, or any Note, or its obligation to make Eurodollar Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or any Note in respect of any Eurodollar Loans (other than Taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Adjusted Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the London interbank market any other condition affecting this Agreement or any Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Eurodollar Loan or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or any Note with respect to any Eurodollar Loan, then Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for any such increased cost or reduction incurred not more than 180 days prior to such demand. If any Lender requests compensation by Borrower under this SECTION 3.15(a), Borrower may, by notice to such Lender (with a copy to Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of SECTION 3.18 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable Law regarding capital adequacy or any change therein or in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Tribunal, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for any such reduction incurred not more than 180 days prior to such demand. (c) Each Lender shall promptly notify Borrower and Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this SECTION 3.15 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 22 29 shall furnish to Borrower and Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3.16 Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Eurodollar Loan: (a) Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) Determining Lenders determine (which determination shall be conclusive) and notify Agent that the Adjusted Eurodollar Rate will not adequately and fairly reflect the cost to Lenders of funding Eurodollar Loans for such Interest Period; then Agent shall give Borrower prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into such Type and Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either prepay them or Convert them into another Type in accordance with the terms of this Agreement. 3.17 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall promptly notify Borrower thereof and such Lender's obligation to make or Continue Eurodollar Loans and to Convert other Types of Loans into Eurodollar Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Loans (in which case the provisions of SECTION 3.18 shall be applicable). 3.18 Treatment of Affected Loans. If the obligation of any Lender to make a particular Type of Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to SECTION 3.15 or 3.17 (Loans of such Type being herein called "AFFECTED LOANS" and such Type being herein called the "AFFECTED TYPE"), such Lender's Affected Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by SECTION 3.17, on such earlier date as such Lender may specify to Borrower with a copy to Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in SECTION 3.15 or 3.17 that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Base Rate Loans. 23 30 If such Lender gives notice to Borrower (with a copy to the Agent) that the circumstances specified in SECTION 3.15 or 3.17 that gave rise to the Conversion of such Lender's Affected Loans pursuant to this SECTION 3.18 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Commitments. 3.19 Compensation. Upon the request of any Lender, Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, Conversion of a Eurodollar Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to SECTION 12 or any syndication of one or more of the Facilities, if such syndication occurs on or before December 31, 1998) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by Borrower for any reason (including, without limitation, the failure of any condition precedent specified in SECTION 6 to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. 3.20 Taxes. (a) Any and all payments by Borrower to or for the account of any Lender or Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future Taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and Agent, Taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded Taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "PAYMENT TAXES"). If Borrower shall be required by law to deduct any Payment Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 3.20) such Lender or Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law, and (iv) Borrower shall furnish to Agent, at its address referred to in SECTION 14.3, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution or delivery of, or otherwise with respect to, any Loan Document (hereinafter referred to as "OTHER TAXES"). 24 31 (c) BORROWER AGREES TO INDEMNIFY EACH LENDER AND AGENT FOR THE FULL AMOUNT OF PAYMENT TAXES AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY PAYMENT TAXES OR OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 3.20) PAID BY SUCH LENDER OR AGENT (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO. (d) Each Lender organized under the laws of a jurisdiction outside the U.S., on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by Borrower or Agent (but only so long as such Lender remains lawfully able to do so), shall provide Borrower and Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the U.S. is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the U.S., (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by SECTIONS 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to any of the Loan Documents. (e) For any period with respect to which a Lender has failed to provide Borrower and Agent with the appropriate form pursuant to SECTION 3.20(d) (unless such failure is due to a change in Law occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under SECTION 3.20(a) or 3.20(b) with respect to Taxes imposed by the U.S.; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this SECTION 3.20, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within 30 days after the date of any payment of Taxes, Borrower shall furnish to Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this SECTION 3.20 shall survive the termination of the Commitments and the payment in full of the Notes. 3.21 Extensions and Conversions of Facility C Termination Date. (a) If no Default or Potential Default exists, Borrower may request 364-day extensions of the then-existing Facility C Termination Date by making such request to Agent and each Lender 25 32 not earlier than 60 days preceding the then-existing Termination Date for such Lender. The then-existing Termination Date shall be extended for 364 days with respect to each Lender only if such Lender consents in writing to such extension within 30 days following Borrower's request, with a failure to respond by any Lender being deemed a denial of such consent by such party; (b) If any 364-day period with respect to Facility C has not been extended under SECTION 3.21(a) with respect to any Lender's Facility C Commitment (whether due to Borrower's failure to timely request an extension or such Lender's failure to timely consent to such extension), and if no Default or Potential Default exists, then Borrower may elect to convert such Lender's Loans under Facility C to a term Loan maturing on the third anniversary of the last day of such 364- day period but in no event later than July 1, 2003. Principal and interest on any such term Loan shall be payable in accordance with SECTION 3.2. 3.22 Replacement Lender. In the event any Lender invokes SECTION 3.16 or 3.17 or Borrower becomes obligated to pay any additional amounts to any Lender pursuant to SECTION 3.15, then, unless such Lender has removed or cured the conditions actuating SECTION 3.15, 3.16, or 3.17, Borrower may designate a substitute lender reasonably acceptable to Agent (such lender referred to in this Agreement as a "REPLACEMENT LENDER") to purchase such Lender's rights and obligations with respect to its entire Pro Rata Part under this Agreement. Any such purchase shall be without recourse to or warranty by, or expense to, the Lender in accordance with SECTION 14.12, and shall have a purchase price equal to the outstanding principal amounts payable to the Lender with respect to its entire Pro Rata Part under this Agreement, plus any accrued and unpaid interest, fees and charges in respect of such Lender's Pro Rata Part, and on other terms reasonably satisfactory to Agent. Upon such purchase by the Replacement Lender and payment of all other amounts owing to the Lender being replaced, such exiting Lender shall no longer be a party to this Agreement or have any rights or obligations under this Agreement and the Replacement Lender shall succeed to the Rights and obligations of the exiting Lender with respect to the exiting Lender's Pro Rata Part and Commitments under this Agreement. SECTION 4 FEES. 4.1 Treatment of Fees. The fees described in this SECTION 4 (a) are not compensation for the use, detention, or forbearance of money, (b) are in addition to, and not in lieu of, interest and expenses otherwise described in this Agreement, (c) are payable in accordance with SECTION 3.1, (d) are non-refundable, (e) to the fullest extent permitted by Law, bear interest, if not paid when due, at the Default Rate, and (f) are calculated on the basis of actual number of days (including the first day but excluding the last day) elapsed, but computed as if each calendar year consisted of 360 days, unless computation would result in an interest rate in excess of the Maximum Rate in which event the computation is made on the basis of a year of 365 or 366 days, as the case may be. The fees described in this SECTION 4 are in all events subject to the provisions of SECTION 3.8 of this Agreement. 4.2 Underwriting and Administrative Fees. Borrower shall pay the underwriting and administrative fees previously agreed to by Borrower and Agent in the letter agreement dated March 13, 1998, and the letter agreement dated March 25, 1998. 4.3 LC Fees. Borrower shall pay Agent, for its own account, a fronting fee for the issuance of each LC equal to 0.125% per annum on the face amount of such LC. Such fee shall be payable on the last day of the fiscal quarter of Borrower in which such LC is issued. In addition, Borrower shall pay Agent 26 33 quarterly, in arrears, on the last day of each fiscal quarter of Borrower during which such LC is outstanding, a fee equal to the Applicable Margin for Eurodollar Loans per annum on the face amount of the LC, provided that the amount of such fee (as calculated on a per annum basis) shall not be less than $350. Such fee shall be calculated on the basis of actual days elapsed, but computed as if each calendar year consisted of 360 days. Borrower also agrees to pay on demand and solely for the account Agent, any and all additional customary LC fees described in SECTION 2.3(c). 4.4 Commitment Fee. Borrower shall pay to Agent for the ratable account of Lenders a commitment fee, payable as it accrues on the last day of each fiscal quarter of Borrower (commencing July 31, 1998) and on the Facility A Termination Date, and with respect to each Lender, on the Facility C Termination Date, equal to the Applicable Percentage per annum on the sum of (a) amount by which the Facility A Commitment exceeds the average daily Facility A Commitment Usage, in each case during the fiscal quarter ending on such date (or, in the case of the first such payment, during the period from the date of the Acquisition through July 31, 1998), plus (b) the amount by which the Facility C Commitment exceeds the average daily Facility C Principal Debt, in each case during the fiscal quarter ending on such date (or, in the case of the first such payment, during the period from the date of the Acquisition through July 31, 1998). SECTION 5 SECURITY. 5.1 Guaranty. Full and complete payment of the Obligation (a) is guaranteed in accordance with the Guaranty of even date herewith executed by each current Guarantor, and (b) shall be guaranteed through the execution and delivery of a Guaranty by each future domestic direct or indirect Subsidiary of Borrower. 5.2 Collateral. Full and complete payment of the Obligation shall be secured through the execution and delivery of Pledge Agreements and Assignments of Partnership Interests with respect to all capital stock, partnership interests or other equity interests of any Company in any domestic direct or indirect Subsidiaries (together with proceeds thereof and any additional collateral ever furnished under SECTIONS 2.3(h), 3.11(b) or 5.3, the "COLLATERAL"). 5.3 Additional Security and Guaranties. Agent may, without notice or demand and without affecting any Person's obligations under the Loan Documents, from time to time (a) receive and hold additional collateral from any Person for the payment of all or any part of the Obligation and exchange, enforce or release all or any part of that collateral and (b) accept and hold any endorsement or guaranty of payment of all or any part of the Obligation and release any endorser or guarantor, or any Person who has given any other security for the payment of all or any part of the Obligation, or any other Person in any way obligated to pay all or any part of the Obligation. SECTION 6 CONDITIONS PRECEDENT. 6.1 General. Lenders will not be obligated to fund the initial Loan on the date of the Acquisition unless: (a) Agent has timely received a Loan Request and all of the items described on SCHEDULE 6; (b) no circumstance or event exists that, individually or collectively with other circumstances or events, has had a material and adverse effect on the financial condition of Borrower or MBCI (individually) or Borrower, Amatek and their respective Subsidiaries (as a whole) as represented in the Financial Statements of Borrower dated as of 27 34 October 31, 1997, and the financial statements of MBCI dated as of December 31, 1997; and (c) the funding of the Loan is permitted by Law. After the Acquisition, Lenders will not be obligated to fund (as opposed to Continue or Convert) any Loan, and Agent will not be obligated to issue any LC unless on the applicable Loan Date, issue date, or creation date (and after giving effect to the requested Loan or LC, as the case may be): (i) Agent shall have timely received a Loan Request or LC Request (together with the applicable duly executed LC Agreement); (ii) all of the representations and warranties of the Companies in the Loan Documents are true and correct in all material respects (unless they speak to a specific date or are based on facts which have changed by transactions contemplated or permitted by this Agreement); (iii) no Material Adverse Event, Default or Potential Default exists; and (iv) the funding of the Loan or issuance of the LC, as the case may be, is permitted by Law. Upon Agent's request, Borrower shall deliver to Agent evidence substantiating any of the matters in the Loan Documents that are necessary to enable Borrower to qualify for the Loan or LC, as the case may be. Each condition precedent in this Agreement (including, without limitation, those on SCHEDULE 6) is material to the transactions contemplated by this Agreement, and time is of the essence with respect to each condition precedent. Subject to the prior approval of Determining Lenders, Lenders may fund any Loan, and Agent may issue any LC, without all conditions being satisfied, but, to the extent permitted by Law, that funding and issuance shall not be deemed to be a waiver of the requirement that each condition precedent be satisfied as a prerequisite for any subsequent funding or issuance, unless Determining Lenders specifically waive each item in writing. 6.2 Supplements to Schedules. Borrower may, from time to time but in no event less than five Business Days prior to delivery of any Loan Request or LC Request, amend or supplement the Schedules to this Agreement by delivering (effective upon receipt) to Agent and each Lender a copy of such revised Schedule or Schedules, which shall (i) be dated the date of delivery, (ii) be certified by a Responsible Officer as true, complete and correct as of such date and as delivered in replacement for the corresponding Schedule or Schedules previously in effect, and (iii) show in reasonable detail (by blacklining or other appropriate graphic means) the changes from each such corresponding predecessor Schedule. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, in the event that Determining Lenders determine based upon such revised Schedules (whether individually or in the aggregate or cumulatively) that a Material Adverse Event has occurred, Lenders shall have no further obligation to make Loans or continue or convert any Loan previously made and Agent shall have no further obligation to issue LCs or to renew or extend existing LCs. SECTION 7 REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Agent and Lenders as follows: 7.1 Purpose of Credit Facility. Borrower will use the proceeds of the initial Loans to consummate the Acquisition and to repay and cancel the Existing Bank Debt. Borrower will use all other proceeds of the Loans and LCs for working capital and general corporate purposes of the Companies. No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended. No part of the proceeds of any LC draft or drawing or Loan will be used, directly or indirectly, for a purpose that violates any Law, including without limitation, the provisions of Regulation U. 28 35 7.2 Corporate Existence, Good Standing, Authority and Compliance. Each Company is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or organized as identified on SCHEDULE 7.2. Except where failure is not a Material Adverse Event, each Company (a) is duly qualified to transact business and is in good standing as a foreign corporation or other entity in each jurisdiction where the nature and extent of its business and properties require due qualification and good standing (those jurisdictions being identified on SCHEDULE 7.2), (b) possesses all requisite authority, permits and power to conduct its business as is now being, or is contemplated by this Agreement to be, conducted, and (c) is in compliance with all applicable Laws. 7.3 Subsidiaries. As of the date of this Agreement, Borrower has no Subsidiaries except as disclosed on SCHEDULE 7.3. All of the outstanding shares of capital stock (or similar voting interests) of those Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and together with the partnership interests pledged pursuant to SECTION 5.2 hereof are owned of record and beneficially as set forth thereon, free and clear of any Liens, restrictions, claims or Rights of another Person (other than Lender Liens and, with respect to partnership interests, any Liens, restrictions, claims or Rights contained in the relevant partnership agreement), and are not subject to any warrant, option or other acquisition Right of any Person or subject to any transfer restriction (other than restrictions imposed by securities Laws and general corporate Laws and, with respect to partnership interests, any restrictions contained in the relevant partnership agreement). 7.4 Authorization and Contravention. The execution and delivery by each Company of each Loan Document or related document to which it is a party and the performance by it of its obligations thereunder (a) are within its corporate power, (b) have been duly authorized by all necessary corporate action, (c) require no action by or filing with any Tribunal (other than any action or filing that has been taken or made on or before the date of this Agreement), (d) do not violate any provision of its charter or bylaws, (e) do not violate any provision of Law or order of any Tribunal applicable to it, other than violations that individually or collectively are not a Material Adverse Event, (f) do not violate any Material Agreements to which it is a party, or (g) do not result in the creation or imposition of any Lien (other than the Lender Liens) on any asset of any Company. 7.5 Binding Effect. Upon execution and delivery by all parties thereto, each Loan Document will constitute a legal and binding obligation of each Company party thereto, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable Debtor Relief Laws and general principles of equity. 7.6 Financial Statements; Fiscal Year. The Current Financials were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition, results of operations, and cash flows of the Companies as of, and for the portion of the fiscal year ending on the date or dates thereof (subject only to normal year-end adjustments). All material liabilities of the Companies as of the date or dates of the Current Financials are reflected therein or in the notes thereto. Except for transactions directly related to, or specifically contemplated by, the Loan Documents, no subsequent material adverse changes have occurred in the consolidated financial condition of the Companies from that shown in the Current Financials, nor has any Company incurred any subsequent material liability. All financial projections concerning the Companies that have been or are hereafter made available to Agent or Lenders by Borrower have been or will be prepared in good faith based upon assumptions Borrower believes to be reasonable. The fiscal year of each Company ends on October 31. 29 36 7.7 Litigation. Except as disclosed on SCHEDULE 7.7, no Company is subject to, or aware of the threat of, any Litigation that is reasonably likely to be determined adversely to any Company and, if so adversely determined, is a Material Adverse Event. Except as permitted under SECTION 11.4, no outstanding and unpaid judgments against any Company exist. 7.8 Taxes. All Tax returns of each Company required to be filed have been filed (or extensions have been granted) before delinquency, except for returns for which the failure to file is not a Material Adverse Event, and all Taxes imposed upon each Company that are due and payable have been paid before delinquency, other than (a) Taxes which are being contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made, and in respect of which levy and execution of any Lien have been and continue to be stayed, and (b) state and local Taxes (except income Taxes) which are immaterial in amount and in respect of which levy and execution of any Lien have been and continue to be stayed. 7.9 Environmental Matters. Except as disclosed on SCHEDULE 7.9, (a) each Company is, and within the period of all applicable statutes of limitations has been, in substantial compliance with all applicable Environmental Laws and with all permits required thereunder; (b) no Materials of Environmental Concern are present at, on, under, in or about any real property now or formerly owned, leased, operated or used by any Company (including, without limitation, any location to which any Materials of Environmental Concern have been sent for reuse or recycling or for treatment, storage or disposal) which could reasonably be expected to give rise to material liability of any Company under any applicable Environmental Law, materially interfere with the continued operations of any Company, or materially impair the fair saleable value of any real property owned or leased by any Company; (c) except for violations or alleged violations which have been fully and finally resolved or have been barred by the applicable statute of limitations, no Company has received any notice or report, or has knowledge, of any Company's violation or alleged violation of any Environmental Law; (d) no Company is under any obligation to fund or conduct remediation of any property; (e) no Company knows of any environmental condition or circumstances materially adversely affecting any Company's properties or operations; (f) there are no pending or, to the Companies' knowledge, threatened, judicial, administrative, or arbitral proceedings under or relating to any Environmental Law to which any Company is, or to Company's knowledge is threatened to be, named as a party; (g) no Company has received any written request for information or been notified that it is a potentially responsible party under any Environmental Law; and (h) no Company has assumed or retained, by contract or operation of law, any material liabilities of any kind under or relating to any Environmental Law. Each Company has taken prudent steps to determine that its properties and operations do not violate any Environmental Law, other than violations that are not, individually or in the aggregate, a Material Adverse Event. 7.10 Employee Plans. Except where occurrence or existence is not a Material Adverse Event, (a) no Employee Plan has incurred an "accumulated funding deficiency" (as defined in section 302 of ERISA or section 412 of the Code), (b) no Company has incurred liability under ERISA to the PBGC in connection with any Employee Plan (other than required insurance premiums, all of which have been paid), (c) no Company has withdrawn in whole or in part from participation in a Multiemployer Plan, (d) no Company has engaged in any "prohibited transaction" (as defined in section 406 of ERISA or section 4975 of the Code), and (e) no "reportable event" (as defined in section 4043 of ERISA) has occurred, excluding events for which the notice requirement is waived under applicable PBGC regulations. 7.11 Properties; Liens. Each Company has good and indefeasible title to all its property reflected on the Current Financials (except for property that is obsolete or that has been disposed in the ordinary 30 37 course of business or, after the date of this Agreement, as otherwise permitted by SECTION 9.10 or SECTION 9.11). Except for Permitted Liens, no Lien exists on any property of any Company, and the execution, delivery, performance or observance of the Loan Documents will not require or result in the creation of any Lien (other than Lender Liens) on any Company's property. 7.12 Location. Each Company's chief executive office is located at the address on SCHEDULE 7.12. 7.13 Government Regulations. No Company is subject to regulation under the Investment Company Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as amended. 7.14 Transactions with Affiliates. Except as disclosed on SCHEDULE 7.14. no Company is a party to a material transaction with any of its Affiliates (excluding other Companies), other than transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than it could obtain or could become entitled to in an arm's-length transaction with a Person that was not its Affiliate. For purposes of this SECTION 7.14, a transaction is "material" if it requires any Company to pay more than $5,000,000 during the term of the governing agreement. 7.15 Debt. No Company is an obligor on any Debt, other than Permitted Debt. 7.16 Material Agreements. All Material Agreements of the Companies are in full force and effect, and no default or potential default exists on the part of any Company thereunder that is a Material Adverse Event. 7.17 Insurance. Each Company maintains with financially sound, responsible, and reputable insurance companies or associations (or, as to workers' compensation or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdictions in which it operates) insurance concerning its properties and businesses against casualties and contingencies and of types and in amounts (and with co-insurance and deductibles) as is customary in the case of similar businesses. 7.18 Labor Matters. No actual or, to the Companies' knowledge, threatened strikes, labor disputes, slow downs, walkouts, or other concerted interruptions of operations by the employees of any Company that are a Material Adverse Event exist. Hours worked by and payment made to employees of the Companies have not been in violation of the Fair Labor Standards Act or any other applicable Law dealing with labor matters, other than any violations, individually or collectively, that are not a Material Adverse Event. All payments due from any Company for employee health and welfare insurance have been paid or accrued as a liability on its books, other than any nonpayments that are not, individually or collectively, a Material Adverse Event. 7.19 Solvency. On each Loan Date, each Company is, and after giving effect to the requested Loan will be, Solvent. 7.20 Trade Names. No Company has used or transacted business under any other corporate or trade name in the five-year period preceding the initial Loan Date, except as disclosed on SCHEDULE 7.20. 7.21 Intellectual Property. Each Company owns or has the right to use all material licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications and trade names necessary to continue to conduct its businesses as presently conducted by it and proposed to be conducted by it immediately after the date of this Agreement. Each Company is conducting its business without 31 38 infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others, other than any infringements or claims that, if successfully asserted against or determined adversely to any Company, would not, individually or collectively, constitute a Material Adverse Event. To the knowledge of any Company, no infringement or claim of infringement by others of any material license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property of any Company exists. 7.22 Full Disclosure. Each material fact or condition relating to the Loan Documents or the financial condition, business or property of any Company has been disclosed in writing to Agent. All information previously furnished, furnished on the date of this Agreement, and furnished in the future, by any Company to Agent in connection with the Loan Documents (a) was, is, and will be, true and accurate in all material respects or, in the case of projections, was based on reasonable estimates on the date the information is stated or certified, and (b) (i) in the case of projections, was not based on unreasonable estimates as of the date the information is stated or certified, or (ii) in the case of all other information, did not, does not, and will not, fail to state any fact the omission of which would otherwise make any such information materially misleading. 7.23 Acquisition. Prior to, or simultaneously with, the funding of the initial Loan (a) the Acquisition has been consummated in accordance with the Purchase Agreement and all applicable Laws for a total cost (excluding fees and expenses, but including assumed indebtedness for borrowed money) of not more than $570,000,000 plus up to 700,000 shares of Borrower's common stock, (b) all consents and approvals of, and filings and registrations with, and all other actions in respect of, all Tribunals required to consummate the Acquisition have been obtained, given, filed, taken or waived and are in full force and effect, (c) all applicable waiting periods with respect thereto have expired without any action being taken by any Tribunal to restrain, prevent or impose material adverse conditions upon the Acquisition, and (d) no judgment, order or injunction exists which prohibits or imposes any material adverse condition upon the Acquisition or the performance of any Company of its obligations in connection therewith. No Company or any Affiliate of any Company is entering into the Acquisition with the intent to hinder, delay or defraud any creditor of any Company. SECTION 8 AFFIRMATIVE COVENANTS. So long as Lenders are committed to fund any Loans and Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid in full, Borrower covenants and agrees as follows: 8.1 Items to be Furnished. Borrower shall cause the following to be furnished to Agent: (a) Promptly after preparation, and no later than 120 days after the last day of each fiscal year of Borrower, Financial Statements showing the consolidated financial condition and results of operations of the Companies as of, and for the year ended on, that last day, accompanied by: (i) the unqualified opinion of a firm of nationally-recognized independent certified public accountants, based on an audit using generally accepted auditing standards, that the Financial Statements were prepared in accordance with GAAP and present fairly, in all material respects, the consolidated financial condition and results of operations of the Companies, 32 39 (ii) any management letter prepared by the accounting firm delivered in connection with its audit, and (iii) a Compliance Certificate with respect to the Financial Statements. (b) Promptly after preparation, and no later than 45 days after the last day of each fiscal quarter of Borrower, Financial Statements showing the consolidated financial condition and results of operations of the Companies for the fiscal quarter and for the period from the beginning of the current fiscal year to the last day of the fiscal quarter, accompanied by a Compliance Certificate with respect to the Financial Statements. (c) Promptly after receipt, a copy of each interim or special audit report and management letter issued by independent accountants with respect to any Company or its financial records. (d) Notice, promptly (and, in any event, within five Business Days) after Borrower knows or has reason to know, of (i) the existence and status of any Litigation that, if determined adversely to any Company, would be a Material Adverse Event, (ii) any change in any material fact or circumstance represented or warranted by any Company in any Loan Document, (iii) the receipt by any Company of notice of any violation or alleged violation of ERISA or any Environmental Law or of any condition which, under any applicable Environmental Law, could give rise to liability or impair the saleable value of any real property now or previously owned, leased or used by any Company, or (iv) a Default, Potential Default or Material Adverse Event, in each case specifying the nature thereof and what action the Companies have taken, are taking, or propose to take. (e) Promptly (and, in any event, within 10 days) after filing or sending, copies of all material reports or filings filed by or on behalf of any Company with any Tribunal (including, without limitation, copies of each Form 10-K, Form 10-Q and Form S-8 filed by or on behalf of any Company with the Securities and Exchange Commission) or sent to its stockholders. (f) Promptly after preparation, and no later than 30 days after the last day of each fiscal quarter of Borrower, copies of all Phase I Environmental Site Assessment Reports obtained by the Companies in connection with acquisitions of interests in real property (or acquisitions of Persons owning interests in real property) closed during such fiscal quarter. (g) Promptly upon reasonable request by Agent or Determining Lenders (through Agent), information (not otherwise required to be furnished under the Loan Documents) respecting the business affairs, assets and liabilities of the Companies and opinions, certifications and documents in addition to those mentioned in this Agreement. 8.2 Use of Proceeds. Borrower shall use the proceeds of Loans only for the purposes represented in this Agreement. 8.3 Books and Records. The Companies will maintain books, records and accounts necessary to prepare financial statements in accordance with GAAP. 8.4 Inspections. Upon three Business Days notice, each Company will allow Agent or any Lender (or their Representatives) to inspect any of its properties, to review reports, files and other records 33 40 and to make and take away copies, to conduct tests or investigations, and to discuss any of its affairs, conditions and finances with such Company's other creditors, directors, officers, employees or representatives from time to time, during reasonable business hours. 8.5 Taxes. The Companies will promptly pay when due any and all Taxes, other than (a) Taxes which are being contested in good faith by lawful proceedings diligently conducted, against which reserve or other provision required by GAAP has been made, and in respect of which levy and execution of any Lien have been and continue to be stayed, and (b) state and local Taxes (except income Taxes) which are immaterial in amount and in respect of which levy and execution of any Lien have been and continue to be stayed. No Company shall use any proceeds of Loans hereunder to pay the wages of employees unless a timely payment to or deposit with the U.S. of all amounts of tax required to be deducted or withheld with respect to such wages is also made. 8.6 Payment of Obligations. Each Company will promptly pay (or renew and extend) all of its material obligations as they become due (unless the obligations are being contested in good faith by appropriate proceedings). 8.7 Expenses; Indemnification. (a) Borrower agrees to pay on demand all costs and expenses of Agent in connection with the preparation, due diligence, execution, delivery, administration, syndication, modification, and amendment of the Loan Documents and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for Agent (including the cost of internal counsel) with respect thereto and with respect to advising Agent as to its rights and responsibilities under the Loan Documents. Borrower further agrees to pay on demand all costs and expenses of Agent and Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the cost of internal counsel), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Loan Documents and the other documents to be delivered hereunder. (b) BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS AGENT AND EACH LENDER AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN "INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED PARTY), EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 8.7(B) APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY BORROWER, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNIFIED PARTY OR ANY OTHER PERSON OR ANY 34 41 INDEMNIFIED PARTY IS OTHERWISE A PARTY THERETO AND WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED; SUBJECT, HOWEVER, TO THE LIMITATION AS TO GROSS NEGLIGENCE OR WILLFUL MISCONDUCT CONTAINED IN THE PRECEDING SENTENCE. BORROWER AGREES NOT TO ASSERT ANY CLAIM AGAINST ANY INDEMNIFIED PARTY, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS. SO LONG AS NO DEFAULT EXISTS, NO CLAIM FOR WHICH INDEMNITY IS CLAIMED HEREUNDER SHALL BE COMPROMISED OR SETTLED BY AN INDEMNIFIED PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF BORROWER. NOTHING CONTAINED HEREIN SHALL PREVENT BORROWER FROM BRINGING A SEPARATE ACTION AGAINST ANY PARTY HERETO FOR BREACH OF ANY CONTRACTUAL OBLIGATION CONTAINED IN THE LOAN DOCUMENTS, NOR SHALL THE PROVISIONS OF THIS SECTION 8.7(B) BE APPLICABLE WITH RESPECT TO ANY ACTION BETWEEN BORROWER AND ANY OTHER PARTY FOR BREACH OF CONTRACTUAL OBLIGATION CONTAINED IN THE LOAN DOCUMENTS IN WHICH BORROWER IS THE PREVAILING PARTY. (c) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this SECTION 8.7 shall survive the payment in full of the Loans and all other amounts payable under this Agreement. (d) Amounts payable under this SECTION 8.7 shall be a part of the Obligation and, if not paid upon demand, shall bear interest at the Default Rate until paid. 8.8 Maintenance of Existence, Assets, and Business. Except as otherwise permitted by SECTION 9.11, each Company will (a) maintain its corporate existence and good standing in its state of incorporation and its authority to transact business in all other states where failure to maintain its authority to transact business is a Material Adverse Event; (b) maintain all licenses, permits and franchises necessary for its business where failure to do so is a Material Adverse Event; (c) keep all of its assets that are useful in and necessary to its business in good working order and condition (ordinary wear and tear excepted) and make all necessary repairs and replacements. No Company will relocate its chief executive office unless prior thereto it gives Agent 30 days prior written notice of such proposed location (such notice to include, without limitation, the name of the county or parish and state of such location). 8.9 Insurance. The Companies will maintain with financially sound, responsible and reputable insurance companies or associations (or, as to workers' compensation or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdictions in which they operate) insurance concerning their properties and businesses against casualties and contingencies and of types and in amounts (and with co-insurance and deductibles) as is customary in the case of similar businesses. 8.10 Preservation and Protection of Rights. The Companies will perform the acts and duly authorize, execute, acknowledge, deliver, file and record any Security Documents, financing statements, stock powers and other writings as Agent or Determining Lenders may reasonably deem necessary or appropriate to perfect and maintain the Lender Liens and preserve and protect the Rights of Agent and Lenders under any Loan Document, and will pay all costs of any related filings or recordations and any Lien searches. 8.11 Environmental Laws. The Companies will (a) conduct their business so as to comply with all applicable Environmental Laws and shall promptly take corrective action to remedy any non-compliance 35 42 with any Environmental Law, except where failure to comply or take action would not be a Material Adverse Event, and (b) establish and maintain a management system designed to ensure compliance with applicable Environmental Laws and minimize financial and other risks to each Company arising under applicable Environmental Laws or as the result of environmentally related injuries to Persons or property. Borrower shall deliver reasonable evidence of compliance with the foregoing covenant to Agent within 30 days after any request from Determining Lenders. 8.12 Subsidiaries. The Companies will pledge to Agent for the benefit of Lenders all stock or partnership interests of each Person that becomes a domestic direct or indirect Subsidiary of Borrower after the date of this Agreement (whether as a result of acquisition, creation or otherwise) and shall cause each such new Subsidiary to execute and deliver a Guaranty, an Officer's Certificate (concerning articles of incorporation, bylaws, resolutions and incumbency) and an opinion of counsel (addressing points 4(a), (b), (c), (d) and (e) of EXHIBIT L with respect to such Subsidiary), in each case within 10 Business Days after becoming a Subsidiary of Borrower. SECTION 9 NEGATIVE COVENANTS. So long as Lenders are committed to fund Loans and Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid in full, Borrower covenants and agrees as follows: 9.1 Taxes. No Company may use any portion of the proceeds of any Loan to pay the wages of employees, unless a timely payment to or deposit with the U.S. of all amounts of Tax required to be deducted and withheld with respect to such wages is also made. 9.2 Payment of Obligations. No Company may voluntarily prepay principal of, or interest on, any Debt, other than the Obligation, if a Default or Potential Default exists. 9.3 Employee Plans. Except where a Material Adverse Event would not result, no Company may permit any of the events or circumstances described in SECTION 7.10 to exist or occur. 9.4 Debt. No Company may create, incur or suffer to exist any Funded Debt, other than Permitted Debt. 9.5 Liens. No Company may (a) create, incur or suffer or permit to be created or incurred or to exist any Lien upon any of its assets, other than Permitted Liens, or (b) enter into or permit to exist any arrangement or agreement that directly or indirectly prohibits any Company from creating or incurring any Lien on any of its assets, other than the Loan Documents, leases that place a Lien prohibition on only the leased property and transactions which result in purchase money debt. 9.6 Transactions with Affiliates. Except as disclosed on SCHEDULE 7.14 (if the disclosures are approved by Determining Lenders), no Company may enter into any material transaction with any of its Affiliates (excluding other Companies), other than transactions in the ordinary course of business and upon fair and reasonable terms not materially less favorable than it could obtain or could become entitled to in an arm's-length transaction with a Person that was not its Affiliate. For purposes of this SECTION 9.6, a transaction is "material" if it requires any Company to pay more than $5,000,000 during the term of the agreement governing such transaction. 9.7 Compliance with Laws and Documents. No Company may (a) violate the provisions of any Laws applicable to it or of any Material Agreement to which it is a party if that violation alone, or when 36 43 aggregated with all other violations, would be a Material Adverse Event (unless such Company disagrees that a violation has occurred, is contesting the allegation of a violation in good faith by lawful proceedings diligently conducted, has made any reserve or other provision against such alleged violation required by GAAP, and has stayed any levy or execution of Lien relating to such alleged violation), (b) violate the provisions of its charter or bylaws, or (c) repeal, replace or amend any provision of its charter or bylaws if that action would be a Material Adverse Event. 9.8 Loans, Advances and Investments. Except as permitted by SECTION 9.9 or SECTION 9.11, no Company may make any loan, advance, extension of credit or capital contribution to, make any investment in, or purchase or commit to purchase any stock or other securities or evidences of Debt of, or interests in, any other Person, other than (a) expense accounts for and other advances to its directors, officers and employees in the ordinary course of business; (b) marketable obligations issued or unconditionally guaranteed by the U.S. Government or issued by any of its agencies and backed by the full faith and credit of the U. S., in each case maturing within one year from the date of acquisition (and investments in mutual funds investing primarily in those obligations); (c) short-term investment grade domestic and eurodollar certificates of deposit or time deposits that are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial banks having combined capital, surplus, and undivided profits of not less than $100,000,000 (as shown on its most recently published statement of condition); (d) commercial paper and similar obligations rated "P-1" by Moody's Investors Service, Inc., or "A-1" by Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.); (e) inter-Company loans and advances; (f) readily marketable tax-free municipal bonds of a domestic issuer rated "Aaa" by Moody's Investors Service, Inc., or "AAA" by Standard & Poors Ratings Group (a division of McGraw Hill, Inc.), and maturing within one year from the date of issuance (and investments in mutual funds investing primarily in those bonds); (g) demand deposit accounts maintained in the ordinary course of business; (h) other investments existing on the initial Loan Date and described on SCHEDULE 9.8 (and, with respect to Amatek and its Subsidiaries, existing on the date of Acquisition); (i) extensions of credit in connection with trade receivables and overpayments of trade payables, in each case resulting from transactions in the ordinary course of business; and (j) as long as no Default or Potential Default exists, other loans, advances, and investments aggregating no more than 5% of the Companies' Net Worth at any time. 9.9 Dividends and Distributions. No Company may declare, make or pay any Distribution, other than Distributions declared, made or paid by (a) Borrower wholly in the form of its capital stock and (b) any other Company to Borrower. No Company shall enter into any arrangement or agreement (other than this Agreement) that prohibits it from paying dividends or other distributions to its shareholders. 9.10 Sale of Assets. No Company may sell, assign, lease, transfer or otherwise dispose of any of its assets, other than (a) sales of inventory in the ordinary course of business, (b) the sale, discount or transfer of delinquent accounts receivable in the ordinary course of business for purposes of collection, (c) occasional sales, leases or other dispositions of immaterial assets for consideration not less than fair market value, (d) sales, leases or other dispositions of assets that are obsolete or have negligible fair market value, (e) sales of equipment for a fair and adequate consideration (but the seller must promptly replace the sold equipment), (f) sales for which the cash proceeds thereof (after selling expenses and taxes related thereto to the extent paid and any reserves for retained liabilities until such liabilities are extinguished) are applied in prepayment of the Principal Debt in accordance with SECTION 3.2(c), and (g) other sales of assets which do not exceed $500,000 in the aggregate annually. 9.11 Mergers and Dissolutions. No Company may acquire all or any substantial portion of stock issued by, interest in, or assets of any other Person (the "ACQUIREE"), unless (a) immediately after the 37 44 acquisition no Default or Potential Default exists and a Responsible Officer represents to Agent and Lenders in writing that the acquisition will not reasonably be expected to cause any Default or Potential Default then or within the one-year period thereafter, (b) the Acquiree has consented to the acquisition, and (c) the Acquiree is in the same or similar business as the Companies (or a reasonably related business). Borrower may not, and may not permit any Subsidiary to, merge or consolidate with any other Person, unless immediately thereafter no Default or Potential Default exists and (i) Borrower, if a party thereto, is the surviving corporation or (ii) if Borrower is not a party thereto, the surviving corporation has either previously executed a Guaranty or assumes, in writing, the non-surviving corporation's obligations created by any Guaranty executed by the non-surviving corporation. Except as a result of a transaction permitted by this SECTION 9.11, no Company will liquidate, wind up, or dissolve (or suffer any liquidation or dissolution). 9.12 Assignment. No Company may assign or transfer any of its Rights, duties, or obligations under any of the Loan Documents, except if any Company merges with another Company as permitted by SECTION 9.11, the assignment or transfer of the Rights, duties, and obligations of the non-surviving Company is permitted if the surviving Company assumes in writing all Rights, duties, and obligations of the non- surviving Company under the Loan Documents. 9.13 Fiscal Year and Accounting Methods. No Company may change its fiscal year or its method of accounting (other than immaterial changes in methods or as required by GAAP). 9.14 New Businesses. No Company may engage in any business except the businesses in which they are presently engaged and any other reasonably related business. 9.15 Government Regulations. No Company may conduct its business in a way that it becomes regulated under the Investment Company Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as amended. 9.16 Tax Sharing Agreements. The Companies shall not enter into any tax sharing arrangements which obligate them to pay more Taxes collectively than they would otherwise pay absent such arrangements. SECTION 10 FINANCIAL COVENANTS. So long as Lenders are committed to fund Loans and Agent is committed to issue LCs under this Agreement, and thereafter until the Obligation is paid and performed in full, Borrower covenants and agrees as follows: 10.1 Minimum Net Worth. Borrower shall not permit Net Worth, as of the last day of any fiscal quarter of Borrower, commencing with October 31, 1998, to be less than the sum of (a) $150,000,000, plus (b) an amount equal to the greater of zero (0) and 75% of the consolidated net earnings after taxes of the Companies determined in accordance with GAAP for the period (taken as a single accounting period) from and including August 1, 1998, to and including such day, plus (c) an amount equal to 100% of any cash proceeds (net of underwriting discounts and commissions and other costs associated therewith) received by the Companies from the issuance and sale of equity securities for the period (taken as a single accounting period) from and including August 1, 1998, to and including such day. 10.2 Maximum Leverage Ratio. Borrower shall not permit the ratio, as of the last day of each fiscal quarter of Borrower listed below, of Funded Debt as of such date to EBITDA for the four fiscal quarters ended on such date to exceed the ratio set forth below opposite such day: 38 45 October 31, 1998 4.50 to 1.00 January 31, 1999 4.50 to 1.00 April 30, 1999 4.50 to 1.00 July 31, 1999 4.50 to 1.00 October 31, 1999 4.25 to 1.00 January 31, 2000 4.25 to 1.00 April 30, 2000 4.25 to 1.00 July 31, 2000 4.25 to 1.00 October 31, 2000 4.00 to 1.00 January 31, 2001 4.00 to 1.00 April 30, 2001 4.00 to 1.00 July 31, 2001 4.00 to 1.00 Thereafter 3.50 to 1.00
10.3 Maximum Senior Debt Ratio. Effective upon the incurrence by any Company of Funded Debt in the amount of $100,000,000 or more which is contractually subordinated or junior in right of payment to the Obligation, Borrower shall not permit the ratio, as of the last day of each fiscal quarter of Borrower listed below, of Senior Debt as of such date to EBITDA for the four fiscal quarters ended on such date to exceed the ratio set forth below opposite such day: October 31, 1998 4.50 to 1.00 January 31, 1999 3.25 to 1.00 April 30, 1999 3.25 to 1.00 July 31, 1999 3.25 to 1.00 October 31, 1999 3.25 to 1.00 January 31, 2000 3.00 to 1.00 April 30, 2000 3.00 to 1.00 July 31, 2000 3.00 to 1.00 October 31, 2000 3.00 to 1.00 January 31, 2001 2.75 to 1.00 April 30, 2001 2.75 to 1.00 July 31, 2001 2.75 to 1.00 October 31, 2001 2.75 to 1.00 Thereafter 2.50 to 1.00
39 46 10.4 Minimum Fixed Charge Coverage Ratio. Borrower shall not permit the ratio, as of the last day of any fiscal quarter of Borrower, of (a) the sum of EBITDA, minus cash taxes paid with respect to income, in each case for the four fiscal quarters ended on such date to (b) the sum of interest expenses plus current maturities of the Companies' long-term Funded Debt, plus cash dividends paid by Borrower, plus repurchases by any Company of its own capital stock or other equity securities (whether or not permitted under Section 9.9), in each case during the four fiscal quarters ended on such date to be less than the ratio set forth opposite such day: October 31, 1998 1.25 to 1.00 January 31, 1999 1.25 to 1.00 April 30, 1999 1.25 to 1.00 July 31, 1999 1.25 to 1.00 October 31, 1999 1.30 to 1.00 January 31, 2000 1.30 to 1.00 April 30, 2000 1.30 to 1.00 July 31, 2000 1.30 to 1.00 Thereafter 1.35 to 1.00
SECTION 11 DEFAULT. The term "DEFAULT" means the occurrence of any one or more of the following events: 11.1 Payment of Obligation. (a) The failure of any Company to make any principal payment on any Note or to pay or reimburse Agent with respect to any draft or draw request under any LC after it becomes due and payable under the Loan Documents; or (b) The failure of any Company to pay any other portion of the Obligation within three Business Days after it becomes due and payable under the Loan Documents. 11.2 Covenants. The failure of Borrower (and, if applicable, any other Company) to punctually and properly perform, observe and comply with: (a) Any covenant or agreement contained in SECTIONS 2.3(h), 8.1, 8.4 or 9; or (b) Any other covenant or agreement contained in any Loan Document (other than the covenants to pay the Obligation and the covenants in clause (a) above), unless, if such breach is curable, such breach is cured within 30 days after Borrower knows of such failure. 11.3 Debtor Relief. Any Company (a) is not Solvent, (b) fails to pay its Debts generally as they become due, (c) voluntarily seeks, consents to, or acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or is made the subject of any proceeding provided for by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the Rights of Agent or any 40 47 Lender granted in the Loan Documents (unless, if the proceeding is involuntary, the applicable petition is dismissed within 60 days after its filing). 11.4 Judgments and Attachments. Any Company fails, within 60 days after entry, to pay, bond or otherwise discharge any judgment or order for the payment of money in excess of $1,000,000 (individually or collectively) or any warrant of attachment, sequestration or similar proceeding against any Company's assets having a value (individually or collectively) of $1,000,000, which is neither (a) stayed on appeal nor (b) diligently contested in good faith by appropriate proceedings and adequate reserves have been set aside on its books in accordance with GAAP. 11.5 Government Action. (a) A final non-appealable order is issued by any Tribunal (including, but not limited to, the U.S. Justice Department) seeking to cause any Company to divest a significant portion of its assets under any antitrust, restraint of trade, unfair competition, industry regulation or similar Laws, or (b) any Tribunal condemns, seizes or otherwise appropriates, or takes custody or control of all or any substantial portion of the assets of any Company. 11.6 Misrepresentation. Any material representation or warranty made by any Company contained in any Loan Document at any time proves to have been materially incorrect when made. 11.7 Ownership of Other Companies. Borrower fails to own, beneficially and of record, with power to vote, 100% of the issued and outstanding shares of capital stock of any other Company that has executed a Loan Document (except as a result of a transaction permitted by this Agreement), or NCI Operating Corp. and NCI Holding Corp. fail to own the partnership interests described in SCHEDULE 7.3. 11.8 Default Under Other Agreements. (a) Any Company fails to pay when due (after lapse of any applicable grace period) any Debt in excess (individually or collectively) of $1,000,000; (b) any default exists (and is not waived or cured) under any agreement to which a Company is a party, the effect of which is to cause, or to permit any Person (other than a Company) to cause, an amount in excess (individually or collectively) of $1,000,000 to become due and payable by any Company before its stated maturity; or (c) any Debt in excess (individually or collectively) of $1,000,000 is declared to be due and payable (unless such declaration is rescinded) or required to be prepaid by any Company before its stated maturity. 11.9 LCs. Agent is served with, or becomes subject to, a court order, injunction, or other process or decree restraining or seeking to restrain it from paying any amount under any LC and either (a) a drawing has occurred under the LC and Borrower has refused to reimburse Agent for payment or (b) the expiration date of the LC has occurred but the right of any beneficiary thereunder to draw under the LC has been extended past the expiration date in connection with the pendency of the related court action or proceeding and Borrower has failed to deposit with Agent cash collateral in an amount equal to Agent's maximum exposure under the LC. 11.10 Validity and Enforceability of Loan Documents. Except in accordance with its terms or as otherwise expressly permitted by this Agreement, any Loan Document at any time after its execution and delivery ceases to be in full force and effect in any material respect or is declared by a Tribunal to be null and void or its validity or enforceability is contested by any Company party thereto or any Company denies that it has any further liability or obligations under any Loan Document to which it is a party. 11.11 Change of Control. The acquisition by any Person, or two or more Persons acting in concert (other than any Person or Persons who own, prior to that acquisition, 20% or more of the outstanding shares 41 48 of Borrower's voting stock), of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of Borrower's voting stock. SECTION 12 RIGHTS AND REMEDIES. 12.1 Remedies Upon Default. (a) If a Default (i) occurs under SECTION 11.3(c) or (ii) occurs and is continuing under SECTION 11.3(a), (b) or (d), the commitment to extend credit under this Agreement automatically terminates, the entire unpaid balance of the Obligation automatically becomes due and payable without any action of any kind whatsoever, and Borrower must provide cash collateral in an amount equal to the then-existing LC Exposure. (b) If a Default occurs and is continuing, Agent may (with the consent of, and must, upon the request of, Determining Lenders), do any one or more of the following: (i) if the maturity of the Obligation has not already been accelerated under SECTION 12.1(a), declare the entire unpaid balance of all or any part of the Obligation immediately due and payable, whereupon it is due and payable; (ii) terminate the commitments of Lenders to extend credit under this Agreement; (iii) reduce any claim to judgment; (iv) to the extent permitted by Law, exercise (or request each Lender to, and each Lender is entitled to, exercise) the Rights of offset or banker's Lien against the interest of any Company in and to every account and other property of any Company that are in the possession of Agent or any Lender to the extent of the full amount of the Obligation (and to the extent permitted by Law, each Company is deemed directly obligated to each Lender in the full amount of the Obligation for this purpose); (v) demand Borrower to provide cash collateral in an amount equal to the LC Exposure then existing; and (vi) exercise any and all other legal or equitable Rights afforded by the Loan Documents, the Laws of the State of Texas, or any other applicable jurisdiction. (c) If Agent refuses to take any action under SECTION 12.1(b) at the request of Determining Lenders, then Determining Lenders may take that action. 12.2 Company Waivers. To the extent permitted by Law, each Company waives presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration and notice of protest and nonpayment, and agrees that its liability with respect to all or any part of the Obligation is not affected by any renewal or extension in the time of payment of all or any part of the Obligation, by any indulgence, or by any release or change in any security for the payment of all or any part of the Obligation. 12.3 Performance by Agent. If any covenant, duty or agreement of any Company is not performed in accordance with the terms of the Loan Documents, Agent may, while a Default exists, at its option (but subject to the approval of Determining Lenders), perform or attempt to perform that covenant, duty or agreement on behalf of that Company (and any amount expended by Agent in its performance or attempted performance is payable by the Companies, jointly and severally, to Agent on demand, becomes part of the Obligation, and bears interest at the Default Rate from the date of Agent's expenditure until paid). However, neither Agent nor any Lender assumes or shall have, except by its express written consent, any liability or responsibility for the performance of any covenant, duty or agreement of any Company. 42 49 12.4 Not in Control. None of the covenants or other provisions contained in any Loan Document shall, or shall be deemed to, give Agent or Lenders the Right to exercise control over the assets (including, without limitation, real property), affairs, or management of any Company; the power of Agent and Lenders is limited to the Right to exercise the remedies provided in this SECTION 12. 12.5 Course of Dealing. The acceptance by Agent or Lenders of any partial payment on the Obligation shall not be deemed to be a waiver of any Default then existing. No waiver by Agent, Determining Lenders or Lenders of any Default shall be deemed to be a waiver of any other then-existing or subsequent Default. No delay or omission by Agent, Determining Lenders or Lenders in exercising any Right under the Loan Documents will impair that Right or be construed as a waiver thereof or any acquiescence therein, nor will any single or partial exercise of any Right preclude other or further exercise thereof or the exercise of any other Right under the Loan Documents or otherwise. 12.6 Cumulative Rights. All Rights available to Agent, Determining Lenders, and Lenders under the Loan Documents are cumulative of and in addition to all other Rights granted to Agent, Determining Lenders, and Lenders at law or in equity, whether or not the Obligation is due and payable and whether or not Agent, Determining Lenders, or Lenders have instituted any suit for collection, foreclosure, or other action in connection with the Loan Documents. 12.7 Application of Proceeds. Any and all proceeds ever received by Agent or Lenders from the exercise of any Rights pertaining to the Obligation shall be applied to the Obligation according to SECTION 3.11. 12.8 Diminution in Value of Collateral. Neither Agent nor any Lender has any liability or responsibility whatsoever for any diminution in or loss of value of any collateral now or hereafter securing payment or performance of all or any part of the Obligation (other than diminution in or loss of value caused by its gross negligence or willful misconduct). 12.9 Certain Proceedings. Borrower will promptly execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments, registration statements and all other documents and papers Agent or Determining Lenders reasonably request in connection with the obtaining of any consent, approval, registration, qualification, permit, license or authorization of any Tribunal or other Person necessary or appropriate for the effective exercise of any Rights under the Loan Documents. Because Borrower agrees that Agent's and Determining Lenders' remedies at Law for failure of Borrower to comply with the provisions of this paragraph would be inadequate and that failure would not be adequately compensable in damages, Borrower agrees that the covenants of this paragraph may be specifically enforced. SECTION 13 AGREEMENT AMONG LENDERS. 13.1 Appointment, Powers, and Immunities of Agent. Each Lender hereby irrevocably appoints and authorizes Agent to act as its agent under the Loan Documents with such powers and discretion as are specifically delegated to Agent by the terms of the Loan Documents, together with such other powers as are reasonably incidental thereto. Agent (which term as used in this sentence and in SECTION 13.5 and the first sentence of SECTION 13.6 shall include its Affiliates and its own and its Affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any 43 50 of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Company or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Company or the satisfaction of any condition or to inspect the property (including the books and records) of any Company; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 13.2 Reliance by Agent. Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Company), independent accountants, and other experts selected by Agent. Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until Agent receives and accepts an Assignment and Acceptance executed in accordance with SECTION 14.12. As to any matters not expressly provided for by this Agreement, Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Determining Lenders, and such instructions shall be binding on all Lenders; provided, however, that Agent shall not be required to take any action that exposes Agent to personal liability or that is contrary to any Loan Document or applicable Law or unless it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 13.3 Defaults. Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Potential Default unless Agent has received written notice from a Lender or Borrower specifying such Default or Potential Default and stating that such notice is a "Notice of Default". In the event that Agent receives such a notice of the occurrence of a Default or Potential Default, Agent shall give prompt notice thereof to Lenders. Agent shall (subject to SECTION 13.2) take such action with respect to such Default or Potential Default as shall reasonably be directed by Determining Lenders, provided that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Potential Default as it shall deem advisable in the best interest of Lenders. 13.4 Rights as Lender. With respect to its Commitments and the Loans made by it, NationsBank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its individual capacity. NationsBank (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Company as if it were not acting as Agent, and NationsBank (and any successor acting as Agent) and its Affiliates may accept fees and other consideration from any Company for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 44 51 13.5 Indemnification. LENDERS AGREE TO INDEMNIFY AGENT (TO THE EXTENT NOT REIMBURSED UNDER SECTION 14.12, BUT WITHOUT LIMITING THE OBLIGATIONS OF BORROWER UNDER SUCH SECTION) RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENTS, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST AGENT (INCLUDING BY ANY LENDER) IN ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTION TAKEN OR OMITTED BY AGENT UNDER ANY LOAN DOCUMENT (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF AGENT); PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY COSTS OR EXPENSES PAYABLE BY BORROWER UNDER SECTION 8.7, TO THE EXTENT THAT AGENT IS NOT PROMPTLY REIMBURSED FOR SUCH COSTS AND EXPENSES BY BORROWER. THE AGREEMENTS CONTAINED IN THIS SECTION 13.5 SHALL SURVIVE PAYMENT IN FULL OF THE LOANS AND ALL OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT. 13.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Companies and decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Company that may come into the possession of Agent or any of its Affiliates. 13.7 Resignation of Agent. Agent may resign at any time by giving notice thereof to Lenders and Borrower. Upon any such resignation, Determining Lenders shall have the right to appoint a successor Agent with the consent of Borrower (which consent shall not unreasonably be withheld). If no successor Agent shall have been so appointed by Determining Lenders and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the U.S. having combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this SECTION 13 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 13.8 Relationship of Lenders. The Loan Documents, and the documents delivered in connection therewith, do not create a partnership or joint venture among Agent and Lenders or among Lenders. 45 52 13.9 Collateral Matters. (a) Each Lender authorizes and directs Agent to enter into the Security Documents for the ratable benefit of Lenders. Each Lender agrees that any action taken by Agent concerning any Collateral with the consent of, or at the request of, Determining Lenders in accordance with the provisions of this Agreement, the Security Documents or the other Loan Documents, and the exercise by Agent (with the consent of, or at the request of, Determining Lenders) of powers concerning the Collateral set forth in any Loan Document, together with other reasonably incidental powers, shall be authorized and binding upon all Lenders. (b) Agent is authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender, from time to time before a Default or Potential Default, to take any action with respect to any Collateral or Security Documents that may be necessary to perfect and maintain perfected the Lender Liens upon the Collateral granted by the Security Documents. (c) Agent has no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Company or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent for the benefit of Lenders under the Security Documents have been properly or sufficiently or lawfully created, perfected, protected or enforced, or are entitled to any particular priority. (d) Agent shall exercise the same care and prudent judgment with respect to the Collateral and the Security Documents as it normally and customarily exercises in respect of similar collateral and security documents. (e) Lenders irrevocably authorize Agent, at its option and in its discretion, to release any Lender Lien upon any Collateral (i) upon full payment of the Obligation; (ii) constituting property being sold or disposed of as permitted under SECTION 9.10, if Agent determines that the property being sold or disposed is being sold or disposed in accordance with the requirements and limitations of SECTION 9.10 and Agent concurrently receives all mandatory prepayments with respect thereto, if any, in accordance with SECTION 9.10; or (iii) if approved, authorized or ratified in writing by Determining Lenders, subject to SECTION 14.10(a)(v). Upon request by Agent at any time, Lenders will confirm in writing Agent's authority to release particular types or items of Collateral under this SECTION 13.9(e). 13.10 Benefits of Agreement. None of the provisions of this SECTION 13 inure to the benefit of any Company or any other Person other than Agent and Lenders; consequently, no Company or any other Person is entitled to rely upon, or to raise as a defense, in any manner whatsoever, the failure of Agent or any Lender to comply with these provisions. SECTION 14 MISCELLANEOUS. 14.1 Headings. The headings, captions and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Documents, nor affect the meaning thereof. 14.2 Nonbusiness Days; Time. Any payment or action that is due under any Loan Document on a non-Business Day may be delayed until the next-succeeding Business Day (but interest shall continue to 46 53 accrue on any applicable payment until payment is in fact made) unless the payment concerns a Eurodollar Loan, in which case if the next-succeeding Business Day is in the next calendar month, then such payment shall be made on the next-preceding Business Day. Unless otherwise indicated, all time references (e.g., 10:00 a.m.) are to Dallas, Texas time. 14.3 Communications. Unless otherwise specifically provided, whenever any Loan Document requires or permits any consent, approval, notice, request, demand or other communication from one party to another, communication must be in writing (which may be by telex or telecopy) to be effective and shall be deemed to have been given (a) if by telex, when transmitted to the appropriate telex number and the appropriate answerback is received, (b) if by telecopy, when transmitted to the appropriate telecopy number (and all communications sent by telecopy must be confirmed promptly thereafter by telephone; but any requirement in this parenthetical shall not affect the date when the telecopy shall be deemed to have been delivered), (c) if by mail, on the third Business Day after it is enclosed in an envelope and properly addressed, stamped, sealed, certified mail, return receipt requested, and deposited in the appropriate official postal service, or (d) if by any other means, when actually delivered. Until changed by notice pursuant to this Agreement, the address (and telecopy number) for Agent, Borrower and each Guarantor is set forth on SCHEDULE 1. 14.4 Form and Number of Documents. The form, substance, and number of counterparts of each writing to be furnished under this Agreement must be satisfactory to Agent and its counsel. 14.5 Exceptions to Covenants. Borrower may not and may not permit any Company to take or fail to take any action that is permitted as an exception to any of the covenants contained in this Agreement if that action or omission would result in the breach of any other covenant contained in this Agreement. 14.6 Survival. All covenants, agreements, undertakings, representations and warranties made in any of the Loan Documents survive all closings under the Loan Documents and, except as otherwise indicated, are not affected by any investigation made by any party. 14.7 Governing Law. Except as expressly provided in a Loan Document, the Laws (other than conflict-of-laws provisions) of the State of Texas and of the U.S. govern the Rights and duties of the parties to the Loan Documents and the validity, construction, enforcement and interpretation of the Loan Documents. 14.8 Invalid Provisions. Any provision in any Loan Document held to be illegal, invalid or unenforceable is fully severable; the appropriate Loan Document shall be construed and enforced as if that provision had never been included; and the remaining provisions shall remain in full force and effect and shall not be affected by the severed provision. Agent, Lenders, and each Company party to the affected Loan Document agree to negotiate, in good faith, the terms of a replacement provision as similar to the severed provision as may be possible and be legal, valid and enforceable. However, if the provision held to be illegal, invalid or unenforceable is a material part of this Agreement, such invalid, illegal or unenforceable provision shall be, to the extent permitted by Law, replaced by a clause or provision judicially construed and interpreted to be as similar in substance and content to the original terms of such illegal, invalid or unenforceable clause or provision as the context thereof would reasonably allow, so that such clause or provision would thereafter be legal, valid and enforceable. 14.9 Venue; Service of Process; Jury Trial. EACH PARTY TO ANY LOAN DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE OF BORROWER, 47 54 FOR EACH OTHER COMPANY), (a) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS OR HARRIS COUNTY, TEXAS, OR IN THE U.S. DISTRICT COURT FOR THE NORTHERN OR SOUTHERN DISTRICT OF TEXAS, DALLAS OR HOUSTON DIVISION, (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS SET FORTH IN THIS AGREEMENT, (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT. The scope of each of the foregoing waivers is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower (for itself and on behalf of each other Company) acknowledges that these waivers are a material inducement to Agent's and each Lender's agreement to enter into a business relationship, that Agent and each Lender has already relied on these waivers in entering into this Agreement, and that Agent and each Lender will continue to rely on each of these waivers in related future dealings. Borrower (for itself and on behalf of each other Company) further warrants and represents that it has reviewed these waivers with its legal counsel, and that it knowingly and voluntarily agrees to each waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION 14.9 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN DOCUMENT. In the event of Litigation, this Agreement may be filed as a written consent to a trial by the court. 14.10 Amendments, Consents, Conflicts and Waivers. (a) Any provision of any Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by Borrower and Determining Lenders (and, if SECTION 13 or the rights or duties of Agent are affected thereby, by Agent); provided that no such amendment or waiver shall, unless signed by all Lenders, (i) increase the Commitments, (ii) reduce the principal of or rate of interest on any Loan or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or for termination of any Commitment, (iv) change the percentage of the Commitments or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for Lenders or any of them to take any action under this SECTION 14.10 or any other provision of this Agreement or (v) release any Guarantor or all or substantially all of the Collateral. 48 55 (b) Any conflict or ambiguity between the terms and provisions of this Agreement and terms and provisions in any other Loan Document is controlled by the terms and provisions of this Agreement. (c) No course of dealing or any failure or delay by Agent, any Lender, or any of their respective Representatives with respect to exercising any Right of Agent or any Lender under this Agreement operates as a waiver thereof. A waiver must be in writing and signed by Agent and Lenders (or Determining Lenders, if permitted under this Agreement) to be effective, and a waiver will be effective only in the specific instance and for the specific purpose for which it is given. 14.11 Multiple Counterparts. Any Loan Document may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of thereof, it shall not be necessary to produce or account for more than one counterpart. Each Lender need not execute the same counterpart of this Agreement so long as identical counterparts are executed by Borrower, each Lender, and Agent. This Agreement shall become effective when counterparts of this Agreement have been executed and delivered to Agent by each Lender, Agent and Borrower, or, in the case only of Lenders, when Agent has received telecopied, telexed or other evidence satisfactory to it that each Lender has executed and is delivering to Agent a counterpart of this Agreement. 14.12 Successors and Assigns; Assignments and Participations. (a) Each Loan Document binds and inures to the benefit of the parties thereto, any intended beneficiary thereof, and each of their respective successors and permitted assigns. No Lender may transfer, pledge, assign, sell any participation in, or otherwise encumber its portion of the Obligation except as permitted by this SECTION 14.12. (b) Each Lender may assign to one or more financial institutions approved by Borrower and Agent (which approval shall not be unreasonably withheld) (each a "PURCHASER") all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitments); provided, however, that (i) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $10,000,000 or an integral multiple of $1,000,000 in excess thereof; (ii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Agreement and the Notes; and (iii) the parties to such assignment shall execute and deliver to Agent for its acceptance an Assignment and Acceptance in the form of EXHIBIT I, together with any Note subject to such assignment and a processing fee of $3,500. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the 49 56 consummation of any assignment pursuant to this SECTION 14.12(b), the assignor, Agent and Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the U.S. or a state thereof, it shall deliver to Borrower and Agent certification as to exemption from deduction or withholding of Taxes in accordance with SECTION 3.20. (c) Agent shall maintain at its address referred to in SECTION 14.3 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of EXHIBIT I, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (e) Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Agreement (including all or a portion of its Commitments or its Loans); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Participant shall be entitled to the benefit of the yield protection provisions contained in SECTIONS 3.15 through 3.20 (however, no Participant is entitled to receive any greater payment than the transferor Lender would have been entitled to receive) and the right of set-off contained in SECTION 3.12, and (iv) Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of Borrower relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitments). (f) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (g) Any Lender may furnish any information concerning Borrower or any of its Subsidiaries in the possession of such Lender from time to time to Purchasers and Participants (including prospective Purchasers and Participants). 50 57 14.13 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. Each Company's obligations under the Loan Documents remain in full force and effect until the Total Commitment is terminated and the Obligation is paid in full (except for provisions under the Loan Documents which by their terms expressly survive payment of the Obligation and termination of the Loan Documents). If at any time any payment of the principal of or interest on any Note or any other amount payable by Borrower or any other obligor on the Obligation under any Loan Document is rescinded or must be restored or returned upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, the obligations of each Company under the Loan Documents with respect to that payment shall be reinstated as though the payment had been due but not made at that time. 14.14 ENTIRETY. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS (EACH AS AMENDED IN WRITING FROM TIME TO TIME) EXECUTED BY ANY COMPANY, ANY LENDER OR AGENT REPRESENT THE FINAL AGREEMENT AMONG THE COMPANIES, LENDERS AND AGENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. EXECUTED as of the day and year first mentioned. NCI BUILDING SYSTEMS, INC. as Borrower By: /s/ Robert J. Medlock -------------------------------------- Robert J. Medlock Vice President and Chief Financial Officer 51 58 NATIONSBANK OF TEXAS, N.A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ---------------------------------------- Richard L. Nichols, Jr. Vice President 52 59 NATIONSBANC MONTGOMERY SECURITIES LLC, as Arranger and Syndication Agent By: /s/ Gary L. Kahn ----------------------------------------- Gary L. Kahn Managing Director 53 60 SWISS BANK CORPORATION, STAMFORD BRANCH as Documentation Agent and a Lender By: /s/ Dorothy McKinley ----------------------------------------- Name: Dorothy McKinley Title: Associate Director Loan Portfolio Support, US By: /s/ Rett Jenal ----------------------------------------- Name: Rett Jenal Title: Director, Banking Finance 54 EX-4.4 4 FIRST AMENDMENT TO CREDIT AGREEMENT - MAY 1, 1998 1 EXHIBIT 4.4 As of May 1, 1998 NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Attn: Robert J. Medlock Chief Financial Officer Re: First Amendment to Credit Agreement Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 25, 1998 (the "CREDIT AGREEMENT"), among NCI Building Systems ("BORROWER"), NationsBank of Texas, N.A., as Administrative Agent ("AGENT"), NationsBanc Montgomery Securities LLC, as Syndication Agent, Swiss Bank Corporation, as Documentation Agent, and the financial institutions named therein (collectively, "LENDERS"). Unless otherwise indicated, all capitalized terms herein are used as defined in the Credit Agreement. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, Guarantors, Agent and Lenders agree as follows: 1. Certain Definitions. (a) The definition of "APPLICABLE MARGIN" in SECTION 1.1 of the Credit Agreement is hereby amended by replacing the table therein with the following table:
============================================================================================================= RATIO OF FUNDED DEBT APPLICABLE MARGIN FOR APPLICABLE MARGIN FOR TO EBITDA BASE RATE LOANS EURODOLLAR LOANS - ------------------------------------------------------------------------------------------------------------- Equal to or greater than 4.0 to 1.0 0.500% 2.000% - ------------------------------------------------------------------------------------------------------------- Less than 4.0 to 1.0, but greater than 3.75 0.500% 2.000% to 1.0 (0.250% if Subordinated Debt (1.750% if Subordinated equals or exceeds Debt equals or exceeds $200,000,000) $200,000,000) =============================================================================================================
2
============================================================================================================= RATIO OF FUNDED DEBT APPLICABLE MARGIN FOR APPLICABLE MARGIN FOR TO EBITDA BASE RATE LOANS EURODOLLAR LOANS - ------------------------------------------------------------------------------------------------------------- Less than or equal to 3.75 to 1.0, but 0.250% 1.750% greater than 3.25 to 1.0 (0% if Subordinated Debt (1.500% if Subordinated equals or exceeds Debt equals or exceeds $200,000,000) $200,000,000) - ------------------------------------------------------------------------------------------------------------- Less than or equal to 3.25 to 1.0, but 0% 1.375% greater than 2.5 to 1.0 - ------------------------------------------------------------------------------------------------------------- Less than or equal to 2.5 to 1.0, but 0% 1.000% greater than 2.0 to 1.0 - ------------------------------------------------------------------------------------------------------------- Less than or equal to 2.0 to 1.0 0% 0.750% =============================================================================================================
(b) The definition of "EBITDA" in SECTION 1.1 of the Credit Agreement is hereby amended to read in its entirety as follows: EBITDA means, in respect of any period, the following (calculated on a consolidated basis for the Companies in accordance with GAAP, and using pro forma combined information for the Companies and Amatek and its Subsidiaries for any fiscal period (or portion thereof) of Borrower prior to the Acquisition, including amounts expended by Amatek and its Subsidiaries for corporate overhead and executive employee compensation): the sum of (a) net income before interest expenses, Taxes, non-cash operating charges (such as depreciation and amortization expense), non-cash charges in respect of pension and retiree benefits, and extraordinary gains and losses; plus (b) expenses incurred by Borrower in connection with the Acquisition during the fiscal quarters of Borrower ending on April 30, 1998, and July 31, 1998, up to an aggregate maximum amount for both quarters of $5,000,000; plus (c) for each of the following fiscal periods, the following amounts (without duplication): $10,000,000 for the four fiscal quarters of Borrower ending on July 31, 1998; $7,500,000 for the four fiscal quarters of Borrower ending on October 31, 1998, $5,000,000 for the four fiscal quarters of Borrower ending on January 31, 1999; and $2,500,000 for the four fiscal quarters of Borrower ending on April 30, 1999. (c) The definition of "GUARANTORS" in SECTION 1.1 of the Credit Agreement is hereby amended by changing the name "A&S Building Interests, Inc." to "A&S Business Interests, Inc." (d) Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition (in proper alphabetical order): 2 3 SUBORDINATED DEBT means Funded Debt which is contractually subordinated or junior in right of payment to the Obligation on terms satisfactory to Determining Lenders. 2. Security. SECTION 5.2 of the Credit Agreement is hereby amended by adding the underlined language shown below, so that the entire section shall read as follows: 5.2 Collateral. Full and complete payment of the Obligation shall be secured through the execution and delivery of Pledge Agreements and Assignments of Partnership Interests with respect to (a) all capital stock, partnership interests or other equity interests of any Company in any domestic direct or indirect Subsidiaries, and (b) the capital stock, partnership interests or other equity interests of any Company in any foreign direct or indirect Subsidiaries (other than Building Systems de Mexico, S.A. de C.V.), up to a maximum of 65% of total combined voting power of all classes of equity interests in such subsidiary which are entitled to vote (together with proceeds thereof and any additional collateral ever furnished under SECTIONS 2.3(H), 3.11(B) OR 5.3, the "COLLATERAL"). 3. Debt. SECTION 9.4 of the Credit Agreement is hereby amended by changing the words "Funded Debt" to "Debt," so that such section shall read as follows: 9.4 Debt. No Company may create, incur or suffer to exist any Debt, other than Permitted Debt. 4. Dividends and Distributions. The first sentence of SECTION 9.9 of the Credit Agreement is hereby amended, so that the entire section shall read as follows: 9.9 Dividends and Distributions. Borrower may not declare, make or pay any Distribution, other than Distributions declared, made or paid by Borrower wholly in the form of its capital stock. No Company shall enter into any arrangement or agreement (other than this Agreement) that prohibits it from paying dividends or other distributions to its shareholders (other than prohibitions with respect to Borrower contained in the Indenture governing Borrower's proposed issuance of up to $200,000,000 of Subordinated Debt). 5. Minimum Net Worth. SECTION 10.1 of the Credit Agreement is hereby amended by changing the date "October 31, 1998" to "July 31, 1998." 6. Maximum Leverage Ratio. SECTION 10.2 of the Credit Agreement is hereby amended by inserting the following line at the beginning of the table set forth therein: July 31, 1998 4.50 to 1.00 7. Maximum Debt Ratio. SECTION 10.3 of the Credit Agreement is hereby amended by inserting the following line at the beginning of the table set forth therein: July 31, 1998 4.50 to 1.00 3 4 8. Minimum Fixed Charge Coverage Ratio. SECTION 10.4 of the Credit Agreement is hereby amended by inserting the following line at the beginning of the table set forth therein: July 31, 1998 1.25 to 1.00 9. Conditions Precedent to Future Advances. Lenders will not be obligated to make any further Advances, and this instrument shall not become effective, unless and until Agent receives (a) counterparts of this instrument executed by Borrower, each Guarantor and each Lender, and (b) such other items related to the transactions contemplated by this instrument as Agent may reasonably request. 10. Representations and Warranties. Borrower represents and warrants that it possesses all requisite power and authority to execute, deliver and comply with the terms of this instrument, which has been duly authorized and approved by all necessary corporate action and for which no consent of any person is required, and agrees to furnish Agent with evidence of such authorization and approval upon request. 11. Fees and Expenses. Borrower agrees to pay the reasonable fees and expenses of counsel to Agent for services rendered in connection with the preparation, negotiation and execution of this instrument. 12. Loan Document; Effect. This instrument is a Loan Document and, therefor, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated herein by reference the same as if set forth herein verbatim. Except as amended in this instrument, the Loan Documents are and shall be unchanged and shall remain in full force and effect. In the event of any inconsistency between the terms of the Credit Agreement as hereby modified (the "AMENDED AGREEMENT") and any other Loan Documents, the terms of the Amended Agreement shall control and such other document shall be deemed to be amended hereby to conform to the terms of the Amended Agreement. Borrower hereby releases Agent and Lenders from any liability for actions or failures to act in connection with the Loan Documents prior to the date hereof. 13. No Waiver of Defaults. This instrument does not constitute a waiver of, or a consent to any present or future violation of or default under, any provision of the Loan Documents, or a waiver of Lenders' right to insist upon future compliance with each term, covenant, condition and provision of the Loan Documents, and the Loan Documents shall continue to be binding upon, and inure to the benefit of, Borrower, Guarantors, Agent and Lenders and their respective successors and assigns. 14. Form. Each agreement, document, instrument or other writing to be furnished Agent or Lenders under any provision of this instrument must be in form and substance satisfactory to Agent and its counsel. 15. Multiple Counterparts. This instrument may be executed in more than one counterpart, each of which shall be deemed an original, and all of which constitute, collectively, one instrument; but, in making proof of this instrument, it shall not be necessary to produce or account for more than one such counterpart. It shall not be necessary for Borrower, Guarantors, Agent and all Lenders to execute the same counterpart hereof so long as Borrower, each Guarantor, Agent and each Lender execute a counterpart hereof. 16. Final Agreement. THE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL 4 5 AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. If the foregoing terms and conditions are acceptable to Borrower and Guarantors, Borrower and Guarantors should indicate its acceptance by signing in the space provided below, whereupon this letter shall become an agreement binding upon and inuring to the benefit of Agent, Lenders, Borrower and Guarantors and their respective successors and assigns. Very truly yours, NATIONSBANK OF TEXAS, N.A. as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ------------------------------------------------- Name: Richard L. Nichols, Jr. ------------------------------------------------ Title: Vice President ---------------------------------------------- SWISS BANK CORPORATION, STAMFORD BRANCH, as Documentation Agent and a Lender By: /s/ Gary Riddell ------------------------------------------------- Name: Gary Riddell ----------------------------------------------- Title: Executive Director, Credit Risk Management --------------------------------------------- By: /s/ Dorothy McKinley ------------------------------------------------ Name: Dorothy McKinley ---------------------------------------------- Title: Associate Director Loan Portfolio Support, US --------------------------------------------- 5 6 Accepted and agreed to as of the day and year first set forth in the foregoing letter. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock --------------------------------------------------- Name: Robert J. Medlock ------------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------------ GUARANTORS' CONSENT AND AGREEMENT As an inducement to Agent and Lenders to execute, and in consideration of Agent's and Lenders' execution of the foregoing, the undersigned hereby consent thereto and agree that the same shall in no way release, diminish, impair, reduce or otherwise adversely affect the respective obligations and liabilities of each of the undersigned under the Guaranty dated as of May 1, 1998, executed by the undersigned, or any agreements, documents or instruments executed by any of the undersigned to create liens, security interests or charges to secure the Obligation. This consent and agreement shall be binding upon the undersigned, and the respective successors and assigns of each, and shall inure to the benefit of Agent and Lenders, and respective successors and assigns of each. A & S BUSINESS INTERESTS, INC. By: /s/ Robert J. Medlock ------------------------------------------------- Name: Robert J. Medlock ---------------------------------------------- Title: Vice President and Chief Financial Officer --------------------------------------------- A & S BUILDING SYSTEMS, L.P. By: NCI OPERATING CORP., as General Partner By: /s/ Robert J. Medlock ------------------------------------------------ Name: Robert J. Medlock ---------------------------------------------- Title: Vice President and Chief Financial Officer --------------------------------------------- 6 7 NCI BUILDING SYSTEMS, L.P. By: NCI OPERATING CORP., as General Partner By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- NCI HOLDING CORP. By: /s/ Robert J. Medlock ------------------------------------------------ Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Treasurer -------------------------------------------- NCI OPERATING CORP. By: /s/ Robert J. Medlock ------------------------------------------------ Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- METAL BUILDING COMPONENTS HOLDING, INC. By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Treasurer -------------------------------------------- 7 8 METAL COATERS HOLDING, INC. By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Treasurer -------------------------------------------- MBCI OPERATING, L.P. By: NCI Operating Corp., as General Partner By: /s/ Robert J. Medlock ------------------------------------------------ Name: Robert J. Medlock --------------------------------------------- Title: Vice President -------------------------------------------- METAL COATERS OPERATING, L.P. By: NCI Operating Corp., as General Partner By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President -------------------------------------------- 8 EX-4.5 5 SECOND AMENDMENT TO CREDIT AGREEMENT - MAY 5, 1998 1 EXHIBIT 4.5 As of May 5, 1998 NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Attn: Robert J. Medlock Chief Financial Officer Re: Second Amendment to Credit Agreement Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of March 25, 1998 (as amended by the First Amendment dated as of May 1, 1998, the "CREDIT AGREEMENT"), among NCI Building Systems ("BORROWER"), NationsBank of Texas, N.A., as Administrative Agent ("AGENT"), NationsBanc Montgomery Securities LLC, as Syndication Agent, Swiss Bank Corporation, as Documentation Agent, and the financial institutions named therein (collectively, "LENDERS"). Unless otherwise indicated, all capitalized terms herein are used as defined in the Credit Agreement. For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, Guarantors, Agent and Lenders agree as follows: 1. Base Rate. A typographical error in the definition of "BASE RATE" in SECTION 1.1 of the Credit Agreement is hereby corrected by deleting the words "the sum of (a)." 2. Pro Rata Part. The definitions of "PRO RATA" and "PRO RATA PART" in SECTION 1.1 of the Credit Agreement are hereby amended to read in their entirety as follows: PRO RATA and PRO RATA PART mean, when determined for any Lender: (a) with respect to Facility A, (i) if there is no Facility A Principal Debt or LC Exposure, the proportion (stated as a percentage) that such Lender's portion of the Facility A Commitment bears to the total Facility A Commitment, or (ii) if any Facility A Principal Debt or LC Exposure is outstanding, the proportion (stated as a percentage) that the Facility A Principal Debt owed to such Lender and (without duplication) the LC Exposure of such Lender bears to the Facility A Commitment Usage; (b) with respect to Facility B, the proportion (stated as a percentage) that the Facility B Principal Debt owed to such Lender bears to the total Facility B Principal Debt; (c) with respect to Facility C, (i) if there is no Facility C Principal Debt, the proportion (stated as a percentage) that such Lender's portion of the Facility C Commitment bears to the total 2 Facility C Commitment, or (ii) if any Facility C Principal Debt is outstanding, the proportion (stated as a percentage) that the Facility C Principal Debt owed to such Lender bears to the total Facility C Principal Debt; and (d) with respect to the Facility as a whole, (i) if there is no Principal Debt or LC Exposure, the proportion (stated as a percentage) that such Lender's Commitment bears to the Total Commitment, or (ii) if there is any Principal Debt or LC Exposure, the proportion (stated as a percentage) that the Principal Debt owed to such Lender and (without duplication) the LC Exposure of such Lender bears to the aggregate Principal Debt and (without duplication) LC Exposure. 3. Purchase Agreement. A typographical error in the definition of "PURCHASE AGREEMENT" in SECTION 1.1 of the Credit Agreement is hereby corrected by replacing the word "Australian" with the word "Australia." 4. Interest Options. A typographical error in the first sentence of SECTION 3.3 of the Credit Agreement is hereby corrected by adding the word "Adjusted" before the words "Eurodollar Rate." 5. LC Fees. A typographical error in the third sentence of SECTION 4.3 of the Credit Agreement is hereby corrected by adding the phrase "for the ratable account of Lenders" after the word "Agent." 6. Commitment Fees. SECTION 4.4 of the Credit Agreement is hereby amended to read in its entirety as follows: 4.4 Commitment Fees. Borrower shall pay to Agent for the ratable account of all Lenders with Commitments for Facility A a commitment fee, payable as it accrues on the last day of each fiscal quarter of Borrower (commencing July 31, 1998) and on the Facility A Termination Date, equal to the Applicable Percentage per annum on the amount by which the Facility A Commitment exceeds the average daily Facility A Commitment Usage, in each case during the fiscal quarter ending on such date (or, in the case of the first such payment, during the period from the date of the Acquisition through July 31, 1998). Borrower shall also pay to Agent for the ratable account of all Lenders with Commitments for Facility C a commitment fee, payable as it accrues on the last day of each fiscal quarter of Borrower (commencing July 31, 1998) and on the Facility C Termination Date for each such Lender, equal to the Applicable Percentage per annum on the amount by which Facility C exceeds the average daily Facility C Principal Debt, in each case during the fiscal quarter ending on such date (or, in the case of the first such payment, during the period from the date of the Acquisition through July 31, 1998). 7. Items to be Furnished. A typographical error in SECTION 8.1(e) of the Credit Agreement is hereby corrected by replacing the reference to "Form S-8" with a reference to "Form 8-K." 8. Debtor Relief. SECTION 11.3 of the Credit Agreement is hereby amended by deleting the phrase ", that could suspend or otherwise adversely affect the Rights of Agent or any Lender granted in the Loan Documents." 9. Remedies Upon Default. SECTION 12.1(a) of the Credit Agreement is hereby amended by replacing the phrase "If a Default (i) occurs under SECTION 11.3(c) or (ii) occurs and is continuing under SECTION 11.3(a), (b) or (d)," with the phrase "If a Default (i) occurs under SECTION 11.3(c) or (d), or (ii) occurs and is continuing under SECTION 11.3(a) or (b)." 2 3 10. Defaults. SECTION 13.3 of the Credit Agreement is hereby amended by adding the following phrase at the end thereof: "(except to the extent that this Agreement expressly requires that such action may only be taken with, or may not be taken without, the consent of the Determining Lenders)." 11. Indemnification. A typographical error in SECTION 13.5 of the Credit Agreement is hereby corrected by replacing the reference to "SECTION 14.12" with a reference to "SECTION 8.7." 12. Assignments. (a) SECTION 14.12(b) of the Credit Agreement is hereby amended by adding the phrase "(if no Default exists)" at the end of the first line thereof after the word "Borrower." (b) SECTION 14.12(b) of the Credit Agreement is hereby further amended by inserting the word "and" at the end of clause (i), deleting clause (ii), and redesignating clause (iii) as clause (ii). (c) EXHIBIT I to the Credit Agreement is hereby replaced with EXHIBIT I attached hereto. 13. Participations. SECTION 14.12(e) of the Credit Agreement is hereby amended by restating the parenthetical clause at the end of such section to read as follows: "(other than amendments, modifications or waivers decreasing the amount of principal or the rate at which interest or any commitment fee is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest or any commitment fee on such Loans or Notes, extending its Commitments, releasing any Guarantor, or releasing all or substantially all of the Collateral)." 14. Loan Request. EXHIBIT E to the Credit Agreement is hereby amended by restating Paragraph 3 to read in its entirety as follows: 3. The requested Loan will not cause (a) the Facility A Commitment Usage to exceed the Facility A Commitment, (b) the Facility B Principal Debt to exceed the Facility B Commitment, (c) the Facility C Principal Debt to exceed the Facility C Commitment, or (d) the Principal Debt and LC Exposure to exceed the Total Commitment. 15. Conditions Precedent to Future Advances. Lenders will not be obligated to make any further Advances, and this instrument shall not become effective, unless and until Agent receives (a) counterparts of this instrument executed by Borrower, each Guarantor and each Lender, and (b) such other items related to the transactions contemplated by this instrument as Agent may reasonably request. 16. Covenants; Representations and Warranties. Borrower hereby covenants to pledge and deliver to Agent for the benefit of Lenders that certain Promissory Note in the face amount of $550,000,000 made by NCI Holding Corp. on or before May 11, 1998. Borrower represents and warrants that it possesses all requisite power and authority to execute, deliver and comply with the terms of this instrument, which has been duly authorized and approved by all necessary corporate action and for which no consent of any person is required, and agrees to furnish Agent with evidence of such authorization and approval upon request. 17. Fees and Expenses. Borrower agrees to pay the reasonable fees and expenses of counsel to Agent for services rendered in connection with the preparation, negotiation and execution of this instrument. 18. Loan Document; Effect. This instrument is a Loan Document and, therefor, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated herein by reference the same as if set forth herein verbatim. Except as amended in this instrument, the Loan 3 4 Documents are and shall be unchanged and shall remain in full force and effect. In the event of any inconsistency between the terms of the Credit Agreement as hereby modified (the "AMENDED AGREEMENT") and any other Loan Documents, the terms of the Amended Agreement shall control and such other document shall be deemed to be amended hereby to conform to the terms of the Amended Agreement. Borrower hereby releases Agent and Lenders from any liability for actions or failures to act in connection with the Loan Documents prior to the date hereof. 19. No Waiver of Defaults. This instrument does not constitute a waiver of, or a consent to any present or future violation of or default under, any provision of the Loan Documents, or a waiver of Lenders' right to insist upon future compliance with each term, covenant, condition and provision of the Loan Documents, and the Loan Documents shall continue to be binding upon, and inure to the benefit of, Borrower, Guarantors, Agent and Lenders and their respective successors and assigns. 20. Form. Each agreement, document, instrument or other writing to be furnished Agent or Lenders under any provision of this instrument must be in form and substance satisfactory to Agent and its counsel. 21. Multiple Counterparts. This instrument may be executed in more than one counterpart, each of which shall be deemed an original, and all of which constitute, collectively, one instrument; but, in making proof of this instrument, it shall not be necessary to produce or account for more than one such counterpart. It shall not be necessary for Borrower, Guarantors, Agent and all Lenders to execute the same counterpart hereof so long as Borrower, each Guarantor, Agent and each Lender execute a counterpart hereof. 22. Final Agreement. THE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. If the foregoing terms and conditions are acceptable to Borrower and Guarantors, Borrower and Guarantors should indicate its acceptance by signing in the space provided below, whereupon this letter shall become an agreement binding upon and inuring to the benefit of Agent, Lenders, Borrower and Guarantors and their respective successors and assigns. Very truly yours, NATIONSBANK OF TEXAS, N.A. as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. -------------------------------- Name: Richard L. Nichols, Jr. -------------------------------- Title: Vice President -------------------------------- 4 5 SWISS BANK CORPORATION, STAMFORD BRANCH, as Documentation Agent and a Lender By: /s/ Gary Riddell ------------------------------------------------- Name: Gary Riddell ----------------------------------------------- Title: Executive Director, Credit Risk Management ----------------------------------------------- By: /s/ Dorothy McKinley ------------------------------------------------- Name: Dorothy McKinley ----------------------------------------------- Title: Associate Director Loan Portfolio Support, US ---------------------------------------------- Accepted and agreed to as of the day and year first set forth in the foregoing letter. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock ------------------------------------------------- Name: Robert J. Medlock ----------------------------------------------- Title: Vice President and Chief Financial Officer ----------------------------------------------- 5 6 GUARANTORS' CONSENT AND AGREEMENT As an inducement to Agent and Lenders to execute, and in consideration of Agent's and Lenders' execution of the foregoing, the undersigned hereby consent thereto and agree that the same shall in no way release, diminish, impair, reduce or otherwise adversely affect the respective obligations and liabilities of each of the undersigned under the Guaranty dated as of May 1, 1998, executed by the undersigned, or any agreements, documents or instruments executed by any of the undersigned to create liens, security interests or charges to secure the Obligation. This consent and agreement shall be binding upon the undersigned, and the respective successors and assigns of each, and shall inure to the benefit of Agent and Lenders, and respective successors and assigns of each. A & S BUSINESS INTERESTS, INC. NCI HOLDING CORP. NCI OPERATING CORP. METAL BUILDING COMPONENTS HOLDING, INC. METAL COATERS HOLDING, INC. By: /s/ Robert J. Medlock ---------------------------------------------- Name: Robert J. Medlock -------------------------------------------- Title: Vice President ------------------------------------------- A & S BUILDING SYSTEMS, L.P. NCI BUILDING SYSTEMS, L.P. MBCI OPERATING, L.P. METAL COATERS OPERATING, L.P. By: NCI OPERATING CORP., as General Partner By: /s/ Robert J. Medlock ---------------------------------------------- Name: Robert J. Medlock -------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------- 6 7 EXHIBIT I ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of March 25, 1998 (as amended, the "CREDIT AGREEMENT") among NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), the Lenders (as defined in the Credit Agreement), the other parties to such Credit Agreement and NationsBank of Texas, N.A., as Administrative Agent for the Lenders ("AGENT"). Terms defined in the Credit Agreement are used herein with the same meaning. The "ASSIGNOR" and the "ASSIGNEE" referred to on SCHEDULE 1 agree as follows: 23. The Assignor hereby sells and assigns to the Assignee, without recourse and without representation or warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Loan Documents as of the date hereof equal to the percentage interest specified on SCHEDULE 1 of all outstanding rights and obligations under each Facility designated on SCHEDULE 1. After giving effect to such sale and assignment, the Commitments of the Assignee and any remaining Commitments of the Assignor and the amount of the Loans owing to the Assignee and Assignor (if applicable) will be as set forth on SCHEDULE 1. 24. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Company or the performance or observance by any Company of any of its obligations under the Loan Documents; and (iv) attaches the relevant Note or Notes held by the Assignor and requests that Agent exchange such Note or Notes for new Notes payable to the order of the Assignee in an amount equal to the Commitments assumed by the Assignee pursuant hereto and to the Assignor in an amount equal to the Commitments retained by the Assignor, if any, as specified on SCHEDULE 1. 25. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in SECTION 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (v) attaches any U.S. Internal Revenue Service or other forms required under SECTION 3.20(d). 26. Following the execution of this Assignment and Acceptance, it will be delivered to Agent for acceptance and recording by Agent. The effective date for this Assignment and Acceptance (the "EFFECTIVE DATE") shall be the date of acceptance hereof by Agent, unless otherwise specified on SCHEDULE 1. 27. Upon such acceptance and recording by Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have 7 8 the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance and in the Credit Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 28. Upon such acceptance and recording by Agent, from and after the Effective Date, Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 29. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Texas. 30. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of SCHEDULE 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused SCHEDULE 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 8 9 SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE % Percentage interest assigned: --------- Facility: --------- $ Assignee's Commitment for such Facility: --------- $ Aggregate outstanding principal amount of Loans under such Facility assigned: --------- $ Assignor's remaining Commitment under such Facility, if any --------- $ Principal amount of Note payable to Assignee for such Facility: --------- $ Principal amount of Note payable to Assignor for such Facility: --------- [If percentages in more than one Facility are being assigned, repeat above information for each other relevant Facility.] * Effective Date (if other than date of acceptance by Agent): -----,---
[NAME OF ASSIGNOR], as Assignor By: -------------------------------------- Name: ------------------------------------ Title: ------------------------------------ [NAME OF ASSIGNEE], as Assignee By: -------------------------------------- Name: ------------------------------------ Title: ---------------------------------- * This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to Agent. 9 10 Accepted and Approved this ___ day of ___________, __ NATIONSBANK OF TEXAS, N.A. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Approved this ____ day of ____________, __ NCI BUILDING SYSTEMS, INC. By: ---------------------------------------- Name: --------------------------------------- Title: -------------------------------------- 10 EX-4.6 6 MASTER ASSIGNMENT AND ACCEPTANCE - MAY 6, 1998 1 EXHIBIT 4.6 MASTER ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of March 25, 1998 (as amended by that CERTAIN First Amendment dated as of May 1, 1998 and by that certain Second Amendment dated as of May 5, 1998 and as hereinafter amended from time to time, the "CREDIT AGREEMENT") among NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), the Lenders (as defined in the Credit Agreement), the other parties to such Credit Agreement and NationsBank of Texas, N.A., as Administrative Agent for the Lenders ("AGENT"). Terms defined in the Credit Agreement are used herein with the same meaning. The "ASSIGNORS" and the "ASSIGNEES" referred to on SCHEDULE 1 agree as follows: 1. The Assignors hereby sell and assign to the Assignees, without recourse and without representation or warranty except as expressly set forth herein, and the Assignees hereby purchase and assume from the Assignors, interests in and to the Assignors' rights and obligations under the Loan Documents as of the date hereof equal to the percentage interests specified on SCHEDULE I of all outstanding rights and obligations under the Loan Documents. After giving effect to such sales and assignments, the Commitments of the Assignees and the remaining Commitments of the Assignors and the amounts of the Loans owing to the Assignees and Assignors will be as set forth on SCHEDULE 1. 2. Each Assignor (i) represents and warrants that it is the legal and beneficial owner of the interests being assigned by it hereunder and that such interests are free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Company or the performance or observance by any Company of any of its obligations under the Loan Documents; and (iv) attaches the Note held by the Assignor and requests that Agent exchange such Note for new Notes payable to the order of each Assignee in an amount equal to the Commitments assumed by such Assignee pursuant hereto and to such Assignor in an amount equal to the Commitments retained by such Assignor as specified on SCHEDULE 1. 3. Each Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in SECTION 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon Agent, the Assignors or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender; and (v) attaches any U.S. Internal Revenue Service or other forms required under SECTION 3.20(d) of the Credit Agreement. 2 4. Following the execution of this Assignment and Acceptance, it will be delivered to Agent for acceptance and recording by Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date specified on SCHEDULE 1. 5. Upon such acceptance and recording by Agent, as of the Effective Date, (i) each Assignee shall be a parry to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) each Assignor shall, to the extent provided in this Assignment and Acceptance and in the Credit Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by Agent, from and after the Effective Date, Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignees. The Assignors and Assignees shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Texas. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of SCHEDULE 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, the Assignors and the Assignees have caused Schedule I to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 2 3 SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE
FACILITY A COMMITMENT AND FACILITY B COMMITMENT AND LENDER PERCENTAGE PERCENTAGE - ----------------------------------------- -------------------------- ------------------------- NationsBank of Texas, N.A $ 15,250,000 7.625% $ 15,250,000 7.625% ------------ ------- ------------ ------- Swiss Bank Corporation $ 13,000,000 6.50% $ 13,000,000 6.50% ------------ ------- ------------ ------- First Union National Bank $ 13,000,000 6.50% $ 13,000,000 6.50% ------------ ------- ------------ ------- The Bank of Nova Scotia $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Compagnie Financiere de CIC et de L'Union Europeenne $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Comerica Bank $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Credit Lyonnais New York Branch $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Creditanstalt Corporate Finance, Inc. $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- General Electric Capital Corporation $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Societe Generale $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- The Sumitomo Bank, Limited $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- Wachovia Bank, N.A $ 11,250,000 5.625% $ 11,250,000 5.625% ------------ ------- ------------ ------- CIBC, Inc. $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- Credit Agricole Indosuez $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- The Fuji Bank, Limited - Houston Agency $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- Imperial Bank, a California Banking Corp. $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- The Industrial Bank of Japan, Limited $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- The Long-Term Credit Bank of Japan, Limited $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- Union Bank of California, N.A $ 7,500,000 3.75% $ 7,500,000 3.75% ------------ ------- ------------ ------- Southwest Bank of Texas N.A $ 5,000,000 2.50% $ 5,000,000 2.50% ------------ ------- ------------ ------- ------------ ------- ------------ ------- TOTAL $200,000,000 100% $200,000,000 100% ------------ ------- ------------ ------- FACILITY C COMMITMENT AND TOTAL COMMITMENT AND LENDER PERCENTAGE PERCENTAGE - ----------------------------------------- ------------------------------ ------------------------ NationsBank of Texas, N.A $140,000,000 70% $170,500,000 28.42% ------------ ------------ ------------ ------ Swiss Bank Corporation $ 60,000,000 30% $ 86,500,000 14.33% ------------ ------------ ------------ ------ First Union National Bank $ 0 0% $ 26,000,000 4.33% ------------ ------------ ------------ ------ The Bank of Nova Scotia $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Compagnie Financiere de CIC et de L'Union Europeenne $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Comerica Bank $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Credit Lyonnais New York Branch $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Creditanstalt Corporate Finance, Inc. $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ General Electric Capital Corporation $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Societe Generale $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ The Sumitomo Bank, Limited $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ Wachovia Bank, N.A $ 0 0% $ 22,500,000 3.75% ------------ ------------ ------------ ------ CIBC, Inc. $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ Credit Agricole Indosuez $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ The Fuji Bank, Limited - Houston Agency $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ Imperial Bank, a California Banking Corp. $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ The Industrial Bank of Japan, Limited $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ The Long-Term Credit Bank of Japan, Limited $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ Union Bank of California, N.A $ 0 0% $ 15,000,000 2.50% ------------ ------------ ------------ ------ Southwest Bank of Texas N.A $ 0 0% $ 10,000,000 1.67% ------------ ------------ ------------ ------ ------------ ------------ ------------ ------ TOTAL $200,000,000 100% $600,000,000 100% ------------ ------------ ------------ ------
3 4 Effective Date: May 6, 1998 ASSIGNORS --------- NATIONSBANK OF TEXAS, N.A. By: /s/ Richard L. Nichols, Jr. ------------------------------------------------ Richard L. Nichols, Jr. Vice President SWISS BANK CORPORATION, STAMFORD BRANCH Re: /s/ Dorothy McKinley ------------------------------------------------ Dorothy McKinley Associate Director Loan Portfolio Support, US By: /s/ Denise M. Clerkin ------------------------------------------------ Denise M. Clerkin Associate Director Loan Portfolio Support, US ASSIGNEES FIRST UNION NATIONAL BANK By: /s/ Braxton B. Comer ------------------------------------------------ Braxton B. Comer Senior Vice President THE BANK OF NOVA SCOTIA By: /s/ F.C. H. Ashby ------------------------------------------------ F.C.H. Ashby Senior Manager Loan Operations 4 5 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: /s/ Anthony Rock /s/ Brian O'Leary ------------------------------------------------- Anthony Rock Brian O'Leary Vice Presidents COMERICA BANK By: /s/ Reginald M. Goldsmith, III ------------------------------------------------ Reginald M. Goldsmith, III Vice President CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Robert Ivosevich ------------------------------------------------- Robert Ivosevich Senior Vice President CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Carl G. Drake ------------------------------------------------ Carl G. Drake Vice President By: /s/ Stephen W. Hipp ------------------------------------------------ Stephen W. Hipp Associate GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Janet K. Williams ------------------------------------------------ Janet K. Williams Duly Authorized Signatory SOCIETE GENERALE By: /s/ Thierry Namuroy ------------------------------------------------ Thierry Namuroy Vice President 5 6 THE SUMITOMO BANK, LIMITED By: /s/ William R. McKown, III ------------------------------------------------- William R. McKown, III Vice President and Manager WACHOVIA BANK, N.A. By: /s/ Paige D. Mesaros ------------------------------------------------- Paige D. Mesaros Vice President CIBC, INC. By: /s/ Elizabeth Fischer ------------------------------------------------- Elizabeth Fischer Executive Director CIBC Oppenheimer Corp., AS AGENT CREDIT AGRICOLE INDOSUEZ By: /s/ David Bouhl ------------------------------------------------- David Bouhl, E.V.P. Head of Corporate Banking - Chicago By: /s/ W. Leroy Startz ------------------------------------------------- W. Leroy Startz First Vice President THE FUJIBANK, LIMITED - HOUSTON AGENCY By: /s/ Philip C. Lauinger III ------------------------------------------------- Philip C. Lauinger III Vice President and Manager IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: /s/ Ray Vadalma ------------------------------------------------- Ray Valdalma Senior Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Takuya Honjo ------------------------------------------------- Takuya Honjo Senior Vice President 6 7 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By: /s/ Sadao Muraoka ------------------------------------------------ Sadao Muraoka Head of Southwest Region UNION BANK OF CALIFORNIA, N.A. By: /s/ Albert W. Kelley ------------------------------------------------- Albert W. Kelley Vice President SOUTHWEST BANK OF TEXAS, N.A. By: /s/ Gary Tolbert ------------------------------------------------- Gary Tolbert Senior Vice President Accepted and Approved as of May 6, 1998 - -------------------------------------------------- NATIONSBANK OF TEXAS, N.A., As Administrative Agent By: /s/ Richard L. Nichols, Jr. ---------------------------------------------- Richard L. Nichols, Jr. Vice President Approved as of May 6, 1998 NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock ---------------------------------------------- Robert J. Medlock Vice President and Chief Financial Officer 7 EX-4.7 7 FACILITY A NOTES - MAY 6, 1998 1 EXHIBIT 4.7 FACILITY A NOTE (Revolving Credit) $15,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A. ("PAYEE") on or before the Facility A Termination Date, the principal amount of FIFTEEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 2 FACILITY A NOTE (Revolving Credit) $13,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SWISS BANK CORPORATION ("PAYEE") on or before the Facility A Termination Date, the principal amount of THIRTEEN MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 3 FACILITY A NOTE (Revolving Credit) $13,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK ("PAYEE") on or before the Facility A Termination Date, the principal amount of THIRTEEN MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 4 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE BANK OF NOVA SCOTIA ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 5 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 6 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of COMERICA BANK ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 7 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 8 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDITANSTALT CORPORATE FINANCE, INC. ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 9 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 10 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SOCIETE GENERALE ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 11 FACILITY A NOTE (Revolving Credit) $6,250,000 Houston, Texas As of June 30, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE SUMITOMO BANK, LIMITED ("PAYEE") on or before the Facility A Termination Date, the principal amount of SIX MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 12 FACILITY A NOTE (Revolving Credit) $5,000,000 Houston, Texas As of June 30, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CITY NATIONAL BANK ("PAYEE") on or before the Facility A Termination Date, the principal amount of FIVE MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 13 FACILITY A NOTE (Revolving Credit) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of WACHOVIA BANK, N.A. ("PAYEE") on or before the Facility A Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 14 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CIBC, INC. ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 15 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDIT AGRICOLE INDOSUEZ ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 16 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE FUJI BANK, LIMITED - HOUSTON AGENCY ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 17 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of IMPERIAL BANK, a California banking corporation ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 18 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE INDUSTRIAL BANK OF JAPAN, LIMITED ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 19 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 20 FACILITY A NOTE (Revolving Credit) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("PAYEE") on or before the Facility A Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 21 FACILITY A NOTE (Revolving Credit) $5,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SOUTHWEST BANK OF TEXAS, N.A. ("PAYEE") on or before the Facility A Termination Date, the principal amount of FIVE MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the Facility A Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility A Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ EX-4.8 8 FACILITY B NOTES - MAY 6, 1998 1 EXHIBIT 4.8 FACILITY B NOTE (Term Loan) $15,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A. ("PAYEE") on or before the Facility B Termination Date, the principal amount of FIFTEEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 2 FACILITY B NOTE (Term Loan) $13,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SWISS BANK CORPORATION ("PAYEE") on or before the Facility B Termination Date, the principal amount of THIRTEEN MILLION DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 3 FACILITY B NOTE (Term Loan) $13,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of FIRST UNION NATIONAL BANK ("PAYEE") on or before the Facility B Termination Date, the principal amount of THIRTEEN MILLION DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 4 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE BANK OF NOVA SCOTIA ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 5 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENE ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 6 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of COMERICA BANK ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 7 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDIT LYONNAIS NEW YORK BRANCH ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 8 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDITANSTALT CORPORATE FINANCE, INC. ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 9 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 10 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SOCIETE GENERALE ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 11 FACILITY B NOTE (Term Loan) $6,250,000 Houston, Texas As of June 30, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE SUMITOMO BANK, LIMITED ("PAYEE") on or before the Facility B Termination Date, the principal amount of SIX MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 12 FACILITY B NOTE (Term Loan) $5,000,000 Houston, Texas As of June 30, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CITY NATIONAL BANK ("PAYEE") on or before the Facility B Termination Date, the principal amount of FIVE MILLION DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 13 FACILITY B NOTE (Term Loan) $11,250,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of WACHOVIA BANK, N.A. ("PAYEE") on or before the Facility B Termination Date, the principal amount of ELEVEN MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 14 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CIBC, INC. ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 15 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of CREDIT AGRICOLE INDOSUEZ ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 16 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE FUJI BANK LIMITED - HOUSTON AGENCY ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 17 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of IMPERIAL BANK, a California banking corporation ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 18 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE INDUSTRIAL BANK OF JAPAN, LIMITED ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 19 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 20 FACILITY B NOTE (Term Loan) $7,500,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("PAYEE") on or before the Facility B Termination Date, the principal amount of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ 21 FACILITY B NOTE (Term Loan) $5,000,000 Houston, Texas As of May 6, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of SOUTHWEST BANK OF TEXAS, N.A. ("PAYEE") on or before the Facility B Termination Date, the principal amount of FIVE MILLION DOLLARS or so much thereof as may then be outstanding as the Facility B Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility B Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J Medlock --------------------------------------------- Name: Robert J. Medlock ------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------ EX-4.9 9 FACILITY C NOTES - MAY 6, 1998 1 EXHIBIT 4.9 FACILITY C NOTE (364-day Revolving Facility) $129,500,000 Houston, Texas As of July 31, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of NATIONSBANK, N.A. ("PAYEE") on or before the Facility C Termination Date, the principal amount of ONE HUNDRED TWENTY-NINE MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility C Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility C Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock -------------------------------- Name: Robert J. Medlock ----------------------------- Title: Vice President and Chief Financial Officer ----------------------------- 2 FACILITY C NOTE (364-day Revolving Facility) $55,500,000 Houston, Texas As of July 31, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of UBS AG, STAMFORD BRANCH ("PAYEE") on or before the Facility C Termination Date, the principal amount of FIFTY-FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS or so much thereof as may be disbursed and outstanding as the Facility C Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility C Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock -------------------------------- Name: Robert J. Medlock ----------------------------- Title: Vice President and Chief Financial Officer ----------------------------- 3 FACILITY C NOTE (364-day Revolving Facility) $15,000,000 Houston, Texas As of July 31, 1998 FOR VALUE RECEIVED, NCI BUILDING SYSTEMS, INC., a Delaware corporation ("MAKER"), hereby promises to pay to the order of THE BANK OF NOVA SCOTIA ("PAYEE") on or before the Facility C Termination Date, the principal amount of FIFTEEN MILLION DOLLARS or so much thereof as may be disbursed and outstanding as the Facility C Principal Debt under this note, together with interest, as described below. This note has been executed and delivered under, and is subject to the terms of, the Credit Agreement dated as of March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), among Maker, NationsBank of Texas, N.A., as Administrative Agent, and the Lenders and other parties named in the Credit Agreement (including, without limitation, Payee) and is one of the Facility C Notes referred to in the Credit Agreement. Unless defined in this note, or the context requires otherwise, capitalized terms used in this note have the meanings given to such terms in the Credit Agreement. Reference is made to the Credit Agreement for provisions affecting this note regarding applicable interest rates, principal and interest payment dates, final maturity, voluntary and mandatory prepayments, acceleration of maturity, exercise of Rights, payment of attorneys' fees, court costs and other costs of collection, certain waivers by Maker and others now or hereafter obligated for payment of any sums due under this note, and security for the payment of this note. This note is a Loan Document and, therefore, is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this note by reference as if set forth in this note verbatim. Specific reference is made to SECTION 3.8 of the Credit Agreement for usury savings provisions. This note is being executed and delivered, and is intended to be performed, in the State of Texas, and the Laws of such State and of the United States of America shall govern the Rights and duties of Maker and Payee and the validity, construction, enforcement and interpretation of this note. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS NOTE, THE CREDIT AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY THE MAKER AND THE PAYEE (OR BY THE MAKER FOR THE BENEFIT OF THE PAYEE) REPRESENT THE FINAL AGREEMENT BETWEEN THE MAKER AND THE PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NCI BUILDING SYSTEMS, INC. By: /s/ Robert J. Medlock -------------------------------- Name: Robert J. Medlock ----------------------------- Title: Vice President and Chief Financial Officer ----------------------------- EX-4.10 10 GUARANTY-NATIONSBANK AND A&S BUILDING SYSTEMS LP 1 EXHIBIT 4.10 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition 2 interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: A&S Building Systems, L.P. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. A&S BUILDING SYSTEMS, L.P., a Texas limited partnership By: NCI Operating Corp., a Nevada corporation and its general partner By: /s/ Robert J. Medlock ------------------------------ Name: Robert J. Medlock ---------------------------- Title: Vice President and Chief Financial Officer ---------------------------- 8 EX-4.11 11 GUARANTY-NATIONSBANK AND NCI BUILDING SYSTEMS LP 1 EXHIBIT 4.11 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post- 2 petition interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: NCI Building Systems, L.P. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. NCI BUILDING SYSTEMS, L.P., a Texas limited partnership By: NCI Operating Corp., a Nevada corporation and its general partner By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- 8 EX-4.12 12 GUARANTY-NATIONSBANK AND NCI HOLDING CORP 1 EXHIBIT 4.12 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post- 2 petition interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: NCI Holding Corp. c/o Delaware Corporate Management, Inc. 1105 North Market Street, Suite 1300 P.O. Box 8985 Wilmington, Delaware 19899 Telephone No.: (302) 427-0803 Attention: David P. Fontello with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. NCI HOLDING CORP., a Delaware corporation By: /s/ Robert J. Medlock -------------------------------------- Name: Robert J. Medlock ------------------------------------ Title: Vice President and Treasurer ----------------------------------- 8 EX-4.13 13 GUARANTY-NATIONSBANK AND NCI OPERATING CORP 1 EXHIBIT 4.13 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post- 2 petition interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: NCI Operating Corp. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. NCI OPERATING CORP., a Nevada corporation By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- 8 EX-4.14 14 GUARANTY-NATIONSBANK AND METAL BUILDING COMPONENTS 1 EXHIBIT 4.14 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition 2 interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: Metal Building Components Holding, Inc. c/o Delaware Corporate Management, Inc. 1105 North Market Street, Suite 1300 P.O. Box 8985 Wilmington, Delaware 19899 Telephone No.: (302) 427-0803 Attention: David P. Fontello with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. METAL BUILDING COMPONENTS HOLDING, INC., a Delaware corporation By: /s/ Robert J. Medlock -------------------------------------- Name: Robert J. Medlock ------------------------------------ Title: Vice President and Treasurer ----------------------------------- 8 EX-4.15 15 GUARANTY-NATIONSBANK AND METAL COATERS HOLDING INC 1 EXHIBIT 4.15 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition 2 interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: Metal Coaters Holding, Inc. c/o Delaware Corporate Management, Inc. 1105 North Market Street, Suite 1300 P.O. Box 8985 Wilmington, Delaware 19899 Telephone No.: (302) 427-0803 Attention: David P. Fontello with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. METAL COATERS HOLDING, INC., a Delaware corporation By: /s/ Robert J. Medlock --------------------------- Name: Robert J. Medlock -------------------------- Title: Vice President and Treasurer ------------------------- 8 EX-4.16 16 GUARANTY-NATIONSBANK AND METAL BUILDING COMP. LP 1 EXHIBIT 4.16 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition 2 interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: MBCI Operating, L.P. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. MBCI OPERATING, L.P., a Texas limited partnership By: NCI Operating Corp., a Nevada corporation and its general partner By: /s/ Robert J. Medlock --------------------------- Name: Robert J. Medlock -------------------------- Title: Vice President and Chief Financial Officer ------------------------- 8 EX-4.17 17 GUARANTY-NATIONSBANK AND METAL COATERS OPERATING 1 EXHIBIT 4.17 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 1, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post-maturity interest thereon (including, without limitation, all post-petition 2 interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: Metal Coaters Operating, L.P. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7788 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. METAL COATERS OPERATING, L.P., a Texas limited partnership By: NCI Operating Corp., a Nevada corporation and its general partner By: /s/ Robert J. Medlock --------------------------- Name: Robert J. Medlock -------------------------- Title: Vice President and Chief Financial Officer ------------------------- 8 EX-4.18 18 GUARANTY-NATIONSBANK AND METAL COATERS OF CA 1 EXHIBIT 4.18 GUARANTY THIS GUARANTY (as amended, this "GUARANTY") is executed as of May 13, 1998, by the undersigned ("GUARANTOR") in favor of NationsBank of Texas, N.A. ("AGENT"), as Agent for the benefit of the Lenders ("LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Guarantor is a Subsidiary of Borrower and, because of its ownership by Borrower, expects to continue to receive business opportunities, financial support and management support from Borrower. Guarantor has agreed to enter into this Guaranty so that Borrower can receive the benefits of the Guaranteed Debt (as defined below) and continue to provide these services to Guarantor. C. Guarantor's board of directors has determined that Guarantor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as Guarantor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Guaranty. D. It is expressly understood among Borrower, Guarantor, Agent and Lenders that the execution and delivery of this Guaranty is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor guarantees to Lenders the prompt payment at maturity (by acceleration or otherwise), and at all times thereafter, of the Guaranteed Debt, as follows: 1. Definitions. UNLESS OTHERWISE DEFINED IN THIS GUARANTY, ANY CAPITALIZED TERM USED IN THIS GUARANTY SHALL HAVE THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT. The following terms shall have the following meanings as used in this Guaranty: 1.1 "BORROWER" includes, without limitation, Borrower as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Borrower or all or substantially all of Borrower's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Debtor Relief Law from time to time in effect affecting the Rights of creditors generally. 1.2 "GUARANTEED DEBT" means the Obligation as defined in the Credit Agreement (including, without limitation, amounts that would become due but for operation of any applicable provision of Title 11 of the U.S. Code (including, without limitation, 11 U.S.C. Sections 502 and 506)), together with all pre- and post- maturity interest thereon (including, without limitation, all post- 2 petition interest if Borrower or any Subsidiary voluntarily or involuntarily files for bankruptcy protection) and any and all costs, attorneys' fees and expenses reasonably incurred by Agent or any Lender to enforce Borrower's, Guarantor's, or any other obligor's, payment of any of the foregoing indebtedness. 1.3 "SUBORDINATED DEBT" means all obligations of Borrower to Guarantor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due to Guarantor, or held or to be held by Guarantor, whether created directly or acquired by assignment or otherwise, and whether or not evidenced by written instrument. 2. Guaranty. This is an absolute, irrevocable and continuing guaranty of payment of the Guaranteed Debt which will remain in effect until the Guaranteed Debt is completely paid and all commitments to lend under the Credit Agreement have terminated. The circumstance that at any time or from time to time all or any portion of the Guaranteed Debt may be paid in full shall not affect the Guarantor's obligation with respect to the Guaranteed Debt of Borrower to Agent and Lenders thereafter incurred. The Guarantor may not rescind or revoke its obligations to Agent and Lenders with respect to the Guaranteed Debt. 3. Amount of Guaranty. In consummating the transactions contemplated by the Credit Agreement, Guarantor does not intend to disturb, delay, hinder, or defraud either its present or future creditors. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of the security and support for the payment and performance of the Guaranteed Debt. Based upon such examination, and taking into account the fairly discounted value of Guarantor's contingent obligations under this Guaranty and the limitation of liability set forth in Section 4 hereof and the value of the subrogation and contribution claims Guarantor could make in connection with this Guaranty, and assuming each of the transaction contemplated by the Credit Agreement is consummated and Borrower makes full use of the credit facilities thereunder, the present realizable fair market value of the assets of Guarantor exceeds the total obligations of Guarantor, and Guarantor is able to realize upon its assets and pay its obligations as such obligations mature in the normal course of business. 4. Limit of Liability. The obligations of Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state Law. 5. Liability for Other Indebtedness of Borrower. If Guarantor becomes liable for any indebtedness owing by Borrower to Agent or any Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be, in any manner, impaired or affected hereby, and the Rights of Agent or Lenders under this Guaranty shall be cumulative of any and all other Rights that Agent or Lenders may ever have against Guarantor. The exercise by Agent or Lenders of any Right or remedy under this Guaranty under the Loan Documents, or other instrument, or at Law or in equity, shall not preclude the concurrent or subsequent exercise of any other Right or remedy. 6. Default by Borrower. If a Default exists, Guarantor shall pay the amount of the Guaranteed Debt then due and payable to Agent and Lenders on demand and without (a) further notice of dishonor, to Guarantor, (b) any prior notice to Guarantor of the acceptance by Agent or Lenders of this Guaranty, (c) any notice having been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, 2 3 or (d) notice of intent to accelerate or notice of acceleration to Guarantor or Borrower. To enforce such payment by Guarantor it shall not be necessary for Agent or Lenders to first or contemporaneously institute suit or exhaust remedies against Borrower or others liable on such indebtedness, or to enforce Rights against any security or collateral ever given to secure such indebtedness. 7. Subordination. All Subordinated Debt shall be expressly subordinated to the final payment in full of the Guaranteed Debt. Guarantor agrees not to receive or accept any payment from Borrower with respect to the Subordinated Debt at any time a Default exists; and, in the event Guarantor receives any payment on the Subordinated Debt in violation of the foregoing, Guarantor shall hold any such payment in trust for Agent and Lenders and promptly turn it over to Agent, in the form received (with any necessary endorsements), to be applied to the Guaranteed Debt. 8. Subrogation. Guarantor agrees that it will not assert, enforce, or otherwise exercise (a) any right of subrogation to any of the rights or liens of Agent or any Lender or any other beneficiary against Borrower or any other obligor on the Guaranteed Debt or any Collateral or other security, or (b) any right of recourse, reimbursement, subrogation, contribution, indemnification, or similar right against Borrower or any other obligor or other guarantor on all or any part of the Guaranteed Debt or any guarantor thereof (whether such rights in clause (a) or clause (b) arise in equity, under contract, by statute, under common law, or otherwise). 9. No Release. Guarantor hereby agrees that its obligations under the terms of this Guaranty shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (a) Agent's or Lenders' taking or accepting of any other security or guaranty for any or all of the Guaranteed Debt; (b) any release, surrender, exchange, subordination or loss of any security at any time existing in connection with any or all of the Guaranteed Debt; (c) any full or partial release of the liability of any other obligor on the Obligation; (d) the insolvency, becoming subject to any Debtor Relief Law, or lack of corporate power of Borrower, any of the undersigned, or any party at any time liable for the payment of any or all of the Guaranteed Debt, whether now existing or hereafter occurring; (e) any renewal, extension or rearrangement of the payment of any or all of the Guaranteed Debt, either with or without notice to or consent of Guarantor, or any adjustment, indulgence, forbearance, or compromise that may be granted or given by Agent or any Lender to Borrower, Guarantor, or any other obligor on the Obligation; (f) any neglect, delay, omission, failure or refusal of Agent or any Lender to take or prosecute any action for the collection of all or any part of the Guaranteed Debt or to foreclose or take or prosecute any action in connection with any instrument or agreement evidencing or securing any or all of the Guaranteed Debt; 3 4 (g) any failure of Agent or any Lender to notify Guarantor of any renewal, extension, or assignment of any or all of the Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by Agent or any Lender against Borrower or any new agreement between Agent, any Lender, and Borrower, it being understood that neither Agent nor any Lender shall be required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with the Guaranteed Debt, other than any notice required to be given to Guarantor elsewhere herein; (h) the unenforceability of all or any part of the Guaranteed Debt against Borrower by reason of the fact that the Guaranteed Debt exceeds the amount permitted by Law, the act of creating the Guaranteed Debt, or any part thereof, is ultra vires, or the officers creating same exceeded their authority or violated their fiduciary duties in connection therewith; (i) any payment of the Obligation to Agent or Lenders is held to constitute a preference under any Debtor Relief Law or if for any other reason Agent or any Lender is required to refund such payment or make payment to someone else (and in each such instance this Guaranty shall be reinstated in an amount equal to such payment), or if there is more than one person or entity signing this Guaranty or otherwise guaranteeing payment of the Guaranteed Debt, the release of any one or more of them hereunder; or (j) any discharge, release, or other forgiveness of Borrower's personal liability for the payment of the Guaranteed Debt. 10. Waiver. Guarantor hereby waives all rights by which it might be entitled to require suit on an accrued right of action in respect of any of the Guaranteed Debt or require suit against Borrower or others, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended (regarding Guarantor's right to require Agent or Lenders to sue Borrower on accrued right of action following Guarantor's written notice to Agent or Lenders), Section 17.001 of the Texas Civil Practice and Remedies Code, as amended (allowing suit against Guarantor without suit against Borrower, but precluding entry of judgment against Guarantor prior to entry of judgment against Borrower), Rule 31 of the Texas Rules of Civil Procedure, as amended (requiring Agent or Lenders to join Borrower in any suit against Guarantor unless judgment has been previously entered against Borrower), or otherwise. Guarantor waives notice of acceptance of this Guaranty, notice of any loan to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or nonpayment of any loan, notice of intent to accelerate, notice of acceleration, and notice of any suit or notice of the taking of other action by Lender against Borrower, Guarantor or any other person and any notice to any party liable thereon (including Guarantor). 11. Reliance and Duty to Remain Informed. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Documents and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Borrower's creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by Agent or Lender as to such creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Borrower and any circumstances affecting (a) Borrower's ability to perform under the Loan Documents to which Borrower is a party or (b) any collateral securing all or any part of the Guaranteed Debt. 4 5 12. Representations and Warranties. Guarantor acknowledges that certain representations and warranties set forth in the Credit Agreement are in respect of it, and Guarantor reaffirms that each such representation and warranty is true and correct in all material respects. Furthermore, Guarantor represents and warrants to Agent and Lenders that Guarantor's board of directors has determined that its liability and obligation hereunder may reasonably be expected to benefit it directly or indirectly. 13. Change in Guarantor's Status. Should Guarantor become insolvent, or fail to pay its debts generally as they become due, or voluntarily seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief Law or become a party to (or be made the subject of) any proceeding provided for by any Debtor Relief Law (other than as a creditor or claimant) that could suspend or otherwise adversely affect the Rights of Agent or Lenders granted hereunder, then, in any such event, the Guaranteed Debt shall be, as between Guarantor, Agent and Lender, a fully matured, due, and payable obligation of Guarantor to Agent or Lender (without regard to whether Borrower is then in Default or whether the Guaranteed Debt, or any part thereof is then due and owing by Borrower to Lender), payable in full by Guarantor to Agent or Lender upon demand, which shall be the estimated amount owing in respect of the contingent claim created hereunder. 14. Covenants. Guarantor acknowledges that certain covenants set forth in the Credit Agreement are in respect of it or shall be imposed upon it, and Guarantor covenants and agrees to promptly and properly perform, observe, and comply with each such covenant. Furthermore, Guarantor shall, jointly and severally, indemnify, protect, and hold Agent and Lenders and their respective parents, subsidiaries, directors, officers, employees, representatives, agents, successors, permitted assigns, and attorneys (collectively, the "INDEMNIFIED PARTIES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, and proceedings and all costs, expenses (including, without limitation, all reasonable attorneys' fees and legal expenses whether or not suit is brought), and reasonable disbursements of any kind or nature (the "INDEMNIFIED LIABILITIES") that may at any time be imposed on, incurred by, or asserted against the indemnified parties, in any way relating to or arising out of (a) the direct or indirect result of the violation by any Company of any Environmental Law, (b) any Company's generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence in connection with its properties of a Hazardous Substance (including, without limitation, (I) all damages from any use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, or presence, or (ii) the costs of any environmental investigation, monitoring, repair, cleanup, or detoxification and the preparation and implementation of any closure, remedial, or other plans), or (c) the Loan Documents or any of the transactions contemplated therein. However, although each indemnified party has the Right to be indemnified under the Loan Documents for its own ordinary negligence, no indemnified party has the Right to be indemnified under the Loan Documents for its own fraud, gross negligence, or willful misconduct. The provisions of and undertakings and indemnification set forth in this paragraph shall survive the satisfaction and payment of the Obligation and termination of this Guaranty. 15. Offset Claims. The Guaranteed Debt shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Borrower or any other party against Agent or Lenders or against payment of the Guaranteed Debt, whether such offset, claim, or defense arises in connection with the Guaranteed Debt or otherwise. Such claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, statute of frauds, bankruptcy, infancy, statute of limitations, lender liability, accord and satisfaction, and usury. 5 6 16. Binding Agreement. This Guaranty is for the benefit of Agent and Lenders and their respective successors and assigns. Guarantor acknowledges that in the event of an assignment of the Guaranteed Debt or any part thereof in accordance with the Credit Agreement, the rights and benefits under this Guaranty, to the extent applicable to the indebtedness so assigned, may be transferred with such indebtedness. This Guaranty is binding on Guarantor and its successors and permitted assigns. 17. Loan Document. This Guaranty is a Loan Document and, therefore, this Guaranty is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which applicable provisions are incorporated into this Guaranty by reference as if set forth verbatim. 18. Notices. All notices required or permitted to be given under this Guaranty, if any, must be in writing and shall or may, as the case may be, be given in the same manner as notice is given under the Credit Agreement as follows: If to Agent: NationsBank of Texas, N.A. Corporate Finance Group 700 Louisiana Street, 8th Floor P.O. Box 2518 Houston, Texas 77252-2518 Telephone No.: (713) 247-6258 Facsimile No.: (713) 247-6360 Attention: Richard L. Nichols, Jr. Vice President with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 35th Floor Houston, Texas 77002 Telephone No.: (713) 226-0681 Facsimile No.: (713) 226-0281 Attention: F. Walter Bistline, Jr. If to Borrower: NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer 6 7 with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling If to Guarantor: Metal Coaters of California, Inc. 7301 Fairview Houston, Texas 77041 Telephone No.: (713) 466-7758 Facsimile No.: (713) 466-3368 Attention: Robert J. Medlock Chief Financial Officer with a copy to: Gardere & Wynne, L.L.P. Thanksgiving Tower 1301 Elm Street, Suite 3000 Dallas, Texas 75201 Telephone No.: (214) 999-3000 Facsimile No.: (214) 999-4667 Attention: John K. Sterling Subject to the terms of the Credit Agreement, by giving at least 30 days written notice, any party to this Guaranty shall have the right from time to time and at any time while this Guaranty is in effect to change their respective addresses or fax numbers and each shall have the right to specify a different address or fax number within the United States of America. Nothing in this SECTION 18 shall be construed to require any notice to Guarantor not otherwise expressly required in this Guaranty. 19. GOVERNING LAW. THIS GUARANTY IS EXECUTED AND DELIVERED AS AN INCIDENT TO A LENDING TRANSACTION NEGOTIATED, CONSUMMATED, AND PERFORMABLE IN HARRIS COUNTY, TEXAS, AND SHALL BE CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND, AS APPLICABLE, THE LAWS OF THE UNITED STATES. 20. NO ORAL AGREEMENTS. THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS GUARANTY (AS AMENDED 7 8 IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY BORROWER, AGENT, LENDERS OR GUARANTOR (OR BY BORROWER OR GUARANTOR FOR THE BENEFIT OF AGENT AND LENDERS) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER, GUARANTOR, AND LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. THIS SECTION IS INCLUDED HEREIN PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. This Guaranty is executed as of the date set forth above. METAL COATERS OF CALIFORNIA, INC., a Texas corporation By: /s/ Robert J. Medlock -------------------------------------- Name: Robert J. Medlock ------------------------------------ Title: Vice President ----------------------------------- 8 EX-4.19 19 PLEDGE AGREEMENT-NATIONSBANK 1 EXHIBIT 4.19 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (as amended, this "PLEDGE AGREEMENT") is executed as of May 1, 1998, by the undersigned ("PLEDGOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Pledgor is the sole owner of all of the capital stock of NCI Operating Corp., a Nevada corporation and NCI Holding Corp., a Delaware corporation. C. It is expressly understood among Pledgor, Borrower, Agent and Lenders that the execution and delivery of this Pledge Agreement is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS PLEDGE AGREEMENT, ANY CAPITALIZED TERM USED IN THIS PLEDGE AGREEMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Pledge Agreement: "COLLATERAL" means Borrower's right, title and interest in and to the Pledged Shares, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PLEDGE AGREEMENT" means this Pledge Agreement together with all schedules and annexes attached to this Pledge Agreement, and all amendments and modifications to this Agreement, the schedules and exhibits. 2 "PLEDGED SHARES" means all shares of capital stock now or hereafter issued to Borrower by any Subsidiary and the certificate(s) representing the Pledged Shares (including the shares listed on SCHEDULE I) and all dividends, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Pledged Shares. "PLEDGOR" includes, without limitation, Pledgor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Pledgor or all or substantially all of Pledgor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Pledge Agreement. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Pledge Agreement is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Borrower hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment are made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Borrower with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Borrower's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Pledge Agreement, or its taking any action in carrying out this Pledge Agreement, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Pledge Agreement does not affect or modify Borrower's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Pledge Agreement to the contrary, Borrower agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent 2 3 conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Borrower to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. Borrower hereby confirms and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Agent and Lenders as follows: (a) The Pledged Shares are duly authorized, validly issued, fully paid and non-assessable, and their transfer thereof is not subject to any restrictions other than restrictions imposed by applicable securities and corporate laws. (b) Borrower owns the Collateral free and clear of all liens. (c) The information contained in SCHEDULE 1 which attached to this Pledge Agreement is true and accurate and sufficiently describes all of the Collateral. 7. Covenants. Borrower shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Borrower with respect to any of the Collateral. (b) Promptly notify Agent of any additional shares in any domestic corporation that becomes a Subsidiary of Borrower subsequent to the execution of this Pledge Agreement. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lender, appear in and defend, at Borrower's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. (f) At Borrower's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Borrower agrees that Agent's remedies at law for failure of Borrower to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Borrower agrees that its covenants in this provision may be specifically enforced). 3 4 (g) From time to time promptly execute and deliver to Agent all such other stock powers, assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without limitation, exercising the Stock Power, a form of which is attached as ANNEX "A" to this Pledge Agreement, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Borrower hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Borrower and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Securities. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lender shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in retaking, holding and preparing any of the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Borrower or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower shall remain liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Borrower shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Borrower is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Borrower upon demand and shall be part of the Obligation. 4 5 (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Borrower to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Borrower was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Borrower is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Borrower to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Borrower on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Borrower, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Borrower to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Borrower with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lender. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Securities. Whether or not a Default has occurred and is continuing, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as pledgee; and Agent shall execute and deliver to Borrower all such proxies, powers of attorney, dividend coupons or orders and other documents as Borrower may reasonably request for the purpose of enabling Borrower to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the dividends and other payments which it is authorized to receive and retain hereunder. Nothing in this Pledge Agreement shall prohibit the issuance of cash dividends by Pledgor if such distribution is permitted under the Credit Agreement. A. Voting of Securities. So long as no Default has occurred, Borrower shall be entitled to exercise all voting rights pertaining to the Collateral. After the occurrence and during the continuance of a Default, the right to vote the Collateral shall be vested exclusively in Agent. To this end, Borrower irrevocably appoints Agent the proxy and attorney-in-fact of Borrower, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. B. Certain Proceeds. Any and all stock dividends or distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such dividends, distributions, or 5 6 proceeds result from a subdivision, combination or reclassification of the outstanding capital stock of Borrower or as a result of any merger, consolidation, acquisition or other exchange of assets to which Borrower may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Borrower, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Borrower in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Borrower for any general or specific purpose, or be retained in whole or in part by Lender as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Pledge Agreement is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Pledge Agreement is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Pledge Agreement by reference the same as if set forth in this Pledge Agreement verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Secured Party's and the Lenders' commitment to lend under the Credit Agreement without Secured Party having exercised its rights under this Pledge Agreement, this Pledge Agreement shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Pledge Agreement, but shall be fully protected in making payment directly to Secured Party, which payment shall be promptly paid over to Borrower after termination of this Pledge Agreement. (c) Notice. Any notice or communication required or permitted under this Pledge Agreement must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED--AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. EXECUTED as of the date set forth in the preamble. NCI BUILDING SYSTEMS, INC. as Borrower and Pledgor By: /s/ Robert J. Medlock ---------------------------------------------- Name: Robert J. Medlock -------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------- 6 7 NATIONSBANK OF TEXAS, N.A. as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. -------------------------------------- Name: Richard L. Nichols, Jr. ------------------------------------ Title: Vice President ----------------------------------- 7 EX-4.20 20 PLEDGE AGREEMENT-NCI HOLDING CORP AND NATIONSBANK 1 EXHIBIT 4.20 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (as amended, this "PLEDGE AGREEMENT") is executed as of May 1, 1998, by the undersigned ("PLEDGOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Pledgor is the sole owner of all of the capital stock of (i) A&S Business Interests, Inc. (f/k/a A&S Building Systems, Inc.), a Texas corporation, (ii) Metal Building Components Holding, Inc., a Delaware corporation and (iii) Metal Coaters Holding, Inc., a Delaware corporation. C. It is expressly understood among Pledgor, Borrower, Agent and Lenders that the execution and delivery of this Pledge Agreement is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS PLEDGE AGREEMENT, ANY CAPITALIZED TERM USED IN THIS PLEDGE AGREEMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Pledge Agreement: "COLLATERAL" means Borrower's right, title and interest in and to the Pledged Shares, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PLEDGE AGREEMENT" means this Pledge Agreement together with all schedules and annexes attached to this Pledge Agreement, and all amendments and modifications to this Agreement, the schedules and exhibits. 2 "PLEDGED SHARES" means all shares of capital stock now or hereafter issued to Borrower by any Subsidiary and the certificate(s) representing the Pledged Shares (including the shares listed on SCHEDULE I) and all dividends, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Pledged Shares. "PLEDGOR" includes, without limitation, Pledgor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Pledgor or all or substantially all of Pledgor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Pledge Agreement. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Pledge Agreement is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Borrower hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment are made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Borrower with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Borrower's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Pledge Agreement, or its taking any action in carrying out this Pledge Agreement, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Pledge Agreement does not affect or modify Borrower's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Pledge Agreement to the contrary, Borrower agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent 2 3 conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Borrower to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. Borrower hereby confirms and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Agent and Lenders as follows: (a) The Pledged Shares are duly authorized, validly issued, fully paid and non-assessable, and their transfer thereof is not subject to any restrictions other than restrictions imposed by applicable securities and corporate laws. (b) Borrower owns the Collateral free and clear of all liens. (c) The information contained in SCHEDULE 1 which attached to this Pledge Agreement is true and accurate and sufficiently describes all of the Collateral. 7. Covenants. Borrower shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Borrower with respect to any of the Collateral. (b) Promptly notify Agent of any additional shares in any domestic corporation that becomes a Subsidiary of Borrower subsequent to the execution of this Pledge Agreement. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lender, appear in and defend, at Borrower's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. (f) At Borrower's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Borrower agrees that Agent's remedies at law for failure of Borrower to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Borrower agrees that its covenants in this provision may be specifically enforced). 3 4 (g) From time to time promptly execute and deliver to Agent all such other stock powers, assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without limitation, exercising the Stock Power, a form of which is attached as ANNEX "A" to this Pledge Agreement, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Borrower hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Borrower and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Securities. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lender shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in retaking, holding and preparing any of the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Borrower or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower shall remain liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Borrower shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Borrower is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Borrower upon demand and shall be part of the Obligation. 4 5 (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Borrower to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Borrower was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Borrower is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Borrower to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Borrower on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Borrower, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Borrower to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Borrower with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lender. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Securities. Whether or not a Default has occurred and is continuing, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as pledgee; and Agent shall execute and deliver to Borrower all such proxies, powers of attorney, dividend coupons or orders and other documents as Borrower may reasonably request for the purpose of enabling Borrower to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the dividends and other payments which it is authorized to receive and retain hereunder. Nothing in this Pledge Agreement shall prohibit the issuance of cash dividends by Pledgor if such distribution is permitted under the Credit Agreement. A. Voting of Securities. So long as no Default has occurred, Borrower shall be entitled to exercise all voting rights pertaining to the Collateral. After the occurrence and during the continuance of a Default, the right to vote the Collateral shall be vested exclusively in Agent. To this end, Borrower irrevocably appoints Agent the proxy and attorney-in-fact of Borrower, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. B. Certain Proceeds. Any and all stock dividends or distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such dividends, distributions, or 5 6 proceeds result from a subdivision, combination or reclassification of the outstanding capital stock of Borrower or as a result of any merger, consolidation, acquisition or other exchange of assets to which Borrower may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Borrower, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Borrower in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Borrower for any general or specific purpose, or be retained in whole or in part by Lender as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Pledge Agreement is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Pledge Agreement is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Pledge Agreement by reference the same as if set forth in this Pledge Agreement verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Secured Party's and the Lenders' commitment to lend under the Credit Agreement without Secured Party having exercised its rights under this Pledge Agreement, this Pledge Agreement shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Pledge Agreement, but shall be fully protected in making payment directly to Secured Party, which payment shall be promptly paid over to Borrower after termination of this Pledge Agreement. (c) Notice. Any notice or communication required or permitted under this Pledge Agreement must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED-- AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. EXECUTED as of the date set forth in the preamble. NCI HOLDING CORP. as Pledgor By: /s/ Robert J. Medlock ---------------------------------------------- Name: Robert J. Medlock -------------------------------------------- Title: Vice President and Chief Financial Officer ------------------------------------------- 6 7 NATIONSBANK OF TEXAS, N.A. as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ---------------------------------------------- Name: Richard L. Nichols, Jr. -------------------------------------------- Title: Vice President ------------------------------------------- 7 EX-4.21 21 PLEDGE AGREEMENT-METAL COATERS HOLDING-NATIONSBANK 1 EXHIBIT 4.21 PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (as amended, this "PLEDGE AGREEMENT") is executed as of May 13, 1998, by the undersigned ("PLEDGOR") for the benefit of NationsBank, N.A., successor by merger with NationsBank of Texas, N.A. ("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Pledgor is the sole owner of all of the capital stock of Metal Coaters of California, Inc., a Texas corporation. C. It is expressly understood among Pledgor, Borrower, Agent and Lenders that the execution and delivery of this Pledge Agreement is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS PLEDGE AGREEMENT, ANY CAPITALIZED TERM USED IN THIS PLEDGE AGREEMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Pledge Agreement: "COLLATERAL" means Borrower's right, title and interest in and to the Pledged Shares, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PLEDGE AGREEMENT" means this Pledge Agreement together with all schedules and annexes attached to this Pledge Agreement, and all amendments and modifications to this Agreement, the schedules and exhibits. 2 "PLEDGED SHARES" means all shares of capital stock now or hereafter issued to Borrower by any Subsidiary and the certificate(s) representing the Pledged Shares (including the shares listed on SCHEDULE I) and all dividends, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Pledged Shares. "PLEDGOR" includes, without limitation, Pledgor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Pledgor or all or substantially all of Pledgor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Pledge Agreement. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Pledge Agreement is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Borrower hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment are made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Borrower with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Borrower's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Pledge Agreement, or its taking any action in carrying out this Pledge Agreement, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Pledge Agreement does not affect or modify Borrower's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Pledge Agreement to the contrary, Borrower agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent 2 3 conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Borrower to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. Borrower hereby confirms and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Agent and Lenders as follows: (a) The Pledged Shares are duly authorized, validly issued, fully paid and non-assessable, and their transfer thereof is not subject to any restrictions other than restrictions imposed by applicable securities and corporate laws. (b) Borrower owns the Collateral free and clear of all liens. (c) The information contained in SCHEDULE 1 which attached to this Pledge Agreement is true and accurate and sufficiently describes all of the Collateral. 7. Covenants. Borrower shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Borrower with respect to any of the Collateral. (b) Promptly notify Agent of any additional shares in any domestic corporation that becomes a Subsidiary of Borrower subsequent to the execution of this Pledge Agreement. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lender, appear in and defend, at Borrower's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. (f) At Borrower's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Borrower agrees that Agent's remedies at law for failure of Borrower to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Borrower agrees that its covenants in this provision may be specifically enforced). 3 4 (g) From time to time promptly execute and deliver to Agent all such other stock powers, assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without limitation, exercising the Stock Power, a form of which is attached as ANNEX "A" to this Pledge Agreement, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Borrower hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Borrower and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Securities. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lender shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in retaking, holding and preparing any of the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Borrower or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower shall remain liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Borrower shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Borrower is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Borrower upon demand and shall be part of the Obligation. 4 5 (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Borrower to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Borrower was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Borrower is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Borrower to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Borrower on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Borrower, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Borrower to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Borrower with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lender. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Securities. Whether or not a Default has occurred and is continuing, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as pledgee; and Agent shall execute and deliver to Borrower all such proxies, powers of attorney, dividend coupons or orders and other documents as Borrower may reasonably request for the purpose of enabling Borrower to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the dividends and other payments which it is authorized to receive and retain hereunder. Nothing in this Pledge Agreement shall prohibit the issuance of cash dividends by Pledgor if such distribution is permitted under the Credit Agreement. A. Voting of Securities. So long as no Default has occurred, Borrower shall be entitled to exercise all voting rights pertaining to the Collateral. After the occurrence and during the continuance of a Default, the right to vote the Collateral shall be vested exclusively in Agent. To this end, Borrower irrevocably appoints Agent the proxy and attorney-in-fact of Borrower, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. B. Certain Proceeds. Any and all stock dividends or distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such dividends, distributions, or 5 6 proceeds result from a subdivision, combination or reclassification of the outstanding capital stock of Borrower or as a result of any merger, consolidation, acquisition or other exchange of assets to which Borrower may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Borrower, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Borrower in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Borrower for any general or specific purpose, or be retained in whole or in part by Lender as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Pledge Agreement is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Pledge Agreement is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Pledge Agreement by reference the same as if set forth in this Pledge Agreement verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Secured Party's and the Lenders' commitment to lend under the Credit Agreement without Secured Party having exercised its rights under this Pledge Agreement, this Pledge Agreement shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Pledge Agreement, but shall be fully protected in making payment directly to Secured Party, which payment shall be promptly paid over to Borrower after termination of this Pledge Agreement. (c) Notice. Any notice or communication required or permitted under this Pledge Agreement must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED-- AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. EXECUTED as of the date set forth in the preamble. METAL COATERS HOLDING, INC., a Delaware corporation, as Pledgor By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- 6 7 NATIONSBANK, N.A., SUCCESSOR BY MERGER WITH NATIONSBANK OF TEXAS, N. A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------------- Name: Richard L. Nichols, Jr. --------------------------------------------- Title: Vice President -------------------------------------------- 7 EX-4.22 22 ASSIGNMENT OF PARTNERSHIP INTEREST-NCI OPERATING 1 EXHIBIT 4.22 ASSIGNMENT OF PARTNERSHIP INTERESTS THIS ASSIGNMENT OF PARTNERSHIP INTERESTS (as amended, this "ASSIGNMENT") is executed as of May 1, 1998, by the undersigned ("ASSIGNOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. NCI Operating Corp., a Delaware corporation and a wholly-owned subsidiary of Borrower is the general partner of (i) NCI Building Systems, L.P., a Texas limited partnership, (ii) A&S Building Systems, L.P., a Texas limited partnership, (iii) MBCI Operating, L.P., a Texas limited partnership and (iv) Metal Coaters Operating, L.P., a Texas limited partnership. C. It is expressly understood among Assignor, Borrower and Lenders that the execution and delivery of this Assignment is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. D. Assignor's board of directors has determined that the Assignor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as the Assignor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS ASSIGNMENT, ANY CAPITALIZED TERM USED IN THIS ASSIGNMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Assignment: "ASSIGNMENT" means this Assignment together with all schedules and annexes attached to this Assignment, and all amendments and modifications to this Assignment, the schedules and exhibits. "ASSIGNOR" includes, without limitation, Assignor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Assignor or all 2 or substantially all of Assignor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "COLLATERAL" means Assignors's right, title and interest in and to the Partnership Interests, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PARTNERSHIP INTERESTS" means all partnership interests, now or hereafter owned by Assignor in any Subsidiary and all distributions, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Partnership Interest. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Assignment. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Assignment is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Assignor hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment is made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Assignor with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Assignor's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Assignment, or its taking any action in carrying out this Assignment, does not constitute Agent's approval of the Collateral or Agent's assumption 2 3 of any obligation under or in connection with the Collateral. This Assignment does not affect or modify Assignor's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Assignment to the contrary, Assignor agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Assignor to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. To the extent applicable, Assignor hereby adopts and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Lenders as follows: (a) Except as provided in the relevant partnership agreement, the assignment, pledge, or transfer of the Partnership Interests is not subject to any restrictions other than restrictions imposed by applicable securities and partnership laws. (b) Except as provided in the relevant partnership agreement, Assignor owns the Collateral free and clear of all liens. (c) The information contained in item B in the recitals above is true and accurate and the Collateral is accurately described in this Assignment. 7. Covenants. Assignor shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Assignor with respect to any of the Collateral. (b) Promptly notify Agent of any additional partnership interest that it acquires or owns in any domestic partnership that becomes a Subsidiary subsequent to the execution of this Assignment. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lenders, appear in and defend, at Assignor's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. 3 4 (f) At Assignor's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Assignor agrees that Agent's remedies at law for failure of Assignor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Assignor agrees that its covenants in this provision may be specifically enforced). (g) From time to time promptly execute and deliver to Agent all such other assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Assignor hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Assignor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Partnership Interests. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lenders shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in preparing any of the Collateral for sale(s) or other disposition(s), in arranging for such sale(s) or other disposition(s), and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Assignor or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower, Assignor and other Guarantors shall remain jointly and severally liable for any deficiency. 4 5 9. Other Rights of Agent and Lenders. (a) Performance. In the event Assignor shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Assignor is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Assignor upon demand and shall be part of the Obligation. (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Assignor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Assignor was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Assignor is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Assignor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Assignor on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Assignor, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Assignor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Assignor with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lenders. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Partnership Interests. Whether or not a Default has occurred and is continuing and to the extent applicable, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as assignee; and Agent shall execute and deliver to Assignor all such proxies, powers of attorney, dividend coupons or orders and other documents as Assignor may reasonably request for the purpose of enabling Assignor to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the distributions and other payments which it is authorized to receive and retain hereunder. Nothing in this Assignment shall prohibit the payment of cash distributions by the Partnership if such distribution is permitted under the Credit Agreement. (d) Partnership Action. So long as no Default has occurred, Assignor shall be entitled to exercise all rights pertaining to the Collateral. After the occurrence and during the continuance of a 5 6 Default, the right to vote or take action as a result of owning the Collateral shall be vested exclusively in Agent. To this end, Assignor irrevocably appoints Agent the proxy and attorney-in-fact of Assignor, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. (e) Certain Proceeds. Any and all distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such distributions, or proceeds result from a subdivision, combination or reclassification of the partnership interests of Assignor or as a result of any merger, consolidation, acquisition or other exchange of assets to which Assignor may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Assignor, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Assignor in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Assignor for any general or specific purpose, or be retained in whole or in part by Lenders as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Assignment is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Assignment is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Assignment by reference the same as if set forth in this Assignment verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Lenders' commitment to lend under the Credit Agreement without Lenders' having exercised their rights under this Assignment, this Assignment shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Assignment, but shall be fully protected in making payment directly to Lenders, which payment shall be promptly paid over to Assignor after termination of this Assignment. (c) Notice. Any notice or communication required or permitted under this Assignment must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS ASSIGNMENT SHALL BE CONSTRUED--AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. 6 7 EXECUTED as of the date set forth in the preamble. NCI OPERATING CORP., as Assignor By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- NATIONSBANK OF TEXAS, N.A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------------- Name: Richard L. Nichols, Jr. --------------------------------------------- Title: Vice President -------------------------------------------- 7 EX-4.23 23 ASSIGNMENT OF PARTNERSHIP INTERESTS-NCI HOLDING 1 EXHIBIT 4.23 ASSIGNMENT OF PARTNERSHIP INTERESTS THIS ASSIGNMENT OF PARTNERSHIP INTERESTS (as amended, this "ASSIGNMENT") is executed as of May 1, 1998, by the undersigned ("ASSIGNOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. NCI Holding Corp., a Delaware corporation and a wholly-owned subsidiary of Borrower is a limited general partner of (i) NCI Building Systems, L.P., a Texas limited partnership, (ii) A&S Building Systems, L.P., a Texas limited partnership, (iii) MBCI Operating, L.P., a Texas limited partnership and (iv) Metal Coaters Operating, L.P., a Texas limited partnership. C. It is expressly understood among Assignor, Borrower and Lenders that the execution and delivery of this Assignment is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. D. Assignor's board of directors has determined that the Assignor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as the Assignor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS ASSIGNMENT, ANY CAPITALIZED TERM USED IN THIS ASSIGNMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Assignment: "ASSIGNMENT" means this Assignment together with all schedules and annexes attached to this Assignment, and all amendments and modifications to this Assignment, the schedules and exhibits. "ASSIGNOR" includes, without limitation, Assignor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Assignor or all 2 or substantially all of Assignor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "COLLATERAL" means Assignors's right, title and interest in and to the Partnership Interests, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PARTNERSHIP INTERESTS" means all partnership interests, now or hereafter owned by Assignor in any Subsidiary and all distributions, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Partnership Interest. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Assignment. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Assignment is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Assignor hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment is made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Assignor with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Assignor's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Assignment, or its taking any action in carrying out this Assignment, does not constitute Agent's approval of the Collateral or Agent's assumption 2 3 of any obligation under or in connection with the Collateral. This Assignment does not affect or modify Assignor's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Assignment to the contrary, Assignor agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Assignor to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. To the extent applicable, Assignor hereby adopts and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Lenders as follows: (a) Except as provided in the relevant partnership agreement, the assignment, pledge, or transfer of the Partnership Interests is not subject to any restrictions other than restrictions imposed by applicable securities and partnership laws. (b) Except as provided in the relevant partnership agreement, Assignor owns the Collateral free and clear of all liens. (c) The information contained in item B in the recitals above is true and accurate and the Collateral is accurately described in this Assignment. 7. Covenants. Assignor shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Assignor with respect to any of the Collateral. (b) Promptly notify Agent of any additional partnership interest that it acquires or owns in any domestic partnership that becomes a Subsidiary subsequent to the execution of this Assignment. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lenders, appear in and defend, at Assignor's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. 3 4 (f) At Assignor's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Assignor agrees that Agent's remedies at law for failure of Assignor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Assignor agrees that its covenants in this provision may be specifically enforced). (g) From time to time promptly execute and deliver to Agent all such other assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Assignor hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Assignor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Partnership Interests. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lenders shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in preparing any of the Collateral for sale(s) or other disposition(s), in arranging for such sale(s) or other disposition(s), and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Assignor or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower, Assignor and other Guarantors shall remain jointly and severally liable for any deficiency. 4 5 9. Other Rights of Agent and Lenders. (a) Performance. In the event Assignor shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Assignor is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Assignor upon demand and shall be part of the Obligation. (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Assignor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Assignor was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Assignor is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Assignor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Assignor on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Assignor, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Assignor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Assignor with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lenders. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Partnership Interests. Whether or not a Default has occurred and is continuing and to the extent applicable, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as assignee; and Agent shall execute and deliver to Assignor all such proxies, powers of attorney, dividend coupons or orders and other documents as Assignor may reasonably request for the purpose of enabling Assignor to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the distributions and other payments which it is authorized to receive and retain hereunder. Nothing in this Assignment shall prohibit the payment of cash distributions by the Partnership if such distribution is permitted under the Credit Agreement. (d) Partnership Action. So long as no Default has occurred, Assignor shall be entitled to exercise all rights pertaining to the Collateral. After the occurrence and during the continuance of a 5 6 Default, the right to vote or take action as a result of owning the Collateral shall be vested exclusively in Agent. To this end, Assignor irrevocably appoints Agent the proxy and attorney-in-fact of Assignor, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. (e) Certain Proceeds. Any and all distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such distributions, or proceeds result from a subdivision, combination or reclassification of the partnership interests of Assignor or as a result of any merger, consolidation, acquisition or other exchange of assets to which Assignor may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Assignor, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Assignor in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Assignor for any general or specific purpose, or be retained in whole or in part by Lenders as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Assignment is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Assignment is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Assignment by reference the same as if set forth in this Assignment verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Lenders' commitment to lend under the Credit Agreement without Lenders' having exercised their rights under this Assignment, this Assignment shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Assignment, but shall be fully protected in making payment directly to Lenders, which payment shall be promptly paid over to Assignor after termination of this Assignment. (c) Notice. Any notice or communication required or permitted under this Assignment must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS ASSIGNMENT SHALL BE CONSTRUED--AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. 6 7 EXECUTED as of the date set forth in the preamble. NCI HOLDING CORP., as Assignor By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- NATIONSBANK OF TEXAS, N.A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------------- Name: Richard L. Nichols, Jr. --------------------------------------------- Title: Vice President -------------------------------------------- 7 EX-4.24 24 ASSINGMENT OF PARTNERSHIP INTERESTS-METAL BUILDING 1 EXHIBIT 4.24 ASSIGNMENT OF PARTNERSHIP INTERESTS THIS ASSIGNMENT OF PARTNERSHIP INTERESTS (as amended, this "ASSIGNMENT") is executed as of May 1, 1998, by the undersigned ("ASSIGNOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Metal Building Components Holding, Inc., a Delaware corporation and a wholly-owned subsidiary of Borrower is a limited general partner of MBCI Operating, L.P., a Texas limited partnership. C. It is expressly understood among Assignor, Borrower and Lenders that the execution and delivery of this Assignment is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. D. Assignor's board of directors has determined that the Assignor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as the Assignor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS ASSIGNMENT, ANY CAPITALIZED TERM USED IN THIS ASSIGNMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Assignment: "ASSIGNMENT" means this Assignment together with all schedules and annexes attached to this Assignment, and all amendments and modifications to this Assignment, the schedules and exhibits. "ASSIGNOR" includes, without limitation, Assignor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Assignor or all or substantially all of Assignor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, 2 rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "COLLATERAL" means Assignors's right, title and interest in and to the Partnership Interests, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PARTNERSHIP INTERESTS" means all partnership interests, now or hereafter owned by Assignor in any Subsidiary and all distributions, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Partnership Interest. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Assignment. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Assignment is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Assignor hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment is made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Assignor with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Assignor's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Assignment, or its taking any action in carrying out this Assignment, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Assignment does not affect or modify Assignor's obligations with respect to the Collateral. 2 3 5. Fraudulent Conveyance. Notwithstanding anything contained in this Assignment to the contrary, Assignor agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Assignor to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. To the extent applicable, Assignor hereby adopts and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Lenders as follows: (a) Except as provided in the relevant partnership agreement, the assignment, pledge, or transfer of the Partnership Interests is not subject to any restrictions other than restrictions imposed by applicable securities and partnership laws. (b) Except as provided in the relevant partnership agreement, Assignor owns the Collateral free and clear of all liens. (c) The information contained in item B in the recitals above is true and accurate and the Collateral is accurately described in this Assignment. 7. Covenants. Assignor shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Assignor with respect to any of the Collateral. (b) Promptly notify Agent of any additional partnership interest that it acquires or owns in any domestic partnership that becomes a Subsidiary subsequent to the execution of this Assignment. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lenders, appear in and defend, at Assignor's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. (f) At Assignor's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Assignor 3 4 agrees that Agent's remedies at law for failure of Assignor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Assignor agrees that its covenants in this provision may be specifically enforced). (g) From time to time promptly execute and deliver to Agent all such other assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Assignor hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Assignor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Partnership Interests. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lenders shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in preparing any of the Collateral for sale(s) or other disposition(s), in arranging for such sale(s) or other disposition(s), and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Assignor or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower, Assignor and other Guarantors shall remain jointly and severally liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Assignor shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Assignor is required, but has failed or refused, to take. Any sum which may be 4 5 expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Assignor upon demand and shall be part of the Obligation. (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Assignor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Assignor was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Assignor is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Assignor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Assignor on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Assignor, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Assignor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Assignor with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lenders. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Partnership Interests. Whether or not a Default has occurred and is continuing and to the extent applicable, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as assignee; and Agent shall execute and deliver to Assignor all such proxies, powers of attorney, dividend coupons or orders and other documents as Assignor may reasonably request for the purpose of enabling Assignor to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the distributions and other payments which it is authorized to receive and retain hereunder. Nothing in this Assignment shall prohibit the payment of cash distributions by the Partnership if such distribution is permitted under the Credit Agreement. (d) Partnership Action. So long as no Default has occurred, Assignor shall be entitled to exercise all rights pertaining to the Collateral. After the occurrence and during the continuance of a Default, the right to vote or take action as a result of owning the Collateral shall be vested exclusively in Agent. To this end, Assignor irrevocably appoints Agent the proxy and attorney-in-fact of Assignor, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that 5 6 such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. (e) Certain Proceeds. Any and all distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such distributions, or proceeds result from a subdivision, combination or reclassification of the partnership interests of Assignor or as a result of any merger, consolidation, acquisition or other exchange of assets to which Assignor may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Assignor, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Assignor in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Assignor for any general or specific purpose, or be retained in whole or in part by Lenders as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Assignment is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Assignment is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Assignment by reference the same as if set forth in this Assignment verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Lenders' commitment to lend under the Credit Agreement without Lenders' having exercised their rights under this Assignment, this Assignment shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Assignment, but shall be fully protected in making payment directly to Lenders, which payment shall be promptly paid over to Assignor after termination of this Assignment. (c) Notice. Any notice or communication required or permitted under this Assignment must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS ASSIGNMENT SHALL BE CONSTRUED--AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. 6 7 EXECUTED as of the date set forth in the preamble. METAL BUILDING COMPONENTS HOLDING, INC., as Assignor By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- NATIONSBANK OF TEXAS, N.A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------------- Name: Richard L. Nichols, Jr. --------------------------------------------- Title: Vice President -------------------------------------------- 7 EX-4.25 25 ASSIGNMENT OF PARTNERSHIP INTERESTS-METAL COATERS 1 EXHIBIT 4.25 ASSIGNMENT OF PARTNERSHIP INTERESTS THIS ASSIGNMENT OF PARTNERSHIP INTERESTS (as amended, this "ASSIGNMENT") is executed as of May 1, 1998, by the undersigned ("ASSIGNOR") for the benefit of NationsBank of Texas, N.A.("AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. NCI Building Systems, Inc., a Delaware corporation ("BORROWER"), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Metal Coaters Holding, Inc., a Delaware corporation and a wholly-owned subsidiary of Borrower is a limited general partner of Metal Coaters Operating, L.P., a Texas limited partnership. C. It is expressly understood among Assignor, Borrower and Lenders that the execution and delivery of this Assignment is a condition precedent to Lenders' obligations to extend credit under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. D. Assignor's board of directors has determined that the Assignor may benefit directly or indirectly from Borrower's execution of the Credit Agreement as the Assignor may be the indirect recipient of funds advanced by Lenders to Borrower under the Credit Agreement or the account party of LCs issued by Agent pursuant to the Credit Agreement, and as such the value of the consideration received and to be received by it under the Loan Documents is reasonably worth at least as much as its liability and obligation under this Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS ASSIGNMENT, ANY CAPITALIZED TERM USED IN THIS ASSIGNMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Assignment: "ASSIGNMENT" means this Assignment together with all schedules and annexes attached to this Assignment, and all amendments and modifications to this Assignment, the schedules and exhibits. "ASSIGNOR" includes, without limitation, Assignor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Assignor or all or substantially all of Assignor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, 2 rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "COLLATERAL" means Assignors's right, title and interest in and to the Partnership Interests, including after acquired Collateral and proceeds of the Collateral. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation"under and as defined in the Credit Agreement. "PARTNERSHIP INTERESTS" means all partnership interests, now or hereafter owned by Assignor in any Subsidiary and all distributions, cash, instruments and other property from time-to-time received, receivable or otherwise distributed in respect of or in exchange of any Partnership Interest. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Assignment. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Assignment is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Assignor hereby grants to Agent a security interest in, and pledges and assigns to Agent: (a) the Collateral, and (b) all present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or claims against any other person with respect to, the Collateral. Such security interest is granted, and such pledge and assignment is made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Assignor with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Assignor's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Assignment, or its taking any action in carrying out this Assignment, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Assignment does not affect or modify Assignor's obligations with respect to the Collateral. 2 3 5. Fraudulent Conveyance. Notwithstanding anything contained in this Assignment to the contrary, Assignor agrees that if, but for the application of this SECTION 5 the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Assignor to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 6. Representations and Warranties. To the extent applicable, Assignor hereby adopts and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Lenders as follows: (a) Except as provided in the relevant partnership agreement, the assignment, pledge, or transfer of the Partnership Interests is not subject to any restrictions other than restrictions imposed by applicable securities and partnership laws. (b) Except as provided in the relevant partnership agreement, Assignor owns the Collateral free and clear of all liens. (c) The information contained in item B in the recitals above is true and accurate and the Collateral is accurately described in this Assignment. 7. Covenants. Assignor shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Assignor with respect to any of the Collateral. (b) Promptly notify Agent of any additional partnership interest that it acquires or owns in any domestic partnership that becomes a Subsidiary subsequent to the execution of this Assignment. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under PARAGRAPH 3 or title to all or any of the Collateral and, at the request of Lenders, appear in and defend, at Assignor's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other lien upon any of the Collateral. (f) At Assignor's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default (as defined in the Credit Agreement) without additional consent or approval from such tribunal (and, because Assignor 3 4 agrees that Agent's remedies at law for failure of Assignor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Assignor agrees that its covenants in this provision may be specifically enforced). (g) From time to time promptly execute and deliver to Agent all such other assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, or applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Assignor hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Assignor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Sales of Partnership Interests. In connection with the sale of the Collateral, Agent is authorized, but not obligated, to limit prospective purchasers to the extent deemed necessary or desirable by Agent to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Lenders shall be deemed not to be "commercially reasonable" because so made. (c) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this PARAGRAPH 8 in the following order: First, to the payment of all its expenses incurred in preparing any of the Collateral for sale(s) or other disposition(s), in arranging for such sale(s) or other disposition(s), and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under Paragraph 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Assignor or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Borrower, Assignor and other Guarantors shall remain jointly and severally liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Assignor shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Assignor is required, but has failed or refused, to take. Any sum which may be 4 5 expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Assignor upon demand and shall be part of the Obligation. (b) Collection. Upon notice from Agent, each person or entity obligated with respect to any of the Collateral, whether as an issuer, account debtor or otherwise (an "OBLIGOR") is hereby authorized and directed by Assignor to make payments on any of the Collateral (including, without limitation, dividends and other distributions) directly to Agent, regardless of whether Assignor was previously making collections thereon. Subject to Subparagraph (e) hereof, until such notice is given, Assignor is authorized to retain and expend all payments made on Collateral. Agent shall have the right in its own name or in the name of Assignor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Assignor on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Assignor, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Assignor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Assignor with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lenders. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Record Ownership of Partnership Interests. Whether or not a Default has occurred and is continuing and to the extent applicable, Agent at any time may have the Collateral registered in its name, or in the name of its nominee or nominees, as assignee; and Agent shall execute and deliver to Assignor all such proxies, powers of attorney, dividend coupons or orders and other documents as Assignor may reasonably request for the purpose of enabling Assignor to exercise the voting rights and powers which it is entitled to exercise hereunder and to receive the distributions and other payments which it is authorized to receive and retain hereunder. Nothing in this Assignment shall prohibit the payment of cash distributions by the Partnership if such distribution is permitted under the Credit Agreement. (d) Partnership Action. So long as no Default has occurred, Assignor shall be entitled to exercise all rights pertaining to the Collateral. After the occurrence and during the continuance of a Default, the right to vote or take action as a result of owning the Collateral shall be vested exclusively in Agent. To this end, Assignor irrevocably appoints Agent the proxy and attorney-in-fact of Assignor, with full power of substitution, to vote and to act with respect to the Collateral, subject to the understanding that 5 6 such proxy may not be exercised unless a Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall continue until the Obligation has been paid and performed in full. (e) Certain Proceeds. Any and all distributions in property made on or in respect of the Collateral, and any proceeds of the Collateral, whether such distributions, or proceeds result from a subdivision, combination or reclassification of the partnership interests of Assignor or as a result of any merger, consolidation, acquisition or other exchange of assets to which Assignor may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Assignor, be held in trust for the benefit of Agent, and shall forthwith be delivered to Agent (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Assignor in accordance with Agent's instructions) to be held subject to the terms hereof. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Assignor for any general or specific purpose, or be retained in whole or in part by Lenders as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Assignment is one of the "Loan Documents" referred to in the Credit Agreement, and, therefore, this Assignment is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Assignment by reference the same as if set forth in this Assignment verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Lenders' commitment to lend under the Credit Agreement without Lenders' having exercised their rights under this Assignment, this Assignment shall terminate; provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Assignment, but shall be fully protected in making payment directly to Lenders, which payment shall be promptly paid over to Assignor after termination of this Assignment. (c) Notice. Any notice or communication required or permitted under this Assignment must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS ASSIGNMENT SHALL BE CONSTRUED--AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. 6 7 EXECUTED as of the date set forth in the preamble. METAL COATERS HOLDING, INC., as Assignor By: /s/ Robert J. Medlock ----------------------------------------------- Name: Robert J. Medlock --------------------------------------------- Title: Vice President and Chief Financial Officer -------------------------------------------- NATIONSBANK OF TEXAS, N.A., as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------------- Name: Richard L. Nichols, Jr. --------------------------------------------- Title: Vice President -------------------------------------------- 7 EX-4.26 26 PROMISSORY NOTE OF NCI HOLDING CORP 1 EXHIBIT 4.26 NCI HOLDING CORP. PROMISSORY NOTE Wilmington, Delaware May 5, 1998 NCI Holding Corp., a Delaware corporation (the "Company"), for value received, hereby promises to pay to the order of NCI Building Systems, Inc., a Delaware corporation and the sole owner of all of the issued and outstanding capital stock of the Company ("Payee"), the principal sum of FIVE HUNDRED FIFTY MILLION AND NO/100 DOLLARS ($550,000,000) subject to adjustment as herein provided (the "Principal Amount"), and to pay interest on the unpaid balance of the Principal Amount at the rate herein provided. 1. Adjustment to Principal Amount. The Company and Payee agree that (i) this Note is being given by the Company to Payee in consideration of the transfer by Payee to the Company of all of the issued and outstanding capital stock of Amatek Holdings, Inc., a Texas corporation ("Amatek"), acquired by Payee pursuant to that certain Stock Purchase Agreement, dated March 25, 1998, as amended by letter agreement dated May 4, 1998 (the "Purchase Agreement"), by and between Payee and BTR Australia Limited, a corporation organized under the laws of Australia ("BTR"), and joined therein for certain limited purposes by BTR plc and (ii) the Principal Amount of this Note is based on the Purchase Price (as defined in the Purchase Agreement) paid by Payee for the capital stock of Amatek. The Company and Payee acknowledge and agree that if the Purchase Price is adjusted in accordance with the terms and provisions of the Purchase Agreement that the Principal Amount of this Note shall be adjusted ab initio to reflect such adjusted Purchase Price for the capital stock of Amatek as if such adjusted Purchase Price had constituted the Principal Amount on the date of this Note. The Principal Amount shall also be increased for any acquisition costs paid to parties other than BTR that are capitalized by Payee for federal income tax purposes into the purchase price of the capital stock of Amatek. 2. Payment. (a) Interest shall accrue on the Principal Amount from the date hereof. For each Interest Period (as defined in that certain Credit Agreement, dated March 25, 1998, by and among Payee, NationsBank of Texas, N.A., NationsBanc Montgomery Securities LLC, Swiss Bank Corporation and the several Lenders named therein, or any commercial credit agreement entered into by Payee in replacement, refinancing or substitution thereof (as amended, supplemented, restated, replaced or substituted, the "Credit Agreement"), or as its equivalent period is defined in any amended, supplemented, restated, replaced or substituted Credit Agreement), interest shall accrue at a per annum rate of two percent over the highest applicable interest rate being paid at any time during the Interest Period by Payee to (i) its principal commercial lenders pursuant to the Credit Agreement or (ii) the holders of any senior or subordinated notes of the Payee, if any, issued by Payee from time to time for money borrowed. Accrued interest shall be due and payable by the 2 Company to Payee on the last day of each Interest Period until the outstanding principal sum of this Note is paid in full. If no commercial credit facility or indebtedness for money borrowed is outstanding, interest shall accrue at a rate of ten percent (10%) per annum. (b) The Principal Amount is due and payable, in one or more installments, on demand on such dates and in such amounts as specified by Payee, together with the accrued interest, if any, specified in such demand; provided, however, that in no event shall the date on which a payment is due be earlier than ten (10) days from the date a demand is made; provided further that if Payee is not the holder of this Note (after the negotiation of this Note to a holder in due course) the Principal Amount is payable on demand. If no demand is earlier made, the entire outstanding Principal Amount, plus any accrued but unpaid interest thereon, shall be due and payable in full on May 5, 2018. (c) Payments pursuant to the terms of this Note shall be credited first to the payment of all costs and expenses of collection of this Note incurred by the holder of this Note, second to accrued but unpaid interest to the extent thereof, and thereafter to unpaid principal. (d) Any payments made by any of the Guarantors (as defined therein) of the Credit Agreement to discharge obligations of Payee thereunder shall also be deemed to discharge the obligations of the Company under this Note in an amount not to exceed the Company's right to such funds (via distributions of partnership earnings or corporate dividend contributions) due to its direct or indirect ownership percentage in the relevant Guarantor entity. Any such deemed payments made by the Guarantors shall be applied first to the payment of all costs and expenses of collection of this Note incurred by the holder of this Note, second as a credit to accrued but unpaid interest hereunder, and thereafter to unpaid principal. 3. Prepayment. This Note may be prepaid in whole or in part at any time or from time to time at the option of the Company, without premium or penalty. 4. Default. A default shall occur hereunder if any payment under this Note is not made when due. In the event of a default, the entire principal balance and accrued but unpaid interest thereon shall, at the option of the holder of this Note, at once become due and payable without further notice. 5. Attorneys' Fees. If this Note is placed in the hands of an attorney for collection pursuant to a suit or legal proceedings or through bankruptcy proceedings, the Company agrees to pay in addition to all sums then due hereunder, including principal and interest, and all expenses of collection, including reasonable attorneys' fees. 6. Waiver. To the extent permitted by applicable law, the Company hereby waives presentment and demand for payment, protest, and notice of protest, notice of intention to accelerate, notice of acceleration, dishonor and nonpayment. 2 3 7. Interest on Past Due Amounts. All past due principal and interest shall bear interest at the highest rate permitted by applicable law. 8. Usury Savings Clause. Notwithstanding any provisions to the contrary in this Note, or in any other documents securing payment hereof or otherwise relating hereto, in no event shall this Note require the payment or permit the collection of interest, as defined under the applicable usury laws, in excess of the maximum amount permitted by such laws. If any such excess interest is contracted for, charged, taken, reserved or received under this Note or under the terms of any other documents securing payment hereof or otherwise relating hereto, or in the event applicable law shall be judicially interpreted so as to render usurious any amount called for under this Note or under the terms of any other documents relating hereto, or in the event the maturity of the indebtedness evidenced by the Note is accelerated in whole or in part, or in the event that all or part of the principal or interest of the Note shall be prepaid, so that under any such circumstances the amount of interest contracted for, charged, taken, reserved or received under this Note or any other documents securing payment hereof or otherwise relating hereto, on the amount of principal actually outstanding from time to time under the Note shall exceed the maximum amount of interest permitted by applicable usury laws, then in any such event: (a) the provisions of this paragraph shall govern and control, (b) to the extent permissible under applicable laws, the excess amount of interest which may have been charged, taken, reserved, received or collected shall be applied (i) as a credit against the then unpaid principal amount on the Note or (ii) refunded to the person paying the same, at the holder's option, (c) the effective rate of interest shall be automatically reduced to the maximum lawful rate reserved or received from the party obligated thereon under applicable laws as now or hereafter construed by the courts having jurisdiction thereof, and (d) the provisions of this Note shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of executing any new document, so as to comply with the applicable law, but also so as to permit the recovery of the fullest amount otherwise called for hereunder. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged, taken, reserved or received under this Note which are made for the purpose of determining whether such rate exceeds the maximum lawful rate of interest, shall be made, to the extent permitted by applicable usury laws, by amortizing, prorating, allocating and spreading during the period of the full term of the Note, all interest at any time contracted for, charged, taken, reserved or received from the party obligated thereon or otherwise by the holder or holders thereof in connection with the Note so that the rate or amount of interest on account of such indebtedness does not exceed the usury ceiling from time to time in effect and applicable to such debt. 9. Governing Law. This Note shall be governed by, construed and enforced in accordance with, the laws of the State of Texas and applicable laws of the United States of America. 10. Miscellaneous. All references to the Company herein shall include its successors and assigns, and all covenants, stipulations, promises and agreements contained herein by or on behalf of the Company shall be binding upon its successors and assigns, whether so 3 4 expressed or not and shall inure to the benefit of and be enforceable by the successors and assigns of any other holder hereof. 11. Security. This Note is an unsecured obligation of the Company. 12. Invalid Provisions. Any provision in this Note held to be illegal, invalid or unenforceable is fully severable; this Note shall be construed and enforced as if that provision had never been included; and the remaining provisions shall remain in full force and effect and shall not be affected by the severed provision. The Company agrees to negotiate with the holder hereof, in good faith, the terms of a replacement provision as similar to the severed provision as may be possible and be legal, valid and enforceable. However, if the provision held to be illegal, invalid or unenforceable is a material part of this Note, such invalid, illegal or unenforceable provision shall be, to the extent permitted by applicable law, replaced by a clause or provision judicially construed and interpreted to be as similar in substance and content to the original terms of such illegal, invalid or unenforceable clause or provision as the context thereof would reasonably allow, so that such clause or provision would thereafter be legal, valid and enforceable. 13. Course of Dealing. The acceptance by Payee or any subsequent holder of this Note of any partial payment on the Note shall not be deemed to be a waiver of any default then existing. No waiver by Payee or any subsequent holder of this Note of any default shall be deemed to be a waiver of any other then-existing or subsequent default. No delay or omission by Payee or any subsequent holder of this Note in exercising any right, remedy, power, privilege or benefit hereunder will impair that right, remedy, power, privilege or benefit or be construed as a waiver thereof or any acquiescence therein, nor will any single or partial exercise of any right, remedy, power, privilege or benefit preclude other or further exercise thereof or the exercise of any other right, remedy, power, privilege or benefit under this Note or otherwise. 14. Venue; Service of Process; Jury Trial. THE COMPANY, ITS SUCCESSORS AND ASSIGNS (a) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS NOTE BROUGHT IN DISTRICT COURTS OF DALLAS OR HARRIS COUNTY, TEXAS, OR IN THE U.S. DISTRICT COURT FOR THE NORTHERN OR SOUTHERN DISTRICT OF TEXAS, DALLAS OR HOUSTON DIVISION, (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY OF THE 4 5 LEGAL PROCESS AT ITS PRINCIPAL EXECUTIVE OFFICE, (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN CONNECTION WITH THIS NOTE MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE. The scope of each of the foregoing waivers is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. The Company acknowledges that these waivers are a material inducement to Payee's agreement to engage in the transaction contemplated hereby, and that Payee and each subsequent holder of this Note will continue to rely on each of these waivers. The Company further warrants and represents that it has reviewed these waivers with its legal counsel, and that it knowingly and voluntarily agrees to each waiver following consultation with legal counsel. THE WAIVERS IN THIS SECTION 14 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO THIS NOTE. In the event of Litigation, this Note may be filed as a written consent to a trial by the court. 15. FINAL AGREEMENT. THIS NOTE (AS MODIFIED IN WRITING FROM TIME TO TIME) REPRESENTS THE FINAL AGREEMENT AMONG THE COMPANY AND PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IN WITNESS WHEREOF, the Company has caused this Note to be executed in its corporate name and in its behalf. NCI HOLDING CORP. By: /s/ Robert J. Medlock ------------------------------------- Robert J. Medlock, Vice President 5 EX-4.27 27 NOTE PLEDGE AGREEMENT-NATIONSBANK 1 EXHIBIT 4.27 NOTE PLEDGE AGREEMENT THIS NOTE PLEDGE AGREEMENT (as hereinafter amended from time to time, this "PLEDGE AGREEMENT") is executed as of May 5, 1998, by NCI Building Systems, Inc., a Delaware corporation ("PLEDGOR") for the benefit of NationsBank, N.A. (successor by merger with NationsBank of Texas, N.A., "AGENT"), as Administrative Agent for itself and for the Lenders (collectively, "LENDERS") now or hereafter party to the Credit Agreement (as defined below). RECITALS A. Pledgor (as Borrower therein), Agent and Lenders and other parties named therein have executed a Credit Agreement dated March 25, 1998 (as amended by that certain First Amendment dated as of May 1, 1998 and by that certain Second Amendment of even date herewith, and as hereinafter amended, supplemented or restated, the "CREDIT AGREEMENT"), together with certain other Loan Documents. B. Pledgor is the sole owner and holder of that certain Pledged Note (as hereinafter defined). C. It is expressly understood among Pledgor, Agent and Lenders that the execution and delivery of this Pledge Agreement is a condition precedent to Lenders' obligations to extend Loans under the Credit Agreement and Agent's obligation to issue LCs under the Credit Agreement. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. UNLESS OTHERWISE DEFINED IN THIS PLEDGE AGREEMENT, ANY CAPITALIZED TERM USED IN THIS PLEDGE AGREEMENT HAS THE MEANING GIVEN THAT TERM IN THE CREDIT AGREEMENT OR IN THE UCC. If the definition given a term in the Credit Agreement conflicts with the definition given that term in the UCC, the Credit Agreement definition shall control to the extent allowed by Law. If the definition given a term in Chapter 9 of the UCC conflicts with the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Pledge Agreement: "COLLATERAL" means Pledgor's right, title and interest in and to the Pledged Note, including all present and future contract rights, chattel paper, documents, instruments, cash and noncash proceeds, substitutes and replacements for, and other rights arising from or by virtue of, or collections with respect to, or claims against any other Person with respect to the Pledged Note. "CREDIT AGREEMENT" is defined in the Recitals. "DEFAULT" means a "Default" under and as defined in the Credit Agreement. "OBLIGATION" means the "Obligation" under and as defined in the Credit Agreement. "PLEDGE AGREEMENT" means this Pledge Agreement together with all exhibits attached to this Pledge Agreement, and all amendments and modifications to this Agreement and the exhibits. 2 "PLEDGED NOTE" means that certain promissory note of even date herewith in the principal amount of US$550,000,000, a copy of which is attached as EXHIBIT "A", made by NCI Holding Corp., a Delaware corporation and a wholly owned subsidiary of Pledgor, in favor of Pledgor. "PLEDGOR" includes, without limitation, Pledgor as a debtor-in-possession, and any receiver, trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Pledgor or all or substantially all of Pledgor's assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, or similar Law from time to time in effect affecting the rights of creditors generally. "SECURITY INTEREST" means the security interests granted and the transfers, pledges and collateral assignments made under SECTION 3 of this Pledge Agreement. "UCC" means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in Texas, as amended from time to time, and (b) with respect to rights in states other than Texas, the Uniform Commercial Code as enacted in the applicable state, as amended from time to time. 2. Credit Agreement. This Pledge Agreement is being executed and delivered pursuant to the terms and conditions of the Credit Agreement. Each Security Interest is a "Lien" referred to in the Credit Agreement. 3. Security Interest. In order to secure the full and complete payment and performance of the Obligation when due, Pledgor hereby grants to Agent a security interest in, and pledges and assigns the Collateral to Agent for the ratable benefit of the Lenders. Such security interest is granted, and such pledge and assignment are made, as security only and shall not subject Lenders to, or transfer or in any way affect or modify, any obligation of Pledgor with respect to any of the Collateral or any transaction involving or giving rise thereto. 4. No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligation when due, and is given as security only. Agent does not assume and shall not be liable for any of Pledgor's liabilities, duties, or obligations under or in connection with the Collateral. Agent's acceptance of this Pledge Agreement, or its taking any action in carrying out this Pledge Agreement, does not constitute Agent's approval of the Collateral or Agent's assumption of any obligation under or in connection with the Collateral. This Pledge Agreement does not affect or modify Pledgor's obligations with respect to the Collateral. 5. Fraudulent Conveyance. Notwithstanding anything contained in this Pledge Agreement to the contrary, Pledgor agrees that if, but for the application of this SECTION 5, the Obligation or any Security Interest would constitute a preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C. Section 548 (or any successor section) or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer Law or similar Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the Obligation and each affected Security Interest will be enforceable against Pledgor to the maximum extent possible without causing the Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this SECTION 5. 2 3 6. Representations and Warranties. Pledgor hereby confirms and restates each of the representations and warranties in the Credit Agreement and further represents and warrants to Agent and Lenders as follows: (a) Pledgor is the legal owner and holder of the Collateral with full right, power and authority to assign the Collateral to Agent; (b) the unpaid principal balance of the Pledged Note is US$550,000,000; (c) no default exists under the Pledged Note; (d) Pledgor has not previously assigned the Pledged Note and the Collateral is free and clear of all Liens: (e) there are no modifications or amendments to the Pledged Note; (f) the maker of the Pledged Note does not have any defenses, offsets or counterclaims in respect of the Collateral; and (g) the pledge of the Collateral to Agent will not constitute a default under the Pledged Note. 7. Covenants. Pledgor shall: (a) Promptly notify Agent of any change in any fact or circumstances represented or warranted by Pledgor with respect to any of the Collateral. (b) Promptly notify Agent of any default under the Pledged Note. (c) Promptly notify Agent of any claim, action or proceeding affecting the security interest granted and the pledge and assignment made under SECTION 3 hereof or title to all or any of the Collateral and, at the request of Lender, appear in and defend, at Pledgor's expense, any such action or proceeding. (d) Except as permitted under the Credit Agreement, not sell, assign or otherwise dispose of any Collateral. (e) Not create, incur or suffer to exist any other Lien upon any of the Collateral. (f) At Pledgor's expense and Agent's request, file or cause to be filed such applications and take such other actions as Agent may request to obtain the consent or approval of any Tribunal to Agent's rights hereunder, including, without limitation, the right to sell all the Collateral upon a Default without additional consent or approval from such Tribunal (and, because Pledgor agrees that Agent's remedies at law for failure of Pledgor to comply with this provision would be inadequate and that such failure would not be adequately compensable in damages, Pledgor agrees that its covenants in this provision may be specifically enforced). 3 4 (g) From time to time promptly execute and deliver to Agent all such other pledges, assignments, certificates, supplemental documents, and financing statements (if appropriate), and do all other acts or things as Agent may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest. 8. Default; Remedies. Should a Default occur and be continuing, Agent may, at its election, exercise any and all rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Loan Documents, at law, in equity, or otherwise, including, without limitation (i) collecting amounts due under the Collateral from the maker until the Obligation is paid in full; and (ii) applying by appropriate judicial proceedings for appointment of a receiver for all or part of the Collateral (and Pledgor hereby consents to any such appointment). (a) Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Pledgor and to any other person entitled to notice under the UCC; provided that if any of the Collateral threatens to decline speedily in value or is of the type customarily sold on a recognized market, Agent may sell or otherwise dispose of the Collateral without notification, advertisement, or other notice of any kind, and no sale so made in good faith by Lender shall be deemed not to be "commercially reasonable" because so made. It is agreed that notice sent or given not less than five Business Days prior to the taking of the action to which the notice relates is reasonable for the purposes of this subparagraph. (b) Application of Proceeds. Agent shall apply the proceeds of any sale or other disposition of the Collateral under this SECTION 8 in the following order: First, to the payment of all its expenses incurred in retaking, holding and preparing any of the Collateral for sale(s) or other disposition, in arranging for such sale(s) or other disposition, and in actually selling or disposing of the same (all of which are part of the Obligation); second, toward repayment of amounts expended by Agent under this SECTION 8; third, toward payment of the balance of the Obligation in accordance with the Credit Agreement. Any surplus remaining shall be delivered to Pledgor or as a court of competent jurisdiction may direct. If the proceeds are insufficient to pay the Obligation in full, Pledgor shall remain liable for any deficiency. 9. Other Rights of Agent and Lenders. (a) Performance. In the event Pledgor shall fail to perform any of its obligations hereunder with respect to the Collateral, then Agent may, at its option, but without being required to do so, take such action which Pledgor is required, but has failed or refused, to take. Any sum which may be expended or paid by Agent under this subparagraph (including, without limitation, court costs and attorneys' fees) shall bear interest from the dates of expenditure or payment at the Maximum Rate (as defined in the Credit Agreement) until paid and, together with such interest, shall be payable by Pledgor upon demand and shall be part of the Obligation. (b) Collection. Upon notice from Agent, the maker or each person or entity obligated with respect to any of the Collateral, whether as a maker, co-maker, endorser, accommodation party or otherwise (an "OBLIGOR") is hereby authorized and directed by Pledgor to make payments on any of the Collateral (including, without limitation, principal and interest payments( directly to Agent, regardless of whether Pledgor was previously making collections thereon. Subject to SECTION 9 (C) hereof, until such notice is given, Pledgor is authorized to retain and expend all payments made on Collateral. Agent shall have 4 5 the right in its own name or in the name of Pledgor to compromise or extend time of payment with respect to all or any portion of the Collateral for such amounts and upon such terms as Agent may determine; to demand, collect, receive, receipt for, sue for, compound and give acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds of any Collateral; to endorse the name of Pledgor substantially in the form of EXHIBIT "B" hereto on the Pledged Note, on any other notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral that may come into the possession of Agent; to send requests for verification of obligations to any Obligor; and to do all other acts and things necessary to carry out the intent of this agreement. If any Obligor fails or refuses to make payment on any Collateral when due, Agent is authorized, in its sole discretion, either in its own name or in the name of Pledgor, to take such action as Agent shall deem appropriate for the collection of any such amounts. Regardless of any other provision hereof, however, Agent shall never be liable for its failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall it be under any duty whatever to anyone except Pledgor to account for funds that it shall actually receive hereunder. Without limiting the generality of the foregoing, Agent shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to any Collateral, or for informing Pledgor with respect to any of such matters (irrespective of whether Agent actually has, or may be deemed to have, knowledge thereof). The receipt of Agent to any Obligor shall be a release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lender. The rights granted Agent under this subparagraph may be exercised at any time, whether or not a Default has occurred and is continuing. (c) Certain Proceeds. Any cash proceeds of Collateral which come into the possession of Agent may, at Agent's option, be applied in whole or in part to the Obligation (to the extent then due), be released in whole or in part to or on the written instructions of Pledgor for any general or specific purpose, or be retained in whole or in part by Lender as additional Collateral. 10. Miscellaneous. (a) Reference to Miscellaneous Provisions. This Pledge Agreement is one of the "Loan Documents" referred to in the Credit Agreement, and therefore, this Pledge Agreement is subject to the applicable provisions of SECTION 14 of the Credit Agreement, all of which are incorporated in this Pledge Agreement by reference the same as if set forth in this Pledge Agreement verbatim. (b) Term. Upon full and final payment of the Obligation and final termination of the Lenders' commitment to lend under the Credit Agreement without Agent having exercised its rights under this Pledge Agreement, this Pledge Agreement shall terminate, provided that no Obligor on any of the Collateral shall be obligated to inquire as to the termination of this Pledge Agreement, but shall be fully protected in making payment directly to Agent, which payment shall be promptly paid over to Pledgor after termination of this Pledge Agreement. (c) Notice. Any notice or communication required or permitted under this Pledge Agreement must be given as prescribed in the Credit Agreement. (d) Governing Law. THIS PLEDGE AGREEMENT SHALL BE CONSTRUED- - AND ITS PERFORMANCE ENFORCED--UNDER TEXAS LAW. 5 6 (e) Credit Agreement. In the event of any conflict or inconsistency between the terms hereof and the Credit Agreement, the terms of the Credit Agreement shall be controlling. EXECUTED as of the date set forth in the preamble. NCI BUILDING SYSTEMS, INC., as Pledgor By: /s/ Robert J. Medlock ----------------------------------------- Robert J. Medlock Vice President and Chief Financial Officer NATIONSBANK, N.A. (SUCCESSOR BY MERGER WITH NATIONSBANK OF TEXAS, N.A), as Administrative Agent and a Lender By: /s/ Richard L. Nichols, Jr. ----------------------------------------- Richard L. Nichols, Jr. Vice President 6 EX-10.3 28 AMENDED AND RESTATED BONUS PROGRAM 1 EXHIBIT 10.3 NCI BUILDING SYSTEMS, INC. BONUS PROGRAM [AMENDED AND RESTATED AS OF DECEMBER 11, 1998] In 1989, the Board of Directors of NCI Building Systems, Inc. (then named National Components Incorporated), a Delaware corporation (the "Company"), adopted the Bonus Program (the "Program"). The Company subsequently amended the Program from time to time. On December 11, 1998, the Board of Directors of the Company amended and restated the Program in its entirety to, among other things, provide for a new bonus performance standard for persons eligible to participate in the Program and set forth certain adjustments to return on assets and earnings per share growth figures in calculating bonus levels under the Program. The Program, as so amended and restated on December 11, 1998, is as follows: 1. Purpose. The purpose of the Bonus Program (the "Program") is: (A) To provide exceptional cash rewards earned by exceptional performance such that the aggregate bonuses paid to all of the Company's employees in a fiscal year, including those awarded under the Program, approximate 10% of the pre-tax, pre-bonus profits of the Company for that fiscal year; and (B) To focus management attention on key objectives of the Company by basing their bonus on return on assets and growth in earnings per share. 2. Administration. The Program will be administered and interpreted by the Compensation Committee of the Board of Directors of the Company (the "Committee"). 3. Bonus Performance Standards. (A) Combination of ROA and EPS. Level 1 and Level 2 participants will be eligible for the award of an annual cash bonus equal to a percentage of their respective base salaries, based upon the Company's achievement of both a specified return on assets ("ROA") and a specified increase in earnings per share ("EPS Growth") for the fiscal year. No cash bonuses will be awarded to these participants if (1) both ROA and EPS Growth are less than 20%, or (2) ROA is less than 10%. Subject to the minimum requirements for ROA and EPS Growth, Level 2 participants will be eligible for a cash bonus award based upon the attached grid of ROA and EPS Growth achievement, in which the bonus eligible for award is the percentage of base salary indicated 2 at each intersecting grid mark for ROA and EPS Growth (e.g., ROA of 30% and EPS Growth of 20% results in a 50% cash bonus). The maximum bonus for Level 2 participants will be 85% of base salary. Cash bonus awards for which Level 1 participants are eligible also will be based on the attached grid of ROA and EPS Growth achievement, but will be 1.5 times the percentage of base salary indicated for the Level 2 participants. The maximum bonus for Level 1 participants will be 127.5% of base salary. (B) ROA Only. Level 3 and Level 4 participants will be eligible for the award of a cash bonus equal to a percentage of their respective base salaries, based upon the Company's achievement of a specified ROA for the fiscal year. No cash bonuses will be awarded to these participants if ROA is less than 20%. If ROA is 20% or more, Level 3 participants will be eligible for the award of a cash bonus equal to 25% of base salary and an additional 1.25% of base salary for each 1% increment in ROA over 20%. The maximum bonus for Level 3 participants will be 50% of base salary. If ROA is 20% or more, Level 4 participants will be eligible for the award of a cash bonus equal to 12.5% of base salary and an additional 0.625% of base salary for each 1% increment in ROA over 20%. The maximum bonus for Level 4 participants will be 25% of base salary. 4. Participants and Eligibility. (A) Whether or not to award a cash bonus to any particular participant is within the absolute discretion of the Company and the Committee. No bonus award to a Level 1, 2 or 3 participant may be paid unless and until and approved by the Committee, and no bonus award may be paid to a Level 4 participant unless and until the Committee has approved the aggregate employee bonus pool for that fiscal year. (B) A participant shall not be eligible for and shall not be entitled to receive a bonus for any fiscal year's performance unless the participant is employed by the Company or one of its subsidiaries both on the last day of the fiscal year and on the date of approval by the Committee of the bonus (if a Level 1, 2 or 3 participant) or the aggregate employee bonus pool for that year (if a Level 4 participant). (C) The Committee, in its sole discretion, shall determine the Level 1, Level 2 and Level 3 participants for any given fiscal year. Designation of a manager as a participant for any -2- 3 fiscal year is in the absolute discretion of the Company and the Committee and does not entitle that participant to remain as a participant in any subsequent year. (D) Addition, removal or movement of participants into, from or between any of Levels 1, 2 or 3 must be submitted to and approved by the Committee. The Level 1 managers, with the approval of the Chairman of the Board and President, shall have discretion to add or remove participants at Level 4 without further action of the Committee, provided the aggregate bonuses paid to all employees do not exceed the amount of the employee bonus pool for that year approved by the Committee. 5. ROA and EPS Calculation. The ROA and EPS for each fiscal year (including 1998) shall be calculated using the asset and pre-tax income amounts set forth on the audited annual financial statements of the Company for that fiscal year and, when appropriate to the calculations, the internally generated financial statements for each month and quarter of the fiscal year, prepared in accordance with generally accepted accounting principles, with the following adjustments: (A) For all fiscal years, the following shall be excluded from the calculation of assets: (i) cash; (ii) credit balances on accounts receivable; (iii) deferred income taxes; (iv) deferred financing costs; and (v) goodwill resulting from the acquisition of Amatek Holdings, Inc. and its subsidiaries, including Metal Building Components, Inc. ("MBCI Goodwill"). (B) For fiscal years 1998 and 1999 only, the unamortized investment in Midwest Metal Coatings, LLC shall be excluded from the calculation of assets. (C) For all fiscal years, interest expense shall be added back to pre-tax income and income from investment of cash, if any, shall be deducted. (D) For fiscal years 1998 and 1999 only, amortization and depreciation of the MBCI Goodwill and of the investment in Midwest Metal Coatings, LLC shall be added back to pre-tax income and the income or loss of Midwest Metal Coatings, LLC shall be excluded. If the Company conducts a public offering of equity securities, the Committee will evaluate and determine at that time whether any adjustments should be made to the calculation of EPS Growth. 6. Interpretation. The Committee shall interpret the Program and shall prescribe such rules and regulations in connection with the operation of the Program as it determines to be advisable. The Committee may rescind and amend its rules, regulations and interpretations. 7. Amendment or Termination. The Program may be terminated at any time or amended from time to time by the Committee without the consent or approval of the participants in the Program. -3- 4 8. Effect of Program. Neither the adoption of the Program nor any action of the Committee, including action taken at any time to terminate or amend the Program, shall be deemed to give any officer, manager, employee, participant or other person any right to receive a bonus or any other rights, whether as a third party beneficiary or otherwise. -4- EX-10.4 29 AMENDED/RESTATED NONQUALIFIED STOCK OPTION PLAN 1 EXHIBIT 10.4 NCI BUILDING SYSTEMS, INC. NONQUALIFIED STOCK OPTION PLAN [AMENDED AND RESTATED AS OF DECEMBER 12, 1996] On April 11, 1989, the Board of Directors of NCI Building Systems, Inc. (then named National Components Incorporated), a Delaware corporation (the "Company"). adopted the Nonqualified Stock Option Plan (the "Plan"). The Company subsequently has amended the Plan from time to time. On December 12, 1996, the Board of Directors of the Company amended and restated the Plan in its entirety to, among other things, increase the number of shares of Common Stock that may be made the subject of options under the Plan, set forth the terms for the automatic grant of options to Non- Employee Directors, extend the term of the Plan and provide that stockholder approval of any amendments to the Plan shall not be required except for an amendment that would increase the number of securities that may be issued under the Plan. The Plan, as so amended and restated on December 12, 1996, is as follows: 1. PURPOSE. The purpose of the Plan is to provide certain key employees and consultants (i.e., persons who provide management or consulting services) of the Company and the Non-Employee Directors with a proprietary interest in the Company through the granting of options which will (a) increase the interest of the key employees, consultants, and Non-Employee Directors in the Company's welfare; (b) furnish an incentive to the key employees, consultants, and Non-Employee Directors to continue their services for the Company; and (c) provide a means through which the Company may attract able persons to enter its employ or to provide management and consulting services to the Company or to serve as Non- Employee Directors. 2. ADMINISTRATION. The Plan will be administered and interpreted by the Board. The Board may delegate to any Committee or Committees of the Board the power and authority to grant options to any or all classes of key employees of the Company and to administer and interpret the Plan as its relates to such employees and any options granted to them. 3. PARTICIPANTS. The Board may from time to time select the particular employees of and consultants to the Company and its Subsidiaries to whom options are to be granted. Upon each such grant, the selected employee or consultant will become a participant in the Plan. Each Non-Employee Director of the Company shall be granted an option under the Plan from time to time as provided herein and, upon the initial grant of an option, will become a participant in the Plan. 4. SHARES SUBJECT TO PLAN. The Board may not grant options under the Plan for more than 2,050,000 shares of Common Stock of the Company, but this number may be adjusted to 2 reflect, if deemed appropriate by the Board, any stock dividend, stock split, share combination, recapitalization or the like, of or by the Company. Shares to be optioned and sold may be made available from either authorized but unissued Common Stock or Common Stock held by the Company in its treasury. Shares that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under the Plan may be reoffered under the Plan. 5. GRANT OF OPTIONS; ALLOTMENT OF SHARES. (a) The Board shall determine the number of shares of Common Stock to be offered from time to time by grant of options to key employees of or consultants to the Company or its Subsidiaries. The grant of an option to a key employee or consultant shall not be deemed either to entitle the employee or consultant to, or to disqualify the employee or consultant from, participation in any other grant of options under the Plan. The Board may grant options to key employees or consultants after its amendment and restatement on December 12, 1996 and prior to stockholder approval of the Plan. If for any reason the stockholders of the Company do not approve the restated Plan at their 1997 annual meeting (or any adjournment thereof), all options granted to consultants, and all options granted to employees under the restated Plan at a time when the aggregate number of shares subject to then outstanding options exceeded the aggregate number of shares then available for issuance pursuant to the Plan, will be terminated and of no effect and all other options granted to employees during such period shall remain outstanding and shall be governed by the Plan as it existed prior to its amendment and restatement on December 12, 1996. No option that is so subject to termination may be exercised in whole or in part prior to such stockholder approval. (b) On the date of his or her initial election or appointment to the Board, a Non- Employee Director of the Company shall be granted an option to purchase 5,000 shares of Common Stock of the Company. On the date of each annual stockholders meeting of the Company, each Non- Employee Director of the Company shall be granted an option to purchase 1,000 shares of Common Stock of the Company unless (i) the initial election of such Non-Employee Director is at such annual stockholders meeting or (ii) the term of such Non-Employee Director ends on such date and he or she is not elected to an additional term at such annual stockholders meeting. No option may be granted under this subsection prior to the date of the 1997 annual meeting of stockholders of the Company (or any adjournment thereof). 6. OPTION AGREEMENTS. Options granted pursuant to the Plan shall be evidenced by stock option agreements containing such terms and provisions as are approved by the Board but not inconsistent with the Plan. The Company shall execute stock option agreements upon instructions from the Board. Options granted under the Plan prior to its amendment and restatement on December 12, 1996 shall continue in effect in accordance with the terms of their original grant and the option agreements executed in connection therewith and, if the restated Plan is approved by stockholders of the Company at their 1997 annual meeting, shall be entitled to the benefit of any amendments to the Plan so approved that favorably modify the rights of the participants. -2- 3 7. OPTION PRICE. (a) With respect to options granted to key employees or consultants, the option price shall be not less than 100% of the fair market value per share of the Common Stock on the date of grant. The Board shall determine the fair market value of the Common Stock, and shall set forth the determination in its minutes, using any reasonable valuation method. Unless the Board determines that another valuation method should be used for a particular grant, the fair market value of the Common Stock shall be deemed to be the last sale price of the Common Stock of the Company on the major securities exchange or market on which it is traded on the last trading day immediately preceding the date of grant. (b) With respect to options granted to Non-Employee Directors, the option price shall be equal to 100% of the fair market value per share of the Common Stock on the date of grant, which for these purposes shall be deemed to be the last sale price of the Common Stock of the Company on the major securities exchange or market on which it is traded on the last trading day immediately preceding the date of grant. 8. OPTION PERIOD; VESTING. (a) The Option Period for options granted to key employees and consultants will begin on the date the option is granted, which will be the date the Board authorizes the option unless the Board specifies a later date. No option may terminate later than ten years from the date the option is granted. The Board or the Committee may provide for the options to vest and become exercisable in installments and upon such other terms, conditions and restrictions as it may determine. The Board may provide for earlier termination of the option and the Option Period in the case of termination of the employment or consulting relationship, or for any other reason. If the employee or consultant dies or becomes permanently disabled (as determined in the sole discretion of the Board or Committee) while serving in the employment of or as a consultant to the Company or retires from such employment or consulting relationship at or after Normal Retirement Age, or if there occurs a Change in Control, then 100% of the shares subject to his or her options will become vested and will be available thereafter for purchase during the Option Period. (b) The Option Period for options granted to a Non-Employee Director will begin on the date the option is granted and will terminate on the earlier of (i) the tenth anniversary of the date of grant; (ii) the 30th day after the Non-Employee Director is no longer a director of the Company for a reason other than death, permanent disability (as determined in the sole discretion of the Board or Committee) or retirement at or after the Normal Retirement Age; or (iii) one year after death or permanent disability (as determined in the sole discretion of the Board or Committee) of the Non- Employee Director or after his or her retirement as a director of the Company at or after the Normal Retirement Age. On the anniversary of the date of grant of each such option, 25% of the shares subject to the option will become vested and will be available thereafter for purchase during the Option Period, provided that from the date of grant through such vesting date the Non-Employee Director had served continuously as a director of the Company. If the Non-Employee Director dies or becomes permanently disabled (as determined in the sole discretion of the Board or Committee) while serving as a director of the Company or retires as a director of the Company at or after Normal Retirement Age, or if there -3- 4 occurs a Change in Control, then 100% of the shares subject to the option will become vested and will be available thereafter for purchase during the Option Period. 9. RIGHTS OF ESTATE OR BENEFICIARIES IN EVENT OF DEATH. If a participant dies prior to termination of his or her right to exercise an option in accordance with the provisions of the Plan or his or her stock option agreement without having totally exercised the option, the option may be exercised during the remainder of the Option Period by the participant's estate or by the person who acquired the right to exercise the option by bequest or inheritance or by reason of the death of the participant, provided the option is exercised prior to the date of expiration of the Option Period or one year from the date of the participant's death, whichever first occurs. 10. PAYMENT. Full payment for shares of Common Stock purchased upon exercising an option shall be made in cash or by check at the time of exercise, or on such other terms as are set forth in the applicable option agreement. No shares of Common Stock may be issued until full payment of the purchase price therefor has been made, and a participant will have none of the rights of a stockholder until shares are issued to him. 11. EXERCISE OF OPTION. Unless otherwise provided in this Plan, all options granted under the Plan may be exercised during the Option Period at such times, in such amounts, in accordance with such terms and subject to such restrictions as are set forth in the applicable stock option agreements. In no event may an option be exercised or shares be issued pursuant to an option if any requisite action, approval or consent of any governmental authority of any kind having jurisdiction over the exercise of options shall not have been taken or secured. 12. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of Common Stock covered by each outstanding option granted under the Plan (including those held by Non-Employee Directors) and the option price may be adjusted to reflect, as deemed appropriate by the Board, any stock dividend, stock split, share combination, exchange of shares, recapitalization, merger, consolidation, separation, reorganization, liquidation or the like, of or by the Company. The number of shares to be made the subject of an initial grant and annual grants to Non-Employee Directors, as set forth in Section 5 hereof, shall not be adjusted for any stock dividend or stock split that may occur prior to the grant, but shall be adjusted to reflect any share combination, exchange of shares, recapitalization, merger, consolidation, separation, reorganization, liquidation or the like of or by the Company that occurs prior to the grant, in the same manner as outstanding options held by all participants are adjusted by the Board. If a Change of Control shall occur, the holder of an option will be entitled to receive, for the aggregate exercise price payable upon exercise of his or her option and in lieu of the Common Stock or other consideration otherwise issuable to him or her upon exercise of the option, the same kind and amount of securities or assets as may be distributable, in or pursuant to the transaction or transactions resulting in the Change of Control, to a holder of the same number of outstanding shares of Common Stock of the Company as the number of shares of Common Stock of the Company that are subject to the option immediately prior to such transaction or transactions. 13. NON-ASSIGNABILITY. Options may not be transferred other than by will or by the laws of descent and distribution. During a participant's lifetime, options granted to a participant may be exercised only by the participant. -4- 5 14. INTERPRETATION. The Board shall interpret the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Board may rescind and amend its rules and regulations. 15. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued by the Board without the approval of the stockholders of the Company, except that any amendment that would materially increase the number of securities that may be issued under the Plan must be approved by the stockholders of the Company. The Plan may not be amended more than once in any six-month period to modify any of the terms or provisions of the Plan relating to options granted or that may be granted to Non-Employee Directors, unless the amendment is required to comply with changes in tax laws and regulations or with laws and regulations governing employee benefit plans and programs. 16. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the Board shall be deemed to give any officer, employee, or consultant or director any right to be granted an option to purchase Common Stock of the Company or any other rights except as may be evidenced by the stock option agreement, or any amendment thereto, duly authorized by the Board and executed on behalf of the Company and then only to the extent and on the terms and conditions expressly set forth therein and in the Plan. 17. TERM. Unless sooner terminated by action of the Board, this Plan will terminate on April 10, 2009. The Board may not grant options under the Plan after that date, but options granted before that date will continue to be effective in accordance with their terms (subject to the condition of obtaining stockholder approval with respect to certain options as set forth in Section 5(a)). 18. DEFINITIONS. For the purpose of this Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: (a) "Board" means the Board of Directors of the Company. (b) "Change of Control" means any sale of substantially all of the assets of the Company, or any merger, consolidation or corporate reorganization of the Company, or any tender offer or exchange offer for stock of the Company, as a result of which the holders of Common Stock of the Company immediately prior to the consummation of such transactions or series of transactions own or could own capital stock representing less than 50.1% of the equity or less than 50.1% of the voting power of all classes of stock of the surviving, resulting or purchasing corporation that is outstanding immediately following the consummation thereof. (c) "Committee" means any committee of the Board to which it has delegated the power and authority to grant options to any or all classes of key employees of the Company and to administer and interpret the Plan as its relates to such employees or consultants and any options granted to them. (d) "Common Stock" means the Company's Common Stock, $.01 par value, which the Company is currently authorized to issue or may in the future be authorized to issue (as long as the common stock varies from that currently authorized, if at all, only in amount of par value). -5- 6 (e) "Non-Employee Director" means an independent director who: (1) Is not currently an officer of the Company or a Subsidiary, or otherwise currently employed by the Company or a Subsidiary; (2) Does not receive compensation, either directly or indirectly, from the Company or a Subsidiary for services rendered as a consultant or in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which the disclosure would be required under the Securities Acts; (3) Does not possess an interest in any other transaction for which disclosure would be required under the Securities Acts; and (4) Is not engaged in a business relationship for which disclosure would be required pursuant to the Securities Acts. (f) "Nonqualified Option" means an option granted under the Plan which is not intended to be an option that satisfies the requirements of Section 422 of the Internal Revenue Code of 1986, as amended. (g) "Normal Retirement Age" means the age established by the Board from time to time as the normal age for retirement of a director or employee, as applicable. In the absence of a determination by the Board, the Normal Retirement Age of Non-Employee Directors shall be deemed to be 70 years of age and, for all other participants, shall be deemed to be 65 years of age. (h) "Option Period" means the period beginning on the date of grant of an option and terminating on the last day an option may be exercised, as provided in the Plan or, if applicable, the related stock option agreement. (i) "Plan" means the NCI Building Systems, Inc. Nonqualified Stock Option Plan, as amended and restated as of December 12, 1996, as hereafter amended from time to time. (j) "Securities Acts" means the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the regulations issued thereunder. (k) "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, and "Subsidiaries" means more than one of any such corporations. -6- EX-13 30 1998 ANNUAL REPORT TO SHAREHOLDERS 1 EXHIBIT 13 [NCI LOGO] [PHOTO] 2 [VARIOUS LOGOS] BUSINESS DESCRIPTION One of the largest integrated manufacturers and marketers of metal building components and pre-engineered metal building systems in North America, NCI Building Systems offers one of the most extensive metal product lines in the building industry, under well-recognized brand names. Through internal growth, accretive acquisitions and the astute management of assets, the company has compiled a record of revenue and earnings growth well above the industry average. In 1998, NCI doubled its size by combining with Metal Building Components, Inc., establishing NCI as a leader in each of its key markets. Today, NCI is: o The largest producer and distributor of metal components for building construction -- growing at an estimated 15% annual rate. o The second largest producer of pre-engineered metal building systems. o The largest supplier of metal roofs in an estimated $20 billion roofing industry. o A leading provider of metal coating and painting services. o An industry leader in growth, profitability and innovation. o A low-cost supplier. The Company is prepared to benefit from a larger sales force and customer base, broader product lines, expanded geographic distribution, and increased manufacturing capacity. NCI's target is 15% annual revenue growth, 20% earnings growth and 30% Return on Operating Assets based on it's sound growth strategy and assuming a relatively stable industry economic outlook. NCI continues to successfully assemble the "Components of Growth." 3 [MAP] *MAJOR BUILDING PLANT +COMPONENT PLANT oCOIL COATING PLANT With the addition of 20 manufacturing facilities, NCI increased its operating space by 130% to 3.5 million square feet, and now has 38 facilities in 18 states and Mexico. Facility integration employs NCI's "hub and spoke" system of satellite manufacturing. This concept places "spoke" locations for the manufacture of secondary structural framing, covering systems, and final distribution closer to the customer, reducing transportation costs and delivery times and improving customer service. Highlights of 1998 o Increased revenues by 65.6% and EPS to $2.05 o Successfully combined with MBCI doubling our revenue base o Combined the industry's profit leaders o NCI became the #1 domestic metal construction products manufacturer o Generated ROE of 20% o Listed common stock on the NYSE under the ticker symbol `NCS' and affected a two-for-one stock split As our 1998 Annual Report theme indicates, NCI continues to assemble new "Components of Growth" for 1999 and the new century. 4 SELECTED FINANCIAL DATA
Year ended October 31, (1) -------------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- Sales ............................................ $167,767 $234,215 $332,880 $407,751 $675,331 Net income ....................................... 10,256 17,032 24,814 27,887 37,318 Net income per share - diluted ................... .77 1.26 1.51 1.64 2.05 Working capital .................................. 16,885 31,687 51,958 76,746 58,393 Total assets ..................................... 63,373 83,082 158,326 196,332 823,537 Long-term debt, noncurrent portion ............... 326 278 1,730 1,679 444,477 Shareholders' equity ............................. $ 39,682 $ 57,682 $116,175 $147,815 $223,612 -------- -------- -------- -------- -------- Average common shares, assuming dilution ......... 13,390 13,530 16,455 17,085 18,192 -------- -------- -------- -------- --------
(1) All numbers in thousands except net income per share. OPERATING POLICIES RETURN ON ASSETS Return on assets (ROA) is defined as operating income divided by average operating assets used in the business (eliminating primarily cash, goodwill, and certain other non-operating assets). NCI's management and directors are thoroughly convinced that this ratio is the best measure of operating performance. Tight control over inventory, receivables, and fixed investment is as important as, and interrelated to, control of the income statement. Return on assets is a proxy for cash flow, which can reward shareholders with undiluted growth. In fiscal year 1998, NCI earned a return on operating assets employed in the business of 31%. GROWTH The company is dedicated to increasing its market share through strong marketing and low cost, quality manufacturing. Special niches that provide unusual profit and growth opportunities are sought. Overall profit growth of at least 20% per year is an intermediate goal of the company with larger increments possible in the short-term. This growth may be internally generated or it may come from carefully selected acquisitions. DIVIDENDS The company's officers and directors are all large stock or option holders. Thus, there is much sympathy for dividends. However, it is considered appropriate, at this stage of the company's development and in view of the available returns, to invest that money in the growth of the equity of the Company and the repayment of debt as opposed to paying dividends. COMPENSATION The company believes in providing base salaries for its management on the low side of industry norms with opportunities, based on performance, to obtain very high bonuses. Specifically, return on assets is the criterion for performance measurement. Bonuses begin when the ratio of operating income divided by assets used in the business is equal to 20%. Maximum bonuses, at a very high level, can be earned when 30% returns and 20% growth in earnings per share are achieved. This measure is felt to be most important because management of both the balance sheet and the income statement are critical to long-term success, especially in a cyclical industry. CORPORATE RESPONSIBILITY The company is committed to the goal of being an exemplary corporate citizen. Toward that end, we have an intense safety program ongoing in the workplace. We also improved our broad coverage of health insurance to all employees this year. There are not only employment, but, advancement opportunities through our growth. We have proper awareness and concern for the overall environment. Finally, we employ high quality engineering professionals to ensure that our products are designed using sound engineering practices and principles. 1 5 DEAR SHAREHOLDERS Our company had an exciting and rewarding 1998, establishing new "Components of Growth" that we believe will serve as springboards for NCI's performance in the coming years. Sales and diluted earnings per share set new records at $675.3 million and $2.05, respectively. These numbers were up 66% and 25% compared to 1997. Internal sales growth was strong in our core businesses. Financial performance also was substantially enhanced by sales and earnings contribution during the last two quarters from Metal Building Components, Inc. (MBCI), which was acquired in May of 1998. Strong cash flow and balance sheet management, a trademark of the company, have enabled us to reduce acquisition debt significantly. As a result of the transaction, NCI's balance sheet became more highly leveraged than in the past with $540 million in debt. However, strong cash flow was used to reduce this amount to $474 million by October 31, 1998, net of $15 million for an additional acquisition expense. Based on the company's outlook for continued strong cash generation, we believe we can reduce debt an additional $50 million in 1999. [PHOTO] THE TRANSACTION WITH MBCI COMBINED LEADERS IN GROWTH AND PROFITABILITY. The dominant event for fiscal 1998 was the mid-year transaction with MBCI for approximately $590 million including 1.4 million shares of NCI common stock -- the company's largest transaction to date. This combination united two industry leaders in sales growth and profitability, and effectively: o DOUBLED SALES FROM $408 MILLION TO $816 MILLION IN 1997 PRO FORMA REVENUES. NCI now dominates the building components and metal building systems markets, and has leading positions in the metal coating and painting and roll-up industrial door markets. The combined manufacturing capabilities also provide a broad North American geographic presence. o PROVIDED MAJOR FUTURE GROWTH OPPORTUNITIES. Once competitors, NCI and MBCI now are able to leverage customer relationships and cross sell a significantly larger product and service offering. Additionally, NCI now has one of the largest metal coating businesses in the industry, a vertical integration bringing metal coating and painting in house and a growing capacity to service an external customer base. o CREATED $15 MILLION IN ANNUAL COST REDUCTION OPPORTUNITIES. In 1998, management identified $15 million in potential cost savings through enhanced purchasing power plus operational consolidations. This is a minimum amount of savings that we now expect. It improved NCI's competitive position as a low-cost provider. o ASSEMBLED A STRONGER AND DEEPER MANAGEMENT TEAM. MBCI brought with it some of the top executives and managers in the metal building and components industry, substantially broadening NCI's talent pool. A.R. Ginn, MBCI's president, and Ken Maddox, MBCI's chief financial officer, were added to NCI's board of directors and are key members of the Company's executive management team. In summary, the combination of these top-performing companies represents a hallmark event to NCI and its shareholders. 2 6 NCI SPLITS STOCK; LISTS ON THE NYSE UNDER THE NEW SYMBOL 'NCS.' NCI listed on the New York Stock Exchange on August 13, 1998. As a company approaching $1 billion in revenues, we see this listing as a natural evolution. The "Big Board" provides NCI with increased global visibility, and may lead to higher valuation as more investors learn of the Company's history of consistent growth and opportunity ahead. We also made the decision to split the stock two for one, effective in July, in order to help improve liquidity and achieve a more popular price level. We are pleased with increased national and regional coverage since our acquisition, which gained us national media attention in such publications as the Wall Street Journal and New York Times, and the addition of new analysts covering NCI in 1998. Along with increased size and enhanced growth prospects, these factors should attract a new profile of investors interested in the building materials sector as well those seeking solid value. NCI'S GROWTH STRATEGY AND BUSINESS OBJECTIVES REMAIN UNCHANGED. Growth strategies have remained unchanged since the company's founding in 1984. Through internal growth and acquisitions, we will continue to expand marketing opportunities with a broader product line and larger customer base. We will vertically integrate where it makes sense in order to become the `one-stop shopping' source for metal components, pre-engineered building systems, and metal coating and painting. The MBCI acquisition is a catalyst for these strategies, and adds to a number of other initiatives underway that we believe will generate further new growth. TWO TRANSACTIONS ADD METAL COATING AND PAINTING CAPACITY. Acquired in 1998 for $15 million, Metal Coaters of California is our first West Coast metal coating operation and will help deliver coated steel to our western states facilities more quickly and at a lower cost. We are extremely proud that Metal Coaters of California was profitable in its first full month as an NCI operation. This facility should achieve our 30% ROA goal in 1999. Also last year, NCI invested in a 50% joint venture with Precoat Metals, a division of Sequa Corporation. This facility will start up in the first calendar quarter of 1999. NEW LONG BAY SYSTEM ENABLES COMPETITIVE ENTRY INTO LARGE BUILDINGS MARKET. NCI leads the market in the production of smaller metal buildings averaging in the $30,000 price range. NCI's new long bay secondary system provides us with a competitive entry into larger buildings with internal column spaces over 40 feet -- a large and profitable market. GROWTH OF MEXICAN MANUFACTURING VENTURE EXPECTED IN 1999. A joint venture in Monterrey, Mexico is providing highly needed mainframe manufacturing capacity to service our numerous mini-plants across the U.S. The Monterrey plant has abundant access to raw materials and available labor and is already proving to be a cost effective endeavor. In addition, we believe this facility can leverage NCI's entry into the Mexican market. Started in 1997, this facility should be a big contributor in 1999. 3 7 HUMAN RESOURCES COMPLETED A HUGE INTEGRATION IN RECORD TIME. We are particularly pleased with the way NCI and MBCI have fit together. Our Human Resources Department coordinated benefits, and added a new, modified bonus program that rewards management based on a combination of both earnings per share growth and return on assets employed (ROA). This revised bonus program takes effect in fiscal 1999. Formerly, NCI rewarded just on ROA, however, we believe our new growth opportunities call for incorporating this second important performance characteristic as well. THE OUTLOOK FOR NCI HAS NEVER BEEN BRIGHTER. Each year, NCI states its operating policies in the annual report. These policies have not changed over the years, nor have our objectives. We seek to enhance shareholder value by averaging 15% annual revenue growth and 20% annual growth in earnings, and providing 30% Return on Operating Assets, and to remain alert for acquisition opportunities that will escalate shareholder value. We exceed those objectives nearly every year. We firmly believe 1999 will be no exception. The efforts in 1998 have set in place NCI's strong "Components of Growth" for the new century. /s/ C.A. RUNDELL, JR. /s/ JOHNIE SCHULTE, JR. /s/ A.R. GINN C.A. Rundell, Jr. Johnie Schulte, Jr. A.R. Ginn Chairman of the Board Chief Executive Officer President & Chief Operating Officer
December 11, 1998 [PHOTO] From left to right: Johnie Schulte, Jr., C.A. Rundell, Jr., and A.R. Ginn. 8 1998 - A MILESTONE IN NCI HISTORY Since being founded by Johnie Schulte in 1984, the Company has created higher bench-marks for performance each year as NCI employees test marketing programs unique to the industry, pursue new products and markets, develop innovative manufacturing and distribution systems, and further leverage growth with a long track record of successful acquisitions. Key periods in the company's evolution are: 1984-1993: NCI's first acquisition, MID-WEST METALLIC division of American Buildings Company, is completed in 1989. In 1992, NCI acquires A&S BUILDING SYSTEMS. Other NCI product brands include ALL AMERICAN SYSTEMS AND STEEL SYSTEMS. Also in 1992, the company goes public at $3.17 per share. The stock is split 3-for-2 in 1993. NCI breaks the $100 million sales mark by a landslide achieving $134.5 million in sales and $6.3 million in net income in its tenth year in business. 1994-95: Forbes recognizes NCI each year as one of its top '200 Small Companies in America.' The company acquires ROYAL METAL BUILDINGS, CARLISLE WESTERN ALABAMA AND DOORS & BUILDING COMPONENTS, INC. In 1995, NCI completes a secondary offering at $12 per share. Revenue surpasses the $200 million level in 1995 achieving sales of $234.2 million and net income of $17.0 million. 1996-1997: Recognized again by Forbes in 1996, NCI acquires MESCO, CARLISLE HOUSTON AND INSULATED PANEL SYSTEMS. Four new plants open. Sales double again by 1997, reaching $407.8 million and generating $27.9 million in net income. 1998 -- Proforma sales double to $816 million with NCI's largest transaction to date, METAL BUILDING COMPONENTS, INC. NCI bolsters its rapidly growing metal painting business with the acquisition of CALIFORNIA COIL COATERS and a joint venture with PRECOAT METALS. Additional mainframe capacity comes online with a manufacturing joint venture in Monterrey, Mexico. The company again splits the stock 2-for-1, and lists on the NYSE. [PHOTO] This year's listing on the New York Stock Exchange exemplifies a year of memorable achievements that has launched NCI into a new phase of growth and opportunity. 5 9 [PHOTO] ROBERT J. MEDLOCK Executive Vice President, and Chief Financial Officer "NCI is a leading non-residential supplier of metal building products and the unquestioned leader in sales and net income growth with a 5-year CAGR of 37.9% and 40.5%, respectively. This impacts our visibility in both our markets and on Wall Street, and supports our ability to remain the most competitive and aggressive player in our industry." [GRAPH] NCI CONTINUES TO TAKE ADVANTAGE OF GROWTH OPPORTUNITIES THROUGH ACQUISITION AND INTERNAL BUSINESS DEVELOPMENT. Performance in 1998 punctuates NCI's strategy and successful track record of capitalizing on opportunities that add immediate and long-term growth potential. This year's principal achievement was our largest acquisition to date -- Metal Building Components, Inc. While this was not the only important initiative taken during the year that will impact 1999 and beyond, the acquisition is significantly affecting every facet of the business, from new sales opportunities, to market expansion, to distribution, to cost reduction. It combines two companies that have collaborated and competed for over a decade. Both have been leaders in their respective markets, aggressively acquisitive, and entrepreneurial in business approach. Both lead the industry in sales and earnings growth and profitability by a wide margin. THE BENEFITS OF THE MBCI ACQUISITION TOUCH ALL ASPECTS OF THE BUSINESS, INCLUDING: o Realizing economies of scale, including purchasing efficiencies; o Expanding internal metal coil coating and painting capacity and utilizing internal capacity to produce many products that were previously purchased from third parties; o Cross selling broader product lines to a wider customer base; o Expanding the geographic scope of operations throughout the United States; o Rationalizing production capacity to maximize productivity and eliminate redundant costs; o Consolidating metal components management, sales and marketing; and o Eliminating duplicative administrative costs. 6 10 [PHOTO] ECONOMIES OF SCALE ENHANCE LOW-COST PRODUCTION. NCI has gained substantial cost savings from combining operations with MBCI. We originally targeted $15 million in annual savings resulting from purchasing power, production and distribution expansions and efficiencies, combining painting and coating facilities, and eliminating redundancies. After the first six months together, our cost reduction efforts are on track, and we now believe that annual savings will exceed our original target. Further cost improvements will be realized in 1999 by rationalizing and combining component and building system operations and products. The company's large-scale manufacturing capabilities provide additional purchasing efficiencies and enhance productivity through the sharing of best practices between metal components and building systems operations. By the end of the year, we completed the consolidation of NCI and MBCI's components operations. We accomplished that task well ahead of schedule. This included the standardization of products, processes and manufacturing equipment, paint and color consolidations, corporate-wide standardization of product coding and labeling, and the closure of three redundant plants. The company also installed the first phase of a new MIS system that, when completed in 1999, will help manage order entry, inventory, manufacturing and financials throughout the company. [PHOTO] KEN MADDOX Executive Vice President, Administration "NCI has become the largest user of coated steel in the U.S. construction industry, sourcing from both domestic and international suppliers. Integration into metal coating and painting places the company as the largest user of paint in the industry. These factors when combined with other cost reduction efforts has enabled the company to be the low cost supplier of metal building systems and components." [GRAPH] 7 11 [PHOTO] FRED KOETTING Vice President, Operations of Metal Buildings Division "NCI is well prepared to meet anticipated sales growth in the next few years. The success of our frame production facility in Mexico and the expansion of structural and building frame capacity in Houston, along with the addition of the MBCI component product lines will give us ample ability to service our customers." [GRAPH] [PHOTO] ADDED MANUFACTURING CAPACITY AND GEOGRAPHIC REACH SUPPORT GROWTH PLANS. With the addition of 20 manufacturing facilities, we have increased our total operating space by 130% to 3.5 million square feet, and now have 38 facilities in 18 states and Mexico. This increase came through the acquired MBCI plants, two additional metal painting and coil coating facilities, and the new mainframe plant in Mexico, which became fully operational in 1998. This has enabled manufacturing to cost-effectively support the company's expansion efforts into new geographic markets. NCI's metal building system plants, located primarily in the South, Southwest and West, fortify the company's metal components expansion nationwide. The addition of MBCI's metal components locations in the Northeast and Northwest provide an attractive platform for the metal buildings group to extend into new regional markets. Facilities integration will continue to employ NCI's "hub and spoke" system of satellite manufacturing. This concept places "spoke" locations for the manufacture of secondary structural framing, covering systems and final distribution closer to the customer, thereby reducing transportation costs and delivery times, and improving customer service. These lower labor and engineering intensive facilities are supported by "hub" plants, which handle heavy manufacturing of components such as mainframes. Throughout the integration, modest capital investments have been made to support higher production levels where possible. 8 12 In 1998, we also completed one of our highest priority objectives -- the integration and internalization of the company's metal coating and painting capability. During the year, we established the internal capacity to pre-treat, coat and paint all of our products for all facilities nationwide. This is a highly cost-effective vertical integration and has also created a new profit center. Even with the additional capacity resulting from the MBCI acquisition, however, painting and coating capacity was still strained. In May, Metal Coaters of California was acquired for $15 million. Located on main railways in Southern California, this plant is now effectively servicing NCI's manufacturing demand in the West. We are in the process of adding a sixth painting operation with a 50% owned joint venture with Precoat Metals, a division of Sequa Corporation. Located in Granite City, Illinois, this new facility will be fully operational in the first calendar quarter of 1999. Together, these two facilities have added 18% additional painting and coating production capacity, sufficient to cover our needs into the year 2000. Another focus in 1998 was the joint venture manufacturing facility in Monterrey, Mexico. NCI has had a growing need for additional heavy manufacturing capacity, including primary structural mainframes. This issue has become even more critical with the growth anticipated from the MBCI acquisition. Initiated in 1997, the plant is now fully operational and able to support the company's anticipated growth requirements. This facility is a joint venture with an established Mexican steel service company. Benefits of the arrangement include an abundant access to raw materials and qualified labor. This new plant has added 17% more heavy steel manufacturing capacity and will provide secondary framing to support NCI's expansion into the Mexican market. [PHOTO] LEN GEORGE Executive Vice President of Metal Buildings Group "We are extremely excited about the potential that our new long bay secondary system offers. This new structural assembly will enable NCI to effectively compete in the large building market, which is estimated at $1 billion. The average large-bay building sale is approximately $500,000, compared to the company's current average building sale of $35,000." [PHOTO] [GRAPH] 9 13 [PHOTO] KELLY GINN Vice President, Manufacturing of Metal Components Group "In 1998, NCI essentially evolved from its leading position in metal building systems to become the leading manufacturer of metal components, building systems and metal coil coating and painting - all businesses that should generate 15% or greater revenue growth through current aggressive strategies to expand and penetrate our markets." [GRAPH] As a result of the company's expanded geographic scope, we are better able to meet customer's product and delivery needs, realize production efficiencies and improve our ability to attract builders and other customers. We believe these facilities will be sufficient to support our production requirements for the next few years and are not planning for any large capital expansion in 1999. GROWTH OPPORTUNITIES BIGGER MARKETS, BETTER DISTRIBUTION AND MORE PRODUCTS. Achievements in 1998 have made NCI a more vertically integrated and geographically diverse provider of metal buildings, components and services. Adding to the company's large business in metal buildings, NCI has market share in metal components more than twice that of its nearest competitor, and leading positions in metal coil coating and painting and commercial doors. As the industry's largest one-stop source for metal buildings and components, the company has large new sales growth opportunities based on expanded geographic coverage, cross selling between NCI and MBCI distribution channels and product lines, and new product introductions. NCI'S LARGE EXPOSURE IN THE COMPONENTS BUSINESS IS ANTICIPATED TO ADD HIGHER-GROWTH POTENTIAL AND GREATER RESILIENCE TO ECONOMIC CYCLES. Comprising 59% of the company's 1998 revenues, metal components is a $3 billion market growing at an estimated 15% per year. The largest percentage of our component sales comes from metal roofs, which competes with non-metal roofing systems in the estimated $20 billion roofing market. 10 14 [PHOTO] We believe strong growth will continue in our roofing business, as the company offers a cost-effective, low-maintenance product with a life more than twice that of conventional roofing materials. Other metal component products include wall systems, overhead doors, fascia, mansard and various trim accessories for commercial, industrial, architectural, agricultural and residential construction and repair and retrofit uses. Components are being used to a greater degree for building repair and retrofit which is generally unaffected by new construction cycles, and can even be counter-cyclical. Demand for metal buildings and components in major construction and architectural communities continues to expand. Our products are finding increasing use in such high-traffic, long-term applications as strip malls, office buildings, community centers, schools, churches and residential construction. Growing aesthetic appeal plays an important role in our increasing popularity. Practical benefits favorably position metal building systems and components as cost effective alternatives to conventional construction materials. These include greater flexibility, lower life-cycle costs, faster occupancy, trouble-free maintenance and long-term energy savings. In addition, the builder's cost for constructing a metal building can be as much as 20% less than that of a conventional building. Factors contributing to this price advantage include better utilization of factory labor (versus field labor), better materials utilization (less waste) and shorter construction time. [PHOTO] JERRY BOEN Vice President, Marketing of Metal Components Division "Metal components, such as roof systems, are frequently used for repair and remodeling. Sales have not historically been highly effected by new construction or economic cycles. With 59% of NCI's revenues generated from components sales, this shift in product mix is expected to reduce NCI's overall exposure to new construction cyclicality." [PHOTO] CHARLES W. DICKINSON Vice President, Sales of Metal Components Division 11 15 [PHOTO] AL RICHEY Vice President, Sales & Marketing of Metal Buildings Group "NCI's unique marketing approach -multiple brands represented by regional sales groups -- has been extremely effective in building our dealer network. A priority in 1999 will be to leverage the distribution network acquired with MBCI to extend cost-effectively our geographic reach and market penetration. In addition, we have set aggressive goals to recruit 15% more authorized builders and put them through training to increase their sales effectiveness and support the achievement of our sales targets." [PHOTO] TOM BISHOP President, American Building Components "American Building Components is now able to offer their customers a much wider product range at high revenue level. Rollformed, pre-packaged metal garage parts and an increased presence in the Western United States are only part of the benefits available from the combination of American Building Components and NCI." [PHOTO] Construction and building material analysts are projecting low to flat industry growth in 1999; however, NCI outperforms these indices nearly every year, delivering an average of 38% annual revenue growth over the past five years, and 45% over the last 10 years. We believe we will continue to meet our growth goals in 1999 and outperform the industry through unique market niches, diversified product lines, and aggressive sales and marketing programs, with additional stimulation from component sales, careful asset management and further pursuit of acquisition opportunities. 100% DISTRIBUTION EXPANSION PROVIDES SUBSTANTIAL CROSS-SELLING OPPORTUNITIES. With a distribution network that nearly doubled in 1998 to nearly 1,200 authorized builders, a key growth strategy is to increase sales and net income by cross selling the company's broadened line of name brand product lines through a substantially larger network. Unlike competitors who generally market under one national brand name, NCI operates under multiple regional, well-known brands. This approach has helped the company grow its dealer network. Local and regional reputation often play an important role in builders' selection, and NCI's strategy of producing under recognized regional brand names is consistent with the way dealers contract for product. 12 16 NCI will continue to market its well-known brands, adding such component lines to the product selection as Metal Building Components, Inc., American Building Components, DBCI, Metal Coaters of Georgia, Metal-Prep, DOUBLECOTE, and Metal Coaters of California. These products are sold through a variety of distribution channels to a broad range of end users. These include 1) authorized builders, 2) building materials manufacturers, distributors and retailers, 3) roofing system installers, 4) contractors and end users, and 5) builders of self-storage facilities. In addition to leveraging the current distribution channels, NCI seeks to recruit new builders and has engaged in industry-wide training programs to better acquaint builders with products, services, and pricing in order to expand sales. A key growth strategy is to leverage customer relationships in the component group to increase building systems sales, and vice versa. For example, we believe there is great potential to stimulate higher components growth, primarily for metal roofing and wall systems segments, by marketing these products through building systems channels. On the other hand, we intend to generate higher building system sales by pursuing new and existing geographic markets. The addition of metal components locations nationwide provides the opportunity to expand building systems sales into components markets in the Northeast and Northwest. By utilizing the nationwide manufacturing facilities as platforms for expansion, both segments serve to benefit. We are well positioned to increase sales of building systems in markets that previously have been difficult for NCI to serve on a cost-effective basis, while the components business can grow in new markets as a result of NCI's builder relationships. [PHOTO] TOM WHEELER Executive Vice President, General Manager, A&S Building Systems "Many of our builder relationships are based on just a few of our full range of products and services. With our combined resources, we have an incredibly broad product line to offer to a distribution system that has doubled to nearly 1,200 authorized dealers. This has opened whole new markets to pursue." [PHOTO] JOHN EUBANKS President, Mesco Metal Buildings "Acquired in 1996, Mesco's main market thrust is in the South Central and Southeastern United States with manufacturing facilities in Texas and South Carolina. Mesco has built its reputation and market acceptance through customer dependability in its performance and integrity in its product and its people. With strong fundamentals in place, the availability of a diversified product line through NCI will significantly increase our business and growth opportunities in the future." 13 17 [PHOTO] RICHARD KLEIN President and COO of Metal Coaters Group "We are extremely pleased with the performance of our Metal Coaters of California, Inc. operation. This 100,000 square foot facility was closed on May 11 for modifications. The plant was reopened on May 28 and became profitable immediately. This facility is able to meet the high internal demand from our Western States operations, and provide us with substantial room to service existing outside customers and generate new business." [PHOTO] JOHN HOLMES President of Metal Prep Division "Metal Prep and the metal construction industry will benefit from the addition of the new Midwest Coating joint venture. Metal Prep operated at full capacity during 1998 and with the additional product capability, the superior pre-painted hot roll product will now be available throughout the market." NEW PRODUCTS AND MARKETS ADD NEW GROWTH OPPORTUNITY. Our large and profitable metal coating and painting business is not just another step toward vertical integration; it offers a profitable new sales growth opportunity. The company has already integrated the NCI and MBCI painting operations and added two facilities to achieve significant cost savings, increased geographical coverage, and relieve strained capacity. NCI targets approximately 50% of these facilities' capacity from external customers, and this business is on course to participate in achieving our corporate goal of 30% return on operating assets in 1999. Another new opportunity is NCI's entry into the large-bay building market as a result of an internally designed long bay framing system. Traditionally focused on the smaller buildings niche market, we have completed the design of an extremely strong, light-weight long bay framing system that will span over 40 feet. In the past, NCI has purchased bar joists from outside suppliers increasing project costs and lead times. This new system will be produced internally, enabling our competitive entry into a big, profitable new market. The MBCI acquisition has provided us with the opportunity to substantially expand our selling and distribution presence into new geographic markets. MBCI's metal components locations have provided us with a competitive entry into regional markets in the Northeast and Northwest United States and Canada. We are also expanding south of the border, largely through our Mexican manufacturing joint venture. In 1999, Metallic de Mexico will launch NCI's foray into the Mexican building market, estimated at $60 million per year. We believe that this new market could generate $5 million in sales in 1999 and be profitable. 14 18 [PHOTO] HUMAN RESOURCES NCI'S MANAGEMENT DEPTH HAS INCREASED SUBSTANTIALLY. Averaging more than 20 years of industry experience, the combined management teams of NCI and MBCI share similar business philosophies, and historically have demonstrated an ability to grow sales and net income in times of adverse, as well as strong, economic conditions. We attribute this ability to marketing our products effectively, strategically locating new manufacturing facilities, controlling expenses, maintaining flexibility in capital budgeting, and reducing production and distribution costs. In addition, the two management teams have successfully identified and completed nine acquisitions in the last five years. NCI's board has been enhanced by the addition of A.R. Ginn and Ken Maddox, who continue to serve as president and chief financial officer, respectively, of the Metal Components Group and the Metal Coaters Group. In addition, A.R. Ginn serves as the president and chief operating officer of NCI, and Ken Maddox serves as executive vice president, administration. We successfully completed the integration of NCI's and MBCI's nearly 4,000 employees, facilities, management and benefit programs in record time. NCI's corporate culture nurtures each divisions' ability to operate independently, and encourages independent thinking, competition and belief that capable people will get the job done. Through all of the separate divisions, however, there runs a strong employee feeling of being part of a large, successful team that serves as a highly productive driver behind NCI's growth and profitability. [PHOTO] DONNIE HUMPHRIES Vice President, Human Relations of Metal Buildings Group "In the last six months of 1998, greater progress was made than we could have hoped for in the integration of these two large companies. The complete overhaul and standardization of employee benefits, incentive programs and human resource policies was completed as a result of both company's high level of competency, enthusiasm and mutual respect." [PHOTO] DAVID CURTIS President, Doors & Building Components, Inc. (DBCI) "The proliferation of self-storage facilities in the United States and Europe has provided substantial new opportunities in the overhead door business. Our business grew well ahead of projections in 1998 and is again estimating a substantial sales increase in 1999." 15 19 NCI BOARD OF DIRECTORS [PHOTO From left to right: C.A. Rundell Jr., Johnie Schulte, Jr., William Breedlove, and A.R. Ginn. [PHOTO] From left to right: Daniel Zabcik, Leonard George, Robert McDonald, Kenneth Maddox, T.C. Arnett, and Gary Forbes. PROFILE NCI is a manufacturer and marketer of pre-engineered metal building systems and components. The company contributes to the building process by designing structures to user specifications, then manufacturing the appropriate parts for its customers -- frequently authorized builders -- to erect and make ready for occupancy. Components are sold to many of the same markets where engineering is not required. NCI aggressively markets its products nationwide through several channels under the following trade names: Metallic Building Company, Mid-West Steel Building Company, Doors & Building Components, Steel Systems, A&S Building Systems, Classic Steel Frame Homes, Mesco Metal Buildings, MBCI, ABC, IPS, DOUBLECOTE, Metal Prep, Metal Coaters of Georgia, Metal Coaters of California and Mid-West Metal Coatings. NCI's products are directed at the non-residential market, primarily industrial and low-rise commercial applications. 15 20 CORPORATE DIRECTORY BOARD OF DIRECTORS
OFFICERS DIRECTORS C.A. RUNDELL, JR. C.A. RUNDELL, JR. GARY L. FORBES** Chairman of the Board Chairman of the Board Vice President NCI Building Systems, Inc. Equus Incorporated JOHNIE SCHULTE, JR. CEO & Chairman of the Executive JOHNIE SCHULTE, JR. LEONARD F. GEORGE Committee CEO & Chairman of the Executive Executive Vice President Committee Metal Buildings Division A.R. GINN NCI Building Systems, Inc. President & Chief Operating Officer WILLIAM D. BREEDLOVE** A.R. GINN Vice Chairman KENNETH W. MADDOX President and Chief Operating Officer Hoak Breedlove Wesneski & Co. Executive Vice President, NCI Building Systems, Inc. Administration ROBERT N. MCDONALD* KENNETH W. MADDOX Private Investor ROBERT J. MEDLOCK Executive Vice President, Executive Vice President & Chief Administration * Compensation Committee Financial Officer ** Audit Committee DANIEL D. ZABCIK DONNIE R. HUMPHRIES Private Investor Secretary T.C. ARNETT* Private Investor
FORWARD - LOOKING STATEMENTS "This Annual Report contains forward-looking statements concerning the business and operations of the Company. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties, and other factors that could cause the actual results to differ materially from those projected. These risks, uncertainties, and factors include, but are not limited to, industry cyclicality and seasonality, adverse weather conditions, fluctuations in customer demand and order patterns, raw material pricing, competitive activity and pricing pressure, the ability to make strategic activities accretive to earning, and general economic conditions affecting the construction industry, as well as other risks detailed in the Company's filings with the Securities and Exchange Commission, including its most recent annual and quarterly reports on Forms 10(k) and 10(Q), the Company expressly disclaim any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes in its expectations." Design: Pegasus Design, Inc. Houston, Texas This annual report is printed on recycled paper containing recovered, post-consumer waste paper. 16 21 [GRAPHIC] NCI BUILDING SYSTEMS, INC. 7301 FAIRVIEW HOUSTON, TEXAS 77041 (713) 466-7788 22 1998 FINANCIAL REVIEW 17 23 CONSOLIDATED STATEMENTS OF INCOME NCI BUILDING SYSTEMS, INC. (IN THOUSANDS, EXCEPT PER SHARE DATA)
October 31, ------------------------------------- 1996 1997 1998 --------- --------- --------- Sales ............................................ $ 332,880 $ 407,751 $ 675,331 Cost of sales .................................... 241,374 299,407 497,862 Gross profit ................................ 91,506 108,344 177,469 --------- --------- --------- Operating expenses ............................... 53,095 66,055 94,040 Nonrecurring acquisition expense ................. -- -- 2,060 --------- --------- --------- Income from operations ...................... 38,411 42,289 81,369 Interest expense ................................. (108) (163) (20,756) Other income ..................................... 1,586 1,999 499 Joint venture income ............................. -- -- 737 --------- --------- --------- Income before income taxes .................. 39,889 44,125 61,849 --------- --------- --------- Provision (benefit) for income taxes Current ..................................... 15,898 15,920 16,573 Deferred .................................... (822) 318 7,958 --------- --------- --------- Total income tax ................................. 15,076 16,238 24,531 --------- --------- --------- Net income ....................................... $ 24,813 $ 27,887 37,318 ========= ========= ========= Net income per common and common equivalent share - Basic ............. $ 1.60 $ 1.73 $ 2.17 ========= ========= ========= Net income per common and common equivalent share - Diluted ........... $ 1.51 $ 1.64 $ 2.05 ========= ========= =========
See Independent Auditor's Report and Accompanying Notes to the Consolidated Financial Statements. 18 24 CONSOLIDATED BALANCE SHEETS NCI BUILDING SYSTEMS, INC. (IN THOUSANDS, EXCEPT SHARE DATA)
October 31, -------------------- 1997 1998 -------- -------- ASSETS Current assets: Cash and cash equivalents ................................................. $ 32,166 $ 4,599 Accounts receivable, net .................................................. 47,006 99,261 Inventories ............................................................... 37,381 78,001 Deferred income taxes ..................................................... 3,463 6,495 Prepaid expenses .......................................................... 942 4,214 -------- -------- Total current assets ...................................................... 120,958 192,570 Property, plant and equipment, net ............................................. 51,223 179,500 Excess of cost over fair value of acquired net assets .......................... 21,072 413,288 Other assets, primarily investment in joint ventures ........................... 3,079 38,179 -------- -------- Total assets ................................................................... $196,332 $823,537 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 47 $ 31,297 Accounts payable .......................................................... 23,921 62,694 Accrued compensation and benefits ......................................... 9,688 16,261 Other accrued expense ..................................................... 10,553 23,925 -------- -------- Total current liabilities ................................................. 44,212 134,177 Long-term debt, noncurrent portion ............................................. 1,679 444,477 Deferred income taxes .......................................................... 2,626 21,271 Contingencies Shareholders' equity Preferred stock, $1 par value, 1,000,000 shares authorized, none outstanding .................................. -- -- Common stock, $.01 par value, 50,000,000 shares authorized, 8,125,739 and 18,064,482 shares issued and outstanding, respectively ........... 82 181 Additional paid-in capital ................................................ 51,109 89,489 Retained earnings ......................................................... 96,624 133,942 -------- -------- Total shareholders' equity ................................................ 147,815 223,612 -------- -------- Total liabilities and shareholders' equity ..................................... $196,332 $823,537 ======== ========
See Independent Auditor's Report and Accompanying Notes to the Consolidated Financial Statements. 19 25 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY NCI BUILDING SYSTEMS, INC. (IN THOUSANDS)
Additional Common Paid-In Retained Shareholders' Stock Capital Earnings Equity -------- -------- -------- -------- Balance, October 31, 1995 ........................ $ 63 $ 13,696 $ 43,923 $ 57,682 Proceeds from stock offering ..................... 11 24,759 -- 24,770 Proceeds from exercise of stock options, including tax benefit thereon ............... 2 2,723 -- 2,725 Shares issued for contribution to 401(k) plan ................. 1 1,008 -- 1,009 Shares issued in connection with the ............. 3 5,172 -- 5,175 purchase of DBCI Net income ....................................... -- -- 24,814 24,814 -------- -------- -------- -------- Balance, October 31, 1996 ........................ 80 47,358 68,737 116,175 Proceeds from exercise of stock options, including tax benefit thereon ............... 1 2,234 -- 2,235 Shares issued for contribution to 401(k) plan ................. 1 1,517 -- 1,518 Net income ....................................... -- -- 27,887 27,887 -------- -------- -------- -------- Balance, October 31, 1997 ........................ 82 51,109 96,624 147,815 Proceeds from exercise of stock options, including tax benefit thereon ............... 2 4,317 -- 4,319 Two for one split of common stock ................ 82 (82) -- -- Shares issued in connection with the purchase of Metal Building Components, Inc ........... 14 32,186 -- 32,200 Shares issued for contribution to 401(k) plan ................. 1 1,959 -- 1,960 Net income ....................................... -- -- 37,318 37,318 -------- -------- -------- -------- Balance, October 31, 1998 ........................ $ 181 $ 89,489 $133,942 $223,612 ======== ======== ======== ========
See Independent Auditor's Report and Accompanying Notes to the Consolidated Financial Statements. 20 26 CONSOLIDATED STATEMENTS OF CASH FLOWS NCI BUILDING SYSTEMS, INC. (IN THOUSANDS)
October 31, ------------------------------------------ 1996 1997 1998 --------- --------- --------- Cash flows from operating activities Net income ........................................................... $ 24,814 $ 27,887 $ 37,318 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization .............................. 5,791 7,876 17,818 (Gain) loss on sale of fixed assets ........................ 1 (3) (32) Provision for doubtful accounts ............................ 681 1,223 2,625 Deferred income tax (benefit) provision .................... (822) 318 7,958 Changes in current assets and liability accounts, net of effects of acquisitions: (Increase) in accounts, notes and other receivables .................. (9,857) (10,481) (3,663) (Increase) decrease in inventories ................................... (4,521) (5,552) 9,951 (Increase) decrease in prepaid expenses .............................. (35) (625) 109 Increase in accounts payable ......................................... 3,043 2,394 24,189 Increase in accrued expenses ......................................... 5,446 5,579 13,772 --------- --------- --------- Net cash provided by operating activities ..................... 24,541 28,616 110,045 Cash flows from investing activities: Proceeds from the sale of fixed assets .......................... 115 25 98 Acquisition of Mesco Metal Buildings ............................ (20,631) -- -- Acquisition of Doors & Building Components, Inc ................. (11,000) -- -- Acquisition of Carlisle Engineered Metals, Inc .................. (2,840) (6,230) -- Acquisition of Metal Building Components, Inc ................... -- -- (553,510) Acquisition of California Finished Metals, Inc .................. -- -- (15,458) (Increase) decrease in other noncurrent assets .................. (1,988) (1,147) (24,450) Capital expenditures ............................................ (10,319) (11,332) (20,834) --------- --------- --------- Net cash provided by (used in) investing activities ...... (46,663) (18,684) (614,154) Cash flows from financing activities: Net proceeds from sale of stock ................................. 24,770 -- -- Exercise of stock options ....................................... 750 1,340 2,494 Borrowings on line of credit and notes .......................... -- -- 592,700 Principal payments on long-term debt, line of credit and notes payable ................................... (85) (50) (118,652) --------- --------- --------- Net cash provided by (used in) financing activities ...... 25,435 1,290 476,542 --------- --------- --------- Net increase (decrease) in cash ...................................... 3,313 11,222 (27,567) Cash at beginning of period .......................................... 17,631 20,944 32,166 --------- --------- --------- Cash at end of period ................................................ $ 20,944 $ 32,166 $ 4,599 ========= ========= =========
See Independent Auditor's Report and Accompanying Notes to the Consolidated Financial Statements. 21 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NCI BUILDING SYSTEMS, INC. (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Reporting Entity These financial statements include the operations and activities of NCI Building Systems, Inc. and its wholly-owned subsidiaries (Company) after the elimination of all material intercompany accounts and balances. The Company designs, manufactures and markets metal building systems and components for commercial, industrial, agricultural and community service use. The Company recognizes revenues as jobs are shipped or as services are performed. Certain prior year amounts have been reclassified to conform with the current year presentation. (b) Accounts Receivable The Company reports accounts receivable net of the allowance for doubtful accounts of $1,498,000 and $2,321,000 at October 31, 1997 and 1998, respectively. Trade accounts receivable are the result of sales of building systems and components to customers throughout the United States and affiliated territories including international builders who resell to end users. Although the Company's sales historically have been concentrated in Texas and surrounding states, in recent years it has been expanding its authorized builder organization and customer base into the midwestern states and, to a lesser extent, into south central, southeastern and coastal states. All sales are denominated in United States dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process. (c) Inventories Inventories are stated at the lower of cost or market value, using specific identification or the weighted-average method for steel coils and other raw materials. A summary of inventories follows:
October 31, ------------------ 1997 1998 ------- ------- (in thousands) Raw materials ........... $28,943 $55,190 Work-in-process and finished goods ......... 8,438 22,811 ------- ------- $37,381 $78,001 ======= =======
(d) Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated over their estimated useful lives. Depreciation is computed using the straight-line method for financial reporting purposes and both straight-line and accelerated methods for income tax purposes. Depreciation expense for the years ended October 31, 1996, 1997 and 1998 was $4,236,000, $5,893,000, and $9,970,000, respectively.
October 31, ------------------------- 1997 1998 --------- --------- (in thousands) Land .......................... $ 3,969 $ 11,184 Buildings and improvements .... 23,600 74,510 Machinery, equipment and furniture ............ 41,393 112,013 Transportation equipment ...... 1,089 4,711 Computer software ............. 481 5,753 --------- --------- 70,532 208,171 Less accumulated depreciation.. (19,309) (28,671) --------- --------- $ 51,223 $ 179,500 ========= =========
Estimated useful lives for depreciation are: Buildings and improvements ............. 10 - 40 years Machinery, equipment and furniture...................... 5 - 13 years Transportation equipment................ 3 - 10 years Computer software ...................... 5 years
(e) Statement of Cash Flows For purposes of the cash flows statement, the Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. Total interest paid for the years ended October 31, 1996, 1997 and 1998 was $108,000, $163,000 and $16,733,000, respectively. Income taxes paid, net of refunds received, for the years ended October 31, 1996, 1997 and 1998 was $12,638,000, $15,676,000 and $19,915,000 respectively. Non-cash investing or financing activities included: $1,960,000 for the 1997 contribution for the 401(k) plan which was paid in common stock in 1998, $1,518,000 for the 1996 contribution for the 401(k) plan which was paid in common stock in 1997, and common stock valued at $32.2 million paid in connection with the acquisition of MBCI, as discussed at Note 11. (f) Excess of Cost Over Fair Value of Acquired Net Assets Excess of cost over fair value of acquired net assets is amortized on a straight-line basis over periods of fifteen to forty years. Accumulated amortization as of October 31, 1998 was $9,788,000, and $3,042,000 as of October 31, 1997. The carrying value of goodwill is reviewed if the facts and circumstances suggest that it may be impaired. If this review indicates that goodwill will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill would be reduced by the estimated shortfall of cash flows. 22 28 (g) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (h) Advertising Costs Advertising costs are expensed as incurred. Advertising expense was $1,267,000, $1,416,000 and $2,301,000 in 1996, 1997 and 1998, respectively. (i) Long-Lived Assets Impairment losses are recognized when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying amount. Assets held for disposal are measured at the lower of carrying value or estimated fair value, less costs to sell. (j) Stock-Based Compensation The Company uses the intrinsic value method in accounting for its stock-based employee compensation plans. (k) Comprehensive Income During the third quarter of fiscal 1998, the Company adopted Financial Accounting Standards Board (FASB) Statement No. 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components. Certain items which were previously required to be reported separately in shareholder's equity, such as unrealized gains or loses on available-for-sale securities, minimum pension liability adjustments and foreign currency translation adjustments, are now required to be included in other comprehensive income. For fiscal 1996, 1997, and 1998 the Company's comprehensive income was the same as net income, and the adoption of this statement had no impact on the presentation of the financial statements. (l) Pending Accounting Changes In June 1997, the FASB issued Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, which establishes new standards for reporting information about operating segments in both annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Statement is effective for the Company's fiscal year ending October 31, 1999. Management has not completed its review of Statement 131. (2) LONG-TERM DEBT
October 31, ----------------------- 1997 1998 --------- --------- (in thousands) Five-year revolving credit line with a bank bearing interest at a rate of 30-day LIBOR plus 1.75% (7.0% at October 31, 1998), maturing on July 1, 2003 ......................... $ -- $ 141,600 Five-year term loan payable to a bank bearing interest at a rate of 90-day LIBOR plus 1.75% (7.0% at October 31, 1998) repayable beginning on October 31, 1998, in quarterly installments beginning with $7.5 million and gradually increasing to $12.5 million on the maturity date, July 1, 2003 ..................................... -- 192,500 364-day revolving credit facility with a bank bearing interest at a rate of 30-day LIBOR plus 1.75% (7.0% at October 31, 1998) maturing on April 30, 1999 ....................... -- 140,000 Note payable to employee bearing interest at 7%, maturing April 1, 2001, with an option to convert into common stock at $14.96 per share ........................ 1,500 1,500 Other ............................................ 226 174 --------- --------- 1,726 475,774 Current portion of long-term debt ................ (47) (31,297) --------- --------- $ 1,679 $ 444,477 ========= =========
Aggregate required principal reductions are as follows:
Year Ended October 31, - ---------------------------------- (in thousands) 1999 . . . . . . . . . . . . . . . . . $ 31,297 2000 . . . . . . . . . . . . . . . . . 36,305 2001 . . . . . . . . . . . . . . . . . 42,807 2002 . . . . . . . . . . . . . . . . . 46,260 2003 . . . . . . . . . . . . . . . . . 319,105 --------- $ 475,774 =========
The Company has a $600 million senior credit facility from a bank, which consists of (i) a five-year revolving credit facility of up to $200 million, of which up to $20 million may be utilized in the form of commercial and standby letters of credit, (ii) a five-year term loan facility in the principal amount of $200 million, and (iii) 23 29 a 364-day revolving credit facility of up to $200 million. On May 4, 1998, the Company borrowed $140 million under the five-year revolver, $200 million under the five-year term loan and $200 million under the 364-day revolver to fund the MBCI acquisition. Loans and letters of credit under the five-year revolver will be available, and amounts repaid may be reborrowed, at any time until July, 2003, subject to the fulfillment of certain conditions precedent, including the absence of default under the senior credit facility. The term loan was fully drawn down as of the acquisition date, and any amounts repaid may not be reborrowed. The Company's obligations under the senior credit facility are secured by the pledge of all capital stock, partnership interests and other equity interests of the Company's subsidiaries. All obligations are also guaranteed by each of the Company's corporate subsidiaries and operating limited partnerships. The senior credit facility contains customary financial and restrictive covenants with amounts and ratios negotiated between the Company and the lender. The Company has an interest rate swap agreement in place which caps interest on LIBOR loans at 5.89% plus the applicable LIBOR margin for the principal amount of the term loan. The estimated fair value of the swap transactions as of October 31, 1998 was not significant. If the 364-day revolver is not repaid by the Company or extended by the lenders, the Company has the option to convert it to a three-year term note. The Company is required to make mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. The carrying amount of the Company's long-term debt approximates its fair value. (3) RELATED PARTY TRANSACTIONS During 1996, 1997 and 1998, the Company purchased $1,417,000, $1,869,000 and $1,862,000, respectively, of materials from a related party under arm's length transactions. (4) INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Taxes on income from continuing operations consist of the following:
Year Ended October 31, --------------------------------- 1996 1997 1998 -------- -------- -------- (in thousands) Current: Federal ....... $ 14,530 $ 15,478 $ 15,371 State ......... 1,368 442 1,202 -------- -------- -------- Total current ......... 15,898 15,920 16,573 Deferred: Federal ....... (745) 304 7,292 State ......... (77) 14 666 -------- -------- -------- Total deferred ........ (822) 318 7,958 -------- -------- -------- Total provision ......... $ 15,076 $ 16,238 $ 24,531 ======== ======== ========
The reconciliation of income tax computed at the United States federal statutory tax rate to the effective income tax rate is as follows:
Year Ended October 31, ---------------------------- 1996 1997 1998 ------ ------ ------ Statutory federal income tax rate ...... 35.0% 35.0% 35.0% Non-deductible goodwill amortization ...................... -- -- 2.7% State income taxes ..................... 2.4 1.2 2.1% Other .................................. 0.4 0.6 (0.1%) ------ ------ ------ Effective tax rate ................ 37.8% 36.8% 39.7% ====== ====== ======
Significant components of the Company's deferred tax liabilities and assets are as follows:
1997 1998 -------- -------- (in thousands) Deferred tax assets Inventory ......................... $ 1,632 $ 1,968 Bad debt reserve .................. 527 1,446 Accrued insurance reserves ........ 595 1,258 Deferred compensation ............. -- 711 Other reserves .................... 709 1,112 -------- -------- Total deferred tax assets .............. 3,463 6,495 -------- -------- Deferred tax liabilities Depreciation and amortization ..... 1,675 18,327 Other ............................. 951 2,944 -------- -------- Total deferred tax liabilities ......... 2,626 21,271 -------- -------- Net deferred tax asset (liability) ..... $ 837 $(14,776) -------- --------
(5) OPERATING LEASE COMMITMENTS Total rental expense incurred from operating non-cancelable leases for the years ended October 31, 1996, 1997 and 1998 was $3,990,000, $4,644,000 and $5,527,000, respectively. Aggregate minimum required annual payments on long-term operating leases at October 31, 1998 were as follows: 24 30
Year Ended October 31, (in thousands) - ------------------------------------------------------ 1999 . . . . . . . . . . . . . . . . . . . . $ 2,319 2000 . . . . . . . . . . . . . . . . . . . . 1,184 2001 . . . . . . . . . . . . . . . . . . . . 634 2002 . . . . . . . . . . . . . . . . . . . . 314 2003 . . . . . . . . . . . . . . . . . . . . 58 ------- $ 4,509 =======
(6) SHAREHOLDERS' RIGHTS PLAN In June 1998 the Board of Directors adopted a Shareholders' Rights Plan in which one preferred stock purchase right (Right) was declared as a dividend for each common share outstanding. Each Right entitles shareholders to purchase, under certain conditions, one-hundredth of a share of newly authorized Series A Junior Participating Preferred Stock at an exercise price of $125. Rights will be exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the common shares or commences a tender or exchange offer, upon consummation of which such person or group would beneficially own 20 percent or more of the common shares. In the event that a person or group acquires 20 percent or more of the common shares, the Rights enable dilution of the acquiring person's or group's interest by providing for a 50 percent discount on the purchase of common shares by the non-controlling shareholders. The company will generally be entitled to redeem the Rights at $0.01 per Right at any time before a person or group acquires 20 percent or more of the common shares. Rights will expire on June 24, 2008, unless earlier exercised, redeemed or exchanged. (7) COMMON STOCK In June 1998, the Company's Board of Directors approved a two-for-one split of the Common Stock effective for stockholders of record on July 8, 1998. Share and per share amounts have been restated to reflect the stock split. The Board of Directors has approved a non-statutory employee stock option plan. This plan includes the future granting of stock options to purchase up to 4,100,000 shares as an incentive and reward for key management personnel. Options expire ten years from date of grant. The right to acquire the option shares is earned in 25% increments over the first four years of the option period. Stock option transactions during 1996, 1997 and 1998 are as follows (in thousands, except per share amounts):
Weighted Number Average of Shares Exercise Price --------- -------------- Balance, October 31, 1995 ......... 1,524 $ 3.36 Granted ...................... 630 12.75 Canceled ..................... (46) (9.83) Exercised .................... (492) (1.52) ------- ------- Balance, October 31, 1996 ......... 1,616 7.39 Granted ...................... 314 15.23 Canceled ..................... (10) (12.09) Exercised ......................... (211) (6.34) ------- ------- Balance, October 31, 1997 .... 1,709 8.94 Granted ...................... 517 23.65 Canceled ..................... (22) (14.56) Exercised .................... (313) (7.98) ------- ------- Balance, October 31, 1998 ......... 1,891 $ 13.06 ======= =======
Options exerciseable at October 31, 1996, 1997, and 1998 were 783,000, 841,000 and 910,000, respectively. The weighted average exercise prices for options exerciseable at October 31, 1996, 1997 and 1998 were $3.00, $4.60 and $6.67. Exercise prices for options outstanding at October 31, 1998 range from $.80 to $27.00. The weighted average remaining contractual life of options outstanding at October 31, 1998 is 6.7 years. In accordance with the terms of APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of the grant, the Company records no compensation expense for its stock option awards. As required by SFAS No. 123, the Company provides the following disclosure of hypothetical values for these awards. The weighted average grant-date fair value of options granted during 1996, 1997 and 1998 was $6.53, $7.89 and $12.07, respectively. These values were estimated using the Black-Sholes option-pricing model with the following weighted average assumptions: no expected dividend, expected volatility of 38.1%, risk free interest rates ranging from 5.5% to 6.7% for 1996, 6.4% to 6.9% for 1997 and 4.6% to 5.9% for 1998, and expected lives of 7 years. Had compensation expense been recorded based on these hypothetical values, the Company's net income and earnings per share would have been as follows (in thousands, except per share data):
1996 1997 1998 ---------- ---------- ---------- Proforma net income .......... $ 24,379 $ 27,081 $ 35,887 Proforma net income per share - Basic ....... $ 1.57 $ 1.68 $ 2.08 Proforma net income per share - Diluted ..... $ 1.48 $ 1.59 $ 1.98
Because options vest over several years and additional options grants are expected, the effects of these hypothetical calculations are not likely to be representative of similar future calculations. (8) LITIGATION The Company is involved in certain litigation that the Company considers to be in the normal course of business. Management of the Company believes that such litigation will not result in any material losses. 25 31 (9) NET INCOME PER SHARE During the first quarter of fiscal 1998, the Company adopted FASB Statement No. 128, Earnings Per Share, which requires the presentation of basic and diluted earnings per share. Under this statement, the dilutive effect of stock options is excluded from basic earnings per share, but included in the computation of diluted earnings per share. Earnings per share amounts for all periods presented have been restated. The computations are as follows:
Year Ended October 31, ----------------------------- 1996 1997 1998 ------- ------- ------- (in thousands, except per share data) Net income ............................. $24,814 $27,887 $37,318 Add: Interest, net of tax, on convertible debenture assumed converted ................. 38 66 66 ------- ------- ------- Adjusted net income .................... $24,852 $27,953 $37,384 ======= ======= ======= Weighted average common shares outstanding ................ 15,499 16,127 17,212 ======= ======= ======= Add: Common stock equivalents: Stock options ..................... 898 858 880 Convertible debenture ............. 58 100 100 Weighted average common shares outstanding, assuming dilution ............... 16,455 17,085 18,192 Net income per share--basic ............ $ 1.60 $ 1.73 $ 2.17 ======= ======= ======= Net income per share--diluted .......... $ 1.51 $ 1.64 $ 2.05 ======= ======= =======
(10) EMPLOYEE BENEFIT PLAN The Company has a 401(k) profit sharing plan (the "Savings Plan") which covers all eligible employees. The Savings Plan requires the Company to match employee contributions up to a certain percentage of a participant's salary. No other contributions may be made to the Savings Plan. Contributions accrued for the Savings Plan for the year ended October 31, 1996, 1997 and 1998 were $1,155,000, $1,604,000 and $2,219,000 respectively. (11) ACQUISITIONS In November 1995, the Company acquired substantially all of the assets and assumed certain liabilities of Doors and Building Components, Inc. ("DBCI"), a manufacturer of roll-up steel overhead doors used primarily in self-storage and commercial/industrial applications, for approximately $12 million in cash and 600,000 shares of common stock of the Company, valued at $5.2 million. Based on the final determination of book value of the purchased assets, the price was reduced by approximately $2.5 million of which $1.5 million was due from the seller and was recorded as a receivable in the October 31, 1996 balance sheet. This amount was settled in cash in December, 1996. The acquisition was accounted for using the purchase method of accounting. The excess of cost over fair value of the acquired net assets was $11.4 million. In April, 1996, the Company acquired substantially all of the assets and assumed certain liabilities of Mesco Metal Buildings, a division of Anderson Industries, Inc. ("Mesco"), a manufacturer of metal building systems and components, for approximately $20.8 million in cash and a $1.5 million 7% convertible subordinated debenture due April, 2001. The acquisition was accounted for using the purchase method of accounting. The excess of cost over fair value of the acquired net assets was $10.9 million. On May 4, 1998, the Company acquired Metal Building Components, Inc. ("MBCI") through the purchase of all of the outstanding capital stock of Amatek Holdings, Inc. from BTR Australia Limited, a wholly owned subsidiary of BTR plc, for a purchase price of approximately $593 million, including cash of $550 million (plus transaction costs) and 1.4 million shares of the Company's common stock valued at $32.2 million. MBCI designs, manufactures, sells and distributes metal components for commercial, industrial, architectural, agricultural and residential construction uses. MBCI also processes its own hot roll coil metal for use in component manufacturing, as well as processing hot roll coil metal and toll coating light gauge metal for use by other parties in the construction of metal building components and numerous other products. The funds for this acquisition were provided from the proceeds of a new $600 million credit facility from a bank under which the Company initially borrowed $540 million. The acquisition was accounted for using the purchase method of accounting. The excess of cost over the fair value of the acquired assets was approximately $395.1 million, based on the preliminary purchase price allocation, which may be adjusted upon final valuation of certain assets and liabilities. The consolidated results of operations for 1998 include MBCI since the date of acquisition. Assuming the acquisition of MBCI had been consummated as at the beginning of the respective periods presented, the proforma unaudited results of operations are as follows (in thousands, except per share data):
Year Ended October 31, 1997 1998 ----------- ----------- Sales $ 815,718 $ 871,026 Net income $ 31,431 $ 36,408 Net income per share - basic $ 1.79 $ 2.03 Net income per share - diluted $ 1.70 $ 1.93
26 32 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders NCI Building Systems, Inc. We have audited the accompanying consolidated balance sheets of NCI Building Systems, Inc. as of October 31, 1998 and 1997, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended October 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NCI Building Systems, Inc. at October 31, 1998 and 1997 and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 1998, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Houston, Texas December 8, 1998 27 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table presents, as a percentage of sales, certain selected consolidated financial data for the Company for the periods indicated:
Year Ended October 31, ------------------------------ 1996 1997 1998 ------ ------ ------ Sales .................................. 100.0% 100.0% 100.0% Cost of sales .......................... 72.5 73.4 73.7 ------ ------ ------ Gross profit ........................... 27.5 26.6 26.3 Operating expenses ..................... 16.0 16.3 14.2 Nonrecurring acquisition expense ....... -- -- 0.3 ------ ------ ------ Income from operations ................. 11.5 10.3 11.8 Interest expense ....................... 0.0 0.0 3.1 Other income net ....................... (0.5) (0.5) (0.5) ------ ------ ------ Income before income taxes ............. 12.0 10.8 9.2 Provision for income taxes ............. 4.5 4.0 3.6 ------ ------ ------ Net income ............................. 7.5% 6.8% 5.6% ====== ====== ======
FISCAL 1998 COMPARED TO FISCAL 1997 Sales in fiscal 1998 increased by $267.8 million, or 66%, compared to fiscal 1997. The acquisition of Metal Building Components, Inc. ("MBCI") on May 4, 1998 accounted for a substantial portion of this increase. Because NCI combined its component business with MBCI, consolidated its component sales and marketing personnel and transferred the operations of three of its manufacturing facilities to MBCI's manufacturing facilities shortly after the completion of the transaction, it is difficult to determine the exact impact on sales of the acquisition. The Company believes that its business grew approximately 9% in fiscal 1998. This internal growth resulted from geographical expansion of sales efforts and the Company's authorized builder organization. Gross profit for fiscal 1998 increased by $69.1 million, or 64%, compared to fiscal 1997. Gross profit dollars increased at a slightly slower rate than sales since components typically have a lower gross profit percentage than building systems. This accounted for the slight decline in gross profit percent to 26.3% in fiscal 1998 from 26.6% in fiscal 1997. The Company believes that the internal growth of gross profit would be similar to the sales increase mentioned above. Operating expenses include engineering, selling and general and administrative costs. Engineering expense is associated only with the sale of metal building systems. This expense increased by $1.2 million, or 9%, in fiscal 1998 compared to fiscal 1997. This increase is in line with the growth of metal building systems sales. Selling, general and administrative expenses increased $28.8 million, or 55%, in fiscal 1998 compared to fiscal 1997. These expenses grew at a slower rate than sales because the component business has a lower level of selling expense associated with it. As a result, the percentage of selling, general and administrative expenses to sales declined to 12.1% in fiscal 1998 from 13.0% in fiscal 1997. The nonrecurring acquisition expense of $2.1 million represented the one-time cost of severance and relocation expenses related to the consolidation of component sales and marketing functions, estimated costs associated with announced plant closures and consolidations and costs associated with the integration of product lines. Interest expense increased in fiscal 1998 to $20.8 million compared to $.2 million in fiscal 1997 reflecting the cost of borrowed funds to finance the MBCI acquisition and the amortization of debt issuance costs related to such borrowings. On May 4, 1998 the Company borrowed $540 million to finance the MBCI acquisition and had outstanding total debt of $475.7 million at the end of October 1998. The company entered into an interest rate swap agreement to fix the interest on $200 million (currently $192.5 million is outstanding) of this amount at 5.9% plus the applicable margin on borrowings which is currently 1.75%. The remainder of the debt bears interest at a floating rate. Joint venture income of $737,000 in fiscal 1998 primarily represents the 50% ownership in a coil coating plant which was acquired as part of the MBCI transaction. Income before income taxes increased by $17.7 million, or 40%, in fiscal 1998. The increase was less than the sales increase as a result of the increase in interest expense, amortization of goodwill expense and the nonrecurring acquisition expenses. Provision for income taxes increased by 51% in fiscal 1998, reflecting an effective tax rate of 39.7% in fiscal 1998 compared to 36.8% in fiscal 1997. The increase in effective tax rate resulted primarily from nondeductible amortization of goodwill associated with the MBCI transaction. FISCAL 1997 COMPARED TO FISCAL 1996 Sales in fiscal 1997 increased by $74.9 million, or 22%, compared to fiscal 1996. The acquisition of the operations of Carlisle Engineered Metals ("ECI") in February 1997 and the inclusion of Mesco Metal Buildings ("Mesco") for the whole fiscal year 1997 accounted for approximately $23 million of this increase. The remaining increase of approximately $50 million, or 15%, resulted from growth of the Doors and Building Components sales due to geographic expansion, building systems sales growth due to increased builder recruitment and a full years' operation of the Company's Atwater plant and growth in the component division of the Company. 28 34 Gross profit increased by $16.8 million, or 18%, compared to fiscal 1996. Gross profit dollars increased at a slower rate than sales due to price competition earlier in the year, bad weather in the first half of 1997 which impacted plant efficiencies and slightly higher raw material costs. In addition, growth in the component and door sales which have lower gross margins than building systems impacted gross profit. As a result, the gross margin percentage in 1997 declined from 27.5% to 26.6%. Engineering costs increased $2.2 million, or 19%, which was in line with the growth in metal building systems sales. Selling, general and administrative costs increased by $10.8 million, or 26%, compared to the prior year. These expenses increased at a slightly higher rate than sales due to the additional expenses resulting from the acquisition of ECI, additional sales expense to support the Classic Metal Homes effort and continued geographic expansion of the Company's sales and marketing effort. Interest expense increased $55,000 in 1997 as a result of the $1.5 million debenture issued in April 1996 being out-standing all of 1997. Other income, which consists of interest income, increased by $413,000 in fiscal year 1997. This increase was the result of higher level of cash invested during the year. Provision for income taxes increased by 7.7% in fiscal year 1997 and decreased as a percent of sales from 4.5% in 1996 to 4.0% in 1997. During the year, the Company changed the corporate structure of certain operating units which reduced the amount of state income paid by these units. LIQUIDITY AND CAPITAL RESOURCES At October 31, 1998, the Company had working capital of $58.4 million compared to $76.8 million on October 31, 1997. The decrease of $18.4 was primarily the result of the MBCI acquisition. During the year, the Company generated $65.7 million in cash flow from operations before changes in working capital components. On May 4, 1998, the Company acquired all of the out-standing capital stock of Amatek Holdings, Inc. from BTR Australia Limited, a wholly owned subsidiary of BTR plc, for a purchase price of approximately $593 million, including cash of $550 million (plus transaction costs) and 1.4 million shares of common stock valued at $32.2 million. The Company financed the MBCI acquisition by obtaining a new $600 million senior credit facility from a bank, (as discussed in Note 2 to the audited financial statements). Loans bear interest, at the Company's option, as follows: (i) base rate loans at the base rate plus a margin that ranges from 0% to 0.5% and (ii) LIBOR loans at LIBOR plus a margin that ranges from 0.75% to 2.0%. Base rate is defined as the higher of NationsBank, N.A.'s prime rate or the overnight Federal funds rate plus 0.5%, and LIBOR is defined as the applicable London interbank offered rate adjusted for reserves. Based on its current ratios, the Company is paying a margin of 0.5% on base rate loans and 1.75% on LIBOR loans. The Company currently has an interest rate swap agreement in place which caps interest on LIBOR loans at 5.89% plus the applicable LIBOR margin for the principal amount of the term loan. In September 1998, the Company reduced its senior credit facility to $540 million to better reflect future anticipated needs. Loans under the five-year revolver mature on July 1, 2003. Loans under the term loan are payable in successive quarterly installments beginning on October 31, 1998 beginning with $7.5 million and gradually increasing to $12.5 million on the maturity date. As of October 31, the Company had $474.1 million outstanding under the senior credit facility. The 364-day revolver matures on April 30, 1999. If the 364-day revolver is not repaid by the Company or extended by the lenders, the Company has the option to convert it to a three-year term note. Borrowings under the senior credit facility may be prepaid and the voluntary reduction of the unutilized portion of the five-year revolver may be made at any time, in certain agreed upon minimum amounts, without premium or penalty but subject to LIBOR breakage costs. The Company is required to make mandatory prepayments on the senior credit facility upon the occurrence of certain events, including the sale of assets and the issuance and sale of equity securities, in each case subject to certain limitations. During the year, the Company spent $18.5 million in capital additions for plant expansion, and the development of new management information systems, and $15.5 million for the acquisition of California Finished Metals, Inc., a coil painting facility located in California. The Company plans to spend approximately $27 million for capital additions in fiscal 1999. Delays or cancellation of planned projects could increase or decrease capital spending from the amounts anticipated at the current time. Inflation has not significantly affected the Company's financial position or operations. Metal components and metal building systems sales are affected more by the availability of funds for construction than interest rates. No assurance can be given that inflation or interest rates will not fluctuate significantly, either or both of which could have an adverse effect on the Company's operations. Liquidity in future periods will be dependent on internally generated cash flows, the ability to obtain adequate financing 29 35 UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) for capital expenditures and expansion when needed and the amount of increased working capital necessary to support expected growth. Based on current capitalization, it is expected that future cash flows from operations and the availability of alternative sources of external financing should be sufficient to provide adequate liquidity for the foreseeable future. IMPACT OF THE YEAR 2000 ISSUE The year 2000 issue is the result of computer programs having been written using two digits rather than four to define the applicable year. Any computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has conducted a review of its computer systems to identify the systems that could be affected by the year 2000 issue and is implementing its plan to attempt to ensure that its management information systems ("MIS") and computer software are year 2000 compliant. This review is part of the Company's overall upgrade of its MIS, which is currently in progress and includes the installation of new systems. As a result, the Company has no separate budget for year 2000 compliance. Expenses relating to reviewing and assessing systems are included in historical operating expenses as part of management information expenses and have not been separately identified. Management has completed the upgrade with respect to a substantial majority of the Company's operations in 1998 and the upgrade for the remaining operating divisions will be completed in the first six months of 1999. Management believes that with installation of the new systems, conversion to new software and modifications to existing software, the year 2000 issue will pose no significant operational problems for the Company's MIS. The Company expects to complete all new installations, conversions and necessary systems modifications and conversions by mid-1999. There can be no assurance, however, that the Company will be able to install and maintain year 2000 compliant MIS and software. The Company is currently discussing with its vendors and customers the possibility of any year 2000 interface difficulties that may affect the Company. The ability of third parties with whom the Company transacts business to address adequately their year 2000 issue is, however, outside the Company's control. To date, the company has not identified any information technology assets under the control of the Company that present a material risk of not being year 2000 ready or for which a suitable alternative cannot be implemented or is not being implemented. The Company does not have a contingency plan with respect to the year 2000 issue if the MIS upgrade is not completed or is delayed beyond the end of 1999. The failure of the Company to address adequately, and in a timely manner, the year 2000 issue, including ensuring that the Company's MIS and software are year 2000 compliant, could have a materially adverse effect on the Company's business, results of operations and financial condition. As the Company's MIS upgrade is implemented, the Company may identify assets that present a risk of a year 2000-related disruption. It is also possible that such a disruption could have a materially adverse effect on the Company's business, financial condition and results of operations. In addition, if any third parties who provide goods or services that are critical to the Company's business activities fail to appropriately address their year 2000 issues, there could be a materially adverse effect on the Company's business, result of operations and financial condition. MARKET RISK DISCLOSURE The Company is subject to market risk exposure related to changes in interest rates on its credit facility, which includes revolving credit notes and term notes. These instruments carry interest at a pre-agreed upon percentage point spread from either the prime interest rate or LIBOR. Under its credit facility, the Company may, at its option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to 6 months. At October 31, 1998, the Company had $474.1 million outstanding under its credit facility, of which $192.5 million is subject to an interest rate swap agreement that effectively fixes the interest rate at 5.9 percent plus the applicable margin on borrowings (currently 1.75%). Based on this balance, an immediate change of one percent in the interest rate would cause a change in interest expense of approximately $2.8 million on an annual basis. The Company's objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared with fixed-rate borrowings. 30 36 QUARTERLY FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- FISCAL YEAR 1998 Sales ............................................ $ 97,323 $ 95,349 $229,547 $253,112 Gross profit ..................................... 25,437 26,614 60,716 64,702 Income before income taxes ....................... 9,448 9,981 19,310 23,110 Net income ....................................... 6,052 6,396 11,098 13,772 Net income per common and common equivalent share - Basic(1) .......... $ .37 $ .39 $ .62 $ .76 Net income per common and common equivalent share - Diluted(1) ........ $ .35 $ .37 $ .58 $ .73 FISCAL YEAR 1997 Sales ............................................ $ 82,875 $ 91,637 $112,484 $120,755 Gross profit ..................................... 22,410 23,694 29,774 32,466 Income before income taxes ....................... 8,250 8,180 12,653 15,042 Net income ....................................... 5,152 5,183 7,971 9,581 Net income per common and common equivalent share - Basic(1) .......... $ .32 $ .32 $ .49 $ .59 Net income per common and common equivalent share - Diluted(1) ........ $ .30 $ .30 $ .47 $ .56
(1)The sum of the quarterly income per share amounts do not equal the annual amount reported, as per share amounts are computed independently for each quarter and for the full year based on the respective weighted average common shares outstanding. PRICE RANGE OF COMMON STOCK The Company's common stock began trading on the NYSE under the symbol "NCS" on August 13, 1998. The Company's stock previously traded on the Nasdaq National Market. The following table sets forth the quarterly high and low closing sale prices of the Company common stock, as reported by the Nasdaq National Market or the NYSE, as applicable, for the prior two years. The prices quoted represent prices between dealers in securities, without adjustments for mark-ups, mark-downs, or commissions, and do not necessarily reflect actual transactions.
Fiscal Year 1997 High Low - --------------------------------------------------------------- January 31 ............................. $ 18.75 $ 13.38 April 30 ............................... $ 19.13 $ 14.75 July 31 ................................ $ 18.94 $ 12.75 October 31 ............................. $ 19.88 $ 16.75
Fiscal Year 1998 High Low - --------------------------------------------------------------- January 31 ............................. $ 19.78 $ 16.88 April 30 ............................... $ 26.00 $ 18.06 July 31 ................................ $ 32.25 $ 23.13 October 31 ............................. $ 27.38 $ 15.44
31 37 CORPORATE DATA CORPORATE HEADQUARTERS NCI Building Systems, Inc. 7301 Fairview Houston, Texas 77041 713/466-7788 PLANT LOCATIONS Atwater, California Caryville, Tennessee Chandler, Arizona Chester, South Carolina Douglasville, Georgia Ennis, Texas Grapevine, Texas Hobbs, New Mexico Houston, Texas (6) Jackson, Mississippi (2) Mattoon, Illinois Tallapoosa, Georgia Stafford, Texas Monterrey, Mexico Oklahoma City, Oklahoma Converse, Texas Grand Prairie, Texas Lubbock, Texas Rome, New York Adel, Georgia Salt Lake City, Utah Hernando, Mississippi Memphis, Tennessee Nicholasville, Kentucky Atlanta, Georgia Plant City, Florida Colonial Heights, Virginia Shelbyville, Indiana Omaha, Nebraska Nampa, Idaho Tolleson, Arizona Marietta, Georgia ANNUAL MEETING 10:00 A.M., March 17, 1999 NCI Building Systems, Inc. Corporate Offices 7301 Fairview Houston, Texas 77041 COMMON STOCK TRANSFER AGENT AND REGISTRAR Harris Trust and Savings Bank Houston, Texas LEGAL COUNSEL Gardere & Wynne, L.L.P. AUDITORS Ernst & Young LLP FORM 10-K The Company's Annual Report on Form 10-K Report for the year ended October 31, 1998, as filed with the Securities and Exchange Commission, is available without charge upon request to Robert J. Medlock at the address of the Corporate Offices. The Company's common stock is traded on the NYSE under the trading symbol NCS. NUMBER OF SHAREHOLDERS As of October 31, 1998, there were 183 share-holders of record of the Company's common stock. The Company has over 7,900 beneficial shareholders. 32 EX-21 31 LIST OF SUBSIDIARIES 1 EXHIBIT 21 NCI BUILDING SYSTEMS, INC. List of Subsidiaries NCI Holding Corp. Delaware NCI Operating Corp. Nevada Metal Building Components Holding, Inc. Delaware Metal Coaters Holding, Inc. Delaware Metal Coaters of California, Inc. Texas Building Systems de Mexico, S.A. de C.V. Mexico EX-23 32 CONSENT OF ERNEST & YOUNG LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of NCI Building Systems, Inc. of our report dated December 8, 1998, included in the 1998 Annual Report to Shareholders of NCI Building Systems, Inc. Our audits also included the financial statement schedule of NCI Building Systems, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-14957 and No. 33-52078) pertaining to the 401(k) Profit Sharing Plan of NCI Building Systems, Inc. and Registration Statements (Form S-8 No. 333-34899, No. 33-52080 and No. 333-12921) pertaining to the Nonqualified Stock Option Plan of NCI Building Systems, Inc., of our reports with respect to the consolidated financial statements and schedule of NCI Building Systems, Inc., for the year ended October 31, 1998. /s/ ERNST & YOUNG LLP ERNST & YOUNG, LLP Houston, Texas January 25, 1999 EX-27 33 FINANCIAL DATA SCHEDULE
5 1,000 YEAR OCT-31-1998 NOV-01-1997 OCT-31-1998 4,599 0 101,582 2,321 78,001 192,570 208,171 28,671 823,537 134,177 0 0 0 181 223,431 823,537 675,331 675,331 497,862 93,475 (1,236) 2,625 20,756 61,849 24,531 0 0 0 0 37,318 2.17 2.05
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