UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
In the matter of
Nortek, Inc., a corporation.
File No. 981-0111
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission ("Commission"), having initiated an
investigation of the acquisition by Nortek, Inc. ("Nortek"), through its
wholly-owned subsidiary NTK Sub, Inc., of all the outstanding shares of the capital stock
of NuTone Inc., and it now appearing that Nortek, hereinafter sometimes referred to as
"proposed respondent," is willing to enter into an agreement containing an order
to divest certain assets and providing for other relief:
IT IS HEREBY AGREED by and between proposed respondent, by its duly authorized
officers and attorney, and counsel for the Commission that:
1. Proposed respondent Nortek is a corporation organized, existing and doing business
under and by virtue of the laws of the State of Delaware with its office and principal
place of business located at 50 Kennedy Plaza, Providence, Rhode Island 02903.
2. Proposed respondent admits all the jurisdictional facts set forth in the draft of
complaint here attached.
3. Proposed respondent waives:
1. any further procedural steps;
2. the requirement that the Commission's decision contain a statement of findings of
fact and conclusions of law;
3. all rights to seek judicial review or otherwise to challenge or contest the validity
of the order entered pursuant to this agreement; and
4. any claim under the Equal Access to Justice Act.
4. Within thirty (30) days of the date this agreement is signed by proposed respondent
and every thirty (30) days thereafter until the order becomes final, proposed respondent
shall submit a report, pursuant to Section 2.33 of the Commissions Rules, signed by
the proposed respondent setting forth in detail the manner in which the proposed
respondent will comply with Paragraph II of the order when and if entered. Such report
will not become part of the public record unless and until the accompanying agreement and
order are accepted by the Commission for public comment.
5. This agreement shall not become part of the public record of the proceeding unless
and until it is accepted by the Commission. If this agreement is accepted by the
Commission it, together with the draft of complaint contemplated thereby, will be placed
on the public record for a period of sixty (60) days and information in respect thereto
publicly released. The Commission thereafter may either withdraw its acceptance of this
agreement and so notify the proposed respondent, in which event it will take such action
as it may consider appropriate, or issue and serve its complaint (in such form as the
circumstances may require) and decision, in disposition of the proceeding.
6. This agreement is for settlement purposes only and does not constitute an admission
by proposed respondent that the law has been violated as alleged in the draft of complaint
here attached, or that the facts as alleged in the draft complaint, other than
jurisdictional facts, are true.
7. This agreement contemplates that, if it is accepted by the Commission, and if such
acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of
§ 2.34 of the Commission's Rules, the Commission may, without further notice to the
proposed respondent, (1) issue its complaint corresponding in form and substance with the
draft of complaint here attached and its decision containing the following order in
disposition of the proceeding and (2) make information public with respect thereto. When
so entered, the order shall have the same force and effect and may be altered, modified or
set aside in the same manner and within the same time provided by statute for other
orders. The order shall become final upon service. Delivery by the U.S. Postal Service of
the complaint and decision containing the agreed-to order to proposed respondent's address
as stated in this agreement shall constitute service. Proposed respondent waives any right
it may have to any other manner of service. The complaint may be used in construing the
terms of the order, and no agreement, understanding, representation, or interpretation not
contained in the order or the agreement may be used to vary or contradict the terms of the
8. By signing this agreement, proposed respondent represents that it can accomplish the
full relief contemplated by this agreement.
9. Proposed respondent has read the proposed complaint and order contemplated hereby.
Proposed respondent understands that once the order has been issued, it will be required
to file one or more compliance reports showing that it has fully complied with the order.
Proposed respondent further understands that it may be liable for civil penalties in the
amount provided by law for each violation of the order after it becomes final. Proposed
respondent agrees to comply with the terms of the proposed order from the date proposed
respondent executes this agreement containing consent order.
IT IS ORDERED that, as used in this order, the following definitions shall
A. "Respondent" or "Nortek" means Nortek, Inc., its directors,
officers, employees, agents, representatives, successors, and assigns; its subsidiaries,
including but not limited to M & S Systems LP, and its divisions, groups and
affiliates controlled by Nortek, Inc., and the respective directors, officers, employees,
agents, representatives, successors, and assigns of each.
B. M & S Systems LP ("M & S") is a limited partnership organized,
existing, and doing business under and by virtue of the laws of the State of Delaware,
with its principal place of business located at 2861 Congressman Lane, Dallas, Texas
75220. M & S is a wholly-owned subsidiary of Nortek.
C. "Commission" means the Federal Trade Commission.
D. "Hard-Wired Residential Intercoms" means electrical devices installed in
residences to provide audio-only room-to-room or room-to-entrance communication or
monitoring functions through in-the-wall low voltage wiring, including, but not limited
to, such devices that incorporate music features.
E. "Assets To Be Divested" means M & S and all its assets, properties,
business and goodwill, tangible and intangible, including, but not limited to, the
- all machinery, fixtures, equipment, vehicles, transportation facilities, furniture,
tools and other tangible personal property;
- all customer lists, vendor lists, catalogs, sales promotion literature, advertising
materials, research materials, technical information, management information systems,
software, inventions, trade secrets, intellectual property, patents and patent
applications and formulas, technology, know-how, specifications, designs, engineering,
drawings, processes and quality control data;
- all copyrights, brands, brand names, trade marks and trade names owned or used by M
& S, and all rights relating thereto, except that the Broan and Novi trade names and
trade marks shall not be included;
- inventory and storage capacity;
- all rights, titles and interests in and to owned or leased real property, together with
appurtenances, licenses and permits;
- all rights, titles and interests in and to the contracts entered into in the ordinary
course of business with customers (together with associated bid and performance bonds),
suppliers, sales representatives, distributors, agents, personal property lessors,
personal property lessees, licensors, licensees, consignors and consignees;
- all rights under warranties and guarantees, express or implied;
- all books, records, and files; and
- all items of prepaid expense.
F. Proposed Acquisition means the proposed acquisition by Nortek of all of
the shares of the capital stock of NuTone Inc.
IT IS FURTHER ORDERED that:
A. Respondent shall divest at no minimum price, absolutely and in good faith, within
six (6) months from the date respondent executes the agreement containing consent order,
the Assets To Be Divested.
B. Respondent shall divest the Assets To Be Divested only to an acquirer that receives
the prior approval of the Commission and only in a manner that receives the prior approval
of the Commission. The purpose of the divestiture of the Assets To Be Divested is to
ensure the continued use of the Assets To Be Divested in the same business in which the
Assets To Be Divested are engaged at the time of the Proposed Acquisition, and to remedy
the lessening of competition in the manufacture, production and sale of Hard-Wired
Residential Intercoms resulting from the Proposed Acquisition as alleged in the
C. Pending divestiture of the Assets To Be Divested, respondent shall take such actions
as are necessary to maintain the viability and marketability of the Assets To Be Divested
and to prevent the destruction, removal, wasting, deterioration, or impairment of any of
the Assets To Be Divested except for ordinary wear and tear.
D. Upon reasonable notice from the acquirer to respondent, respondent shall provide
such technical assistance to the acquirer as is reasonably necessary to enable the
acquirer to manufacture and sell products in substantially the same manner and quality as
they were manufactured and sold prior to the divestiture of the assets described in
Paragraph I.E. of this agreement, except that Nortek shall only be required to provide
such technical assistance that is within its operation or control and shall not be
required to provide third-party technical assistance. Such assistance shall include
reasonable consultation with knowledgeable employees and training at the acquirers
or the respondents facility, at the acquirers option, for a period of time
sufficient to satisfy the acquirers management that its personnel are appropriately
trained in the skills necessary to manufacture and sell the products. Respondent shall
convey all know-how necessary to manufacture and sell the products in substantially the
same manner and quality as they were manufactured and sold prior to the divestiture.
However, respondent shall not be required to continue providing such assistance for more
than one year from the date of the divestiture. Respondent shall charge the acquirer at a
rate no more than its own direct costs for providing such technical assistance.
E. Respondent shall comply with all terms of the Agreement to Hold Separate, attached
to this order and made a part hereof as Appendix I. The Agreement to Hold Separate shall
continue in effect until such time as respondent has divested all the Assets To Be
Divested as required by this order.
IT IS FURTHER ORDERED that:
A. If Nortek has not divested, absolutely and in good faith and with the Commission's
prior approval, the Assets To Be Divested within the time period in Paragraph II, the
Commission may appoint a trustee to divest the Assets To Be Divested. In the event that
the Commission or the Attorney General brings an action pursuant to § 5(l) of the
Federal Trade Commission Act, 15 U.S.C. § 45(l), or any other statute enforced by
the Commission, Nortek shall consent to the appointment of a trustee in such action.
Neither the appointment of a trustee nor a decision not to appoint a trustee under this
Paragraph shall preclude the Commission or the Attorney General from seeking civil
penalties or any other relief available to it, including a court-appointed trustee,
pursuant to § 5(l) of the Federal Trade Commission Act, or any other statute
enforced by the Commission, for any failure by the respondent to comply with this order.
B. If a trustee is appointed by the Commission or a court pursuant to Paragraph III.A.
of this order, respondent shall consent to the following terms and conditions regarding
the trustee's powers, duties, authority, and responsibilities:
- The Commission shall select the trustee, subject to the consent of respondent, which
consent shall not be unreasonably withheld. The trustee shall be a person with experience
and expertise in acquisitions and divestitures. If respondent has not opposed, in writing,
including the reasons for opposing, the selection of any proposed trustee within ten (10)
days after notice by the staff of the Commission to respondent of the identity of any
proposed trustee, respondent shall be deemed to have consented to the selection of the
- Subject to the prior approval of the Commission, the trustee shall have the exclusive
power and authority to divest the Assets To Be Divested.
- Within ten (10) days after appointment of the trustee, respondent shall execute a trust
agreement that, subject to the prior approval of the Commission and, in the case of a
court-appointed trustee, of the court, transfers to the trustee all rights and powers
necessary to permit the trustee to effect the divestiture required by this order.
- The trustee shall have twelve (12) months from the date the Commission approves the
trust agreement described in Paragraph III. B. 3. to accomplish the divestiture, which
shall be subject to the prior approval of the Commission. If, however, at the end of the
twelve-month period, the trustee has submitted a plan of divestiture or believes that
divestiture can be achieved within a reasonable time, the divestiture period may be
extended by the Commission, or, in the case of a court-appointed trustee, by the court;
provided, however, the Commission may extend this period only two (2) times.
- The trustee shall have full and complete access to the personnel, books, records and
facilities related to the Assets To Be Divested or to any other relevant information, as
the trustee may request. Respondent shall develop such financial or other information as
such trustee may request and shall cooperate with the trustee. Respondent shall take no
action to interfere with or impede the trustee's accomplishment of the divestiture. Any
delays in divestiture caused by respondent shall extend the time for divestiture under
this Paragraph in an amount equal to the delay, as determined by the Commission or, for a
court-appointed trustee, by the court.
- The trustee shall use his or her best efforts to negotiate the most favorable price and
terms available in each contract that is submitted to the Commission, subject to
respondent's absolute and unconditional obligation to divest expeditiously at no minimum
price. The divestiture shall be made in the manner as set out in Paragraph II of this
order; provided, however, if the trustee receives bona fide offers from more than one
acquiring entity, and if the Commission determines to approve more than one such acquiring
entity, the trustee shall divest to the acquiring entity or entities selected by
respondent from among those approved by the Commission.
- The trustee shall serve, without bond or other security, at the cost and expense of
respondent, on such reasonable and customary terms and conditions as the Commission or a
court may set. The trustee shall have the authority to employ, at the cost and expense of
respondent, such consultants, accountants, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are necessary to carry
out the trustee's duties and responsibilities. The trustee shall account for all monies
derived from the divestiture and all expenses incurred. After approval by the Commission
and, in the case of a court-appointed trustee, by the court, of the account of the
trustee, including fees for his or her services, all remaining monies shall be paid at the
direction of the respondent, and the trustee's power shall be terminated. The trustee's
compensation shall be based at least in significant part on a commission arrangement
contingent on the trustee's divesting the Assets To Be Divested.
- Respondent shall indemnify the trustee and hold the trustee harmless against any losses,
claims, damages, liabilities, or expenses arising out of, or in connection with, the
performance of the trustee's duties, including all reasonable fees of counsel and other
expenses incurred in connection with the preparation for, or defense of any claim, whether
or not resulting in any liability, except to the extent that such liabilities, losses,
damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton
acts, or bad faith by the trustee.
- If the trustee ceases to act or fails to act diligently, a substitute trustee shall be
appointed in the same manner as provided in Paragraph III. A. of this order.
- The Commission or, in the case of a court-appointed trustee, the court, may on its own
initiative or at the request of the trustee issue such additional orders or directions as
may be necessary or appropriate to accomplish the divestiture required by this order.
- The trustee shall have no obligation or authority to operate or maintain the Assets To
- The trustee shall report in writing to respondent and the Commission every sixty (60)
days concerning the trustee's efforts to accomplish divestiture.
IT IS FURTHER ORDERED that within thirty (30) days after the date this order
becomes final and every thirty (30) days thereafter until respondent has fully complied
with the provisions of Paragraphs II or III of this order, respondent shall submit to the
Commission a verified written report setting forth in detail the manner and form in which
it intends to comply, is complying, and has complied with Paragraphs II and III of this
order. Respondent shall include in its compliance reports, among other things that are
required from time to time, a full description of the efforts being made to comply with
Paragraphs II and III of the order, including a description of all substantive contacts or
negotiations for the divestiture and the identity of all parties contacted. Respondent
shall include in its compliance reports copies of all written communications to and from
such parties, all internal memoranda, and all reports and recommendations concerning
divestiture. The final compliance report shall include a statement that the divestiture
has been accomplished in the manner approved by the Commission and shall include the date
the divestiture was accomplished.
IT IS FURTHER ORDERED that respondent shall notify the Commission at least
thirty (30) days prior to any proposed change in the corporate respondent that may affect
compliance obligations arising out of the order, such as dissolution, assignment, sale
resulting in the emergence of a successor corporation, or the creation or dissolution of
subsidiaries or any other change in the corporation.
IT IS FURTHER ORDERED that, for the purpose of determining or securing
compliance with this order, upon written request, respondent shall permit any duly
authorized representative of the Commission:
A. Access, during office hours and in the presence of counsel, to all facilities and
access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and
other records and documents in the possession or under the control of respondent relating
to any matters contained in this order; and
B. Upon five days' notice to respondent and without restraint or interference from it,
to interview officers, directors, employees, agents or independent contractors of
Signed this _____ day of _______________, 19____.
NORTEK, INC., A CORPORATION FEDERAL TRADE COMMISSION
Richard L. Bready
Chairman and Chief Executive Officer
Kevin J. Arquit, Esq.
Rogers & Wells
Counsel for Nortek, Inc.
Paul G. Block
Gary S. Cooper
Colleen S. Lynch
David I. Keniry
Boston Regional Office
Andrew D. Caverly
Boston Regional Office
Willard K. Tom
Deputy Director Bureau of Competition
William J. Baer
Bureau of Competition