UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- Robert Pitofsky, Chairman
- Sheila F. Anthony
- Mozelle W. Thompson
- Orson Swindle
In the matter of
Nortek, Inc., a corporation.
DOCKET NO. C-3831
DECISION AND ORDER
The Federal Trade Commission ("Commission"), having initiated an
investigation of the acquisition by the respondent Nortek, Inc. ("Nortek"),
through its wholly-owned subsidiary NTK Sub, Inc., of all the outstanding shares of the
capital stock of NuTone Inc., and respondent having been furnished with a draft of
complaint which, if issued by the Commission, would charge respondent with violations of
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and Section 7
of the Clayton Act, as amended, 15 U.S.C. § 18; and
The respondent, its attorneys, and counsel for the Commission having thereafter
executed an agreement containing a consent order, an admission by the respondent of all
the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that
the signing of said agreement is for settlement purposes only and does not constitute an
admission by respondent that the law has been violated as alleged in such complaint, and
waivers and other provisions as required by the Commissions rules; and
The Commission, having thereafter considered the matter and having determined that it
had reason to believe that the respondent has violated the said Acts, and that a complaint
should issue stating its charges in that respect, and having thereupon accepted the
executed consent agreement and placed such agreement on the public record for a period of
sixty (60) days, now in further conformity with the procedure prescribed in § 2.34 of its
Rules, makes the following jurisdictional findings and enters the following order:
- 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.
- The Federal Trade Commission has jurisdiction of the subject matter of this proceeding
and of the respondent, and the proceeding is in the public interest.
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
By the Commission.
SEAL Donald S. Clark
ISSUED: October 8, 1998
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
In the matter of
Nortek, Inc., a corporation.
File No. 981-0111
AGREEMENT TO HOLD SEPARATE
This Agreement to Hold Separate is by and between Nortek, Inc. ("Nortek"), a
corporation organized and existing under the laws of the State of Delaware, M & S
Systems LP ("M & S"), a limited partnership organized and existing under the
laws of the State of Delaware and a wholly-owned subsidiary of Nortek, and the Federal
Trade Commission (the "Commission"), an independent agency of the United States
Government, established under the Federal Trade Commission Act of 1914, 15 U.S.C. § 41, et
WHEREAS, Nortek, through its wholly-owned subsidiary NTK Sub, Inc., has proposed
to acquire all the outstanding shares of the capital stock of NuTone Inc. ("Proposed
WHEREAS, the Commission is now investigating the Proposed Acquisition to
determine if it would violate any of the statutes the Commission enforces; and
WHEREAS, Nortek has entered into an Agreement Containing Consent Order
("Consent Agreement"), which requires, among other things, Nortek to divest
certain assets of M & S, as defined therein; and
WHEREAS, if the Commission accepts the Consent Agreement, the Commission will
place it on the public record for a period of at least sixty (60) days and subsequently
may either withdraw such acceptance or issue and serve its Complaint and decision in
disposition of the proceeding pursuant to the provisions of Section 2.34 of the
Commissions Rules; and
WHEREAS, the Commission is concerned that if an understanding is not reached
preserving the status of M & S during the period prior to the final issuance of the
Consent Agreement by the Commission (after the 60-day public notice period), there may be
interim competitive harm and divestiture or other relief resulting from a proceeding
challenging the legality of the Proposed Acquisition might not be possible, or might be
less than an effective remedy; and
WHEREAS, Nortek and M & S entering into this Agreement to Hold Separate
shall in no way be construed as an admission by Nortek that the Proposed Acquisition
constitutes a violation of any statute; and
WHEREAS, Nortek understands that no act or transaction contemplated by this
Agreement to Hold Separate shall be deemed immune or exempt from the provisions of the
antitrust laws or the Federal Trade Commission Act by reason of anything contained in this
Agreement to Hold Separate.
NOW, THEREFORE, upon the understanding that the Commission has not yet
determined whether it will challenge the Proposed Acquisition, and in consideration of the
Commissions agreement that, at the time it accepts the Consent Agreement for public
comment, it will grant early termination of the Hart-Scott-Rodino waiting period, Nortek
and M & S agree as follows:
1. Nortek agrees to execute and be bound by the terms of the order contained in the
Consent Agreement, as if it were final, from the date Nortek signs the Consent Agreement.
2. The terms capitalized herein shall have the same definitions as in the Consent
3. Nortek agrees that from the date the Proposed Acquisition is consummated until the
earlier of the dates listed in subparagraphs 3.a. - 3.b., it will comply with the
provisions of Paragraph 4. of this Agreement to Hold Separate:
- a. ten (10) business days after the Commission withdraws its acceptance of the Consent
Order pursuant to the provisions of Section 2.34 of the Commissions rules; or
- b. the day after the divestiture required by the Consent Order has been completed.
4. To ensure the complete independence and viability of M & S and to assure that no
competitive information is exchanged between the M & S and Nortek, Nortek shall hold M
& S separate and apart on the following terms and conditions:
- a. Nortek will cause to be appointed, within three (3) days of the date the Proposed
Acquisition is consummated, Richard Denman to manage and maintain M & S who will make
no changes to M & S other than changes made in the ordinary course of business. This
individual ("the Manager") shall manage M & S independently of the
management of Norteks other businesses. The Manager shall not be involved in any way
in the operations or management of any other Nortek business.
- b. The Manager shall have exclusive control over M & S, with responsibility for the
management of M & S and for maintaining the independence of M & S.
- c. Nortek shall not exercise direction or control over, or influence, directly or
indirectly, the Manager relating to the operation of M & S; provided, however, that
Nortek may exercise only such direction and control over the Manager and M & S as is
necessary to assure compliance with this Agreement to Hold Separate and with all
- d. Nortek and M & S shall maintain the marketability, viability, and competitiveness
of M & S and shall not sell, transfer, encumber it (other than in the normal course of
business or to assure compliance with the Consent Agreement), or otherwise impair its
marketability, viability or competitiveness.
- e. Except as required by law, and except to the extent that necessary information is
exchanged in the course of evaluating the Proposed Acquisition, defending investigations
or litigation, negotiating and executing agreements to divest the Assets To Be Divested,
complying with this Hold Separate Agreement or the consent order, or as necessary to
comply with its reporting requirements as a public company, Nortek shall not receive or
have access to, or the use of, non-public business information, or any material
confidential information about M & S or the activities of the Manager or support
service employees involved in the operation of M & S, not in the public domain. In
addition, Nortek may receive aggregate financial information relating to M & S, but
only to the extent necessary to allow Nortek to prepare federal and state consolidated
financial reports or tax returns and to comply with its reporting requirements as a public
company. Such information that is obtained pursuant to this subparagraph shall be used
only for the purposes set forth in this subparagraph.
- f. Nortek shall circulate to all its employees involved with M & S, or any line of
products that M & S manufactures and sells, and appropriately display, a copy of this
Agreement to Hold Separate and the Consent Agreement.
- g. If the Manager ceases to act or fails to act diligently, a substitute Manager shall
be appointed subject to the Commissions approval.
- h. The Manager shall have access to and be informed about all companies who inquire
about or seek or propose to buy any of the Assets To Be Divested. M & S may require
the Manager to sign a confidentiality agreement prohibiting the disclosure of any material
confidential information gained as a result of his or her role as a Manager to anyone
other than the Commission.
- i. The Manager shall report in writing to the Commission every thirty (30) days
concerning his or her efforts to accomplish the purposes of this Agreement to Hold
5. Nortek waives all rights to contest the validity of this Agreement to Hold Separate.
6. For the purpose of determining or securing compliance with this Agreement to Hold
Separate, subject to any legally recognized privilege, and upon written request, and on
reasonable notice, to Nortek made to its principal office, Nortek and M & S shall
permit any duly authorized representative or representatives of the Commission:
- a. Access during the office hours of Nortek and M & S, and in the presence of
counsel, to inspect any facilities and to inspect and copy all books, ledgers, accounts,
correspondence, memoranda, and other records and documents in the possession or under the
control of Nortek or M & S relating to compliance with this Agreement to Hold
- b. Upon five (5) days notice to Nortek and M & S, without restraint or
interference from it, to interview officers, directors, or employees of Nortek or M &
S, who may have counsel present, regarding any such matters.
7. This Agreement to Hold Separate shall not be binding until accepted by the
|FEDERAL TRADE COMMISSION
Debra A. Valentine
Chairman and Chief Executive Officer
M & S SYSTEMS LP
M & S Systems LP
Kevin J. Arquit, Esq.
Rogers & Wells
Counsel for Nortek, Inc.
Counsel for M & S Systems LP