10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2003
	OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to ____________
	Commission file number: 1-6112
	NORTEK HOLDINGS, INC.
	(exact name of Registrant as specified in its charter)
	Delaware	16-1638891
	(State or other jurisdiction	(IRS Employer
	of incorporation or organization)	Identification Number)
	50 Kennedy Plaza
	Providence, Rhode Island	02903-2360
	(Address of principal executive offices)	(zip code)
	REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 751-1600
	SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

As of January 9, 2003, the registrant no longer has any securities registered pursuant to this section

Indicate by check mark whether 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].

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).Yes __ No X  .

The aggregate market value of voting stock held by non-affiliates is zero

The number of shares of Capital Stock outstanding as of March 30, 2004 was 8,527,822.

NORTEK, INC. AND SUBSIDIARIES

December 31, 2003

PART I

ITEM 1. BUSINESS

Recapitalization Transaction

On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Nortek Holdings, Inc. (the “Company” or “Holdings”), a Delaware corporation formed in 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). On January 9, 2003, Holdings completed a recapitalization transaction (the “Recapitalization”), which resulted in the acquisition of Holdings by certain affiliates and designees of Kelso & Company L.P. (“Kelso”) and certain members of Nortek’s management. As a result, the Company’s shares of capital stock are no longer publicly traded, however, the Company will continue to file periodic reports with the Securities and Exchange Commission (“SEC”) as a voluntary filer as required by the indenture of the Company’s outstanding notes payable. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of Part II of this report and Notes 1, 2 and 7 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.

General

The Company is a diversified manufacturer of residential and commercial building products, operating within two principal segments. The Residential Building Products Segment and the Air Conditioning and Heating Products Segment. Through these segments, the Company manufactures and sells, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and the do-it-yourself (“DIY”) and professional remodeling and renovation markets. As used in this report, the terms "Company" and "Holdings" refer to Nortek Holdings, Inc., together with its subsidiaries, unless the context indicates otherwise. Such terms as "Company" and "Holdings" are used for convenience only and are not intended as a precise description of any of the separate corporations, each of which manages its own affairs.

The Company's performance is dependent to a significant extent upon the levels of residential replacement and remodeling, new residential construction and non-residential construction, which are affected by such factors as interest rates, inflation, seasonality, consumer spending habits and unemployment.

On February 12, 2004, the Company sold its wholly owned subsidiary Ply Gem Industries, Inc. (“Ply Gem”). Ply Gem consists of the operating subsidiaries that comprised the Company’s former Windows, Doors and Siding Products (“WDS”) Segment and Ply Gem’s corporate entity that was formerly part of Unallocated in the Company’s segment reporting. Prior to the sale of Ply Gem, the Company sold certain subsidiaries of Ply Gem. The sale of Ply Gem and these subsidiaries and their related operating results have been excluded from earnings (loss) from continuing operations and are classified as discontinued operations for all periods presented. (See Notes 1 and 10 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.)

Additional information concerning the Company's business is set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of Part II of this report, incorporated herein by reference. Information on foreign and domestic operations is set forth in Note 11 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.

Residential Building Products Segment

The Residential Building Products Segment manufactures and distributes built-in products primarily for the residential new construction, DIY and professional remodeling and renovation markets. The principal products sold by the Segment are:

• kitchen range hoods
• built-in exhaust fans (such as bath fans and fan, heater and light combination units)
• indoor air quality products
• bath cabinets
• door chimes
• radio intercoms
• central vacuum systems
• surround sound systems and,
• multi-room audio and video distribution equipment

The Segment is the largest supplier in North America of range hoods, bath fans and combination units, indoor air quality products (such as continuous-ventilation systems and energy-recovery ventilators) and one of the leading suppliers in Western Europe and South America of luxury "Eurostyle" range hoods. Products are sold under the Broan®, NuTone®, Nautilus®, Venmar®, vanEE®, Best®, Channel Plus®, Elan® and SpeakerCraft® brand names, among others. A key component of the Company’s operating strategy for this Segment is to introduce new products that capitalize on our strong brand names and on our extensive distribution system. Other products sold by this Segment include, among others, door chimes, trash compactors, attic and whole house ventilators, air quality and HEPA whole-house filtration systems, ceiling fans, as well as, wireless security products, garage door and gate operators and infrared control equipment (marketed under the Linear®, Westinghouse®, Open House® and Xantech® brand names). This Segment also manufactures and markets premium, hand crafted cooking ranges and accessories under the La Cornue name. The Company’s sales of kitchen range hoods and exhaust fans accounted for approximately 18.5% and 17.2%, respectively, of the Company’s consolidated net sales in 2003, 18.5% and 17.6%, respectively, of the Company’s consolidated net sales in 2002 and 16.8% and 17.1%, respectively, of the Company’s consolidated net sales in 2001.

A key component of the Segment's operating strategy is the introduction of new products which capitalize on the strong Broan®, NuTone®, Nautilus®, Venmar®, vanEE®, and Best® brand names and the extensive distribution system of the Segment's businesses. Products sold under these brand names include the Broan Allure® and Rangemaster® range hoods, Sensaire®, Solitaire® and Solitaire Ultra Silent® fans and fan lights, LoSone Select® fans, Best by Broan® “Eurostyle” luxury range hoods, the Venmar®, Guardian Plus™ Air Systems and vanEE® line of indoor air quality systems, NuTone SenSonic™ stereo speakers, Whispaire® range hoods and the Broan 12" wide trash compactor.

With respect to certain product lines, private label customers accounted for approximately 16.8% of the total sales of this Segment in 2003.

Production generally consists of fabrication from coil and sheet steel and formed metal utilizing stamping, pressing and welding methods, assembly with components and subassemblies purchased from outside sources (principally motors, fan blades, heating elements, wiring harnesses, controlling devices, glass, wood, mirrors, lighting fixtures and polyethylene components, speakers, grilles and electronic components) and painting, finishing and packaging. See the discussion on Raw Materials under General Considerations below.

The Segment offers a broad array of products with various features and styles across a range of price points. The Company believes that the Segment's variety of product offerings helps the Segment maintain and improve its market position for its principal products. At the same time, the Company believes that the Segment's status as a low-cost producer, in large part as a result of advanced manufacturing processes, provides the Segment with a competitive advantage.

The Segment's primary products compete with many domestic and international suppliers in their various markets. The Segment competes with suppliers of competitive products primarily on the basis of quality, distribution, delivery and price. Although the Segment believes it competes favorably among other suppliers of the Segment's products, certain of these suppliers have greater financial and marketing resources than the Segment.

The Segment had 17 manufacturing plants and employed approximately 4,139 full-time people as of December 31, 2003, 615 of whom are covered by collective bargaining agreements which expire in 2004 and 171 of whom are covered by collective bargaining agreements which expire between 2007 and 2008. The Company believes that the Segment's relationships with its employees are satisfactory.

Air Conditioning and Heating Products Segment

The Air Conditioning and Heating Products Segment manufactures and sells heating, ventilating and air conditioning systems and products (“HVAC”) for site-built residential and manufactured housing structures and custom-designed commercial applications and standard light commercial products.

Residential Products

The Segment manufactures air conditioners, heat pumps and furnaces for the residential and light commercial markets. For site-built homes and light commercial structures, the Segment markets its products under the licensed names, Frigidaire®, Tappan®, Philco®, Kelvinator®, Gibson®, Westinghouse® and Maytag® and certain private label names. Within the residential market, the Segment is one of the largest suppliers of these products for manufactured homes in the United States and Canada. In the manufactured housing market, the Segment markets its products under the Intertherm® and Miller® brand names.

The principal factors affecting the market for the Segment's residential HVAC products are the demand for replacement and modernization of existing equipment, housing starts and the level of manufactured housing shipments. The Company anticipates that the replacement market will continue to expand as a large number of previously installed heating and cooling products become outdated or reach the end of their useful lives. This growth may be accelerated by a tendency among consumers to replace older heating and cooling products with higher efficiency models prior to the end of such equipment's useful life. The market for residential cooling products, including those sold by the Segment, is affected by spring and summer temperatures. The Segment does not sell window air conditioners, a segment of the market which is highly seasonal and significantly impacted by spring and summer temperatures. The Company believes that the Segment's ability to offer both heating and cooling products helps offset the effects of seasonality on the Segment's sales.

The Segment sells its manufactured housing products to builders of manufactured housing and, through distributors, to manufactured housing retailers and owners of such housing. The majority of sales to builders of manufactured housing consist of furnaces designed and engineered to meet or exceed certain standards mandated by federal agencies, including HUD. These standards differ in several important respects from the standards for furnaces used in site-built residential homes. The aftermarket channel of distribution includes sales of both new and replacement air conditioning units and heat pumps and replacement furnaces. The Company believes that the Segment has one major competitor in the furnace sector of this market, York International Corporation, which markets its products primarily under the Coleman name. The Segment competes with most major industry manufacturers for the air conditioning sector of this market.

Residential HVAC products for use in site-built homes are sold through independently-owned distributors who sell to HVAC contractors. The site-built residential HVAC market is very competitive. In this market, the Segment competes with, among others, Carrier Corporation, Rheem Manufacturing Company, Lennox Industries, The Trane Company, York International Corporation and Goodman Manufacturing. The Company estimates that more than half of the Segment's sales of residential HVAC products in 2003 were attributable to the replacement market, which tends to be less cyclical than the new construction market.

The Segment competes in both the manufactured housing and site-built markets on the basis of breadth and quality of its product line, distribution, product availability and price. Although the Company believes that the Segment competes favorably with respect to certain of these factors, most of the Segment’s competitors have greater financial and marketing resources than the Segment and certain competitors may enjoy greater brand awareness.

Commercial Products

The Segment's commercial products consist of HVAC systems which are custom-designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. Such systems are primarily designed to operate on building rooftops (including large self-contained walk-in-units) or on individual floors within a building, and range from 40 to 600 tons of cooling capacity. The Segment markets its commercial products under the Governair®, Mammoth®, Temtrol®, Venmar®, Ventrol® and Webco™ brand names. Also part of the Segment, the Company’s subsidiary Eaton-Williams Group Limited (“Eaton-Williams”), manufactures and markets custom and standard air conditioning and humidification equipment throughout Western Europe under the Vapac®, Cubit®, Qualitair®, Edenaire®, Colman™ and Moducel™ brand names.

The market for commercial HVAC equipment is segmented between standard and custom-designed equipment. Standard equipment can be manufactured at a lower cost and therefore offered at substantially lower initial prices than custom-designed equipment. As a result, suppliers of standard equipment generally have a larger share of the overall commercial HVAC market than suppliers of custom-designed equipment, including the Segment. However, because of certain building designs, shapes or other characteristics, the Company believes there are many applications for which custom-designed equipment is required or is more cost effective over the life of the building. Unlike standard equipment, the Segment's custom-designed commercial HVAC equipment can be designed to match the exact space, capacity and performance requirements of the customer. The Segment's packaged rooftop and self-contained walk-in equipment rooms maximize a building's rentable floor space because they are located outside the building. In addition, factors relating to the manner of construction and timing of installation of commercial HVAC equipment can often favor custom-designed rather than standard systems. As compared with site-built and factory built HVAC systems, the Segment's systems are factory assembled according to customer specifications and then installed by the customer or third parties, rather than assembled on site, permitting extensive testing prior to shipment. As a result, the Segment's commercial systems can be installed later in the construction process than site-built systems, thereby saving the owner or developer construction and labor costs. The Segment sells its commercial products primarily to contractors, owners and developers of commercial office buildings, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. The Segment seeks to maintain strong relationships nationwide with design engineers, owners and developers, and the persons who are most likely to value the benefits and long-term cost efficiencies of the Segment's custom-designed equipment.

The Company estimates that about one-third of the Segment's commercial sales in 2003 were attributable to replacement and retrofit activity, which typically is less cyclical than new construction activity and generally commands higher margins. The Segment continues to develop product and marketing programs to increase penetration in the growing replacement and retrofit market.

The Segment's commercial products are marketed through independently-owned manufacturers' representatives and approximately 300 sales, marketing and engineering professionals as of December 31, 2003. The independent representatives are typically HVAC engineers, a factor which is significant in marketing the Segment's commercial products because of the design intensive nature of the market segment in which the Segment competes.

The Company believes that the Segment is among the largest suppliers of custom-designed commercial HVAC products in the United States. The Segment's four largest competitors in the commercial HVAC market are Carrier Corporation (a subsidiary of United Technologies Corporation), York International, McQuay International (a subsidiary of OYL Corporation), and The Trane Company (a subsidiary of American Standard Inc.). The Segment competes primarily on the basis of engineering support, quality, flexibility in design and construction and total installed system cost. Although the Company believes that the Segment competes favorably with respect to certain of these factors, most of the Segment's competitors have greater financial and marketing resources than the Segment and enjoy greater brand awareness. However, the Company believes that the Segment's ability to produce equipment that meets the performance characteristics required by the particular product application provides it with advantages not enjoyed by certain of these competitors.

The Segment had 14 manufacturing plants and employed approximately 3,271 full-time people as of December 31, 2003, 171 of whom are covered by a collective bargaining agreement which expires in 2005. The Company believes that the Segment's relationships with its employees are satisfactory.

GENERAL CONSIDERATIONS

Employees

Excluding employees of discontinued operations, the Company employed approximately 7,450 persons at December 31, 2003.

Backlog

Backlog expected to be filled during 2004 was approximately $138,200,000 at December 31, 2003 ($131,900,000 at December 31, 2002). Backlog is not regarded as a significant factor for operations where orders are generally for prompt delivery. While backlog stated for December 31, 2003 is believed to be firm, the possibility of cancellations makes it difficult to assess the firmness of backlog with certainty.

Research and Development

The Company's research and development activities are principally new product development and represent approximately 1.5%, 1.4% and 1.4% of the Company’s consolidated net sales in 2003, 2002 and 2001, respectively.

Patents and Trademarks

The Company holds numerous design and process patents that it considers important, but no single patent is material to the overall conduct of its business. It is the Company's policy to obtain and protect patents whenever such action would be beneficial to the Company. The Company owns or licenses numerous trademarks that it considers material to the marketing of its products, including Broan®, NuTone®, Nautilus®, Venmar®, Guardian Plus™ Air Systems, vanEE®, Best®, Governair®, Mammoth®, Temtrol®, Miller®, Intertherm®, Frigidaire®, Tappan®, Philco®, Kelvinator®, Gibson®, Westinghouse®, Maytag®, Ventrol®, Webco™, Vapac®, Cubit®, Qualitair®, Edenaire®, Linear®, Channel Plus®, Open House®, Xantech®, Elan®, Via!®, SpeakerCraft® and OSCO®. The Company believes that its rights in these trademarks are adequately protected.

Raw Materials

The Company purchases raw materials and most components used in its various manufacturing processes. The principal raw materials purchased by the Company are rolled sheet steel, formed and galvanized steel, copper, aluminum, plate mirror glass, polypropylene, wood, various chemicals, paints and plastics.

The materials, molds and dies, subassemblies and components purchased from other manufacturers, and other materials and supplies used in manufacturing processes have generally been available from a variety of sources. From time to time increases in raw material costs can affect future supply availability due in part to raw material demands by other industries. Whenever practical, the Company establishes multiple sources for the purchase of raw materials and components to achieve competitive pricing, ensure flexibility and protect against supply disruption. In 2001, the Company instituted a Company wide material procurement strategy designed to reduce the purchase price of raw materials and purchased components. The strategy focuses on adopting world-class procurement practices and Company-wide negotiation leverage to reduce the costs of purchased materials. As part of this program, the Company has invested in strategic procurement software. The Company expects that completion of the development of this software and systems will occur in early 2005. The Company believes the use of strategic sourcing software and systems development by its procurement personnel will continue to enhance the Company’s competitive position by reducing costs from its vendors and limiting cost increases for goods and services in sectors experiencing rising prices.

The Company is subject to significant market risk with respect to the pricing of its principal raw materials. If prices of these raw materials were to increase dramatically, the Company may not be able to pass such increases on to its customers and, as a result, gross margins could decline significantly. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of Part II of this report, incorporated herein by reference for further discussion.

Working Capital

The carrying of inventories to support customers and to permit prompt delivery of finished goods requires substantial working capital. Substantial working capital is also required to carry receivables. The demand for the Company's products is seasonal, particularly in the Northeast and Midwest regions of the United States and in Canada where inclement weather during the winter months usually reduces the level of building and remodeling activity in both the home improvement and new construction markets. Certain of the residential product businesses in the HVAC Segment have in the past been more seasonal in nature than the Company's other businesses’ product categories. As a result, the demand for working capital of the Company's subsidiaries is greater from late in the first quarter until early in the fourth quarter. See "Liquidity and Capital Resources" in Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of Part II of this report, incorporated herein by reference.

Website

The Company’s periodic and current reports are available on Nortek’s website, www.nortek-inc.com, free of charge, as soon as reasonably practicable after such materials are filed with, or furnished to the Securities and Exchange Commission (“SEC”).

ITEM 2. PROPERTIES

Set forth below is a brief description of the location and general character of the principal administrative and manufacturing facilities and other material real properties of the Company’s continuing operations, all of which the Company considers to be in satisfactory repair. All properties are owned, except for those indicated by an asterisk, which are leased under operating leases and those with a double asterisk, which are leased under capital leases.

		Approximate
Location	Description	Square Feet
Residential Building Products Segment:
Union, IL	Manufacturing/Warehouse/Administrative	197,000	(1)
Hartford, WI	Manufacturing/Warehouse/Administrative	498,000
Mississauga, ONT, Canada	Manufacturing/Administrative	110,000	(1)
Sylmar, CA	Manufacturing/Administrative	35,000*
Xiang, Bao An County, Shenzhen, PRC	Manufacturing	113,000*
Fabriano, Italy	Manufacturing/Administrative	168,000
Cerreto D'Esi, Italy	Manufacturing/Administrative	135,000
Montefano, Italy	Manufacturing/Administrative	84,000
Cleburne, TX	Manufacturing/Administrative	210,000
Los Angeles, CA	Manufacturing/Administrative	177,000
Drummondville, QUE, Canada	Manufacturing/Administrative	76,000
Cincinnati, OH	Manufacturing	836,000
Saint-Ouen l'Aumone, France	Manufacturing/Administrative	31,000*
Lexington, KY	Manufacturing/Administrative	26,000*
Carlsbad, CA	Manufacturing/Administrative	31,000	(1)
Riverside, CA	Manufacturing/Administrative	66,000*
Casnovia, MI	Manufacturing/Administrative	27,000*
Air Conditioning and Heating Products Segment:
St. Leonard d'Aston, QUE, Canada	Manufacturing/Administrative	95,000*
O'Fallon, MO	Administrative	70,000*
St. Peters, MO	Warehouse/Administrative	250,000*
St. Louis, MO	Manufacturing	214,000	(2)
St. Louis, MO	Manufacturing	103,000*	(2)
Holland, MI	Manufacturing/Warehouse	45,000*
Boonville, MO	Manufacturing	250,000
Tipton, MO	Manufacturing	50,000
Poplar Bluff, MO	Manufacturing	445,000**	(1)
Dyersburg, TN	Manufacturing	368,000**
Chaska, MN	Manufacturing/Administrative	230,000*
Oklahoma City, OK	Manufacturing/Administrative	127,000
Okarche, OK	Manufacturing/Administrative	210,000
Saskatoon, Canada	Manufacturing	49,000*
Springfield, MO	Manufacturing	77,000*
Montreal, QUE, Canada	Manufacturing	122,000*
Edenbridge, U.K	Manufacturing	93,000*
Fenton, Stoke, U.K	Manufacturing/Administrative	104,000*
Other:
Providence, RI	Administrative	23,900*

(1) These facilities are pledged as security under various subsidiary debt agreements. (See Note 6 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.)

(2) During 2003, the Company initiated restructuring activities related to the closure of two facilities in St. Louis, Missouri, in order to relocate the operations to other facilities by the end of the first quarter of 2004. (See Note 13 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.)

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to numerous federal, state and local laws and regulations, including environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. The Company believes that it is in substantial compliance with the material laws and regulations applicable to it. The Company is involved in current, and may become involved in future, remedial actions under federal and state environmental laws and regulations which impose liability on companies to clean up, or contribute to the cost of cleaning up, sites at which their hazardous wastes or materials were disposed of or released. Such claims may relate to properties or business lines acquired by the Company after a release has occurred. In other instances, the Company may be partially liable under law or contract to other parties that have acquired businesses or assets from the Company for past practices relating to hazardous substances management. The Company believes that all such claims asserted against it, or such obligations incurred by it, will not have a material adverse effect upon the Company's financial condition or results of operations. Expenditures in 2003, 2002 and 2001 to evaluate and remediate such sites were not material. However, the Company is presently unable to estimate accurately its ultimate financial exposure in connection with identified or yet to be identified remedial actions due among other reasons to: (i) uncertainties surrounding the nature and application of environmental regulations, (ii) the Company's lack of information about additional sites to which it may be listed as a potentially responsible party ("PRP"), (iii) the level of clean-up that may be required at specific sites and choices concerning the technologies to be applied in corrective actions and (iv) the time periods over which remediation may occur. Furthermore, since liability for site remediation is joint and several, each PRP is potentially wholly liable for other PRP's that become insolvent or bankrupt. Thus, the solvency of other PRP’s could directly affect the Company's ultimate aggregate clean-up costs. In certain circumstances, the Company's liability for clean-up costs may be covered in whole or in part by insurance or indemnification obligations of third parties.

A previously owned subsidiary of the Company is a defendant in a number of lawsuits alleging damage caused by alleged defects in certain pressure treated wood products. The Company has assumed the liability and is entitled to insurance coverage proceeds related to specific pressure treated wood product claims. Many of the suits have been resolved by dismissal or settlement with amounts being paid out of insurance proceeds or other recoveries. The Company continues to vigorously defend the remaining suits. Certain defense and indemnity costs are being paid out of insurance proceeds and proceeds from a settlement with suppliers of material used in the production of the pressure treated wood products. The Company has engaged in coverage litigation with certain insurers and has settled all coverage claims with such insurers on a satisfactory basis.

In addition to the legal matters described above, the Company and its subsidiaries are named as defendants in a number of legal proceedings, including a number of product liability lawsuits, incident to the conduct of their businesses.

The Company does not expect that any of the above described proceedings will have a material adverse effect, either individually or in the aggregate, on the Company's financial position, results of operations, liquidity or competitive position. (See Note 9 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On October 15, 2003, the Series B Convertible Preference stockholders of Nortek Holdings consented to, by unanimous written consent in lieu of a special meeting, the issuance of 10,869 shares of Class A Common Stock to Jeffrey C. Bloomberg, a Director of the Company (or his permitted designee).

On November 19, 2003, the Series B Convertible Preference stockholders of Nortek Holdings consented to, by unanimous written consent in lieu of a special meeting, the issuance of Nortek Holdings’ $515,000,000 10% Senior Discount Notes due 2011.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Nortek Holdings, Inc. (the “Company” or “Holdings”). Holdings became the successor public company, and Nortek became a wholly-owned subsidiary of Holdings. On January 9, 2003, Holdings completed the Recapitalization, which resulted in the acquisition of Holdings by certain affiliates and designees of Kelso and certain members of Nortek’s management. In connection with the Recapitalization, each share of the Company’s Common Stock and Special Common Stock was called for redemption at $46.00 per share. As of January 9, 2003, there is no established public trading market for the Company’s capital stock. As of March 30, 2004, there were (i) 19,000,000 shares of Class A Common Stock, par value $1.00 per share, (ii) 14,000,000 shares of Class B Common Stock, par value $1.00 per share and (iii) 19,000,000 shares of Preference Stock, par value $1.00 per share of which 9,000,000 shares have been designated as Series B Convertible Preference Stock (the “Series B Preference Stock”) of the Company authorized and 397,380 shares of Class A Common Stock and 8,130,442 shares of Series B Convertible Preference Stock of the Company outstanding, most of which were owned by management of the Company and certain affiliates of Kelso.

On November 26, 2003, the Company declared a cash dividend of $35 per share on each outstanding share of its Class A Common Stock and Series B Convertible Preference Stock, which also resulted in an equal reduction of the exercise price of all of the outstanding options to purchase shares of the Company’s Common Stock. The Company has not declared any other dividends in the past five years.

The Company declared a dividend on November 26, 2003 totaling approximately $298,474,000 which was paid to the Company’s shareholders in the fourth quarter of 2003. Option holders of the Rollover Options received a cash distribution of approximately $41,600,000, which was treated as a charge to additional paid-in capital in the accompanying consolidated statement of stockholders’ investment. The distribution to each individual option holder of the Rollover Options was equal to the number of shares held multiplied by the lesser of (i) $35 per share or (ii) $46 per share minus the amount per share the exercise price was reduced. In conjunction with this shareholder distribution, the Company adjusted the exercise price of all of the Rollover Options to equal $10.50 per share and all of the other Class A stock options to equal $11.00 per share.

See Notes 1, 2 and 7 of the Notes to the Consolidated Financial Statements, Item 8 of Part II of this report, incorporated herein by reference.

ITEM 6. CONSOLIDATED SELECTED FINANCIAL DATA

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -			Jan. 1, 2000 -			Jan. 1, 1999 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001			Dec. 31, 2000			Dec. 31, 1999
	(In millions except ratios)
Consolidated Summary of Operations:
Net sales	$	1,490	.1	$	24	.9	$	1,384	.1	$	1,293	.8	$	1,297	.4	$	1,180	.2
Operating earnings (loss)		159	.5		(81	.8)		119	.6		109	.7		140	.2		138	.3
Earnings (loss) from continuing operations		62	.0		(60	.9)		43	.6		32	.8		58	.3		56	.4
Earnings (loss) from discontinued operations		12	.2		(1	.0)		18	.9		(24	.8)		(16	.7)		(7	.1)
Net earnings (loss)		74	.2		(61	.9)		62	.5		8	.0		41	.6		49	.3
Financial Position:
Unrestricted cash, investments and
marketable securities	$	194	.1	$	283	.6	$	294	.8	$	255	.6	$	138	.5	$	111	.4
Working capital		686	.4		711	.6		813	.3		742	.3		727	.9		723	.5
Total assets		2,100	.0		1,781	.2		1,830	.8		1,819	.9		1,836	.8		1,791	.4
Total debt--
Current		15	.3		4	.4		5	.5		10	.0		20	.5		12	.9
Long-term		1324	.6		953	.7		953	.8		959	.7		919	.4		918	.2
Current ratio		2.6	:1		2.7	:1		3.0	:1		2.6	:1		2.4	:1		2.4	:1
Debt to equity ratio		6.7	:1		6.1	:1		3.0	:1		3.6	:1		3.3	:1		3.6	:1
Depreciation and amortization expense
including non-cash interest		38	.3		0	.8		39	.2		40	.7		36	.1		35	.1
Amortization of goodwill included in
depreciation and amortization expense		--			--			--			8	.7		8	.8		8	.2
Capital expenditures		24	.7		0	.2		19	.1		27	.1		29	.7		21	.8
Stockholder's investment		200	.2		272	.1		317	.5		271	.3		282	.2		259	.8

See the Notes to the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations, included elsewhere herein regarding the effect on operating results of acquisitions, discontinued operations and other matters. See Part II, Item 5 of this report, incorporated herein by reference, for a discussion on dividends declared or paid on the Company's Capital Stock.

NORTEK, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

December 31, 2003

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nortek Holdings, Inc. and its continuing wholly-owned subsidiaries (individually and collectively, the “Company” or “Holdings”) are diversified manufacturers of residential and commercial building products, operating within two principal segments: the Residential Building Products Segment and the Air Conditioning and Heating Products Segment. Through these principal segments, the Company manufactures and sells, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and the do-it-yourself (“DIY”) and professional remodeling and renovation markets. As used in this report, the terms “Company” and “Holdings” refer to Nortek Holdings, Inc., together with its subsidiaries, unless the context indicates otherwise. Such terms as “Company” and “Holdings” are used for convenience only and are not intended as a precise description of any of the separate corporations, each of which manages its own affairs.

On November 20, 2002, the Company was reorganized into a holding company structure and each outstanding share of capital stock of Nortek, Inc. (“Nortek”) was converted into an identical share of capital stock of Holdings, a Delaware corporation formed in 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). On January 9, 2003, the Company completed a recapitalization transaction, which resulted in the acquisition of the Company by certain affiliates and designees of Kelso & Company L.P. (“Kelso”) and certain members of Nortek’s management (the “Recapitalization”). (See Liquidity and Capital Resources and Notes 1, 2 and 7 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

On February 12, 2004, the Company’s wholly-owned subsidiary, WDS, LLC, sold all of the capital stock of Ply Gem Industries, Inc. (“Ply Gem”); on April 2, 2002, Ply Gem sold the capital stock of its subsidiary Hoover Treated Wood Products, Inc. (“Hoover”); on November 22, 2002, Ply Gem sold the capital stock of its subsidiary Richwood Building Products, Inc. (“Richwood”); and on September 21, 2001, Ply Gem sold the capital stock of its subsidiaries Peachtree Doors and Windows, Inc. (“Peachtree”) and SNE Enterprises, Inc. (“SNE”). The results of operations of the operating subsidiaries of Ply Gem, with the exception of Hoover, comprised the Company’s entire Windows, Doors and Siding Products (“WDS”) reporting segment while Hoover and the corporate expenses of Ply Gem were previously included in Unallocated other net in the Company’s segment reporting. The results of Ply Gem, Hoover, Richwood, Peachtree and SNE have been excluded from earnings from continuing operations and are classified separately as discontinued operations for all periods presented. Accordingly, for purposes of this presentation of Management’s Discussion and Analysis of Financial Condition and Results of Operations, all discussion relates to the results from continuing operations. (See Notes 1, 10 and 11 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The Residential Building Products Segment manufactures and distributes built-in products primarily for the residential new construction, DIY and professional remodeling and renovation markets. The principal products sold by the segment include, kitchen range hoods, built-in exhaust fans (such as bath fans and fan, heater and light combination units) and indoor air quality products. The Air Conditioning and Heating Products Segment manufactures and sells heating, ventilating, and air conditioning systems (“HVAC”) for site-built residential and manufactured housing structures and custom-designed commercial applications and standard light commercial products.

On January 17, 2003, the Company through its wholly owned subsidiary, Linear Corporation (“Linear”) acquired Elan Home Systems L.L.C. (“Elan”). Elan is located in Lexington, KY and manufactures and sells home automation and audio video distribution equipment. On July 11, 2003, the Company through Linear, acquired SpeakerCraft, Inc. (“SPC”). SPC is located in Riverside, CA and manufactures and sells in-wall and in-ceiling speakers, amplifiers and subwoofers. On December 15, 2003, the Company, through Linear, acquired all of the capital stock of Operator Specialty Company, Inc. (“OSCO”). OSCO is located in Casnovia, MI and manufactures and sells gate operators and door openers. On June 15, 2001, the Company acquired Senior Air Systems (“SAS”) from a wholly owned subsidiary of Senior Plc. These acquisitions have been accounted for under the purchase method of accounting. Accordingly, the results of Elan, SPC, OSCO and SAS are included in the Company’s consolidated results since the date of their acquisition. (See “Liquidity and Capital Resources” and Note 3 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. (See the Notes to the Consolidated Financial Statements included elsewhere herein.) Certain of the Company’s accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company periodically evaluates the judgments and estimates used for its critical accounting policies to ensure that such judgments and estimates are reasonable for its interim and year-end reporting requirements. These judgments and estimates are based on the Company’s historical experience, current trends and other information available, as appropriate. If different conditions result from those assumptions used in the Company’s judgments, the results could be materially different from the Company’s estimates. The Company’s critical accounting policies include:

Revenue Recognition and Related Expenses

The Company recognizes sales based upon shipment of products to its customers and has procedures in place at each of its subsidiaries to ensure that an accurate cut-off is obtained for each reporting period.

Allowances for cash discounts, volume rebates, and other customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages agreed to with the Company’s various customers, which are typically earned by the customer over an annual period. The Company records periodic estimates for these amounts based upon the historical results to date, estimated future results through the end of the contract period and the contractual provisions of the customer agreements. For calendar year customer agreements, the Company is able to adjust its periodic estimates to actual amounts as of December 31 each year based upon the contractual provisions of the customer agreements. For those customers who have agreements that are not on a calendar year cycle, the Company records estimates at December 31 consistent with the above described methodology. As a result, at the end of any given reporting period, the amounts recorded for these allowances are based upon estimates of the likely outcome of future sales with the applicable customers and may require adjustment in the future if the actual outcome differs. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Customer returns are recorded on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Company generally estimates customer returns based upon the time lag that historically occurs between the date of the sale and the date of the return while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Provisions for the estimated costs for future product warranty claims and bad debts are recorded in cost of sales and selling, general and administrative expense, respectively, at the time a sale is recorded. The amounts recorded are generally based upon historically derived percentages while also factoring in any new business conditions that might impact the historical analysis such as new product introduction for warranty and bankruptcies of particular customers for bad debts. The Company also periodically evaluates the adequacy of its reserves for warranty and bad debts recorded in its consolidated balance sheet as a further test to ensure the adequacy of the recorded provisions. Warranty claims can extend far into the future and bad debt analysis often involves subjective analysis of a particular customer’s ability to pay. As a result, significant judgment is required by the Company in determining the appropriate amounts to record and such judgments may prove to be incorrect in the future. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Inventory Valuation

The Company values inventories at the lower of cost or market with approximately 57%, as of December 31, 2003, valued using the last-in, first-out (“LIFO”) method and the remainder valued using the first-in, first-out (“FIFO”) method. In connection with both LIFO and FIFO inventories, the Company will record provisions, as appropriate, to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potential may cause the actual results to differ from the estimates at the time such inventory is disposed or sold. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Prepaid Income Tax Assets and Deferred Tax Liabilities

The Company accounts for income taxes using the liability method in accordance with SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”), which requires that the deferred tax consequences of temporary differences between the amounts recorded in the Company’s Consolidated Financial Statements and the amounts included in the Company’s federal, state income and foreign tax returns be recognized in the balance sheet. As the Company generally does not file their income tax returns until well after the closing process for the December 31 financial statements is complete, the amounts recorded at December 31 reflect estimates of what the final amounts will be when the actual income tax returns are filed for that fiscal year. In addition, estimates are often required with respect to, among other things, the appropriate state income tax rates to use in the various states that the Company and its subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realizable in the future. The Company requires each of its subsidiaries to submit year-end tax information packages as part of the year-end financial statement closing process so that the information used to estimate the deferred tax accounts at December 31 is reasonably consistent with the amounts expected to be included in the filed tax returns. SFAS No. 109 requires balance sheet classification of current and long-term deferred income tax assets and liabilities based upon the classification of the underlying asset or liability that gives rise to a temporary difference. As such, the Company has historically had prepaid income tax assets due principally to the unfavorable tax consequences of recording expenses for required book reserves for such things as, among others, bad debts, inventory valuation, insurance, product liability and warranty that cannot be deducted for income tax purposes until such expenses are actually paid. The Company believes that the amounts recorded as prepaid income tax assets will be recoverable through future taxable income generated by the Company, although there can be no absolute assurance that all recognized prepaid income tax assets will be fully recovered. The Company believes the procedures and estimates used in its accounting for income taxes are reasonable and in accordance with established tax law. The income tax estimates used have historically not resulted in material adjustments to income tax expense in subsequent periods when the estimates are adjusted to the actual filed tax return amounts, although there may be reclassifications between the current and long-term portion of the deferred tax accounts.

Goodwill and Other Long-Lived Assets

Subsequent to June 30, 2001, the Company accounts for acquired goodwill and intangible assets in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”). Prior to July 1, 2001, the Company accounted for acquired goodwill and intangible assets in accordance with APB No. 16, “Business Combinations” (“APB No. 16”). Purchase accounting required by SFAS No. 141 and APB No. 16 involves judgment with respect to the valuation of the acquired assets and liabilities in order to determine the final amount of goodwill. The Company believes that the estimates that it has used to record prior acquisitions were reasonable and in accordance with SFAS No. 141 and APB No. 16.

On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). As a result, the Company accounts for acquired goodwill and goodwill impairment in accordance with SFAS No. 142 (see Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein). This pronouncement requires considerable judgment in the valuation of acquired goodwill and the ongoing evaluation of goodwill impairment. The Company primarily utilizes a discounted cash flow approach in order to value the Company’s operating segments required to be tested for impairment by SFAS No. 142, which requires that the Company forecast future cash flows of the operating segments and discount the cash flow stream based upon a weighted average cost of capital that is derived from comparable companies within similar industries. The discounted cash flow calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable operating segment. The Company believes that its procedures for applying the discounted cash flow methodology, including the estimates of future cash flows, the weighted average cost of capital and the long-term growth rate, are reasonable and consistent with market conditions at the time of the valuation. The Company has evaluated the carrying value of segment goodwill and determined that no impairment existed at either the date of adoption of the standard, January 1, 2002, or as of its annual evaluation date of October 1. Accordingly, no adjustments were required to be recorded in the Company’s Consolidated Financial Statements as a result of adopting SFAS No. 142 or as a result of its annual evaluation on October 1, 2003.

The Company performs an annual evaluation for the impairment of long-lived assets, other than goodwill, based on expectations of non-discounted future cash flows compared to the carrying value of the subsidiary in accordance with SFAS No. 144. The Company’s cash flow estimates are based upon historical cash flows, as well as future projected cash flows received from subsidiary management in connection with the annual Company wide planning process, and include a terminal valuation for the applicable subsidiary based upon a multiple of earnings before interest expense, net, depreciation and amortization expense and income taxes (“EBITDA”). The Company estimates the EBITDA multiple by reviewing comparable company information and other industry data. The Company believes that its procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with current market conditions. The Company historically has not had any material impairment adjustments.

Pensions and Post Retirement Health Benefits

The Company’s accounting for pensions, including supplemental executive retirement plans, and post retirement health benefit liabilities requires the estimating of such items as the long-term average return on plan assets, the discount rate, the rate of compensation increase and the assumed medical cost inflation rate. Such estimates require a significant amount of judgment. As evidenced during 2002 and 2001, items such as stock market declines, changes in interest rates and plan amendments can have a significant impact on the assumptions used and therefore on the ultimate final actuarial determinations for a particular year. The Company believes the procedures and estimates used in its accounting for pensions and post retirement health benefits are reasonable and consistent with acceptable actuarial practices in accordance with accounting principles generally accepted in the United States. In certain years, such as 2002 and 2001, revisions to actuarial assumptions caused by adverse financial market conditions, changes in discount rates and increased compensation levels have resulted in significant increases to pension and post-retirement liabilities and other comprehensive loss from amounts recognized in prior years.

Insurance Liabilities

The Company records insurance liabilities and related expenses for health, workers compensation, product and general liability losses and other insurance reserves and expenses in accordance with either the contractual terms of its policies or, if self-insured, the total liabilities that are estimable and probable as of the reporting date. Insurance liabilities are recorded as current liabilities to the extent they are expected to be paid in the succeeding year with the remaining requirements classified as long-term liabilities. The accounting for self-insured plans requires that significant judgments and estimates be made both with respect to the future liabilities to be paid for known claims and incurred but not reported claims as of the reporting date. The Company considers historical trends when determining the appropriate insurance reserves to record in the consolidated balance sheet. In certain cases where partial insurance coverage exists, the Company must estimate the portion of the liability that will be covered by existing insurance policies to arrive at the net expected liability to the Company. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimated amounts are adjusted to the actual insurance claims paid.

Contingencies

The Company is subject to contingencies, including legal proceedings and claims arising out of its businesses that cover a wide range of matters, including, among others, environmental matters, contract and employment claims, workers compensation claims, product liability, warranty and modification, adjustment or replacement of component parts of units sold, which may include product recalls. Product liability, environmental and other legal proceedings also include matters with respect to businesses previously owned.

The Company provides accruals for direct costs associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. Costs accrued have been estimated based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and outcomes.

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. It is possible, however, that future results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’s control.

Overview

We are a leading, diversified manufacturer and distributor of building products used in the residential remodeling, replacement and new construction markets (including the manufactured housing industry) and to a lesser extent the commercial construction and replacement markets. We have a diverse number of products that serve multiple markets through various distribution channels. We operate through two segments: the Residential Building Products Segment (“RBP”) and the Air Conditioning and Heating Products Segment (“HVAC”). For the year ended December 31, 2003 RBP accounted for about 55 % of consolidated net sales and 71 % of operating earnings before unallocated expense. HVAC accounted for the balance. A little more than half of our business is believed to be used in the replacement and remodeling markets and the balance serves the new construction markets. The manufactured housing and commercial construction industries have seen significant declines in the level of business activity over the past several years, which have had an adverse effect on our business, particularly for our HVAC Segment. The level of new construction, replacement and remodeling activity in site-built residential markets has been strong over the past several years and has contributed positively to our operating performance. Key industry activity affecting our businesses in the United States for the past three years was as follows:

	Source		% Increase (Decrease)
	of Data		2003			2002			2001
Residential construction spending		1		11	.0%		9	.0%		4	.0%
Single family housing starts		1		10	.0		7	.0		4	.0
New home sales		1		12	.0		7	.0		3	.0
Residential improvement spending		1		2	.0		13	.0		(1	.0)
Air conditioning and heat pump shipments		2		1	.0		7	.0		(6	.0)
Manufactured housing shipments		1,3		(22	.0)		(13	.0)		(23	.0)
Non-residential construction spending		1		(1	.5)%		(13	.3)%		(5	.6)%

Source of data:
(1)	U.S. Census Bureau
(2)	Air Conditioning and Refrigeration Institute
(3)	Manufactured Housing Institute

Our manufactured housing business for 2003 was about 7 % of total sales vs. about 13% in 2000. Our HVAC business serving the commercial construction market was about 18% (including foreign commercial sales) of consolidated sales in 2003. A large portion of our manufacturing activity and customers are located in North America although we do have manufacturing activity and sell product to customers in Canada, Europe and China among other countries. Including Canada our foreign sales in 2003 were about 20 % of total sales. About 14 % of total sales are through retail distribution and about 50% is to distributors and wholesalers and similar channels of distribution. Principal RBP products include kitchen range hoods, bath fans and indoor air quality products where we have large market shares. Principal HVAC products include residential air conditioners, heat pumps and furnaces and large custom and semi-custom commercial air handlers and cooling equipment. We have leading market shares in HVAC products in both the manufactured housing and custom and semi custom commercial markets that we serve. In the site-built residential HVAC market we have a single digit market share that has increased our share of market considerably over the past several years. In both segments we have employed a strategy of using well-recognized and respected brand names (both owned and licensed) and have introduced new products and made selected acquisitions to improve growth and profitability. As a result we have experienced stable and strong cash flow from continuing operations during the past three years. In both our manufactured housing and Commercial HVAC products businesses, we have maintained our market shares and we believe that we can quickly respond to rebounds in these markets over the long term. In 2004 we expect manufactured housing and commercial construction markets to remain weak, residential new construction to decline moderately and remodeling and replacement activity to grow moderately. We also expect that our brand strategy for residential site-built HVAC products will allow us to gain market share. In RBP in 2004 we expect to continue to grow and improve the profitability of our electronics products through the integration of our acquisitions. In 2004 we also expect to achieve further cost reductions in raw material and purchased components in all our businesses through our strategic sourcing software and systems development. During 2002, 2003 and again in the first quarter of 2004 we have periodically experienced significant increases in the price we pay for raw steel and steel fabricated parts. Overall our annual purchases in this category are about 6% of total cost of products sold. We also buy some component parts from suppliers that use steel in their manufacturing process. While we have had some success in raising prices to our customers for some products, as a result of higher steel costs, there is no assurance that we will be able to offset all steel increases in 2004 due to extremely tight steel supply in the United States. We also rely on our strategic sourcing initiatives to mitigate the effect of higher steel costs. Material cost as a percentage of net sales improved, in part from these initiatives, from approximately 45.4% in 2001 to 44.0% in 2002 and 43.7% in 2003. In the following discussion of the results of operations for the year 2003 as compared to 2002 we will talk about the significance of a number of factors that affected our operations including, among others, the following:

• The effect of the Acquisition by Kelso and the changes in our accounting
• The strong growth of our residential site-built HVAC business from our brand strategy
• The effect of acquisitions in RBP for our electronics businesses
• The softness in manufactured housing and commercial markets
• The effect of changes in foreign exchange

In our discussion of liquidity and capital resources we have reviewed a number of transactions and summarized and analyzed our cash flow activity during the past year. We began the year with about $295,000,000 of unrestricted cash and investments and ended the year with about $194,100,000. We have also enclosed information with respect to our future cash flow requirements. During the past year we had a number of transactions that significantly affected our financial position beginning with the Recapitalization with Kelso on January 9, 2003 whereby we used about $160,700,000 of our existing cash and significant equity investments were made by both Kelso and management (through the rollover of stock and options) to take the Company private in a transaction valued at $1.6 billion. In the fourth quarter of 2003 the Company sold $515,000,000 aggregate principal amount at maturity ($349,400,000 gross proceeds) of the Company’s Senior Discount Notes and used these proceeds to pay a dividend of about $298,500,000 to holders of the Company’s capital stock and about $41,000,000 to purchase additional capital stock of Nortek. Nortek used these proceeds to fund the majority of a cash distribution of about $41,600,000 to option holders of the Rollover Options. During the year we worked on the sale of Ply Gem, which was completed in early 2004. Net proceeds of about $450,000,000 from the sale of Ply Gem together with cash from the sale of $200,000,000 principal amount of senior variable interest rate Notes, and existing cash allowed us to redeem $695,000,000 principal amount of fixed rate senior notes in the first quarter of 2004. As a result we also reduced the size of our Senior Secured Credit Facility from $200,000,000 to $175,000,000. We have no borrowings outstanding under this facility, which together with existing cash and cash from our subsidiaries, provides the Company with its primary source of liquidity. We also used about $76,000,000 in 2003 and about $16,500,000 of our cash in the first quarter of 2004 for acquisitions to further grow our electronics businesses in our RBP segment. Upon completion of the first quarter 2004 debt redemptions, the Company expects total indebtedness to be about $835,000,000 and unrestricted cash and investments to be about $130,000,000.

Results of Operations

The combined year ended December 31, 2003 pre- and post-Recapitalization periods have been compared to the year ended December 31, 2002 for purposes of management’s discussion and analysis of the results of operations. Any references, below, to the year ended December 31, 2003 shall refer to the combined periods. Material fluctuations in operations resulting from the effect of purchase accounting have been highlighted.

	Pre-Recapitalization			Post-Recapitalization			Combined
	January 1, 2003 -			January 10, 2003			Year Ended
	January 9, 2003			December 31, 2003			December 31, 2003
	(Dollar amounts in millions)
Net sales:
Residential Building Products	$	16	.3	$	814	.8	$	831	.1
Air Conditioning and Heating Products		8	.6		675	.3		683	.9
Consolidated net sales	$	24	.9	$	1,490	.1	$	1,515	.0
Operating earnings (loss) *:
Residential Building Products	$	2	.7	$	137	.3	$	140	.0
Air Conditioning and Heating Products		(1	.2)		58	.4		57	.2
Subtotal	$	1	.5	$	195	.7	$	197	.2
Unallocated:
Expenses and charges arising from the
Recapitalization		(83	.0)		--			(83	.0)
Strategic sourcing software and
systems development expense		(0	.1)		(3	.4)		(3	.5)
Stock based compensation charges		--			(1	.8)		(1	.8)
Other, net		(0	.2)		(31	.0)		(31	.2)
Consolidated operating earnings (loss)	$	(81	.8)	$	159	.5	$	77	.7
Depreciation and amortization expense *:
Residential Building Products	$	0	.3	$	19	.6	$	19	.9
Air Conditioning and Heating Products		0	.3		11	.8		12	.1
Other		--			0	.6		0	.6
	$	0	.6	$	32	.0	$	32	.6
Operating earnings (loss) margin:
Residential Building Products		16	.6%		16	.9%		16	.8%
Air Conditioning and Heating Products		(14	.0)		8	.6		8	.4
Consolidated		(328	.5)%		10	.7%		5	.1%
Depreciation and amortization
expense as a % of net sales:
Residential Building Products		1	.8%		2	.4%		2	.4%
Air Conditioning and Heating Products		3	.5		1	.7		1	.8
Consolidated		2	.4%		2	.1%		2	.2%

* During the period from January 10, 2003 to December 31, 2003, the Company recorded approximately $5,400,000 of amortization of purchase price allocated to inventory as a non-cash charge to cost of products sold. Approximately $4,800,000 related to the Residential Building Products Segment and approximately $600,000 related to the Air Conditioning and Heating Products Segment.

The tables that follow present the net sales from continuing operations, operating earnings from continuing operations and depreciation and amortization expense from continuing operations for the Company’s principal segments for the combined period ended December 31, 2003 and the years ended December 31, 2002 and 2001, the dollar amount and percentage change of such results as compared to the prior year and the percentage to net sales of operating earnings and depreciation and amortization expense for the combined period ended December 31, 2003 and the years ended December 31, 2002 and 2001:

										Net Change
	Year-ended December 31,									2003 to 2002						2002 to 2001
	2003 (1)			2002			2001			$			%			$			%
	(Dollar amounts in millions)
Net Sales:
Residential Building Products	$	831	.1	$	729	.6	$	660	.0	$	101	.5		13	.9%	$	69	.6		10	.5%
Air Conditioning and Heating Products		683	.9		654	.5		633	.8		29	.4		4	.5		20	.7		3	.3
	$	1,515	.0	$	1,384	.1	$	1,293	.8	$	130	.9		9	.5%	$	90	.3		7	.0%
Operating Earnings:
Residential Building Products	$	140	.0	$	122	.9	$	93	.7	$	17	.1		13	.9%	$	29	.2		31	.2%
Air Conditioning and Heating Products		57	.2		61	.5		53	.8		(4	.3)		(7	.0)		7	.7		14	.3
Subtotal		197	.2		184	.4		147	.5		12	.8		6	.9		36	.9		25	.0
Unallocated:
Recapitalization fees and expenses		(83	.0)		(6	.6)		--			(76	.4)		*			(6	.6)		*
Re-audit fees and expenses		--			(2	.1)		--			2	.1		*			(2	.1)		*
1999 equity performance plan incentive		--			(4	.4)		--			4	.4		*			(4	.4)		*
Strategic sourcing software and
systems development expense		(3	.5)		(3	.7)		(5	.5)		0	.2		5	.4		1	.8		32	.7
Stock based compensation charges		(1	.8)		(0	.7)			--		(1	.1)		(157	.1)		(0	.7)			*
Other, net		(31	.2)		(47	.3)		(32	.3)		16	.1		34	.0		(15	.0)		(46	.4)
	$	77	.7	$	119	.6	$	109	.7	$	(41	.9)		(35	.0)%	$	9	.9		9	.0%
Depreciation and Amortization Expense:
Residential Building Products	$	19	.9	$	15	.6	$	22	.9	$	4	.3		27	.6%	$	(7	.3)		(31	.9)%
Air Conditioning and Heating Products		12	.1		13	.2		13	.8		(1	.1)		(8	.3)		(0	.6)		(4	.3)
Other		0	.6		0	.3		0	.4		0	.3		100	.0		0	.1		25	.0
	$	32	.6	$	29	.1	$	37	.1	$	3	.5		12	.0%	$	(8	.0)		(21	.6)%
Operating Earnings Margin:
Residential Building Products		16	.8%		16	.8%		14	.2%
Air Conditioning and Heating Products		8	.4		9	.4		8	.5
Consolidated		5	.1%		8	.6%		8	.5%
Depreciation and Amortization
Expense as a % of Net Sales:
Residential Building Products		2	.4%		2	.1%		3	.5%
Air Conditioning and Heating Products		1	.8		2	.0		2	.2
Consolidated		2	.2%		2	.1%		2	.9%

(1) The year ended December 31, 2003 represents the combined pre- and post-Recapitalization periods of January 1, 2003 to January 9, 2003 and January 10, 2003 to December 31, 2003, respectively.

* not applicable or not meaningful

The combined year ended December 31, 2003 pre- and post-Recapitalization periods have been compared to the year ended December 31, 2002 for purposes of management‘s discussion and analysis of the results of operations. Any references, below, to the year ended December 31, 2003 shall refer to the combined periods. Material fluctuations in operations resulting from the effect of purchase accounting have been highlighted.

	Pre-			Post-
	Recapitalization			Recapitalization			Combined
	Jan. 1, 2003 -			Jan. 10, 2003 -			Year Ended
	Jan. 9, 2003			December 31, 2003			December 31, 2003
	(Dollar amounts in millions)
Net sales	$	24	.9	$	1,490	.1	$	1,515	.0
Cost of products sold		18	.6		1,060	.0		1,078	.6
Selling, general and administrative expenses, net		5	.0		261	.6		266	.6
Amortization of intangible assets		0	.1		9	.0		9	.1
Expenses and charges arising from the
Recapitalization		83	.0		--			83	.0
Operating earnings (loss)		(81	.8)		159	.5		77	.7
Interest expense		(1	.0)		(57	.7)		(58	.7)
Investment income		0	.1		1	.5		1	.6
Earnings (loss) before provision (benefit) for
income taxes		(82	.7)		103	.3		20	.6
Provision (benefit) for income taxes		(21	.8)		41	.3		19	.5
Earnings (loss) from continuing operations		(60	.9)		62	.0		1	.1
Earnings (loss) from discontinued operations		(1	.0)		12	.2		11	.2
Net earnings (loss)	$	(61	.9)	$	74	.2	$	12	.3

	Percentage of Net Sales
	Pre-			Post-
	Recapitalization			Recapitalization			Combined
	Jan. 1, 2003 -			Jan. 10, 2003 -			Year Ended
	Jan. 9, 2003			December 31, 2003			December 31, 2003
Net sales		100	.0%		100	.0%		100	.0%
Cost of products sold		74	.7		71	.1		71	.2
Selling, general and administrative expenses, net		20	.1		17	.6		17	.6
Amortization of intangible assets		0	.4		0	.6		0	.6
Expenses and charges arising from the
Recapitalization		333	.3		--			5	.5
Operating earnings (loss)		(328	.5)		10	.7		5	.1
Interest expense		(4	.0)		(3	.9)		(3	.8)
Investment income		0	.4		0	.1		0	.1
Earnings (loss) before provision (benefit) for
income taxes		(332	.1)		6	.9		1	.4
Provision (benefit) for income taxes		(87	.5)		2	.7		1	.3
Earnings (loss) from continuing operations		(244	.6)		4	.2		0	.1
Earnings (loss) from discontinued operations		(4	.0)		0	.8		0	.7
Net earnings (loss)		(248	.6)%		5	.0%		0	.8%

The tables that follow set forth, for each of the three years in the period ended December 31, 2003, (a) certain consolidated operating results, (b) the percentage change of such results as compared to the prior year, (c) the percentage which such results bear to net sales and (d) the change of such percentages as compared to the prior year:

										Percentage Change
										2003			2002
	Year-ended December 31,									to			to
	2003 (1)			2002			2001			2002			2001
	(Dollar amounts in millions)
Net sales	$	1,515	.0	$	1,384	.1	$	1,293	.8		9	.5%		7	.0%
Cost of products sold		1,078	.6		992	.3		945	.6		(8	.7)		(4	.9)
Selling, general and administrative expense, net		266	.6		262	.6		226	.5		(1	.5)		(15	.9)
Amortization of goodwill and intangible assets		9	.1		3	.0		12	.0		(203	.3)		75	.0
Expenses and charges arising from the Recapitalization		83	.0		6	.6		--				*			*
Operating earnings		77	.7		119	.6		109	.7		(35	.0)		9	.0
Interest expense		(58	.7)		(52	.4)		(51	.8)		(12	.0)		(1	.2)
Loss from debt retirement		--			--			(5	.5)		*			100	.0
Investment income		1	.6		5	.9		8	.2		(72	.9)		(28	.0)
Earnings from continuing operations
before provision for income taxes		20	.6		73	.1		60	.6		(71	.8)		20	.6
Provision for income taxes		19	.5		29	.5		27	.8		33	.9		(6	.1)
Earnings from continuing operations		1	.1		43	.6		32	.8		(97	.5)		32	.9
Earnings (loss) from discontinued operations		11	.2		18	.9		(24	.8)		(40	.7)		176	.2
Net earnings	$	12	.3	$	62	.5	$	8	.0		(80	.3)%		681	.2%

										Percentage Change
	Percentage of Net Sales									2003			2002
	Year-ended December 31,									to			to
	2003 (1)			2002			2001			2002			2001
Net sales		100	.0%		100	.0%		100	.0%		---	%		---	%
Cost of products sold		71	.2		71	.7		73	.1		0	.5		1	.4
Selling, general and administrative expense, net		17	.6		19	.0		17	.5		1	.4		(1	.5)
Amortization of goodwill and intangible assets		0	.6		0	.2		0	.9		(0	.4)		0	.7
Expenses and charges arising from the Recapitalization		5	.5		0	.5		--			(5	.0)		(0	.5)
Operating earnings		5	.1		8	.6		8	.5		(3	.5)		0	.1
Interest expense		(3	.8)		(3	.8)		(4	.0)		--			0	.2
Loss from debt retirement		--			--			(0	.4)		--			0	.4
Investment income		0	.1		0	.5		0	.6		(0	.4)		(0	.1)
Earnings from continuing operations before
provision for income taxes		1	.4		5	.3		4	.7		(3	.9)		0	.6
Provision for income taxes		1	.3		2	.1		2	.1		0	.8		--
Earnings from continuing operations		0	.1		3	.2		2	.6		(3	.1)		0	.6
Earnings (loss) from discontinued operations		0	.7		1	.3		(2	.0)		(0	.6)		3	.3
Net earnings		0	.8%		4	.5%		0	.6%		(3	.7)%		3	.9%

(1) The year ended December 31, 2003 represents the combined pre- and post-Recapitalization periods of January 1, 2003 to January 9, 2003 and January 10, 2003 to December 31, 2003, respectively.

* not applicable or not meaningful

Year-ended December 31, 2003 as Compared to the Year-ended December 31, 2002

Combined consolidated net sales from continuing operations increased approximately $130,900,000 or 9.5% for the year ended December 31, 2003 as compared to the year ended December 31, 2002. The Company’s segments have a significant number of different products across a wide range of price points and numerous distribution channels that does not always allow meaningful quantitative analysis to be performed with respect to the effect on net sales of changes in units sold or the price per unit sold. The Company however, does ensure that whenever the underlying causes of material increases or decreases in consolidated net sales can be adequately analyzed and quantified, that, appropriate disclosure of such reasons, including changes in price, volume and the mix of products is made. The effect of changes in foreign currency exchange rates accounted for approximately $38,600,000 of the increase in net sales from continuing operations for the year ended December 31, 2003 as compared to the year ended December 31, 2002. Net sales increased for the year ended December 31, 2003 as compared to the year ended December 31, 2002 as a result of the acquisitions of Elan and SPC, price increases and higher net sales volume. In the Residential Building Products Segment, net sales increased approximately $101,500,000 or 13.9% and include an increase of approximately $29,300,000 attributable to the effect of changes in foreign currency exchange rates. The acquisition of Elan in January of 2003 and SPC in July of 2003 contributed approximately $46,000,000 of the increase in net sales for the Residential Building Products Segment. In the Air Conditioning and Heating Products Segment, net sales increased approximately $29,400,000 or 4.5% and include an increase of approximately $9,300,000 attributable to the effect of changes in foreign currency exchange rates.

Overall, increases in sales levels in the year ended December 31, 2003 reflect the ongoing stability of the housing construction and remodeling markets and our expanded branding effort in our line of air conditioning and heating products, partially offset by the general slowdown in commercial construction activity and the continued softness in the manufactured housing market. For the years ended December 31, 2003 and 2002, the Company’s net sales to customers serving the manufactured housing markets, principally consisting of air conditioners and furnaces, constituted approximately 7.1% and 8.5%, respectively, of the Company’s consolidated net sales. The increase in net sales volume in the Residential Building Products Segment in the year ended December 31, 2003 as compared to the year ended December 31, 2002 was, in part, the result of new products and the ongoing stability in the residential housing construction and remodeling markets. Increased sales volume of bathroom exhaust fans, range hoods and garage door openers was also a factor in the increase in this segment. Net sales in the Air Conditioning and Heating Products Segment for HVAC products sold to residential site-built customers constituted the largest category of product sold to a particular group of customers within this segment in 2003 and increased approximately 22% over 2002. The increase in net sales in this Segment in the year ended December 31, 2003 as compared to 2002 was due to continued growth principally from this segment's brand-name strategy of HVAC products to the residential site built market. In the year ended December 31, 2003, this Segment benefited from the introduction of our Westinghouse ® and Maytag ® brands which were introduced in the third quarter of 2002 and from the ongoing success of existing brands. To a lesser extent, increased sales prices of HVAC residential products were also a factor in the increase in net sales. These increases were partially offset by the general slowdown in commercial construction activity, which reduced sales of the Company’s commercial HVAC products by approximately 6% and an approximate 9% decrease in sales to the manufactured housing market in this segment as continued softness is being experienced by this industry. The trend of lower levels of orders and shipments of commercial HVAC products, particularly in the office building and telecommunications markets, is expected to continue into 2004.

Combined cost of products sold was approximately $1,078,600,000 for the year ended 2003 and approximately $992,300,000 for the year ended 2002. Cost of products sold, as a percentage of net sales, decreased from approximately 71.7% in the year ended December 31, 2002 to approximately 71.2% in the year ended December 31, 2003. Cost of products sold for 2003 includes approximately $23,600,000 of cost of products sold from the acquisitions of Elan and SPC, including non-cash charges of approximately $800,000 related to the amortization of purchase price allocated to inventory, an increase of approximately $30,600,000 related to the effect of changes in foreign currency exchange rates, a non-cash charge of approximately $4,600,000 related to the amortization of purchase price allocated to inventory as a result of the Recapitalization, approximately $8,100,000 of lower depreciation expense as a result of the fair value adjustment to property, plant and equipment and approximately $6,900,000 of restructuring charges and startup costs. A more complete discussion on depreciation and its impact on the year ended December 31, 2003 and the expected impact on 2004 is available in the second paragraph below. In the Residential Building Products Segment, cost of products sold for 2003 was approximately $541,800,000, as compared to approximately $480,000,000 in 2002, and includes approximately $23,600,000 of cost of products sold from the acquisitions of Elan and SPC, including non-cash charges of approximately $800,000 related to the amortization of purchase price allocated to inventory, an increase of approximately $22,700,000 related to the effect of changes in foreign currency exchange rates, a non-cash charge of approximately $4,000,000 related to the amortization of purchase price allocated to inventory related to the Recapitalization, and approximately $4,600,000 of lower depreciation expense as a result of the fair value adjustment to property, plant and equipment. In the Air Conditioning and Heating Products Segment cost of products sold in 2003 was approximately $536,800,000, as compared to approximately $512,300,000 in 2002, and includes an increase of approximately $7,900,000 related to the effect of changes in foreign currency exchange rates, a non-cash charge of approximately $600,000 related to the amortization of purchase price allocated to inventory, approximately $6,900,000 of restructuring charges and start-up costs and approximately $3,500,000 of lower depreciation expense as a result of the fair value adjustment to property, plant and equipment.

Material costs were approximately 43.7% and 44.0% of net sales for the years ended December 31, 2003 and 2002, respectively. Cost reductions due to strategic sourcing software and systems development were primarily responsible for the decrease in material costs as a percentage of net sales in 2003 as compared to 2002. Manufacturing cost reduction measures implemented in 2002 and 2003 combined with net sales increases contributed to the decrease in cost of products sold as a percentage of net sales in the year ended December 31, 2003 as compared to 2002. Increased sales volume of HVAC products to residential site built customers in the Air Conditioning and Heating Products Segment, without a proportionate increase in cost (in part, reflecting increased sales without an increase in fixed costs) was a factor in the decrease in costs in the year ended December 31, 2003. Cost of products sold for the Air Conditioning and Heating Products Segment for the year ended December 31, 2003 include approximately $5,800,000 of severance and other costs associated with the closure of certain manufacturing facilities and include approximately $1,100,000 of expenses associated with the start-up of a new manufacturing facility.

In connection with both the initial and final allocations of purchase price to property, plant and equipment acquired as part of the Recapitalization, the Company assigned new useful lives based upon the initial estimated and then the final useful lives adopted from the date of the Recapitalization, respectively, in order to determine depreciation expense for all periods subsequent to the Recapitalization. For the period from January 10, 2003 to December 31, 2003, the Company reflected approximately $8,100,000 of lower depreciation expense in continuing operations in cost of sales as compared to the Company’s historical basis of accounting prior to the Recapitalization. The lower depreciation expense reflects the favorable impact of approximately $12,200,000 related to revisions to the remaining useful lives, which was partially offset by the unfavorable impact of approximately $4,100,000 related to the increase in property, plant and equipment related to the allocation of purchase price. In 2004, the Company expects to record approximately $5,100,000 of lower depreciation expense in cost of products sold as compared to the Company’s historical basis of accounting prior to the Recapitalization. Depreciation expense related to property, plant and equipment acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and initial estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and final useful lives adopted for the period from October 5, 2003 to December 31, 2003. Depreciation expense would have been approximately $3,600,000 higher for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and final useful lives adopted had been used to record depreciation expense for the period from January 10, 2003 to October 4, 2003, primarily due to the final remaining useful lives adopted being shorter than the initial estimates, which was partially offset by the reduction in the amount of the final purchase price allocation. During the period from January 10, 2003 to December 31, 2003, the Company reflected amortization of purchase price allocated to inventory of approximately $4,600,000 in continuing operations in cost of sales related to inventory acquired as part of the Recapitalization. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.) Additionally, amortization of purchase price allocated to inventory of approximately $800,000 was reflected in continuing operations in cost of sales relating to the acquisition of Elan and SPC. No similar amortization was required for such inventory in 2002 under the Company’s historical basis of accounting. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Had all year-end inventory values been stated on a FIFO basis, year-end inventory would have been approximately $7,800,000 lower in 2003 and $800,000 higher in 2002. Overall, changes in the cost of products sold as a percentage of net sales for one period as compared to another period may reflect a number of factors including changes in the relative mix of products sold, the effect of changes in sales prices, material costs and changes in productivity levels.

Combined selling, general and administrative expense (“SG&A”) was approximately $266,600,000 for the year ended 2003 and approximately $262,600,000 for the year ended 2002. SG&A as a percentage of net sales decreased from approximately 19.0% in 2002 to approximately 17.6% in 2003. SG&A in 2003 includes approximately $15,200,000 of SG&A from the acquisitions of Elan and SPC in the Residential Building Products Segment, and an increase of approximately $6,400,000 related to the effect of changes in foreign currency exchange rates, of which approximately $4,200,000 is included in the Residential Building Products Segment and $2,200,000 is included in the Air Conditioning and Heating Products Segment. SG&A also includes in unallocated, approximately $3,500,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development. SG&A in 2003 is also higher due to approximately $1,400,000 of stock based compensation from adopting SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and $600,000 of compensation expense in the fourth quarter of 2003 from the sale of stock. SG&A in 2002 includes approximately $3,700,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development, approximately $2,100,000 of fees and expenses incurred in connection with the Nortek’s re-audit of Nortek’s Consolidated Financial Statements for each of the three years in the period ended December 31, 2001, a $4,400,000 charge relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan and approximately $700,000 of stock based-compensation charges, all of which are recorded in unallocated and approximately $1,000,000 in the fourth quarter of 2002 relating to restructuring charges in the Residential Building Products Segment. The direct expenses and fees associated with the Company’s strategic sourcing software and systems development, the fees and expenses related to the re-audit of Nortek’s Consolidated Financial Statements and the charge relating to incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan are set-forth separately in the segment data. The decrease in the percentage is principally due, in part, to lower compensation and benefit expenses of certain members of management subsequent to the Recapitalization and higher sales without a proportionate increase in expense (in part, reflecting increased sales without an increase in fixed expenses) in the Air Conditioning and Heating Products segment in the fourth quarter and in the year ended December 31,2003 in the Residential Building Products Segment. These decreases were partially offset by increased expense levels associated with the Company’s brand name strategy of HVAC products sold to the residential site built market.

Amortization of intangible assets, as a percentage of net sales from continuing operations, increased from approximately .2% in the year ended December 31, 2002 to approximately .6% in the year ended December 31, 2003 principally as a result of approximately $6,300,000 of higher amortization of intangible assets arising from the Recapitalization as compared to the Company’s historical basis of accounting prior to the Recapitalization, of which approximately $3,600,000 and $2,700,000 relates to the Residential Building Products Segment and the Air Conditioning and Heating Products Segment, respectively. This higher amortization reflects the combination of the unfavorable impact of approximately $1,400,000 related to revisions to the remaining useful lives and the unfavorable impact of approximately $4,900,000 related to the increase in intangible assets as a result of the allocation of purchase price. The acquisitions of Elan and SPC in the Residential Building Products Segment accounted for an additional increase of approximately $700,000. In 2004, the Company expects to record approximately $8,400,000 of higher amortization of intangible assets as compared to the Company’s historical basis of accounting prior to the Recapitalization. Amortization expense related to intangible assets acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and final useful lives adopted for the period from October 5, 2003 to December 31, 2003. Amortization expense would have been approximately $1,800,000 higher for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and final remaining useful lives adopted had been used to record amortization expense for the period from January 10, 2003 to October 4, 2003, primarily due to the final remaining useful lives adopted being shorter than the initial estimates, which was partially offset by the reduction in the amount of the allocation of purchase price. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Expenses and charges arising from the Recapitalization were $83,000,000 or 5.5%, as a percentage of net sales, and $6,600,000 or .5%, as a percentage of net sales, in 2003 and 2002, respectively. See Liquidity and Capital Resources and Notes 1, 2 and 14 of the Notes to the Consolidated Financial Statements included elsewhere herein, for further discussion of these expenses and charges.

Consolidated operating earnings decreased by approximately $41,900,000 from approximately $119,600,000, or 8.6% as a percent of net sales, in 2002 to approximately $77,700,000, or 5.1% as a percent of net sales, in 2003 as a result of the factors discussed above.

Consolidated operating earnings have been reduced by depreciation and amortization expense (other than amortization of deferred debt expense and debt premium and discount) of approximately $32,600,000 and $29,100,000 for the years ended December 31, 2003 and 2002, respectively. Consolidated operating earnings for the year ended December 31, 2003 includes approximately $5,400,000 of amortization expense from purchase price allocated to inventory and approximately $6,300,000 of additional amortization expense of intangible assets, partially offset by approximately $8,100,000 of lower depreciation expense of property, plant and equipment as a result of the fair value adjustments arising from acquisitions and the Recapitalization.

Operating earnings of the Residential Building Products Segment were approximately $140,000,000 in 2003 compared to approximately $122,900,000 in 2002 and include an increase of approximately $2,400,000 from the effect of foreign currency exchange rates, $7,600,000 of operating earnings contributed by the acquisition of Elan and SPC and an increase of approximately $4,600,000 of lower depreciation expense as a result of the fair value adjustment to property, plant and equipment in 2003. These increases were offset by decreased operating earnings from approximately $4,800,000 of amortization expense from purchase price allocated to inventory in 2003 and $3,600,000 of increased amortization from the estimated amount of fair value adjustment to intangible assets in 2003. Operating earnings in 2002 include a decrease of $1,000,000 relating to restructuring charges recorded in the fourth quarter of 2002. Operating earnings of the Air Conditioning and Heating Products Segment were approximately $57,200,000 in 2003 as compared to approximately $61,500,000 in 2002 and include an increase of approximately $3,500,000 of lower depreciation expense as a result of the fair value adjustment to property, plant and equipment in 2003. This increase was offset by decreased operating earnings of approximately $800,000 from the effect of foreign currency exchange rates, approximately $600,000 of amortization expense from purchase price allocated to inventory in 2003, $2,700,000 of increased amortization from the estimated amount of fair value adjustment to intangible assets in 2003 and $6,900,000 of restructuring charges and plant start-up costs in 2003. The operating expense in unallocated was approximately $119,500,000 for the year ended December 31, 2003 compared to expense of approximately $64,800,000 in 2002 and includes the effect of approximately $83,000,000 of fees and expenses associated with the Recapitalization, approximately $3,500,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development incurred in 2003 and approximately $1,800,000 of stock based compensation expense in 2003. The operating expense in unallocated for 2002 includes approximately $6,600,000 of fees and expenses associated with the Recapitalization, the effect of the incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan of approximately $4,400,000 in the second quarter of 2002, the effect of the fees and expenses incurred in connection with Nortek’s re-audit of Nortek’s Consolidated Financial Statements for each of the three years in the period ended December 31, 2001 of approximately $2,100,000 in the third quarter of 2002, $3,700,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development and approximately $700,000 of stock based compensation expense.

The increase in operating earnings in the Residential Building Products Segment in 2003 was primarily as a result of increased sales volume, principally bathroom exhaust fans and kitchen range hoods, due to the continued stability of new home construction and remodeling markets and increased sales of garage door openers. The increase in operating earnings in the Air Conditioning and Heating Products Segment in 2003 was principally due to increased sales volume of HVAC products to customers serving the residential site built market without a proportionate increase in costs and expenses (in part, reflecting increased sales without an increase in fixed costs and expenses), strategic sourcing software and systems development and cost reduction measures implemented in 2002 and, partially offset by a decrease in operating earnings of certain product lines due to the general slowdown in the commercial construction and manufactured housing markets. The operating results of the Air Conditioning and Heating Products Segment for the year ended December 31, 2003 include approximately $5,800,000 of severance and other costs associated with the closure of certain manufacturing facilities and include approximately $1,100,000 of costs associated with the start-up of a new manufacturing facility.

Operating earnings of foreign operations, consisting primarily of the results of operations of the Company's Canadian and European subsidiaries were approximately 6.6% and 7.2% of operating earnings (before unallocated and corporate expense) in 2003 and 2002, respectively. Sales and earnings derived from international markets are subject to, among others, the risks of currency fluctuations.

Interest expense increased approximately $6,300,000 or approximately 12.0% in 2003 as compared to 2002. The increase in interest expense in 2003 is primarily due to approximately $3,600,000 of interest expense associated with the sale, on November 24, 2003 of $515,000,000 aggregate principal amount at maturity of its 10% Senior Discount Notes due May 15, 2011 and approximately $4,100,000 of interest expense from the amortization of the Bridge Facility commitment fees and related expenses and reflects the effect of a net increase in debt and approximately $3,200,000 of lower interest expense allocated to discontinued operations in 2003. These increases were partially offset by approximately $5,700,000 in the year ended December 31, 2003 of lower interest expense from the amortization of premium arising from the fair value adjustment on the date of the Recapitalization allocated to indebtedness as compared to the Company’s historical basis of accounting prior to the Recapitalization. Interest allocated to discontinued operations was approximately $38,600,000 and $41,800,000 for the years ended December 31, 2003 and 2002, respectively. (See Liquidity and Capital Resources and Notes 2 and 10 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Investment income decreased approximately $4,300,000 or 72.9% in 2003 as compared to 2002 primarily as a result of lower average invested balances in 2003 as a result of the funds utilized in the Recapitalization and for acquisitions. Included in investment income in the year ended December 31, 2002 was approximately $2,600,000 related to restricted investments and marketable securities held by certain pension trusts (including related party amounts) which funds were distributed to participants on the date of the Recapitalization. (See Note 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The provision for income taxes from continuing operations was approximately $19,500,000 for the year ended December 31, 2003 as compared to approximately $29,500,000 for the year ended December 31, 2002. The income tax rates in both 2003 and 2002 differed from the United States Federal statutory rate of 35% principally as a result of the effect of non-deductible expenses, foreign income tax on foreign source income, state income tax provisions, and in 2003 due to the Recapitalization. (See Notes 1, 2 and 5 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The table that follows presents a summary of the operating results of discontinued operations for the periods presented. (See Note 10 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

	For the Periods
	Post-Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002
	(Amounts in thousands)
Net sales	$	522,600		$	8,800		$	529,700
Operating earnings (loss) of discontinued
operations *		58,237			(368	)		70,401
Interest expense, net		(38,537	)		(1,232	)		(42,701	)
Earnings (loss) before provision (benefit) for
income taxes		19,700			(1,600	)		27,700
Provision (benefit) for income taxes		7,500			(600	)		10,600
Earnings (loss) from discontinued operations		12,200			(1,000	)		17,100
Gain (loss) on sale of discontinued operations		--			--			2,400
Tax provision (benefit) on sale of discontinued
operations		--			--			600
		--			--			1,800
Earnings (loss) from discontinued operations	$	12,200		$	(1,000	)	$	18,900
Depreciation and amortization expense	$	16,101		$	315		$	14,902

* Operating earnings (loss) of discontinued operations are net of Ply Gem corporate expenses previously included within Unallocated other, net in the Company’s segment reporting.

Operating earnings (loss) of discontinued operations for the period from January 10, 2003 to December 31, 2003 include approximately $600,000 of severance and other costs associated with the closure of certain manufacturing facilities. Operating earnings (loss) of discontinued operations for the period from January 10, 2003 to December 31, 2003 also include approximately $1,300,000 of costs and expenses for expanded distribution including new customers.

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Company adopted SFAS No. 143 on January 1, 2003. Adoption of this accounting standard was not material to the Company’s Consolidated Financial Statements.

SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (“SFAS No. 145”), was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No. 145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of APB 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The Company adopted SFAS No. 145 on January 1, 2003. Adoption of this accounting standard was not material to the results presented in the consolidated financial statements but did require reclassification of the Company’s $5,500,000 pre tax extraordinary loss recorded in 2001 to earnings from continuing operations.

Effective January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”), which addresses the accounting and reporting for costs associated with exit or disposal activities, nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”) and substantially nullifies EITF Issue No. 88-10, “Costs Associated with Lease Modification or Termination” (“EITF 88-10”). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company’s Consolidated Financial Statements (see Note 13 of the Notes to the Consolidated Financial Statements included elsewhere herein).

On December 31, 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) to provide alternative methods of transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, “Interim Financial Reporting”. In the fourth quarter of 2003, the Company adopted the fair value method of accounting for stock based employee compensation in accordance with SFAS No. 123. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). Along with new disclosure requirements, FIN 45 requires guarantors to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. This differs from the prior practice to record a liability only when a loss is probable and reasonably estimable. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company adopted the disclosure provisions of FIN 45 as of December 31, 2002 and adopted the entire interpretation on January 1, 2003. Adoption of FIN 45 was not material to the Company’s Consolidated Financial Statements (see Note 9 of the Notes to the Consolidated Financial Statements included elsewhere herein).

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements of FIN 46 apply to the Company immediately for variable interest entities created after January 31, 2003 and for existing variable interest entities no later than the end of the first annual reporting period beginning after December 15, 2003. The adoption of FIN 46 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”), which clarifies the financial accounting and reporting proscribed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) for derivative instruments, including certain derivative instruments embedded in other contracts. Certain provisions of SFAS No. 149 related to implementation issues of SFAS No. 133 are already effective and other provisions related to forward purchases or sales are effective for both existing contracts and new contracts entered into after June 30, 2003. The Company has previously adopted SFAS No. 133, including the implementation issues addressed in SFAS No. 149, and the adoption of the new provisions of SFAS No. 149 on July 1, 2003 did not have an impact on the Company’s Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”), which addresses the accounting and reporting for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and for all existing financial instruments beginning in the first interim period after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities, which are subject to the provisions for the first fiscal period beginning after December 15, 2004. The Company adopted SFAS No. 150 on July 1, 2003. Adoption of this accounting standard did not have an impact on the Company’s Consolidated Financial Statements.

In December 2003, the FASB issued the revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“SFAS No. 132”) to require additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The revised SFAS No. 132 provides only for additional disclosures and does not change the accounting for pension and postretirement plans. The Company has previously adopted SFAS No. 132 and has provided the required new disclosures of the revised SFAS No. 132 in Note 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.

The Company uses EBITDA as both an operating performance and liquidity measure. Operating performance measure disclosures with respect to EBITDA are provided below. Refer to the Liquidity and Capital Resources section for liquidity measure disclosures with respect to EBITDA and a reconciliation from net cash flows from operating activities to EBITDA.

EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization expense. EBITDA is not a measure of operating performance under generally accepted accounting principles in the United States (“GAAP”) and should not be considered as an alternative or substitute for GAAP profitability measures such as operating earnings (loss) from continuing operations, discontinued operations, extraordinary items and net income (loss). EBITDA as an operating performance measure has material limitations since it excludes, among other things, the statement of operations impact of depreciation and amortization expense, interest expense and the provision (benefit) for income taxes and therefore does not necessarily represent an accurate measure of profitability, particularly in situations where a company is highly leveraged or has a disadvantageous tax structure. The Company uses a significant amount of capital assets and depreciation and amortization expense is a necessary element of the Company’s costs and ability to generate revenue and therefore its exclusion from EBITDA is a material limitation. The Company has a significant amount of debt and interest expense is a necessary element of the Company’s costs and ability to generate revenue and therefore its exclusion from EBITDA is a material limitation. The Company generally incurs significant U.S federal, state and foreign income taxes each year and the provision (benefit) for income taxes is a necessary element of the Company’s costs and therefore its exclusion from EBITDA is a material limitation. As a result, EBITDA should be evaluated in conjunction with net income (loss) for a more complete analysis of the Company’s profitability, as net income (loss) includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to EBITDA. As EBITDA is not defined by GAAP, the Company’s definition of EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of the Company’s operating results as reported under GAAP.

Company management uses EBITDA as a supplementary non-GAAP operating performance measure to assist with its overall evaluation of Company and subsidiary operating performance (including the performance of subsidiary management) relative to outside peer group companies. In addition, the Company uses EBITDA as an operating performance measure in financial presentations to the Company’s Board of Directors, shareholders, various banks participating in the Company’s Credit Facility, note holders and Bond Rating agencies, among others, as a supplemental non-GAAP operating measure to assist them in their evaluation of the Company’s performance. The Company is also active in mergers, acquisitions and divestitures and uses EBITDA as an additional operating performance measure to assess Company, subsidiary and potential acquisition target enterprise value and to assist in the overall evaluation of Company, subsidiary and potential acquisition target performance on an internal basis and relative to peer group companies. The Company uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of potential valuation and relative performance and therefore does not place undue reliance on EBITDA as its only measure of operating performance. The Company believes EBITDA is useful for both the Company and investors as it is a commonly used analytical measurement for comparing company profitability, which eliminates the effects of financing, differing valuations of fixed and intangible assets and tax structure decisions. The Company believes that EBITDA is specifically relevant to the Company, due to the different degrees of leverage among its competitors, the impact of purchase accounting associated with the Recapitalization, which impacts comparability with its competitors who may or may not have recently revalued their fixed and intangible assets, and the differing tax structures and tax jurisdictions of certain of the Company’s competitors. The Company has included EBITDA as a supplemental operating performance measure, which should be evaluated by investors in conjunction with the traditional GAAP performance measures discussed earlier in this Results of Operations section for a complete evaluation of the Company’s operating performance.

The following table presents a reconciliation from net earnings (loss), which is the most directly comparable GAAP operating performance measure, to EBITDA:

	For the Periods
	Post-Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002
Net earnings (loss) *	$	74,200		$	(61,900	)	$	62,500
Provision (benefit) for income taxes from
continuing operations		41,300			(21,800	)		29,500
Provision (benefit) for income taxes from discontinued
operations		7,500			(600	)		11,200
Interest expense from continuing operations		57,627			1,054			52,410
Interest expense from discontinued operations		38,733			1,234			44,224
Investment income from continuing operations		(1,482	)		(119	)		(5,943	)
Investment income from discontinued operations		(196	)		(2	)		(1,523	)
Depreciation expense from continuing operations		17,502			586			26,130
Depreciation expense from discontinued operations		10,865			245			11,784
Amortization expense from continuing operations		14,460			67			2,988
Amortization expense from discontinued operations		5,236			70			3,118
EBITDA	$	265,745		$	(81,165	)	$	236,388

* Includes approximately $12,200,000, $(1,000,000) and $18,900,000 of earnings (loss) from discontinued operations for the periods from January 10, 2003 to December 31, 2003 and from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002, respectively. (See Note 10 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

EBITDA includes approximately $83,000,000 and $6,600,000 of expenses and charges arising from the Recapitalization recorded in the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002, respectively (see Notes 2 and 11 of the Notes to the Consolidated Financial Statements included elsewhere herein) and approximately $1,500,000 of stock based compensation from adopting SFAS No. 123 and $600,000 of compensation expense in the fourth quarter of 2003 from the sale of stock (see Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein).

Year-ended December 31, 2002 as Compared to the Year-ended December 31, 2001

Consolidated net sales increased approximately $90,300,000 or 7.0% for 2002 as compared to 2001. The Company’s segments have a significant number of different products across a wide range of price points and numerous distribution channels that does not always allow meaningful quantitative analysis to be performed with respect to the effect on net sales of changes in units sold or the price per unit sold. The Company however, does ensure that whenever the underlying causes of material increases or decreases in consolidated net sales can be adequately analyzed and quantified, that, appropriate disclosure of such reasons, including changes in price, volume and the mix of products is made. The effect of changes in foreign currency exchange rates accounted for approximately $5,600,000 of the increase in net sales in 2002. In the Residential Building Products Segment, net sales increased approximately $69,600,000 or 10.5% and include an increase of approximately $3,800,000 attributable to the effect of changes in foreign currency exchange rates. In the Air Conditioning and Heating Products Segment, net sales increased approximately $20,700,000 or 3.3% and include an increase of approximately $1,800,000 attributable to the effect of changes in foreign currency exchange rates.

Overall, increases in sales levels in 2002 reflect continued strength in new home construction and remodeling markets and favorable weather conditions, partially offset by the continued slowdown in the manufactured housing market. For the years ended December 31, 2002 and 2001, the Company’s net sales to customers serving the manufactured housing markets, principally consisting of air conditioners and furnaces, constituted approximately 8.5% and 9.8%, respectively, of the Company’s consolidated net sales. The increase in net sales volume in the Residential Building Products Segment was, in part, the result of steady new home construction and strong remodeling business, increases in average unit sales prices of range hoods due to changes in product mix and increased sales of garage door openers. The increase in net sales in the Air Conditioning and Heating Products Segment, was principally due to continued growth resulting from this Segment's brand-name strategy resulting in increased sales volume of HVAC products to the residential site built market, partially offset by the general slowdown in commercial construction activity which reduced the level of shipments of the Company’s commercial HVAC products and lower sales to the manufactured housing market in this segment in 2002 as continued softness was being experienced by this industry.

Cost of products sold, as a percentage of net sales, decreased from approximately 73.1% for the year ended 2001 to approximately 71.7% for the year ended 2002. In the Residential Building Products Segment, cost of products sold for 2002 was approximately $480,000,000 compared to $443,200,000 for 2001 and includes an increase of approximately $3,200,000 related to the effect of changes in foreign currency exchange rates. In the Air Conditioning and Heating Products Segment cost of products sold was approximately $512,300,000 for 2002 compared to approximately $502,400,000 for 2001. Cost of products sold for 2002 includes an increase of approximately $1,500,000 related to the effect of changes in foreign currency exchange rates while cost of products sold for 2001 includes an increase of $2,700,000 over 2000 attributable to costs incurred in the start-up of a residential HVAC manufacturing facility.

Material costs represented approximately 44.0% and 45.4% of net sales for the year 2002 and 2001, respectively. Material costs as a percentage of net sales decreased for the year 2002 as compared to the year 2001, primarily due to increased net sales levels and decreases in product costs including lower costs achieved from the Company’s strategic sourcing software and systems development discussed further below.

The decrease in the percentage in 2002 as compared to 2001 principally resulted from reductions realized in the cost of certain purchased materials and component parts, in part, due to lower prices and the effect of lower costs from cost reduction measures implemented in 2001. The Company realized slightly lower prices on steel products for the first half of 2002 as compared to 2001, but higher steel prices in the second half of 2002 began to mitigate cost savings achieved. In addition, increased sales volume of HVAC products to residential site built customers in the Air Conditioning and Heating Products Segment and increased sales volume and higher average unit sales prices of range hoods due to changes in product mix toward higher priced units in the Residential Building Products Segment, all without a proportionate increase in cost (in part, reflecting increased sales without an increase in fixed costs) were also a factor. During 2002 the Company estimates that it has realized benefits related to its strategic sourcing software and systems development of between approximately $9,000,000 and $17,000,000 of lower cost of sales, before implementation costs as compared to between approximately $4,000,000 and $6,000,000 of lower cost of sales, before implementation costs in 2001. Cost savings achieved from this strategy were partially offset by the effect of increases in steel prices noted above. Had all year-end inventory values been stated on a FIFO basis, year-end inventory would have been approximately $800,000 higher in 2002 and $2,700,000 higher in 2001. Overall, changes in the cost of products sold as a percentage of net sales for one period as compared to another period may reflect a number of factors including changes in the relative mix of products sold, the effect of changes in sales prices, material costs and changes in productivity levels.

Selling, general and administrative expense increased from $226,500,000 or approximately 17.5% as a percentage of net sales in the year 2001 to approximately $262,600,000 or approximately 19.0% as a percentage of net sales in the year 2002. SG&A in 2002 includes approximately $3,700,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development, approximately $2,100,000 of fees and expenses incurred in connection with Nortek’s re-audit of Nortek’s Consolidated Financial Statements for each of the three years in the period ended December 31, 2001, and a $4,400,000 charge relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan all of which are recorded in unallocated and approximately $1,000,000 in the fourth quarter of 2002 relating to restructuring charges in the Residential Building Products Segment. The direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development, the fees and expenses related to the re-audit of Nortek’s Consolidated Financial Statements and the charge relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan are forth separately in the segment data. Selling, general and administrative expense in 2001 included approximately $5,500,000 of fees and expenses related to the Company’s strategic sourcing software and systems development recorded in unallocated. All of the above amounts are set forth separately in the segment data except for the restructuring charges in the fourth quarter of 2002, which were recorded in the Residential Building Products Segment.

The increase in the percentage is due, in part, to compensation and benefit expenses of certain members of management prior to the Recapitalization in 2002.

Amortization of goodwill and intangible assets, as a percentage of net sales, decreased from approximately 0.9% in 2001 to approximately 0.2% in 2002. Beginning January 1, 2002, goodwill is no longer being amortized by the Company in accordance with the adoption of SFAS No. 142. Amortization of goodwill of continuing operations was approximately $8,700,000 for 2001, as determined under accounting principles generally accepted in the United States in effect in the year 2001 (see below).

Expenses and charges arising from the Recapitalization were $6,600,000 or .5%, as a percentage of net sales, in 2002. See Liquidity and Capital Resources and Notes 1, 2 and 14 of the Notes to the Consolidated Financial Statements included elsewhere herein, for further discussion of these expenses and charges.

Consolidated operating earnings increased approximately $9,900,000 or approximately 9.0% from approximately $109,700,000 in 2001 to approximately $119,600,000 in 2002 as a result of the factors discussed above.

Consolidated operating earnings have been reduced by depreciation and amortization expense (other than amortization of deferred debt expense and debt discount) of approximately $29,100,000 and $37,100,000 for 2002 and 2001, respectively.

Operating earnings of the Residential Building Products Segment were approximately $122,900,000 in 2002 compared to approximately $93,700,000 in 2001 and include an increase of approximately $200,000 from the effect of foreign currency exchange rates in 2002, and a decrease of $1,000,000 relating to restructuring charges recorded in the fourth quarter of 2002. Operating earnings of the Air Conditioning and Heating Products Segment were approximately $61,500,000 in 2002 compared to approximately $53,800,000 in 2001 and include a decrease of approximately $100,000 from the effect of foreign currency exchange rates in 2002 and approximately $2,700,000 attributable to costs incurred in the start-up of a residential HVAC manufacturing facility in 2001. The operating expense in unallocated was approximately $64,800,000 for the year ended December 31, 2002 compared to expense of approximately $37,800,000 in 2001 and includes the effect of approximately $6,600,000 of fees and expenses in 2002 associated with the Recapitalization of the Company, the effect of the incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan of approximately $4,400,000 in the second quarter of 2002, the effect of the fees and expenses incurred in connection with Nortek’s re-audit of Nortek’s Consolidated Financial Statements for each of the three years in the period ended December 31, 2001 of approximately $2,100,000 in the third quarter of 2002 and $3,700,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development incurred in 2002.

The increase in operating earnings in the Residential Building Products Segment was primarily as a result of increased sales volume due to continued strength in 2002 in new home construction and remodeling markets, favorable weather conditions, increases in sales volume and higher average unit sales prices of range hoods due to changes in product mix and increased sales of garage door openers. The increase in operating earnings in the Air Conditioning and Heating Products Segment in 2002 was principally due to increased sales volume of HVAC products to customers serving the residential site built market, partially offset by a decrease in operating earnings of commercial products principally due to the softness in the commercial construction market. During 2002, both segments realized benefits associated with the Company’s strategic sourcing software and systems development.

Operating earnings of foreign operations, consisting primarily of the results of operations of the Company's Canadian and European subsidiaries, were approximately 7.2% and 6.3% of operating earnings (before unallocated and corporate expense) in 2002 and 2001, respectively. Sales and earnings derived from international markets are subject to, among others, the risks of currency fluctuations.

Interest expense in 2002 increased approximately $600,000 or approximately 1.2% as compared to 2001. The increase in interest expense is primarily due to approximately $2,200,000 in 2002 associated with the refinancing of Nortek’s 9 7/8% Senior Subordinated Notes due 2011 and increased interest and deferred debt amortization associated with Nortek’s Senior Secured Credit Facility entered into in 2002 partially offset by duplicative interest expense of approximately $1,750,000 incurred in 2001 in connection with the refinancing of Nortek’s 9 7/8% Senior Subordinated Notes due 2004 since the redemption of the 9 7/8% Senior Subordinated Notes due 2004 did not occur on the same day as the financing. Interest allocated to discontinued operations remained unchanged at approximately $41,800,000 for the years ended December 31, 2002 and 2001. (See Liquidity and Capital Resources and Notes 6, 10 and 16 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

On July 11, 2001, Nortek redeemed $204,822,000 principal amount of Nortek’s 9 7/8% Senior Subordinated Notes due 2004, plus an approximate $2,900,000 redemption premium thereon. As a result of this redemption, the Company recorded a pre-tax loss of approximately $5,500,000 in the third quarter of 2001. (See Note 6 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Investment income decreased approximately $2,300,000 or 28.0% in 2002 as compared to 2001 primarily as a result of (a) approximately $1,700,000 of interest income resulting from the favorable abatement of state income taxes in 2001, (b) additional interest income of approximately $500,000 in 2001, earned on the funds from the financing held in escrow for the subsequent redemption of the 9 7/8% Senior Subordinated Notes due 2004 and (c) lower investment income rates in 2002. Included in investment income was approximately $2,600,000 in 2002 and $2,200,000 in 2001, respectively, related to restricted investments and marketable securities held by certain pension trusts (including related party amounts). (See Note 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The provision for income taxes from continuing operations was approximately $29,500,000 for 2002 as compared to approximately $27,800,000 for 2001. The income tax rates in both years differed from the United States Federal statutory rate of 35% principally as a result of the effect of non-deductible expenses, foreign income tax on foreign source income, state income tax provisions and, in 2002, by the effect of approximately $2,000,000 of income taxes no longer required as a result of the Company’s Hong Kong subsidiary permanently investing un-remitted foreign earnings outside the United States and, in 2001 and non-deductible amortization expense (for tax purposes). Beginning January 1, 2002, goodwill and intangible assets determined to have an indefinite life are no longer being amortized (non-deductible for tax purposes). (See Notes 1 and 5 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The table that follows presents a summary of the operating results of discontinued operations for 2002 and 2001. (See Notes 1 and 10 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

	For the Years Ended December 31,
	2002			2001
	(Amounts in thousands)
Net sales	$	529,700		$	787,400
Operating earnings of discontinued operations *	$	70,401		$	43,188
Interest expense, net		(42,701	)		(47,688	)
Earnings (loss) before provision for income taxes		27,700			(4,500	)
Provision for income taxes		10,600			300
Earnings (loss) from discontinued operations	$	17,100		$	(4,800	)
Gain (loss) on sale of discontinued operations	$	2,400		$	(34,000	)
Tax provision (benefit) on sale of discontinued operations		600			(14,000	)
	$	1,800		$	(20,000	)
Earnings (loss) from discontinued operations	$	18,900		$	(24,800	)
Depreciation and amortization expense	$	14,902		$	26,291

* Operating earnings (loss) of discontinued operations are net of Ply Gem corporate expenses previously included within Unallocated other, net in the Company’s segment reporting.

Operating earnings (loss) of discontinued operations for the year ended December 31, 2001 include approximately $600,000 of direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development and approximately $3,200,000 of net death benefit insurance proceeds related to life insurance maintained on former managers, both of which were previously included within Unallocated other, net in the Company’s segment reporting. Operating earnings (loss) of discontinued operations for the year ended December 31, 2001 also include approximately $300,000 of manufacturing costs incurred in connection with the start-up of a vinyl fence and decking facility, which were previously included in the WDS Segment in the Company’s segment reporting.

In accordance with the adoption of SFAS No. 142, the Company ceased recording goodwill amortization expense as of January 1, 2002. The table that follows presents earnings from continuing operations and net earnings for the year ended December 31, 2001, as adjusted, to reflect the elimination of goodwill amortization expense and the related income tax impact:

	For the Year Ended
	December 31, 2001
	Earnings from
	Continuing
	Operations			Net Earnings
	(Amounts in thousands)
As reported in the accompanying
consolidated statement of operations	$	32,800		$	8,000
Eliminate goodwill amortization expense		8,718			16,394
Eliminate related tax impact		(118	)		(294	)
As adjusted	$	41,400		$	24,100

Comprehensive income included in stockholders’ investment was approximately $44,700,000 for 2002. Included in comprehensive income was a loss of approximately $22,700,000 (net of tax benefit of approximately $12,900,000) primarily as a result of actuarial losses due to market declines in plan assets, compensation increases and changes in discount rates and a gain recorded on the change in the cumulative amount of currency translation adjustment of approximately $5,250,000. (See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The Company uses EBITDA as both an operating performance and liquidity measure. Operating performance measure disclosures with respect to EBITDA are provided below. Refer to the Liquidity and Capital Resources section for liquidity measure disclosures with respect to EBITDA and a reconciliation from net cash flows from operating activities to EBITDA.

EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization expense. EBITDA is not a measure of operating performance under generally accepted accounting principles in the United States (“GAAP”) and should not be considered as an alternative or substitute for GAAP profitability measures such as operating earnings (loss) from continuing operations, discontinued operations, extraordinary items and net income (loss). EBITDA as an operating performance measure has material limitations since it excludes, among other things, the statement of operations impact of depreciation and amortization expense, interest expense and the provision (benefit) for income taxes and therefore does not necessarily represent an accurate measure of profitability, particularly in situations where a company is highly leveraged or has a disadvantageous tax structure. The Company uses a significant amount of capital assets and depreciation and amortization expense is a necessary element of the Company’s costs and ability to generate revenue and therefore its exclusion from EBITDA is a material limitation. The Company has a significant amount of debt and interest expense is a necessary element of the Company’s costs and ability to generate revenue and therefore its exclusion from EBITDA is a material limitation. The Company generally incurs significant U.S federal, state and foreign income taxes each year and the provision (benefit) for income taxes is a necessary element of the Company’s costs and therefore its exclusion from EBITDA is a material limitation. As a result, EBITDA should be evaluated in conjunction with net income (loss) for a more complete analysis of the Company’s profitability, as net income (loss) includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to EBITDA. As EBITDA is not defined by GAAP, the Company’s definition of EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of the Company’s operating results as reported under GAAP.

Company management uses EBITDA as a supplementary non-GAAP operating performance measure to assist with its overall evaluation of Company and subsidiary operating performance (including the performance of subsidiary management) relative to outside peer group companies. In addition, the Company uses EBITDA as an operating performance measure in financial presentations to the Company’s Board of Directors, shareholders, various banks participating in the Company’s Credit Facility, note holders and Bond Rating agencies, among others, as a supplemental non-GAAP operating measure to assist them in their evaluation of the Company’s performance. The Company is also active in mergers, acquisitions and divestitures and uses EBITDA as an additional operating performance measure to assess Company, subsidiary and potential acquisition target enterprise value and to assist in the overall evaluation of Company, subsidiary and potential acquisition target performance on an internal basis and relative to peer group companies. The Company uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of potential valuation and relative performance and therefore does not place undue reliance on EBITDA as its only measure of operating performance. The Company believes EBITDA is useful for both the Company and investors as it is a commonly used analytical measurement for comparing company profitability, which eliminates the effects of financing, differing valuations of fixed and intangible assets and tax structure decisions. The Company believes that EBITDA is specifically relevant to the Company, due to the different degrees of leverage among its competitors, the impact of purchase accounting associated with the Recapitalization, which impacts comparability with its competitors who may or may not have recently revalued their fixed and intangible assets, and the differing tax structures and tax jurisdictions of certain of the Company’s competitors. The Company has included EBITDA as a supplemental operating performance measure, which should be evaluated by investors in conjunction with the traditional GAAP performance measures discussed earlier in this Results of Operations section for a complete evaluation of the Company’s operating performance.

The following table presents a reconciliation from net earnings, which is the most directly comparable GAAP operating performance measure, to EBITDA:

	For the years ended December 31,
	2002			2001
Net earnings*	$	62,500		$	8,000
Provision for income taxes from continuing operations		29,500			27,800
Provision (benefit) for income taxes from discontinued operations		11,200			(13,700	)
Interest expense from continuing operations		52,410			51,748
Interest expense from discontinued operations		44,224			50,150
Investment income from continuing operations		(5,943	)		(8,189	)
Investment income from discontinued operations		(1,523	)		(2,462	)
Depreciation expense from continuing operations		26,130			25,166
Depreciation expense from discontinued operations		11,784			15,148
Amortization expense from continuing operations		2,988			11,955
Amortization expense from discontinued operations		3,118			11,143
EBITDA	$	236,388		$	176,759

* Includes approximately $18,900,000 and $(24,800,000) of earnings (loss) from discontinued operations for the years ended December 31, 2002 and 2001, respectively (see Note 10 of the Notes to the Consolidated Financial Statements included elsewhere herein).

EBITDA includes approximately $6,600,000 of expenses and charges arising from the Recapitalization recorded for the year ended December 31, 2002 (see Notes 2 and 11 of the Notes to the Consolidated Financial Statements included elsewhere herein).

Liquidity and Capital Resources

From January 1, 2004 through February 3, 2004, the Company purchased approximately $14,800,000 of Nortek’s 9 1/4% Senior Notes due 2007 (“9 1/4% Notes”) and approximately $10,700,000 of Nortek’s 9 1/8% Senior Notes due 2007 (“9 1/8% Notes”) in open market transactions. These purchases resulted in a pre-tax loss of approximately $400,000, which will be recorded in the first quarter of 2004.

On February 13, 2004, the Company called for redemption on March 15, 2004 all of Nortek’s outstanding 9 1/4% Notes (approximately $160,200,000 in principal amount) and called for redemption on March 14, 2004 all of Nortek’s outstanding 9 1/8% Notes (approximately $299,300,000 in principal amount). The 9 1/4% Notes and 9 1/8% Notes were called at a redemption price of 101.542% and 103.042%, respectively, of the principal amount thereof plus accrued and unpaid interest. The 9 1/4% Notes and 9 1/8% Notes ceased to accrue interest as of the respective redemption dates indicated above. The Company used the estimated net after tax proceeds from the sale of Ply Gem of approximately $450,000,000, together with existing cash on hand, to fund the redemption of the 9 1/4% Notes and 9 1/8% Notes. On February 13, 2004, the Company called for redemption on March 14, 2004 $60,000,000 of Nortek’s outstanding 8 7/8% Senior Notes due 2008 (“8 7/8% Notes”). On March 1, 2004, the Company called for redemption on March 31, 2004 the remaining $150,000,000 of Nortek’s outstanding 8 7/8% Notes (see below). The 8 7/8% Notes were called at a redemption price of 104.438% of the principal amount thereof plus accrued and unpaid interest.

Approximately $60,000,000 principal amount of the 8 7/8% Notes ceased to accrue interest as of March 14, 2004 and approximately $150,000,000 principal amount of such Notes will cease to accrue interest as of March 31, 2004. Nortek will use the net proceeds of approximately $196,000,000 from the sale of the Floating Rate Notes, together with existing cash on hand, to fund the redemption of the 8 7/8% Notes.

The Company expects that the redemption of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% will result in a pre-tax loss of approximately $11,500,000, based upon the difference between the respective redemption prices indicated above and the estimated carrying values at the redemption dates of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% Notes, which include the principal amount to be redeemed and the estimated remaining unamortized premium recorded in connection with the Recapitalization (see Note 16 of the Notes to the Consolidated Financial Statements included elsewhere herein). The Company will record such loss in the first quarter of 2004.

On March 1, 2004, Nortek completed the sale of $200,000,000 of Senior Floating Rate Notes due 2010 (the “Floating Rate Notes”). The Floating Rate Notes will bear interest at a rate per annum equal to LIBOR, as defined, plus 3% (4.17% as of March 1, 2004). Interest on the Floating Rate Notes will be determined and payable semi-annually on June 30 and December 31 of each year commencing June 30, 2004. Nortek incurred fees and expenses, including the initial purchaser’s discount, of approximately $4,000,000 in connection with the sale, which will be amortized over the life of the Floating Rate Notes. The Floating Rate Notes are unsecured obligations of Nortek, which mature on December 31, 2010, and may be redeemed in whole or in part prior to December 31, 2010 at the redemption prices as defined in the indenture governing the Floating Rate Notes (the “Indenture”). The Indenture contains covenants that limit the Company’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Floating Rate Notes require Nortek to register notes having substantially identical terms (the “Exchange Notes”) with the SEC as part of an offer to exchange freely tradable Exchange Notes for the Floating Rate Notes (the “Exchange”). In the event Nortek does not complete the Exchange in accordance with the timing requirements outlined in the Indenture, Nortek may be required to pay a higher interest rate. Nortek expects to complete the Exchange within the required time period.

On November 24, 2003, the Company completed the sale of $515,000,000 aggregate principal amount at maturity (approximately $349,400,000 gross proceeds) of its 10% Senior Discount Notes due May 15, 2011 (“Senior Discount Notes”). The Senior Discount Notes, which are structurally subordinate to all debt and liabilities of the Company’s subsidiaries, were issued and sold in a private Rule 144A offering to institutional investors. The net proceeds of the offering were used to pay a dividend of approximately $298,474,000 to holders of the Company’s capital stock and approximately $41,000,000 of these proceeds were used by the Company to purchase additional capital stock of Nortek. Nortek used these proceeds to fund the majority of a cash distribution of approximately $41,600,000 to option holders of the Rollover Options in the fourth quarter of 2003 (see Note 1, 6 & 7 of the Notes to the Consolidated Financial Statements included elsewhere herein). The accreted value of the 10% Senior Discount Notes will increase from the date of issuance at a rate of 10% per annum compounded semi-annually such that the accreted value will equal the principal amount of $515,000,000 on November 15, 2007. No cash interest will accrue on the 10% Senior Discount Notes prior to November 15, 2007 and, thereafter, cash interest will accrue at 10% per annum payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Discount Notes are unsecured obligations of the Company, which mature on May 15, 2011, and may be redeemed in whole or in part at the redemption prices as defined in the indenture governing the Senior Discount Notes (the “Indenture”). The Indenture contains covenants that limit the Company’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Senior Discount Notes require the Company to register notes having substantially identical terms (the “Holdings Exchange Notes”) with the SEC as part of an offer to exchange freely tradable Holdings Exchange Notes for the Senior Discount Notes (the “Holdings Exchange”). In the event the Company does not complete the Holdings Exchange in accordance with the timing requirements outlined in the Indenture, the Company may be required to pay a higher interest rate. The Company expects to complete the Holdings Exchange within the required time period. Under certain limited circumstances, Nortek may be required in the future to guarantee the Senior Discount Notes on a senior subordinated basis. This requirement will not apply if the terms of any of Nortek’s senior indebtedness restricts the issuance of such guarantee. Nortek’s Senior Secured Credit Facility does not permit such a guarantee. In addition the issuance of such a guarantee by Nortek would constitute a restricted payment under the terms of Nortek’s indentures.

The Company’s pro forma interest expense for the year ended December 31, 2003 would have been approximately $78,300,000, after adjusting the combined historical interest expense for the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to December 31, 2003 to give effect to the redemption of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% Notes, the sale of the Floating Rate Notes and the 10% Senior Discount Notes, as if they had occurred on January 1, 2003.

On January 9, 2003, Holdings, the parent company of Nortek, was acquired by Kelso, and certain members of Nortek’s management (the “Management Investors”) in accordance with the Agreement and Plan of Recapitalization by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (“K Holdings”) dated as of June 20, 2002, as amended, (the “Recapitalization Agreement”) in a transaction valued at approximately $1.6 billion, including the assumption of certain indebtedness (the “Recapitalization”).

On January 8, 2003, at a special meeting of stockholders of the Company, the stockholders approved the following amendments to the certificate of incorporation (the “Stockholder Approval”), which were required in connection with the terms of the Recapitalization Agreement:

• A new class of common stock, Class A Common Stock, par value $1.00 per share, of Nortek Holdings was created consisting of 19,000,000 authorized shares.

• At the time that the amendment to the certificate of incorporation became effective, each share of common stock, par value $1.00 per share and special common stock, par value $1.00 per share outstanding, was reclassified into one share of a new class of mandatorily redeemable common stock, Class B Common Stock, par value $1.00 per share, of Nortek Holdings consisting of 14,000,000 authorized shares.

• Class B Common Stock was required to be immediately redeemable for $46 per share in cash upon completion of the Recapitalization.

• The authorized number of shares of Series B Preference Stock, par value $1.00 per share, was increased to 19,000,000 authorized shares.

Following the Stockholder Approval, common stock and special common stock held by the Management Investors were exchanged for an equal number of newly created shares of Series B Preference Stock. In addition, certain options to purchase shares of common and special common stock held by the Management Investors were exchanged for fully vested options to purchase an equal number of shares of the newly created Class A Common Stock. The remaining outstanding options, including some held by Management Investors, were cancelled in exchange for the right to receive a single lump sum cash payment equal to the product of the number of shares of common stock or special common stock underlying the option and the amount by which the redemption price of $46 per share is greater than the per share exercise price of the option.

On January 9, 2003, in connection with the Recapitalization, Kelso purchased newly issued shares of Series B Preference Stock for approximately $355,923,000 and purchased shares of Series B Preference Stock held by the Management Investors for approximately $18,077,000. Newly issued Class A Common Stock of approximately $3,262,000 was purchased by designated third parties. Shares of Series B Preference Stock held by the Management Investors that were not purchased by Kelso were converted into an equal number of shares of Class A Common Stock. In addition, Nortek declared and distributed to the Company a dividend of approximately $120,000,000 and distributed approximately $27,900,000 for reimbursement of fees and expenses of Kelso, which were paid out of Nortek’s unrestricted cash and cash equivalents on hand and were permissible under the most restrictive covenants with respect to the indentures of Nortek’s 8 7/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2007, 9 1/8% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2011 (the “Existing Notes”).

The Company used the proceeds from the purchase by Kelso of the newly issued Series B Preference Stock, Class A Common Stock and the dividend from Nortek to redeem the Company’s Class B Common Stock and to cash out options to purchase common and special common stock totaling approximately $497,262,000.

In connection with the Recapitalization, Nortek received a bridge financing letter from a lender for a senior unsecured term loan facility not to exceed $955,000,000 (the “Bridge Facility”). The Bridge Facility was intended to be used to fund, if necessary, any change in control offers Nortek might have made in connection with the Recapitalization. Nortek did not use this Bridge Facility because the structure of the Recapitalization did not require Nortek to make any change of control offers. The commitment letter expired on January 31, 2003.

In January 2003, the Company filed for the deregistration of its shares of common and special common stock under the Securities Exchange Act of 1934. The Company’s shares of common and special common stock are no longer publicly traded. The Company will continue to file periodic reports with the SEC as required by the respective indentures of the Company’s Notes.

Under the terms of one of Nortek’s supplemental executive retirement plans (“SERP”), Nortek was required to make one-time cash payments to participants in such plan in satisfaction of obligations under that plan when the Recapitalization was completed. Accordingly, Nortek made a distribution of approximately $75,100,000 to the participants in the plan from funds included in the Company’s Consolidated Balance Sheet in long-term assets in restricted investments and marketable securities held by pension trusts and transferred to one of the participants a life insurance policy with approximately $10,300,000 of cash surrender value to satisfy a portion of such participant’s obligation upon the Stockholder Approval.

The total amount of transaction fees and costs incurred by Nortek and Kelso associated with the Recapitalization was approximately $47,300,000, including the $27,900,000 noted above, of which approximately $10,500,000 of advisory fees and expenses was paid to Kelso & Company L.P. A portion of these fees and expenses were recorded, by Nortek in selling, general and administrative expenses, since they were obligations of Nortek prior to the Recapitalization, including approximately $6,600,000 during the year ended December 31, 2002. An additional amount of approximately $12,800,000 was recorded as expense in January 2003 since these fees and expenses became obligations of Nortek upon consummation of the Recapitalization.

Nortek has a $175,000,000 Senior Secured Credit Facility, as amended, (the “Senior Secured Credit Facility”), which is syndicated among several banks. The Senior Secured Credit Facility is secured by substantially all of Nortek’s accounts receivable and inventory, as well as certain intellectual property rights, and, as amended, permits borrowings up to the lesser of $175,000,000 or the total of 85% of eligible accounts receivable, as defined, and 50% of eligible inventory, as defined. The outstanding principal balances under the Senior Secured Credit Facility accrue interest at Nortek’s option at either LIBOR plus a margin ranging from 2.0% to 2.5% or the banks’ prime rate plus a margin ranging from 0.5% to 1.0% depending upon the excess available borrowing base, as defined, and the timing of the borrowing as the margin rates will be adjusted quarterly. In addition, Nortek pays an unused line fee of between 0.375% and 0.5% on the excess available borrowing capacity, as defined. The Senior Secured Credit Facility includes customary limitations and covenants, but does not require Nortek to maintain any financial covenant unless the excess available borrowing base, as defined, is less than $30,000,000 in which case Nortek would be required to maintain, on a trailing four quarter basis, a minimum level of $155,000,000 of earnings before interest, taxes, depreciation and amortization, as defined. At December 31, 2003 there were no outstanding borrowings under the Senior Secured Credit Facility.

The Company is highly leveraged and expects to continue to be highly leveraged for the foreseeable future. The Company had consolidated debt at December 31, 2003, of approximately $1,339,975,000 consisting of (i) $15,349,000 of short-term borrowings and current maturities of long-term debt, (ii) $15,843,000 of long-term notes, mortgage notes and other indebtedness, (iii) $212,698,000 of 8 7/8% Notes, (iv) $314,456,000 of 9 1/8% Notes, (v) $178,136,000 of 9 1/4% Notes, (vi) $250,577,000 of 9 7/8% Senior Subordinated Notes due 2011 (“9 7/8% Notes”) and (vii) $352,916,000 of 10% Senior Discount Notes due 2011.

The indentures and other agreements governing Nortek’s and its subsidiaries’ indebtedness (including the indentures for the 8 7/8% Notes, the 9 1/8% Notes and the 9 1/4% Notes (collectively, the “Senior Notes”) which will be redeemed in the first quarter of 2004, the 9 7/8% Notes, and the Company’s Senior Discount Notes, as well as, the Senior Secured Credit Facility) contain restrictive financial and operating covenants including covenants that restrict the ability of the Company and its subsidiaries to complete acquisitions, pay dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The Senior Floating Rate Notes also contain restrictive covenants, which will apply to the Company beginning March 1, 2004. During the year 2003, the Company had a net increase in its consolidated debt of approximately $1,300,000.

At March 26, 2004 approximately $34,300,000 was available for the payment of cash dividends, stock purchases or other restricted payments by the Company as defined under the terms of the Company’s most restrictive indenture based on the redemption and refinancing of certain of the Nortek’s Notes. Restricted payments to Holdings from Nortek are limited by the amount of cash available for payment under the terms of Nortek’s most restrictive indenture which was approximately $91,100,000 at March 26, 2004. (See Notes 6, 7 and 16 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

At December 31, 2003, the Company had consolidated unrestricted cash, cash equivalents and marketable securities of approximately $194,120,000 as compared to approximately $294,804,000 at December 31, 2002. Approximately $160,748,000 of the Company’s consolidated cash and cash equivalents was used to fund a portion of the cost of the Recapitalization. The Company’s debt to equity ratio was approximately 6.7:1 at December 31, 2003 as compared to approximately 3.0:1 at December 31, 2002. The change in the ratio was primarily due to an increase in debt from the sale of the Company’s Senior Discount Notes and a decrease in stockholders’ investment primarily as a result of the distributions to the Company’s shareholders and stock option holders. (See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The Company's ability to pay interest on or to refinance its indebtedness depends on the Company’s future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond its control. There can be no assurance that the Company will generate sufficient cash flow from the operation of its subsidiaries or that future financings will be available on acceptable terms or in amounts sufficient to enable the Company to service or refinance its indebtedness, or to make necessary capital expenditures.

The Company has evaluated and expects to continue to evaluate possible acquisition transactions and possible dispositions of certain of its businesses on an ongoing basis and at any given time may be engaged in discussions or negotiations with respect to possible acquisitions or dispositions.

The following is a summary of the Company’s estimated future cash obligations under current and long-term debt obligations (excluding unamortized debt premium of approximately $10,867,000), interest expense (based upon interest rates in effect at the time of the preparation of this summary), capital lease obligations, minimum annual rental obligations primarily for non-cancelable lease obligations (operating leases), purchase obligations and other long-term liabilities and other obligations. Long-term debt and interest payments in the table below consider the financing transactions subsequent to December 31, 2003 previously described. (See Notes 6, 8, 9, 12 and 16 of the Notes to the Consolidated Financial Statements included elsewhere herein.):

	Payments due by period
	Less than		Between		Between		5 Years			Total
	1 Year		1 & 2 Years		3 & 4 Years		or Greater
	(Amounts in thousands)
Debt obligations	$	709,620	$	2,500	$	200	$	965,180		$	1,677,500
Interest payments		69,800		71,600		121,700		179,600	*		442,700	*
Capital lease obligations		680		1,500		1,600		9,920			13,700
Operating lease obligations		12,018		19,126		12,302		26,403			69,849
Purchase obligations		296		--		--		--			296
Other long-term liabilities		--		26,876		24,200		85,757			136,833
Other		--		2,810		3,030		8,136			13,976
Total	$	792,414	$	124,412	$	163,032	$	1,274,996		$	2,354,854

* Subsidiary debt used for working capital purposes such as lines of credit are estimated to continue through December 31, 2011 in the above table.

Certain subsidiaries, which are classified as discontinued operations, have guaranteed approximately $27,700,000 of third party obligations relating to guarantees of rental payments through June 30, 2016 under a facility leased by SNE, which was sold on September 21, 2001. The Company has indemnified these guarantees in connection with the sale of Ply Gem on February 12, 2004 (see Notes 9 and 10 of the Notes to the Consolidated Financial Statements included elsewhere herein). The buyer of SNE has provided certain indemnifications and other rights to the subsidiary for any payments that it might be required to make pursuant to this guarantee. Should the buyer of SNE cease making payments then the Company may be required to make payments on its indemnifications. The Company does not anticipate incurring any loss under these guarantees and accordingly has not recorded any liabilities at December 31, 2003 in the accompanying consolidated balance sheet in accordance with accounting principles generally accepted in the United States.

The Company has guaranteed certain obligations of third parties of approximately $4,300,000 which relates to guarantees of the remaining principal and interest balances of mortgages of a third-party on certain buildings, one of which houses the Company’s corporate headquarters. These guarantees expire on December 31, 2020 and are payable in the event of non-payment of the mortgage. These guarantees are collateralized by the buildings to which the mortgages relate and any liability to the Company would first be reduced by the Company’s pro-rata share of proceeds received on the sale of the buildings. The Company does not anticipate incurring any loss under these guarantees and accordingly has not recorded any liabilities at December 31, 2003 in the accompanying consolidated balance sheet in accordance with accounting principles generally accepted in the United States.

As of December 31, 2003, approximately $6,900,000 of letters of credit had been issued as additional security for certain of the Company's insurance programs.

At December 31, 2003, the Company had approximately $194,120,000 of unrestricted cash and cash equivalents to fund its cash flow needs for 2004. During 2004, the Company expects that it is reasonably likely that the following major cash requirements will occur as compared to 2003:

	For the Year-ended December 31,
	2004		2003
The Recapitalization	$	--	$	160,748,000
Interest payments, net		69,800,000		91,991,000
Principal payments, net		709,620,000		6,244,000
Capital lease obligations		680,000		680,000
Capital expenditures		35,000,000		17,357,000
Operating lease and rental payments		15,000,000		16,700,000
Income tax payments, net		70,000,000		11,971,000
	$	900,100,000	$	305,691,000

The Company expects to meet its cash flow requirements for debt payments and retirements through fiscal 2004 from net proceeds from the sale of Ply Gem in February 2004, net proceeds from the sale of Senior Floating Rate Notes in February 2004 and existing cash and cash equivalents.

The Company has recorded all pension liabilities for the Company’s defined benefit retirement plans at their fair values based upon the projected benefit obligations determined. As a result, on January 9, 2003, the amount of Nortek’s projected benefit obligation was increased by approximately $5,000,000 as compared to the amount recorded in its consolidated balance sheet prior to the Recapitalization. Accordingly, as of January 10, 2003, the Company recorded accrued pension liabilities of approximately $59,500,000, which represent the estimated combined under funding of the Company’s various pension plans. In addition, as discussed previously, Nortek settled all obligations related to Nortek’s SERP in connection with the Recapitalization. The Company’s policy, generally, is to make annual contributions to the various pension plans in such amounts and at such times so as to meet at least the minimum funding requirements of the Employee Retirement Income Security Act of 1974. The amount of under funding will change in future periods for a variety of factors including, among others, the actual performance of the various pension plan’s investments and changes, if any, in actuarial assumptions resulting from changing external economic conditions. Consistent with many pension plans in the United States, the Company’s various pension plans have been negatively impacted by the performance of the United States equity markets over the past several years and the decline in yields available in fixed income markets.

The Company has recorded all post retirement health benefit plan liabilities at their fair values based upon the accumulated projected benefit obligations determined. As a result, on January 9, 2003, the amount of the Company’s accumulated projected benefit obligation was increased by approximately $17,231,000 as compared to the amount recorded in its consolidated balance sheet prior to the Recapitalization. Accordingly, as of January 10, 2003, the Company has recorded accrued post retirement health liabilities of approximately $35,000,000, which represents the current discounted amount of the remaining estimated amounts to be paid out under the Company’s various post retirement health benefit plans. The Company’s policy is to fund the costs associated with its various post retirement health benefit plans as they become due and there are no investments or other assets associated with these plans. Consistent with many post retirement health benefit plans in the United States, the Company’s liabilities under these plans have been negatively impacted by rising medical costs in the United States.

Unrestricted cash and cash equivalents decreased from approximately $294,804,000 at December 31, 2002 to approximately $194,120,000 at December 31, 2003. The Company has classified as restricted in the accompanying consolidated balance sheet certain investments that are not fully available for use in its operations. At December 31, 2003, approximately $2,346,000 (of which $1,223,000 is included in current assets) of cash, investments and marketable securities is held primarily as collateral for insurance and letter of credit requirements. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Capital expenditures were approximately $17,400,000 in 2003 and are expected to be between $30,000,000 and $35,000,000 in 2004. As of December 31, 2003, the Company is obligated to fund future cash payments, primarily related to operating leases for facilities and equipment, of approximately $69,800,000, of which approximately $12,000,000 will be funded in 2004. Since these payments are for operating leases, future cash requirements and the value of the assets leased are not included in the Company’s Consolidated Financial Statements in accordance with generally accepted accounting principles currently in effect in the United States. (See Note 9 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

The Company's working capital and current ratio decreased from approximately $813,300,000 and 3.0:1, respectively, at December 31, 2002 to approximately $686,400,000 and 2.6:1, respectively, at December 31, 2003, principally as a result of the factors described below.

Accounts receivable increased approximately $34,487,000 or approximately 19.2%, between December 31, 2002 and December 31, 2003, while net sales increased approximately $41,235,000 or approximately 12.7% in the fourth quarter of 2003 as compared to the fourth quarter of 2002. These increases are primarily a result of increased sales levels and the acquisitions of Elan and SPC, which contributed approximately $18,000,000 to net sales in the fourth quarter of 2003 and approximately $9,200,000 to accounts receivable at December 31, 2003. The rate of change in accounts receivable in certain periods may be different than the rate of change in sales in such periods principally due to the timing of net sales. Increases or decreases in net sales near the end of any period generally result in significant changes in the amount of accounts receivable on the date of the balance sheet at the end of such period, as was the situation on December 31, 2003 as compared to December 31, 2002. The Company did not experience any significant overall changes in credit terms, collection efforts, credit utilization or delinquency in accounts receivable in 2003.

Inventories increased approximately $27,011,000 or approximately 20.4%, between December 31, 2002 and December 31, 2003. Approximately $7,000,000 of the increase was as a result of the net remaining fair market value adjustment of inventories at December 31, 2003 arising from the Recapitalization. The acquisition of Elan and SPC contributed approximately $9,400,000 to the increase in inventories. Increased levels of inventory in anticipation of relocation of certain manufacturing facilities within the HVAC Segment also contributed to the increase.

Accounts payable increased approximately $3,699,000 or approximately 3.4%, between December 31, 2002 and December 31, 2003. The acquisitions of Elan and SPC contributed approximately $3,200,000 to this increase.

Changes in certain working capital accounts, as noted above, between December 31, 2002 and December 31, 2003, differ from the changes reflected in the Company’s Condensed Consolidated Statement of Cash Flows for such period as a result of the specific items mentioned in the three preceding paragraphs and from other non-cash items, including among others, the effect of changes in foreign currency exchange rates.

Unrestricted cash and cash equivalents decreased approximately $11,204,000 from December 31, 2002 to January 9, 2003 and decreased approximately $89,480,000 from January 10, 2003 to December 31, 2003, principally as a result of the following:

	Condensed Consolidated Cash Flows (*)
	January 10, 2003 -			January 1, 2003 -
	December 31, 2003			January 9, 2003
Operating Activities:
Cash flow from operations, net	$	108,214,000		$	7,175,000
Stock option and other stock compensation expense		2,071,000			--
(Increase) decrease in accounts receivable, net		(18,390,000	)		4,298,000
Increase in inventories		(595,000	)		(4,457,000	)
(Increase) decrease in prepaids and other current assets		(2,145,000	)		268,000
Decrease in accounts payable		(6,251,000	)		(777,000	)
Decrease in net assets of discontinued operations		3,808,000			1,717,000
(Decrease) increase in accrued expenses and taxes		60,546,000			(19,766,000	)
Investing Activities:
Net cash paid for acquisitions		(76,016,000	)		--
Capital expenditures		(17,150,000	)		(207,000	)
Redemption of publicly held shares in connection
with the Recapitalization		(469,655,000	)		--
Payment of fees and expenses in connection with
with the Recapitalization		(27,900,000	)		--
Decrease (increase) in restricted cash and investments		1,028,000			(49,000	)
Financing Activities:
Sale of 10% Senior Discount Notes, net of fees		339,522,000			--
Issuance of preferred and common stock in connection
with the Recapitalization		359,185,000			--
Dividend to preferred and common stockholders		(298,474,000	)		--
Increase (decrease) in borrowings, net		2,658,000			(1,313,000	)
Issuance of 32,608 shares of class A common stock		1,500,000			--
Cash distributions to stock option holders		(41,600,000	)		--
Other, net		(9,836,000	)		1,907,000
	$	(89,480,000	)	$	(11,204,000	)

(*) Prepared from the Company’s Consolidated Statement of Cash Flows for the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to December 31, 2003. (See Nortek, Inc. and Subsidiaries Consolidated Financial Statements for 2003 included elsewhere herein.)

The impact of changes in foreign currency exchange rates on cash was not material and has been included in other, net.

Income tax payments, net of refunds, were approximately $11,971,000 in 2003. At December 31, 2003, the Company has approximately $8,500,000 of foreign net operating loss carry-forwards that if utilized would offset future foreign tax payments.

The Company uses EBITDA as both a liquidity and operating performance measure. Liquidity measure disclosures with respect to EBITDA are provided below. Refer to the Results of Operations section for operating performance measure disclosures with respect to EBITDA and a reconciliation from net income (loss) to EBITDA.

EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization expense. EBITDA is not a measure of cash flow under generally accepted accounting principles in the United States (“GAAP”) and should not be considered as an alternative or substitute for GAAP cash flow measures such as cash flows from operating, investing and financing activities. EBITDA does not necessarily represent an accurate measure of cash flow performance because it excludes, among other things, capital expenditures, working capital requirements, significant debt service for principal and interest payments, income tax payments and other contractual obligations, which may have a significant adverse impact on a company’s cash flow performance thereby limiting its usefulness when evaluating the Company’s cash flow performance. The Company uses a significant amount of capital assets and capital expenditures are a significant component of the Company’s annual cash expenditures and therefore their exclusion from EBITDA is a material limitation. The Company has significant working capital requirements during the year due to the seasonality of its business, which require significant cash expenditures and therefore its exclusion from EBITDA is a material limitation. The Company has a significant amount of debt and the Company has significant cash expenditures during the year related to principal and interest payments and therefore their exclusion from EBITDA is a material limitation. The Company generally pays significant U.S federal, state and foreign income taxes each year and therefore its exclusion from EBITDA is a material limitation. As a result, EBITDA should be evaluated in conjunction with net cash from operating, investing and financing activities for a more complete analysis of the Company’s cash flow performance, as they include the financial statement impact of these items. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and EBITDA does not reflect any cash requirements for replacements. As EBITDA is not defined by GAAP, the Company’s definition of EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies thereby limiting its usefulness as a comparative measure. Because of the limitations that EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of the Company’s cash flows as reported under GAAP.

Company management uses EBITDA as a supplementary non-GAAP liquidity measure to allow the Company to evaluate its operating units cash-generating ability to fund income tax payments, corporate overhead, capital expenditures and increases in working capital. EBITDA is also used by management to allocate resources for growth among its businesses, to identify possible impairment charges, to evaluate the Company’s ability to service its debt and to raise capital for growth opportunities, including acquisitions. In addition, the Company uses EBITDA as a liquidity measure in financial presentations to the Company’s Board of Directors, shareholders, various banks participating in the Company’s Credit Facility, note holders and Bond Rating agencies, among others, as a supplemental non-GAAP liquidity measure to assist them in their evaluation of the Company’s cash flow performance. The Company uses EBITDA in conjunction with traditional GAAP liquidity measures as part of its overall assessment and therefore does not place undue reliance on EBITDA as its only measure of cash flow performance. The Company believes EBITDA is useful for both the Company and investors as it is a commonly used analytical measurement for assessing a company’s cash flow ability to service and/or incur additional indebtedness, which eliminates the impact of certain non-cash items such as depreciation and amortization. The Company believes that EBITDA is specifically relevant to the Company due to the Company’s leveraged position as well as the common use of EBITDA as a liquidity measure within the Company’s industries by lenders, investors, others in the financial community and peer group companies. The Company has included EBITDA as a supplemental liquidity measure, which should be evaluated by investors in conjunction with the traditional GAAP liquidity measures discussed earlier in this Liquidity and Capital Resources section for a complete evaluation of the Company’s cash flow performance.

The following table presents a reconciliation from net cash provided by (used in) operating activities, which is the most directly comparable GAAP liquidity measure, to EBITDA:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Net cash provided by (used in) operating activities *	$	138,078		$	(5,705	)	$	51,276		$	110,583
Cash (provided from) used by working capital and other
long-term asset and liability changes		(27,793	)		12,880			43,569			(27,197	)
Effect of the Recapitalization, net		--			(62,397	)		--			--
Deferred federal income tax credit (provision) from
continuing operations		4,800			(5,900	)		200			2,800
Deferred federal income tax credit (provision) from
discontinued operations		(500	)		--			(2,000	)		2,000
Gain (loss) on sale of discontinued operations		--			--			2,400			(34,000	)
Loss from debt retirement		--			--			--			(5,500	)
Non-cash interest expense, net		(6,352	)		(125	)		(3,827	)		(3,565	)
Stock option and other stock compensation expense		(2,071	)		--			--			--
Provision (benefit) for income taxes from continuing
operations		41,300			(21,800	)		29,500			27,800
Provision (benefit) for income taxes from discontinued
operations		7,500			(600	)		11,200			(13,700	)
Interest expense from continuing operations		57,627			1,054			52,410			51,748
Interest expense from discontinued operations		38,733			1,234			44,224			50,150
Investment income from continuing operations		(1,482	)		(119	)		(5,943	)		(8,189	)
Investment income from discontinued operations		(196	)		(2	)		(1,523	)		(2,462	)
Depreciation expense from discontinued operations		10,865			245			11,784			15,148
Amortization expense from discontinued operations		5,236			70			3,118			11,143
EBITDA	$	265,745		$	(81,165	)	$	236,388		$	176,759

* Includes approximately $12,200,000, $(1,000,000), $18,900,000 and $(24,800,000) of earnings (loss) from discontinued operations for the periods from January 10, 2003 to December 31, 2003 and from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001. (See Note 10 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

EBITDA includes approximately $83,000,000 and $6,600,000 of expenses and charges arising from the Recapitalization recorded in the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002, respectively (see Notes 2 and 11 of the Notes to the Consolidated Financial Statements included elsewhere herein) and approximately $1,500,000 of stock based compensation from adopting SFAS No. 123 and $600,000 of compensation expense in the fourth quarter of 2003 from the sale of stock (see Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein).

Inflation, Trends and General Considerations

The Company has evaluated and expects to continue to evaluate possible acquisition transactions and the possible dispositions of certain of its businesses on an ongoing basis and at any given time may be engaged in discussions or negotiations with respect to possible acquisitions or dispositions.

The Company's performance is dependent to a significant extent upon the levels of new residential construction, residential replacement and remodeling and non-residential construction, all of which are affected by such factors as interest rates, inflation, consumer confidence and unemployment.

The demand for the Company's products is seasonal, particularly in the Northeast and Midwest regions of the United States where inclement weather during the winter months usually reduces the level of building and remodeling activity in both the home improvement and new construction markets. The Company's lower sales levels usually occur during the first and fourth quarters. Since a high percentage of the Company's manufacturing overhead and operating expenses are relatively fixed throughout the year, operating income and net earnings tend to be lower in quarters with lower sales levels. In addition, the demand for cash to fund the working capital of the Company's subsidiaries is greater from late in the first quarter until early in the fourth quarter.

Market Risk

As discussed more specifically below, the Company is exposed to market risks related to changes in interest rates, foreign currencies and commodity pricing. The Company does not use derivative financial instruments, except, on a limited basis to periodically mitigate certain economic exposures. The Company does not enter into derivative financial instruments or other financial instruments for trading purposes.

A. Interest Rate Risk

The Company is exposed to market risk from changes in interest rates primarily through its investing and borrowing activities. In addition, the Company’s ability to finance future acquisition transactions may be impacted if the Company is unable to obtain appropriate financing at acceptable interest rates.

The Company’s investing strategy, to manage interest rate exposure, is to invest in short-term, highly liquid investments and marketable securities. Short-term investments primarily consist of federal agency discount notes, treasury bills and bank issued money market instruments with original maturities of 90 days or less. At December 31, 2003, the fair value of the Company’s unrestricted and restricted investments and marketable securities was not materially different from their cost basis.

The Company manages its borrowing exposure to changes in interest rates by optimizing the use of fixed rate debt with extended maturities. At December 31, 2003, approximately 99.7% of the carrying values of the Company’s long-term debt was at fixed interest rates.

See the table set forth in item D (Long-term Debt) below and Notes 1 and 6 of the Notes to the Consolidated Financial Statements included elsewhere herein for further disclosure of the terms of the Company’s debt.

B. Foreign Currency Risk

The Company’s results of operations are affected by fluctuations in the value of the U.S. dollar as compared to the value of currencies in foreign markets primarily related to changes in the Euro, the Canadian Dollar and the British Pound. In 2003, the net impact of foreign currency changes was not material to the Company’s financial condition or results of operations. The impact of foreign currency changes related to translation resulted in an increase in stockholders’ investment of approximately $1,096,000 and $19,501,000 for the periods January 1, 2003 to January 9, 2003 and January 10, 2003 to December 31, 2003, respectively. The Company manages its exposure to foreign currency exchange risk principally by trying to minimize the Company’s net investment in foreign assets through the use of strategic short and long-term borrowings at the foreign subsidiary level. Consistent with this strategy, notes payable and other short-term obligations at December 31, 2003 consist primarily of short-term borrowings by certain of the Company’s foreign subsidiaries. At December 31, 2003, the Company’s net investment in foreign assets was approximately $113,500,000. An overall unfavorable change in foreign exchange rates of 10% would result in an approximate $10,300,000 reduction in equity as a result of the impact on the cumulative translation adjustment. The Company generally does not enter into derivative financial instruments to manage foreign currency exposure. At December 31, 2003, the Company did not have any significant outstanding foreign currency hedging contracts.

C. Commodity Pricing Risk

The Company is subject to significant market risk with respect to the pricing of its principal raw materials, which include, among others, steel, copper, packaging material, plastics, resins, glass, wood and aluminum. If prices of these raw materials were to increase dramatically, the Company may not be able to pass such increases on to its customers and, as a result, gross margins could decline significantly. The Company manages its exposure to commodity pricing risk by continuing to diversify its product mix, strategic buying programs and vendor partnering.

The Company generally does not enter into derivative financial instruments to manage commodity-pricing exposure. At December 31, 2003, the Company did not have any material outstanding commodity forward contracts.

D. Long-term Debt

The table that follows sets forth as of December 31, 2003, the Company’s long-term debt obligations, principal cash flows by scheduled maturity, weighted average interest rates and estimated fair market values. 0.3% of the Company’s total long-term indebtedness is denominated in foreign currencies. The weighted average interest rates for variable rate debt are based on December 31, 2003 interest rates. See Liquidity and Capital Resources for discussion of changes in the Company debt subsequent to December 31, 2003.

Long-term Debt:

	Scheduled Maturity									Average Interest Rate
	Fixed			Variable						Fixed			Variable
Year-ending	Rate			Rate			Total			Rate			Rate			Total
	(Dollar amounts in millions)
December 31, 2004	$	5	.3	$	1	.9	$	7	.2		7	.5%		3	.6%		6	.5%
2005		1	.1		1	.6		2	.7		7	.0		3	.7		5	.0
2006		1	.2		0	.2		1	.4		7	.1		3	.3		6	.7
2007		485	.9		--			485	.9		9	.2		--			9	.2
2008		210	.9		--			210	.9		8	.9		--			8	.9
Thereafter (1)		612	.9		--			612	.9		9	.9		--			9	.9
Total Principal		1,317	.3		3	.7		1,321	.0		9	.5%		3	.6%		9	.4%
Unamortized Debt Premium		10	.9		--			10	.9
Total Long-term Debt at
December 31, 2003	$	1,328	.2	$	3	.7	$	1,331	.9
Fair Market Value of Long-term
Debt at December 31, 2003	$	1,387	.1	$	3	.7	$	1,390	.8

(1) Senior and Senior Subordinated Notes with a total principal of $1,297,900,000 and a weighted average interest rate of 9.5% mature at various times from 2007 through 2011. A substantial portion of Nortek’s fixed rate debt was called for redemption or refinanced with variable rate debt in the first quarter of 2004. (See Liquidity and Capital Resources and Notes 6 and 16 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Recent Developments

On December 15, 2003, the Company, through Linear, acquired Operator Specialty Company, Inc. (“OSCO”), located in Casnovia, MI for approximately $2,600,000. OSCO is a manufacturer and designer of gate operators and access controls.

On February 12, 2004, the Company sold all of the capital stock of Ply Gem Industries, Inc. for approximately $560,000,000.

On March 9, 2004, the Company, through Linear, acquired OmniMount Systems, Inc. (“OmniMount”) located in Phoenix, AZ, for approximately $16,500,000. OmniMount is a leading designer and supplier of audio and video mounting devices, speakerstands and related furniture.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this discussion and throughout this document, words, such as “intends”, “plans”, “estimates”, “believes”, “anticipates” and “expects” or similar expressions are intended to identify forward-looking statements. These statements are based on the Company’s current plans and expectations and involve risks and uncertainties, over which the Company has no control, that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and operating results to differ include the availability and cost of certain raw materials, (including, among others, steel, copper, packaging materials, plastics, resins, glass, wood and aluminum) and purchased components, the level of domestic and foreign construction and remodeling activity affecting residential and commercial markets, interest rates, employment, inflation, foreign currency fluctuations, consumer spending levels, exposure to foreign economies, the rate of sales growth, price, and product and warranty liability claims. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Readers are also urged to carefully review and consider the various disclosures made by the Company, in this document, as well as the Company's periodic reports on Forms 10-K, 10-Q and 8-K, filed with the SEC.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosure about market risk is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required by this Item 8 are set forth at the pages indicated in Item 15(a), including exhibits, of Part IV of this report, incorporated herein by reference.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

An evaluation of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) was carried out under the supervision and with the participation of the Company's Chairman and Chief Executive Officer along with the Company’s Vice President and Chief Financial Officer and the members of the Company's Disclosure and Controls Committee as of the end of the period covered by this annual report on Form 10-K. The Company's Chairman and Chief Executive Officer along with the Company’s Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures, as currently in effect, are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits to the SEC, is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant

Name	Principal Occupation	Age	Director Since
Richard L. Bready	Chairman, President and Chief Executive	59	1976
	Officer of the Company
Philip E. Berney	Managing Director, Kelso & Company L.P.	40	2003
Jeffrey C. Bloomberg	Office of the Chairman, Gordon Brothers	56	2003
	Group LLC
Joseph M. Cianciolo	Independent Director	64	2003
David B. Hiley	Financial Consultant	65	2003

Mr. Bready has been Chairman, President and Chief Executive Officer of the Company and/or Nortek for more than the past five years. Mr. Berney has been a Managing Director of Kelso, a private investment firm, since 1999. From 1996 to 1999, he was a Senior Managing Director and head of the High Yield Capital Markets Group at Bear, Stearns & Co., a financial services company. Mr. Berney is currently a director of Key Components, LLC. Mr. Bloomberg has served since 2001 in the Office of the Chairman of Gordon Brothers Group LLC, a company which assists retail and consumer goods companies in asset redeployment and providing capital solutions to middle market companies in the retail and consumer product industries. From 1994 to 2001, Mr. Bloomberg served as the President of Bloomberg Associates, an investment banking company. Mr. Bloomberg is a director of Tweeter Home Entertainment Group, Inc. Mr. Cianciolo retired in June 1999 as the managing partner of the Providence, RI office of KPMG, LLP. Mr. Cianciolo is currently a director of United Natural Foods, Inc. Mr. Hiley, for more than the past five years, has been a financial consultant, including a financial consultant to the Company. From April 1, 1998 through March 1, 2000, Mr. Hiley served as Executive Vice President and Chief Financial Officer of Koger Equity, Inc., a real estate investment trust. Mr. Hiley is currently a director of Koger Equity, Inc. Each director holds office until the Company’s next annual meeting of stockholders and until such director’s successor is duly elected and qualified.

Executive Officers of the Company

Name	Age	Position
Richard L. Bready	59	Chairman, President and Chief Executive Officer of the Company
Robert E.G. Ractliffe	60	Executive Vice President and Chief Operating Officer
Almon C. Hall	57	Vice President and Chief Financial Officer
Edward J. Cooney	56	Vice President and Treasurer
Kevin W. Donnelly	49	Vice President, General Counsel and Secretary

Messrs. Bready, Hall and Donnelly have served in the same or substantially similar executive positions with the Company since November 20, 2002 and with Nortek for at least the past five years. Mr. Ractliffe served as President and Chief Executive Officer of Ply Gem Industries, Inc. (“Ply Gem”) and as Chief Executive Officer of Nordyne, Inc., both subsidiaries of the Company, prior to joining Nortek in January 2002, and Nortek Holdings in November 2002. Mr. Cooney served as Senior Vice President-Chief Financial Officer and Executive Vice President Sales and Marketing at Amtrol Inc. and as Chief Financial Officer at Speidel Inc. prior to joining Nortek in August 2001 and Nortek Holdings in November 2002. Executive Officers are elected annually by the Board of Directors of the Company and serve until their successors are chosen and qualified. The Company’s executive officers include only those officers of the Company who perform policy-making functions for the Company as a whole and have managerial responsibility for major aspects of the Company’s overall operations. A number of other individuals who serve as officers of the Company’s subsidiaries perform policy-making functions and have managerial responsibilities for the subsidiary or division by which they are employed, although not for the Company overall. Certain of these individuals could, depending on earnings of such unit, be more highly compensated than some executive officers of the Company.

The Company’s board of directors has an audit committee comprised of Joseph M. Cianciolo and Jeffrey C. Bloomberg. Although the Company’ is not a “listed issuer” within the meaning of Rule 10A-3 under the Exchange Act, the board of directors of the Company has determined that each of Mr. Cianciolo and Mr. Bloomberg would be considered an “independent” director within the meaning of the rules of the New York Stock Exchange for listed companies and within the meaning of Rule 10A-3 under the Exchange Act. In addition, Mr. Cianciolo is an audit committee financial expert as that term is used in Item 401(h)(2) of Regulation S-K adopted by the Securities and Exchange Commission.

Code of Ethics

The Company has adopted a code of ethics that applies to its President and Chief Executive Officer, Vice President and Chief Financial Officer, Vice President and Treasurer, Vice President and Controller and other persons performing similar functions as identified by the President and Chief Executive Officer. The Company filed a copy of its code of ethics as Exhibit 14 to this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth, on an accrual basis, information concerning the compensation for services to the Company and its subsidiaries for 2003, 2002, and 2001 of those persons who were, at December 31, 2003, the Chief Executive Officer and the other four most highly compensated executive officers of the Company or its subsidiaries.

		Annual Compensation						Long-Term Compensation
								Awards		Payouts
								Securities
Name and						Other Annual		Underlying		LTIP		All Other
Principal Position	Year	Salary		Bonus		Compensation (1)		Options		Payouts		Compensation (2)
Richard L. Bready	2003	$	2,500,000	$	5,000,000	$	295,351		1,869,149		--	$	127,331
Chairman, President and	2002		1,068,768		8,230,780		61,184		50,000	$	2,586,489		1,012,214
Chief Executive Officer	2001		1,051,932		6,259,140		--		--		--		612,961
Robert E. G. Ractliffe (3)	2003	$	600,000	$	532,380	$	105,669		167,000		--	$	465,445
Vice President and	2002		600,000		500,000		--		15,000	$	776,122		72,945
Chief Operating Officer	2001		--		--		--		--		--		--
Almon C. Hall	2003	$	410,000	$	725,000		--		147,900		--	$	114,760
Vice President and	2002		393,750		600,000		--		15,000	$	776,122		42,447
Chief Financial Officer	2001		375,000		450,000		--		--		--		28,501
Kevin W. Donnelly	2003	$	265,000	$	350,000		--		96,047		--	$	69,000
Vice President, General	2002		252,000		450,000		--		10,000	$	258,561		16,000
Counsel and Secretary	2001		240,000		175,000		--		--		--		13,600
Edward J. Cooney (4)	2003	$	240,000	$	250,000		--		42,500		--	$	64,000
Vice President and	2002		210,000		200,000		--		--		--		16,000
Treasurer	2001		73,913		30,000		--		15,000		--		--

(1) Except for Messrs. Bready and Ractliffe in 2003 and Mr. Bready in 2002, the aggregate amount of any compensation in the form of perquisites and other personal benefits paid in each of the years, based on the Company's incremental cost, did not exceed the lesser of 10% of any executive officer's annual salary and bonus or $50,000. The amount for Messrs. Bready and Ractliffe in 2003 includes $246,142 and $78,346 respectively, relating to the installation of products from the Company’s subsidiaries. The amount for Mr. Bready in 2002 includes $49,410 relating to personal use of automobiles provided by the Company.

(2) The amounts in 2003, for each of Messrs. Bready and Hall, include premiums paid by the Company for split dollar life insurance pursuant to agreements between each of them and the Company, of which $31,791 and $49 represent the term life portion of the premiums and $79,540 and $16,711 represent the non-term portion, in each case for Messrs. Bready and Hall, respectively. Pursuant to certain of the split dollar life insurance agreements, the Company will be reimbursed for premiums that it pays on the split dollar life insurance policies upon the death of the second to die of the executive and his spouse. Pursuant to other split dollar agreements between the Company and Mr. Bready, the Company will be reimbursed for premiums that it pays on split dollar life insurance policies on Mr. Bready’s life, upon the earlier of Mr. Bready’s death or the Company’s termination of such split dollar agreement.

For each of Messrs. Ractliffe, Hall, Donnelly and Cooney, includes change in control payments made in connection with the Recapitalization of $120,000, $82,000, $53,000 and $48,000.

Includes $329,445 in relocation expenses for Mr. Ractliffe.

Includes $6,000 in matching contributions and $10,000 in profit sharing contributions by the Company in 2003 for each of Messrs. Bready, Ractliffe, Hall, Donnelly and Cooney under the Company’s 401(k) Savings Plan, which is a defined contribution retirement plan.

(3) Mr. Ractliffe’s date of hire was January 1, 2002.

(4) Mr. Cooney's date of hire was August 20, 2001.

Stock Option Tables

Upon reorganization of Nortek into a holding company structure in November 2002, each stock option for the Nortek’s common stock and special common stock then outstanding was exchanged for a stock option to purchase an equal number of shares of the common stock or special common stock of Holdings at the same per share exercise price.

Options Granted in Last Fiscal Year

The following table provides information regarding stock options for the Company’s common stock granted to named executive officers in 2003 pursuant to the Company’s 2002 Stock Option Plan (the “Option Plan”).

					% of Total
	No. of Shares				Options						Exercise
	Underlying				Granted to						Price as of							Grant Date
	Options				Employees			Exercise			Grant					Expiration		Present
Name	Granted				in 2003			Price (3)			Date					Date		Value (4)
Richard L. Bready		1,398,849	(1	)		44	.29%	$	10	.50	$	23	.31	(5	)		01/09/2013	$	39,250,164
		470,300	(2	)		14	.89%		11	.00		46	.00				01/09/2013		3,226,258
Robert E.G. Ractliffe		87,000	(1	)		2	.75%		10	.50		24	.38	(5	)		01/09/2013		2,384,279
		80,000	(2	)		2	.53%		11	.00		46	.00				01/09/2013		548,800
Almon C. Hall		67,900	(1	)		2	.15%		10	.50		25	.95	(5	)		01/09/2013		1,808,326
		80,000	(2	)		2	.53%		11	.00		46	.00				01/09/2013		548,800
Kevin W. Donnelly		46,047	(1	)		1	.46%		10	.50		24	.72	(5	)		01/09/2013		1,251,746
		50,000	(2	)		1	.58%		11	.00		46	.00				01/09/2013		343,000
Edward J. Cooney		7,500	(1	)		0	.24%		10	.50		20	.25				01/09/2013		225,975
		35,000	(2	)		1	.11%		11	.00		46	.00				01/09/2013		240,100

(1) Represent Rolled Over Options which were exercisable in full as of the date of the grant.

(2) One-third of the shares underlying theses options are Class A options and two-thirds are Class B options to purchase shares of Holdings’ common stock. Pursuant to the terms of the Option Plan, Class A options generally become exercisable on a quarterly basis over a three-year period, although Class A options will become exercisable in full when certain of the investors affiliated with Kelso have sold or disposed of at least 90% of their equity securities for cash or marketable securities in Holdings. In addition Class A options will become exercisable in full in any liquidity event which results in the Class B options becoming exercisable in full. The Option Plan defines a liquidity event as the receipt of cash or marketable securities by certain of the investors affiliated with Kelso in respect of their equity investment in Holdings.

The Class B options will become exercisable upon liquidity events relating to the equity securities held by investors affiliated with Kelso, but only if those investors receive at least 17% internal rate of return through the liquidity events. Assuming this condition is satisfied, the Class B options become exercisable ratably beginning when those investors have received at least two times the amount of their investment through the liquidity events, with such options becoming exercisable in full when the investors have received four times the amount of their investment through liquidity events.

(3) On November 26, 2003, the Company declared a dividend of $35.00 per share which resulted in an equal reduction of the Exercise Price of the options to purchase shares of common stock of the Company.

(4) Pre-tax amounts based on Black-Scholes option pricing model with the following assumptions: interest rates are based on the risk-free interest rate at grant date, a maximum of an expected life of 5 years, expected volatility of 38% for Rolled Over options and expected volatility of 0% for Class A and B options and a dividend yield of 0%.

(5) Exercise prices are based upon a weighted average.

Aggregated Option Exercises in 2003 and Year-End Option Values

					Number of Unexercised				Value of Unexercised In-the-Money
					Options at Year-End				Options at Year-End (1)
	Aggregated Shares		Value
Name	Acquired on Exercise		Realized		Exercisable (2)		Unexercisable (3)		Exercisable		Unexercisable
Richard L. Bready		--		--		1,438,041		431,108	$	84,465,313	$	25,112,041
Robert E.G. Ractliffe		--		--		93,667		73,333		5,499,603		4,271,647
Almon C. Hall		--		--		74,567		73,333		4,377,478		4,271,647
Kevin W. Donnelly		--		--		50,214		45,833		2,947,989		2,669,772
Edward J. Cooney		7,500	$	193,125		10,417		32,083		610,540		1,868,835

(1) Calculated by multiplying the relevant number of unexercised options by the difference between the stock price for the Company’s common stock on December 31, 2003 of $69.25 (based upon a valuation prepared on November 19, 2003) and the exercise price of the options.

(2) Includes Rolled-Over options for the named individuals for the following amounts: Bready 1,398,849; Ractliffe 87,000; Hall 67,900; Donnelly 46,047; and Cooney 7,500 and Exercisable Class A options.

(3) Includes Unexercisable Class A options and all of the Class B options to purchase shares of Nortek Holdings common stock.

Pension and Similar Plans

Nortek’s qualified pension plan (the “Pension Plan”) was frozen as of December 31, 1995, and no further increases in benefits may occur as a result of increases in service or compensation. The benefit payable to a participant at normal retirement equals the accrued benefit as of December 31, 1995 and will be payable as a joint and 50% survivor annuity in the case of a married employee and as a single-line annuity in the case of an unmarried employee. The annual pension benefits entitled to be paid to the executive officers beginning at age 65 under the Pension Plan are as follows: Mr. Bready $160,000, Mr. Hall $52,163, Mr. Donnelly $15,574 and Mr. Ractliffe $7,891.

In 1996, Nortek established a supplemental executive retirement plan (the “SERP”), pursuant to which participants were entitled to supplemental pension payments equal to a specified percentage of their highest consecutive three-year average W-2 compensation, less amounts payable to the participant under the Pension Plan. Messrs. Bready, Hall and Donnelly were participants in the SERP. The SERP provided that, upon a change of control of Nortek, each participant would be paid a lump sum payment equal to the actuarially determined present value of the benefits payable under the SERP calculated at the time of the change in control as though retirement benefits had commenced on such date without reduction for early retirement. The Recapitalization was considered a change of control and, accordingly, Messrs. Bready, Hall and Donnelly received distributions of $73,658,948, $8,563,677 and $3,156,380, respectively, and the SERP was subsequently terminated.

Mr. Ractliffe is a participant in a Nortek supplemental executive retirement plan. His annual pension benefit under this plan entitled to be paid to him beginning at age 65 is projected to be $244,274.

Compensation of Directors

The directors of the Company are not compensated for their services. However, the Board of Directors of the Company is identical to the Board of Directors of its subsidiary, Nortek. For their services as directors of Nortek, directors who are not officers, employees or consultants of the Company or its subsidiaries, or of Kelso, receive directors’ fees from Nortek. The fees currently payable to such directors (as of January 9, 2003), are a $50,000 annual retainer, payable quarterly in advance, $1,500 per meeting ($1,000 if director participates by telephone) and $1,000 per committee meeting ($750 if director participates by telephone).

Employment Contracts, Termination of Employment and Change-in-Control Arrangements

Employment Arrangement for Mr. Bready

Mr. Bready entered into an employment agreement with the Company and Nortek that became active upon completion of the Recapitalization. The agreement replaced Mr. Bready's existing employment agreement with Nortek, entered into in 1997. The new employment agreement has a five-year term, renewable for successive one-year terms unless the Company and Nortek provide Mr. Bready with written notice of their intent not to renew the agreement at least 90 days prior to the end of the original term or any successive term. The employment agreement provides that during the employment term Mr. Bready will serve as Chairman and Chief Executive Officer of the Company and Nortek.

The employment agreement provides that the basic annual salary for Mr. Bready during the employment term would be not less than $1,068,767 for the year ended December 31, 2002 and not less than $2,500,000 per year during the remainder of the employment term. Mr. Bready’s salary for 2003 was $2,500,000. Mr. Bready is eligible for cash performance bonus awards under the employment agreement to the extent our company achieves specific levels of EBITDA. The maximum amount of such performance award in any year is $5,000,000. Mr. Bready is entitled to receive all other benefits, including medical and dental insurance, generally available to executive personnel. In addition, Mr. Bready is entitled to reimbursement of the costs of automobile and private aircraft transportation for personal and business use consistent with his employment prior to the Recapitalization.

If the employment of Mr. Bready is terminated (1) without “cause”, as defined in the employment agreement, (2) as a result of any notice not to renew his employment as described above or (3) as a result of his disability or death, Mr. Bready terminates his employment for “good reason”, as defined in the employment agreement, the Company and Nortek are obligated to pay Mr. Bready, or, in the event of death, his estate or designated beneficiary, an annual severance and other benefits for the period equal to the longer of (1) one year from the date of such termination and (2) the remaining period of the original five-year employment term. The annual severance payment in all cases is equal to $1,750,000.

If his employment is terminated for any reason, Mr. Bready has agreed not to compete with the Company and Nortek for various periods of time depending on the reason for such termination. In the event his employment is, terminated without “cause” or as a result of disability, or if he terminates his employment for “good reason”, Mr. Bready has agreed not to compete with the Company and Nortek for the duration of time in which he receives the severance payments described above. In the event his employment is terminated for “cause” or if he terminates his employment without “good reason”, Mr. Bready has agreed not to compete for a period of one year from such termination.

In 1997, Nortek made a ten-year loan to Mr. Bready in the amount of $3,000,000, repayable annually, in arrears, in installments of $300,000 principal plus accrued interest. The interest on this loan accrues daily at the applicable federal long-term rate in effect on each day the loan is outstanding, determined in accordance with Section 1274 of the Internal Revenue Code of 1986, as amended (the “Code”). Consistent with the terms of the prior employment agreement, the new employment agreement for Mr. Bready provides that the installment payment for any year is deferred until operating earnings, as defined in the agreement, for the prior fiscal year has been determined. If Mr. Bready is an employee of the Company and Nortek on the date an installment payment is due and if operating earnings for the prior fiscal year are in excess of $35,000,000, then the installment payment and accrued interest for that year will be forgiven. The installment payments under the loan will also be forgiven if Mr. Bready is terminated without “cause”, if he resigns for “good reason”, or dies or is disabled during the term of the agreement. As of December 31, 2003, the outstanding principal balance of the loan is $1,200,000 and accrued interest due of $88,304.

Subject to the limit referred to below in this paragraph, following the termination of employment of Mr. Bready for any reason, the Company and Nortek will provide, at no additional cost to Mr. Bready, lifetime medical coverage to Mr. Bready, his spouse and dependents. The lifetime medical coverage includes all medical and dental benefits provided to Mr. Bready as of the date of effectiveness of the Recapitalization. In lieu of lifetime medical coverage, Mr. Bready may request a lump sum payment in an amount to be established by the board of directors as reasonably sufficient to provide such lifetime medical coverage. The Company and Nortek have also agreed to make payments to Mr. Bready to cover any and all state and federal income taxes that may be due as a result of the provision of lifetime medical coverage as described in the three preceding sentences. In no event will the reimbursement obligations of the Company and Nortek, exclusive of the tax gross-up obligations, to provide lifetime medical coverage under the employment agreement exceed $1,000,000 in the aggregate during the lifetime of Mr. Bready and his spouse.

If it is determined that any payment or benefit provided by the Company and Nortek to Mr. Bready under the employment agreement or any other agreement or plan is subject to the 20% excise tax imposed by Section 4999 of the Code, the Company and Nortek will make an additional lump-sum payment to Mr. Bready sufficient, after giving effect to all federal, state and other taxes and charges with respect to that payment, to restore him to the same after-tax position that he would have been in if the excise tax had not been imposed.

Employment Arrangements for Messrs. Hall and Donnelly

Messrs. Hall and Donnelly have entered into employment agreements with the Company and Nortek on terms substantially similar to each other, except as otherwise noted below. Each of the employment agreements became effective upon the completion of the Recapitalization and terminates upon termination of employment. The employment agreements provide that during their respective employment, Mr. Hall will serve as Vice President and Chief Financial Officer of the Company and Nortek and Mr. Donnelly will serve as Vice President and General Counsel of the Company and Nortek.

The basic annual salary for Mr. Hall will not be less than $393,750. Mr. Hall’s salary for 2003 was $410,000. The basic annual salary for Mr. Donnelly will not be less than $252,000. Mr. Donnelly’s salary for 2003 was $265,000. Messrs. Hall and Donnelly are also eligible for incentive compensation in each year of the employment period. In each year, the incentive compensation will be in an amount recommended by the Chief Executive Officer and approved by the compensation committee of the board of directors. Messrs. Hall and Donnelly are entitled to receive all other benefits, including medical and dental insurance, generally available to executive personnel. Messrs. Hall and Donnelly are also entitled to reimbursement of the costs of automobile transportation for personal and business use consistent with their employment prior to the Recapitalization.

If employment is terminated (1) without “cause”, as defined in the employment agreement, (2) by the employee for “good reason”, as defined in the employment agreement, or (3) on account of the employee's death or disability, the Company and Nortek are obligated to pay the respective employee or his estate an annual severance for two years from the date of termination. The annual severance payments for Messrs. Hall and Donnelly would be equal to their respective basic annual salaries as of the date of termination plus the highest amount of bonus or incentive compensation, exclusive of Nortek’s 1999 Equity Performance Plan, paid or payable in cash to such employee in any one of the three calendar years immediately prior to the completion of the Recapitalization (or, if higher, the three calendar years immediately prior to such termination).

If employment is terminated without “cause”, as a result of disability, or by the employee for “good reason”, each employee has agreed not to compete with the Company and Nortek for two years from the date of the termination. In the event employment is terminated for “cause” or if the employee terminates his employment without “good reason”, each of Messrs. Hall and Donnelly has agreed not to compete for a period of one year from such termination.

Subject to the limit referred to below in this paragraph, the Company and Nortek will provide, at no additional cost to Messrs. Hall and Donnelly, lifetime medical coverage for each such employee and his spouse and dependents beginning upon such employee's termination with the Company and Nortek. The lifetime medical coverage includes all medical and dental benefits provided to each such employee as of the date of effectiveness of the Recapitalization. Each of Messrs. Hall and Donnelly are irrevocably entitled to 25% of his lifetime medical coverage and shall become irrevocably entitled to an additional 25% on each of the following three anniversaries of the completion of the Recapitalization. If the employment of Messrs. Hall or Donnelly is terminated at any time (1) by the Company and Nortek for any reason other than a conviction of the employee of a crime involving theft, embezzlement, or fraud against the employer or a civil judgment involving fraud or misappropriation by the employee against the employer, (2) as a result of death, disability or a medical emergency in his immediate family, or (3) by the employee for “good reason”, as defined in the employment agreement, the respective employee shall become irrevocably entitled to 100% of his lifetime medical coverage.

In addition the respective employee shall become irrevocably entitled to 100% of his lifetime medical coverage upon a change of control regardless of whether such employee is terminated. Following their termination of employment for any reason or in the event of a change of control, in lieu of lifetime medical coverage, Messrs. Hall and Donnelly may request a lump sum payment in an amount to be established by the board of directors as reasonably sufficient to provide the percentage of lifetime medical coverage to which he has become irrevocably entitled. In no event will the reimbursement obligations of the Company and Nortek, exclusive of tax gross-up obligations, to provide lifetime medical coverage under the employment agreement exceed $1,000,000 in the aggregate during the lifetime of the employee and his spouse. The Company and Nortek have also agreed to make payments to Messrs. Hall and Donnelly to cover any and all state and federal income taxes that may be due as a result of the provision of lifetime medical coverage as described in this paragraph.

If it is determined that any payment or benefit provided by the Company and Nortek to Messrs. Hall and Donnelly, under their respective employment agreements or any other agreement or plan is subject to the excise tax, imposed by Section 4999 of the Code, the Company and Nortek will make an additional lump-sum payment to Mr. Hall or Mr. Donnelly, as the case may be, sufficient, after giving effect to all federal, state and other taxes and charges with respect to such payment, to restore him to the same after-tax position that he would have been in if the excise tax had not been imposed.

Retention Plan

Nortek established a retention plan for its executive officers and others, other than Mr. Bready, which provides that, in consideration of each employee agreeing not to voluntarily terminate his employment or service as a consultant if there is an attempted change of control, as that term is defined in the plan, of Nortek, the individual will be entitled to an immediate payment equal to 20% of his basic annual salary, and, if the employee is terminated within the twenty-four month period following the change of control, including termination by reason of a material adverse change in the terms of employment as provided in the plan, the individual also will be entitled at the time of termination to severance pay for a period of twenty-four months following termination at an annual rate equal to his base salary plus the highest amount of bonus or incentive compensation paid or payable to him for any one of the three calendar years prior to the Recapitalization (or, if higher, the three calendar years immediately prior to such termination), and to continued medical, life insurance and other benefits for the twenty-four month period, at payment of an amount equal to the cost of providing these benefits. Notwithstanding the foregoing, the terms of the employment agreements for Messrs. Hall and Donnelly, rather than the retention plan, govern their rights to any severance pay in the event of their termination of employment following the completion of the Recapitalization.

The Recapitalization was a change of control for purposes of the retention plan. Accordingly, upon the completion of the Recapitalization, Nortek made immediate cash payments in 2003 to participants in the retention plan in the following amounts: Mr. Cooney, $48,000; Mr. Donnelly, $53,000; Mr. Hall, $82,000; Mr. Hiley, $30,000; and Mr. Ractliffe, $120,000.

Deferred Compensation Arrangements

Since March 1983, Nortek has been a party to individual deferred compensation agreements with Messrs. Bready and Hall, under which Nortek will make 180 monthly payments commencing at age 65 to each of Messrs. Bready and Hall. The annual payments to Messrs. Bready and Hall will be, assuming retirement at age 65, $60,600 and $22,000, respectively. The deferred compensation agreements provide that, in the event of a change in control, the covered executive will be paid a lump sum payment equal to the present value of the unreduced benefit that would be payable to the executive upon retirement on or after age 65. Although the Recapitalization was otherwise a change in control for purposes of the deferred compensation agreements, Mr. Bready and Mr. Hall each waived their right to receive the lump sum payment described above. Following the Recapitalization, the deferred compensation agreements and all of the obligations of Nortek remained in effect.

Compensation Committee Interlocks and Insider Participation

From January 1, 2003 through the completion of the Recapitalization on January 9, 2003, the Compensation Committee of the Board of Directors of the Company consisted of William I. Kelly and Phillip L. Cohen. After January 9, 2003 and through the end of the fiscal year, the Company has a Compensation Committee consisting of Mr. Bready, President and Chief Executive Officer of the Company, and Mr. Berney, which determines compensation of the executive officers of the Company other than Mr. Bready. Mr. Bready’s compensation is determined by the full Board of Directors of the Company. With respect to Mr. Berney, see “Financial Advisory Arrangement with Kelso” under Item 12 of this report. With respect to Mr. Berney, see “Financial Advisory Arrangement with Kelso” under Item 12 of this report.

Compensation Committee Report on Executive Compensation

The Company’s executive compensation program was administered for the 2003 fiscal year by the Board of Directors through its Compensation Committee for all executives, except for Mr. Bready whose compensation program was determined and administered by the full Board of Directors. During fiscal year 2003, the Compensation Committee of the Board of Directors of the Company and of Nortek, after January 9, 2003 and through the end of the fiscal year, consisted of Richard L. Bready and Philip E. Berney.

The Company’s policy with respect to the compensation of its executive officers, other than Messrs. Bready, Hall and Donnelly, is primarily based on the performance of the individual officer along with such other factors as compensation paid by our competitors, geographical factors, the terms of employment and salary surveys. Bonuses for executive officers are awarded on a discretionary basis by the Chief Executive Officer based on individual goals derived from the responsibilities of the individual and which are determined, in part, on the company's performance and to a greater extent on individual performance. The compensation of Messrs. Bready, Hall and Donnelly during fiscal year 2003 was governed, in part, by the terms of their employment agreements, the terms of which are set forth above under “Employment Contracts, Termination of Employment and Change-in-Control Arrangements”.

The executive officers named in the Summary Compensation Table received salary increases in 2003 based on competitive salary analyses and individual performance of job goals and objectives. Bonuses awarded such executive officers for the year reflected the achievement of individual goals, the operating performance of the company and certain units and other factors.

The full Board of Directors of Nortek and the Company are authorized to approve changes in the compensation arrangement with the Chief Executive Officer and with respect to the named executive officers.

During 2003, Mr. Bready earned a $5,000,000 bonus pursuant to his employment agreement with the Company and Nortek.

With respect to long-term incentive compensation, the Company believes that stock options are an additional incentive for executive officers and other selected key employees of Nortek Holdings and its subsidiaries and upon whose efforts the Company is largely dependent for the successful conduct of its business. The award of stock options will encourage such persons to improve operations and increase profits and to accept employment with, or remain in the employ of, Nortek Holdings or its subsidiaries. The Nortek Holdings’ stock option plan is administered by the Compensation Committee of the Board. In 2003, the Committee awarded options to its executive officers in the amounts set forth above in the table entitled “Options Granted in Last Fiscal Year”.

Five-Year Shareholder Return Comparison

The following graph compares the yearly percentage change for the last five years plus January 1, 2003 through January 9, 2003, in the cumulative total shareholder return of the Company’s Common Stock against the cumulative total return of the Russell 2000 Index and a group of peer companies which are listed below. Following the completion on January 9, 2003 of the Recapitalization, the Company’s common stock ceased to be publicly traded.

* $100 INVESTED ON 12/31/97 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
LAST PERIOD INCLUDES CALENDAR YEAR 2002 THROUGH
JANUARY 9, 2003.

The peer group companies are:

Armstrong World Industries, Inc.
Fedders Corporation
Masco Corporation
Maytag Corporation
The Stanley Works
Whirlpool Corporation
York International Corp.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 30, 2004, the issued and outstanding capital stock of the Company consists of (i) 397,380 shares of Class A Common Stock, par value $1.00 per share and (ii) 8,130,442 shares of Series B Convertible Preference Stock, par value $1.00 per share. The following table sets forth the beneficial ownership of the Class A Common Stock and the Series B Convertible Preference Stock of the Company, as of March 30, 2004, by the Company’s directors, by its executive officers named in the Summary Compensation Table and by its directors and executive officers as a group.

	Class A Common Stock					Series B Convertible Preference Stock
	Amount and Nature of		Percent of			Amount and Nature of		Percent of
Name (1)	Beneficial Ownership (2)		Class (3)			Beneficial Ownership (4)		Class
Philip E. Berney		--		--	%		8,130,442		100	%
Jeffrey C. Bloomberg		15,036		3	.7		--		--
Richard L. Bready		1,722,319		92	.5		--		--
Joseph M. Cianciolo		4,167		1	.0		--		--
Edward J. Cooney		12,361		3	.0		--		--
Kevin W. Donnelly		58,702		13	.0		--		--
Almon C. Hall		96,011		20	.2		--		--
David B. Hiley		11,945		2	.9		--		--
Robert E.G. Ractliffe		111,111		22	.4		--		--
All directors and executive
officers as a group		2,031,652		95	.6%		8,130,442		100	%

(1) The address of all such persons is c/o Nortek, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903. Certain of the shares shown in the table are shown as to which the persons named in the table have the right to acquire beneficial ownership, or specified in Rule 13d-3(d)(1) promulgated under the Securities Exchange Act of 1934, as amended. Unless otherwise indicated, the persons identified in this table have sole voting and investment power with respect to all shares shown as beneficially held by them, subject to community property laws where applicable.

(2) Includes shares subject to options outstanding and exercisable within sixty (60) days after March 30, 2004 as follows: Bready 1,464,169 shares, Hall 79,011 shares, Donnelly 52,922 shares, Ractliffe 98,111 shares, Cooney 12,361 shares, Bloomberg 4,167 shares, Cianciolo 4,167 shares and Hiley 11,945 shares.

(3) Assuming the exercise by all of our directors and executive officers of all options to acquire Class A Common Stock exercisable or, pursuant to Rule 13d-3(d)(1), deemed exercisable, ownership percentages would be as follows: Bready 81.1%; Hall 4.5%; Donnelly 2.8%; Ractliffe 5.2%; Cooney .6%; Bloomberg .7%; Cianciolo .2%; Hiley .6%; and all directors and officers as a group 95.6%.

(4) Mr. Berney may be deemed to share beneficial ownership of shares of Series B Convertible Preference Stock owned of record by Kelso Investment Associates VI, L.P., Kelso Nortek Investors LLC and KEP VI, LLC, by virtue of his status as a managing member of KEP VI, LLC and Kelso GP VI, LLC (which is the general partner of Kelso Investment Associates VI, L.P. and the managing member of Kelso Nortek Investors, LLC). Mr. Berney shares investment and voting power with respect to the shares of Series B Convertible Preference Stock owned by Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC and KEP VI, LLC but disclaims beneficial ownership of such shares, except with respect to his pecuniary interest therein.

The Company’s Series B Preference Stock is convertible at any time subsequent to January 9, 2004 into one full share of Class A Common Stock. Upon occurrence of certain events, the Series B Preference Stock can automatically be converted into Class A Common Stock. The Series B Preference Stock does not provide for distributions to shareholders and has a liquidation preference of $0.01 per share. In addition to the election of directors, the consent of a majority of the Series B Preference Stockholders is required; i) to amend the certificate of incorporation of Holdings to modify the powers, preferences or special rights of the holders of the Series B Preference Stock, ii) to authorize or issue any series of capital stock ranking senior to or on parity with the Series B Preference Stock as to either payments of dividends or rights on liquidation, iii) to enter into a material transaction in excess of $50,000,000, iv) to incur indebtedness outside the ordinary course of business, v) to make certain capital expenditures, vi) to enter into agreements and arrangements with members of senior management of Holdings, vii) to create, issue, grant, deliver or sell equity securities, including warrants and options, other than under the 2002 Stock Option Plan and other agreements and arrangements in existence on or prior to the date of the completion of the Recapitalization, viii) to enter into legal settlements in excess of $25,000,000 and ix) to take any other significant actions involving the Company.

Securities Authorized for Issuance under Equity Compensation Plans

			Number of
	Number of		securities remaining
	securities to be		for future issuance
	issued upon exercise	Weighted average	under equity
	of outstanding	price of outstanding	compensation plans
	options, warrants	options, warrants	(excluding securities
	and rights	and rights	on column (a))
	(a)	(b)	(c)
Equity
Compensation Plans	3,151,120	$10.70	128,100
approved by
security holders
Equity
Compensation Plans	none	N/A	none
not approved by
security holders

The only equity compensation plan of the Company is the Nortek Holdings, Inc. 2002 Stock Option Plan. See “Stock Option Tables” and the footnotes thereto in Item 11 of this Report.

Other Transactions

Other transactions between the Registrant and certain of its Executive Officers are described in Footnote 2 of the Summary Compensation Table above and in the section entitled “Employment Arrangements and Severance Agreements” of Item 11 of this Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Recapitalization

On November 20, 2002, Nortek reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Holdings. On January 9, 2003, Holdings completed the Recapitalization which resulted in the acquisition of Holdings by Kelso and certain members of Nortek’s management. Pursuant to the terms of certain Exchange Agreements by and among Nortek, the Company and each of Richard L. Bready, President and CEO and director of the Company, Almon C. Hall, Vice President and CFO of the Company, Robert E.G. Ractliffe, Executive Vice President and COO of the Company, Kevin W. Donnelly, Vice President, General Counsel and Secretary of the Company, Edward J. Cooney, Vice President and Treasurer of the Company and David B. Hiley, director of the Company, Messrs. Hall, Donnelly and Hiley rolled-over all of their equity interests in Nortek as part of the Recapitalization and Messrs. Bready, Ractliffe and Cooney have sold or cashed-out a portion of their equity interests in Holdings as part of the Recapitalization and have retained or rolled-over the remainder of their interests. (See Item 12 of this Report, Security Ownership of Certain Beneficial Owners and Management.) Such members of Nortek’s management received amounts in connection with the cash-out of a portion of their equity interests in hHoldings as follows: Mr. Bready $17,166,372; Mr. Ractliffe $556,048; and Mr. Cooney $193,125. Immediately after the completion of the transaction, Kelso held approximately 79.4% of the fully-diluted equity of Holdings, and the Company’s management held approximately 18.4% (with approximately 16.0% held by Mr. Bready). Members of Nortek’s management received various amounts in connection with payments in respect of the termination of Nortek’s SERP as follows: Mr. Bready, $73,658,948; Mr. Hall, $8,563,677; and Mr. Donnelly $3,156,380; and payments under Nortek’s retention plan as follows: Mr. Cooney, $48,000; Mr. Donnelly, $53,000; Mr. Hall, $82,000; Mr. Hiley, $30,000; and Mr. Ractliffe, $120,000. (See “Pension and Similar Plans” and “Retention Plan” under Item 11 of this Report.) Mr. Hiley received a fee of $3,000,000 in connection with the transaction.

Members of the Company’s management, the Company, Nortek, Kelso and other stockholders entered into a Stockholders Agreement that sets forth the terms of their relationship as stockholders of the Company upon the completion of the Recapitalization. Under the Stockholders Agreement, members of the Cmpany’s management have customary “tag-along” rights to participate on a pro-rata basis with affiliates of Kelso in sales of equity securities of Holdings. The Stockholders Agreement also provides that members of the Company’s management will be subject to customary “drag-along” rights, which will permit affiliates of Kelso to require the certain members of the Company’s management to sell their shares pro-rata with these Kelso affiliates in a transaction involving a sale of at least 75% of the ownership by the Kelso affiliates of their equity interest in Holdings.

Certain members of the Company’s management have also been granted rights to have their shares of Nortek Holdings registered for sale under the Securities Act of 1933 in certain circumstances, pursuant to the terms of the Registration Rights Agreement by and among the Company, Kelso affiliates and certain members of the Company’s management. Nortek Holdings is only required to use “best efforts” to register the shares and is under no further obligation to the Registration Rights holders.

Mr. Bready is also a party to a Preemptive Rights Agreement with Holdings that provides him with the right to participate in any future equity financings of Holdings, subject to limited exceptions, in an amount necessary to permit Mr. Bready to maintain his fully diluted ownership interest in Holdings.

Fees Paid to Consultant

David B. Hiley, a director of the Company, provides consulting services to the Company for a fee of $12,500 per month, plus a year-end bonus of $325,000 in 2003 and for a fee of $16,667 per month plus a discretionary year-end bonus in 2004.

Financial Advisory Arrangement with Kelso

Philip E. Berney, a director of the Company, is also a managing director of Kelso. Upon completion of the Recapitalization, Nortek paid Kelso and its designees a fee of $10,500,000 and reimbursed Kelso and its designees for their expenses and entered into a financial advisory agreement with Kelso with respect to services to be provided by Kelso or some of its related parties to the Company in return for financial advisory fees to be paid annually to Kelso by Nortek. The amount of the financial advisory fee will be determined by Kelso, but will not exceed $1,500,000 per year. The financial advisory agreement includes indemnification and expense reimbursement by Nortek of Kelso and other related parties with respect to the Recapitalization, including with respect to the financing of the Recapitalization and any services to be provided by Kelso or any related party to Nortek on a going forward basis.

Equity Purchase by Director

In October 2003, Mr. Bloomberg, a member of the Company’s Board of Directors, purchased, individually and in the name of a family trust, directly from the Company 10,869 shares of the Company’s Class A Common Stock for a purchase price of $499,974.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The Company was billed $2,872,000 and $3,720,000 for audit services for the years ended December 31, 2003 and 2002, respectively. Audit fees for the year ended December 31, 2003 include fees for the audit of the Company’s annual financial statements for the years ended December 31, 2003, the audit of the combined financial statements of the Company’s subsidiary Ply Gem Industries, Inc. as of December 31, 2002 and 2001 and for each of the three years ended December 31, 2002 and as of December 31, 2003 and for the year then ended, review of the financial statements included in Nortek’s Quarterly Reports on Form 10-Q filed during 2003, professional services rendered in connection with the Company’s private placement of Senior Discount Notes, and statutory audits. Audit fees for the year ended December 31, 2002 include fees for the audit of Nortek’s annual financial statements for the years ended December 31, 2002, the re-audit of Nortek’s financial statements as of December 31, 2001 and 2000 and for each of the three years ended December 31, 2001, the review of the financial statements included in Nortek’s Quarterly Reports on Form 10-Q filed during 2002, and statutory audits.

Audit-Related Fees

The Company was billed $270,000 and $400,000 for non-audit services from the Company’s principal accountant during the year ended December 31, 2003 and 2002. Audit-related fees billed during 2003 include fees for the audits of the Company’s employee benefit plans, accounting consultations and audit procedures related to acquisitions, and consultations related to the Company’s Sarbanes-Oxley Act Section 404 project. Audit-related fees billed during 2002 include fees for the audits of Nortek’s employee benefit plans and accounting consultations related to acquisitions.

Tax Fees

The Company was billed $1,059,000 and $525,000 for professional services rendered by the Company’s accountants for tax compliance, tax advice related to acquisitions, tax advice and tax planning during the years ended December 31, 2003 and 2002, respectively.

All Other Fees

The Company was billed $16,000 for other services during 2003. Other services billed in 2003 relate to the Company’s subscription to Ernst & Young’s accounting information database and other services. The Company was not billed for other services in 2002.

PART IV

ITEM 15. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Schedules

The following documents are filed as part of this report:

1. Financial Statements

Consolidated Statement of Operations for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001

Consolidated Balance Sheet as of December 31, 2003 and 2002

Consolidated Statement of Cash Flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001

Consolidated Statement of Stockholders’ Investment for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001

Notes to Consolidated Financial Statements

Report of Independent Auditors

2. Financial Statement Schedule

Schedule I - Consolidated Parent Company Financial Statements

Schedule II - Valuation and Qualifying Accounts

All other financial statements are not required under the related instructions or are inapplicable and therefore have been omitted.

3. The exhibits are listed in the Exhibit Index, which is incorporated herein by reference

(b) Reports on Form 8-K

• March 12, 2003, Item 5, Other Events
• May 15, 2003, Item 9, Regulation FD Disclosure
• August 7, 2003, Item 7, Financial Statements and Exhibits
• November 6, 2003, Item 12, Results of Operations and Financial Condition
• December 22, 2003, Item 5, Other Events
• February 13, 2004, Item 5, Current Report
• February 17, 2004, Item 2, Acquisition or Disposition of Assets
• February 17, 2004, Item 7, Financial Statements and Exhibits
• March 1, 2004, Item 5, Current Report

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 March 30, 2004.

NORTEK, INC.

/s/ Richard L. Bready          

Richard L. Bready

Chairman of the Board

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 March 30, 2004.

/s/ Richard L. Bready	/s/ Philip E. Berney
Richard L. Bready, Chairman,	Philip E. Berney
President and Chief Executive Officer	Director
/s/ Almon C. Hall	/s/ Jeffrey C. Bloomberg
Almon C. Hall, Vice President,	Jeffrey C. Bloomberg
and Chief Financial Officer	Director
	/s/ Joseph M. Cianciolo
	Joseph M. Cianciolo
	Director
	/s/ David B. Hiley
	David B. Hiley
	Director

Consolidated Statement of Operations

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Net Sales	$	1,490,073		$	24,951		$	1,384,125		$	1,293,780
Costs and Expenses:
Cost of products sold		1,060,004			18,635			992,299			945,617
Selling, general and administrative expense		261,569			5,014			262,671			226,549
Amortization of goodwill and intangible assets		9,055			67			2,988			11,955
Expenses and charges arising from the Recapitalization		--			83,000			6,600			--
		1,330,628			106,716			1,264,558			1,184,121
Operating earnings (loss)		159,445			(81,765	)		119,567			109,659
Interest expense		(57,627	)		(1,054	)		(52,410	)		(51,748	)
Loss from debt retirement		--			--			--			(5,500	)
Investment income		1,482			119			5,943			8,189
Earnings (loss) from continuing operations
before provision (benefit) for income taxes		103,300			(82,700	)		73,100			60,600
Provision (benefit) for income taxes		41,300			(21,800	)		29,500			27,800
Earnings (loss) from continuing operations		62,000			(60,900	)		43,600			32,800
Earnings (loss) from discontinued operations		12,200			(1,000	)		18,900			(24,800	)
Net earnings (loss)	$	74,200		$	(61,900	)	$	62,500		$	8,000

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Balance Sheet

	Post-		Pre-
	Recapitalization		Recapitalization
	December 31,
	2003		2002
	(Amounts in thousands)
Assets
Current Assets:
Unrestricted
Cash and cash equivalents	$	194,120	$	294,804
Restricted
Cash, investments and marketable securities at cost,
which approximates fair value		1,223		2,808
Accounts receivable, less allowances of $5,880,000 and $6,003,000		214,267		179,780
Inventories:
Raw materials		54,144		51,245
Work in process		19,229		16,110
Finished goods		86,042		65,049
		159,415		132,404
Prepaid expenses		6,765		8,528
Other current assets		14,868		9,571
Prepaid income taxes		17,826		15,964
Assets of discontinued operations		494,851		567,457
Total current assets		1,103,335		1,211,316
Property and Equipment, at Cost:
Land		7,591		8,250
Buildings and improvements		67,814		85,909
Machinery and equipment		136,769		243,749
		212,174		337,908
Less accumulated depreciation		17,719		194,533
Total property and equipment, net		194,455		143,375
Other Assets:
Goodwill		678,063		287,164
Intangible assets, less accumulated amortization of
$9,122,000 and $21,081,000		94,645		43,205
Deferred income taxes		--		9,882
Deferred debt expense		12,589		19,494
Restricted investments and marketable securities held by
pension trusts (including related party amounts - see Note 8)		1,123		76,503
Other		15,770		39,887
		802,190		476,135
	$	2,099,980	$	1,830,826
Liabilities and Stockholder's Investment
Current Liabilities:
Notes payable and other short-term obligations	$	8,120	$	3,338
Current maturities of long-term debt		7,229		2,208
Accounts payable		112,772		109,073
Accrued expenses and taxes, net		151,048		133,569
Liabilities of discontinued operations		137,683		149,859
Total current liabilities		416,852		398,047
Other Liabilities:
Deferred income taxes		21,461		--
Other long-term liabilities		136,833		161,428
		158,294		161,428
Notes, Mortgage Notes and Obligations
Payable, Less Current Maturities		1,324,626		953,846
Commitments and Contingencies (Note 9)
Stockholder's Investment:
Preference stock, $1.00 par value; authorized 7,000,000 shares;
none issued as of December 31, 2003		--		--
Series B Preference Stock, $1.00 par value; authorized
19,000,000 shares; 8,130,442 shares issued and outstanding
as of December 31, 2003		8,130		--
Class A Common stock, $1.00 par value; authorized 19,000,000
shares; 397,380 shares issued and outstanding
as of December 31, 2003		397		--
Class B Common stock, $1.00 par value; authorized 14,000,000
shares outstanding; none issued as of December 31, 2003		--		--
Common stock, $1.00 par value; authorized 40,000,000
shares; 10,502,627 shares issued and outstanding
as of December 31, 2002		--		10,503
Special Common stock, $1.00 par value; authorized 5,000,000
shares; 501,224 shares issued and outstanding
as of December 31, 2002		--		501
Additional paid-in capital		172,244		108,617
Retained earnings		--		255,366
Accumulated other comprehensive income (loss)		19,437		(57,482	)
Total stockholder's investment		200,208		317,505
	$	2,099,980	$	1,830,826

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Cash Flows

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Cash Flows from operating activities:
Earnings (loss) from continuing operations	$	62,000		$	(60,900	)	$	43,600		$	32,800
Earnings (loss) from discontinued operations		12,200			(1,000	)		18,900			(24,800	)
Net earnings (loss)		74,200			(61,900	)		62,500			8,000
Adjustments to reconcile net earnings (loss) provided by (used in) operating
activities:
Depreciation and amortization expense, including amortization of purchase price
allocated to inventory		31,962			653			29,118			37,121
Non-cash interest expense, net		6,352			125			3,827			3,565
Stock option and other stock compensation expense		2,071			--			--			--
(Gain) loss on sale of discontinued operations		--			--			(2,400	)		34,000
Loss on debt retirement		--			--			--			5,500
Deferred federal income tax (credit) provision from continuing operations		(4,800	)		5,900			(200	)		(2,800	)
Deferred federal income tax provision (credit) from discontinued operations		500			--			2,000			(2,000	)
Effect of the Recapitalization, net		--			62,397			--			--
Changes in certain assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable, net		(18,390	)		4,298			(8,782	)		6,588
Inventories		(595	)		(4,457	)		8,426			7,356
Prepaids and other current assets		(2,145	)		268			(2,742	)		(1,727	)
Net assets of discontinued operations		3,808			1,717			(53,143	)		(11,261	)
Accounts payable		(6,251	)		(777	)		(2,403	)		7,112
Accrued expenses and taxes		60,546			(19,766	)		(1,143	)		20,724
Long-term assets, liabilities and other, net		(9,180	)		5,837			16,218			(1,595	)
Total adjustments to net earnings (loss)		63,878			56,195			(11,224	)		102,583
Net cash provided by (used in) operating activities		138,078			(5,705	)		51,276			110,583
Cash Flows from investing activities:
Capital expenditures	$	(17,150	)	$	(207	)	$	(19,095	)	$	(27,141	)
Net cash paid for businesses acquired		(76,016	)		--			--			(1,900	)
Redemption of publicly held shares in connection with the Recapitalization		(469,655	)		--			--			--
Payment of fees and expenses in connection with the Recapitalization		(27,900	)		--			--			--
Purchase of investments and marketable securities		(30,015	)		--			(332,069	)		(240,366	)
Proceeds from the sale of investments and marketable securities		30,015			--			428,307			152,170
Proceeds from the sale of discontinued businesses		--			--			29,516			45,000
Change in restricted cash and investments		1,028			(49	)		(2,867	)		(34,194	)
Other, net		(663	)		109			(4,097	)		1,822
Net cash provided by (used in) investing activities	$	(590,356	)	$	(147	)	$	99,695		$	(104,609	)
Cash Flows from financing activities:
Sale of 10% Senior Discount Notes due 2011, net of fees	$	339,522		$	--		$	--		$	--
Sale of 9 7/8% Senior Subordinated Notes due 2011		--			--			--			241,800
Redemption of 9 7/8% Senior Subordinated Notes due 2004		--			--			--			(207,700	)
Increase (decrease) in borrowings, net		2,658			(1,313	)		(12,143	)		(12,558	)
Issuance of preferred and common stock in connection with the Recapitalization		359,185			--			--			--
Dividend to preferred and common stockholders		(298,474	)		--			--			--
Cash distributions to stock option holders		(41,600	)		--			--			--
Purchase of common and special common stock		--			--			(1	)		(3	)
Issuance of 32,608 shares of class A common stock		1,500			--			--			--
Exercise of stock options		--			--			631			1,307
Other, net		7			(4,039	)		(4,022	)		48
Net cash provided (used in) by financing activities		362,798			(5,352	)		(15,535	)		22,894
Net increase (decrease) in unrestricted cash and cash equivalents		(89,480	)		(11,204	)		135,436			28,868
Unrestricted cash and cash equivalents at the beginning of the period		283,600			294,804			159,368			130,500
Unrestricted cash and cash equivalents at the end of the period	$	194,120		$	283,600		$	294,804		$	159,368

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Stockholder's Investment
For the Year Ended December 31, 2001
(Dollar amounts in thousands)

													Accumulated
			Special			Additional							Other
	Common		Common			Paid-in		Retained		Treasury			Comprehensive			Comprehensive
	Stock		Stock			Capital		Earnings		Stock			Loss			Income (Loss)
Balance, December 31, 2000	$	18,753	$	828		$	208,813	$	184,866	$	(111,682	)	$	(19,367	)	$	--
Net earnings		--		--			--		8,000		--			--			8,000
Other comprehensive loss:
Currency translation adjustment		--		--			--		--		--			(4,444	)		(4,444	)
Minimum pension liability net of
tax of $8,969		--		--			--		--		--			(15,823	)		(15,823	)
Unrealized decline in the fair value
of marketable securities		--		--			--		--		--			(91	)		(91	)
Comprehensive loss																$	(12,358	)
13,721 shares of special common stock
converted into 13,721 shares of
common stock		14		(14	)		--		--		--			--
62,504 shares of common stock issued
upon exercise of stock options		62		--			1,401		--		--			--
130 shares of treasury stock acquired		--		--			--		--		(3	)		--
Balance, December 31, 2001	$	18,829	$	814		$	210,214	$	192,866	$	(111,685	)	$	(39,725	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Stockholder's Investment
For the Year Ended December 31, 2002
(Dollar amounts in thousands)

			Nortek
	Nortek		Holdings					Nortek											Accumulated
	Holdings		Special		Nortek			Special			Additional								Other
	Common		Common		Common			Common			Paid-in			Retained		Treasury			Comprehensive			Comprehensive
	Stock		Stock		Stock			Stock			Capital			Earnings		Stock			Loss			Income (Loss)
Balance, December 31, 2001	$	--	$	--	$	18,829		$	814		$	210,214		$	192,866	$	(111,685	)	$	(39,725	)	$	--
Net earnings		--		--		--			--			--			62,500		--			--			62,500
Other comprehensive income (loss):
Currency translation adjustment		--		--		--			--			--			--		--			5,250			5,250
Minimum pension liability net of
tax of $12,920		--		--		--			--			--			--		--			(22,701	)		(22,701	)
Unrealized decline in the fair value
of marketable securities		--		--		--			--			--			--		--			(306	)		(306	)
Comprehensive income																						$	44,743
22,390 shares of special common stock
converted into 22,390 shares of
common stock		--		--		22			(22	)		--			--		--			--
28,963 shares of common stock issued
Upon exercise of stock options		--		--		29			--			682			--		--			--
The effect of directors’ stock options		--		--		--			--			739			--		--			--
33 shares of treasury stock acquired		--		--		--			--			--			--		(1	)		--
Nortek Holdings Reorganization (See
Notes 1, 2 and 7)		10,503		501		(18,880	)		(792	)		(103,018	)		--		111,686			--
Balance, December 31, 2002	$	10,503	$	501	$	--		$	--		$	108,617		$	255,366	$	--		$	(57,482	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Stockholder's Investment
For the Period from January 1, 2003 to January 9, 2003
(Dollar amounts in thousands)

																	Accumulated
	Series B		Class A					Special			Additional						Other
	Preference		Common		Common			Common			Paid-in			Retained			Comprehensive			Comprehensive
	Stock		Stock		Stock			Stock			Capital			Earnings			Loss			Income (Loss)
Balance, December 31, 2002	$	--	$	--	$	10,503		$	501		$	108,617		$	255,366		$	(57,482	)	$	--
Net loss		--		--		--			--			--			(61,900	)		--			(61,900	)
Other comprehensive income (loss):
Currency translation adjustment		--		--		--			--			--			--			1,096			1,096
Minimum pension liability net of
tax of $9,906		--		--		--			--			--			--			18,398			18,398
Comprehensive loss																				$	(42,406	)
Settlement of stock options held by
employees, net of taxes of $1,710		--		--		--			--			(3,000	)		--			--
Subtotal		--		--		10,503			501			105,617			193,466			(37,988	)
Effect of the Recapitalization		8,130		365		(10,503	)		(501	)		328,857			(193,466	)		37,988
Balance, January 9, 2003	$	8,130	$	365	$	--		$	--		$	434,474		$	--		$	--

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Stockholder's Investment
For the Period from January 10, 2003 to December 31, 2003
(Dollar amounts in thousands)

											Accumulated
	Series B				Additional						Other
	Preference		Common		Paid-in			Retained			Comprehensive			Comprehensive
	Stock		Stock		Capital			Earnings			Income (Loss)			Income (Loss)
Balance, January 9, 2003	$	8,130	$	365	$	434,474		$	--		$	--		$	--
Net earnings		--		--		--			74,200			--			74,200
Other comprehensive income (loss):
Currency translation adjustment		--		--		--			--			19,501			19,501
Minimum pension liability, net of
tax of $35		--		--		--			--			(64	)		(64	)
Comprehensive income														$	93,637
Issuance of 32,608 shares of Class A
Common Stock		--		32		1,468			--			--
Dividend to common and preferred
stockholders		--		--		(224,274	)		(74,200	)		--
Cash distribution to stock option holders		--		--		(41,600	)		--			--
Stock option and other stock compensation
expense		--		--		2,179			--			--
Other, net		--		--		(3	)		--			--
Balance, December 31, 2003	$	8,130	$	397	$	172,244		$	--		$	19,437

The accompanying notes are an integral part of these Consolidated Financial Statements.

NORTEK HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nortek Holdings, Inc. and its continuing wholly-owned subsidiaries (individually and collectively, the “Company” or “Holdings”) are diversified manufacturers of residential and commercial building products, operating within two principal segments (see Note 10 for a discussion of discontinued operations related to the Company’s subsidiary, Ply Gem Industries, Inc. (“Ply Gem”) and Ply Gem’s current and former subsidiaries): the Residential Building Products Segment and the Air Conditioning and Heating Products Segment. Through these remaining principal segments, the Company manufactures and sells, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and the do-it-yourself (“DIY”) and professional remodeling and renovation markets.

The consolidated financial statements prior to November 20, 2002 reflect the financial position, results of operations and cash flows of Nortek, Inc. (“Nortek”), the predecessor company. On November 20, 2002, Nortek and Holdings reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Holdings, a Delaware corporation formed in 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). Subsequent to November 20, 2002, the consolidated financial statements reflect the financial position, results of operations and cash flows of Holdings (the successor company). On January 9, 2003, Holdings was acquired by certain affiliates and designees of Kelso & Company L.P. (“Kelso”) and certain members of Nortek’s management (the “Management Investors”) in accordance with the Agreement and Plan of Recapitalization by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (“K Holdings”) dated as of June 20, 2002, as amended, (the “Recapitalization Agreement”) in a transaction valued at approximately $1.6 billion, including all of the Company’s indebtedness (the “Recapitalization”) (see Notes 2 and 7).

Beginning on January 9, 2003, the Company accounted for the Recapitalization as a purchase in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS No. 141”), which resulted in a new valuation for the assets and liabilities of the Company and its subsidiaries based upon fair values as of the date of the Recapitalization. SFAS No. 141 requires the Company to establish a new basis for its assets and liabilities based on the amount paid for its ownership at January 9, 2003. Accordingly, the Company’s ownership basis (including the fair value of options rolled over by the Management Investors) is reflected in the Company’s consolidated financial statements beginning upon completion of the Recapitalization. The Company’s purchase price of approximately $586,266,000, including net dividends and distributions from Nortek of approximately $115,397,000 to fund the Recapitalization, was allocated to the assets and liabilities based on their relative fair values and approximately $442,969,000 was reflected in Stockholders’ Investment as the value of the Company’s ownership upon completion of the Recapitalization. Immediately prior to the Recapitalization, Stockholders’ Investment was approximately $272,099,000.

The Company completed the final allocation of purchase price as of October 5, 2003, which reflects the excess purchase price over the net assets acquired in the Recapitalization. The following table shows a comparison of the initial allocation of purchase price reflected in Nortek’s Form 10-Q for the quarter ended April 5, 2003 and the final allocation of purchase price included in the Company’s accompanying Consolidated Financial Statements for the year ended December 31, 2003, both of which include amounts allocated to discontinued operations which were sold subsequent to January 9, 2003 (see Note 10):

	Initial			Final
	Allocation			Allocation
Inventories	$	13,234,000		$	12,908,000
Property, plant and equipment		102,474,000			38,035,000
Intangible assets		72,953,000			21,686,000
Indebtedness		(33,777,000	)		(33,777,000	)
Pension and post retirement health care benefits		(32,195,000	)		(23,781,000	)
Prepaid and deferred income taxes		(38,325,000	)		(11,370,000	)
Goodwill		227,671,000			310,240,000
Other		--			226,000
Total	$	312,035,000		$	314,167,000

The following is a summary of the material adjustments made to the initial allocation of purchase price and the final allocation of purchase price:

• Purchase price increased by $2,132,000 from $584,134,000 to $586,266,000 due to refinements made to the fair value of the options to purchase common stock of the Management Investors that were included in the purchase price as they were exchanged for fully vested options to purchase common stock of the new entity (see Note 2).

• The change in the allocations to property, plant and equipment and intangible assets reflect adjustments recorded based upon the finalization of the Company’s asset appraisals for each of the Company’s significant locations in the fourth quarter of 2003.

• The change in the allocations to pension and post retirement health benefits reflect adjustments recorded subsequent to April 5, 2003 based upon the finalization of the Company’s actuarial studies for significant pension and post retirement health benefit liabilities.

• The change in the allocation to prepaid and deferred income taxes principally reflects the deferred tax consequences of the adjustments made to property, plant and equipment, intangible assets and pensions and post-retirement health benefits discussed above.

• The increase in the allocation to goodwill principally reflects the net impact of the changes to property, plant and equipment, intangible assets, pensions and post-retirement health benefits and prepaid and deferred income taxes and the $2,132,000 of additional purchase price discussed above. Goodwill associated with the Recapitalization will not be deductible for federal, state or foreign income tax purposes.

The following table shows a comparison of the initial allocation of purchase price reflected in the quarter ended April 5, 2003 and the final allocation of purchase price for the year ended December 31, 2003 allocated to discontinued operations which were discontinued subsequent to January 9, 2003 (see Note 10):

	Initial			Final
	Allocation			Allocation
Fair Value Adjustments:
Inventories	$	892,000		$	892,000
Property, plant and equipment		30,429,000			3,026,000
Intangible assets		(2,429,000	)		(18,429,000	)
Prepaid and deferred income taxes		(12,972,000	)		5,450,000
Goodwill		(11,513,000	)		(40,567,000	)
Other		90,000			542,000
Total	$	4,497,000		$	(49,086,000	)

The following table presents a summary of the activity in goodwill for continuing operations and discontinued operations for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001. Goodwill related to discontinued operations is included in assets of discontinued operations in the accompanying consolidated balance sheets as of December 31, 2003 and 2002.

	Continuing			Discontinued
	Operations			Operations			Total
	(Amounts in thousands)
Balance as of December 31, 2000	$	302,899		$	279,537		$	582,436
Amortization of goodwill		(8,718	)		(7,676	)		(16,394	)
Purchase accounting adjustments		(6,551	)		(380	)		(6,931	)
Impact of foreign currency translation		(1,234	)		72			(1,162	)
Balance as of December 31, 2001		286,396			271,553			557,949
Purchase accounting adjustments		426			(3,401	)		(2,975	)
Allocated to subsidiary sold		--			(4,200	)		(4,200	)
Impact of foreign currency translation		342			46			388
Balance as of December 31, 2002		287,164			263,998			551,162
Impact of foreign currency translation		269			74			343
Balance as of January 9, 2003		287,433			264,072			551,505
Effect of Recapitalization		350,807			(40,567	)		310,240
Acquisitions during the period from January 10, 2003 to December
31, 2003		46,248			--			46,248
Purchase accounting adjustments		(11,979	)		(4,195	)		(16,174	)
Impact of foreign currency translation		5,554			667			6,221
Balance December 31, 2003	$	678,063		$	219,977		$	898,040

Goodwill associated with the Recapitalization will not be deductible for income tax purposes. Approximately $7,300,000 of the goodwill associated with acquisitions during the period from January 10, 2003 to December 31, 2003 will be deductible for income tax purposes. Purchase accounting adjustments relate principally to final revisions resulting from the completion of fair value adjustments and adjustments to deferred income taxes that impact goodwill.

During the period from January 10, 2003 to December 31, 2003, the Company reflected amortization of purchase price allocated to inventory of approximately $4,600,000 in continuing operations in cost of sales related to inventory acquired as part of the Recapitalization. No similar amortization was required for such inventory in 2002 under the Company’s historical basis of accounting.

In connection with both the initial and final allocations of purchase price to property, plant and equipment acquired as part of the Recapitalization, the Company assigned new useful lives based upon the initial estimate and then the final remaining useful lives adopted from the date of the Recapitalization, respectively, in order to determine depreciation expense for all periods subsequent to the Recapitalization. For the period from January 10, 2003 to December 31, 2003, the Company reflected approximately $8,057,000 of lower depreciation expense in continuing operations in cost of sales as compared to the Company’s historical basis of accounting prior to the Recapitalization. The lower depreciation expense reflects the favorable impact of approximately $12,212,000 related to revisions to the remaining useful lives, which was partially offset by the unfavorable impact of approximately $4,155,000 related to the increase in property, plant and equipment related to the allocation of purchase price. Depreciation expense related to property, plant and equipment acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and initial estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and final useful lives adopted for the period from October 5, 2003 to December 31, 2003. Depreciation expense would have been approximately $3,633,000 higher for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and final remaining useful lives adopted had been used to record depreciation expense for the period from January 10, 2003 to October 4, 2003, primarily due to the final remaining useful lives adopted being shorter than the initial estimates, which was partially offset by the reduction in the final purchase price allocation.

In connection with both the initial and final allocations of purchase price to intangible assets acquired as part of the Recapitalization, the Company assigned new useful lives based upon the initial estimated and then the final remaining useful lives adopted from the date of the Recapitalization, respectively, in order to determine amortization expense for all periods subsequent to the Recapitalization. For the period from January 10, 2003 to December 31, 2003, the Company reflected in continuing operations approximately $6,325,000 of higher amortization of intangible assets as compared to the Company’s historical basis of accounting prior to the Recapitalization. The higher amortization reflects the combination of the unfavorable impact of approximately $1,460,000 related to revisions to the remaining useful lives adopted and the unfavorable impact of approximately $4,865,000 related to the increase in intangible assets as a result of the allocation of purchase price. Amortization expense related to intangible assets acquired as part of the Recapitalization was recorded based upon the initial allocation of purchase price and estimated useful lives for the period from January 10, 2003 to October 4, 2003 and based upon the final allocation of purchase price and final useful lives adopted for the period from October 5, 2003 to December 31, 2003. Amortization expense would have been approximately $1,839,000 higher for the period from January 10, 2003 to December 31, 2003 if the final allocation of purchase price and final remaining useful lives adopted had been used to record amortization expense for the period from January 10, 2003 to October 4, 2003, primarily due to the final remaining useful lives adopted being shorter than the initial estimates, which was partially offset by the reduction in the amount of the allocation of purchase price allocated to intangible assets other than goodwill.

As a result of the allocation of purchase price to indebtedness, during the period from January 10, 2003 to December 31, 2003, the Company reflected approximately $5,700,000 of lower interest expense as compared to the Company’s historical basis of accounting prior to the Recapitalization.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and all of its wholly-owned continuing subsidiaries after elimination of intercompany accounts and transactions. Certain amounts in the prior years’ Consolidated Financial Statements have been reclassified to conform to the current year presentation.

Accounting Policies and Use of Estimates

The preparation of these Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States involves estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expense during the reporting periods. Certain of the Company’s accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company periodically evaluates the judgments and estimates used for its critical accounting policies to ensure that such judgments and estimates are reasonable for its interim and year-end reporting requirements. These judgments and estimates are based on the Company’s historical experience, current trends and information available from other sources, as appropriate. If different conditions result from those assumptions used in the Company’s judgments, the results could be materially different from the Company’s estimates.

Recognition of Sales and Related Costs, Incentives and Allowances

The Company recognizes sales upon the shipment of its products net of applicable provisions for discounts and allowances. Allowances for cash discounts, volume rebates and other customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages agreed to with the Company’s various customers, which are typically earned by the customer over an annual period. The Company records periodic estimates for these amounts based upon the historical results to date, estimated future results through the end of the contract period and the contractual provisions of the customer agreements. For calendar year customer agreements, the Company is able to adjust its periodic estimates to actual amounts as of December 31 each year based upon the contractual provisions of the customer agreements. For those customers who have agreements that are not on a calendar year cycle, the Company records estimates at December 31 consistent with the above described methodology. Customer returns are recorded on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Company generally estimates customer returns based upon the time lag that historically occurs between the date of the sale and the date of the return while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. The Company also provides for its estimate of warranty, bad debts and shipping costs at the time of sale. Shipping and warranty costs are included in cost of products sold. Bad debt provisions are included in selling, general and administrative expense. The amounts recorded are generally based upon historically derived percentages while also factoring in any new business conditions that might impact the historical analysis such as new product introduction for warranty and bankruptcies of particular customers for bad debts.

Cash, Investments and Marketable Securities

Cash equivalents consist of short-term highly liquid investments with original maturities of three months or less which are readily convertible into cash.

At December 31, 2003 and 2002, the Company did not have any marketable securities available for sale. During the fourth quarter of 2002, all marketable securities available for sale matured and the proceeds were invested in short-term investments.

The Company has classified as restricted in the accompanying consolidated balance sheet certain investments and marketable securities that are not fully available for use in its operations. At December 31, 2003 and 2002, approximately $2,346,000 (of which $1,223,000 is included in current assets) and $79,311,000 (of which $2,808,000 is included in current assets), respectively, of cash, investments and marketable securities have been pledged as collateral or are held in pension trusts (including related party amounts) for insurance, employee benefits and other requirements (see Notes 2 and 8).

Disclosures About Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents-- The carrying amount approximates fair value because of the short maturity of those instruments.

Investments - -- The fair value of investments are based on quoted market prices. The fair value of investments was not materially different from their cost basis at December 31, 2003 or 2002.

Long-Term Debt--At December 31, 2003, the fair value of the Company’s long-term indebtedness was approximately $69,800,000 higher, before unamortized premium ($17,600,000 higher, before original issue discount, at December 31, 2002), than the amount on the Company’s consolidated balance sheet. At December 31, 2003, the carrying value of the Company’s 10% Senior Discount Notes due May 15, 2011 (“Senior Discount Notes”) was approximately $352,916,000 and will continue to accrete interest until November 15, 2007, at which time the carrying value of the obligation will be $515,000,000 (see Note 6).

Inventories

Inventories in the accompanying consolidated balance sheet are valued at the lower of cost or market. At December 31, 2003 and 2002, approximately $91,099,000 and $78,909,000 of total inventories, respectively, were valued on the last-in, first-out method (“LIFO”). Under the first-in, first-out method (“FIFO”) of accounting, such inventories would have been approximately $7,755,000 lower and $840,000 higher at December 31, 2003 and 2002, respectively. All other inventories were valued under the FIFO method. In connection with both LIFO and FIFO inventories, the Company will record provisions, as appropriate, to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potential may cause the actual results to differ from the estimates at the time such inventory is disposed or sold.

Depreciation and Amortization

Depreciation and amortization of property and equipment is provided on a straight-line basis over their estimated useful lives, which are generally as follows:

Buildings and improvements	10-35 years
Machinery and equipment, including leases	3-15 years
Leasehold improvements	term of lease

Expenditures for maintenance and repairs are expensed when incurred. Expenditures for renewals and betterments are capitalized. When assets are sold, or otherwise disposed, the cost and related accumulated depreciation are eliminated and the resulting gain or loss is recognized.

Purchase price allocated to the fair value of inventory is amortized over the estimated period in which the inventory will be sold.

Intangible Assets and Goodwill

In the third quarter of 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets” (“SFAS No. 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets but does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets and, as required by the standard, applied this accounting standard as of January 1, 2001. Adoption of this accounting standard did not result in any material changes in net earnings from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation for all periods presented has been reclassified to conform to the new standard (see Note 10).

Subsequent to June 30, 2001, the Company accounts for acquired goodwill and intangible assets in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”). Prior to July 1, 2001, the Company accounted for acquired goodwill and intangible assets in accordance with APB No. 16, “Business Combinations” (“APB No. 16”). Purchase accounting required by SFAS No. 141 and APB No. 16 involves judgment with respect to the valuation of the acquired assets and liabilities in order to determine the final amount of goodwill. The Company believes that the estimates that it has used to record prior acquisitions were reasonable and in accordance with SFAS No. 141 and APB No. 16 (see Note 3).

On January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). This statement applies to goodwill and intangible assets acquired after June 30, 2001, as well as goodwill and intangible assets previously acquired. Under this statement, goodwill and intangible assets determined to have an indefinite useful life are no longer amortized, instead these assets are evaluated for impairment on an annual basis and whenever events or business conditions warrant. All other intangible assets will continue to be amortized over their remaining estimated useful lives and are evaluated for impairment in accordance with the provisions of SFAS No. 144. The adoption of SFAS No. 142 did not result in any material changes to the Company’s accounting for intangible assets. The Company has evaluated the carrying value of goodwill and determined that no impairment exists and therefore no impairment loss was required to be recorded in the Company’s Consolidated Financial Statements as a result of adopting SFAS No. 142.

In accordance with SFAS No. 144, the Company has evaluated the realizability of non-goodwill long-lived assets, which primarily consist of property, plant and equipment and intangible assets (the “SFAS No. 144 Long-Lived Assets”) based on expectations of non-discounted future cash flows for each subsidiary having a material amount of SFAS No. 144 Long-Lived Assets. If the sum of the expected non-discounted future cash flows is less than the carrying amount of all assets including SFAS No. 144 Long-Lived Assets, the Company would recognize an impairment loss. The Company’s cash flow estimates are based upon historical cash flows, as well as future projected cash flows received from subsidiary management in connection with the annual Company wide planning process, and include a terminal valuation for the applicable subsidiary based upon a multiple of earnings before interest expense, net, depreciation and amortization expense and income taxes (“EBITDA”). The Company estimates the EBITDA multiple by reviewing comparable company information and other industry data. The Company believes that its procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with current market conditions. Based on its most recent analysis, the Company believes that no material impairment of SFAS No. 144 Long-Lived Assets exists at December 31, 2003. Prior to the adoption of SFAS No. 144 and SFAS No. 142, the Company accounted for the impairment of long-lived assets, including goodwill, in accordance with the then existing accounting standards and did not result in any impairment losses in prior years.

Intangible assets consist principally of patents, trademarks, customer relationships and non-compete agreements and are amortized on a straight-line basis over a weighted average estimated useful life of approximately 8.5 years. Amortization of intangible assets charged to operations amounted to approximately $9,055,000, $67,000, $2,988,000 and $3,237,000 for period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003, and the years ended December 31, 2002 and 2001, respectively. The table that follows presents the major components of intangible assets as of December 31, 2003 and 2002:

								Weighted
								Average
	Gross Carrying		Accumulated			Net Intangible		Remaining
	Amount		Amortization			Assets		Useful Lives
	(Amounts in thousands except for Useful Lives)
December 31, 2003:
Trademarks	$	51,396	$	(3,257	)	$	48,139		15	.0
Patents		16,908		(680	)		16,228		16	.1
Customer relationships		29,965		(4,883	)		25,082		4	.6
Other		5,498		(302	)		5,196		4	.7
	$	103,767	$	(9,122	)	$	94,645		8	.5
December 31, 2002:
Trademarks	$	43,613	$	(8,365	)	$	35,248
Patents		8,331		(1,658	)		6,673
Other		12,342		(11,058	)		1,284
	$	64,286	$	(21,081	)	$	43,205

As of December 31, 2003, the estimated annual intangible asset amortization expense for each of the succeeding five years aggregates approximately $54,100,000 as follows:

Year Ended		Annual Amortization
December 31,		Expense
(Amounts in thousands)
(Unaudited)
	2004	$	13,200
	2005		13,200
	2006		12,000
	2007		10,200
	2008		5,500

The Company has classified as goodwill the cost in excess of fair value of the net assets (including tax attributes) of companies acquired in purchase transactions. Prior to January 1, 2002, goodwill was amortized on a straight-line basis over 40 years through December 31, 2001. Goodwill amortization related to continuing operations and discontinued operations was approximately $8,718,000 and $7,676,000, respectively for 2001, as determined under the then applicable accounting principles generally accepted in the United States. See Note 11 for a rollforward of the activity in goodwill by operating segment for the years ended December 31, 2003 and 2002.

The table that follows presents earnings from continuing operations and net earnings for the year ended December 31, 2001, as adjusted to reflect the elimination of goodwill amortization expense and the related income tax impact:

	For the Year Ended
	December 31, 2001
	Earnings from
	Continuing
	Operations			Net Earnings
	(Amounts in thousands)
	(Unaudited)
As reported in the accompanying
consolidated statement of operations	$	32,800		$	8,000
Eliminate goodwill amortization expense		8,718			16,394
Eliminate related tax impact		(118	)		(294	)
As adjusted	$	41,400		$	24,100

Pensions and Post Retirement Health Benefits

The Company accounts for pensions, including supplemental executive retirement plans, and post retirement health benefit liabilities under SFAS No. 87 “Employers' Accounting for Pensions” (“SFAS No. 87”) and SFAS No. 106, “Employers' Accounting for Post Retirement Benefits Other Than Pensions” (“SFAS No. 106”). SFAS No. 87 and SFAS No. 106 require the estimating of such items as the long-term average return on plan assets, the discount rate, the rate of compensation increase and the assumed medical cost inflation rate. Such estimates require a significant amount of judgment.

Insurance Liabilities

The Company records insurance liabilities and related expenses for health, workers compensation, product and general liability losses and other insurance reserves and expenses in accordance with either the contractual terms of its policies or, if self-insured, the total liabilities that are estimable and probable as of the reporting date. Insurance liabilities are recorded as current liabilities to the extent they are expected to be paid in the succeeding year with the remaining requirements classified as long-term liabilities. The accounting for self-insured plans requires that significant judgments and estimates be made both with respect to the future liabilities to be paid for known claims and incurred but not reported claims as of the reporting date. The Company considers historical trends when determining the appropriate insurance reserves to record in the consolidated balance sheet for a substantial portion of its workers compensation and general and product liability losses. In certain cases where partial insurance coverage exists, the Company must estimate the portion of the liability that will be covered by existing insurance policies to arrive at the net expected liability to the Company.

Income Taxes

The Company accounts for income taxes using the liability method in accordance with SFAS No. 109 “Accounting for Income Taxes” (“SFAS No. 109”), which requires that the deferred tax consequences of temporary differences between the amounts recorded in the Company’s Consolidated Financial Statements and the amounts included in the Company’s federal and state income tax returns be recognized in the balance sheet. As the Company generally does not file their income tax returns until well after the closing process for the December 31 financial statements is complete, the amounts recorded at December 31 reflect estimates of what the final amounts will be when the actual income tax returns are filed for that fiscal year. In addition, estimates are often required with respect to, among other things, the appropriate state income tax rates to use in the various states that the Company and its subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realizable in the future. SFAS No. 109 requires balance sheet classification of current and long-term deferred income tax assets and liabilities based upon the classification of the underlying asset or liability that gives rise to a temporary difference (see Note 5).

Interest Allocation to Dispositions

The Company allocates interest to dispositions that qualify as a discontinued operation for debt instruments which, are entered into specifically and solely with the entity disposed of and from debt which is settled with proceeds received from the disposition.

Stock-Based Compensation of Employees, Officers and Directors

In the fourth quarter of 2003, the Company adopted the fair value method of accounting for stock-based employee compensation in accordance with, SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and recorded pre-tax charges of approximately $1,400,000 in selling, general and administrative expense and $100,000 in earnings from discontinued operations in the accompanying consolidated statement of operations for the period January 10, 2003 to December 31, 2003 related to stock options issued during the period. No stock options were issued during the period from January 1, 2003 to January 9, 2003. The Company had previously accounted for stock-based employee compensation in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), including related interpretations, and followed the disclosure only provisions of SFAS No. 123. The Company adopted SFAS No. 123 using the prospective method of transition in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”). The prospective method under SFAS No. 148 required the Company to adopt SFAS No. 123 effective January 1, 2003 for all employee awards granted, modified, or settled after January 1, 2003. Of the $1,400,000 total charge, approximately $700,000, $200,000, $300,000 and $200,000 related to the period from January 10, 2003 to April 5, 2003 and the quarters ended July 5, 2003, October 4, 2003 and December 31, 2003, respectively. In addition, in the fourth quarter of 2003, the Company recorded a $600,000 compensation based charge related to the sale of certain capital stock.

During the period from January 1, 2003 to January 9, 2003, the Company had previously recorded a pre-tax stock-based employee compensation charge of approximately $4,710,000 (approximately $3,000,000 net of tax) related to the cash settlement and cancellation of outstanding stock options that were tendered in connection with the Recapitalization in accordance with the provisions of APB 25. In connection with the adoption of SFAS No. 123, the compensation charge, net of tax, of approximately $3,000,000 was reclassified in accordance with the provisions of SFAS No. 123 to be reflected as an equity adjustment to additional paid-in capital in the accompanying consolidated statement of stockholders’ investment for the period from January 1, 2003 to January 9, 2003.

The following tables summarize the Company’s common and special common stock option transactions for stock options issued prior to the Recapitalization and Class A stock options issued subsequent to the Recapitalization, including options held by the Management Investors that were exchanged in connection with the Recapitalization. Options issued prior to the Holdings Reorganization on November 20, 2002 for the common and special common stock of Nortek were converted to options to purchase the common and special common stock of Holdings in connection with the Holdings Reorganization (see Note 7).

Stock Options Issued:

							Weighted
							Average
	Number			Option Price			Exercise
	Of Shares			Per Share			Price
Options outstanding at December 31, 2000		2,040,663		$	8.75-	$33.06	$	23	.39
Granted		33,100			20.25-	27.65		24	.30
Exercised		(65,954	)		8.75-	22.94		21	.45
Canceled		(24,000	)		21.63-	27.65		23	.07
Options outstanding at December 31, 2001		1,983,809		$	8.75-	$33.06	$	23	.47
Granted		133,300			26.33-	44.16		26	.44
Exercised		(28,963	)		20.44-	22.94		21	.79
Canceled		(2,600	)		21.63-	22.94		21	.93
Options outstanding at December 31, 2002		2,085,546		$	8.75-	$44.16	$	23	.69
Exercised and tendered in connection with the
Recapitalization		(217,226	)		20.25-	44.16		24	.81
Options canceled and exchanged for new Class A stock options
in connection with the Recapitalization on January 9, 2003		1,868,320		$	8.75-	$33.06	$	23	.56
Granted		443,266			46.00-	46.00		46	.00
Canceled		(2,333	)		46.00-	46.00		46	.00
Options outstanding at December 31, 2003		2,309,253		$	10.50-	$11.00	$	10	.62

As of December 31, 2002 and 2001, 1,948,525 and 1,854,411, respectively, of options to acquire shares of common and special common stock were exercisable.

As defined by the stock option plans, all options became fully vested upon the completion of the Recapitalization on January 9, 2003. Options to purchase 217,226 of common stock of the Company were exercised and tendered in connection with the Recapitalization for a cash settlement of approximately $4,700,000. Options to purchase 1,868,320 shares of common stock and special common stock of the Company, that were rolled-over by the Management Investors, were exchanged for fully vested stock options to purchase an equal number of shares of Class A Common Stock of the Company at the same price per share (the “Rollover Options”). Such rolled-over options will expire on January 9, 2013 (see Note 2).

In connection with a dividend of approximately $298,474,000 paid to the Company’s shareholders in the fourth quarter of 2003, option holders of the Rollover Options received a cash distribution of approximately $41,600,000 (see Note 7), which was treated as a charge to additional paid-in capital in the accompanying consolidated statement of stockholders’ investment in accordance with the provisions of SFAS No. 123. The distribution to each individual option holder was equal to the number of shares held multiplied by the lesser of (i) $35 per share or (ii) $46 per share minus the amount per share the exercise price was reduced. In conjunction with this shareholder distribution, the Company adjusted the exercise price of all of the Rollover Options to equal $10.50 per share and all of the other Class A stock options to equal $11.00 per share, which has been reflected in the above table.

The Rollover Options are fully vested and the other Class A common stock options vest quarterly in equal installments over three years. As of December 31, 2003, 1,977,026 of Class A common stock options were exercisable. The weighted average remaining contractual life for all Class A stock options is approximately 9 years. As of December 31, 2003, there was approximately $2,500,000 of remaining unamortized stock-based employee compensation with respect to the Class A stock options, which will be amortized on a pro-rata basis over the remaining vesting period for the respective options.

In 2003, the Company issued 846,534 of Class B common stock options of which 841,867 remain outstanding at December 31, 2003 as 4,667 of Class B common stock options were cancelled during the year. The Class B stock options only vest in the event that certain performance-based criteria, as defined, are met. The weighted average remaining contractual life for all Class B stock options is approximately 9 years. No stock–based employee compensation charges have been recognized for the Class B common stock options under SFAS No. 123, as it is uncertain when, if ever, these options will vest. As of December 31, 2003, there was approximately $6,400,000 of unamortized stock-based employee compensation with respect to the Class B stock options, which will be amortized in the event that it becomes probable that the Class B options or any portion thereof will vest.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options at the date of grant. The following table summarizes the weighted-average assumptions for the periods presented. The weighted-average assumptions for options granted subsequent to January 1, 2003 were used to calculate the stock-based employee compensation charge of approximately $1,400,000 for the period from January 10, 2003 to December 31, 2003 in connection with the Company’s adoption of SFAS No. 123. As Holdings was no longer a public company during this period, the weighted-average assumptions reflect the use of the minimum value calculations permitted under SFAS No. 123 for non-public companies, whereby a volatility assumption is excluded from the calculation. The weighted-average assumptions for options granted prior to January 1, 2003 included in the pro forma information for the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001 presented below include a volatility assumption as Holdings and, prior to the Holdings Reorganization, Nortek’s common stock was publicly traded as of the end of these periods. The weighted average assumptions related to earnings (loss) from continuing operations exclude options issued to employees of Ply Gem, which has been treated as a discontinued operation for all periods presented.

	For the Periods
	Post-
	Recapitalization	Pre-Recapitalization
	Jan. 10, 2003 -	Jan. 1, 2003 -	Jan. 1, 2002 -	Jan. 1, 2001 -
	Dec. 31, 2003	Jan. 9, 2003	Dec. 31, 2002	Dec. 31, 2001
Assumptions for Earnings (Loss) from
Continuing Operations:
Risk-free interest rate	Between 2.33%		Between 4.29%	Between 4.33%
	and 2.85%	N/A	and 4.54%	and 4.87%
Expected life	5 years	N/A	5 years	5 years
Expected volatility	N/A	N/A	38%	40%
Expected dividend yield	0%	N/A	0%	0%
Weighted average fair value at grant
date of options granted	$8.03	N/A	$10.68	$8.54
Assumptions for Net Earnings (Loss):
Risk-free interest rate	Between 2.33%		Between 4.29%	Between 4.33%
	and 2.85%	N/A	and 4.54%	and 4.87%
Expected life	5 years	N/A	5 years	5 years
Expected volatility	N/A	N/A	38%	40%
Expected dividend yield	0%	N/A	0%	0%
Weighted average fair value at grant
date of options granted	$7.93	N/A	$10.67	$8.98

No pro-forma information for the period from January 10, 2003 to December 31, 2003 is required under SFAS No. 148 as all options issued prior to January 1, 2003 were fully vested as of January 9, 2003 and the consolidated statement of operations for the period includes the actual stock-based employee compensation for options issued subsequent to January 1, 2003.

Pro forma information for the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001 has been determined as if the Company had been accounting for its employee stock options under the fair value method of SFAS No. 123 for all options issued prior to January 1, 2003 and subsequent to the initial effective date of SFAS No. 123. The pro forma stock-based employee compensation charge for the period from January 1, 2003 to January 9, 2003 reflects the pro forma impact of the accelerated vesting associated with the immediate vesting of all unvested options in connection with the Recapitalization. No historical stock-based employee compensation is reflected for the period from January 1, 2003 to January 9, 2003 as no options were issued. No historical stock-based employee compensation is reflected in the years ended December 31, 2002 and 2001, as all employee options granted under those plans had an intrinsic value of zero on the date of grant. The pro forma amounts with respect to earnings (loss) from continuing operations exclude the pro forma impact of options issued to employees of Ply Gem, which has been treated as a discontinued operation for all periods presented.

	For the Periods
	Pre-Recapitalization
	Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Earnings (loss) from continuing
operations, as reported	$	(60,900	)	$	43,600		$	32,800
Less: Total stock-based employee compensation
expense determined under the fair value method
for awards issued prior to January 1, 2003,
net of related tax effects		(500	)		(1,000	)		(700	)
Pro forma (loss) earnings from continuing
operations	$	(61,400	)	$	42,600		$	32,100
Net earnings (loss), as reported	$	(61,900	)	$	62,500		$	8,000
Less: Total stock-based employee compensation
expense determined under the fair value method
for awards issued prior to January 1, 2003,
net of related tax effects		(600	)		(1,200	)		(1,000	)
Pro forma net (loss) earnings	$	(62,500	)	$	61,300		$	7,000

Commitments and Contingencies

The Company provides accruals for all direct costs associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. Costs accrued are estimated based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and outcomes (see Note 9).

Comprehensive Income (Loss)

Comprehensive income (loss) includes net earnings and unrealized gains and losses from currency translation, marketable securities available for sale and minimum pension liability adjustments, net of tax attributes. The components of the Company’s comprehensive income (loss) and the effect on earnings for the periods presented are detailed in the accompanying consolidated statement of stockholders’ investment.

The balances of each classification, net of tax attributes, within accumulated other comprehensive loss as of the periods presented are as follows:

				Unrealized						Total
				Gains			Minimum			Accumulated
	Foreign			(Losses) on			Pension			Other
	Currency			Marketable			Liability			Comprehensive
	Translation			Securities			Adjustment			Loss
	(Amounts in thousands)
Balance December 31, 2000	$	(12,051	)	$	19		$	(7,335	)	$	(19,367	)
Change during the period		(4,444	)		(91	)		(15,823	)		(20,358	)
Balance December 31, 2001		(16,495	)		(72	)		(23,158	)		(39,725	)
Change during the period		5,250			(306	)		(22,701	)		(17,757	)
Balance December 31, 2002		(11,245	)		(378	)		(45,859	)		(57,482	)
Change during the period		1,096			--			18,398			19,494
Balance January 9, 2003		(10,149	)		(378	)		(27,461	)		(37,988	)
Effect of the Recapitalization		10,149			378			27,461			37,988
Change during the period		19,501			--			(64	)		19,437
Balance December 31, 2003	$	19,501		$	--		$	(64	)	$	19,437

Foreign Currency Translation

The financial statements of subsidiaries outside the United States are generally measured using the foreign subsidiaries’ local currency as the functional currency. The Company translates the assets and liabilities of its foreign subsidiaries at the exchange rates in effect at year-end. Net sales and expenses are translated using average exchange rates in effect during the year. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders’ investment in the accompanying consolidated balance sheet. Transaction gains and losses are recorded in selling, general and administrative expense and have not been material during any of the periods from January 10, 2003 to December 31, 2003 and January 1, 2003 to January 9, 2003 and during any of the years ending December 31, 2002 and 2001.

Derivative Instruments and Hedging Activities

The Company accounts for derivative instruments and hedging activities in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, amended in 1999 by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of SFAS No. 133 – Amendment of SFAS No. 133” and amended in June 2000 by SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities – an amendment to SFAS No. 133” (combined “SFAS No. 133”). SFAS No. 133 requires that every derivative instrument (including certain derivative instruments embedded in other contracts) issued, acquired, or substantially modified after December 31, 1997 be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

Other New Accounting Pronouncements

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Company adopted SFAS No. 143 on January 1, 2003. Adoption of this accounting standard was not material to the Company’s consolidated financial statements.

SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (“SFAS No. 145”), was issued in April 2002 and addresses the reporting of gains and losses resulting from the extinguishment of debt, accounting for sale-leaseback transactions and rescinds or amends other existing authoritative pronouncements. SFAS No. 145 requires that any gain or loss on extinguishment of debt that does not meet the criteria of APB 30 for classification as an extraordinary item shall not be classified as extraordinary and shall be included in earnings from continuing operations. The Company adopted SFAS No. 145 on January 1, 2003. Adoption of this accounting standard was not material to the results presented in the consolidated financial statements but did require reclassification of the Company’s $5,500,000 pre tax extraordinary loss recorded in 2001 to earnings from continuing operations.

Effective January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”), which addresses the accounting and reporting for costs associated with exit or disposal activities, nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”) and substantially nullifies EITF Issue No. 88-10, “Costs Associated with Lease Modification or Termination” (“EITF 88-10”). SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material effect on the Company’s consolidated financial statements (see Note 13).

In November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). Along with new disclosure requirements, FIN 45 requires guarantors to recognize, at the inception of certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. This differs from the prior practice to record a liability only when a loss is probable and reasonably estimable. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company adopted the disclosure provisions of FIN 45 as of December 31, 2002 and adopted the entire interpretation on January 1, 2003. The adoption of FIN 45 on January 1, 2003 was not material to the Company’s consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation requirements on FIN 46 apply to the Company immediately for all variable interest entities created after December 31, 2003 and begin on January 1, 2005 for all variable interest entities created prior to January 1, 2004. The adoption of FIN 46 is not expected to have an impact on the Company’s consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”), which clarifies the financial accounting and reporting proscribed by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”) for derivative instruments, including certain derivative instruments embedded in other contracts. Certain provisions of SFAS No. 149 related to implementation issues of SFAS No. 133 are already effective and other provisions related to forward purchases or sales are effective for both existing contracts and new contracts entered into after June 30, 2003. The Company has previously adopted SFAS No. 133, including the implementation issues addressed in SFAS No. 149, and the adoption of the new provisions of SFAS No. 149 on July 1, 2003 did not have an impact on the Company’s Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS No. 150”), which addresses the accounting and reporting for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003 and for all existing financial instruments beginning in the first interim period after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities, which are subject to the provisions for the first fiscal period beginning after December 15, 2003. The Company adopted SFAS No. 150 on July 1, 2003. Adoption of this accounting standard did not have an impact on the Company’s consolidated financial statements.

In December 2003, the FASB issued the revised SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits” (“SFAS No. 132”) to require additional disclosures to those in the original SFAS No. 132 about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The revised SFAS No. 132 provides only for additional disclosures and does not change the accounting for pension and postretirement plans. The Company has previously adopted SFAS No. 132 and has provided the required new disclosures of the revised SFAS No. 132 in Note 8.

2. RECAPITALIZATION TRANSACTION

On January 8, 2003, at a special meeting of stockholders of the Company, the stockholders approved the following amendments to the certificate of incorporation (the “Stockholder Approval”), which were required in order to complete the Recapitalization:

• A new class of common stock, Class A Common Stock, par value $1.00 per share, of Nortek Holdings was created consisting of 19,000,000 authorized shares.

• At the time that the amendment to the certificate of incorporation became effective, each share of common stock, par value $1.00 per share and special common stock, par value $1.00 per share outstanding, was reclassified into one share of a new class of mandatorily redeemable common stock, Class B Common Stock, par value $1.00 per share, of Nortek Holdings consisting of 14,000,000 authorized shares.

• Class B Common Stock was required to be immediately redeemed for $46 per share in cash upon completion of the Recapitalization.

• The authorized number of shares of Series B Preference Stock, par value $1.00 per share, was increased to 19,000,000 authorized shares.

Following the Stockholder Approval, common stock and special common stock held by the Management Investors were exchanged for an equal number of newly created shares of Series B Preference Stock. In addition, certain options to purchase shares of common and special common stock held by the Management Investors were exchanged for fully vested options to purchase an equal number of shares of the newly created Class A Common Stock. The remaining outstanding options, including some held by Management Investors, were cancelled in exchange for the right to receive a single lump sum cash payment equal to the product of the number of shares of common stock or special common stock underlying the option and the amount by which the redemption price of $46 per share exceeded the per share exercise price of the option.

On January 9, 2003, in connection with the Recapitalization, Kelso purchased newly issued shares of Series B Preference Stock for approximately $355,923,000 and purchased shares of Series B Preference Stock held by the Management Investors for approximately $18,077,000. Newly issued Class A Common Stock of approximately $3,262,000 was purchased by designated third parties. Shares of Series B Preference Stock held by the Management Investors that were not purchased by Kelso were converted into an equal number of shares of Class A Common Stock. In addition, Nortek declared and distributed to the Company a dividend of approximately $120,000,000 and distributed approximately $27,900,000 for reimbursement of fees and expenses of Kelso, which were paid out of the Company’s unrestricted cash and cash equivalents on hand and were permissible under the most restrictive covenants with respect to the indentures of Nortek’s 8 7/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2007, 9 1/8% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2011 (the “Existing Notes”).

The Company used the proceeds from the purchase by Kelso and designated third parties of the newly issued Series B Preference Stock and Class A Common Stock and the dividend from Nortek to redeem the Company’s Class B Common Stock and to cash out options to purchase common and special common stock totaling approximately $479,185,000. Kelso also purchased from certain Management Investors 392,978 shares of Series B Preference Stock for approximately $18,077,000.

In connection with the Recapitalization, K Holdings received a bridge financing letter from a lender for a senior unsecured term loan facility not to exceed $955,000,000 (the “Bridge Facility”). The Bridge Facility was intended to be used to fund, if necessary, any change in control offers Nortek might have made in connection with the Recapitalization. Nortek did not use this Bridge Facility because the structure of the Recapitalization did not require Nortek to make any change of control offers. The commitment letter expired on January 31, 2003. As a result, the Company’s consolidated interest expense for the period from January 10, 2003 to December 31, 2003 includes approximately $4,100,000 of interest expense from the amortization of the Bridge Facility commitment fees and related expenses.

In January 2003, the Company filed for the deregistration of its shares of common and special common stock under the Securities Exchange Act of 1934. The Company’s shares of common and special common stock are no longer publicly traded. The Company will continue to file periodic reports with the SEC as required by the respective indentures of Nortek’s Existing Notes.

Under the terms of one of Nortek’s supplemental executive retirement plans (“SERP”), Nortek was required to make one-time cash payments to participants in such plan in satisfaction of obligations under that plan when the Recapitalization was completed. Accordingly, Nortek made a distribution of approximately $75,100,000 to the participants in the plan from funds included in the Company’s Consolidated Balance Sheet at December 31, 2002 and classified in long-term assets in restricted investments and marketable securities held by pension trusts and transferred to one of the participants a life insurance policy with approximately $10,300,000 of cash surrender value to satisfy a portion of the SERP’s obligation to such participant’s obligation upon the Stockholder Approval. The termination and settlement of the obligation of this SERP resulted in a curtailment loss on January 9, 2003 (see Notes 8 and 14).

The total amount of transaction fees and related costs incurred by Nortek and Kelso associated with the Recapitalization was approximately $47,300,000, including the $27,900,000 noted above, of which approximately $10,500,000 of advisory fees and expenses was paid to Kelso & Company L.P. A portion of these fees and expenses was recorded by Nortek in selling, general and administrative expense, since they were obligations of Nortek prior to the Recapitalization. Approximately $12,800,000 was recorded as expense on January 9, 2003 since these fees and expenses became obligations of Nortek upon consummation of the Recapitalization (see Note 14). Approximately $6,600,000 of expense was previously recorded by Nortek in the year ended December 31, 2002.

The following reflects the unaudited pro forma effect of the Recapitalization on continuing operations for the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002:

	Pro Forma			Pro Forma
	For the Period			For the
	Jan. 1, 2003 -			Year Ended
	Jan. 9, 2003			Dec. 31, 2002
(Amounts in thousands)
Net sales	$	25,000		$	1,384,100
Operating earnings	$	300		$	123,100
Net earnings (loss)	$	(3,400	)	$	46,100

The unaudited pro forma condensed consolidated summary of operations for the period from January 1, 2003 to January 9, 2003 presented above has been prepared by adjusting historical amounts for the period to give effect to the Recapitalization as if it had occurred on January 1, 2003. The pro forma adjustments to the historical results of operations for the period from January 1, 2003 to January 9, 2003 include the pro forma impact of the Pushdown Accounting for such period and the elimination of approximately $83,000,000 of expenses and charges of the Recapitalization recorded during such period as the unaudited pro forma condensed consolidated summary of operations assumes that the Recapitalization occurred on January 1, 2003 (see Note 1). The unaudited pro forma condensed consolidated summary of operations for the year ended December 31, 2002 presented above has been prepared by adjusting historical amounts for the year to give effect to the Recapitalization as if it occurred January 1, 2002.

3. ACQUISITIONS

Acquisitions are accounted for as purchases and, accordingly, have been included in the Company's consolidated results of operations since the acquisition date. Purchase price allocations are subject to refinement until all pertinent information regarding the acquisitions is obtained (see Note 2).

On January 17, 2003, the Company acquired Elan Home Systems L.L.C. (“Elan”), a manufacturer and seller of consumer electronic equipment that controls whole-house entertainment, communication and automation systems for new residential construction and retrofit markets. For the year ended December 31, 2002, Elan reported net sales of approximately $21,300,000 (unaudited).

On July 11, 2003, the Company acquired SpeakerCraft, Inc. (“SPC”), a leading designer and supplier of architectural loudspeakers and audio products used in residential custom applications. For the year ended December 31, 2002, SPC reported net sales of approximately $34,800,000 (unaudited).

Pro forma results related to the acquisitions of Elan and SPC have not been presented as the effect is not material. Operating earnings and depreciation and amortization expense for these acquisitions from January 1, 2003 to the date of their acquisition were approximately $4,600,000 (unaudited) and $200,000 (unaudited), respectively.

On June 15, 2001, the Company acquired Senior Air Systems ("SAS") from a wholly-owned subsidiary of Senior Plc. The acquired company is located in Stoke-on-Trent, England and manufactures and sells air conditioning equipment.

4. CASH FLOWS

Interest paid was $91,991,000, $95,352,000 and $102,406,000 for the period from January 10, 2003 to December 31, 2003 and the years ended December 31, 2002 and 2001, respectively. There was no interest paid for the period from January 1, 2003 to January 9, 2003.

The fair value of the assets of the businesses acquired was approximately $95,000,000 and $1,950,000 in the period from January 10, 2003 to December 31, 2003 and the year ended December 31, 2001, respectively. Liabilities assumed or created from businesses acquired were approximately $17,184,000 and $50,000 in the period from January 10, 2003 to December 31, 2003 and the year ended December 31, 2001, respectively. Net cash paid for acquisitions was approximately $76,000,000 and $1,900,000 in the period from January 10, 2003 to December 31, 2003 and the year ended December 31, 2001, respectively. The Company had no acquisitions during the period from January 1, 2003 to January 9, 2003 or in 2002.

Significant non-cash financing and investing activities excluded from the accompanying consolidated statement of cash flows include capitalized lease additions of approximately $7,589,000 in the period from January 10, 2003 to December 31, 2003 and a decline of approximately $306,000 and $91,000 in the fair market value of marketable securities available for sale for the years ended December 31, 2002 and 2001, respectively. There were no declines in the fair market value of marketable securities available for sale for the periods from January 10, 2003 to December 31, 2003 and from January 1, 2003 to January 9, 2003.

5. INCOME TAXES

The following is a summary of the components of earnings (loss) from continuing operations before provision (benefit) for income taxes:

	For the Periods
	Post-
	Recapitalization		Pre-Recapitalization
	Jan. 10, 2003 -		Jan. 1, 2003 -			Jan. 1, 2002 -		Jan. 1, 2001 -
	Dec. 31, 2003		Jan. 9, 2003			Dec. 31, 2002		Dec. 31, 2001
	(Amounts in thousands)
Domestic	$	87,900	$	(82,300	)	$	54,250	$	48,300
Foreign		15,400		(400	)		18,850		12,300
	$	103,300	$	(82,700	)	$	73,100	$	60,600

The following is a summary of the provision (benefit) for income taxes from continuing operations included in the accompanying consolidated statement of operations:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Federal income taxes
Current	$	34,100		$	(27,800	)	$	21,500		$	23,000
Deferred		(4,800	)		5,900			(200	)		(2,800	)
		29,300			(21,900	)		21,300			20,200
Foreign		8,700			100			6,800			6,800
State		3,300			--			1,400			800
	$	41,300		$	(21,800	)	$	29,500		$	27,800

Income tax payments, net of refunds, were approximately $11,690,000, $281,000, $49,879,000 and $4,500,000 in the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for the years ended December 31, 2002 and 2001, respectively.

Income tax benefits of approximately $14,600,000 related to a cash distribution of approximately $41,600,000 to option holders of Rollover Options in the period from January 10, 2003 to December 31, 2003 and were reflected as a reduction of goodwill. Income tax benefits of approximately $1,710,000, related to the settlement of certain stock options, were reflected as an equity adjustment to additional paid-in-capital in the period from January 1, 2003 to January 9, 2003.

The table that follows reconciles the federal statutory income tax rate of continuing operations to the effective tax rate of such earnings of approximately 40.0%, 26.4%, 40.4% and 45.9% in the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for the years ended December 31, 2002 and 2001, respectively.

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -		Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002		Dec. 31, 2001
	(Amounts in thousands)
Income tax provision (benefit) from continuing
operations at the federal statutory rate	$	36,155		$	(28,945	)	$	25,585	$	21,210
Net change from statutory rate:
Amortization of goodwill not deductible for income
tax purposes		--			--			--		2,991
State income tax provision, net of federal income
tax effect		2,145			--			910		520
Non-deductible expenses, net		(311	)		4,888			2,113		1,069
Tax effect resulting from foreign activities		3,286			242			545		1,256
Other, net		25			2,015			347		754
	$	41,300		$	(21,800	)	$	29,500	$	27,800

Effective tax rate %:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
Income tax provision (benefit) from continuing
operations at the federal statutory rate		35	.0%		(35	.0)%		35	.0%		35	.0%
Net change from statutory rate:
Amortization of goodwill not deductible for income tax
purposes		--			--			--			4	.9
State income tax provision, net of federal income tax
effect		2	.1		--			1	.2		0	.9
Non-deductible expenses, net		(0	.3)		5	.9		2	.9		1	.8
Tax effect resulting from foreign activities		3	.2		0	.3		0	.7		2	.1
Other, net		--			2	.4		0	.6		1	.2
		40	.0%		(26	.4)%		40	.4%		45	.9%

The tax effect of temporary differences which give rise to significant portions of deferred income tax assets and liabilities for continuing operations as of December 31, 2003 and December 31, 2002 are as follows:

	December 31,
	2003			2002
	(Amounts in thousands)
Prepaid Income Tax Assets (classified current)
Arising From:
Accounts receivable	$	1,616		$	1,738
Inventories		(1,709	)		400
Insurance reserves		6,525			6,430
Warranty accruals		4,239			4,287
Other reserves and assets, net		7,155			3,109
	$	17,826		$	15,964
Deferred Income Tax Assets (Liabilities)
(classified non-current)
Arising From:
Property and equipment, net	$	(33,591	)	$	(22,544	)
Intangible assets, net		(32,127	)		(13,890	)
Pension and other benefit accruals		18,312			40,046
Insurance reserves		6,073			4,415
Warranty accruals		5,006			4,148
Capital loss carryforward / net loss carryforward		3,174			3,549
Valuation allowances		(5,411	)		(2,904	)
Deferred debt expense / debt premium		11,822			--
Other reserves and assets, net		5,281			(2,938	)
	$	(21,461	)	$	9,882

The Company has established valuation allowances related to certain reserves and foreign net operating loss carry-forwards. The Company has not provided United States income taxes or foreign withholding taxes on un-remitted foreign earnings, with the exception of its Hong Kong subsidiary, as they are considered permanently invested. In the fourth quarter of 2002, cumulative earnings of the Company’s Hong Kong subsidiary were permanently invested which resulted in a reduction in the tax provision of approximately $2,000,000 for previously provided United States income taxes no longer required. In addition, the Company has approximately $8,500,000 of foreign net operating loss carry-forwards that if utilized would offset future foreign tax payments.

Included in the valuation allowances of $5,411,000 at December 31, 2003 are valuation allowances of approximately $3,963,000 which will reduce goodwill in the future should the tax assets they relate to be realized, as these tax assets existed at the date of the Recapitalization.

6. NOTES, MORTGAGE NOTES AND OBLIGATIONS PAYABLE

Short-term bank obligations for continuing operations at December 31, 2003 and 2002 consist of the following:

	December 31,
	2003		2002
	(Amounts in thousands)
Secured lines of credit and bank advances of the
Company's European subsidiaries	$	8,120	$	3,338

These short-term bank obligations are secured by approximately $34,165,000 of accounts receivable, inventory and other assets, and have a weighted average interest rate of approximately 2.52% at December 31, 2003.

Notes, mortgage notes and obligations payable for continuing operations, included in the accompanying consolidated balance sheet at December 31, 2003 and 2002, consist of the following:

	December 31,
	2003		2002
	(Amounts in thousands)
8 7/8% Senior Notes due 2008 ("8 7/8% Notes"), including unamortized
premium of $2,698,000 and net of original issue discount of $501,000	$	212,698	$	209,499
9 1/4% Senior Notes due 2007 ("9 1/4% Notes"), including unamortized
premium of $3,136,000 and net of original issue discount of $541,000		178,136		174,459
9 1/8% Senior Notes due 2007 ("9 1/8% Notes"), including unamortized
premium of $4,456,000 and net of original issue discount of $1,450,000		314,456		308,550
9 7/8% Senior Subordinated Notes due 2011 ("9 7/8% Notes"), including
unamortized premium of $577,000 and net of original issue discount of $2,461,000		250,577		247,539
10% Senior Discount Notes due 2011 ("Senior Discount Notes"),
net of unamortized discount of $162,084,000		352,916		--
Senior Secured Credit Facility		--		--
Mortgage notes payable		1,647		2,122
Other		21,425		13,885
		1,331,855		956,054
Less amounts included in current liabilities		7,229		2,208
	$	1,324,626	$	953,846

On November 24, 2003, the Company completed the sale of $515,000,000 aggregate principal amount at maturity ($349,400,000 gross proceeds) of its 10% Senior Discount Notes due May 15, 2011 (“Senior Discount Notes”). The Notes, which are structurally subordinate to all debt and liabilities of the Company’s subsidiaries, were issued and sold in a private Rule 144A offering to institutional investors. The net proceeds of the offering were used to pay a dividend of approximately $298,474,000 to holders of the Company’s capital stock and approximately $41,000,000 of these proceeds were used by the Company to purchase additional capital stock of Nortek. Nortek used these proceeds to fund the majority of a cash distribution of approximately $41,600,000 to option holders of the Rollover Options in the fourth quarter of 2003 (see Note 1). The accreted value of the 10% Senior Discount Notes will increase from the date of issuance at a rate of 10% per annum compounded semi-annually such that the accreted value will equal the principal amount of $515,000,000 on November 15, 2007. No cash interest will accrue on the 10% Senior Discount Notes prior to November 15, 2007 and, thereafter, cash interest will accrue at 10% per annum payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Discount Notes are unsecured obligations of the Company, which mature on May 15, 2011, and may be redeemed in whole or in part at the redemption prices as defined in the indenture governing the Senior Discount Notes (the “Indenture”). The Indenture contains covenants that limit the Company’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Senior Discount Notes require the Company to register notes having substantially identical terms (the “Holdings Exchange Notes”) with the SEC as part of an offer to exchange freely tradable Holdings Exchange Notes for the Senior Discount Notes (the “Holdings Exchange”). In the event the Company does not complete the Holdings Exchange in accordance with the timing requirements outlined in the Indenture, the Company may be required to pay a higher interest rate. The Company expects to complete the Holdings Exchange within the required time period. Under certain limited circumstances, Nortek may be required in the future to guarantee the Senior Discount Notes on a senior subordinated basis. This requirement will not apply if the terms of any of Nortek’s senior indebtedness restricts the issuance of such guarantee. Nortek’s Senior Secured Credit Facility does not permit such a guarantee. In addition the issuance of such a guarantee by Nortek would constitute a restricted payment under the terms of Nortek’s indentures.

Nortek has a $175,000,000 Senior Secured Credit Facility, as amended, (the “Senior Secured Credit Facility”), which is syndicated among several banks. The Senior Secured Credit Facility is secured by substantially all of Nortek’s accounts receivable and inventory, as well as certain intellectual property rights, and, as amended, permits borrowings up to the lesser of $175,000,000 or the total of 85% of eligible accounts receivable, as defined, and 50% of eligible inventory, as defined. The outstanding principal balances under the Senior Secured Credit Facility accrue interest at the Company’s option at either LIBOR plus a margin ranging from 2.0% to 2.5% or the banks’ prime rate plus a margin ranging from 0.5% to 1.0% depending upon the excess available borrowing base, as defined, and the timing of the borrowing as the margin rates will be adjusted quarterly. In addition, Nortek pays an unused line fee of between 0.375% and 0.5% on the excess available borrowing capacity, as defined. The Senior Secured Credit Facility includes customary limitations and covenants, but does not require Nortek to maintain any financial covenant unless the excess available borrowing base, as defined, is less than $30,000,000 in which case Nortek would be required to maintain, on a trailing four quarter basis, a minimum level of $155,000,000 of earnings before interest, taxes, depreciation and amortization, as defined. At December 31, 2003 there were no outstanding borrowings under the Senior Secured Credit Facility.

The indentures and other agreements governing Nortek’s and its subsidiaries’ indebtedness (including the indentures for the 8 7/8% Notes, the 9 1/8% Notes and the 9 1/4% Notes (collectively, the “Senior Notes”), the 9 7/8% Notes, the Senior Secured Credit Facility, the Company’s Senior Discount Notes and in 2004, Nortek’s Senior Floating Rate Notes) contain restrictive financial and operating covenants including covenants that restrict, among other things, the payment of cash dividends, repurchase of the Company’s capital stock and the making of certain other restricted payments, the incurrence of additional indebtedness, the making of certain investments, mergers, consolidations and sale of assets (all as defined in the indentures and other agreements). Upon certain asset sales (as defined in the indentures), the Company will be required to offer to purchase, at 100% principal amount plus accrued interest to the date of purchase, Senior Notes in a principal amount equal to any net cash proceeds (as defined in the indentures) that are not invested in properties and assets used primarily in the same or related business to those owned and operated by the Company at the issue date of the Senior Notes or at the date of such asset sale and such net cash proceeds were not applied to permanently reduce Senior Indebtedness (as defined in the indentures).

At March 26, 2004, approximately $34,300,000 was available for the payment of cash dividends, stock purchases or other restricted payments by the Company as defined under the terms of the Company's most restrictive indenture based on the redemption and refinancing of certain of the Nortek’s Notes (see Notes 7 and 16). Restricted payments to Holdings from Nortek are limited by the amount of cash available for payment under the terms of Nortek’s most restrictive indenture which was approximately $91,100,000 at March 26, 2004.

Mortgage notes payable of approximately $1,647,000 outstanding at December 31, 2003 include various mortgage notes and other related indebtedness payable in installments through 2009. These notes bear interest at rates ranging from approximately 3.25% to 6.25% and are collateralized by property and equipment with an aggregate net book value of approximately $6,847,000 at December 31, 2003.

Other obligations of approximately $21,425,000 outstanding at December 31, 2003 include borrowings relating to equipment purchases, notes payable issued for acquisitions and other borrowings bearing interest at rates primarily ranging 3.25% to 10.5% and maturing at various dates through 2018. Approximately $13,700,000 of such indebtedness is collateralized by property and equipment with an aggregate net book value of approximately $14,039,000 at December 31, 2003.

The table that follows is a summary of maturities of all of the Company’s debt obligations, excluding unamortized debt premium of approximately $10,867,000 and the remaining approximately $162,084,000 to be accreted on the Senior Discount Notes, due after December 31, 2004:

2005	$	2,745,000
2006		1,331,000
2007		485,873,000
2008		210,934,000
Thereafter		774,960,000

As of December 31, 2003, approximately $6,900,000 of letters of credit had been issued as additional security for certain of the Company's insurance programs.

A substantial portion of Nortek’s fixed rate debt was called for redemption or refinanced with variable rate debt in the first quarter of 2004. The above table of maturities does not reflect the effect of these subsequent events (see Note 16).

7. COMMON STOCK, SPECIAL COMMON STOCK, PREFERENCE STOCK, STOCK OPTIONS AND DEFERRED COMPENSATION

In connection with the Holdings Reorganization on November 20, 2002, Nortek became a wholly-owned subsidiary of the Company as each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of the Company with the Company receiving 100 shares of Nortek’s common stock. As a result of the Holdings Reorganization, Nortek’s previously outstanding common stock and treasury stock balances were reclassified to additional paid-in capital to reflect the Company’s new capital structure as shown in the accompanying consolidated statement of stockholders’ investment for the year ended December 31, 2002.

On January 9, 2003, Nortek declared and distributed to the Company a cash dividend of approximately $120,000,000 and distributed approximately $27,900,000 for reimbursement of fees and expenses of Kelso as contemplated by the Recapitalization (see Note 2).

Prior to the Holdings Reorganization, each share of Nortek’s special common stock had 10 votes on all matters submitted to a stockholder vote, except that the holders of common stock, voting separately as a class, had the right to elect 25% of the directors to be elected at a meeting, with the remaining 75% being elected by the combined vote of both classes. Shares of Nortek’s special common stock were generally non-transferable, but were freely convertible on a share-for-share basis into shares of Nortek’s common stock.

Prior to the Holdings Reorganization, Nortek had a shareholder rights plan which expired March 31, 2006. Each shareholder right entitled shareholders to buy 1/100 of a share of a new series of preference stock of Nortek at an exercise price of $72 per share, subject to adjustments for stock dividends, splits and similar events. The rights, which were never exercisable, were attached to each share of Nortek’s common stock. The Company assumed the shareholder rights plan in connection with the Holdings Reorganization.

Prior to the Holdings Reorganization, Nortek had several Equity and Cash Incentive Plans, which provided for the granting of options and other awards to certain officers, employees and non-employee directors of Nortek. Nortek also had a cash incentive program for certain key employees under the 1999 Equity and Cash Incentive Plan and the 1999 Equity Performance Plan based on the performance of Nortek’s stock price. During 2002, approximately $4,400,000 was paid to the participants in the plan under this cash incentive program and is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2002. No amounts were required to be paid under the cash incentive program in prior years. Options that were granted under the Equity and Cash Incentive Plans vested over periods ranging up to five years and expired ten years from the date of grant. As of the date of the Holdings Reorganization, the Company assumed and was assigned each of the plans and Nortek no longer has any stock-based compensation programs for the granting of options or other awards. Certain officers, employees, consultants and directors of Nortek and its subsidiaries, however, are recipients of stock option awards in the stock of the Company. See Note 1, Summary of Significant Accounting Policies, for a further discussion related to stock options.

As of December 31, 2002, the Company had 40,000,000 authorized shares of common stock with 10,502,627 shares issued and outstanding and 5,000,000 authorized shares of special common stock with 501,224 shares issued and outstanding. In connection with the Holdings Reorganization, Nortek retired all treasury shares held by Nortek, which consisted of 8,377,968 shares of common stock and 290,136 shares of special common stock. The retirement of Nortek’s treasury shares was recorded as a reduction to Nortek’s common stock and special common stock for the par value of the retired shares with the remaining balance recorded as a reduction to additional paid-in capital. The net outstanding Nortek shares of common and special common stock, after the retirement of the respective treasury shares, were then converted to an equal number of outstanding shares of Holdings' common and special common stock as of the date of the Holdings Reorganization. The impact of the retirement of Nortek's treasury shares and the conversion of Nortek common and special common stock to Holdings common and special common stock is included in the accompanying consolidated statement of stockholders’ investment for the year ended December 31, 2002.

The Company’s Preference Stock is convertible at any time subsequent to January 9, 2004 into one full share of Class A Common Stock. Upon occurrence of certain events, the preference stock can automatically be converted into Class A Common Stock. The preference stock does not provide for distributions to shareholders and has a liquidation preference of $0.01 per share. In addition to the election of directors, the Preference Stock has the following rights with the consent of at least the majority of the outstanding shares; i) amend the certificate of incorporation of Nortek to modify the powers, preferences or special rights of the holders of the Series B Preference Stock, ii) authorize or issue any series of capital stock ranking senior to or on parity with the Series B Preference Stock as to either payments of dividends or rights on liquidation, iii) material transactions in excess of $50,000,000, iv) incurrence of indebtedness outside the ordinary course of business, v) certain capital expenditures, vi) agreements and arrangements with members of senior management of Nortek, vii) creation, issuance, grant, delivery or sale of equity securities, including warrants and options, other than under the 2002 Stock Option Plan and other agreements and arrangements in existence on or prior to the date of the completion of the Recapitalization, viii) legal settlements in excess of $25,000,000 and ix) any other significant matters involving the Company.

8. PENSION, PROFIT SHARING AND OTHER POST RETIREMENT BENEFITS

The Company and its subsidiaries have various pension, supplemental retirement plans for certain officers, profit sharing and other post retirement benefit plans requiring contributions to qualified trusts and union administered funds.

Pension and profit sharing expense charged to operations aggregated approximately $14,400,000 for the period from January 10, 2003 to December 31, 2003, $950,000 for the period from January 1, 2003 to January 9, 2003, $19,300,000 in 2002 and $14,900,000 in 2001. The Company’s policy is to generally fund currently the maximum allowable annual contribution of its various qualified defined benefit plans. In 2004, the Company expects to contribute approximately $7,600,000 to its defined benefit pension plans.

The Company uses a September 30 measurement date for its plans. The table that follows provides a reconciliation of benefit obligations, plan assets and funded status of the plans in the accompanying consolidated balance sheet at December 31, 2003 and 2002:

	Pension Benefits
	2003			2002
	(Amounts in thousands)
Change in benefit obligation:
Benefit obligation at October 1,	$	238,910		$	187,478
Service cost		2,035			2,833
Interest cost		9,655			12,399
Plan participant contributions		342			446
Amendments		690			302
Actuarial loss due to exchange rate		2,930			2,491
Actuarial (gain) loss excluding assumption changes		(2,460	)		30,822
Actuarial loss due to assumption changes		2,692			15,703
Actuarial loss due to Recapitalization		1,548			--
Benefits and expenses paid		(94,643	)		(13,564	)
Benefit obligation at September 30,	$	161,699		$	238,910
Change in plan assets:
Fair value of plan assets at October 1,	$	96,930		$	104,583
Actual return (loss) on plan assets		15,385			(3,624	)
Actuarial gain due to exchange rate		1,867			1,676
Employer contribution		88,671			7,413
Plan participant contributions		342			446
Benefits and expenses paid		(94,643	)		(13,564	)
Fair value of plan assets at September 30,	$	108,552		$	96,930
Funded status and statement of financial position:
Fair value of plan assets at September 30,	$	108,552		$	96,930
Benefit obligation at September 30,		(161,699	)		(238,910	)
Funded status		(53,147	)		(141,980	)
Amount contributed during fourth quarter		390			66
Unrecognized actuarial (gain) loss		(3,502	)		88,645
Unrecognized prior service cost		378			22,914
Accrued benefit cost	$	(55,881	)	$	(30,355	)
Amount recognized in the statement of financial position consists of:
Accrued benefit liabilities	$	(55,952	)	$	(111,531	)
Intangible pension asset		--			15,981
Accumulated other comprehensive loss before tax benefit		71			65,195
Accrued benefit cost	$	(55,881	)	$	(30,355	)

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were approximately $161,699,000, $155,004,000 and $108,552,000, respectively, as of December 31, 2003 and $238,910,000, $208,470,000 and $96,930,000, respectively, as of December 31, 2002.

As a result of the Recapitalization, purchase accounting adjustments were made for all defined benefit plans as of the January 9, 2003 transaction date. The purchase accounting adjustments reflect the immediate recognition of all unrecognized actuarial losses and unrecognized prior service costs as well as the reversal of the accumulated other comprehensive loss before tax benefit and the intangible pension asset. The actuarial loss excluding assumption changes decreased approximately $33,282,000 between December 31, 2002 and December 31, 2003 primarily due to the termination of one of Nortek’s supplemental executive retirement plans as part of the Recapitalization as discussed below.

Plan assets primarily consist of cash and cash equivalents, common stock (including 283,063 shares of the Company’s common stock and special common stock with a fair market value of approximately $12,248,000 at September 30, 2002. There were no shares of the Company’s common stock held in plan assets at September 30, 2003.), U.S. Government securities, corporate debt and mutual funds, as well as other investments, and include certain commingled funds. At December 31, 2003 and 2002, the Company has recorded as long-term restricted investments and marketable securities held by pension trusts (including related party amounts), in the accompanying consolidated balance sheet, approximately $1,123,000 and $76,500,000, respectively, which have been contributed to trusts. These assets are not included in the amount of fair value of plan assets at December 31, 2003 and 2002 but are available to fund certain of the benefit obligations included in the table above relating to certain supplemental retirement plans, and in the period from January 1, 2003 to January 9, 2003 were used to fund the payment required upon the termination of one of Nortek’s supplemental executive retirement plans, and were the primary reason for the increase in employer contributions and benefits paid in the above table. Under the terms of one of Nortek’s supplemental executive retirement plans, Nortek was required to make one-time distributions to participants in such plan in satisfaction of obligations under that plan upon a change of control, as defined. Accordingly, upon completion of the Recapitalization, this plan was terminated and Nortek made distributions of approximately $75,100,000 to the participants in the plan and transferred to one of the participants a life insurance policy with approximately $10,300,000 of cash surrender value to satisfy a portion of such participant’s obligation. Assets of the related pension trust were used to pay the amounts due to plan participants, and these amounts are included in benefits and expenses paid and employer contributions in the above table. As a result of this plan termination and settlement of participant benefit obligations, the Company recorded in January 2003 a curtailment loss of approximately $65,800,000. During 2001 and 2000, this pension trust loaned funds to certain officers of the Company who had fully vested retirement benefits in such plans. At December 31, 2002, approximately $34,622,000 of notes receivable from these officers are included in restricted investments and marketable securities held by pension trusts in the Company’s accompanying consolidated balance sheet. The notes receivable from these officers were repaid in full on January 9, 2003 in connection with the Recapitalization.

The weighted average rate assumptions used in determining pension, supplemental retirement plans and post retirement costs and the projected benefit obligation are as follows:

	For the Periods
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
Discount rate for projected benefit obligation		6	.00%		6	.25%		6	.25%		7	.00%
Discount rate for pension costs		6	.25%		6	.25%		7	.00%		7	.75%
Expected long-term average return on plan assets		7	.75%		7	.75%		8	.50%		8	.50%
Rate of compensation increase		5	.00%		5	.00%		5	.00%		5	.00%

The Company’s net periodic benefit cost for its defined benefit plans for the periods presented consist of the following components:

	For the Periods
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Service cost	$	1,955		$	80		$	2,833		$	2,294
Interest cost		9,270			385			12,399			11,621
Expected return on plan assets		(7,438	)		(184	)		(8,531	)		(10,046	)
Amortization of prior service cost		210			70			2,860			1,419
Recognized actuarial loss		29			210			1,828			1,471
Curtailment loss		123			65,766			--			1,921
Net periodic benefit cost	$	4,149		$	66,327		$	11,389		$	8,680

The Company’s pension plan weighted-average asset allocations at December 31, 2003 and 2002, by asset category are as follows:

	Plan Assets at December 31,
Asset Category	2003			2002
Cash and cash equivalents		3	.4%		4	.4%
Equity securities		56	.9		64	.9
Fixed income securities		39	.2		30	.2
Other		0	.5		0	.5
		100	.0%		100	.0%

The Company’s domestic qualified defined benefit plans’ assets are invested to maximize returns without undue exposure to risk. The investment objectives are also to produce a total return exceeding the median of a universe of portfolios with similar average asset allocation and investment style objectives, and to earn a return, net of fees, greater or equal to the long-term rate of return used by the Company in determining pension expense.

Risk is controlled by maintaining a portfolio of assets that is diversified across a variety of asset classes, investment styles and investment managers. The plans’ asset allocation policies are consistent with the established investment objectives and risk tolerances. The asset allocation policies are developed by examining the historical relationships of risk and return among asset classes, and are designed to provide the highest probability of meeting or exceeding the return objectives at the lowest possible risk. For 2004, the target allocation is 57% for equity securities, 41% for fixed income securities and 2% for cash.

The table that follows provides a reconciliation of the benefit obligations, plan assets and funded status of the Company’s post retirement health benefit plans included in the accompanying consolidated balance sheet at December 31, 2003 and 2002:

	Non-pension
	Post Retirement
	Health Benefits
	2003			2002
	(Amounts in thousands)
Change in benefit obligation:
Benefit obligation at October 1,	$	40,174		$	26,257
Service cost		994			352
Interest cost		2,237			2,148
Plan participant contributions		134			129
Amendments		(1,857	)		2,686
Actuarial loss excluding assumption changes		(3,068	)		3,735
Actuarial loss due to assumption changes		4,520			6,417
Actuarial gain due to Recapitalization		(33	)		--
Benefits and expenses paid		(1,609	)		(1,550	)
Benefit obligation at September 30,	$	41,492		$	40,174
Change in plan assets:
Fair value of plan assets at October 1,	$	--		$	--
Employer contribution		1,474			1,421
Plan participant contributions		135			129
Benefits and expenses paid		(1,609	)		(1,550	)
Fair value of plan assets at September 30,	$	--		$	--
Funded status and statement of financial position:
Fair value of plan assets at September 30,	$	--		$	--
Benefit obligation at September 30,		(41,492	)		(40,174	)
Funded status		(41,492	)		(40,174	)
Amount contributed during fourth quarter		411			343
Unrecognized actuarial loss		3,888			18,607
Unrecognized prior service cost		--			2,633
Accrued benefit cost	$	(37,193	)	$	(18,591	)

The Company’s net periodic benefit cost for its subsidiary’s Post Retirement Health Benefit Plan for the periods presented consists of the following components:

	For the Periods
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -		Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002		Dec. 31, 2001
	(Amounts in thousands)
Service cost	$	981		$	13		$	352	$	285
Interest cost		2,175			62			2,148		1,509
Amortization of prior service cost		8			2			310		52
Recognized actuarial (gain) loss		(8	)		35			760		149
Curtailment gain		--			(355	)		--		--
Net periodic post retirement health benefit
cost (income)	$	3,156		$	(243	)	$	3,570	$	1,995

For purposes of calculating the post retirement health benefit cost, a medical inflation rate of 12% was assumed for 2002. The rate was assumed to decrease gradually to an ultimate rate of 5.5% by 2010.

Assumed health care cost trend rates have a significant effect on the amounts reported for the post retirement health benefit plan. A one-percentage-point change in assumed health care cost trend rate would have the following effect:

	Decrease Trend 1%			Increase Trend 1%
	(Amounts in thousands)
Effect on the total service and interest cost components	$	(367	)	$	445
Effect on the post retirement benefit obligation	$	(4,822	)	$	5,798

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”). The Act expanded Medicare to include, for the first time, coverage for prescription drugs. The Company sponsors a retiree medical program for certain of its locations and the Company expects that this legislation will eventually reduce the Company’s cost for the program. At this point, the Company’s investigation into its response to the legislation is preliminary, as we await guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions as well as the manner in which such savings should be measured. Because of various uncertainties related to the Company’s response to this legislation and the appropriate accounting methodology for this event, the Company has elected to defer financial recognition of this legislation until the FASB issues final accounting guidance. When issued, that final guidance could require the Company to change previously reported information. This deferral election is permitted under FASB Staff Position No. FAS 106-1.

9. COMMITMENTS AND CONTINGENCIES

The Company provides accruals for all direct costs associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated.

At December 31, 2003, the Company and its subsidiaries are obligated under lease agreements for the rental of certain real estate and machinery and equipment used in its operations. Future minimum rental obligations related to continuing operations aggregate approximately $69,849,000 at December 31, 2003. The obligations are payable as follows:

Year ended December 31,		Amount
	2004	$	12,018,000
	2005		10,452,000
	2006		8,674,000
	2007		7,374,000
	2008		4,928,000
	Thereafter		26,403,000

Certain of these lease agreements provide for increased payments based on changes in the consumer price index. Rental expense charged to continuing operations in the accompanying consolidated statement of operations was approximately $16,600,000, $400,000, $15,600,000 and $15,000,000 for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. Under certain of these lease agreements, the Company or its subsidiaries are also obligated to pay insurance and taxes.

Certain subsidiaries, which are classified as discontinued operations, have guaranteed approximately $27,700,000 of third party obligations relating to guarantees of rental payments through June 30, 2016 under a facility leased by SNE, which was sold on September 21, 2001. The Company has indemnified these guarantees in connection with the sale of Ply Gem on February 12, 2004 (see Note 10). The buyer of SNE has provided certain indemnifications and other rights to the subsidiary for any payments that it might be required to make pursuant to this guarantee. Should the buyer of SNE cease making payments then the Company may be required to make payments on its indemnification. The Company does not anticipate incurring any loss under this indemnification and accordingly has not recorded any liabilities at December 31, 2003 in the accompanying consolidated balance sheet in accordance with accounting principles generally accepted in the United States.

The Company has guaranteed certain obligations of third parties of approximately $4,300,000 which relates to guarantees of the remaining principal and interest balances of mortgages of a third-party on certain buildings, one of which houses the Company’s corporate headquarters. These guarantees expire on December 31, 2020 and are payable in the event of non-payment of the mortgage. These guarantees are collateralized by the buildings to which the mortgages relate and any liability to the Company would first be reduced by the Company’s pro-rata share of proceeds received on the sale of the buildings. The Company does not anticipate incurring any loss under these guarantees and accordingly has not recorded any liabilities at December 31, 2003 in the accompanying consolidated balance sheet in accordance with accounting principles generally accepted in the United States.

The Company has indemnified third parties for certain matters in a number of transactions involving dispositions of former subsidiaries. The Company has recorded liabilities in relation to these indemnifications of approximately $20,900,000 at December 31, 2003 and $27,100,000 at December 31, 2002. Approximately $18,200,000 and $24,200,000 of these liabilities are included in liabilities of discontinued operations at December 31, 2003 and 2002, respectively.

The Company sells a number of products and offers a number of warranties including in some instances, extended warranties. The specific terms and conditions of these warranties vary depending on the product sold and country in which the product is sold. The Company estimates the costs that may be incurred under its warranties, with the exception of extended warranties, and records a liability for such costs at the time of sale. Proceeds received from extended warranties are amortized over the life of the warranty and reviewed to ensure that the liability recorded is equal to or greater than estimated future costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary. Changes in the Company’s combined short-term and long-term warranty liabilities (see Note 12) during the periods presented are as follows:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002
	(Amounts in thousands)
Balance, beginning of period	$	25,983		$	26,007		$	24,757
Warranties provided during period		16,259			234			12,375
Settlements made during period		(15,187	)		(274	)		(11,606	)
Changes in liability estimate, including acquisitions		2,032			16			481
Balance, end of period	$	29,087		$	25,983		$	26,007

The Company is subject to other contingencies, including legal proceedings and claims arising out of its businesses that cover a wide range of matters, including, among others, environmental matters, contract and employment claims, product liability, warranty and modification, adjustment or replacement of component parts of units sold, which may include product recalls. Product liability, environmental and other legal proceedings also include matters with respect to businesses previously owned. The Company has used various substances in its products and manufacturing operations which have been or may be deemed to be hazardous or dangerous, and the extent of its potential liability, if any, under environmental, product liability and workers’ compensation statutes, rules, regulations and case law is unclear. Further, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no range of potential exposure may be reasonably estimated.

A former subsidiary of the Company is a defendant in a number of lawsuits alleging damage caused by alleged defects in certain pressure treated wood products. A subsidiary of the Company has indemnified the buyer of the former subsidiary for all known liabilities and future claims relating to such matters and retained the rights to all potential reimbursements related to insurance coverage. Many of the lawsuits have been resolved by dismissal or settlement with amounts being paid out of insurance proceeds or other recoveries. The Company and the former subsidiary continue to vigorously defend the remaining suits. Certain defense and indemnity costs are being paid out of insurance proceeds and proceeds from a settlement with suppliers of material used in the production of the treated wood products. The Company has recorded, within liabilities of discontinued operations, liabilities of approximately $6,602,000 at December 31, 2003 for the estimated costs to resolve these outstanding matters. The Company has also recorded, within assets of discontinued operations, receivables at December 31, 2003 of approximately $2,385,000 for the estimated recoveries which are deemed probable of collection related primarily to insurance litigation coverage claims. The Company has indemnified the buyer of Ply Gem for these liabilities in connection with the sale of Ply Gem on February 12, 2004 (see Note 10).

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. It is possible, however, that future results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’s control.

10. DISCONTINUED OPERATIONS

On February 12, 2004, the Company sold Ply Gem, to an affiliate of Caxton-Iseman Capital, Inc. in a transaction valued at approximately $560,000,000, including debt assumed by the buyer and expects to record a net after-tax gain upon the sale of between approximately $60,000,000 and $70,000,000 in the first quarter of 2004. Ply Gem, through its operating subsidiaries, is a manufacturer and distributor of a range of products for use in the residential new construction, do-it-yourself and professional renovation markets, including vinyl siding, windows, patio doors, fencing, railing, decking and accessories. The results of operations of the operating subsidiaries of Ply Gem comprised the Company’s entire Windows, Doors and Siding Products (“WDS”) reporting segment and the corporate expenses of Ply Gem were previously included in Unallocated other, net in the Company’s segment reporting (see Note 11).

On November 22, 2002, Ply Gem sold the capital stock of its subsidiary Richwood Building Products, Inc. (“Richwood”) for approximately $8,500,000 of net cash proceeds and recorded a pre-tax loss of approximately $3,000,000 in the fourth quarter of 2002. Prior to the sale of Ply Gem, the operating results of Richwood were previously included in WDS in the Company’s segment reporting. As required by SFAS No. 142, the Company allocated $4,200,000 of goodwill to Richwood in connection with the determination of the loss on sale based upon the relative fair value of Richwood to the total fair value of the WDS operating segment. The related goodwill amortization prior to January 1, 2002 and goodwill have been included in the results of discontinued operations and assets of discontinued operations, respectively, for all periods presented below, as required.

On April 2, 2002, Ply Gem sold the capital stock of its subsidiary Hoover Treated Wood Products, Inc. (“Hoover”) for approximately $20,000,000 of net cash proceeds and recorded a pre-tax gain of approximately $5,400,000 in the second quarter of 2002. Prior to the sale of Ply Gem, the operating results of Hoover were previously included in Other in the Company’s segment reporting. Approximately $8,500,000 of the cash proceeds was used to pay down outstanding debt under the Company’s Ply Gem credit facility in the second quarter of 2002.

On September 21, 2001, Ply Gem sold the capital stock of Peachtree Doors and Windows, Inc. (“Peachtree”) and SNE Enterprises, Inc. (“SNE”) for approximately $45,000,000 in cash, and recorded a pre-tax loss on the sale of approximately $34,000,000 in the third quarter of 2001, including the write off of approximately $11,700,000 of unamortized intangible assets. Prior to the sale of Ply Gem, Peachtree and SNE were previously part of WDS. A portion of the cash proceeds was used to pay down approximately $20,500,000 of outstanding debt under the Company’s Ply Gem credit facility.

Interest allocated to discontinued operations, included in interest expense, net in the table below, was approximately $23,600,000 (net of taxes of approximately $13,800,000), $800,000 (net of taxes of approximately $400,000), $26,300,000 (net of taxes of approximately $15,500,000) and $26,300,000 (net of taxes of approximately $15,500,000) for the periods from January 10, 2003 to December 31, 2003 and from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively.

The sale of Ply Gem, Richwood, Hoover, SNE and Peachtree and the related operating results have been excluded from earnings (loss) from continuing operations and are classified as discontinued operations for all periods presented.

The table that follows presents a summary of the results of discontinued operations for the periods presented:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Net sales	$	522,600		$	8,800		$	529,700		$	787,400
Operating earnings (loss) of discontinued operations *	$	58,237		$	(368	)	$	70,401		$	43,188
Interest expense, net		(38,537	)		(1,232	)		(42,701	)		(47,688	)
Earnings (loss) before provision (benefit) for income taxes		19,700			(1,600	)		27,700			(4,500	)
Provision (benefit) for income taxes		7,500			(600	)		10,600			300
Earnings (loss) from discontinued operations	$	12,200		$	(1,000	)	$	17,100		$	(4,800	)
Gain (loss) on sale of discontinued operations	$	--		$	--		$	2,400		$	(34,000	)
Tax provision (benefit) on sale of discontinued operations		--			--			600			(14,000	)
	$	--		$	--		$	1,800		$	(20,000	)
Earnings (loss) from discontinued operations	$	12,200		$	(1,000	)	$	18,900		$	(24,800	)
Depreciation and amortization expense	$	16,101		$	315		$	14,902		$	26,291

* Operating earnings (loss) of discontinued operations are net of Ply Gem corporate expenses previously included within Unallocated other, net in the Company’s segment reporting.

Operating earnings (loss) of discontinued operations for the period from January 10, 2003 to December 31, 2003 include approximately $600,000 of severance and other costs associated with the closure of certain manufacturing facilities. Operating earnings (loss) of discontinued operations for the period from January 10, 2003 to December 31, 2003 also include approximately $1,300,000 of costs and expenses for expanded distribution including new customers.

Operating earnings (loss) of discontinued operations for the year ended December 31, 2001 include approximately $600,000 of direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development and approximately $3,200,000 of net death benefit insurance proceeds related to life insurance maintained on former managers, both of which were previously included within Unallocated in the Company’s segment reporting. Operating earnings (loss) of discontinued operations for the year ended December 31, 2001 also include approximately $300,000 of manufacturing costs incurred in connection with the start-up of a vinyl fence and decking facility, which were previously included with the WDS Segment in the Company’s segment reporting.

The table that follows presents a breakdown of the major components of assets and liabilities of discontinued operations as of December 31, 2003 and 2002:

	December 31,
	2003		2002
	(Amounts in thousands)
Assets:
Accounts receivable, less allowances of $8,695,000 and $7,129,000	$	45,236	$	45,852
Inventories		44,136		43,481
Prepaid income taxes		8,392		11,100
Property and equipment, net		122,816		123,618
Goodwill		219,977		263,998
Intangible assets, less accumulated amortization of $3,849,000
and $12,929,000		44,363		66,710
Other assets		9,931		12,698
Total assets of discontinued operations	$	494,851	$	567,457
Liabilities:
Accounts payable	$	18,876	$	17,327
Accrued expenses		33,803		36,177
Notes, mortgage notes and obligations payable		29,562		31,027
Deferred income taxes		25,323		31,507
Other liabilities		30,119		33,821
Total liabilities of discontinued operations	$	137,683	$	149,859

11. OPERATING SEGMENT INFORMATION AND CONCENTRATION OF CREDIT RISK

The Company is a diversified manufacturer of residential and commercial building products, which is organized within two principal operating segments: the Residential Building Products Segment; and the Air Conditioning and Heating Products Segment. Individual subsidiary companies are included in each of the Company’s two principal operating segments based on the way the chief operating decision maker manages the business and on the similarity of products, production processes, customers and expected long-term financial performance. In the tables below, Unallocated includes corporate related items, intersegment eliminations and certain income and expense items not allocated to reportable segments.

The Residential Building Products Segment manufactures and distributes built-in products primarily for the residential new construction, DIY and professional remodeling and renovation markets. The principal products sold by the segment include, kitchen range hoods, exhaust fans (such as bath fans and fan, heater and light combination units), indoor air quality products, bath cabinets, radio intercoms and central vacuum systems. The Air Conditioning and Heating Products Segment principally manufactures and sells heating, ventilating and air conditioning (“HVAC”) systems for custom-designed commercial applications and for manufactured and site-built residential housing.

On February 12, 2004, the Company sold its Ply Gem subsidiary, which encompasses the WDS Segment and the corporate costs of Ply Gem that were formerly included in Unallocated other, net in the Company’s segment reporting. On November 22, 2002, the Company sold the capital stock of Richwood. On April 2, 2002, the Company sold the capital stock of Hoover. On September 21, 2001, the Company sold the capital stock of Peachtree and SNE. Accordingly, the results of Ply Gem which were previously the WDS Segment, Hoover, which were previously part of the Other Segment, and Richwood, Peachtree and SNE, which were previously part of the WDS Segment prior to the sale of Ply Gem, have been excluded from earnings from continuing operations and classified separately as discontinued operations for all periods presented (see Notes 1 and 10). Accordingly the segment information presented below excludes the WDS Segment, Richwood, Hoover, Peachtree and SNE for all periods.

The accounting policies of the segments are the same as those described in Note 1 Summary of Significant Accounting Policies. The Company evaluates segment performance based on operating earnings before allocations of corporate overhead costs. Intersegment net sales and intersegment eliminations are not material for any of the periods presented. The income statement impact of all purchase accounting adjustments, including goodwill and intangible assets amortization, is reflected in the operating earnings of the applicable operating segment. Unallocated assets consist primarily of cash and cash equivalents, marketable securities, prepaid and deferred income taxes, deferred debt expense and long-term restricted investments and marketable securities.

Summarized financial information for the Company’s reportable segments is presented in the tables that follow for each of the periods presented:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
	(Amounts in thousands)
Net Sales:
Residential Building Products	$	814,770		$	16,338		$	729,566		$	660,008
Air Conditioning and Heating Products		675,303			8,613			654,559			633,772
Consolidated net sales	$	1,490,073		$	24,951		$	1,384,125		$	1,293,780
Operating Earnings (loss):
Residential Building Products	$	137,282		$	2,731		$	122,863		$	93,708
Air Conditioning and Heating Products		58,408			(1,258	)		61,461			53,801
Subtotal		195,690			1,473			184,324			147,509
Unallocated:
Expenses and charges arising from the
Recapitalization		--			(83,000	)		(6,600	)		--
Re-audit fees and expenses		--			--			(2,100	)		--
1999 equity performance plan incentive		--			--			(4,400	)		--
Strategic sourcing, software and
system development expense		(3,400	)		(100	)		(3,700	)		(5,500	)
Stock based compensation charges		(1,800	)		--			(700	)		--
Other, net		(31,045	)		(138	)		(47,257	)		(32,350	)
Consolidated operating earnings (loss)		159,445			(81,765	)		119,567			109,659
Interest expense		(57,627	)		(1,054	)		(52,410	)		(51,748	)
Loss from debt retirement		--			--			--			(5,500	)
Investment income		1,482			119			5,943			8,189
Earnings (loss) from continuing operations
before provision (benefit) for income taxes	$	103,300		$	(82,700	)	$	73,100		$	60,600

See Notes 1, 2, 13 and 14 with respect to restructuring charges and certain other income (expense) items affecting segment earnings (loss).

	For the Periods
	Post-
	Recapitalization		Pre-Recapitalization
	Jan. 10, 2003 -		Jan. 1, 2003 -		Jan. 1, 2002 -		Jan. 1, 2001 -
	Dec. 31, 2003		Jan. 9, 2003		Dec. 31, 2002		Dec. 31, 2001
	(Amounts in thousands)
Segment Assets:
Residential Building Products	$	863,400	$	544,677	$	543,701	$	531,871
Air Conditioning and Heating Products		494,830		257,475		256,965		265,395
		1,358,230		802,152		800,666		797,266
Unallocated:
Cash, cash equivalents and marketable securities		195,343		286,411		297,612		258,455
Prepaid income taxes		17,826		53,747		15,964		22,303
Assets of discontinued operations		494,851		568,114		567,457		608,724
Other assets		33,730		70,793		149,127		133,166
Consolidated assets	$	2,099,980	$	1,781,217	$	1,830,826	$	1,819,914
Depreciation Expense:
Residential Building Products	$	8,526	$	295	$	13,062	$	12,751
Air Conditioning and Heating Products		8,407		276		12,674		12,003
Other		569		15		394		412
Consolidated depreciation expense	$	17,502	$	586	$	26,130	$	25,166
Amortization of goodwill, intangible assets and purchase
price allocated to inventory:
Residential Building Products	$	10,985	$	53	$	2,502	$	10,160
Air Conditioning and Heating Products		3,475		14		486		1,795
Consolidated amortization expense and purchase price
allocated to inventory	$	14,460	$	67	$	2,988	$	11,955
Amortization of Goodwill included in Amortization Expense:
Residential Building Products	$	--	$	--	$	--	$	7,401
Air Conditioning and Heating Products		--		--		--		1,317
Consolidated goodwill amortization expense	$	--	$	--	$	--	$	8,718
Capital Expenditures:
Residential Building Products	$	10,556	$	91	$	9,551	$	14,412
Air Conditioning and Heating Products		13,434		116		9,335		11,165
Other		749		--		209		1,564
Consolidated capital expenditures	$	24,739	$	207	$	19,095	$	27,141

The following table presents a summary of the activity in goodwill for continuing operations by reporting segment for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001.

				Air
	Residential			Conditioning
	Building			and Heating			Consolidated
	Products			Products			Nortek
	(Amounts in thousands)
Balance as of December 31, 2000	$	260,399		$	42,500		$	302,899
Amortization of goodwill		(7,401	)		(1,317	)		(8,718	)
Purchase accounting adjustments		(184	)		(6,367	)		(6,551	)
Impact of foreign currency translation		(916	)		(318	)		(1,234	)
Balance as of December 31, 2001		251,898			34,498			286,396
Purchase accounting adjustments		403			23			426
Impact of foreign currency translation		(15	)		357			342
Balance as of December 31, 2002		252,286			34,878			287,164
Impact of foreign currency translation		264			5			269
Balance as of January 9, 2003		252,550			34,883			287,433
Effect of the Recapitalization		163,395			187,412			350,807
Acquisitions during the period from January 10, 2003 to December
31, 2003		46,248			--			46,248
Purchase accounting adjustments		(7,807	)		(4,172	)		(11,979	)
Impact of foreign currency translation		1,511			4,043			5,554
Balance December 31, 2003	$	455,897		$	222,166		$	678,063

In accordance with SFAS No. 141 and SFAS No. 142, the Company allocated the effect of the Recapitalization on goodwill to its reportable segments (see Note 1). Purchase accounting adjustments relate principally to fair value revisions resulting from completion of the final valuation of assets and liabilities and adjustments to deferred income taxes that impact goodwill.

Foreign net sales were approximately 20.3%, 21.5%, 19.4% and 18.1% of consolidated net sales for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. Foreign Long-Lived Assets were approximately 9.2%, 15.3%, 15.2% and 14.4% of consolidated Long-Lived Assets for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001, respectively. Foreign net sales are attributed based on the location of the Company’s subsidiary responsible for the sale. As required, Long-Lived Assets exclude financial instruments and deferred income taxes.

No single customer accounts for 10% or more of consolidated net sales or accounts receivable.

The Company operates internationally and is exposed to market risks from changes in foreign exchange rates. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base and their dispersion across many different geographical regions. At December 31, 2003, the Company had no significant concentrations of credit risk.

12. ACCRUED EXPENSES AND TAXES, NET

Accrued expenses and taxes, net, included in current liabilities in the accompanying consolidated balance sheet, consist of the following at December 31, 2003 and 2002:

	December 31,
	2003		2002
	(Amounts in thousands)
Payroll, pension and employee benefits	$	48,917	$	37,771
Insurance and employee health benefit accruals		12,846		11,254
Interest		23,176		23,244
Product warranty		14,456		13,921
Sales and marketing		23,089		19,792
Employee termination and other costs		1,843		1,465
Other, net		26,721		26,122
	$	151,048	$	133,569

Accrued expenses, included in other long-term liabilities in the accompanying consolidated balance sheet, consist of the following at December 31, 2003 and 2002:

	December 31,
	2003		2002
	(Amounts in thousands)
Employee pension retirement benefit obligations	$	55,497	$	110,474
Product warranty		14,631		12,086
Post retirement health benefit obligations		35,994		17,395
Insurance		17,350		14,348
Other, net		13,361		7,125
	$	136,833	$	161,428

In January 2003, in connection with the Recapitalization, approximately $62,000,000 of the $110,474,000 of employee pension retirement benefit obligations noted in the table above at December 31, 2002 were settled (see Note 8).

13. RESTRUCTURING CHARGES

The Company records restructuring costs primarily in connection with operations acquired or facility closings which management plans to eliminate in order to improve future operating results of the Company. During the fourth quarter of 2002, the Company provided approximately $1,000,000 for liabilities related to restructuring and closing costs of certain subsidiaries within its Residential Building Products Segment. During the period from January 10, 2003 to December 31, 2003, the Company recognized restructuring charges primarily associated with plant closings in the Air Conditioning Segment.

Within the Air Conditioning and Heating Products Segment, the Company, in the second quarter of 2003, initiated restructuring activities related to the closure of two facilities in St. Louis, Missouri, in order to relocate the operations to other facilities by the end of the first quarter of 2004. Approximately 293 employees have been terminated to date and approximately 159 additional employees are expected to be terminated during 2004. The facilities currently support manufacturing, warehousing and distribution activities of the segment’s residential HVAC products. During the year ended December 31, 2003, the Company provided approximately $5,800,000 in cost of goods sold related to liabilities incurred as a result of the restructuring and expects to provide an additional estimated $2,400,000 of costs through early 2004. The facilities to be closed are owned by the Company and are expected to be sold in 2004.

The following table sets forth restructuring activity in the accompanying consolidated statement of operations for the periods presented. These costs are included in cost of goods sold and selling, general and administrative expenses in the accompanying consolidated statement of operations of the Company.

	Employee						Total
	Separation						Restructuring
	Expenses			Other			Costs
	(Amounts in thousands)
Balance at December 31, 2001	$	710		$	159		$	869
Provision		524			486			1,010
Payments and asset write downs		(200	)		--			(200	)
Other adjustments		(214	)		--			(214	)
Balance at December 31, 2002	$	820		$	645		$	1,465
Balance at December 31, 2002	$	820		$	645		$	1,465
Other adjustments		(90	)		(110	)		(200	)
Balance at January 9, 2003		730			535			1,265
Provision		3,629			2,128			5,757
Payments and asset write downs		(2,369	)		(2,205	)		(4,574	)
Other adjustments		(352	)		(253	)		(605	)
Balance at December 31, 2003	$	1,638		$	205		$	1,843

Employee separation expenses are comprised of severance, vacation, outplacement and retention bonus payments. Other restructuring costs include expenses associated with terminating other contractual arrangements, costs to prepare facilities for closure, costs to move equipment and products to other facilities and write-offs related to equipment sales and disposals attributable to a restructuring which occurred prior to December 31, 2002.

14. OTHER INCOME AND EXPENSE

For the nine days ended January 9, 2003, the Company incurred certain charges in connection with the Recapitalization. These charges were as follows:

Curtailment loss upon termination of a SERP	$	70,142,000
Recapitalization fees, expenses and other		12,848,000
Other		10,000
	$	83,000,000

During the period from January 10, 2003 to December 31, 2003, the Company recorded a pre-tax charge to continuing operations of approximately $1,400,000 for compensation expense related to stock options issued to employees, officers and Directors in accordance with SFAS No. 123, and recorded compensation expense of approximately $600,000 in the fourth quarter of 2003 in connection with the issuance of common stock.

The operating results of the Air Conditioning and Heating Products Segment for the period from January 10, 2003 to December 31, 2003 include approximately $5,800,000, of severance and other costs associated with the closure of certain manufacturing facilities (see Note 13). The operating results of the Air Conditioning and Heating Products Segment for the period from January 10, 2003 to December 31, 2003 also include approximately $1,100,000, of expenses associated with the start-up of a new manufacturing facility.

During the fourth quarter of 2002, the Company provided approximately $1,000,000 for liabilities related to restructuring and closing costs of certain subsidiaries within its Residential Building Products Segment.

In the second quarter of 2002, approximately $4,400,000 was charged to operating earnings and is included in selling, general and administrative expenses relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan. In addition, as discussed in Note 2, Nortek has recorded expenses of approximately $6,600,000 in the year ended 2002 related to fees and expenses associated with the Recapitalization of Nortek. In the third quarter of 2002, the Company incurred approximately $2,100,000 in connection with its re-audit of Nortek’s Consolidated Financial Statements for each of the three years in the period ended December 31, 2001 (see Note 10). In the year ended December 31, 2002, the Company incurred approximately $3,700,000 of direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development which are recorded in Unallocated in the Company’s segment reporting.

In 2001, the Company incurred approximately $5,500,000 of direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development which are recorded as unallocated expense. In 2001, the Company expensed approximately $2,700,000 of manufacturing costs incurred in connection with the start up of a residential air conditioning facility. In 2001, the Company also incurred certain duplicative net interest expense as discussed in Note 6. Also, in the third quarter of 2001, the Company recorded approximately $1,700,000 of interest income resulting from the favorable abatement of state income taxes. The abatement of state income taxes did not have a significant effect on the overall annual effective income tax rate in 2001.

15. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

The tables that follow summarize unaudited quarterly financial data for the years ended December 31, 2003 and December 31, 2002:

	For the Quarters Ended
	April 5 (1)			July 5		October 4		December 31
	(Amounts in thousands)
2003
Net sales	$	361,028		$	390,029	$	398,553	$	365,414
Gross profit		102,736			109,292		120,017		104,340
Selling, general and administrative expense		65,087			63,425		68,321		69,750
Recapitalization Fees and Expenses		83,000			--		--		--
Depreciation expense		4,350			3,939		4,006		5,793
Amortization of intangible assets and purchase price
allocated to inventory		5,921			2,964		2,306		3,336
Operating earnings (loss)		(47,241	)		43,847		49,713		31,361
Earnings (loss) from continuing operations		(49,900	)		18,500		20,900		11,600
Earnings (loss) from discontinued operations		(6,500	)		7,400		9,000		1,300
Net earnings (loss)	$	(56,400	)	$	25,900	$	29,900	$	12,900

(1) The first quarter ended April 5, 2003 represents the combined pre- and post-Recapitalization periods of January 1, 2003 to January 9, 2003 and January 10, 2003 to April 5, 2003, respectively.

	For the Quarters Ended
	March 30			June 29		September 28		December 31
	(Amounts in thousands)
2002
Net sales	$	327,802		$	374,134	$	358,010	$	324,179
Gross profit		91,777			108,474		98,926		92,649
Selling, general and administrative expense		58,994			68,530		67,187		67,960
Recapitalization Fees and Expenses		--			5,200		1,000		400
Depreciation expense		6,841			6,463		6,414		6,412
Amortization of intangible assets		729			712		683		864
Operating earnings		32,054			34,032		30,056		23,425
Earnings from continuing operations		12,700			13,100		8,700		9,100
Earnings (loss) from discontinued operations		(2,100	)		14,600		8,000		(1,600	)
Net earnings	$	10,600		$	27,700	$	16,700	$	7,500

See Notes 1, 2, 3 and 13 and Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 7 of Part II of this report, regarding certain other quarterly transactions which impact the operating results in the above table including dispositions, financing activities, new accounting pronouncements, acquisitions, sales volume, material costs, rationalization and relocation of manufacturing operations, material procurement strategies and weakness in the manufactured housing industry.

16. SUBSEQUENT EVENTS (UNAUDITED)

From January 1, 2004 through February 3, 2004, the Company purchased approximately $14,800,000 of Nortek’s 9 1/4% Senior Notes due 2007 (“9 1/4% Notes”) and approximately $10,700,000 of Nortek’s 9 1/8% Senior Notes due 2007 (“9 1/8% Notes”) in open market transactions. These purchases resulted in a pre-tax loss of approximately $400,000, which will be recorded in the first quarter of 2004.

On February 13, 2004, the Company called for redemption on March 15, 2004 all of Nortek’s outstanding 9 1/4% Notes (approximately $160,200,000 in principal amount) and called for redemption on March 14, 2004 all of Nortek’s outstanding 9 1/8% Notes (approximately $299,300,000 in principal amount). The 9 1/4% Notes and 9 1/8% Notes were called at a redemption price of 101.542% and 103.042%, respectively, of the principal amount thereof plus accrued and unpaid interest. The 9 1/4% Notes and 9 1/8% Notes ceased to accrue interest as of the respective redemption dates indicated above. The Company used the estimated net after tax proceeds from the sale of Ply Gem of approximately $450,000,000, together with existing cash on hand, to fund the redemption of the 9 1/4% Notes and 9 1/8% Notes. On February 13, 2004, the Company called for redemption on March 14, 2004 $60,000,000 of Nortek’s outstanding 8 7/8% Senior Notes due 2008 (“8 7/8% Notes”). On March 1, 2004, the Company called for redemption on March 31, 2004 the remaining $150,000,000 of Nortek’s outstanding 8 7/8% Notes (see below). The 8 7/8% Notes were called at a redemption price of 104.438% of the principal amount thereof plus accrued and unpaid interest.

On March 1, 2004, Nortek completed the sale of $200,000,000 of Senior Floating Rate Notes due 2010 (the “Floating Rate Notes”). The Floating Rate Notes will bear interest at a rate per annum equal to LIBOR, as defined, plus 3% (4.17% as of March 1, 2004). Interest on the Floating Rate Notes will be determined and payable semi-annually on June 30 and December 31 of each year commencing June 30, 2004. Nortek incurred fees and expenses, including the initial purchaser’s discount, of approximately $4,000,000 in connection with the sale, which will be amortized over the life of the Floating Rate Notes. The Floating Rate Notes are unsecured obligations of Nortek, which mature on December 31, 2010, and may be redeemed in whole or in part prior to December 31, 2010 at the redemption prices as defined in the indenture governing the Floating Rate Notes (the “Nortek Indenture”). The Nortek Indenture contains covenants that limit Nortek’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Floating Rate Notes require Nortek to register notes having substantially identical terms (the “Nortek Exchange Notes”) with the SEC as part of an offer to exchange freely tradable Nortek Exchange Notes for the Floating Rate Notes (the “Nortek Exchange”). In the event Nortek does not complete the Nortek Exchange in accordance with the timing requirements outlined in the Indenture, Nortek may be required to pay a higher interest rate. Nortek expects to complete the Exchange within the required time period.

Approximately $60,000,000 principal amount of the 8 7/8% Notes ceased to accrue interest as of March 14, 2004 and approximately $150,000,000 principal amount of such Notes will cease to accrue interest as of March 31, 2004. The Company will use the net proceeds of approximately $196,000,000 from the sale of the Floating Rate Notes, together with existing cash on hand, to fund the redemption of the 8 7/8% Notes.

The Company expects that the redemption of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% will result in a pre-tax loss of approximately $11,500,000, based upon the difference between the respective redemption prices indicated above and the estimated carrying values at the redemption dates of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% Notes, which include the principal amount to be redeemed and the estimated remaining unamortized premium recorded in connection with the Recapitalization (see Note 16 of the Notes to the Consolidated Financial Statements included elsewhere herein). The Company will record such loss in the first quarter of 2004.

The Company’s pro forma interest expense for the year ended December 31, 2003 would have been approximately $78,300,000, after adjusting the combined historical interest expense for the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to December 31, 2003 to give effect to the redemption of the 9 1/4% Notes, 9 1/8% Notes and 8 7/8% Notes, the sale of the Floating Rate Notes and the sale of the Senior Discount Notes, as if they had occurred on January 1, 2003.

The table that follows is a summary of maturities of the Company’s debt obligations, including the offerings and redemptions discussed in the previous paragraphs and excluding unamortized debt premiums:

2004	$	710,300,000
2005		2,700,000
2006		1,300,000
2007		900,000
2008		900,000
Thereafter		975,100,000

The Company expects to meet its cash flow requirements for debt payments and retirements through fiscal 2004 from, net proceeds from the sale of Ply Gem in February 2004, net proceeds from the sale of Senior Floating Rate Notes in February 2004 and existing cash and cash equivalents.

On March 9, 2004, the Company acquired OmniMount Systems, Inc. (“OmniMount”) for approximately $16,500,000 in cash. OmniMount is a manufacturer and designer of speaker mountings and other products to maximize the home theater experience. Net sales, operating earnings and depreciation and amortization were approximately $28,300,000, $3,500,000 and $231,000, respectively, for the year ended December 31, 2003.

Report of Independent Auditors

To Nortek Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Nortek Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders’ investment, and cash flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002. Our audits also included the financial statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nortek Holdings, Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 2003 the Company changed its method of accounting for stock-based compensation, pursuant to the adoption of Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure an Amendment of FASB statement No. 123. As discussed in Note 1 to the consolidated financial statements, in 2002 the Company changed its method of accounting for goodwill and other intangible assets, pursuant to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

ERNST & YOUNG, LLP

Boston, Massachusetts
March 26, 2004

NORTEK HOLDINGS, INC. (PARENT COMPANY)
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Condensed Balance Sheet

	December 31,
	2003		2002
	(Amounts in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	11,771	$	--
Investments and Other Assets:
Net intercompany balance and investment in subsidiaries		537,290		317,505
Deferred debt expense, net		9,801		--
		547,091		317,505
	$	558,862	$	317,505
Liabilities and Stockholders’ Investment
Current Liabilities:
Accounts payable	$	8	$	--
Accrued expenses		5,730		--
		5,738		--
10% Senior Discount Notes due 2011		352,916		--
Commitments and Contingencies (Note 3)
Stockholders’ Investment:
Preference stock, $1.00 par value; authorized 7,000,000 shares;
none issued as of December 31, 2002		--		--
Series B preference stock, $1.00 par value; authorized
19,000,000 shares; 8,130,442 shares issued and outstanding
as of December 31, 2003		8,130		--
Class A common stock, $1.00 par value; authorized 19,000,000
shares; 397,380 shares issued and outstanding as of
December 31, 2003		397		--
Class B common stock, $1.00 par value; authorized 14,000,000
shares; none issued and outstanding as of December 31, 2003		--		--
Common Stock, $1.00 par value; authorized 40,000,000 shares;
10,502,627 shares issued and outstanding as of
December 31, 2002		--		10,503
Special Common Stock, $1.00 par value; authorized 5,000,000
shares; 501,224 shares issued and outstanding as of
December 31, 2002		--		501
Additional paid-in capital		172,244		108,617
Retained earnings		--		255,366
Accumulated other comprehensive income (loss)		19,437		(57,482	)
Total stockholders’ investment		200,208		317,505
	$	558,862	$	317,505

The accompanying notes are an integral part of these condensed financial statements.

Condensed Statement of Operations

	For the periods
	Jan. 10, 2003 to			Jan. 1, 2003 to			Nov. 21, 2002 to
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002
	(Amounts in thousands)
Revenues:
Investment income	$	131		$	--		$	--
Expenses:
Selling, general and administrative expense		37			--			--
Interest expense		3,594			--			--
		3,631			--			--
Loss from continuing operations before equity
in subsidiaries’ earnings (loss)		(3,500	)		--			--
Equity in subsidiaries’ earnings (loss) before
provision (benefit) for income taxes		106,800			(82,700	)		7,000
Earnings (loss) from continuing operations before
provision (benefit) for income taxes		103,300			(82,700	)		7,000
Provision (benefit) for income taxes		41,300			(21,800	)		2,900
Earnings (loss) from continuing operations		62,000			(60,900	)		4,100
Earnings (loss) from discontinued operations		12,200			(1,000	)		(5,800	)
Net earnings (loss)	$	74,200		$	(61,900	)	$	(1,700	)

The accompanying notes are an integral part of these condensed financial statements.

Condensed Statement of Cash Flows

	For the periods
	Jan. 10, 2003 to			Jan. 1, 2003 to			Nov. 21, 2002 to
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002
	(Amounts in thousands)
Cash flows from operating activities:
Earnings (loss) from continuing operations	$	62,000		$	(60,900	)	$	4,100
Earnings (loss) from discontinued operations		12,200			(1,000	)		(5,800	)
Net earnings (loss)		74,200			(61,900	)		(1,700	)
Adjustments to reconcile net earnings to cash:
Non-cash interest expense		3,593			--			--
Equity in subsidiaries’ (earnings) loss before
provision (benefit) for income taxes		(106,800	)		82,700			(7,000	)
(Earnings) loss from discontinued operations before
provision (benefit) for income taxes		(19,700	)		1,600			8,700
Current income tax provision (benefit) for
Subsidiary continuing operations		47,300			(27,700	)		2,900
Deferred income tax (credit) provision for
Subsidiary continuing operations		(4,800	)		5,900			(2,100	)
Current income tax provision (benefit) for
discontinued operations		7,000			(600	)		(800	)
Deferred income tax provision (credit) for
discontinued operations		500			--			--
Changes in certain assets and liabilities, net of
effects from acquisitions and dispositions:
Accounts payable		8			--			--
Accrued expenses and taxes		3,995			--			--
Total adjustments to net earnings		(68,904	)		61,900			1,700
Net cash provided by operating activities		5,296			--			--
Cash flows from investing activities:
Redemption of publicly held shares in connection
with the Recapitalization		(469,655	)		--			--
Payment of fees and expenses in connection with
the Recapitalization		(27,900	)		--			--
Net cash used in investing activities	$	(497,555	)	$	--		$	--
Cash flows from financing activities:
Sale of 10% Senior Discount Notes, net of fees	$	339,522		$	--		$	--
Issuance of Series B preference stock in connection
with the Recapitalization		355,923			--			--
Issuance of Class A common stock in connection
with the Recapitalization		3,262			--			--
Issuance of Class A common stock		1,500			--			--
Dividend to preferred and common stockholders		(298,474	)		--			--
Dividends and distributions received from
Nortek, Inc.		--			147,900			--
Purchase of Nortek, Inc. common stock		(41,000	)		(4,603	)		--
Net cash provided by financing activities		360,733			143,297			--
Net (decrease) increase in cash and cash equivalents		(131,526	)		143,297			--
Cash and cash equivalents at the beginning of the period		143,297			--			--
Cash and cash equivalents at the end of the period	$	11,771		$	143,297		$	--

The accompanying notes are an integral part of these condensed financial statements.

Notes to Condensed Financial Statements
December 31, 2003

1. On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of the Company was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”), a Delaware corporation formed on June 19, 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). From June 19, 2002 through November 20, 2002, Holdings was a wholly owned subsidiary of Nortek, which had no operating or cash flow activity. Prior to the Holdings Reorganization, Nortek was the Registrant and parent company for all filings required by the Securities and Exchange Commission (“SEC”). As of December 31, 2001, Nortek met the restricted net asset requirements under SEC rules and regulations for financial statement schedules and, accordingly, Nortek filed Schedule I - Condensed Financial Information of the Registrant in its Form 10-K for the year ended December 31, 2001. As of December 31, 2003 and 2002, Holdings also met the restricted net asset requirements under SEC rules and regulation, which require Holdings to file Schedule I - Condensed Financial Information of the Registrant. Schedule I - Condensed Financial Information of Registrant included in this Form 10-K provides all parent company information for the periods subsequent to the Holdings Reorganization, when Holdings became the parent company, that are required to be presented in accordance with SEC rules and regulations for financial statement schedules. The Nortek, Inc. (Parent Company) - Schedule I - Condensed Financial Information of Nortek, Inc., which cover the required periods prior to the Holdings Reorganization, are included elsewhere in this Form 10-K and are incorporated herein by reference. The accompanying condensed financial statements have been prepared in accordance with the reduced disclosure requirements permitted by Form 10-K, Part IV, Item 14, Schedule I - Condensed Financial Information of the Registrant. The Consolidated Financial Statements and related notes of Nortek Holdings, Inc. are included elsewhere in this Form 10-K (Part II, Item 8) and are incorporated herein by reference.

On January 9, 2003, Holdings, the parent company of Nortek, was acquired by Kelso and Company L.P. (“Kelso”), and certain members of Nortek’s management in accordance with the Agreement and Plan of Recapitalization by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. dated as of June 20, 2002, as amended, (the “Recapitalization Agreement”) in a transaction valued at approximately $1.6 billion, including the assumption of certain indebtedness (the “Recapitalization”). Holdings accounted for the Recapitalization as a purchase in accordance with the provisions of Statement of Financial Standards No. 141, “Business Combinations”, which resulted in a new valuation for the assets and liabilities of Holdings and its subsidiaries based upon fair values as of the date of the Recapitalization. Refer to Notes 1 and 2 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference for a complete discussion of the Recapitalization and the related purchase accounting recorded by Holdings.

2. In the third quarter of 2001, Holdings adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets and, as required by standard, applied this accounting standard as of January 1, 2001. Adoption of this accounting standard did not result in any material changes in net earnings from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation for all periods presented has been reclassified to conform to the new standard.

On February 12, 2004, Nortek sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”). In 2002 and 2001, Nortek sold certain former subsidiaries of Ply Gem. The sale of the former subsidiaries of Ply Gem in 2002 and 2001 and their related operating results, together with the operating results of Ply Gem, have been excluded from earnings (loss) from continuing operations and have been classified as discontinued operations for all periods presented. Information pertaining to Ply Gem and its subsidiaries is included in Note 10 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

3. On November 24, 2003, Holdings completed the sale of $515,000,000 aggregate principal amount at maturity (approximately $349,400,000 of gross proceeds) of its 10% Senior Discount Notes due May 15, 2011 (“Senior Discount Notes”). The Notes, which are structurally subordinate to all debt and liabilities of Holding’s subsidiaries, were issued and sold in a private Rule 144A offering to institutional investors. Holdings used the net proceeds of the offering to pay a dividend to holders of capital stock of approximately $298,474,000 and to make a capital contribution to Nortek of $41,000,000. Nortek used the capital contribution, together with cash on hand, to make an approximately $41,600,000 distribution to option holders of Holdings’ common stock. The accreted value of the 10% Senior Discount Notes will increase from the date of issuance at a rate of 10% per annum compounded semi-annually such that the accreted value will equal the principal amount at maturity of $515,000,000 on November 15, 2007. No cash interest will accrue on the 10% Senior Discount Notes prior to November 15, 2007 and, thereafter, cash interest will accrue at 10% per annum payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Discount Notes are unsecured obligations of Holdings, which mature on May 15, 2011, and may be redeemed in whole or in part at the redemption prices as defined in the indenture governing the Senior Discount Notes (the “Indenture”). The Indenture contains covenants that limit the Company’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Senior Discount Notes require Holdings to register notes having substantially identical terms (the “Holdings Exchange Notes”) with the Securities and Exchange Commission as part of an offer to exchange freely tradable Holdings Exchange Notes for the Senior Discount Notes (the “Holdings Exchange”). In the event the Company does not complete the Holdings Exchange in accordance with the timing requirements outlined in the Indenture, the Company may be required to pay a higher interest rate. The Company expects to complete the Holdings Exchange within the required time period. See Notes 1 and 6 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

On March 1, 2004, Nortek completed the sale of $200,000,000 of Floating Rate Notes. The Floating Rate Notes will bear interest at a rate per annum equal to LIBOR, as defined, plus 3% (4.17% as of March 1, 2004). Interest on the Floating Rate Notes will be determined and payable semi-annually on June 30 and December 31 of each year commencing June 30, 2004. Nortek incurred fees and expenses, including the initial purchaser’s discount, of approximately $4,000,000 in connection with the sale, which will be amortized over the life of the Floating Rate Notes. See Notes 6 and 16 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

In 2004, Nortek, at various times, either purchased on the open market or called for redemption all of Nortek’s 8 7/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2007 and 9 1/8% Senior Notes due 2007. Nortek used the proceeds from the sale of Ply Gem and the Floating Rates Notes to fund these redemptions. See Notes 6 and 16 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

Descriptions of material contingencies, significant provisions of other long-term debt obligations and commitments of Holdings and its subsidiaries are included in Notes 1, 6 and 9 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

4. At December 31, 2003, Nortek Holding’s subsidiaries, principally Nortek, had unrestricted cash and investments and marketable securities of approximately $182,349,000.

5. Nortek is Nortek Holdings only directly owned subsidiary and all of Holding’s other subsidiaries are either directly or indirectly owned by Nortek. As a result, Holdings ability to receive cash from Nortek is limited to the amount of cash transfers or dividends that can be paid by Nortek, which are restricted under the terms of certain of Nortek’s indebtedness. As part of the Recapitalization, Nortek declared and distributed to the Company a dividend of approximately $120,000,000 and distributed approximately $27,900,000 for reimbursement of fees and expenses of Kelso, which were paid out of Nortek’s unrestricted cash and cash equivalents on hand and were permissible under the most restrictive covenants with respect to the indentures of Nortek’s 8 7/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2007, 9 1/8% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2011 (the “Existing Notes”). At March 26, 2004, approximately $92,300,000 was available for the payment of cash dividends, stock purchases or other restricted payments as defined under the terms of Nortek’s most restrictive indenture based upon the redemption and refinancing of certain of Nortek’s Existing Notes in fiscal 2004. See Notes 6 and 16 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

6. The combined liabilities, excluding deferred income taxes, of Nortek’s subsidiaries as of December 31, 2003 were approximately $1,516,474,000 consisting of $987,059,000 of short and long-term debt (prior to the redemption and refinancing discussed in 5. above), $112,764,000 of accounts payable, $278,968,000 of short and long-term accruals, taxes and other obligations (of which approximately $142,135,000 are classified as short-term) and $137,683,000 of liabilities of discontinued operations.

NORTEK HOLDINGS, INC. (PARENT COMPANY)
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF NORTEK, INC.

Condensed Statement of Operations

	For the Period
	from January 1,			For the Year
	2002 to			Ended
	November 20,			December 31,
	2002			2001
	(Amounts in thousands)
Revenues:
Charges and allocations to subsidiaries	$	21,307		$	30,142
Investment income		2,586			5,514
Other income		48			234
Total revenues		23,941			35,890
Expenses:
Selling, general and administrative expense		59,275			31,173
Loss from debt retirement		--			5,500
Interest expense		52,712			53,540
Other expense		885			689
Total expenses		112,872			90,902
Loss from continuing operations before equity in
subsidiaries’ earnings		(88,931	)		(55,012	)
Equity in subsidiaries’ earnings before provision for income taxes		155,031			115,612
Earnings from continuing operations before provision
for income taxes		66,100			60,600
Provision for income taxes		26,600			27,800
Earnings from continuing operations		39,500			32,800
Earnings (loss) from discontinued operations		24,700			(24,800	)
Net earnings	$	64,200		$	8,000

The accompanying notes are an integral part of these condensed financial statements.

Condensed Statement of Cash Flows

	For the Period
	from January 1,			For the Year
	2002 to			Ended
	November 20,			December 31,
	2002			2001
	(Amounts in thousands)
Cash Flows from operating activities:
Earnings from continuing operations	$	39,500		$	32,800
Loss from discontinued operations		24,700			(24,800	)
Net earnings		64,200			8,000
Adjustments to reconcile net earnings to cash:
Depreciation and amortization expense		313			380
Non-cash interest expense, net		3,351			3,529
Loss on debt retirement		--			5,500
Equity in subsidiaries’ earnings before provision for
income taxes		(155,031	)		(115,612	)
Charges and allocations to subsidiaries		(21,307	)		(30,142	)
Net transfers from subsidiaries, principally cash		205,290			159,112
Deferred federal income tax credit from continuing operations		--			(1,200	)
Deferred federal income tax credit from discontinued operations		--			(3,700	)
Changes in certain assets and liabilities, net of effects
from acquisitions and dispositions:
Notes and accounts receivable and other current assets		(252	)		6
Other assets		(4,777	)		(428	)
Accounts payable		(5,352	)		4,231
Accrued expenses and taxes		51,482			3,194
Long-term liabilities		6,580			1,710
Other, net		738			80
Total adjustments to net earnings		81,035			26,660
Net cash provided by operating activities		145,235			34,660
Cash Flows from investing activities:
Capital expenditures	$	(120	)	$	(1,556	)
Purchases of investments and marketable securities		(236,926	)		(117,798	)
Proceeds from the sale of investments and marketable securities		148,227			76,968
Cash contributed to subsidiaries for businesses acquired		--			(1,900	)
Change in restricted cash, investments and marketable securities		(2	)		5,201
Net cash used in investing activities		(88,821	)		(39,085	)
Cash Flows from financing activities:
Sale of 9 7/8% Senior Subordinated Notes due 2011		--			241,800
Redemption of 9 7/8% Senior Subordinated Notes due 2004		--			(207,700	)
Repayment of other long-term debt		(5	)		(5,005	)
Payment of fees associated with Nortek’s Senior Secured
Credit Facility		(3,873	)		--
Exercise of stock options		615			1,307
Purchase of Nortek Common and Special Common Stock		--			(3	)
Other, net		27			68
Net cash (used in) provided by financing activities		(3,236	)		30,467
Net increase in unrestricted cash and investments		53,178			26,042
Unrestricted cash and investments at the beginning of the year		83,260			57,218
Unrestricted cash and investments at the end of the year	$	136,438		$	83,260
Interest paid on indebtedness	$	38,277		$	51,985
Net income taxes paid, including amounts paid by subsidiaries	$	16,900		$	4,500

The accompanying notes are an integral part of these condensed financial statements.

Notes to Condensed Financial Statements
For the Period from January 1, 2002 to December 31, 2002

1. On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of the Company was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”), a Delaware corporation formed in 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). Prior to the Holdings Reorganization, Nortek was the Registrant and parent company for all filings required by the Securities and Exchange Commission (“SEC”). As of December 31, 2001, Nortek met the restricted net asset requirements under SEC rules and regulations for financial statement schedules and, accordingly, Nortek filed Schedule I - Condensed Financial Information of the Registrant in its Form 10-K for the year ended December 31, 2001. As of December 31, 2003 and 2002, Holdings also met the restricted net assets requirements under SEC rules and regulation, which require Holdings to file Schedule I - Condensed Financial Information of the Registrant. Schedule I - Condensed Financial Information of Nortek included in this Form 10-K Statement provides all parent company information for the periods prior to the Holdings Reorganization, when Nortek was the parent company, that are required to be presented in this Form 10-K in accordance with SEC rules and regulations for financial statement schedules. The Nortek Holdings, Inc. (Parent Company) - Schedule I - Condensed Financial Information of Registrant, which cover the required periods subsequent to the Holdings Reorganization, are included elsewhere in this Form 10-K and are incorporated herein by reference. The accompanying condensed financial statements have been prepared in accordance with the reduced disclosure requirements permitted by Form 10-K, Part IV, Item 14, Schedule I - Condensed Financial Information of the Registrant. The Consolidated Financial Statements and related notes of Nortek Holdings, Inc. are included elsewhere in this Form 10-K (Part II, Item 8) and are incorporated herein by reference.

2. In the third quarter of 2001, Nortek adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets and, as required by standard, applied this accounting standard as of January 1, 2001. Adoption of this accounting standard did not result in any material changes in net earnings from accounting standards previously applied. Adoption of this standard did result in the accounting for the gain (loss) on the sale of certain businesses and their related operating results as discontinued operations. The presentation for all periods presented has been reclassified to conform to the new standard.

On February 12, 2004, Nortek sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”). In 2002 and 2001, Nortek sold certain former subsidiaries of Ply Gem. The sale of the former subsidiaries of Ply Gem in 2002 and 2001 and their related operating results, together with the operating results of Ply Gem, have been excluded from earnings from continuing operations and have been classified as discontinued operations for all periods presented. Information pertaining to Ply Gem and its subsidiaries is included in Note 10 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

3. Descriptions of material contingencies, significant provisions of long-term debt obligations and commitments of Nortek and Holdings are included in Notes 1, 6 and 9 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

4. Included in interest expense in the accompanying condensed statement of operations for the period from January 1, 2002 to November 20, 2002 and the year ended December 31, 2001 is approximately $6,900,000 and $3,900,000, respectively, related to notes payable to a subsidiary of Nortek that bear interest at rates ranging from 8% to 10%. Interest expense allocated to discontinued operations in the accompanying condensed statement of operations for the period from January 1, 2002 to November 20, 2002 and the year ended December 31, 2001 is approximately $37,800,000 and $41,800,000, respectively.

5. Included in the Registrant’s condensed statement of cash flows for the year ended December 31, 2001 (in net transfers from subsidiaries, principally cash) are non-cash dividends (declared by subsidiaries’ Board of Directors) from subsidiaries of approximately $280,000,000.

NORTEK HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

											Balance at
	Balance at				Charged to			Deduction			at
	Beginning		Charged to Cost		Other			from			End of
Classification	of Year		and Expense		Accounts			Reserves			Year
	(Amounts in thousands)
For the year-ended December 31, 2001:
Allowance for doubtful accounts and sales allowances	$	4,069	$	2,196	$	(171	)(b)	$	(1,331	)(a)	$	4,763
For the year-ended December 31, 2002:
Allowance for doubtful accounts and sales allowances	$	4,763	$	3,035	$	70	(b)	$	(1,865	)(a)	$	6,003
For the year-ended December 31, 2003:
Allowance for doubtful accounts and sales allowances	$	6,003	$	3,431	$	711	(b)	$	(4,265	)(a)	$	5,880

(a)	Amounts written off, net of recoveries
(b)	Other including acquisitions

EXHIBIT INDEX

Exhibits marked with an asterisk are filed herewith. The remainder of the exhibits have heretofore been filed with the Commission and are incorporated herein by reference. Exhibits marked with a double asterisk identify each management contract or compensatory plan or arrangement.

2.1 Agreement and Plan of Recapitalization, dated as of June 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit 2 to Nortek, Inc.’s Form 8-K filed June 24, 2002).

2.2 Amendment No. 1 to Agreement and Plan of Recapitalization, dated as of September 16, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit 2 to Nortek, Inc.’s Form 8-K filed September 16, 2002).

2.3 Agreement and Plan of Merger by and among Nortek, Inc. and Nortek Holdings, Inc. and Nortek Holdings Merger Sub, Inc., dated as of November 20, 2002. (Exhibit 2.1 to Form 8-K filed November 20, 2002).

2.4 Amendment No. 2 to Agreement and Plan of Recapitalization, dated November 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit (d)(13) to Nortek, Inc.’s Amendment No. 3 to Schedule 13E-3 filed November 27, 2002).

2.5 Amendment No. 3 to Agreement and Plan of Recapitalization, dated December 4, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit (d)(15) to Amendment No. 4 to Schedule 13E-3 filed December 4, 2002).

*3.1 Amended and Restated Certificate of Incorporation of Nortek Holdings, Inc.

*3.2 Amended and Restated By-laws of Nortek Holdings, Inc., effective December 8, 2003.

*4.1 Indenture dated as of November 24, 2003 by and between Nortek Holdings, Inc. and U.S. Bank National Association, relating to the 10% Senior Discount Notes due 2011.

4.2 Indenture dated as of June 12, 2001 between Nortek, Inc. and State Street Bank and Trust Company, as Trustee, relating to the 9 7/8% Senior Subordinated Notes due 2011 (Exhibit 4.1 to Nortek, Inc.’s Registration Statement No. 333-64130 filed July 11, 2001).

4.3 Indenture dated as of March 1, 2004 by and between Nortek, Inc. and U.S. Bank National Association, as Trustee relating to the Senior Floating Rate Notes due 2010 (Exhibit 4.3 to Nortek, Inc.’s form 10-K filed March 30,2004).

*4.4 Registration Rights Agreement dated as of November 24, 2003 by and among Nortek Holdings, Inc., Deutsche Bank Securities, Inc., UBS Securities LLC, Credit Suisse First Boston LLC and Bear, Stearns & Co., Inc.

4.5 Registration Rights Agreement dated as of March 1, 2004 by and among Nortek, Inc., Deutsche Bank Securities, Inc., Fleet Securities, Inc. and UBS Securities LLC (Exhibit 4.5 to Nortek, Inc.’s form 10-K filed March 30,2004).

4.6 Registration Rights Agreement, dated as of January 9, 2003, among Nortek Holdings, Inc., Nortek, Inc., Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC, KEP VI, LLC, the Third Party Investors and the Management Stockholders (Exhibit 4.8 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

9.1 Voting Agreement, dated as of June 20, 2002, by and among Nortek, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 9 to Nortek, Inc.’s Form 8-K filed June 24, 2002).

**10.1 Change in Control Severance Benefit Plan for Key Employees adopted February 10, 1986, and form of agreement with employees (Exhibit 10.19 to Nortek, Inc.’s Form 10-K filed March 31, 1986).

**10.2 Change in Control Severance Benefit Plan for Key Employees as Amended and Restated June 12, 1997, and form of agreement with employees (Exhibit 10.1 to Nortek, Inc.’s Form 10-Q filed August 8, 1997).

**10.3 Form of Indemnification Agreement between Nortek, Inc. and its directors and certain officers (Appendix C to Nortek, Inc.’s Proxy Statement dated March 23, 1987 for Annual Meeting of Nortek Stockholders).

10.4 Split Dollar Agreement dated as of June 29, 1999 between Nortek, Inc. and Douglass N. Ellis, Jr. as trustee of The Richard L. Bready and Cheryl A. Bready 1998 Irrevocable Trust, together with appendix prepared by Nortek, Inc. (Exhibit 10.7 to Nortek, Inc.’s Form 10-Q filed August 11, 2000).

10.5 Split Dollar Agreement dated as of June 29, 1999 between Nortek, Inc. and Almon C. Hall, together with appendix prepared by Nortek, Inc. (Exhibit 10.8 to Nortek, Inc.’s Form 10-Q filed August 11, 2000).

10.6 Split Dollar Agreement dated as of June 29, 1999 between Nortek, Inc. and Mark Richard Harris and Pamela Jean Harris as trustees of the Richard J. and Carole M. Harris 1999 Irrevocable Trust, together with appendix prepared by Nortek, Inc. (Exhibit 10.9 to Nortek, Inc.’s Form 10-Q filed August 11, 2000).

**10.7 Exchange Agreement, dated June 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 5 to Schedule 13D/A filed by Richard L. Bready on June 24, 2002).

10.8 $200,000,000 Loan and Security Agreement, dated as of July 25, 2002, among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporation, Individually and as Administrative Agent and Fleet Capital Canada Corporation, Individually and as Canadian Agent. (Exhibit 10.1 to Nortek, Inc.’s Form 10-Q filed August 13, 2002).

**10.9 Amendment No. 1 to Exchange Agreement, dated September 16, 2002, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 2 to Schedule 13D/A filed by Richard L. Bready on September 18, 2002).

**10.10 Nortek, Inc., Nortek Holdings, Inc. and Richard L. Bready Employment Agreement dated January 9, 2003 (Exhibit 10.13 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

**10.11 Nortek, Inc., Nortek Holdings, Inc. and Kevin W. Donnelly Employment Agreement dated January 9, 2003 (Exhibit 10.14 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

**10.12 Nortek, Inc., Nortek Holdings, Inc. and Almon C. Hall, III Employment Agreement dated January 9, 2003 (Exhibit 10.15 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

**10.13 Amendment No. 2 to Exchange Agreement, dated January 9, 2003, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 10.6 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

10.14 Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and RGIP, LLC (Exhibit 10.17 to Form 10-K filed March 27, 2003).

10.15 Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and Magnetitte Asset Investors III, LLC (Exhibit 10.18 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

10.16 Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and Daroth Investors LLC (Exhibit 10.19 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

10.17 Stockholders Agreement, dated as of January 9, 2003 by and among Nortek Holdings, Inc., Nortek, Inc., Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC, KEP VI, LLC, the Third Party Investors and the Management Stockholders (Exhibit 10.20 to Nortek, Inc.’s Form 10-K filed March 27, 2003).

10.18 Nortek Holdings, Inc. 2002 Stock Option Plan (Exhibit 10.9 to Nortek, Inc.’s Form 10-Q filed May 19, 2003).

*10.19 Equity Subscription Agreement, dated July 11, 2003 between Nortek Holdings, Inc. and Jeremy Burkhardt.

*/**10.20 Equity Subscription Agreement, dated October 31, 2003 among Nortek Holdings, Inc., Jeffery C. Bloomberg and Jeffrey C. Bloomberg as Trustee of the Jeffrey C. Bloomberg Family Trust.

10.21 Amendment No.1 to the Credit Agreement, dated as of February 12, 2004 by and among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporate, individually and as Administrative Agent and Fleet Capital Canada Corporation, individually and as Canadian Agent (Exhibit 10.21 to Nortek, Inc.’s Form 10-K filed March 30, 2004).

10.22 Amendment No. 2 to the Credit Agreement, dated as of February 20, 2004 by and among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporate, individually and as Administrative Agent and Fleet Capital Canada Corporation, individually and as Canadian Agent (Exhibit 10.22 to Nortek, Inc.’s Form 10-K filed March 30, 2004).

**10.23 Nortek, Inc. Supplement Executive Retirement Plan C, dated December 18, 2003 (Exhibit 10.23 to Nortek, Inc.’s Form 10-K filed March 30, 2004).

*14.1 Code of Ethics

16.1 Letter from Nortek, Inc.’s former independent accountant regarding its concurrence or disagreement with statements made by Nortek, Inc. in the current report concerning the resignation or dismissal as Nortek, Inc.’s principal accounts. (Exhibit 16 to Nortek, Inc.’s Form 8-K filed June 28, 2002).

*21.1 List of subsidiaries.

*31.1 Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2 Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

EX-3

Exhibit 3.1

EX-4

Exhibit 4.1

___________________________________________________________________________

NORTEK HOLDINGS, INC., as the Issuer,

and

U.S. BANK NATIONAL ASSOCIATION, as Trustee

_________________

INDENTURE

_________________

Dated as of November 24, 2003

_________________

10% Senior Discount Notes due 2011

___________________________________________________________________________

CROSS-REFERENCE TABLE

TIA	Indenture
Section	Section

310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	7.08; 7.10
(b)	7.08; 7.10; 12.02
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.06
(b)	12.03
(c)	12.03
313(a	7.06
(b)(1)	7.06
(b)(2)	7.06
(c)	7.06; 12.02
(d)	7.06
314(a)	4.06; 4.17
(b)	N.A.
(c)(1)	7.02; 12.04; 12.05
(c)(2)	7.02; 12.04; 12.05
(c)(3)	N.A.
(d)	N.A.
(e)	12.05
(f)	N.A.
315(a)	7.01(b)
(b)	7.05
(c)	7.01(a)
(d)	6.05; 7.01(c)
(e)	6.11
316(a)(last sentence)	2.10
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	9.02
(b)	6.07
(c)	9.04
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.05
318(a)	12.01
(c)	12.01

N.A. means Not Applicable

Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture.

TABLE OF CONTENTS

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01	Definitions	1
SECTION 1.02	Other Definitions	21
SECTION 1.03	Incorporation by Reference of TIA	22
SECTION 1.04	Rules of Construction	23

ARTICLE II
THE NOTES

SECTION 2.01	Amount of Notes	23
SECTION 2.02	Form and Dating	24
SECTION 2.03	Execution and Authentication	24
SECTION 2.04	Registrar and Paying Agent	25
SECTION 2.05	Paying Agent To Hold Assets in Trust	26
SECTION 2.06	Holder Lists	26
SECTION 2.07	Transfer and Exchange	26
SECTION 2.08	Replacement Notes	27
SECTION 2.09	Outstanding Notes	27
SECTION 2.10	Treasury Notes	27
SECTION 2.11	Temporary Notes	28
SECTION 2.12	Cancellation	28
SECTION 2.13	Defaulted Interest	28
SECTION 2.14	CUSIP Number	29
SECTION 2.15	Deposit of Moneys	29
SECTION 2.16	Book-Entry Provisions for Global Notes	29
SECTION 2.17	Special Transfer Provisions	31
SECTION 2.18	Computation of Interest	33

ARTICLE III
REDEMPTION

SECTION 3.01	Notices to Trustee	33
SECTION 3.02	Selection of Notes To Be Redeemed	33
SECTION 3.03	Notice of Redemption	34
SECTION 3.04	Effect of Notice of Redemption	35
SECTION 3.05	Deposit of Redemption Price	35
SECTION 3.06	Notes Redeemed in Part	35

ARTICLE IV
COVENANTS

SECTION 4.01	Payment of Notes	36
SECTION 4.02	Maintenance of Office or Agency	36
SECTION 4.03	Corporate Existence	36
SECTION 4.04	Payment of Taxes and Other Claims	36
SECTION 4.05	Maintenance of Properties and Insurance	37
SECTION 4.06	Compliance Certificate; Notice of Default	37
SECTION 4.07	Compliance with Laws	38
SECTION 4.08	Waiver of Stay, Extension or Usury Laws	38
SECTION 4.09	Change of Control	38
SECTION 4.10	Limitation on Additional Indebtedness	40
SECTION 4.11	Restricted Payments	44
SECTION 4.12	Liens	46
SECTION 4.13	Limitation on Use of Proceeds from Asset Sales	47
SECTION 4.14	Limitation on Transactions with Affiliates	49
SECTION 4.15	Limitations on Certain Restrictions Affecting Subsidiaries	50
SECTION 4.16	Limitation on Guarantees by Certain Subsidiaries	52
SECTION 4.17	Provision of Reports	52
SECTION 4.18	Payments for Consents	53
SECTION 4.19	Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries	54

ARTICLE V
SUCCESSOR CORPORATION

SECTION 5.01 Merger, Consolidation, or Transfer of Assets 54 

ARTICLE VI
DEFAULT AND REMEDIES

SECTION 6.01	Events of Default	55
SECTION 6.02	Acceleration	57
SECTION 6.03	Other Remedies	58
SECTION 6.04	Waiver of Defaults	58
SECTION 6.05	Control by Majority	58
SECTION 6.06	Limitation on Suits	59
SECTION 6.07	Rights of Holders To Receive Payment	59
SECTION 6.08	Collection Suit by Trustee	59
SECTION 6.09	Trustee May File Proofs of Claim	60
SECTION 6.10	Priorities	60
SECTION 6.11	Undertaking for Costs	60

ARTICLE VII
TRUSTEE

SECTION 7.01	Duties of Trustee	61
SECTION 7.02	Rights of Trustee	62
SECTION 7.03	Individual Rights of Trustee	63
SECTION 7.04	Trustee's Disclaimer	63
SECTION 7.05	Notice of Default	63
SECTION 7.06	Reports by Trustee to Holders	64
SECTION 7.07	Compensation and Indemnity	64
SECTION 7.08	Replacement of Trustee	65
SECTION 7.09	Successor Trustee by Merger, Etc	66
SECTION 7.10	Eligibility; Disqualification	66
SECTION 7.11	Preferential Collection of Claims Against the Issuer	66

ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01	Termination of the Issuer's Obligations	67
SECTION 8.02	Legal Defeasance and Covenant Defeasance	68
SECTION 8.03	Conditions to Legal Defeasance or Covenant Defeasance	69
SECTION 8.04	Application of Trust Money	70
SECTION 8.05	Repayment to the Issuer	71
SECTION 8.06	Reinstatement	71

ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.01	Without Consent of Holders	71
SECTION 9.02	With Consent of Holders	72
SECTION 9.03	Compliance with TIA	73
SECTION 9.04	Revocation and Effect of Consents	73
SECTION 9.05	Notation on or Exchange of Notes	73
SECTION 9.06	Trustee To Sign Amendments, Etc	74

ARTICLE X
[RESERVED]

ARTICLE XI
[RESERVED]

ARTICLE XII
MISCELLANEOUS

SECTION 12.01	TIA Controls	74
SECTION 12.02	Notices	74
SECTION 12.03	Communications by Holders with Other Holders	75
SECTION 12.04	Certificate and Opinion as to Conditions Precedent	76
SECTION 12.05	Statements Required in Certificate or Opinion	76
SECTION 12.06	Rules by Trustee, Paying Agent, Registrar	76
SECTION 12.07	Legal Holidays	76
SECTION 12.08	Governing Law	77
SECTION 12.09	No Adverse Interpretation of Other Agreements	77
SECTION 12.10	No Recourse Against Others	77
SECTION 12.11	Successors	77
SECTION 12.12	Duplicate Originals	77
SECTION 12.13	Severability	77

Signatures S-1

EXHIBITS

Exhibit A	Form of Note	A-1
Exhibit B	Form of Legend for 144A Notes and Other Notes That Are Restricted Notes	B-1
Exhibit C	Form of Legend for Regulation S Note	C-1
Exhibit D	Form of Legend for Global Note	D-1
Exhibit E	Form of Certificate To Be Delivered in Connection with Transfers to Non-QUB Accredited Investors	E-1
Exhibit F	Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S	F-1

Note:      This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture.

          INDENTURE dated as of November 24, 2003 between NORTEK HOLDINGS, INC., a Delaware corporation (the "Issuer"), as issuer, and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the "Trustee").

          Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders.

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.      Definitions.

          Set forth below are certain defined terms used in this Indenture.

          "Accreted Value" means, as of any date (the "Specified Date"), the amount provided below for each $1,000 principal amount at maturity of Notes:

(1) if the Specified Date occurs on one of the following dates (each, a "Semi-Annual Accrual Date"), the Accreted Value will equal the amount set forth below for such Semi-Annual Accrual Date:

Semi-Annual Accrual Date		Accreted	Value
May 15, 2004	$	710	.68
November 15, 2004	$	746	.22
May 15, 2005	$	783	.53
November 15, 2005	$	822	.70
May 15, 2006	$	863	.84
November 15, 2006	$	907	.03
May 15, 2007	$	952	.38
November 15, 2007	$	1,000	.00

          (2)      if the Specified Date occurs before the first Semi-Annual Accrual Date, the Accreted Value will equal the sum of (A) the original issue price of a Note (as certified to the Trustee in connection with the initial issuance of the Notes) and (B) an amount equal to the product of (x) the Accreted Value for the first Semi-Annual Accrual Date less such original issue price multiplied by (y) a fraction, the numerator of which is the number of days from the Issue Date to the Specified Date, using a 360-day year of twelve 30-day months, and the denominator of which is the number of days elapsed from the Issue Date to the first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day months;

          (3)      if the Specified Date occurs between two Semi-Annual Accrual Dates, the Accreted Value will equal the sum of (A) the Accreted Value for the Semi-Annual Accrual Date immediately preceding such Specified Date and (B) an amount equal to the product of (x) the Accreted Value for the immediately following Semi-Annual Accrual Date less the Accreted Value for the Semi-Annual Accrual Date immediately preceding such Specified Date multiplied by (y) a fraction, the numerator of which is the number of days from the immediately preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day year of twelve 30-day months, and the denominator of which is 180; or

          (4)      if the Specified Date occurs on or after the Full Accretion Date, the Accreted Value will equal $1,000.

           "Acquired Indebtedness" means, with respect to any Person, Indebtedness of such Person (i) assumed in connection with an acquisition of assets or properties from such Person or (ii) existing at the time such Person becomes a Restricted Subsidiary of any other Person; provided such Person was not immediately prior thereto an Unrestricted Subsidiary (in each case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Restricted Subsidiary).

          "Additional Interest" means all Additional Interest then owing pursuant to the Registration Rights Agreement.

           "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to "control" (including the correlative meanings, the terms "controlling," "controlled by" and "under common control with") another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise.

           "Agent" means any Registrar, Paying Agent or co-Registrar.

           "Allowable Subsidiary Loans" means Indebtedness of the Issuer or any Restricted Subsidiary to a Restricted Subsidiary of the Issuer not to exceed the Net Cash Proceeds received by the Issuer as a result of such Restricted Subsidiary becoming less than a Wholly-Owned Subsidiary through the sale of Equity Interests in compliance with the terms of this Indenture; provided that (i) all such Allowable Subsidiary Loans are contractually subordinated in right of payment to the Notes and (ii) the total amount of all Allowable Subsidiary Loans at any time outstanding does not exceed $35 million.

           "amend" means amend, modify, supplement, restate or amend and restate, including successively; and "amending" and "amended" have correlative meanings.

           "asset" means any asset or property, whether real, personal or other, tangible or intangible.

          "Asset Sale" means, with respect to any Person, the sale, lease, conveyance or other transfer or disposition by such Person of any of its assets or properties (including by way of a sale-and-leaseback and including the sale, issuance or other transfer of any of the Capital Stock of any Subsidiary of such Person), in a single transaction or through a series of related transactions, for aggregate consideration received by such Person or a Subsidiary of such Person (but if such Person is the Issuer or any Restricted Subsidiary of the Issuer, only if such Subsidiary is a Restricted Subsidiary of the Issuer), net of out-of-pocket costs relating thereto (including, without limitation, legal, accounting and investment banking fees and sales commissions), in excess of $5 million. For purposes of this definition, consideration shall include, without limitation, any indebtedness for borrowed money of such Person or such Subsidiary that is assumed by the transferee of any assets or any such indebtedness of any Subsidiary of such Person whose stock is purchased by the transferee. Notwithstanding anything to the contrary in the foregoing provisions of this definition, the term "Asset Sale," with respect to any Person, shall not include

          (i)      the sale, lease or other transfer or disposition of assets acquired and held for resale in the ordinary course of business;

          (ii)      the sale, lease or other transfer or disposition of assets in accordance with Section 5.01;

          (iii)      the sale, lease or other transfer or disposition of damaged, worn-out or obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of the business of such Person or its Subsidiaries;

          (iv)      the abandonment of assets or properties which are no longer useful in the business of such Person or its Subsidiaries and are not readily saleable:

          (v)      the granting of any Lien permitted under Section 4.12 (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure);

          (vi)      any sale, lease, assignment or other disposition by such Person or its Subsidiaries if such Person has outstanding senior debt securities all of which are rated BBB- or higher by S&P and have not been placed on credit watch by S&P for a possible downgrade or are rated Baa3 or higher by Moody's and have not been placed on credit watch by Moody's for a possible downgrade; or

          (vii)      the sale or other transfer or disposition of receivables in connection with an asset securitization transaction by such Person or its Subsidiaries.

          "Average Life" means, as of the date of determination, with respect to any debt security, the quotient obtained by dividing (i) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment (assuming the exercise by the obligor of such debt security of all unconditional (other than as to the giving of notice) extension options of each such scheduled payment date) of such debt security multiplied by the amount of such principal payment by (ii) the sum of all such principal payments.

          "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors.

          "Board of Directors" means:

          (1)      with respect to a corporation, the board of directors of the corporation;

          (2)      with respect to a partnership, the Board of Directors of the general partner of the partnership; and

          (3)      with respect to any other Person, the board or committee of such Person serving a similar function.

          "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

          "Broan-NuTone Canada, Inc. Credit Facility" means a credit facility between Broan-NuTone Canada, Inc. or any of the Canadian Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time.

          "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in the City of New York or St. Paul, Minnesota are required or authorized by law or other governmental action to be closed.

          "Canadian Subsidiary" means any Subsidiary of Broan-NuTone Canada, Inc. and any Subsidiary of the Issuer whose headquarters is located in Canada.

          "Capital Lease Obligations" means, with respect to any Person, all obligations under leases of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP, and for purposes of this Indenture the amount of such obligations at any time shall be the aggregate capitalized amount thereof at such time, as determined in accordance with GAAP.

          "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock (including common or preferred stock), partnership interests or any other participation right or other interest in the nature of an equity interest in such Person.

          "Cash Equivalents" means (i) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by the United States of America, or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), (ii) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, BBB- or better by S&P or Moody's or the equivalent of such rating by a successor rating agency, (iii) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Issuer) organized and existing under the laws of the United States of America or any State thereof or the District of Columbia which is rated, at the time as of which any Investment therein is made, P-1 or better by Moody's or A-1 or better by S&P, or the equivalent of such rating by a successor rating agency, (iv) Investments in mutual funds, money market funds, investment pools and other savings vehicles, substantially all of the assets of which are invested in Investments described in clause (i), (ii) or (iii) above, and (v) in the case of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries, (a) any evidence of Indebtedness, maturing not more than 365 days after the date of acquisition, issued or fully guaranteed or insured by Canada or any instrumentality or agency thereof (provided that the full faith and credit of Canada is pledged in support thereof), (b) any certificate of deposit, overnight bank deposit or bankers' acceptance, maturing not more than 365 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution having unsecured long-term debt (or whose holding company has unsecured long-term debt) rated, at the time as of which any Investment therein is made, A or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency and (c) commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Issuer) organized and existing under the laws of Canada or any province thereof which is rated, at the time as of which any Investment therein is made, R-1 or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency.

          "Change of Control" means such time as any of the following events occurs:

          (i)      there is consummated any consolidation or merger of the Issuer with or into another corporation, or all or substantially all of the assets of the Issuer are sold, leased or otherwise transferred or conveyed to another Person (other than pursuant to a bona fide pledge of assets to secure Indebtedness made in accordance with this Indenture), and the holders of the Issuer's common stock outstanding immediately prior to such consolidation, merger, sale, lease or other transfer or conveyance or one or more Exempt Persons do not hold, directly or indirectly, at least a majority of the common stock of the continuing or surviving corporation immediately after such consolidation or merger or at least a majority of the Equity Interests of such Person;

           (ii)      any person (defined, solely for the purposes of Section 4.09, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the combined voting power of all the Issuer's then outstanding securities entitled to vote generally for the election of directors; provided, however, that a person shall not be deemed to be the beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or associates until such tendered securities are accepted for purchase or exchange thereunder, or (B) any securities if such beneficial ownership arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act; or

          (iii)      during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Issuer (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Issuer was approved by a vote of 66 2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or is approved or designated by an Exempt Person) cease for any reason to constitute a majority of the Board of Directors of the Issuer then in office.

          Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred under clause (ii) of the immediately preceding paragraph solely by virtue of the Issuer, any Subsidiary of the Issuer, any employee stock ownership plan or any other employee benefit plan of the Issuer or any such Subsidiary, any other person holding securities of the Issuer for or pursuant to the terms of any such employee benefit plan, or any Exempt Person, beneficially owning securities of the Issuer equal to or greater than 50% of the combined voting power of the Issuer's then outstanding securities entitled to vote generally for the election of directors or otherwise.

          "Change of Control Premium" shall mean (i) in the case of a Change of Control Redemption occurring prior to November 15, 2004, 15% of the Accreted Value of the Notes, (ii) in the case of a Change of Control Redemption occurring on or after November 15, 2004, but prior to November 15, 2005, 12.5% of the Accreted Value of the Notes, and (iii) in the case of a Change of Control Redemption occurring on or after November 15, 2005 but prior to November 15, 2006, 10% of the Accreted Value of the Notes.

          "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code as in effect on the Issue Date and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor.

           "Commission" means the Securities and Exchange Commission.

          "Commodity Agreement" means any agreement or arrangement designed to protect the Issuer or any of its Restricted Subsidiaries against fluctuations in the prices of commodities used by the Issuer or any of its Subsidiaries in the ordinary course of business.

          "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of such Person and its Subsidiaries (or if such Person is the Issuer, the amortization expense of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, the amortization expense of Nortek and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP, excluding any amortization expense included in Consolidated Interest Expense.

          "Consolidated Cash Flow" means, with respect to any Person for any period, the sum of, without duplication, (i) Consolidated Net Income of such Person for such period, (ii) Consolidated Interest Expense of such Person for such period, (iii) Consolidated Income Tax Expense of such Person for such period, (iv) Consolidated Depreciation Expense of such Person for such period, (v) Consolidated Amortization Expense of such Person for such period, and (vi) the amount, not to exceed 10% of Consolidated Cash Flow of such Person for such period (which amount shall be excluded in determining such Consolidated Cash Flow), by which (A) other non-cash items of expense that reduce Consolidated Net Income of such Person for such period exceed (B) other non-cash items of expense that increase Consolidated Net Income of such Person for such period.

          "Consolidated Cash Flow Coverage Ratio" means, with respect to any Person for any period, the ratio of Consolidated Cash Flow of such Person for such period to Consolidated Interest Expense of such Person for such period; provided, however, that Consolidated Cash Flow and Consolidated Interest Expense shall be calculated on a pro forma basis after giving effect, as if occurring at the beginning of such period, to (i) the incurrence of Indebtedness giving rise to the need to calculate the Consolidated Cash Flow Coverage Ratio and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (ii) the incurrence, during such period or since the last day of such period, of any Indebtedness (other than Indebtedness incurred for working capital purposes), and the retirement of any Indebtedness refinanced with the proceeds of such Indebtedness, (iii) the acquisition by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Issuer or Nortek and directly or through a Subsidiary of such Person if such Person is not the Issuer or Nortek) of any company or business during such period or since the last day of such period and (iv) the sale or other disposition of assets or properties outside the ordinary course of business by such Person (directly or through a Restricted Subsidiary of such Person if such Person is the Issuer or Nortek and directly or through a Subsidiary of such Person if such Person is not the Issuer or Nortek) and the actual application of the proceeds therefrom during such period or since the last day of such period.

          "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation and depletion expense of such Person and its Subsidiaries (or if such Person is the Issuer, the depreciation and depletion expense of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, the depreciation and depletion expense of Nortek and its Restricted Subsidiaries), determined on a consolidated basis for such period in accordance with GAAP.

          "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for federal, state, local and foreign income taxes (including franchise, net worth or similar taxes) of such Person and its Subsidiaries (or if such Person is the Issuer, the provision for such taxes of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, the provision for such taxes of Nortek and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP.

          "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of

          (i)      the interest expense of such Person and its Subsidiaries (or if such Person is the Issuer, the interest expense of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, the interest expense of Nortek and its Restricted Subsidiaries) for such period, determined on a consolidated basis in accordance with GAAP, including, without limitation, all original issue discount and other interest portion of any deferred payment Indebtedness and all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing less any interest income included in Consolidated Net Income for such period, but excluding any deferred financing fees otherwise includible in Consolidated Interest Expense for such period;

          (ii)      the interest component of Capital Lease Obligations paid, accrued and and/or scheduled to be paid or accrued by such Person and its Subsidiaries (or if such Person is the Issuer, such interest expense paid, accrued and/or scheduled to be paid or accrued by the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, such interest expense paid, accrued and/or scheduled to be paid or accrued by Nortek and its Restricted Subsidiaries) during such period as determined on a consolidated basis in accordance with GAAP; and

          (iii)      all cash dividends or other distributions declared or paid on any Capital Stock (other than common stock or preferred stock that is not Redeemable Stock) of such Person and its Subsidiaries (or if such Person is the Issuer, all such dividends or other distributions declared or paid on any such Capital Stock of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, all such dividends or other distributions declared or paid on any such Capital Stock of Nortek and its Restricted Subsidiaries) for such period as determined on a consolidated basis in accordance with GAAP;

provided,however, that any Indebtedness bearing a floating rate of interest shall be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period.

          "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Subsidiaries (or if such Person is the Issuer, the aggregate net income (or loss) of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, the aggregate net income (or loss) of Nortek and its Restricted Subsidiaries) for such period, before discontinued operations, extraordinary items and the cumulative effect of a change in accounting principles, determined on a consolidated basis in accordance with GAAP; provided that there shall also be excluded from Consolidated Net Income (but only to the extent included in calculating such Consolidated Net Income):

          (i)      any net gains or losses in respect of dispositions of assets other than in the ordinary course of business;

          (ii)      any gains from currency exchange transactions not in the ordinary course of business consistent with past practice;

          (iii)      any gains or losses realized from the termination of any employee pension benefit plan;

          (iv)      any gains or losses realized upon the refinancing of any Indebtedness of such Person or any of its Subsidiaries (or if such Person is the Issuer, any gains or losses realized upon the refinancing of any Indebtedness of the Issuer and its Restricted Subsidiaries, or if such Person is Nortek, any gains or losses realized upon the refinancing of any Indebtedness of Nortek and its Restricted Subsidiaries);

          (v)      any gains or losses arising from the destruction of property or assets due to fire or other casualty;

          (vi)      any gains or losses from the revaluation of property or assets;

          (vii)      the net income (or loss) of any Person that is not a Subsidiary of such first Person (or that is not a Restricted Subsidiary of the Issuer, if such first Person is the Issuer, or that is not a Restricted Subsidiary of Nortek, if such first Person is Nortek) except to the extent of cash dividends or distributions paid to such first Person by such other Person in such period;

          (viii)      the net income (or loss) of any Subsidiary of such first Person except to the extent of the interest of such Person in such Subsidiary;

          (ix)      the net income of any Subsidiary of such Person (or if such Person is the Issuer, of any Restricted Subsidiary of the Issuer, or if such Person is Nortek, of any Restricted Subsidiary of Nortek) that is subject to any restriction or limitation on the payment of dividends and other distributions (including loans or advances) by operation of the terms of its charter or by agreement, instrument, judgment, decree, order or governmental regulation applicable to such Subsidiary (or such Restricted Subsidiary, if applicable) to the extent of such restriction or limitation in such period (other than restrictions or limitations permitted under Section 4.15);

          (x)      the net income of any Person acquired in a pooling transaction for any period prior to the date of such acquisition; and

          (xi)      the excess of (a) the consolidated compensation expense recorded by the Issuer in the computation of net earnings of the Issuer or Nortek in respect of shares of Capital Stock (other than Redeemable Stock) or other Equity Interests awarded, pursuant to a plan or other arrangement approved by the Board of Directors of the Issuer (or of a Reporting Subsidiary, if applicable), to or for the benefit of any employee, officer or director of the Issuer or any of its Subsidiaries or to or by any employee stock ownership plan or similar trust for the benefit of any such employee, officer or director, over (b) the amount of consolidated income tax benefit recorded by the Issuer in connection with such consolidated compensation expense of the Issuer.

          "Consolidated Net Worth" means, with respect to any Person at any date of determination, the sum of the Capital Stock, additional paid-in capital and cumulative translation, pension and other adjustment account plus retained earnings (or minus accumulated deficit), excluding amounts attributable to Redeemable Stock, any Capital Stock convertible into Indebtedness, or treasury stock, of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP.

          "Corporate Trust Office" means the corporate trust office of the Trustee located at One Federal Street, 3rd Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Services, or such other office, designated by the Trustee by written notice to the Issuer, at which at any particular time its corporate trust business and this Indenture shall be administered.

          "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Issuer or any of its Restricted Subsidiaries against fluctuations in currency values to or under which the Issuer or any of its Restricted Subsidiaries is a party or a beneficiary on the Issue Date or becomes a party or a beneficiary thereafter.

           "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

           "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.

           "Depositary" shall mean The Depository Trust Company, New York, New York, or a successor thereto registered under the Exchange Act or other applicable statute or regulation.

          "Disinterested Director" means, with respect to any transaction or series of transactions, in respect of which the Board of Directors of the Issuer is required to deliver a Board Resolution under this Indenture, a member of such Board of Directors who does not have any material direct or indirect financial interest in or with respect to such transaction or series of transactions.

          "8 7/8% Notes" means any of Nortek's 8 7/8% Senior Notes due August 1, 2008 issued under the indenture dated as of July 31, 1998 between Nortek and State Street Bank and Trust Company.

          "Eligible Inventory" means, with respect to any Person, the finished goods, raw materials and work-in-process of such Person less any applicable reserves, each of the foregoing determined on the FIFO method of accounting in accordance with GAAP.

          "Eligible Receivables" means, with respect to any Person, the trade receivables of such Person less the allowance for doubtful accounts, each of the foregoing determined in accordance with GAAP.

          "Equity Interests" means Capital Stock, warrants, options or other rights to acquire Capital Stock (but excluding any debt security which is convertible into, or exchangeable for, Capital Stock).

          "Equity Offering" means any public or private issuance by the Issuer of Capital Stock (other than Redeemable Stock) of the Issuer for cash.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

          "Exchange Notes" means the 10% Senior Discount Notes due 2011 to be issued pursuant to this Indenture in connection with (i) a registration pursuant to the Registration Rights Agreement or, (ii) the issuance of Additional Notes issued in accordance with Section 2.01 or any registration of such Additional Notes pursuant to a registration rights agreement.

          "Exempt Person" means (A) (i) Richard L. Bready, (ii) any Person which is an Affiliate of Richard L. Bready or (iii) any other Affiliate of such Person so long as such Person is an Affiliate of Richard L. Bready and (B) Kelso & Company, L.P. and its Affiliates.

          "Existing Indebtedness" means Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Issue Date; provided, that all Indebtedness outstanding under the Nortek Credit Facility on the Issue Date shall not be Existing Indebtedness and shall be deemed to have been incurred under clause (3) of Section 4.10(b).

          "Existing Investments" means (i) Investments of the Issuer and its Restricted Subsidiaries in existence on the Issue Date and (ii) Investments to be made pursuant to commitments authorized by the Board of Directors of Nortek prior to the Issue Date in Ecological Engineering Associates, L.P. in an amount not to exceed $3 million (including such Investments made prior to the Issue Date).

          "Existing Notes" means the 8 7/8% Notes, the 9 1/8% Notes, the 9 1/4% Notes and the 9 7/8% Notes.

          "Fair Market Value" means, with respect to any asset, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of which is under pressure or compulsion to complete the transaction; provided, however, that the Fair Market Value of any asset or assets of the Issuer or any of its Subsidiaries shall be determined by the Board of Directors of the Issuer or, if such Subsidiary is a Reporting Subsidiary, of such Reporting Subsidiary, acting in good faith, and evidenced by a Board Resolution of the Issuer or such Reporting Subsidiary, as the case may be, delivered to the Trustee.

          "Full Accretion Date" means November 15, 2007.

           "GAAP" means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that with respect to the obligations of the Issuer described in Article IV or Section 5.01 hereof and the definitions used herein, GAAP shall be determined on the basis of such principles as in effect on the Issue Date.

          "Global Note" has the meaning set forth in Section 2.16.

          "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged.

           "guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness or other obligations.

           "Holder" or "Noteholder" means the registered holder of any Note.

           "Indebtedness" means, with respect to any Person, without duplication, any indebtedness, contingent or otherwise, (i) with respect to borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or consisting of reimbursement obligations with respect to letters of credit, or (ii) representing the deferred and unpaid balance of the purchase price of any property excluding any such balance that constitutes a trade payable or an accrued liability, in each case arising in the ordinary course of business, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared on a consolidated basis in accordance with GAAP, and shall also include, to the extent not otherwise included, (a) any Capital Lease Obligations, (b) the maximum fixed repurchase price of any Redeemable Stock, (c) indebtedness secured by a Lien to which the property or assets owned or held by such Person are subject, whether or not the obligations secured thereby shall have been assumed, (d) guaranties of items that would be included within this definition to the extent of such guaranties, and (e) net liabilities in respect of Commodity Agreements, Currency Agreements and Interest Rate Agreements. For purposes of the immediately preceding sentence, the maximum fixed repurchase price of any Redeemable Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; provided that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be without duplication (y) the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any such contingent obligations at such date and (z) in the case of Indebtedness of others secured by a Lien to which the property or assets owned or held by such Person are subject, the lesser of the Fair Market Value at such date of any property or asset subject to a Lien securing the Indebtedness of others or the amount of the Indebtedness secured. The amount of any Indebtedness issued at a discount shall be equal to the gross proceeds of such issuance (and not the face amount of any bond, note, debenture or similar instrument representing such Indebtedness).

           "Indenture" means this Indenture, as amended, restated or supplemented from time to time in accordance with the terms hereof.

          "Initial Purchasers" means Deutsche Bank Securities Inc., UBS Securities LLC, Credit Suisse First Boston LLC and Bear, Stearns & Co. Inc.

           "interest" means, with respect to the Notes, interest and any Additional Interest on the Notes.

          "Interest Payment Date" means the stated maturity of an installment of interest on the Notes.

          "Interest Rate Agreement" means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect the Issuer or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which the Issuer or any of its Restricted Subsidiaries is a party or a beneficiary thereof.

           "Investment" means, with respect to any Person, (i) any direct or indirect loan or other extension of credit (other than extensions of trade credit by such Person on commercially reasonable terms and relating to the sale of property or services in the ordinary course of business) or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to any other Person, or (ii) any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person.

          "Issue Date" means November 24, 2003, the date of original issuance of the Notes.

           "Issuer" means the party named as the "Issuer" in the first paragraph of this Indenture.

           "Lien" means any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease intended as security, any option or other agreement to sell or give any security interest and any filing of or other agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a financing statement covering leased goods under a lease not intended as security).

          "Maturity Date" means May 15, 2011.

           "Moody's" means Moody's Investors Service, Inc.

          "9 1/8% Notes" means any of Nortek's 9 1/8% Senior Notes due September 1, 2007 issued under the indenture dated as of August 26, 1997 between Nortek and State Street Bank and Trust Company.

          "9 1/4% Notes" means any of Nortek's 9 1/4% Senior Notes due March 15, 2007 issued under the indenture dated as of March 17, 1997 between Nortek and State Street Bank and Trust Company.

          "9 7/8% Notes" means any of Nortek's 9 7/8% Senior Subordinated Notes due June 15, 2011 issued under the indenture dated as of June 12, 2001 between Nortek and State Street Bank and Trust Company.

          "Net Cash Proceeds" means the aggregate Cash Proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, net of the out-of-pocket costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions) and any relocation expenses and severance and shutdown costs incurred as a result thereof, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP as a consequence of such Asset Sale, amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reasonable reserve in accordance with GAAP for adjustments in respect of the sale price of such asset or assets.

          "Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Issuer or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Issuer or any of its Restricted Subsidiaries.

          "Non-U.S. Person" has the meaning assigned to such term in Regulation S.

           "Nortek" means Nortek, Inc.

          "Nortek Credit Facility" means one or more credit facilities between Nortek or any of its Subsidiaries and one or more banks or other institutional lenders, as the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time, specifically designated in each such credit facility as a "Nortek Credit Facility." All Nortek Credit Facilities are referred to collectively in this Indenture as the "Nortek Credit Facility."

           "Notes" means the 10% Senior Discount Notes due 2011 issued by the Issuer, including, without limitation, the Exchange Notes and the Additional Notes, if any, treated as a single class of securities, as amended from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture.

           "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

           "Officer" means the Chairman of the Board, the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer.

          "Officers' Certificate" means, with respect to any Person, a certificate signed by the Chief Executive Officer or President and the Treasurer, Chief Financial Officer or Chief Accounting Officer of such Person.

          "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.

          "Permitted Investments" means any of the following:

          (i)      Cash Equivalents;

          (ii)      Existing Investments;

          (iii)      Investments by the Issuer or a Restricted Subsidiary of the Issuer in any Subsidiary of the Issuer that is a Restricted Subsidiary or any other Person that concurrently with the making of such Investment becomes a Subsidiary of the Issuer that is a Restricted Subsidiary;

          (iv)      guaranties by Restricted Subsidiaries of the Issuer permitted under Section 4.10;

           (v)      Indebtedness of the Issuer to any Restricted Subsidiary of the Issuer; provided that such Indebtedness is contractually subordinated in right of payment to the Notes;

          (vi)      Investments by the Issuer or any of its Restricted Subsidiaries in debt securities or debt instruments having maturities of 10 years or less and (A) issued or fully guaranteed or insured by the United States of America or an instrumentality or agency thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) or (B) with a rating of BBB- or better by S&P or Baa-3 or better by Moody's or the equivalent of such rating by a successor rating agency;

          (vii)      any Investment by Broan-NuTone Canada, Inc. and/or any Canadian Subsidiary in debt securities or debt instruments having maturities of 10 years or less and issued or fully guaranteed or insured by Canada or an instrumentality or agency thereof or rated, at the time of such Investment, BBB- or better by Dominion Bond Rating Services or the equivalent of such rating by a successor rating agency, so long as the aggregate amount of all such Investments by Broan-NuTone Canada, Inc. and any Canadian Subsidiaries that are Restricted Subsidiaries does not exceed $15 million at any one time outstanding;

          (viii)      loans and advances to officers and directors of the Issuer or any Restricted Subsidiary of the Issuer made in the ordinary course of business or pursuant to any employee benefit plan, up to $10 million in the aggregate at any one time outstanding;

          (ix)      loans and advances to vendors, suppliers and contractors of the Issuer or any Restricted Subsidiary of the Issuer and made in the ordinary course of business;

          (x)      the receipt by the Issuer or any of its Restricted Subsidiaries of consideration other than Cash Proceeds in any Asset Sale made in compliance with the terms of this Indenture;

          (xi)      so long as no Default or Event of Default shall have occurred and be continuing, other Investments made after the Issue Date not exceeding in the aggregate at any time outstanding (A) $40 million, if at the time of the making of such Investment the implied senior subordinated debt rating of Nortek is not BB+ or better by S&P or Bal or better by Moody's, or (B) $50 million, if at the time of the making of such Investment the implied senior subordinated debt rating of Nortek is BB+ or better by S&P or Bal or better by Moody's;

          (xii)      any Lien permitted under Section 4.12; and

          (xiii)      Investments by Restricted Subsidiaries of the Issuer not exceeding in the aggregate $10 million at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term in this Indenture; provided that for purposes of this clause (xiii) an instrument referred to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100 million.

          "Permitted Liens" means

          (i)      Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

          (ii)      statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

          (iii)      Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance or other types of social security;

          (iv)      Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers' acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

          (v)      easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Issuer or any of its Subsidiaries, taken as a whole;

          (vi)      Liens securing Purchase Money Obligations permitted to be incurred by the provisions of this Indenture;

          (vii)      leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries, taken as a whole;

          (viii)      Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Issuer or any of its Restricted Subsidiaries relating to such property or assets;

          (ix)      any interest or title of a lessor in the property subject to any Capital Lease Obligation;

          (x)      Liens arising from filing Uniform Commercial Code financing statements regarding leases;

          (xi)      Liens on property of, or on shares of stock or Indebtedness of, any Person existing at the time (A) such Person becomes a Restricted Subsidiary of the Issuer or (B) such Person or such property becomes a part of the Issuer or any Restricted Subsidiary of the Issuer;

          (xii)      Liens in favor of the Issuer or any Restricted Subsidiary of the Issuer;

          (xiii)      Liens securing any real property or other assets of the Issuer or any Restricted Subsidiary of the Issuer in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of the Issuer or such Restricted Subsidiary of the Issuer;

          (xiv)      Liens arising from the rendering of a final judgment or order against the Issuer or any Restricted Subsidiary of the Issuer that does not give rise to an Event of Default;

          (xv)      Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

          (xvi)      Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

          (xvii)      Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Nortek Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements: and

          (xviii)      Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Issuer and its Restricted Subsidiaries prior to the Issue Date.

           "Person" means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.

          "Principal Property" means any manufacturing or processing plant, warehouse or other building used by the Issuer or any Restricted Subsidiary of the Issuer, other than a plant, warehouse or other building that, in the good faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by the Issuer and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of the Issuer.

          "Private Placement Legend" means the legends initially set forth on the Notes in the form set forth in Exhibit B.

          "Purchase Money Obligations" means any Indebtedness of the Issuer or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Issuer or assumed by the Issuer or a Restricted Subsidiary of the Issuer in connection with the acquisition of-assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased.

          "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act.

          "Record Date" means the applicable Record Date specified in the Notes; provided that if any such date is not a Business Day, the Record Date shall be the first day immediately preceding such specified day that is a Business Day.

          "Redeemable Stock" means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable or is redeemable at the sole option of the holder thereof, in whole or in part, prior to the Stated Maturity of the Notes.

          "Redemption Date," when used with respect to any Note to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Notes.

          "Redemption Price," when used with respect to any Note to be redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Notes.

          "Registration Rights Agreement" means the registration rights agreement dated as of the Issue Date between the Issuer and the Initial Purchasers named therein.

          "Regulation S" means Regulation S under the Securities Act.

          "Responsible Officer" means, when used with respect to the Trustee, any officer in the Corporate Trust Office of the Trustee to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject and shall also mean any officer who shall have direct responsibility for the administration of this Indenture.

          "Restricted Security" means a Note that constitutes a "Restricted Security" within the meaning of Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security.

          "Restricted Subsidiary" means (i) when referring to a Subsidiary of the Issuer, Nortek, (ii) any Subsidiary of Nortek in existence on the Issue Date, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Issuer as provided in and in compliance with the definition of "Unrestricted Subsidiary," (iii) any Subsidiary of Nortek (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of this Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Issuer as provided in and in compliance with the definition of "Unrestricted Subsidiary" and (iv) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of the Issuer; provided that immediately after giving effect to the designation referred to in clause (iv), no Default or Event of Default shall have occurred and be continuing and Nortek could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (B) of Section 4.10(a). The Issuer shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers' Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence.

          "Rule 144A" means Rule 144A under the Securities Act.

           "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.

          "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

          "Senior Indebtedness" means all Indebtedness of Nortek whether outstanding on the Issue Date or thereafter incurred (unless, in the case of any particular Indebtedness, the instrument under which such Indebtedness is incurred expressly provides that such Indebtedness shall not be senior or superior in right of payment to any other Indebtedness of Nortek), and all Obligations of Nortek with respect thereto, but excluding: (i) any Indebtedness of Nortek to any of its Subsidiaries or other Affiliates; (ii) amounts owed for goods, materials or services purchased in the ordinary course of business or for compensation to employees; (iii) any Indebtedness in respect of any Capital Lease Obligation created, incurred, assumed or guaranteed prior to or, unless designated in the instrument evidencing such Capital Lease Obligation as "Senior Indebtedness," after the Issue Date; (iv) any Indebtedness of Nortek represented by Redeemable Stock; and (v) any Indebtedness that is incurred in violation of this Indenture.

          "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the Commission, as such regulation is in effect on the date of this Indenture, and shall always include Nortek.

          "Stated Maturity" means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency).

           "Subsidiary" of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof.

           "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as amended, as in effect on the date of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.03.

           "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

          "Unrestricted Securities" means one or more Notes that do not and are not required to bear the legends in the form set forth in Exhibit B or Exhibit C, including, without limitation, the Exchange Notes.

          "Unrestricted Subsidiary" means, until such time as any of the following shall be designated as a Restricted Subsidiary of the Issuer by the Board of Directors of the Issuer as provided in and in compliance with the definition of "Restricted Subsidiary," (i) any Subsidiary of the Issuer (other than Nortek) or of a Restricted Subsidiary organized or acquired after the Issue Date that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of the Issuer, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of the Issuer (other than Nortek) that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of the Issuer, provided that (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in Section 4.11, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, the Issuer or any other Restricted Subsidiary of the Issuer that is not a Subsidiary of the Subsidiary to be so designated. Any Subsidiary formed or acquired after the Issue Date by the Issuer that is not also a Subsidiary of Nortek shall be required to be designated and maintained as an Unrestricted Subsidiary, and the formation or acquisition of such Subsidiary shall be subject to the satisfaction of the conditions on designation set forth in clause (iii) of the prior sentence. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt: (ii) is a Person with respect to which neither the Issuer nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in accordance with Section 4.11; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Issuer or any of its Restricted Subsidiaries. Nortek may not be designated as an Unrestricted Subsidiary. The Issuer shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers' Certificate certifying that such designation has been made and that such designation complies with the requirements of this Indenture and all conditions thereto have been satisfied.

          "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

          "Wholly-Owned Subsidiary" of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary (other than directors' qualifying shares) is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries).

SECTION 1.02.      Other Definitions.

Term	Defined in Section
"Additional Notes"	2.01
"Affiliate Transaction"	4.14
"Agent Members"	2.16
"Cash Proceeds"	4.13
"Change of Control Offer"	4.09
"Change of Control Payment"	4.09
"Change of Control Payment Date"	4.09
"Covenant Defeasance"	8.02
"Coverage Ratio Exception"	4.10
"Event of Default"	6.01
"Excess Proceeds"	4.13
"Excess Proceeds Offer"	4.13
"Excess Proceeds Offer Amount"	4.13
"Excess Proceeds Payment"	4.13
"Excess Proceeds Payment Date"	4.13
"Legal Defeasance"	8.02
"Other Notes"	2.02
"Paying Agent"	2.04
"Permitted Debt"	4.10
"Physical Notes"	2.02
"Registrar"	2.04
"Regulation S Global Note"	2.16
"Regulation S Notes"	2.02
"Restricted Global Notes"	2.16
"Restricted Period"	2.16
"Rule 144A Notes"	2.02

SECTION 1.03.      Incorporation by Reference of TIA.

          Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings:

          "indenture securities" means the Notes.

          "indenture security holder" means a Holder or a Noteholder.

          "indenture to be qualified" means this Indenture.

          "indenture trustee" or "institutional trustee" means the Trustee.

           "obligor" on the indenture securities means the Issuer or any other obligor on the Notes.

          All other TIA terms used in this Indenture that are defined by the TIA, defined by the TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein.

SECTION 1.04.       Rules of Construction.

          Unless the context otherwise requires:

          (1)      a term has the meaning assigned to it herein, whether defined expressly or by reference;

          (2)      an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

          (3)      "or" is not exclusive;

          (4)      words in the singular include the plural, and words in the plural include the singular;

          (5)      words used herein implying any gender shall apply to both genders;

          (6)      provisions apply to successive events and transactions;

          (7)      "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and

          (8)      the words "including," "includes" and similar words shall be deemed to be followed by "without limitation."

ARTICLE II
THE NOTES

SECTION 2.01.      Amount of Notes.

          The Trustee shall initially authenticate (a) Notes for original issue on the Issue Date in an aggregate principal amount at maturity of $515,000,000 upon a written order of the Issuer in the form of an Officers' Certificate of the Issuer; and (b) Unrestricted Securities from time to time only in exchange for a like principal amount at maturity of Notes in each case upon a written order of the Issuer in the form of an Officers' Certificate. The Trustee shall authenticate Notes thereafter in unlimited amount (so long as permitted by the terms of this Indenture, including, without limitation, Section 4.10) (any such Notes, the "Additional Notes") for original issue upon a written order of the Issuer in the form of an Officers' Certificate in aggregate principal amount at maturity as specified in such order. Each such written order shall specify the principal amount at maturity of Notes to be authenticated and the date on which the Notes are to be authenticated.

SECTION 2.02.       Form and Dating.

          The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, which is incorporated in and forms a part of this Indenture. The Notes may have notations, legends or endorsements required by law, rule or usage to which the Issuer is subject. Without limiting the generality of the foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance on Rule 144A ("Rule 144A Notes") shall bear the legend and include the form of assignment set forth in Exhibit B, Notes offered and sold in offshore transactions in reliance on Regulation S ("Regulation S Notes") shall bear the legend and include the form of assignment set forth in Exhibit C, and Notes offered and sold to Institutional Accredited Investors in transactions exempt from registration under the Securities Act not made in reliance on Rule 144A or Regulation S ("Other Notes") may be represented by a Restricted Global Note or, if such an investor may not hold an interest in the Restricted Global Note, a Physical Note, in each case, bearing the Private Placement Legend. The Issuer shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and show the date of its authentication.

          The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and agree to be bound thereby.

          The Notes may be presented for registration of transfer and exchange at the offices of the Registrar.

          Notes issued in exchange for interests in a Global Note pursuant to Section 2.16 may be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "Physical Notes").

SECTION 2.03.      Execution and Authentication.

          One Officer, who shall have been duly authorized by all requisite corporate actions, shall sign the Notes for the Issuer by manual or facsimile signature.

          If the Officer whose signature is on a Note was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

          No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Note shall have been authenticated and delivered hereunder but never issued and sold by the Issuer, and the Issuer shall deliver such Note to the Trustee for cancellation as provided in Section 2.12, for all purposes of this Indenture such Note shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

          The Trustee may appoint an authenticating agent reasonably acceptable to the Issuer to authenticate the Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate the Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Issuer and Affiliates of the Issuer. Each Paying Agent is designated as an authenticating agent for purposes of this Indenture.

          The Notes shall be issuable only in registered form without coupons in denominations of $1,000 principal at maturity and any integral multiple of $1,000.

SECTION 2.04.       Registrar and Paying Agent.

          The Issuer shall maintain an office or agency in the Borough of Manhattan, The City of New York, where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuer may act as its own Registrar or Paying Agent, except that for the purposes of Articles Three and Eight and Sections 4.09 and 4.13, neither the Issuer nor any Affiliate of the Issuer shall act as Paying Agent. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuer, upon notice to the Trustee, may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional paying agent. The Issuer initially appoints the Trustee as Registrar and Paying Agent until such time as the Trustee has resigned and a successor has been appointed.

          The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall notify the Trustee, in advance, of the name and address of any such Agent. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.

SECTION 2.05.      Paying Agent To Hold Assets in Trust.

          The Issuer shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of, principal or Accreted Value of, premium, if any, or interest on, the Notes (whether such assets have been distributed to it by the Issuer or any other obligor on the Notes), and shall notify the Trustee of any Default by the Issuer (or any other obligor on the Notes) in making any such payment. The Issuer at any time may require a Paying Agent to promptly distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to promptly distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuer to the Paying Agent, the Paying Agent shall have no further liability for such assets.

SECTION 2.06.       Holder Lists.

          The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two (2) Business Days prior to each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee.

SECTION 2.07.      Transfer and Exchange.

          Subject to Sections 2.16 and 2.17, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount at maturity of Notes of other authorized denominations, the Registrar or co-Registrar shall promptly register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar or co-Registrar, duly executed by the Holder thereof or his or her attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith.

          The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article III, except the unredeemed portion of any Note being redeemed in part, and (iii) during a Change of Control Offer or an Asset Sale Offer if such Note is tendered pursuant to such Change of Control Offer or Asset Sale Offer and not withdrawn.

          Any Holder of a beneficial interest in a Global Note shall, by acceptance of such beneficial interest, agree that transfers of beneficial interests in such Global Notes may be effected only through a book-entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book-entry system.

SECTION 2.08.       Replacement Notes.

          If a mutilated Note is surrendered to the Registrar or the Trustee, or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the Holder of such Note furnishes to the Issuer and the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note and if the requirements of Section 8-405 of the New York Uniform Commercial Code as in effect on the date of this Indenture are met. If required by the Trustee or the Issuer, an indemnity bond shall be posted, sufficient in the judgment of all to protect the Issuer, if any, the Trustee or any Paying Agent from any loss that any of them may suffer if such Note is replaced. The Issuer may charge such Holder for the Issuer's reasonable out-of-pocket expenses in replacing such Note and the Trustee may charge the Issuer for the Trustee's expenses (including, without limitation, attorneys' fees and disbursements) in replacing such Note. Every replacement Note shall constitute a contractual obligation of the Issuer.

SECTION 2.09.      Outstanding Notes.

          The Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding because the Issuer or any of its Affiliates holds the Note (subject to the provisions of Section 2.10).

          If a Note is replaced pursuant to Section 2.08 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless a Responsible Officer of the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.08.

          If the principal or Accreted Value of any Note is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity Date the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds U.S. Legal Tender or Government Securities sufficient to pay all of the Accreted Value of, premium, if any, and interest due on the Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue.

SECTION 2.10.      Treasury Notes.

          In determining whether the Holders of the required principal amount at maturity of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or any of its Affiliates shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be disregarded.

SECTION 2.11.      Temporary Notes.

          Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. Notwithstanding the foregoing, so long as the Notes are represented by a Global Note, such Global Note may be in typewritten form.

SECTION 2.12.       Cancellation.

          The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent (other than the Issuer or a Subsidiary), and no one else, shall cancel and, at the written direction of the Issuer, shall dispose of all Notes surrendered for transfer, exchange, payment or cancellation in accordance with its customary procedures. Subject to Section 2.08, the Issuer may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Issuer shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.12.

SECTION 2.13.       Defaulted Interest.

          If the Issuer defaults in a payment of interest on the Notes, it shall, unless the Trustee fixes another record date pursuant to Section 6.10, pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. The Issuer may pay the defaulted interest to the persons who are Holders on a subsequent special record date, which special record date shall be the fifteenth day next preceding the date fixed by the Issuer for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record date, the Issuer shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. The Issuer may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Notes may be listed and, upon such notice as may be required by such exchange, if, after written notice given by the Issuer to the Trustee of the proposed payment pursuant to this sentence, such manner of payment shall be deemed practicable by the Trustee.

SECTION 2.14.      CUSIP Number.

          The Issuer in issuing the Notes may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Issuer will promptly notify the Trustee of any change in the CUSIP numbers.

SECTION 2.15.      Deposit of Moneys.

          Prior to 10:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Excess Proceeds Payment Date, the Issuer shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Excess Proceeds Offer Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Excess Proceeds Payment Date, as the case may be. The Accreted Value, premium and interest on Global Notes shall be payable to the Depositary or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Global Notes represented thereby. The principal amount at maturity and interest on Physical Notes shall be payable, either in person or by mail, at the office of the Paying Agent.

SECTION 2.16.       Book-Entry Provisions for Global Notes.

           (a)      Rule 144A Notes and Other Notes shall be represented by one or more notes in registered, global form without interest coupons (collectively, the "Restricted Global Note"). Regulation S Notes initially shall be represented by one or more notes in registered, global form without interest coupons (collectively, the "Regulation S Global Note," and, together with the Restricted Global Note and any other global notes representing Notes, the "Global Notes"). The Global Notes shall bear legends as set forth in Exhibit D. The Global Notes initially shall (i) be registered in the name of the Depositary or the nominee of such Depositary, in each case for credit to an account of an Agent Member, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Exhibit B with respect to Restricted Global Notes and Exhibit C with respect to Regulation S Global Notes.

          Members of, or direct or indirect participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Notes, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note.

          (b)      Transfers of Global Notes shall be limited to transfer in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depositary and the provisions of Section 2.17. In addition, a Global Note shall be exchangeable for Physical Notes if (i) requested by a Holder of such interests or (ii) the Depositary notifies the Issuer that it is unwilling or unable to continue as depository for such Global Note and the Issuer thereupon fails to appoint a successor depositary within 90 days. In all cases, Physical Notes delivered in exchange for any Global Note or beneficial interests therein shall be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures).

          (c)      In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount at maturity of the Global Note in an amount equal to the principal amount at maturity of the beneficial interest in the Global Note to be transferred, and the Issuer shall execute, and the Trustee shall upon receipt of a written order from the Issuer authenticate and make available for delivery, one or more Physical Notes of like tenor and amount.

          (d)      In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount at maturity of Physical Notes of authorized denominations.

           (e)      Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17, bear the Private Placement Legend or, in the case of the Regulation S Global Note, the legend set forth in Exhibit C, in each case, unless the Issuer determines otherwise in compliance with applicable law.

           (f)      On or prior to the end of the "distribution compliance period" (as defined in Regulation S, the "Restricted Period"), a beneficial interest in a Regulation S Global Note may be transferred to a Person who takes delivery in the form of an interest in the corresponding Restricted Global Note only upon receipt by the Trustee of a written certification from the transferor to the effect that such transfer is being made (i) (a) to a Person that the transferor reasonably believes is a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A or (b) pursuant to another exemption from the registration requirements under the Securities Act which is accompanied by an Opinion of Counsel regarding the availability of such exemption and (ii) in accordance with all applicable securities laws of any state of the United States or any other jurisdiction.

          (g)      Beneficial interests in the Restricted Global Note may be transferred to a Person who takes delivery in the form of an interest in the Regulation S Global Note, whether before or after the expiration of the Restricted Period, only if the transferor first delivers to the Trustee a written certificate to the effect that such transfer is being made in accordance with Regulation S or Rule 144 (if available).

          (h)      Any beneficial interest in one of the Global Notes that is transferred to a Person who takes delivery in the form of an interest in another Global Note shall, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, shall thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

          (i)      The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

SECTION 2.17.       Special Transfer Provisions.

           (a)     Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:

           (i)      the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the date of original issuance thereof or such other date as such Note shall be freely transferable under Rule 144 as certified in an Officers' Certificate or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit E hereto or (2) in the case of a transfer to a Non-U.S. Person (including a QIB), the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit F hereto; provided that, in the case of any transfer of a Note bearing the Private Placement Legend for a Note not bearing the Private Placement Legend, the Registrar has received an Officers' Certificate authorizing such transfer; and;

          (ii)      if the proposed transferor is an Agent Member holding a beneficial interest in a Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depositary's and the Registrar's procedures,

whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount at maturity of a Global Note in an amount equal to the principal amount at maturity of the beneficial interest in a Global Note to be transferred, and (b) the Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of a Global Note in an amount equal to the principal amount at maturity of the beneficial interest in the Global Note transferred or the Issuer shall execute and the Trustee shall authenticate and make available for delivery one or more Physical Notes of like tenor and amount.

           (b)     Transfers to QIBs. The following provisions shall apply with respect to the registration or any proposed registration of transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):

          (i)      the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on such Holder's Note stating, or to a transferee who has advised the Issuer and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and

          (ii)      if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of the Global Note in an amount equal to the principal amount at maturity of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred.

           (c)     Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) it has received the Officers' Certificate required by paragraph (a)(i)(y) of this Section 2.17, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act and the Registrar has received an Officers' Certificate from the Issuer to such effect or such Note has been exchanged in the exchange offer under the Registration Rights Agreement.

           (d)     General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture.

          The Registrar shall retain for a period of two years copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable notice to the Registrar.

          The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depositary or other Person with respect to the accuracy of the books or records, or the acts or omissions, of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee on the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

          The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

SECTION 2.18.      Computation of Interest.

          Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months and actual days elapsed.

ARTICLE III
REDEMPTION

SECTION 3.01.      Notices to Trustee.

          If the Issuer elects to redeem Notes pursuant to Section 5, 6 or 7 of the Notes, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount at maturity of Notes to be redeemed. Subject to Section 3.03, the Issuer shall give notice of redemption to the Paying Agent and Trustee at least 30 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein.

SECTION 3.02.       Selection of Notes To Be Redeemed.

          If less than all of the Notes are to be redeemed at any time, the Trustee will select Notes for redemption as follows:

          (1)      by lot; or

          (2)      if such method is prohibited by the rules of any stock exchange on which the Notes are listed, by such method as the Trustee deems reasonable.

          No Notes of a principal amount at maturity of $1,000 or less shall be redeemed in part.

SECTION 3.03.      Notice of Redemption.

          At least 30 days but not more than 60 days before a Redemption Date, the Issuer shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture. At the Issuer's request, the Trustee shall forward the notice of redemption in the Issuer's name and at the Issuer's expense; provided that, in such case, the Trustee has received notice from the Issuer at least 45 days, but not more than 60 days, before a Redemption Date (unless a shorter notice shall be agreed to in writing by the Trustee). Notes called for redemption become due on the date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption. Each notice of redemption shall identify the Notes (including the CUSIP number) to be redeemed and shall state:

          (1)      the Redemption Date;

          (2)      the Redemption Price and the amount of accrued interest, if any, to be paid;

          (3)      the name and address of the Paying Agent;

          (4)      that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any;

          (5)      that, unless the Issuer defaults in making the redemption payment, Accreted Value or interest on Notes called for redemption ceases to accrete or accrue, as the case may be, on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Notes redeemed;

          (6)      if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in aggregate principal amount at maturity equal to the unredeemed portion thereof will be issued;

          (7)      if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount at maturity of Notes to be redeemed and the aggregate principal amount at maturity of Notes to be outstanding after such partial redemption; and

          (8)      the Section of the Notes pursuant to which the Notes are to be redeemed.

          The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Notices of redemption may not be conditional.

SECTION 3.04.       Effect of Notice of Redemption.

          Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. On and after the Redemption Date interest shall cease to accrue on Notes or portions thereof called for redemption.

SECTION 3.05.       Deposit of Redemption Price.

          On or before 10:00 a.m. New York time on the Redemption Date, the Issuer shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Notes to be redeemed on that date.

          If the Issuer complies with the preceding paragraph, then, unless the Issuer defaults in the payment of such Redemption Price plus accrued interest, if any, on the Notes to be redeemed will cease to accrue or accrete interest on and after the applicable Redemption Date, whether or not such Notes are presented for payment.

SECTION 3.06.       Notes Redeemed in Part.

          If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount at maturity thereof to be redeemed. A new Note in principal amount at maturity equal to the unredeemed portion of the original Note shall be issued in the name of the Holder thereof upon cancellation of the original Note.

ARTICLE IV
COVENANTS

SECTION 4.01.      Payment of Notes.

          (a)      The Issuer shall pay the principal of (and premium, if any) and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal of premium, if any, or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Issuer or an Affiliate thereof) holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months.

          (b)      The Issuer shall pay interest on overdue principal amount at maturity (including, without limitation, post petition interest in a proceeding under any Bankruptcy Law), and overdue interest, to the extent lawful, at the same rate per annum borne by the Notes.

SECTION 4.02.       Maintenance of Office or Agency.

          (a)      The Issuer shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.04. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.02.

          (b)      The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

          (c)      The Issuer hereby initially designates U.S. Bank National Association, U.S. Bank Trust New York, 100 Wall Street, Suite 1600, New York, NY 10005 as one such office or agency of the Issuer in accordance with Section 2.04.

SECTION 4.03.      Corporate Existence.

          Except as otherwise permitted by Article V, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence in accordance with its organizational documents and the rights (charter and statutory) and material franchises of the Issuer.

SECTION 4.04.      Payment of Taxes and Other Claims.

          The Issuer shall, and shall cause each of its Restricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon it or any of its Restricted Subsidiaries or upon the income, profits or property of it or any of its Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of its Restricted Subsidiaries; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.

SECTION 4.05.       Maintenance of Properties and Insurance.

           (a)      The Issuer shall cause all material properties owned by or leased by it or any of its Restricted Subsidiaries used or useful to the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all repairs, renewals, replacements, and betterments thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.05 shall prevent the Issuer or any of its Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the management of the Issuer or any such Restricted Subsidiary desirable in the conduct of the business of the Issuer or any such Restricted Subsidiary; provided, further, that nothing in this Section 4.05 shall prevent the Issuer or any of its Restricted Subsidiaries from discontinuing or disposing of any properties to the extent otherwise permitted by this Indenture.

          (b)      The Issuer shall maintain, and shall cause its Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size, including property and casualty loss, workers' compensation and interruption of business insurance.

SECTION 4.06.       Compliance Certificate; Notice of Default.

          (a)      The Issuer shall deliver to the Trustee, within 90 days after the close of each fiscal year commencing with the fiscal year ending December 31, 2003, an Officers' Certificate stating that a review of the activities of the Issuer and its Subsidiaries has been made under the supervision of the signing Officers with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge, the Issuer during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default occurred during such year and at the date of such certificate there is no Default that has occurred and is continuing or, if such signers do know of such Default, the certificate shall describe its status with particularity. The Officers' Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes its fiscal year end.

          (b)      The Issuer shall deliver to the Trustee as soon as possible, and in any event within fifteen days after the Issuer becomes aware of the occurrence of any Default, an Officers' Certificate specifying the Default and describing its status with particularity and the action proposed to be taken thereto.

          (c)      The Issuer's fiscal years currently end on December 31. The Issuer will provide written notice to the Trustee of any change in its fiscal year.

SECTION 4.07.       Compliance with Laws.

          The Issuer shall comply, and shall cause each of its Restricted Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except, in any such case, to the extent the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of the Issuer and its Restricted Subsidiaries taken as a whole.

SECTION 4.08.      Waiver of Stay, Extension or Usury Laws.

          The Issuer covenants (to the extent permitted by applicable law) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Issuer from paying all or any portion of the principal of, premium, if any, and/or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent permitted by applicable law) the Issuer hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 4.09.       Change of Control.

           (a)      Upon the occurrence of a Change of Control, each Holder will have the right to require the repurchase of all or any part of such Holder's Notes pursuant to an offer (the "Change of Control Offer") at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment") on terms set forth in this Indenture.

          (b)      Immediately following any Change of Control, the Issuer is required to mail a notice to the Trustee and to each Holder stating:

          (i)      that the Change of Control Offer is being made pursuant to this Section 4.09 and that all Notes tendered will be accepted for payment;

           (ii)      the amount of the Change of Control Payment and the purchase date (the "Change of Control Payment Date"), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed;

          (iii)      that any Note not tendered will continue to accrete or accrue interest;

          (iv)      that, unless the Issuer defaults in the payment thereof, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrete or accrue interest on and after the Change of Control Payment Date;

          (v)      that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third business day preceding the Change of Control Payment Date;

          (vi)      that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice; and

          (vii)      that Holders whose Notes are being purchased only in part will be issued new notes (or book-entry notation made with respect thereto) equal in principal amount at maturity to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 at maturity or an integral multiple thereof.

          (c)      On the Change of Control Payment Date, the Issuer will, to the extent lawful:

          (i)      accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn;

          (ii)      deposit with the Paying Agent an amount sufficient to pay the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn; and

          (iii)      deliver or cause to be delivered to the Trustee all Notes so tendered and not withdrawn together with an Officers' Certificate specifying the Notes or portions thereof tendered to the Issuer.

           (d)      The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Change of Control Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder a new Note (or cause to be transferred by book entry) equal in principal amount at maturity to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be in a principal amount at maturity of $1,000 or an integral multiple thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

          Notwithstanding the foregoing, the Issuer shall not be required to make a Change of Control Offer as described above if it shall have provided a notice of redemption to the Trustee pursuant to Section 3.01 hereof in respect of a redemption of the Notes permitted by Section 5 (b) of the Notes.

          (e) The Issuer will comply, and will cause any third party making a Change of Control Offer to comply, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with a Change of Control Offer. To the extent the provisions of any applicable securities laws or regulations conflict with the provisions of this Indenture relating to a Change of Control Offer, the Issuer will not be deemed to have breached its obligations under this Indenture by virtue of complying with such laws or regulations.

SECTION 4.10.       Limitation on Additional Indebtedness.

           (a)      The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an "incurrence") any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that (A) the Issuer may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or after giving effect to, the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of the Issuer for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0 and (B) Nortek may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or after giving effect to, the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of Nortek for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0.

          (b)      Section 4.10(a) shall not prohibit, without duplication:

          (1)      Existing Indebtedness;

          (2)      Indebtedness of the Issuer represented by the Notes issued on the Issue Date;

           (3)      Indebtedness of the Issuer and its Restricted Subsidiaries under the Nortek Credit Facility; provided that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (3) and outstanding on such date, shall not exceed the greater of (a) $75 million and (b) the sum of 85% of Eligible Receivables of Nortek and its Subsidiaries plus 65% of Eligible Inventory of Nortek and its Subsidiaries;

           (4)      Indebtedness of (a) Broan-NuTone Canada, Inc. and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility; provided that (i) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (4) and outstanding on such date, shall not exceed the greater of (x) $50 million (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (3) above) and (ii) such Indebtedness shall be secured only by Liens on assets of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries, and (b) Nortek under its limited guarantee of not more than $30 million (Canadian) of the Indebtedness of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility;

          (5)      Indebtedness of NuTone and any NuTone Subsidiary not exceeding at any time $6 million in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of NuTone and any NuTone Subsidiary;

           (6)      Indebtedness of the Issuer to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (provided that such Indebtedness is contractually subordinated in right of payment to the Notes) or Indebtedness of any Subsidiary of the Issuer that is a Restricted Subsidiary to the Issuer or to any other Wholly-Owned Subsidiary of the Issuer that is a Restricted Subsidiary; provided that if the Issuer or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly-Owned Subsidiary of the Issuer that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary or ceases to be a Restricted Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of the Issuer or ceases to be a Restricted Subsidiary;

           (7)      Indebtedness of the Issuer and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements; provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements related to Indebtedness permitted to be incurred under this Indenture and the notional principal amount of the obligations of the Issuer and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of the Issuer and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

          (8)      Indebtedness of the Issuer and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers;

          (9)      Indebtedness incurred by the Issuer and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30 million in aggregate outstanding principal amount;

          (10)      Acquired Indebtedness incurred by a Restricted Subsidiary of Nortek to the extent such Indebtedness could have been incurred by Nortek under the Consolidated Cash Flow Coverage Ratio test set forth in clause (B) of Section 4.10(a), after giving pro forma effect to the acquisition of such Restricted Subsidiary by Nortek;

           (11)      Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of this Indenture if immediately prior to such designation such Subsidiary was an Unrestricted Subsidiary;provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by Nortek under the limitations set forth in clause (B) of Section 4.10(a); and provided, further, that none of the Issuer or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent the Issuer or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of this Section 4.10 (other than solely in accordance with clause (6) above or this clause (11));

          (12)      Indebtedness of the Issuer and its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds incurred or provided in the ordinary course of business;

          (13)      Indebtedness of (a) Nortek Holding B.V. and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek Holding B.V. and its Subsidiaries and (b) Nortek under its limited guarantee of not more than $20 million of any such Indebtedness of Nortek Holding B.V. and its Subsidiaries;

          (14)      other Indebtedness of the Issuer and its Restricted Subsidiaries not to exceed at any time $35 million in aggregate outstanding principal amount;

          (15)      Liens permitted under Section 4.12; and

           (16)      Indebtedness ("Refinancing Indebtedness") created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute or refund ("refinance"), Indebtedness described in Section 4.10(a) or referred to in clauses (1) through (14) above; provided, however, that

          (a)      the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced,

     (1)      in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (3), (4), (5) and (14) above, shall not, when added to all other Indebtedness outstanding under such clause, exceed the aggregate amount of Indebtedness permitted to be incurred under such clause (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof), and

     (2)      in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (1), (2) and (6) through (13) above, shall not exceed the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof);

          (b)      such Refinancing Indebtedness shall be subordinated in right of payment to the Notes at least to the same extent as the Indebtedness to be refinanced;

          (c)      such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence;

          (d)      the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of the Issuer, shall not be used to refinance Indebtedness of the Issuer or another Subsidiary of the Issuer; and

          (e)      the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced.

           (c)      Notwithstanding any other provision in this Section 4.10, the Issuer will not permit Nortek to refinance or redeem the 9 7/8% Notes or issue additional Indebtedness (other than Senior Indebtedness) unless Nortek executes a guarantee satisfactory in form and substance to the Trustee, pursuant to which Nortek fully and unconditionally guarantees the Notes; provided that such guarantee shall be subordinated to Senior Indebtedness of Nortek in substantially the same manner that the 9 7/8% Notes are subordinated to Senior Indebtedness; provided, further, that the obligation to execute any such guarantee shall not apply if and for as long as such guarantee is restricted by the terms of any Senior Indebtedness of Nortek. The Issuer will not permit Nortek to issue any Indebtedness (other than Senior Indebtedness) after the Issue Date that restricts or prohibits the guarantee of Nortek required by the prior sentence.

          (d)      For purposes of this Section 4.10, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness.

SECTION 4.11.       Restricted Payments.

          (a)      The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

          (A)      declare or pay any dividend on, or make any distribution in respect of the Issuer's or any of its Restricted Subsidiary's Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by the Issuer or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of the Issuer or such Restricted Subsidiary, as the case may be;

          (B)      purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of the Issuer or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by the Issuer or any Wholly-Owned Subsidiary of the Issuer that is a Restricted Subsidiary);

          (C)      prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date, any Indebtedness of the Issuer that is subordinate in right of payment to the Notes (other than in connection with any refinancing of such Indebtedness permitted by this Indenture); or

          (D)      make any Investment other than Permitted Investments

(each such action described in any of clauses (A) through (D) above being referred to as a "Restricted Payment") if, at the time of such Restricted Payment,

          (1)      a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof;

          (2)      such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the Issue Date (including, without duplication, Restricted Payments described in Section 4.11(b) (other than clause (5) thereof), exceeds the sum of

     (A)      the sum of (i) $25 million plus (ii) 50% of cumulative Consolidated Net Income of the Issuer for the period commencing on October 5, 2003 through the last day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (it being understood that for purposes of determining cumulative Consolidated Net Income of the Issuer pursuant to this clause (2)(A) only, the Issuer's non-cash interest expense and amortization of original issue discounts shall be excluded) (provided that if the amount of cumulative Consolidated Net Income of the Issuer divided by the number of full fiscal quarters of the Issuer in the applicable period exceeds $5.25 million, then such amount shall equal (i) 50% of the product of $5.25 million multiplied by the number of full fiscal quarters in such period plus (ii) 75% of the amount in excess of the product of $5.25 million multiplied by the number of full fiscal quarters in such period) (or, if cumulative Consolidated Net Income of the Issuer shall be a deficit, minus 100% of such deficit);

     (B)      the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by the Issuer (other than from a Restricted Subsidiary of the Issuer) from the issuance and sale at any time after the Issue Date of either Capital Stock of the Issuer (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of the Issuer (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock;

     (C)      an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by the Issuer or any of its Restricted Subsidiaries after the Issue Date as a dividend or other distribution from any Unrestricted Subsidiary; and

     (D)      the Fair Market Value of any Investment held by either the Issuer or any Restricted Subsidiary of the Issuer in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of this Indenture; or

          (3)      (a) in the case of a Restricted Payment made by the Issuer, the Issuer could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (A) of Section 4.10(a), or (b) in the case of a Restricted Payment made by Nortek or any of its Restricted Subsidiaries, Nortek could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test forth in clause (B) of Section 4.10(a).

          (b)      Section 4.11(a) shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof:

     (1)      the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of this Indenture;

     (2)      the declaration and payment by a Restricted Subsidiary of the Issuer which is required to file periodic reports under Section 13 or 15(d) of the Exchange Act (a "Reporting Subsidiary") of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends;provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for the immediately preceding fiscal year;

     (3)      the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of the Issuer, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of the Issuer or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $7.5 million in the aggregate in any fiscal year of the Issuer;

     (4)      the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Issuer that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of the Issuer (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock); or

     (5)      the declaration and payment of dividends or other distributions to the holders of capital stock of or other equity interests in the Issuer with the proceeds received on the Issue Date by the Issuer from the sale of the Notes.

SECTION 4.12.       Liens.

          (a)      The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on:

          (1)      any Principal Property,

          (2)      any shares of Capital Stock of any Restricted Subsidiary of the Issuer held by the Issuer or, in the case of a Lien securing Indebtedness of the Issuer, any shares of Capital Stock of any Restricted Subsidiary of the Issuer held by any other Restricted Subsidiary of the Issuer or

          (3)      any Indebtedness owed by any Restricted Subsidiary of the Issuer to the Issuer or, in the case of a Lien securing Indebtedness of the Issuer, any Indebtedness owed by any Restricted Subsidiary of the Issuer to any other Restricted Subsidiary of the Issuer,

          without making effective provision for the Notes and all other amounts due under this Indenture to be directly secured equally and ratably with (or, if the Indebtedness or other obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the Indebtedness or other obligation or liability secured by such Lien.

          (b)      Section 4.12(a) shall not prohibit:

          (1)      Liens existing on the Issue Date;

          (2)      Liens securing Indebtedness under the Nortek Credit Facility;

           (3)      Liens securing Indebtedness of a Restricted Subsidiary that is permitted to be incurred under Section 4.10; provided that this clause (3) will only permit Liens securing Indebtedness incurred by Nortek if such Indebtedness constitutes Senior Indebtedness of Nortek;

          (4)      Liens with respect to the assets of a Restricted Subsidiary of the Issuer granted by such Restricted Subsidiary to the Issuer to secure Indebtedness owing to the Issuer;

          (5)      Liens in respect of Indebtedness permitted by clause (4), (5), (9), (12) or (13) of Section 4.10(b);

           (6)       Liens securing Refinancing Indebtedness incurred to refinance Indebtedness that has been secured by a Lien permitted under this Indenture; provided that such Liens do not extend to or cover any property or assets of the Issuer or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and

          (7)      Permitted Liens.

SECTION 4.13.       Limitation on Use of Proceeds from Asset Sales.

          (a)      The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:

          (1)      the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and

           (2)      at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, "Cash Proceeds") or indebtedness for borrowed money of the Issuer or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of the Issuer whose stock is purchased by the transferee.

          (b)      Any Net Cash Proceeds

          (1)      in excess of the amount of cash applied by the Issuer or any Restricted Subsidiary of the Issuer during the period beginning 12 months prior to the date of the Asset Sale and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by the Issuer and its Subsidiaries as of the Issue Date or at the date of such Asset Sale and

           (2)      not applied within 13 months after the date of the Asset Sale to reduce Indebtedness under the Nortek Credit Agreement, Indebtedness of a Restricted Subsidiary or other Indebtedness of the Issuer that ranks pari passu with the Notes (provided that if the Issuer shall so reduce Indebtedness of the Issuer that ranks pari passu with the Notes, it will equally and ratably reduce Indebtedness under the Notes by making an offer (in accordance with the procedures set forth below for an Excess Proceeds Offer) to all Holders to purchase a pro rata amount of Accreted Value of the Notes at a purchase price equal to 100% of the Accreted Value thereof, plus accrued and unpaid interest, if any)

shall be deemed to be "Excess Proceeds"; provided that, if an offer to purchase any Indebtedness of Nortek or any of its Restricted Subsidiaries is made in accordance with the terms of such Indebtedness, the obligation to reduce the Indebtedness of such Restricted Subsidiary will be deemed to be satisfied to the extent of the amount of the offer, whether or not accepted by the holders thereof, and no Excess Proceeds in the amount of such offer will be deemed to exist following such offer.

           (c)      When the aggregate amount of Excess Proceeds exceeds $10 million, the Issuer shall make an offer (the "Excess Proceeds Offer") to apply the Excess Proceeds to purchase the Notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the Accreted Value of the Notes plus accrued and unpaid interest, if any, thereon to the date fixed for the closing of such offer, substantially in accordance with the procedures set forth below.

          (d)      To the extent that the aggregate Accreted Value of Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, the Issuer may use the remaining Excess Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate Accreted Value of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the Notes.

          (e)      Immediately following any Excess Proceeds Offer, the Issuer is required to mail a notice to the Trustee and to each Holder stating:

          (i)      that the Excess Proceeds Offer is being made pursuant to this Section 4.13 and that all Notes tendered will be accepted for payment;

           (ii)      the amount of the Excess Proceeds Payment and the purchase date (the "Excess Proceeds Payment Date"), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed;

          (iii)      that any Note not tendered will continue to accrete or accrue interest;

          (iv)      that, unless the Issuer defaults in the payment thereof, all Notes accepted for payment pursuant to the Excess Proceeds Offer will cease to accrete or accrue interest on and after the Excess Proceeds Payment Date;

          (v)      that Holders electing to have any Notes purchased pursuant to an Excess Proceeds Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third business day preceding the Excess Proceeds Payment Date;

          (vi)      that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice; and

           (vii)      that Holders whose Notes are being purchased only in part will be issued new notes (or book-entry notation made with respect thereto) equal in principal amount at maturity to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 at maturity or an integral multiple thereof.

          (f)      On the Excess Proceeds Payment Date, the Issuer will, to the extent lawful:

          (i)      accept for payment all Notes or portions thereof tendered pursuant to the Excess Proceeds Offer and not withdrawn;

          (ii)      deposit with the Paying Agent an amount sufficient to pay the Excess Proceeds Payment in respect of all Notes or portions thereof so tendered and not withdrawn; and

          (iii)      deliver or cause to be delivered to the Trustee all Notes so tendered and not withdrawn together with an Officers' Certificate specifying the Notes or portions thereof tendered to the Issuer.

           (g)      The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Excess Proceeds Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder a new Note (or cause to be transferred by book entry) equal in principal amount at maturity to any unpurchased portion of the Notes surrendered; provided that each such new Note shall be in a principal amount at maturity of $1,000 or an integral multiple thereof. The Issuer will publicly announce the results of the Excess Proceeds Offer on or as soon as practicable after the Excess Proceeds Payment Date.

          (h)      The Issuer will comply, and will cause any third party making an Excess Proceeds of Control Offer to comply, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with Excess Proceeds Offer. To the extent the provisions of any applicable securities laws or regulations conflict with the provisions of this Indenture relating to an Excess Proceeds Offer, the Issuer will not be deemed to have breached its obligations under this Indenture by virtue of complying with such laws or regulations.

SECTION 4.14.      Limitation on Transactions with Affiliates.

          (a)      Except as otherwise permitted under this Indenture, the Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, make any Investment, loan, advance, guarantee or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of the Issuer or any of its Restricted Subsidiaries, unless:

          (1)      such transaction or series of transactions is in the best interests of the Issuer or such Restricted Subsidiary based on all relevant facts and circumstances;

          (2)      such transaction or series of transactions is fair to the Issuer or such Restricted Subsidiary and on terms that are no less favorable to the Issuer or such Restricted Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arm's-length basis from a Person that is not an Affiliate of the Issuer or any of its Restricted Subsidiaries; and

          (3)      (a) with respect to a transaction or series of transactions involving aggregate payments in excess of $5 million, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions complies with clauses (1) and (2) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $15 million, the Issuer receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to the Issuer or such Restricted Subsidiary from a financial point of view.

          (b)      Section 4.14(a) shall prohibit:

          (1)      any payment of money or issuance of securities by the Issuer or any Restricted Subsidiary of the Issuer pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors' and officers' liability insurance;

          (2)      reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of the Issuer or any of its Restricted Subsidiaries and reimbursement of expenses related thereto;

          (3)      agreements and instruments to which Kelso & Company, L.P. or any of its Affiliates is a party which are in effect on the Issue Date or any instruments or securities held by Kelso & Company, L.P. or any of its Affiliates on the Issue Date or the payment of fees, reimbursements, indemnifications and other amounts and other transactions pursuant to such agreements, instruments or securities; or

           (4)      transactions between the Issuer and any Restricted Subsidiary of the Issuer, or between one Restricted Subsidiary of the Issuer and another Restricted Subsidiary of the Issuer; provided that not more than 20% of any such Restricted Subsidiary is owned by any Affiliate of the Issuer or any of its Restricted Subsidiaries (other than the Issuer or a Wholly-Owned Subsidiary of the Issuer which is a Restricted Subsidiary).

SECTION 4.15.       Limitations on Certain Restrictions Affecting Subsidiaries.

          (a)      The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restrictions on the ability of any such Restricted Subsidiary to:

          (1)      pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by the Issuer or any of its Restricted Subsidiaries,

          (2)      pay or repay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary,

          (3)      make loans or advances to the Issuer or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary,

          (4)      transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary, or

          (5)      guarantee any Indebtedness of the Issuer or any other Restricted Subsidiary of the Issuer.

          (b)      Section 4.15(a) will not prohibit encumbrances or restrictions existing under or by reason of:

          (1)      applicable law,

          (2)      this Indenture,

          (3)      customary nonassignment provisions of any lease governing a leasehold interest of the Issuer or any of its Restricted Subsidiaries,

          (4)      any instrument governing Indebtedness of a Person acquired by the Issuer or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired,

          (5)      agreements existing as of the Issue Date,

          (6)      the Nortek Credit Facility,

          (7)      the Broan-NuTone Canada, Inc. Credit Facility,

          (8)      (i) any agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (4) or (5) above or this clause (8), or (ii) any other agreement pursuant to which any Restricted Subsidiary of the Issuer incurs Indebtedness after the Issue Date in accordance with Section 4.10, and, in each case, either:

     (A)      the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to the Issuer, taken as a whole, as determined by the Board of Directors of the Issuer in good faith than the provisions contained in the Nortek Credit Facility or in the indentures governing the Existing Notes, in each case, as in effect on the Issue Date, or

     (B)      any encumbrance or restriction contained in such Indebtedness is not expected to prohibit (except upon a default or event of default thereunder) the payment of dividends in an amount sufficient, as determined by the Board of Directors of the Issuer in good faith, to make scheduled payments of cash interest on the Notes when due.

          (c)      The foregoing Sections 4.15(a) and (b) shall not restrict the ability of any Restricted Subsidiary of the Issuer to grant any Lien to the extent otherwise permitted in this Indenture.

SECTION 4.16.       Limitation on Guarantees by Certain Subsidiaries.

           (a)      At any time upon the occurrence of the guarantee of any Indebtedness of the Issuer by any Restricted Subsidiary of the Issuer, the Issuer will cause such Restricted Subsidiary to execute a guarantee, satisfactory in form and substance to the Trustee (and with such documentation relating thereto as the Trustee shall require, including, without limitation, the execution of a supplemental guarantee and opinions of counsel as to the enforceability of such guarantee), pursuant to which such Restricted Subsidiary will fully and unconditionally guarantee the Notes; provided, however, that if such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Indebtedness that is expressly subordinated to the Notes, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such subordinated Indebtedness shall be subordinated to the guarantee of the Notes pursuant to customary subordination provisions.

          (b)      Notwithstanding the foregoing Section 4.16(a) and the other provisions of this Indenture, any guarantee by a Restricted Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of the Issuer of a majority of the Capital Stock or all or substantially all of the assets of any such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture), (ii) the release or discharge of the Indebtedness that resulted in the creation of such guarantee (except a discharge or release by or as a result of payment under such guarantee), or (iii) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of this Indenture.

SECTION 4.17.       Provision of Reports.

          (a)      Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Issuer will furnish to the Holders within the time periods specified in the Commission's rules and regulations:

          (1)      all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuer were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Issuer and its Subsidiaries, and, with respect to the annual information only, a report thereon by the Issuer's independent certified public accountants, as applicable; and

          (2)      all reports that would be required to be filed with the Commission on Form 8-K if the Issuer were required to file such reports.

          (b)      In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, the Issuer will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request.

          (c)      In addition, the Issuer has agreed that, if it is not subject to and in compliance with the informational requirements of Section 13 or 15(d) of the Exchange Act at any time while the Notes constitute "restricted securities" within the meaning of the Securities Act, it will furnish to Holders and beneficial owners of the Notes and to prospective purchasers designated by such Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with resales of the Notes.

          The Trustee shall not be under a duty to review or evaluate any report or information delivered to the Trustee pursuant to the provisions of this Section 4.17 for the purposes of making such reports available to it and to the Holders of notes who may request such information. Delivery of such reports, information and documents to the Trustee as may be required under this Section 4.17 is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on an Officers' Certificate).

SECTION 4.18.       Payments for Consents.

          Neither the Issuer nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

SECTION 4.19.       Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries.

          The Issuer shall not:

          (i)      permit any of its Restricted Subsidiaries to issue or sell to any Person except the Issuer or a Wholly-Owned Subsidiary of the Issuer that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or

          (ii)      sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued or sold to the Issuer or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (except to the issuer thereof, the Issuer or any of its other Wholly-Owned Subsidiaries that is a Restricted Subsidiary).

ARTICLE V
SUCCESSOR CORPORATION

SECTION 5.01.       Merger, Consolidation, or Transfer of Assets.

          (a)      The Issuer shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of the Issuer and its Subsidiaries on a consolidated basis, unless:

           (1)      the Issuer shall be the continuing Person, or the Person, if other than the Issuer, formed by such consolidation or into which the Issuer is merged, or to which the properties and assets of the Issuer, or of the Issuer and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a Person organized and existing under the laws of the United States or any state thereof or the District of Columbia (provided that if such Person is not a corporation, such Person shall be required to cause a Subsidiary of such Person that is a corporation to be a co-obligor under the Notes) and shall expressly assume, by an indenture supplemental to this Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Issuer under the Notes and this Indenture, and this Indenture remains in full force and effect;

          (2)      immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing;

           (3)      the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the "surviving entity"), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (A) of Section 4.10(a); and

          (4)      immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of the Issuer immediately before such transaction.

          Upon any consolidation or merger, or any transfer of all or substantially all of the assets of the Issuer and its Subsidiaries on a consolidated basis, in accordance with the preceding paragraph, the successor Person formed by such consolidation or into which the Issuer is merged or the successor Person to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such successor Person had been named as the Issuer in this Indenture, and when a successor Person assumes all the obligations of its predecessor under this Indenture or the Notes, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of the principal of, premium, if any, interest on the Notes.

          (b)      In connection with any such consolidation, merger or transfer, the Issuer shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with this Indenture and that all conditions precedent therein provided for relating to such transactions have been complied with.

ARTICLE VI
DEFAULT AND REMEDIES

SECTION 6.01.      Events of Default.

          Each of the following constitutes an "Event of Default":

          (1)      the Issuer defaults in the payment, when due and payable, of (i) interest on any Note and the default continues for a period of 30 days, or (ii) principal or Accreted Value of or premium, if any, on any Notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise;

          (2)      the Issuer fails to comply with any of the provisions set forth under Section 5.01;

          (3)      the Issuer fails to comply with any of its covenants or agreements in the Notes or this Indenture (other than those referred to in clause (1) or (2) above) and such failure continues for the period and after receipt by the Issuer of the notice specified below;

          (4)      default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries), whether such indebtedness or guarantee is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15 million or more;

          (5)      the Issuer or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any bankruptcy law:

      (A)      commences a voluntary case or proceeding;

     (B)      consents to the entry of an order for relief against it in an involuntary case or proceeding;

     (C)      consents to the appointment of a custodian of it or for all or substantially all of its property;

     (D)      makes a general assignment for the benefit of its creditors; or

     (E)      admits in writing its inability to pay its debts generally as they become due;

          (6)      a court of competent jurisdiction enters an order or decree under any bankruptcy law that:

     (A)      is for relief against the Issuer or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding;

     (B)      appoints a custodian of the Issuer or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; or

     (C)      orders the liquidation of the Issuer or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary),

and such order or decree with respect to clause (A), (B) or (C) remains unstayed and in effect for 60 days; or

          (7)      final judgments for the payment of money which in the aggregate exceed $15 million shall be rendered against the Issuer or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days.

          A Default specified in Section 6.01(3) above is not an Event of Default until the Trustee notifies the Issuer, or the Holders of at least 25% in aggregate principal amount at maturity of the Notes at the time outstanding notify the Issuer and the Trustee, of the Default and the Issuer does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that is be remedied and state that such notice is a "Notice of Default."

SECTION 6.02.       Acceleration.

          If an Event of Default specified in Section 6.01(5) or (6) above occurs and is continuing, then all unpaid Accreted Value of, and premium, if any, and accrued and unpaid interest, if any, on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of each Trustee or any Holder.

          If any Event of Default (other than an Event of Default specified in Section 6.01 (5) or (6)) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount at maturity of the Notes then outstanding, by written notice to the Issuer (and to the Trustee if such notice is given by such Holders), may, and such Trustee at the request of such Holders shall, declare all unpaid Accreted Value, premium, if any, accrued interest on the Notes to be due and payable immediately.

          In the case of any Event of Default (other than as a result of the failure to comply with Section 4.09) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuer with the intention of avoiding payment of the premium which the Issuer would have to pay if the Issuer then had elected to redeem the Notes, an equivalent premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to this Section 6.02 to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding.

          In the case of an Event of Default as a result of a failure to comply with Section 4.09 occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuer with the intention of avoiding payment of the premium which the Issuer would have to pay pursuant to Section 4.09, such premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to this Section 6.02 to the extent permitted by law, anything in this Indenture or in the Notes contained to the contrary notwithstanding.

          At any time after a declaration of acceleration (except an acceleration due to default in payment of Accreted Value, premium, if any, accrued interest on the Notes) with respect to the Notes as described in the four preceding paragraphs, the holders of a majority in principal amount at maturity of the Notes may rescind and cancel such declaration and its consequences, if all existing Events of Default have been cured or waived, except non-payment of the Accreted Value, premium, if any, accrued interest on the Notes that have become due solely because of the acceleration.

SECTION 6.03.      Other Remedies.

          (a)      If a Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of Accreted Value, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

          (b)      The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon a Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

          (c)      Holders may not enforce this Indenture or the Notes except as provided in this Indenture and under the TIA. Subject to the provisions of this Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under this Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable indemnity. Subject to all provisions of this Indenture and applicable law, the Holders of a majority in aggregate principal amount at maturity of the then outstanding Notes issued under this Indenture have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

SECTION 6.04.       Waiver of Defaults.

          Provided the Notes are not then due and payable by reason of a declaration of acceleration, the Holders of a majority in aggregate principal amount at maturity of Notes at the time outstanding may on behalf of the Holders of all the Notes waive any Default with respect to such Notes and its consequences by providing written notice thereof to the Issuer and the Trustee, except a Default (1) in the payment of Accreted Value of, premium, if any, or interest, if any, on any Note or (2) in respect of a covenant or provision hereof which under this Indenture cannot be modified or amended without the consent of the Holder of each outstanding Note affected. In the case of any such waiver, the Issuer, the Trustee and the Holders will be restored to their former positions and rights under this Indenture, respectively; provided that no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto.

SECTION 6.05.       Control by Majority.

          The Holders of not less than a majority in principal amount at maturity of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Noteholder, or that may involve the Trustee in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

          In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification against any loss or expense caused by taking such action or following such direction.

SECTION 6.06.       Limitation on Suits.

          A Holder may not pursue any remedy with respect to this Indenture or the Notes unless:

          (1) the Holder gives to the Trustee written notice of a continuing Event of Default;

          (2) the Holder or Holders of at least 25% in principal amount at maturity of the outstanding Notes make a written request to the Trustee to pursue the remedy;

          (3) such Holder or Holders offer and provide to the Trustee reasonable indemnity or security against any loss, liability or expense satisfactory to the Trustee;

          (4) the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity and security; and

          (5) during such 30-day period the Holder or Holders of a majority in principal amount at maturity of the outstanding Notes do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request.

          A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder.

SECTION 6.07.       Rights of Holders To Receive Payment.

          Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of Accreted Value of, premium, if any, and interest, if any, on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder.

SECTION 6.08.       Collection Suit by Trustee.

          If a Default in payment of principal or interest specified in Section 6.01(1) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor on the Notes for the whole amount of Accreted Value of, premium, if any, and accrued interest and fees remaining unpaid, together with interest on overdue Accreted Value and premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

SECTION 6.09.       Trustee May File Proofs of Claim.

          The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relating to the Issuer, its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. The Trustee shall be entitled to participate as a member of any officer committee of creditors in the matters as it deems necessary or advisable.

SECTION 6.10.       Priorities.

          If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:

          FIRST: to the Trustee for amounts due under Section 7.07;

          SECOND: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest;

          THIRD: to Holders for Accreted Value and premium, if any, due and unpaid on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; and

          FOURTH: to the Issuer.

          The Trustee, upon prior notice to the Issuer, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

SECTION 6.11.       Undertaking for Costs.

          In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount at maturity of the outstanding Notes.

ARTICLE VII
TRUSTEE

SECTION 7.01.       Duties of Trustee.

          (a)      If a Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

          (b)      Except during the continuance of a Default:

          (1)      The Trustee need perform only those duties as are specifically set forth herein and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee.

          (2)      In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

          (c)      Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

          (1)      This paragraph does not limit the effect of paragraph (b) of this Section 7.01.

          (2)      The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

          (3)      The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

          (d)      No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it.

          (e)      Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01.

          (f)      The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

          (g)      In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee.

SECTION 7.02.       Rights of Trustee.

          Subject to Section 7.01:

          (a)      The Trustee may rely conclusively on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

          (b)      Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 12.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion.

          (c)      The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) appointed with due care.

          (d)      The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers.

          (e)      The Trustee may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

          (f)      The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby.

          (g)      The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Issuer, to examine the books, records, and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer.

          (h)      The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

          (i)      The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties.

          (j)      The Trustee shall not be deemed to have notice of any Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

          (k)      The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

SECTION 7.03.       Individual Rights of Trustee.

          The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer, its Subsidiaries or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

SECTION 7.04.       Trustee's Disclaimer.

          The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in this Indenture or any document issued in connection with the sale of Notes or any statement in the Notes other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture.

SECTION 7.05.       Notice of Default.

          If a Default occurs and is continuing and the Trustee receives actual notice of such Default, the Trustee shall mail to each Holder notice of the uncured Default within 60 days after such notice is received. Except in the case of a Default in payment of Accreted Value of, premium, if any, or interest on, any Note, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or the Excess Proceeds Payment Date pursuant to an Asset Sale Offer, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Holders.

SECTION 7.06.       Reports by Trustee to Holders.

          Within 60 days after each May 15, beginning with May 15, 2004, the Trustee shall, to the extent that any of the events described in TIA § 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA § 313(a). The Trustee also shall comply with TIA § § 313(b), 313(c) and 313(d).

          A copy of each report at the time of its mailing to Holders shall be mailed to the Issuer and filed with the Commission and each securities exchange, if any, on which the Notes are listed.

          The Issuer shall notify the Trustee if the Notes become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with TIA § 313(d).

SECTION 7.07.       Compensation and Indemnity.

          The Issuer shall pay to the Trustee from time to time such compensation as the Issuer and the Trustee shall from time to time agree in writing for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence, bad faith or willful misconduct. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel.

          The Issuer shall indemnify each of the Trustee or any predecessor Trustee and its agents, employees, officers, stockholders and directors for, and hold them harmless against, any and all loss, damage, claims including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of any of the Trustee's rights, powers or duties hereunder. The Trustee shall notify the Issuer promptly of any claim asserted against the Trustee or any of its agents, employees, officers, stockholders and directors for which it may seek indemnity. The Issuer may, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents, employees, officers, stockholders and directors subject to the claim may have separate counsel and the Issuer shall pay the reasonable fees and expenses of such counsel; provided, however, that the Issuer will not be required to pay such fees and expenses if, subject to the approval of the Trustee (which approval shall not be unreasonably withheld), it assumes the Trustee's defense and there is no conflict of interest between the Issuer and the Trustee and its agents, employees, officers, stockholders and directors subject to the claim in connection with such defense as reasonably determined by the Trustee. The Issuer need not pay for any settlement made without its written consent. The Issuer need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct.

          To secure the Issuer's payment obligations in this Section 7.07, the Trustee shall have a senior lien prior to the Notes against all money or property held or collected by the Trustee, in its capacity as Trustee.

          Without prejudice to its rights hereunder, when the Trustee incurs expenses or renders services after a Default specified in Section 6.01(5) or (6) occurs, such expenses and the compensation for such services (including the fees and expenses of its agent and counsel) shall constitute expenses of administration under the Bankruptcy Law.

          Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the appointment of a successor Trustee.

SECTION 7.08.       Replacement of Trustee.

          The Trustee may resign at any time by providing thirty days prior written notice to the Issuer. The Holders of a majority in principal amount at maturity of the outstanding Notes may remove the Trustee by so notifying the Issuer and the Trustee and may appoint a successor Trustee. The Issuer may remove the Trustee if:

          (1)      the Trustee fails to comply with Section 7.10;

          (2)      the Trustee is adjudged a bankrupt or an insolvent;

          (3)      a receiver or other public officer takes charge of the Trustee or its property; or

          (4)      the Trustee becomes incapable of acting.

          If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount at maturity of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.

          A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder. A resignation of the Trustee shall not be effective until a successor trustee delivers a written acceptance of its appointment in accordance with this Section 7.08.

          If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in principal amount at maturity of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Issuer.

          If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

          Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

SECTION 7.09.       Successor Trustee by Merger, Etc.

          If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee;provided that such corporation shall be otherwise qualified and eligible under this Article VII.

SECTION 7.10.       Eligibility; Disqualification.

          This Indenture shall always have a Trustee who satisfies the requirement of TIA § § 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $150,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of the bank holding company, shall meet the capital requirements of TIA § 310(a)(2). The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding, if the requirements for such exclusion set forth in TIA § 310(b)(1) are met. The provisions of TIA § 310 shall apply to the Issuer and any other obligor of the Notes.

SECTION 7.11.       Preferential Collection of Claims Against the Issuer.

          The Trustee, in its capacity as Trustee hereunder, shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated.

ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01.      Termination of the Issuer's Obligations.

          The Issuer may terminate its obligations under the Notes and this Indenture, except those obligations referred to in the penultimate paragraph of this Section 8.01, if all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes which have been replaced or paid) have been delivered to the Trustee for cancellation and the Issuer has paid all sums payable by it hereunder, or if:

          (a)      either (i) pursuant to Article III, the Issuer shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Notes in accordance with the provisions hereof or (ii) all Notes have otherwise become or will become due and payable at maturity or by reason of the mailing of a notice of redemption or otherwise within one (1) year hereunder;

           (b)      the Issuer shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders of that purpose, U.S. Legal Tender or Government Securities, or a combination thereof, in such amount as is, in the opinion of a nationally recognized firm of independent public accountants, sufficient without consideration of reinvestment of such interest, to pay Accreted Value of, premium, if any, and interest, if any, on the outstanding Notes to maturity or redemption; provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender or Government Securities, or a combination thereof, to the payment of said Accreted Value of premium, if any, and interest, if any, with respect to the Notes;

          (c)      Such deposit will not result in a breach or violation of, or constitute a default under, this Indenture, the Nortek Credit Facility or any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which it is bound;

          (d)      the Issuer shall have paid all other sums payable by it hereunder; and

          (e)      the Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for or relating to the termination of the Issuer's obligations under the Notes and this Indenture have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under the Nortek Credit Facility or any other material agreement or instrument then known to such counsel that binds or affects the Issuer.

          Subject to the next sentence and notwithstanding the foregoing paragraph, the Issuer's obligations in Sections 2.06, 2.07, 2.08, 2.09, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.09. After the Notes are no longer outstanding, the Issuer's obligations in Sections 7.07, 8.05 and 8.06 shall survive.

          After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer's obligations under the Notes and this Indenture except for those surviving obligations specified above.

SECTION 8.02.       Legal Defeasance and Covenant Defeasance.

          (a)      The Issuer may, at its option and at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03.

           (b)      Upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Issuer shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

          (i)      the rights of Holders to receive payments in respect of the principal of, premium, if any, interest on the Notes when the payments are due from the trust referred to below;

          (ii)      the Issuer's obligations under Sections 2.06, 2.07, 2.08, 2.09 or 4.02;

          (iii)      the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer's obligations in connection therewith; and

          (iv)      this Article VIII.

          Subject to compliance with this Article VIII, the Issuer may exercise its option under this Section 8.02(b) notwithstanding the prior exercise of its option under Section 8.02(c) hereof.

           (c)      Upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Issuer shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from its obligations under the covenants contained in Sections 4.04, 4.05, 4.07, 4.09 through 4.19 and clauses (3) and (4) of Section 5.01(a) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.03 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuer's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, clauses (4) and (7) of Section 6.01 hereof shall not constitute Events of Default.

SECTION 8.03.       Conditions to Legal Defeasance or Covenant Defeasance.

          The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:

          In order to exercise either Legal Defeasance or Covenant Defeasance:

          (1)      the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the applicable Notes issued thereunder, cash in U.S. Legal Tender, non-callable Government Securities, or a combination of cash in U.S. Legal Tender and Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium on the outstanding Notes issued thereunder on the stated maturity or on the applicable redemption date, as the case may be, and the Issuer must specify whether the Notes are being defeased to maturity or to a particular date fixed for redemption;

          (2)      in the case of an election under Section 8.02(b) hereof, the Issuer has delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel will confirm that, the holders of the respective outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

          (3)      in the case of an election under Section 8.02(c) hereof, the Issuer has delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

          (4)      91 days pass after the deposit is made and during the 91-day period no Default under Section 6.01(5) or (6) occurs with respect to the Issuer which is continuing at the end of the period;

          (5)      no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto;

          (6)      the Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound;

          (7)      the Issuer will have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding creditors of the Issuer or others; and

          (8)      the Issuer will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the Legal Defeasance or the Covenant Defeasance have been satisfied.

SECTION 8.04.       Application of Trust Money.

          The Trustee or Paying Agent shall hold in trust U.S. Legal Tender and Government Securities deposited with it pursuant to this Article VIII, and shall apply the deposited U.S. Legal Tender and the money from Government Securities in accordance with this Indenture to the payment of Accreted Value of, premium, if any, and interest, if any, on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender and Government Securities except as it may agree with the Issuer.

          The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender and Government Securities deposited pursuant to Section 8.03 or the Accreted Value of, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

          Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the Issuer's request any U.S. Legal Tender and Government Securities held by it as provided in Section 8.03 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.05.       Repayment to the Issuer.

          Subject to this Article VIII, the Trustee and the Paying Agent shall promptly pay to the Issuer upon request any excess U.S. Legal Tender and Government Securities held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Issuer upon request any money held by them for the payment of Accreted Value of, premium, if any, or interest, if any, that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Issuer cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Issuer. After payment to the Issuer, Holders entitled to such money must look to the Issuer for payment as general creditors unless an applicable law designates another Person.

SECTION 8.06.       Reinstatement.

          If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender and Government Securities in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender and Government Securities in accordance with this Article VIII; provided that if the Issuer has made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender and Government Securities held by the Trustee or Paying Agent.

ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.01.       Without Consent of Holders.

          The Issuer and the Trustee, together, may amend or supplement this Indenture or the Notes without notice to or consent of any Holder:

          (1)      to cure any ambiguity, defect or inconsistency;

          (2)      to comply with Section 5.01;

          (3)      to provide for uncertificated Notes in addition to or in place of certificated Notes so long as such uncertificated Notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended;

          (4)      to make any other change that does not adversely affect the rights of any Holder, or

          (5)      to comply with any requirement of the Commission in connection with the qualification of this Indenture under the TIA;

provided that the Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01.

SECTION 9.02.       With Consent of Holders.

          (a)      Subject to Section 6.04, the Issuer and the Trustee, together, with the written consent of the Holder or Holders of a majority in aggregate principal amount at maturity of the outstanding Notes, may amend or supplement this Indenture or the Notes or may waive compliance by the Issuer with any provision of this Indenture or the Notes.

          (b)      Notwithstanding Section 9.02(a), without the consent of each Holder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not (with respect to any Notes held by a non-consenting Holder):

          (1)      reduce the percentage of principal amount at maturity of the Notes whose Holders must consent to an amendment or waiver;

          (2)      make any change to the Stated Maturity or time for payment of the principal or Accreted Value of, premium, if any, interest on the Notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any Note payable in money or securities other than that stated in the Note;

          (3)      change the method of calculation of Accreted Value;

          (4)      waive a default in the payment of principal or Accreted Value of, premium, if any, interest on any Notes;

          (5)      make any change in Section 4.09 or Section 4.13; or

          (6)      make any change to this Section 9.02.

          (c)      It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver but it shall be sufficient if such consent approves the substance thereof.

          (d)      After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.

SECTION 9.03.       Compliance with TIA.

          From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect.

SECTION 9.04.       Revocation and Effect of Consents.

          (a)      Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of his Note by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount at maturity of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver.

          (b)      The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Noteholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. The Issuer shall inform the Trustee in writing of the fixed record date if applicable.

           (c)      After an amendment, supplement or waiver becomes effective, it shall bind every Noteholder, unless it makes a change described in any of clauses (1) through (6) of Section 9.02(b), in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder.

SECTION 9.05.       Notation on or Exchange of Notes.

          If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Trustee. The Issuer shall provide the Trustee with an appropriate notation on the Note about the changed terms and cause the Trustee to return it to the Holder at the Issuer's expense. Alternatively, if the Issuer or the Trustee so determines, the Issuer in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

SECTION 9.06.      Trustee To Sign Amendments, Etc.

          The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article IX; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article IX is authorized or permitted by this Indenture and constituted the legal, valid and binding obligations of the Issuer enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Issuer.

ARTICLE X
[RESERVED]

ARTICLE XI
[RESERVED]

ARTICLE XII
MISCELLANEOUS

SECTION 12.01.      TIA Controls.

          If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required or deemed to be included in this Indenture by the TIA, such required or deemed provision shall control.

SECTION 12.02.       Notices.

          Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by nationally recognized overnight courier service, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

          if to the Issuer:

Nortek Holdings, Inc.
50 Kennedy Plaza
Providence, RI 02903-2603
Attention: Almon C. Hall

Telephone: (401) 751-1600
Facsimile: (401) 751-9844

          with a copy to:

Ropes & Gray
One International Place
Boston, MA 02110
Attention: John B. Ayer, Esq.

Telephone: (617) 951-7000 Facsimile:
(617) 951-7050

          if to the Trustee:

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110
Attention: Corporate Trust Services

Telephone: (617) 603-6573
Facsimile: (617) 603-6668

          Each of the Issuer and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Issuer and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back; when receipt is acknowledged, if telecopied; five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee); and next Business Day if by nationally recognized overnight courier service.

          Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed.

          Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 12.03.      Communications by Holders with Other Holders.

          Noteholders may communicate pursuant to TIA § 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Issuer, the Trustee, the Registrar and any other Person shall have the protection of TIA § 312(c).

SECTION 12.04.       Certificate and Opinion as to Conditions Precedent.

          Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee at the request of the Trustee:

          (1)      an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Issuer, if any, provided for in this Indenture relating to the proposed action have been complied with; and

          (2)      an Opinion of Counsel stating that, in the opinion of such counsel, any and all such conditions precedent have been complied with.

SECTION 12.05.       Statements Required in Certificate or Opinion.

          Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include:

          (1)      a statement that the Person making such certificate or opinion has read such covenant or condition;

          (2)      a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

          (3)      a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with or satisfied; and

          (4)      a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials.

SECTION 12.06.       Rules by Trustee, Paying Agent, Registrar.

          The Trustee, Paying Agent or Registrar may make reasonable rules for its functions.

SECTION 12.07.       Legal Holidays.

          If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day.

SECTION 12.08.       Governing Law.

          This Indenture and the Notes will be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York.

SECTION 12.09.      No Adverse Interpretation of Other Agreements.

          This Indenture may not be used to interpret another indenture, loan or debt agreement of the Issuer or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

SECTION 12.10.       No Recourse Against Others.

          No director, officer, employee, incorporator or stockholder of the Issuer or any direct or indirect parent corporation, as such, shall have any liability for any obligations of the Issuer under the Notes or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for issuance of the Notes.

SECTION 12.11.       Successors.

          All agreements of the Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor.

SECTION 12.12.       Duplicate Originals.

          All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement.

SECTION 12.13.       Severability.

          In case any one or more of the provisions in this Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law.

SIGNATURES

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the date first written above.

NORTEK HOLDINGS, INC.

   as the Issuer

By   \s\ Richard L. Bready

Name: Richard L. Bready

Title: President & CEO

U.S. BANK NATIONAL ASSOCIATION

   as Trustee

By   \s\ Todd R. DiNezza

Name: Todd R. DiNezza

Title: Assistant Vice President

EX-4

Exhibit 4.4

EX-10

Exhibit 10.19

EX-21

Exhibit 21.1

LIST OF SUBSIDIARIES

          Set forth below is a list of all subsidiaries of the Company as of December 31, 2003 the assets and operations of which are included in the Consolidated Financial Statements of Nortek, Inc., except subsidiaries that, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary:

NAME OF SUBSIDIARY	Jurisdiction
Nortek, Inc.	Delaware
Best S.p.A	Italy
Best Deutschland GmbH	Germany
Best France S.A	France
Broan-NuTone Canada, Inc.	Ontario, Canada
Venmar Ventilation Inc.	Quebec, Canada
Innergy Tech Inc.	Quebec, Canada
Venmar CES, Inc.	Saskatchewan, Canada
Venmar Ventilation (H.D.H.) Inc.	Quebec, Canada
Broan-NuTone LLC	Delaware
Aubrey Manufacturing, Inc.	Delaware
NuTone Inc.	Delaware
Rangaire LP	Delaware
Eaton-Williams Holding Limited	United Kingdom
Elektromec S.p.A	Italy
Jensen Industries, Inc.	Delaware
LaConue International, Inc.	Delaware
Linear LLC	California
Elan Home Systems, L.L.C	Kentucky
Linear H.K. Manufacturing Ltd.	Hong Kong
Multiplex Technology, Inc.	California
Operator Specialty Company, Inc.	Michigan
SpeakerCraft, Inc.	Delaware
We Monitor America Incorporated	Colorado
Xantech Corporation	California
Nordyne Inc.	Delaware
Governair Corporation	Oklahoma
Mammoth, Inc.	Delaware
Mammoth China, Ltd.	Delaware
Temtrol, Inc.	Oklahoma
Ventrol Air Handling Systems Inc.	Quebec, Canada
Webco, Inc.	Missouri
*Ply Gem Industries, Inc.	Delaware
*Great Lakes Window, Inc.	Ohio
*Napco Window Systems, Inc.	Delaware
*Kroy Building Products, Inc.	Delaware
*Napco, Inc.	Delaware
*Thermal-Gard, Inc.	Pennsylvania
*Variform, Inc.	Missouri

*      The stock of the Companies marked with an asterisk was sold to an unrelated third party pursuant to the terms of a Stock Purchase Agreement dated December 19, 2003. The transaction was completed on February 12, 2004.

EX-31

EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard L. Bready, certify that:

1) I have reviewed this annual report on Form 10-K of Nortek Holdings, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 30, 2004

  /s/                                       

Richard L. Bready

Chairman and Chief Executive Officer

Nortek Holdings, Inc.

EX-31

EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Almon C. Hall, certify that:

1) I have reviewed this annual report on Form 10-K of Nortek Holdings, Inc.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 30, 2004

  /s/                                       

Almon C. Hall

Vice President and Chief Financial Officer

Nortek Holdings, Inc.