-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cn0DIEVk8faiW52PUsNhTgZdaRNrkS66CAMWI4yP2bye50F4iC4m6S0HT2GrG0Kq QgMvBPG153BXZQhHmGRFEg== 0000072423-95-000017.txt : 19951118 0000072423-95-000017.hdr.sgml : 19951118 ACCESSION NUMBER: 0000072423-95-000017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951031 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951109 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTEK INC CENTRAL INDEX KEY: 0000072423 STANDARD INDUSTRIAL CLASSIFICATION: SHEET METAL WORK [3444] IRS NUMBER: 050314991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06112 FILM NUMBER: 95589040 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4017511600 MAIL ADDRESS: STREET 1: 50 KENNEDY PLAZA CITY: PROVIDENCE STATE: RI ZIP: 02903 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) October 31, 1995 ------------------- Commission File No. 1-6112 ----------------------------------------------- NORTEK, INC. - ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 05-0314991 - ----------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 Kennedy Plaza, Providence, RI 02903-2360 - ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (401) 751-1600 - ----------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - ----------------------------------------------------------------- (Former name, former address and former fiscal year if changed since last year) Item 2. Acquisition or Disposition of Assets On October 31, 1995, pursuant to a stock purchase agreement, two subsidiaries of a wholly owned subsidiary of Nortek, Inc., purchased substantially all of the outstanding capital stock of BEST S.p.A. and Maninvest S.r.l. ("Best" or "Best- Maninvest Group") for Italian lira ("L") 21.0 billion (approximately U.S.$13 million at exchange rates in effect at the acquisition date) consisting of L 16.0 billion (approximately U.S.$10 million at exchange rates in effect at the acquisition date) in cash at the closing and an additional L 5.0 billion (approximately U.S.$3 million at exchange rates in effect at the acquisition date) in deferred payments over five years. In addition, such selling shareholders have the right to earn purchase price payments of up to L 3.0 billion (approximately U.S.$1.9 million at exchange rates in effect at the acquisition date) over the next five years' depending on the amount of earnings of Best. See the attached financial statements and pro forma financial statements of Nortek and Best-Maninvest Group contained elsewhere herein. Item 7. Financial Statements and Exhibits (a) Financial statements of business acquired Unaudited Best-Maninvest Group Combined Balance Sheet as of June 30, 1995, together with unaudited Best-Maninvest Group Combined Statements of Operations, Combined Statements of Changes in Shareholders' Equity and Combined Statements of Cash Flows for the six months ended June 30, 1995 and June 30, 1994. Audited Best-Maninvest Group Combined Balance Sheet as of December 31, 1994, together with audited Best-Maninvest Group Combined Statement of Operations, Combined Statement of Changes in Shareholders' Equity and Combined Statement of Cash Flows for the year ended December 31, 1994, together with accompanying Notes. (b) Pro Forma Financial Information (1) Nortek, Inc. and Subsidiaries unaudited pro forma condensed consolidated balance sheet as of July 1, 1995, together with Nortek, Inc. and Subsidiaries unaudited pro forma condensed consolidated statement of operations from continuing operations for the year ended December 31, 1994 and the six months ended July 1, 1995. (c) Exhibits 2.1 Acquisition Agreement dated as of October 31, 1995 between Nortek, Inc. and Sergio Mancini and Franco Mantini. 23.1 Consent of Independent Public Accountants SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTEK, INC. By: /s/ Almon C. Hall -------------------------- November 9, 1995 NORTEK, INC. AND SUBSIDIARIES INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated balance sheet as of July 1, 1995 and the unaudited pro forma condensed consolidated statements of operations from continuing operations for the six months ended July 1, 1995 and the twelve months ended December 31, 1994 give effect to the purchase of all the stock of Best-Maninvest Group by subsidiaries of Nortek, Inc. See Item 2 which is incorporated herein by reference. The pro forma balance sheet assumes that the transaction occurred as of July 1, 1995, while the statements of operations assume that the transaction occurred as of January 1, 1994. The pro forma data does not purport to be indicative of the results which would have actually been reported had the purchase occurred on the dates assumed or which may be reported in the future. These financial statements should be read in conjunction with the accompanying notes and the historical consolidated financial statements and related notes of Nortek included in its latest annual and quarterly reports and the Best financial statements included herein. Interim results are not necessarily indicative of the results to be expected in the future. NORTEK, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JULY 1, 1995 (Amounts in Millions of U.S.$) U.S. PRO FORMA NORTEK GAAP ADJUST- AS ADD ADJ. SUB- MENTS PRO REPORTED BEST DR/(CR) TOTAL DR/(CR) FORMA -------- ---- ---- ----- ------- ----- Current Assets: Unrestricted-- Cash and investments at cost which approximates market $ 78.5 $ 7.0 $ --- $ 7.0 $(10.0)(a) $ 75.5 Marketable securities available for sale 19.5 --- --- --- --- 19.5 Restricted-- Investments and market- able securities at cost which approxi- mates market 9.4 --- --- --- --- 9.4 Accounts receivable, less allowances 106.0 17.5 --- 17.5 --- 123.5 Inventories, net 98.1 12.3 --- 12.3 .9(e) 111.3 Prepaid expenses and other current assets 9.1 4.6 --- 4.6 --- 13.7 U. S. Federal prepaid income taxes 18.5 --- --- --- --- 18.5 ----- ---- ---- ---- --- ----- Total Current Assets 339.1 41.4 --- 41.4 (9.1) 371.4 ----- ---- ---- ---- ---- ----- Property and Equipment at cost, net 98.3 15.4 2.4 17.8 4.4(c) 120.5 ----- ---- ---- ---- ---- ----- Other Assets: Goodwill, less accumu- lated amortization 71.7 --- --- --- 5.9(g) 77.6 Deferred debt expense 8.0 --- --- --- --- 8.0 Other 9.2 .8 --- .8 --- 10.0 ----- ---- ----- ---- ----- ----- 88.9 .8 --- .8 5.9 95.6 ----- ---- ----- ---- ----- ----- $526.3 $57.6 $ 2.4 $60.0 $ 1.2 $587.5 ===== ==== ===== ==== ==== ===== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. NORTEK, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Continued) AS OF JULY 1, 1995 (Amounts in Millions of U.S.$) U.S. PRO FORMA NORTEK GAAP ADJUST- AS ADD ADJ. SUB- MENTS PRO REPORTED BEST DR/(CR) TOTAL DR/(CR) FORMA -------- ---- ---- ----- ------- ----- LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Notes payable, current maturities of long-term debt and other short- term obligations $ 4.5 $17.6 $ --- $17.6 $ (.6)(a) $ 22.7 Accounts payable 58.8 21.2 --- 21.2 --- 80.0 Accrued expenses and taxes, net 91.3 7.0 (.2) 7.2 (.9)(d) 99.4 ---- ---- ---- ---- ---- ----- Total Current Liabilities 154.6 45.8 (.2) 46.0 (1.5) 202.1 ----- ---- ----- ---- ---- ----- Other Liabilities: Deferred income taxes 18.2 --- (.5) .5 (2.7)(f) 21.4 Other 7.5 --- --- --- --- 7.5 ----- ---- ---- ---- ---- ----- 25.7 --- (.5) .5 (2.7) 28.9 ----- ---- ---- ---- ---- ----- Notes, Mortgage Notes and Other Notes Payable 219.6 6.6 (2.2) 8.8 (1.7)(a) 230.1 ----- ---- ---- ---- ---- ----- Stockholders' Investment: Preference stock, $1 par value; authorized 7,000,000 shares, none issued --- --- --- --- --- --- Common Stock, $1 par value; authorized 40,000,000 shares, 15,829,710 shares issued 15.8 2.2 --- 2.2 2.2(b) 15.8 Special Common Stock, $1 par value; author- ized 5,000,000 shares, 790,233 shares issued .8 --- --- --- --- .8 Additional paid-in capital 134.6 --- --- --- --- 134.6 Retained earnings 6.5 3.0 .5 2.5 2.5(b) 6.5 Cumulative translation, pension and other adjustments (3.2) --- --- --- --- (3.2) Less - treasury common and special common stock at cost, 3,795,210 shares and 271,605 shares, respectively (28.1) --- --- --- --- (28.1) ----- ---- ---- ---- ---- ----- $526.3 $57.6 $(2.4) $60.0 $(1.2) $587.5 ===== ==== ==== ==== ==== ===== The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. NORTEK, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FROM CONTINUING OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 (Amounts in Millions of U.S.$, Except Per Share Amounts) U.S. PRO FORMA NORTEK GAAP ADJUST- AS ADD ADJ. SUB- MENTS PRO REPORTED BEST DR/(CR) TOTAL DR/(CR) FORMA -------- ---- ---- ----- ------- ----- Net Sales $737.1 $59.8 $ --- $59.8 $ --- $796.9 ----- ---- ---- ---- ---- ----- Costs and Expenses: Cost of products sold 520.3 45.6 --- 45.6 (.6)(l) 565.3 Selling, general and administrative expense 166.8 9.0 (.1) 8.9 --- 175.7 ----- ---- ---- ---- ---- ----- 687.1 54.6 (.1) 54.5 (.6) 741.0 ----- ---- ---- ---- ---- ----- Operating earnings 50.0 5.2 (.1) 5.3 (.6) 55.9 Interest expense (26.2) (1.8) .1 (1.9) .3(i) (28.4) Interest income 5.3 .3 --- .3 .5(j) 5.1 Loss on businesses sold (1.7) --- --- --- --- (1.7) Exchange rate losses --- (.4) --- (.4) --- (.4) ----- ----- ---- ---- ---- ----- Earnings from continuing operations before provision for income taxes 27.4 3.3 --- 3.3 .2 30.5 Provision for income taxes 10.2 1.0 .4 1.4 (.1)(k) 11.5 ----- ---- ---- --- ---- ----- Earnings from continuing operations $ 17.2 $ 2.3 $ .4 $1.9 $ .1 $ 19.0 ===== ==== ==== === ==== ===== Net Earnings Per Share: Continuing operations Primary $ 1.35 $ 1.50 ===== ===== Fully diluted $ 1.34 $ 1.48 ===== ===== Weighted Average Number of Shares: Primary 12.7 12.7 ==== ==== Fully diluted 13.1 13.1 ==== ==== NORTEK, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FROM CONTINUING OPERATIONS FOR THE SIX MONTHS ENDED JULY 1, 1995 (Amounts in Millions of U.S.$, Except Per Share Amounts) U.S. PRO FORMA NORTEK GAAP ADJUST- AS ADD ADJ. SUB- MENTS PRO REPORTED BEST DR/(CR) TOTAL DR/(CR) FORMA -------- ---- ---- ----- ------- ----- Net Sales $379.0 $35.9 $ --- $35.9 $ --- $414.9 ----- ---- ---- ---- ---- ----- Costs and Expenses: Cost of products sold 280.1 29.2 --- 29.2 (.6)(h) 308.7 Selling, general and administrative expense 79.7 4.7 (.1) 4.6 --- 84.3 ----- ----- ---- ---- ---- ----- 359.8 33.9 (.1) 33.8 (.6) 393.0 ----- ---- ---- ---- ---- ----- Operating earnings 19.2 2.0 (.1) 2.1 (.6) 21.9 Interest expense (11.8) (1.2) .1 (1.3) .1(i) (13.2) Interest income 3.2 .1 --- .1 .3(j) 3.0 Net loss on marketable securities (.2) --- --- --- --- (.2) Exchange rate losses --- (.5) --- (.5) --- (.5) ----- ---- ---- ---- ---- ----- Earnings from continuing operations before provision for income taxes 10.4 .4 --- .4 (.2) 11.0 Provision for income taxes 4.7 .1 .1 .2 .1(k) 5.0 ----- ---- ---- ---- ---- ----- Earnings from continuing operations $ 5.7 $ .3 $ (.1) $ .2 $ (.1) $ 6.0 ===== ===== ==== ==== ==== ===== Net Earnings Per Share: Continuing operations Primary $ .45 $ .47 ===== ===== Fully diluted $ .45 $ .47 ===== ===== Weighted Average Number of Shares: Primary 12.7 12.7 ==== ==== Fully diluted 12.7 12.7 ==== ==== NORTEK, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JULY 1, 1995 AND DECEMBER 31, 1994 (a) Entry necessary to reflect the purchase of all the outstanding shares of Best at an approximate aggregate purchase price of approximately $10,000,000 in cash and approximately $2,300,000 (net of debt discount at 10.5%) payable in installments over five years. (b) Elimination of Best's shareholders' equity (c) Entry necessary to adjust the book value of property and equipment to estimated fair market value. (d) Entry necessary to accrue the estimated acquisition costs. (e) Entry necessary to adjust Best's inventory to estimated fair market value. (f) Entry necessary to record deferred income taxes in connection with the allocation of the purchase price to net assets. (g) Entry necessary to record estimated goodwill arising from the acquisition of Best. (h) Adjustment to increase cost of products sold for approximately $72,000, reflecting the amortization of goodwill of approximately $5,900,000 over a 40-year period, the decrease of approximately $363,000 to reflect the Company adopting a first-in, first-out method of accounting for Best's inventory, and a net decrease of approximately $261,000 that is necessary to record Best's depreciation expense which reflects the net effect of the increase to fair market value of property and equipment and the Company's basis of accounting upon acquisition. (i) Adjustment to interest expense at a rate of 10.5% that is necessary to reflect amortization of debt discount on a portion of the purchase price (approximately $3,100,000) that is payable in five annual installments. (j) Adjustment to interest income that is necessary to reflect the effect of cash and short-term investments used in connection with the acquisition. (k) The provision for income taxes reflects the tax effect of the pro forma adjustments at an assumed effective tax rate of 50%. (l) Adjustment to increase cost of products sold for approximately $147,000, reflecting the amortization of goodwill of approximately $5,900,000 over a 40-year period, and a net decrease of $783,000 that is necessary to record Best's depreciation expense which reflects the net effect of the increase to fair market value of property and equipment and the Company's new basis of accounting upon acquisition. BEST/MANINVEST GROUP -------------------- COMBINED BALANCE SHEET ---------------- Millions of Italian Lire ASSETS June 30, 1995 (Unaudited) FIXED ASSETS INTANGIBLE FIXED ASSETS Formation and expansion expenses 32 Research, development and advertising costs 62 Licenses, trademarks and concessions 74 Other charges to depreciate 173 ------ 341 ------ TANGIBLE FIXED ASSETS Land and buildings 14,158 Plant and machinery 8,308 Industrial and commercial equipment 1,742 Work in progress and advance 853 Other assets 74 ------ 25,135 ------ FINANCIAL FIXED ASSETS Receivables: long term 109 ------ Total 109 ------ TOTAL FIXED ASSETS 25,585 ------ CURRENT ASSETS INVENTORY Raw, ancillary and consumption materials 9,098 Semi-finished goods 5,730 Finished goods 4,759 Advances 403 ------ 19,990 ------ RECEIVABLES: Trade receivables 28,611 Other third parties - short terms 7,026 - long terms 40 ------ 35,677 ------ FINANCIAL ASSETS WHICH ARE NOT FIXED ASSETS Investments in not controlled enterprises 104 Other investments 748 ------ 852 ------ CASH AND BANKS Bank and postal accounts 11,361 Cash and valuables 59 ------ 11,420 ------ TOTAL CURRENT ASSETS 67,939 ------ PREPAYMENTS AND ACCRUALS Accruals and other prepayments 960 ------ TOTAL ASSETS 94,484 ------ BEST/MANINVEST GROUP -------------------- COMBINED BALANCE SHEET ---------------- Millions of Italian Lire LIABILITIES June 30, 1995 (Unaudited) SHAREHOLDERS' EQUITY Share Capital 3,550 Legal Reserve 341 Retained Earnings 3,907 Net Income 398 ------ Shareholders' Equity of the Group 8,196 ------ Capital and Reserve of minority interests 264 Net Income of minority interests 25 ------ Total Shareholders' Equity 8,485 ------ PROVISIONS FOR RISKS AND EXPENSES Taxes 918 Others 1,032 ------ Total 1,950 ------ PERSONNEL LEAVING INDEMNITY 4,000 ------ PAYABLES To banks: - short term 28,410 - long term 10,339 Other financial institutions: - short term 278 - long term 442 Advances 234 Trade payables 34,601 Taxes payable 729 To social security institutions 656 Other payables 3,775 ------ Total 79,464 ------ ACCRUED LIABILITIES AND DEFERRED INCOME Accruals and other deferred income 585 ------ TOTAL LIABILITIES 94,484 ------ MEMORANDUM ACCOUNTS SECURITIES GRANTED Real securities: Land and buildings 8,667 Other securities 700 OTHER MEMORANDUM ACCOUNTS 4,348 BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF INCOME ---------------- Millions of Italian Lire For the six months ended June 30, 1995 and 1994 For The Six Months Ended -------------------- June 30, June 30, 1995 1994 ---- ---- (Unaudited) VALUE OF PRODUCTION Net sales revenues 59,358 48,571 Other revenues 1,076 150 ------ ------ TOTAL REVENUES 60,434 48,721 PRODUCTION COSTS (48,651) (36,062) ------- ------- Earnings before sales costs and general expenses 11,783 12,659 ------- ------- Sales costs and general expenses (8,682) (6,949) Financial income and expenses, net (2,778) (1,379) Other income and expenses, net 290 --- ------- ------- Earnings before income taxes 613 4,331 Provision for income taxes 190 1,863 ------- ------- Total net income 423 2,468 Minorities' net income (25) (43) ------- ------- GROUP NET INCOME 398 2,425 ------- ------- BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY ----------------------------------------------------- Millions of Italian Lire For the six months ended June 30, 1995 (Unaudited) Minority Total Interests Share- Share Legal Reval.Ret. Net Net hold. Capital Res. Res. Earn. Inc. Total Inc. Res. Equity ------- ---- ---- ----- ---- ----- ---- ---- ------ BALANCE, December 31, 1994 1,052 196 304 2,570 3,688 7,810 65 180 8,055 Allocation of 1994 income 145 3,543 (3,688) 0 (65) 65 0 Dividends distri- bution (33) (33) (33) Reserves utilized to increase share capital 2,498 (304) (2,194) 0 0 Changes in the foreign rate and other differences 21 21 19 40 Net income 398 398 25 423 ----- --- --- ----- --- ----- -- --- ----- BALANCE, June 30, 1995 3,550 341 0 3,907 398 8,196 25 264 8,485 ===== === === ===== === ===== == === ===== BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF STOCKHOLDERS' EQUITY ------------------------------- Millions of Italian Lire For the six months ended June 30, 1994 (Unaudited) Approp. Balance of 1993 Other 1994 Balance 12/31/93 Result Changes Income 6/30/94 -------- ------ ------- ------ ------- Capital stock 1,052 --- --- --- 1,052 Revaluation reserve 304 --- --- --- 304 Legal reserve 172 30 (6) --- 196 Other and retained earnings 3,168 (504) (94) --- 2,570 Net income for the period 2,425 2,425 ----- Total group shareholders' equity 6,547 Minority interests: Capital stock and reserves 162 Net income for the period 43 ----- Total Minority Interest 205 ----- Total Stockholders' Equity 6,752 ----- BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF CASH FLOW ------------------------------- Millions of Italian Lire For the six months ended June 30, 1995 and 1994 --------------------------------------- For The Six Months Ended -------------------- June 30, June 30, 1995 1994 ---- ---- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Cash flow from operations 3,509 5,218 ------ ------ Changes in certain assets and liabilities: Trade receivables, net (1,957) (5,482) Inventories, net (7,012) (3,186) Trade payables, net 4,692 6,510 Other, net (354) 1,718 ------ ------ Total adjustments to operations (4,631) (440) ------ ------ Net cash (used in) provided by operating activities (1,122) 4,778 ------ ------ Cash flows from investing activities: Capital expenditures (5,219) (6,967) Other, net (253) --- ------ ------ Net cash used in investing activities (5,472) (6,967) ------ ------ Cash flows from financing activities: Increase in borrowings 4,311 2,763 Other, net 32 (430) ------ ------ Net cash provided by financing activities 4,343 2,333 ------ ------ (Decrease) increase in cash in hand and at banks (2,251) 144 Cash in hand and at banks at the beginning of the period 13,671 9,355 ------ ------ Cash in hand and at banks at the end of the period 11,420 9,499 ------ ------ BEST-MANINVEST GROUP NOTES TO THE UNAUDITED COMBINED FINANCIAL STATEMENTS AS OF JUNE 30, 1995 AND JUNE 30, 1994 The unaudited combined financial statements as of June 30, 1995 and for the six months ended June 30, 1995 and June 30, 1994 have been prepared on the basis of interim financial statements by the management of The Best- Maninvest Group. These unaudited combined financial statements have been prepared on the basis of the statutory accounting records at June 30, 1995 and June 30, 1994 integrated by extra-accounting records (such as depreciation, provision for leaving indemnities, accruals, etc.) which usually are recorded in the statutory books only at December 31, closing date of the Fiscal Year. These unaudited combined financial statements should be read in conjunction with the audited combined financial statements of Best-Maninvest Group as of December 31, 1994 included elsewhere herein. INDEPENDENT AUDITORS' REPORT To the Shareholders of BEST S.p.A. and MANINVEST S.r.l. We have audited the combined financial statements of the BEST - MANINVEST GROUP (which includes BEST S.p.A. and its subsidiary and MANINVEST S.r.l. and its subsidiaries as indicated in note 1 of these financial statements) for the year ended December 31, 1994. Our audit was conducted in accordance with Italian generally accepted auditing standards which are substantially similar to auditing standards generally accepted in the United States. In accordance with the Italian standards, we make reference to the accounting principles issued by the Italian National Council of Accountants. In our opinion, the combined financial statements referred to above, taken as a whole, present fairly, in all material respects, the financial position and results of operations and cash flow of the BEST - MANINVEST GROUP (as identified above) for the year ended December 31, 1994, in conformity with accounting principles generally accepted in Italy. /s/DELOITTE & TOUCHE October 20 1995 Ancona, Italy BEST/MANINVEST GROUP -------------------- COMBINED BALANCE SHEET ---------------------- ASSETS 12.31.94 Amounts in Lire Millions A RECEIVABLES FROM SHAREHOLDERS FOR PAYMENTS STILL DUE 0 -- B FIXED ASSETS I INTANGIBLE FIXED ASSETS 1 Start-up and expansion expenses 42 2 Research, development and advertising expenses 12 3 Industrial patents and intellectual property rights 32 4 Concessions, licenses, trade marks 17 5 Other intangible fixed assets 12 --- Total intangible fixed assets 115 --- II TANGIBLE FIXED ASSETS 1 Land and buildings 13,204 2 Plant and machinery 7,185 3 Industrial and commercial equipment 1,735 5 Assets under construction and advances to suppliers 433 ------ Total tangible fixed assets 22,557 III FINANCIAL FIXED ASSETS 1 Equity investments in: a) non-combined subsidiaries b)associated companies c)other companies 2 Financial receivables due from: a)non-combined subsidiaries b)associated companies c)third parties: - Short term 21 - Long term 160 3 Other securities 0 --- Total financial fixed assets 181 --- TOTAL FIXED ASSETS 22,853 ------ C CURRENT ASSETS I INVENTORIES 1 Raw materials and other materials 5,821 2 Work in progress and semifinished products 4,285 4 Finished goods and goods for resale 2,478 5 Advance payments to suppliers 394 ------ Total inventories 12,978 ------ II ACCOUNTS RECEIVABLE: 1 Trade receivables 26,654 5 Other receivables: - due within 12 months 7,170 - due beyond 12 months 95 ------ Total accounts receivable 33,919 ------ III CURRENT FINANCIAL ASSETS 3 Other investments 58 5 Other securities 747 ------ Total current financial assets 805 ------ IV LIQUID FUNDS 1 Bank and post office deposits 13,619 2 Cash and valuables 52 ------ Total liquid funds 13,671 ------ TOTAL CURRENT ASSETS 61,373 ------ D ACCRUED INCOME AND PREPAID EXPENSES 841 ------ TOTAL ASSETS 85,067 ------ See accompanying Notes to Combined Financial Statements BEST/MANINVEST GROUP -------------------- COMBINED BALANCE SHEET ---------------------- LIABILITIES AND SHAREHOLDERS' EQUITY 12.31.94 Amounts in Lire Millions A SHAREHOLDERS' EQUITY I Capital stock 1,052 III Revaluation reserves 304 IV Legal reserve 196 VII Other reserves 2,570 IX Net income (loss) for the year 3,688 ----- GROUP INTEREST IN SHAREHOLDERS' EQUITY 7,810 Minority interest 245 ----- TOTAL SHAREHOLDERS' EQUITY 8,055 ----- B PROVISIONS FOR RISKS AND EXPENSES 2 For taxation 869 3 Other provision s 1,755 Total provisions for risks and expenses 2,624 ----- C PERSONNEL LEAVING INDEMNITY 3,587 ----- D ACCOUNTS PAYABLE 3 Due to banks: - within 12 months 27,088 - beyond 12 months 7,350 4 Due to other financial institutions: - within 12 months 161 - beyond 12 months 322 5 Advances 311 6 Trade accounts 29,909 7 Payables represented by securities 254 11 Taxes payable 2,040 12 Payables to social security institutions 1,077 13 Other payables 1,569 ------ Total accounts payable 70,081 ------ ACCRUED LIABILITIES AND DEFERRED INCOME 720 ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 85,067 ------ See accompanying Notes to Combined Financial Statements MEMORANDUM ACCOUNTS 12.31.94 A. Guarantees given: - Sureties 77 - Mortgages on land and buildings 19,010 - Guarantees on owned bonds 700 ------ Total guarantees given 19,787 ------ B. Other memorandum accounts: - Leasing payables 2,801 ------ TOTAL GUARANTEES AND MEMORANDUM ACCOUNTS 22,588 ------ See accompanying Notes to Combined Financial Statements BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF INCOME ---------------------------- 12.31.94 Amounts in Lire Millions A PRODUCTION VALUE 1 Revenues from sales and services 96,347 2 Changes in inventories of work in progress, finished and semi-finished goods 2,548 5 Other income and revenues 820 ------ Total production value 99,715 ------ B PRODUCTION COSTS 6 Raw, ancillary, consumable materials and goods (32,862) 7 Services (30,791) 8 Utilization of third party assets (1,049) 9 Labour costs a) wages and salaries (15,240) b) social contributions (6,129) c) personnel termination indemnity (1,021) d) other costs (226) 10 Depreciation, amortization and writedowns: a) amortization of intangible fixed assets (399) b) depreciation of tangible fixed assets (2,919) c) other writedowns of non current assets (116) d) writedowns of receivables included in working capital and liquid assets (95) 11 Changes in inventories of raw materials and other materials 1,919 12 Provision for risks 13 Other provisions 14 Other operating charges (2,501) ------- Total production cost (91,429) ------- DIFFERENCE BETWEEN VALUE AND COST OF PRODUCTION 8,286 ------- C FINANCIAL INCOME AND CHARGES 15 Income from investments 4 16 Other financial income: b) from securities held as financial fixed assets which do not constitute equity investments 81 c)from securities included among the current assets which do not constitute equity investments 6 d)financial income other than the above 1,182 17 Interest and other financial charges (4,369) ------ Total financial income and charges (3,096) ------ D ADJUSTMENTS TO THE FINANCIAL ASSETS 18 Revaluations 0 19 Writedowns 0 ------ Total adjustments 0 ------ E EXTRAORDINARY INCOME AND CHARGES 20 Income: a) gains on disposals 72 b) sundry gains 81 c) other extraordinary gains 244 21 Charges: - losses on disposals (200) - other charges (36) ------ Total extraordinary items 161 ------ PROFIT (LOSS) BEFORE TAX 5,351 22 Income taxes for the year - current (1,558) - deferred (40) ------ 23 COMBINED NET INCOME 3,753 (Profit)/loss pertaining to the minority interests (65) ------ NET INCOME (LOSS) PERTAINING TO THE GROUP 3,688 ----- See accompanying Notes to Combined Financial Statements BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY ----------------------------------------------------- FOR THE YEAR ENDING DECEMBER 31, 1994 ------------------------------------- (Amounts in Lire Millions) APPROPRIATION SHAREHOLDERS' BALANCE OF 1993 OTHER 1994 BALANCE EQUITY 12/31/93 RESULT CHANGES INCOME 12/31/94 - ------------- -------- ------ ------- ------ -------- Pertaining to the Group: Capital stock 1,052 1,052 Revaluation reserve 304 304 Legal reserve 172 30 (6) 196 Other reserve and retained earnings 3,168 (504) (94) 2,570 Net income for the year 3,688 3,688 ----- Total Group shareholders' equity 7,810 ----- Minority interests: Capital stock and reserves 180 Net income for the year 65 ----- Total minority interest 245 ----- TOTAL 8,055 ----- See accompanying Notes to Combined Financial Statements BEST/MANINVEST GROUP -------------------- COMBINED STATEMENT OF CASH FLOW ------------------------------- Million of Italian Lire For the year ending December 31, 1994 ------------------------------------ Cash flow generated by operations: Net income for the year (before minority interest) 3,753 Adjustments of items which do not affect cash flow Depreciation and amortization 3,434 Personnel leaving indemnity provision accrued during the year 1,038 Accrual to provisions 956 Net loss on assets disposed 128 5,556 Changes in current assets and liabilities Trade receivables (8,063) Other receivables (3,991) Inventories (4,822) Prepayments and accruals (146) Trade payables 13,863 Other payables 928 (2,231) ------ Total adjustments to Net Income 3,325 ------ Cash flow generated by operations 7,078 ------ Cash flows from investment activities: Book value of assets disposed 131 Purchase of tangible fixed assets (12,545) Increase in intangible fixed assets (64) (Increase) decrease in investments (50) _______ Net cash used in investing activities (12,528) ------- Cash flow from financing activities Personnel leaving indemnity paid during the year (268) Increase in other non-current assets 82 Increase in payables to banks 7,905 New loans 3,164 Payments of existing loans (598) Dividends distributed (544) _______ Net cash by financing activities 9,741 ------- Exchange differences arising on translation of foreign currency financial statements 25 ------- Increase (decrease) in liquid funds 4,316 ------- Cash in hand and at banks at December 31, 1993 9,355 Cash in hand and at banks at December 31, 1994 13,671 ------- Increase (decrease) in cash in hand and at banks 4,316 ------- See accompanying Notes to Combined Financial Statements BEST-MANINVEST GROUP NOTES TO THE COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1994 The combined financial statements have been prepared taking into consideration the regulations introduced by Decree 127/1991 which implements the EC VII Directive. The notes to the combined financial statements explain, analyze and, in some cases, supplement the data reported on the face of the financial statements. Additional information is also provided in order to present a true and fair view of the financial and operating position of the Group, even where this is not required by specific legislation. Unless otherwise specified amounts indicated in these notes are expressed in millions of Italian Lire. ACTIVITIES OF THE GROUP - ----------------------- BEST-MANINVEST Group, the parent companies, and their subsidiary companies (collectively the "Group") primarily manufacture and market range hoods, motors and electrical transformers, plastic materials and stamps for the manufacture of such plastic materials. FORM AND CONTENT OF THE COMBINED FINANCIAL STATEMENTS - ----------------------------------------------------- 1) Format and combining area These financial statements consist of the balance sheet, statement of income, statement of changes in shareholders' equity and of cash flows together with explanatory notes. The combining area consists of the parent companies BEST S.p.A. and MANINVEST S.r.l. and the companies in which BEST S.p.A. and MANINVEST S.r.l. have the control, in virtue of the voting rights owned. In their turn, BEST S.p.A. and MANINVEST S.r.l. are controlled by a common share structure ending up with two shareholders (individual persons); therefore, the group is named BEST-MANINVEST GROUP. These combined financial statements, presented in a format that is not compared with the prior year, have been prepared in connection with, and for the purpose of, the possible transfer of the share capital of the two companies (BEST S.p.A. and MANINVEST S.r.l.). The list of the companies (that are fully combined on a line-by-line basis) is the following: BEST Group: - Best S.p.A. (Parent company) - Best Deutschland Gmbh (Subsidiary at 100%) MANINVEST Group: - Maninvest S.r.l. (Parent company) - Elektromec S.p.A. (Subsidiary at 96%) - Selea S.r.l. ( " " 90%) - Teknomec S.r.l. ( " " 100%) - Interglass S.r.l. ( " " 72%) - Elektra S.r.l. ( " " 100%) 2) Year end date The combined financial statements have been prepared by the management of the Group Parent companies and approved by the legal representatives on the basis of the statements as at December 31, 1994, approved by the shareholders. 3) Combining principles The financial statements used for combining purposes are the statutory financial statements of the individual group companies. These financial statements have been suitably reclassified and adjusted in order to bring them into line with the parent companies BEST S.p.A. and MANINVEST S.r.l. accounting principles and valuation methods, which comply with those laid down by articles 2423 et seq. of the Italian Civil Code and with those recommended by CONSOB. In preparing the combined financial statements, all assets, liabilities, income and expense items of the companies included in the combination have been included in their entirety on a line-by-line basis. Receivables and payables, income and expenses, profits and losses deriving from transactions between combined companies have been eliminated. The book value of investments in combined companies is eliminated against their corresponding portions of net equity. The difference existing at the acquisition date between the book value of the investments being eliminated and the corresponding portion of net equity being included are entirely booked as an adjustment to combined net equity. Such difference is immaterial. The amount of the capital and reserves of subsidiaries pertaining to third party shareholders is booked to an equity item entitled "Minority interests"; the portion of the net profit or loss for the year pertaining to third party shareholders is booked to a profit & loss item entitled "Profit (loss) pertaining to minority interests". 4) Translation of foreign currency financial statements Balance sheet items are translated into Italian lire at year end exchange rate, while the statement of income items are translated at average exchange rates for the year. The difference between the profit or loss for the year translated at the average exchange rate and the figure translated at the year end exchange rate, as well as the effect on assets and liabilities of the changes in exchange rates between the beginning and the end of the year, are booked to equity under the Other reserves. The exchange rate used to translate financial statements not expressed in Italian lire is shown in the following table: Currency Average rate Year end rate DM 999,7 1.047,7 5) Accounting principles and valuation methods a) General The accounting principles and valuation methods have been applied consistently by all of the combined companies. The accounting principles used in the combined financial statements are those used by the parent companies BEST S.p.A. and MANINVEST S.r.l. suitably adjusted to make them homogeneous, and comply with the legal regulation mentioned earlier, integrated and interpreted by the Accounting Principles issued by the Italian National Council of Accountants. b) Value adjustments and recoveries Tangible and intangible fixed assets with a limited useful life are depreciated over that period. If they or other asset items suffer a permanent loss of value, then they are written down to their actual value. Depreciation methods and writedowns are explained in detail later in the notes. c) Revaluations No revaluations have been carried out except for those permitted under specific laws regarding tangible fixed assets. d) Accounting entries made solely for tax purposes Certain subsidiaries have made accounting entries in their statutory financial statements solely for tax reasons, particularly accelerated depreciation in excess of what is required to charge the cost of the tangible fixed assets over their estimated useful life. These entries have been eliminated on combination. The more important accounting principles and valuation methods are as follows: e) Intangible fixed assets Intangible fixed assets are booked at purchase or internal cost, including ancillary charges, and amortized on a straight line basis. Start-up and expansion expenses are shown in a specific item and amortized over their useful life, which in any case cannot be more than 5 years. Research, development costs and advertising expenses are all written off to the statement of income in the year they are incurred. Patent rights and rights to use original works are amortized on the basis of their estimated period of utilization, which in no case can be longer than the period laid down in the license contract. Concessions, licenses, trade marks and similar rights that have been capitalized are amortized over the period for which they are expected to be used, and in any case no longer than the period set by the purchase contract; if no contract exists or it is impossible to quantify a useful life, amortization is charged over a period of five years. Intangible fixed assets that at year end appear to have suffered a permanent loss of value compared with their net book value are written down to their actual value. f) Tangible fixed assets and depreciation Tangible fixed assets are booked at purchase or production cost, including ancillary expenses. Cost is only revalued if it is in accordance with national laws permitting such assets to be restated. Depreciation is charged on the basis of the cost of the assets, or the revalued cost where applicable, in such a way as to reflect the assets' residual useful life. In accordance with the accounting principles mentioned earlier, tangible fixed assets that at year end appear to have suffered a permanent loss of value compared with their net book value are written down to their actual value. Ordinary maintenance expenses are all written off. Maintenance expenses that increase the useful life of the assets are booked to the accounts concerned and depreciated over the residual useful life. The depreciation rates consistently applied are as follows: Buildings Industrial buildings 3% Plant and machinery Generic plant and machinery 10-15,5% Dies and machine parts 25% Painting area 15% Industrial and commercial equipment Tools and equipment 25% Other assets Software and EDP equipment 33% Furniture and office machinery 12% Electronic office machinery 20% Motor vehicles 20-25% In the case of fixed tangible asset additions, the amount of depreciation is reduced to 50% to take into consideration the period of the year in which the asset was purchased. g) Inventory Inventories are valued at the lower of purchase or production cost, including overheads, and realizable value based upon market trends. Raw, ancillary and consumption materials are valued at the average purchase cost using the LIFO method. Work in progress, semifinished goods and finished products are valued on the basis of the costs incurred depending on the stage of completion reached at the end of the year. Obsolete and slow-moving items are written-down taking into account the chances they have of being utilized or sold at a profit. h) Receivables Accounts receivable are shown at their estimated realizable value which is obtained from reducing their nominal value by the corresponding provision for bad debts. i) Current financial assets Current financial assets that are not long term, are valued at the lower of the purchase cost and realizable value. l) Cash and banks Liquid assets existing in cash and banks are shown at their nominal value. m) Prepayments and accruals These include only income and costs that refer to the financial year but are payable in future periods, or revenues and expenses paid during the year but applicable to future periods. In any case, the items recorded in these accounts are only portion of costs and revenues that are common to two or more years, the amount of which varies according to time. n) Provision for risks and expenses Risk and expense provisions are made only to cover losses or liabilities of a specific nature, that certainly or probably exist, but which are hard to quantify or schedule at the year end. This account includes the provision for deferred taxation. o) Personnel leaving indemnity The personnel leaving indemnity account has been booked in accordance with Italian laws, labour contracts and local agreements and has been calculated for each employee. This account includes the accruals for the pension plan of the procurator of BEST DEUTSCHLAND GMBH which is determined and adjusted in accordance with actuarial measurements of the existing benefit obligation. p) Payables Payables are shown at their nominal value. q) Amounts expressed in foreign currency Amounts expressed in foreign currency are translated at the historical exchange rate. If a net loss arises from the adjustment of the foreign currency receivables and payables to year end exchange rates, this loss is booked to the statement of income against a specific account shown under the provision for risks and expenses. r) Provision for taxation Income taxes are calculated on the basis of the taxable income of each of the combined companies in accordance with local tax regulations. Deferred taxes are charged in the combination on timing differences existing between the taxable results of the individual companies and those combined. For prudence sake, deferred tax assets are only accounted for up to the extent of any deferred tax liabilities. ANALYSIS OF THE ITEMS IN THE FINANCIAL STATEMENTS: (All amounts in the tables are expressed in Millions of Italian Lire) ASSETS ------ A) Receivables due from shareholders for payments still due The balance of this account in the financial statements for the year ended December 31, 1994, is zero since there are no receivables from shareholders for share capital subscribed but not paid. B) Non-current assets I -Intangible fixed assets Intangible fixed assets at the year end are made up as follows: Breakdown: 12/31/1994 Set-up and expansion expenses 42 R&D and advertising expenses 12 Industrial patents and intellectual property rights 32 Concessions, licenses, trade marks 17 Other intangible fixed assets 12 --- Total 115 --- The above mentioned items are capitalized since they are considered to be of benefit to the company over many years. They are amortized on a straight line basis. No revaluations or writedowns have been made during the current year. II- Tangible fixed assets Movements in this account during the year are as follows: Balance Balance 12/31/93 Additions (Decrease) (Amort.) 12/31/94 -------- --------- ---------- -------- -------- Land and buildings 5,318 8,197 - 311 13,204 Plant and machinery 6,420 2,887 69 2,053 7,185 Industrial and commercial equipment 1,439 1,028 62 670 1,735 Assets under construction and advances to suppliers 6 433 6 - 433 ------ ------ --- ----- ------ TOTAL 13,183 12,545 137 3,034 22,557 ------ ------ --- ----- ------ No revaluations or writedowns have been made during the current year. Certain fixed assets of Best S.p.A. were revalued in prior years in accordance with specific laws permitting monetary revaluation. No writedowns have ever been made. Additions during the year mainly refer to the purchase of an industrial building by Best S.p.A. and of plants, machineries and equipments finalized to increase production capacity of the Best and Maninvest groups, to rationalize and automate it. Some of the Group's tangible fixed assets are pledged as guarantees for long-term loans from banks. The amount of such real guarantees is approximately, at the original value, Lire 19,010 million as of December 31, 1994. At the year end the Group had commitments for purchasing fixed assets for about Lire 3,300 million. Monetary revaluations Tangible fixed assets in existence at the balance sheet date include the following amounts (before depreciation) of revaluations carried out by Best S.p.A. as permitted by Italian law. 12/31/94 -------- land and buildings 372 plant and machinery 126 industrial and commercial equipment 39 --- TOTAL 537 --- III- Financial fixed assets The account is analyzed as follows: 12/31/94 -------- Financial receivables due from: third parties 181 --- TOTAL 181 --- The financial fixed assets shown in the balance sheet refer mainly to guarantee deposits. There are no amounts receivable after five years. C) Current assets I -Inventories Inventories as at December 31, 1994 are analyzed as follows: Reserve for Net value Gross depreciation 12/31/94 ----- ------------ -------- Raw materials, other materials 5,871 -50 5,821 Work in progress and semifinished products 4,285 - 4,285 Finished goods and goods for resale 2,743 -265 2,478 Advance payments to suppliers 394 - 394 ------ ---- ------ TOTAL 13,293 -315 12,978 ------ ---- ------ The valuation of the inventory at current cost valuation as compared with the LIFO method resolve in a difference amounting to approximately Lire 900 million. II-Accounts Receivable Accounts receivable are made up as follows: 12/31/94 -------- Accounts receivable: trade receivables 26,654 other receivables 7,265 ------ TOTAL 33,919 ------ The amount of the receivables from customers and the provision for bad debts is the following: 12/31/94 -------- Trade receivables 27,239 Provision for bad debts 585 ------ TOTAL 26,654 ------ Accounts receivable from customers refer to commercial transactions and are mainly receivables from European customers. Some Group companies have obtained insurance cover for collection risks. The provision for bad debts is considered adequate to cover potential risks of not collecting outstanding balances from customers. The account as at December 31, 1994 includes Lire 72 million receivables from the related party 3M di Mantini F. & C S.a.S, which collection is expected to be short-term. The analysis of the balance Other receivables is the following: 12/31/94 -------- Receivables within 12 months For VAT from Tax Authorities 5,629 Income tax credit 1,257 Suppliers' debit balances 16 Other receivables 268 ----- Total 7,170 ----- Such receivables, which are all current, are all collectible. The receivable for VAT is mainly due to the annual fiscal return of the group companies filing for a reimbursement. Income tax credit refers to the amount of income tax filed with the prior year return and the amount will be off-set against future tax due. Others receivables include an amount of Lire 42 million due from shareholders which is off-set by an amount of Lire 50 million payable to shareholders included in Other payables. These receivables are stated net of the provision for bad debts of Lire 60 million relevant to the advance to a supplier for the purchase of a machinery in dispute. 12/31/94 -------- Receivables beyond 12 months Tax credits 18 Other receivables 77 --- Total 95 --- Receivables after 12 months are mainly due to advance payments to personnel. III- Current financial assets The balance of current financial assets is analyzed as follows: 12/31/94 -------- Current financial assets: other investments 58 other securities 747 --- TOTAL 805 --- The account Other securities includes bonds given as a guarantee deposit to Italian tax authorities for Lire 400 million, and to banks for Lire 300 million. IV - Liquid funds Liquid funds are made up as follows: 12/31/94 -------- Liquid funds: bank and post office deposits 13,619 cash and valuables 52 ------ TOTAL 13,671 ------ Liquid funds consist of cash at banks and on hand at December 31, 1994. D) Accrued income and prepaid expenses Accrued income and prepaid expenses are made up as follows: 12/31/94 -------- Accrued income 68 --- Total accrued income 68 --- Prepaid expenses: Insurance premiums 32 Installments of financial lease 160 Prepaid interest 262 Prepaid expenses 72 Other prepayments 247 --- Total Prepayments 773 --- TOTAL 841 --- Prepayments and accrued income are accounted for on the accruals basis. Prepaid interests refer to interests payable on interest assisted loans according to the Sabatini law as shown in the balance sheet of the companies Best S.p.A., Teknomec S.r.l., and Interglass S.r.l. LIABILITIES AND SHAREHOLDERS' EQUITY The changes in shareholders' equity for the year 1994 is shown in the accompanying statement. A) Shareholders' equity Shareholders' equity accounts are as follows: I -Capital Stock The capital stock, issued and fully-paid, of the Parent companies as at December 31, 1994 is composed as follows: No. of stocks Face value Total value ------------- ---------- ----------- - Best S.p.A. 1,001,980 1,000 1,002 - Maninvest S.r.l. 50,000 1,000 50 --------- ----- 1,051,980 1,052 --------- ----- Both companies are held 50% by Mr. S. Mancini and 50% by Mr. F. Mantini. III- Revaluation reserves This reserve, amounting to Lire 304 million at December 31, 1994, shows the residual amount of the revaluation of tangible fixed assets made by the Group in accordance with Italian law. Taxes have not been provided in respect of this reserve since, at this time, the conditions (such as for example distribution) which would give rise to such taxation, are not expected to occur. IV - Legal reserve This reserve refers to the allocation of prior years' profit as approved by the shareholders' meeting, as requested by Italian law (at least 5% of annual net income must be allocated to legal reserve until the balance is equal to 20% of the capital stock). VII- Other reserves Other reserves include exchange rates adjustments generated by translating the foreign currency financial statements of combined companies to Italian Lire, and profits carryforward which will be subject to taxation upon distribution or if utilized for purposes other than covering losses. The following statement highlights a summary of the differences between the parents' financial statements and the combined financial statements in respect to the year result and the equity. RECONCILIATION BETWEEN THE PARENTS' FINANCIAL STATEMENTS AND THE COMBINED FINANCIAL STATEMENTS Shareholders' Net profit Equity ---------- ------ Balances as per statutory financial statements: Best S.p.A. 2,260 4,078 Maninvest S.r.l. 640 709 ----- ----- 2,900 4,787 Difference between the Group's share of net equity and the carrying value of the investment 1,704 2,223 Elimination of intercompany profits on the sale on intangible assets -20 -66 Elimination of intercompany dividends -1,150 -400 Elimination of intercompany profits on inventory 67 -190 Elimination of intercompany profits on the sales of fixed assets -59 -266 Adjustment for depreciation in excess of the useful life of the assets 516 2,061 Other adjustments -270 -339 ----- ----- Balances as per the combined financial statements 3,688 7,810 ----- ----- B) Provisions for risks and expenses Provisions for risks and expenses are made up as follows: 12/31/94 -------- Provisions for risks and expenses: for taxation 869 other provisions 1,755 ----- Total 2,624 ----- The provision for taxation includes, for Lire 813 million, deferred taxes on timing differences between the taxable results and the financial statements used for combining purposes. The fiscal years of Best S.p.A. are closed up to 1986. The fiscal years of Maninvest S.r.l., Elektromec S.p.A. and Interglass S.r.l. are closed up to 1987 while no fiscal years are closed for Elektra S.r.l. as the company was recently set-up. The last tax assessment of Best Deutschland Gmbh concerned fiscal years from 1988 to 1990. Management, in agreement with tax consultants, believes that no material liabilities will arise from the related settlement. Some Group companies (Best S.p.A., Elektromec S.p.A., Selea S.r.l. and Teknomec S.r.l.) benefited from the offset of tax exemption (ILOR) not yet formally recognized by tax authorities. The account Other provisions is analyzed as follows: 12/31/94 -------- Other provisions: Provision for exchange rates losses 1,234 Provision for guarantees 521 ----- Total 1,755 ----- The provision for exchange rates losses shows the net effect of adjusting the foreign currency balances using the year end exchange rates. The provision for guarantees represents an estimate of the costs to be incurred for the repairing of products under warranty sold by Best Gmbh in the German market. C) Personnel leaving indemnity Changes during the year are the following: 12/31/94 -------- Beginning balance 2,817 (+) Accruals 1,038 (-) Payments 268 ----- Ending balance 3,587 ----- The personnel leaving indemnity, applicable to Italian companies, has been accrued in accordance with the laws in force in the country and amounts to Lire 3,214 million, while the pension fund of Best Gmbh amounts to Italian Lire 373 million. D) Accounts payable The analysis of the accounts payables based upon nature and due date, is the following: 12/31/94 -------- Amounts payable --------------- Within From 1 to 5 1 year years ------ ----- due to banks 27,088 7,350 other financial institutions 161 322 advances 311 trade accounts 29,909 payables represented by securities 254 taxes payable 2,040 payable to social security institutions 1,077 other payables 1,569 ------ ----- Total 62,409 7,672 ------ ----- There are no amounts payable after five years. Short-term indebtedness with banks is mainly due to new lines of credit on current account, advances on exports, and the current portion of loans (amounting to Lire 1,645 million). A detail of the medium-long term financial payables is as follows: 12/31/94 -------- Due to banks Medium term financing to export 663 Industrial loan B.N.L. 2,500 Loan Bimer Banca 3,091 Loan Mediocredito L. 949 318 Financing B.N.L. 778 ----- Total 7,350 ----- Payables to other financial institutions Financing Law 1329/65 322 --- Total 322 --- All loans given to the companies Best S.p.A., Selea S.r.l. and Elektromec S.p.A., are guaranteed by mortgages on the buildings owned by these companies for a total amount, at the original value, of Lire 19,010 million. Trade accounts Trade accounts, amounting to Lire 29,909 million, are all current. Payables represented by securities Payables represented by securities include the notes payable in relation to fixed assets purchased under the Sabatini law 1329/65 by Teknomec S.r.l. Taxes payable Taxes payable are made up as follows: 12/31/94 -------- Income taxes 1,022 Tax on shareholders' equity 368 VAT payable 8 Withholding tax payable to Tax Authorities 626 Other taxes and dues 16 ----- Total 2,040 ----- Payables to social security institutions Payables to social security, amounting to Lire 1,077 million, refer to both the Group and the employees contributions payable to these institutions for the month of December paid in January 1995. Other payables Other payables are made up as follows: 12/31/94 -------- Personnel 1,029 Other payables 540 ----- Total 1,569 ----- Payables to personnel are related to the salaries of the month of December 1994 which were paid in January 1995. Other payables refer to commissions payable and the Directors' emoluments. E) Accrued liabilities and deferred income Accrued liabilities and deferred income are made up as follows: 12/31/94 -------- Accrued liabilities: Others 652 --- Total accrued liabilities 652 --- Deferred income: Interest receivables 68 --- Total deferred income 68 --- TOTAL 720 --- The account accrued liabilities as at December 31, 1994 is mainly represented by the amount of vacations accrued but not used by personnel. MEMORANDUM ACCOUNTS The guarantees given to third parties and shown in the memorandum accounts refer for Lire 77 million to sureties. Real guarantees, amounting to Lire 19,710 million, refer for Lire 19,010 million to the mortgage on tangible fixed assets to guarantee medium and long term loans, at the original value, and for Lire 700 million to guarantees on owned bonds. Other memorandum accounts include Lire 2,801 million of lease installments payable which is the residual liabilities to suppliers deriving from financial leasing contracts of tangible fixed assets. STATEMENT OF INCOME ------------------- A) Production value Analysis of sales and services: 12/31/94 -------- Breakdown of sales by type of activity: Sales of products, spare parts, accessories 96,133 Repairs, packaging, transports 20 Other sales 800 Services 214 ------ Total 97,167 ------ Other sales mainly include customs duties recovered on exports of finished goods. 12/31/94 -------- Geographical breakdown of sales of products, spare parts, accessories Italy 12,441 Foreign 83,692 ------ Total 96,133 ------ B) Production costs Purchases of raw, ancillary, consumable materials and goods The analysis of purchases is the following: 12/31/94 -------- Raw materials and components 31,311 Consumable materials 199 Packaging materials 195 Other production materials 677 Other purchases 480 ------ Total 32,862 ------ Costs of services The analysis and the breakdown of costs of services are as follows: 12/31/94 -------- Subcontracted work 21,256 Electricity and other utilities 725 Maintenance 2,224 Technical consultancy 569 Commissions 1,275 Legal and consultancy expenses 398 Transport on sales 2,739 Transport on purchases 277 Other services 1,328 ------ Total 30,791 ------ C) Financial income and charges The composition of financial charges is the following: 12/31/94 -------- Income from long term securities 81 Interest income on other securities 6 Bank interest income 284 Interest on other current receivables 28 Realized exchange gains 839 Other financial income 35 ----- Total 1,273 ----- The composition of interests payable and other charges is the following: 12/31/94 -------- Financial charges on: payable to banks for short term finance 1,881 payable to banks for loan and other medium- long term borrowings 702 payable to other financial institutions 4 suppliers 62 other payables 58 Other financial charges: loss on exchange rates 1,512 commissions and bank charges 150 ----- Total 4,369 ----- D) Adjustment to the value of financial assets The balance is zero. E) Extraordinary items Breakdown on extraordinary income Extraordinary income consists of: 12/31/94 -------- Extraordinary income: Sundry gains 81 Other extraordinary gains 244 --- Total 325 --- Gains on disposal of assets: Gains on disposal of fixed assets 72 --- Total 72 --- OTAL 397 --- The breakdown of extraordinary charges is as follows: 12/31/94 -------- Extraordinary charges: Expenses and losses extraordinary in nature 1 Sundry losses 35 --- Total 36 --- Losses on disposal of fixed assets: Losses on disposal of fixed assets 200 --- Total 200 --- TOTAL 236 --- Other information As required by law the following is a breakdown of personnel by category and the emoluments paid to Directors and Statutory Auditors. Average number of employees by category 12/31/94 -------- Factory workers 459 Office workers 73 Managers 1 --- Total 533 --- Compensation paid to Directors and Statutory Auditors are the following: 12/31/94 -------- Directors 511 Statutory Auditors 53 --- Total 564 --- EXPLANATION ADDED FOR TRANSLATION TO ENGLISH The financial statements have been translated into English from the original version in Italian. They have been prepared in accordance with the Italian law related to financial statements, interpreted and integrated by the accounting principles established by the Italian Accounting Profession. EX-2 2 EXHIBIT 2.1 ACQUISITION AGREEMENT Dated as of October 31, 1995 between NORTEK, INC. (as Buyer) and SERGIO MANCINI FRANCO MANTINI (as Sellers) TABLE OF CONTENTS Page 1 Acquisition of Gruppo BEST by Nortek on the Closing Date 2 1.1 Purchase and Sale of Gruppo BEST 2 1.2 Purchase Price for the Acquisition Shares 2 1.3 Allocation of the Purchase Price 2 1.4 Additional Adjustment to Purchase Price 3 1.5 Target Value 3 1.6 Operating Earnings 4 2 Closing 4 2.1 Delivery and Recordation of the Acquisition Shares by Messrs. Mancini and Mantini 4 2.2 Payment to Sellers 5 2.3 Certificates, Opinions, etc 5 3 Representations and Warranties by Sellers 5 3.1 Corporate Status 5 3.2 Capitalization and Ownership of the BEST Shares and Maninvest Shares 6 3.3 Subsidiaries 6 3.4 Merger of Teknomec S.r.l. and Selea S.r.l 7 3.5 Authority for Agreement 7 3.6 Financial Statements 9 3.7 Absence of Undisclosed Liabilities 10 3.8 Absence of Changes 10 3.9 Taxes 12 3.10 Property 14 3.10.1 Title; Encumbrances 3.10.2 Leases 3.10.3 Condition 3.11 Material Contracts 15 3.12 Accounts Receivable; Inventories 16 3.13 Intellectual Property 17 3.14 Insurance 18 3.15 Litigation 18 3.16 Compliance with Laws; Governmental Authorizations 18 3.17 Environmental, Health and Safety Matters 19 3.18 Brokers, Finders, etc 20 3.19 Directors, Officers and Employees; Compensation 20 3.20 Labor and Employment 21 3.20.2 Schedule of Employee Benefit Plans 3.21 Government Grants 23 3.22 Product Warranty 23 3.23 Product Liability 23 3.24 Customers and Suppliers 24 3.25 No Illegal Payments, etc 24 3.26 Disclosure 24 4 Representations and Warranties by Nortek 25 4.1 Corporate Status 25 4.2 Authority for Agreement 25 4.3 Brokers, Finders, etc 25 5 Expenses 26 6 Additional Covenants of the Parties 26 6.1 General 26 6.2 Conduct of Business 26 6.3 Notices and Consents 27 6.4 Full Access 27 6.5 Notice of Developments 28 6.6 Exclusivity 28 7 Survival of Representations and Warranties 28 8 Indemnification 28 8.1 Indemnity by Sellers 28 8.2 Nortek Indemnity 28 8.3 Certification of Claims 30 8.4 Third Party Actions 30 8.5 Definition of Damages 32 8.6 Right of Set-off 33 9 Post-Closing Covenants 33 9.1 General 33 9.2 Litigation Support 33 9.3 Transition 34 9.4 Confidentiality 34 9.5 Tax Matters 35 9.5.1 Tax Periods Ending on or Before the Closing Date 9.5.2 Tax Periods Beginning Before and Ending after the Closing Date 9.6 Non-Competition 35 10 Conditions Precedent to Nortek's Obligations 36 10.1 Performance by Sellers; Certificate 36 10.2 Representations and Warranties; Certificate 36 10.3 Opinions of Counsel 37 10.4 Absence of Litigation 37 10.5 No Material Adverse Change 37 10.6 Due Diligence 37 10.7 Management Consulting Agreements 37 10.8 Non-competition Agreements 37 10.9 Relationships with Customers and Suppliers 37 10.10 Other Consents 37 10.11 [RESERVED] 38 10.12 Limitation on Dividends 38 10.13 Governmental Clearance and Approval 38 10.14 Approval of Proceedings; Documentation 38 10.15 [RESERVED] 38 10.16 Resignations of Members of the Board of Directors and Board of Auditors 38 11 Conditions Precedent to the Obligations of Sellers. 38 11.1 Performance by Nortek; Certificate 38 11.2 Representations and Warranties; Certificate 39 11.3 Opinion of Counsel 39 11.4 Management Consulting Agreements 39 11.5 Non-competition Agreements 39 11.6 Absence of Litigation 39 11.7 Governmental Clearance and Approval. 39 11.8 Other Consents 40 11.9 Approval of Proceedings; Documentation 40 12 Entire Agreement 40 13 Amendment 40 14 Press Releases 40 15 Headings 40 16 Exhibits, etc 40 17 Assignment, Successors and Assigns; Benefits of Agreement 41 18 Notices 41 19 Intentionally Omitted 42 20 Severability 42 21 Arbitration 43 22 Governing Law 44 23 Counterparts 44 ACQUISITION AGREEMENT made as of October 31, 1995 (this "Agreement") by and between Nortek, Inc., a Delaware corporation with its principal offices at 50 Kennedy Plaza, Providence, Rhode Island 02903 U.S.A. ("Nortek"), Sergio Mancini, an Italian national ("Mr. Mancini") and Franco Mantini, an Italian national ("Mr. Mantini") (Mr. Mancini and Mr. Mantini are sometimes referred collectively as the "Sellers"). WHEREAS, Mr. Mancini and Mr. Mantini are the holders of all of the issued and outstanding capital stock of BEST S.p.A., an Italian corporation with its principal offices at Via Euplo Natali, 18 Fabriano, Italy ("BEST"), and all of the issued and outstanding share capital of Maninvest S.r.l., an Italian corporation with its principal offices at Via Dante, 71 Fabriano, Italy ("Maninvest"). WHEREAS, Nortek desires to purchase from Mr. Mancini and Mr. Mantini the business conducted by BEST and its subsidiary BEST Deutschland GmbH, a German corporation ("BEST Deutschland"), as well as the business conducted by Maninvest and its subsidiaries Elektromec S.p.A., an Italian corporation with its principal offices at S. S. Settempedena, Montefano, Italy ("Elektromec"), Elektra S.r.l. with its principal offices at Via Bruno Buozzi, Fonte Rita, Fabriano, Italy ("Elektra"), and Interglass S.r.l. with its principal offices at Via Dante, 71 Fabriano, Italy ("Interglass") (such business being hereinafter referred to as the "Business" and such corporations together with any other subsidiaries of Maninvest being hereinafter referred to, collectively, as the "Gruppo BEST Companies"). WHEREAS, prior to the date hereof the Sellers acquired 6.79% and 28%, respectively, of the share capital of Elektromec and Interglass, so that as of the date hereof Maninvest holds 93.21% and the Sellers, collectively, hold 6.79% of the share capital of Elektromec and Maninvest holds 72% and the Sellers, collectively, hold 28% of the share capital of Interglass. WHEREAS, Mr. Mancini and Mr. Mantini, jointly and severally, desire to sell to Nortek the Business conducted by the Gruppo BEST Companies. NOW THEREFORE, and in consideration of the premises and respective covenants and conditions herein contained, Nortek and each of the Sellers hereby agree as follows: 1 Acquisition of Gruppo BEST by Nortek on the Closing Date. 1.1 Purchase and Sale of Gruppo BEST. Mr. Mancini and Mr. Mantini will sell and transfer to Nortek (or, at the option of Nortek, to one or more direct or indirect subsidiaries of Nortek designated by Nortek (its "designee" or "designees")) at the Closing (as defined in Section 2), and Nortek agrees to purchase (or cause its designee or designees to purchase) from Mr. Mancini and Mr. Mantini, jointly and severally, at the Closing, (a) all of the issued and outstanding shares of capital stock of BEST (the "BEST Shares"), (b) all of the issued and outstanding quotas of the capital of Maninvest (the "Maninvest Quotas"), (c) all of the issued and outstanding capital of Elektromec and Interglass, respectively, not held by Maninvest (the "Elektromec Shares" and the "Interglass Quotas", respectively), and (d) the issued and outstanding shares capital of BEST Deutschland not held by BEST (the "German Shares", which together with the BEST Shares, the Elektromec Shares, the Maninvest Quotas are referred to collectively as, the "Acquisition Shares"). 1.2 Purchase Price for the Acquisition Shares. In consideration of the assignment, transfer, conveyance and delivery by Mr. Mancini and Mr. Mantini of the Acquisition Shares to Nortek (or its designee or designees) and of the other agreements of Mr. Mancini and Mr. Mantini stated herein, Nortek (or its designees) will pay and the Sellers will receive the purchase price for the Acquisition Shares determined in accordance with Section 1.3 below. 1.3 Allocation of the Purchase Price. Subject to the adjustment provided for in Section 1.4 below, Nortek agrees to pay to Sellers an aggregate of Lit. 21 billion (the "Purchase Price"), of which Lit. 16 billion (the "Initial Purchase Price") shall be payable at the Closing and Lit. 5 billion (the "Deferred Purchase Price") shall be payable in five equal installments of Lit. 1 billion following each anniversary of the Closing Date for five years following such date. The Purchase Price shall be allocated among the Acquisition Shares on the basis of the following values: BEST (Lit. 14.25 billion); BEST Deutschland (Lit. 1.5 billion); Elektromec (Lit. 5 billion); Interglass (Lit. 200 million); and Elektra (Lit. 50 million). So that the aggregate Purchase Price for the Acquisition Shares shall be as follows: Lit.15.75 billion for the BEST Shares and the German Shares and Lit. 5.25 billion for the Maninvest Quotas, the Elektromec Shares and the Interglass Quotas. 1.4 Additional Adjustment to Purchase Price. (a) If Operating Earnings (as defined below) for the year ended December 31 in the year of the first anniversary of the Closing Date (for ease of reference 1996) and each subsequent year for four years ( i.e., 1997, 1998, 1999 and 2000) equals or exceeds the Target Value (as defined below), then the Purchase Price shall be adjusted upward and Nortek shall pay to the Sellers Lit. 600 million for each such year in which Operating Earnings exceeds the Target Value. It is the intention of the parties that during such five year period to the extent Operating Earnings exceeds the Target Value for any such year, such excess shall be applied to Operating Earnings in prior or subsequent year Target Value would not otherwise be met; provided that any such excess shall not be double counted. Accordingly, if in any such year, Operating Earnings for that year exceeds the Target Value, then to the extent that such Operating Earnings are in excess of the Target Value for that year, such excess shall be carried over to the next succeeding year or years for which Operating Earnings are calculated and shall cumulate for purposes of determining whether Operating Earnings for such succeeding year equals or exceeds the Target Value for such year. Conversely, if in any such year which is prior to a year in which Operating Earnings exceeds the Target Value, Operating Earnings for such prior year did not equal or exceed the Target Value for that year, then such excess shall be applied to the prior year and if the application of such excess plus the Operating Earnings for such year equals or exceeds the Target Value for such prior year, the Purchase Price shall be adjusted upward retroactively for that year to which such excess is applied and Nortek shall pay to the Sellers Lit. 600 million (without interest) in respect of such prior year. Any increase in Purchase Price hereunder shall be allocated among the Acquisition Shares in the same proportion as required by Section 1.3. In no event shall the aggregate increase in Purchase Price resulting from these adjustments exceed Lit. 3 billion. (b) The payment to Sellers by Nortek (or its designees) of any adjustment in the Purchase Price pursuant to this Section 1.4 shall be payable 30 days after Nortek shall have filed its Annual Report on Form 10-K with the Securities and Exchange Commission by wire transfer of next day funds to such account or accounts as each of the Sellers shall so notify Nortek at least 10 business days prior to such date. 1.5 Target Value. "Target Value" means for any year in which there is an adjustment to the Purchase Price an amount equal to Lit. 8.4 billion as adjusted in each year following the Closing Date for inflation beginning in 1997 based on percentage changes in the Italian ISTAT index of the production prices of industrial products for such year as compared with such index for the year 1995. 1.6 Operating Earnings. "Operating Earnings" means for any period the combined operating earnings of the Gruppo BEST Companies before providing for interest and for Taxes (as defined in Section 3.9 hereof) determined on the basis of the financial statements of the Gruppo BEST Companies for such period computed in accordance with United States generally accepted accounting principles consistently applied; provided, however, that any expense, including without limitation compensation, social security payments, benefits, reimbursement of expenses and other expenses incurred by Nortek (or any affiliate thereof) in connection with the management consulting agreements to which the Sellers are parties, shall reduce Operating Earnings for such period. 2 Closing. The purchase of the Acquisition Shares by Nortek or its designee(s) from Sellers in exchange for the Purchase Price and the consummation of the transactions contemplated by this Agreement (the "Closing") shall be held commencing at 10:00 A.M. at the offices of BEST, S.p.A., 18, Via Euplo Natali 60044 Fabriano (AN), ITALY, on October 31, 1995 (the "Closing Date"), or at such other time and place as the parties may agree in writing. At the Closing, the following transactions shall occur all of which shall be deemed to have occurred simultaneously: 2.1 Delivery and Recordation of the Acquisition Shares by Messrs. Mancini and Mantini. Messrs. Mancini and Mantini will deliver to Nortek (or one or more of its designees) certificates representing the BEST Shares and the Elektromec Shares duly endorsed, and deeds of transfer of the Maninvest Quotas and the Interglass Quotas, in each case, in proper form for transfer and will cause upon said delivery and, with respect to the Maninvest Quotas and the Interglass Quotas, upon filing of the deed of transfer with the competent tribunal, the due recordation of such transfer of such BEST Shares and Elektromec Shares and the Maninvest Quotas and the Interglass Quotas on the stock ledger books of the respective corporations and with the appropriate Italian notary public as may be required to vest in Nortek (or its designee) all of the right, title and interest in the Acquisition. In addition, the Sellers shall take such action as is necessary under German law to transfer or cause the transfer of the German Shares to Nortek or its designee(s). 2.2 Payment to Sellers. Nortek (or its designees) will deliver to Sellers Lit.16 billion in cash by wire transfer of immediately available funds or as the Sellers shall so specify. Such amount to be paid to Messrs. Mancini and Mantini in proportion to their ownership interest in the Acquisition Shares, respectively; provided, however, that if at the Closing the Sellers are unable to transfer the German Shares to Nortek or its designee(s), then Nortek or its designee(s) shall be entitled to withhold Lit. 60 million of the Purchase Price allocated to the BEST Shares and the German Shares until the Sellers shall have delivered to Nortek or its designee(s) evidence reasonable satisfactory to Nortek and its counsel that the German Shares have been transferred to Nortek or its designee(s) in accordance with German Law. 2.3 Certificates, Opinions, etc. Each party will deliver to the other parties such certificates, opinions and other documents as are contemplated hereby or as may reasonably be requested by the other parties to evidence compliance with the terms of Sections 1 and 2 and the other provisions of this Agreement. 3 Representations and Warranties by Sellers. For purposes of this Section 3, except as the context otherwise indicates, any reference to accounting terms or accounting principles shall mean U.S. generally accepted accounting principles ("U.S. GAAP") as in effect on the date of this Agreement. Except as set forth or disclosed any schedule delivered in connection with this Agreement, each of the Sellers, jointly and severally with respect to each representation and warranty being made by them hereunder, represents and warrants as follows: 3.1 Corporate Status. Each of BEST and Maninvest is a corporation duly organized, validly existing and in good standing under the laws of the Republic of Italy and has all necessary corporate power and authority to carry on the Business as now conducted and as proposed to be conducted. The Sellers have delivered to Nortek complete and correct copies of the charter and by-laws, each as amended to date, of BEST and Maninvest. 3.2 Capitalization and Ownership of the BEST Shares and Maninvest Shares. (a) The authorized and issued share capital of BEST consists of 3,500,000 shares of common stock, nominal value Lit. 1,000 per share. (b) The authorized and issued share capital of Maninvest consists of 50,000 shares of common stock, nominal value Lit.1,000 per share. (c) The Sellers own of record and beneficially all of the issued and outstanding share capital of BEST and Maninvest, respectively, and the Elektromec Shares, the Interglass Quotas and the German Shares not owned by Maninvest and BEST, respectively, free and clear of all liens, claims, charges, encumbrances and restrictions of any kind whatsoever ("Encumbrances"). The legal patrimonial system between each of the Sellers and their respective spouses is that of separate ownership of properties. No other person or entity has or shares any direct or indirect interest or right with respect to either the BEST Shares or the Maninvest Shares other than directors qualifying shares which shall be transferred to Nortek (or its designee(s)) in accordance with the terms of this Agreement. The BEST Shares and the Maninvest Shares have been duly authorized and validly issued and are fully paid and nonassessable. There are no preemptive rights or rights of first refusal on the part of any holder of any class of securities of either BEST or Maninvest or any other person. There are no options, warrants, conversion or other rights, agreements or commitments of any kind obligating either BEST or Maninvest, contingently or otherwise, to issue or sell any shares of its capital stock of any class or any securities convertible into or exchangeable for any such shares, and no authorization therefore has been given. Each of the Sellers has full right, power and authority to transfer the BEST Shares and the Maninvest Shares to Nortek and/or its designees, free and clear of any Encumbrances, and such transfer will not constitute a breach or violation of, or a default under, any agreement or instrument by which BEST, Maninvest or any Seller is bound. 3.3 Subsidiaries. Schedule 3.3 sets forth the name and country of incorporation of each wholly owned subsidiary of either BEST or Maninvest and of each subsidiary comprising part of the Gruppo BEST Companies (individually, a "Subsidiary" and collectively, "Subsidiaries"). Other than BEST Deutschland, Elektra, Elektromec and Interglass and except as set forth on Schedule 3.3, neither BEST nor Maninvest has any subsidiaries nor owns directly or indirectly any capital stock or other equity or ownership interest in any other corporation, partnership, association, trust, joint venture or other entity or person. Except as set forth on Schedule 3.3, BEST or Maninvest owns or is sole beneficiary of all of the issued and outstanding stock options, warrants, rights or commitments, relating to the issuance of any shares of capital stock of or equity interests in the Subsidiaries other than directors qualifying shares which shall be transferred to Nortek (or its designee(s)) in accordance with the terms of this Agreement. Each Subsidiary is a duly organized, validly existing corporation under the laws of its jurisdiction of incorporation and has all necessary power and authority, corporate or otherwise, to carry on its business as presently conducted and as proposed to be conducted. The Sellers have delivered to Nortek a complete and correct copy of the organizational and governance documents, each as amended to date, of each Subsidiary. 3.4 Merger of Teknomec S.r.l. and Selea S.r.l. The mergers of Teknomec S.r.l., an Italian corporation ("Teknomec"), and Selea S.r.l., an Italian corporation ("Selea") with Elektromec as the surviving corporation were completed on May 15, 1995 and properly registered prior to the date hereof (the "Mergers"). All corporate formalities necessary to authorize the Mergers by Teknomec and Selea, on the one hand, and Elektromec, on the other hand, were complied with and no further consents, approvals or authorizations of any kind are required in order to give effect to the Mergers and each of the Mergers was effected in accordance with Italian law. Nortek has been provided true and complete copies of all documents and instruments executed, delivered and/or filed with any governmental authority relating to the Mergers. Except as reflected in the Gruppo BEST Financial Statements referred to in Section 3.6 hereof, neither Teknomec nor Selea, prior to giving effect to the Mergers, had any material liabilities or obligations of any nature, whether absolute, contingent or otherwise which are not so reflected in the Gruppo BEST Financial Statements after giving effect to the Mergers. 3.5 Authority for Agreement. (a) Each of the Sellers has all necessary power and authority to execute and deliver this Agreement and any other agreement, document or instrument to be delivered in connection with the consummation of the transactions contemplated hereby and to carry out his obligations hereunder and thereunder. This Agreement and each other agreement, document and instrument to be delivered in connection with the consummation of the transaction contemplated hereby and thereby constitutes the valid and legally binding obligation of each of the Sellers and is enforceable in accordance with its terms. Except as set forth in Schedule 3.5, the execution and delivery of this Agreement and the consummation of any of the other transactions contemplated hereby will not conflict with, or result in any violation of, or default with respect to, or require the consent of or notice to any third parties under, any mortgage, loan, indenture, lease, agreement or other instrument, permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Gruppo BEST Companies or to the Sellers. The execution and delivery of this Agreement and of each other agreement, document and instrument to be delivered in connection with the consummation of the transactions contemplated hereby and thereby will not accelerate the maturity of or otherwise modify in any material respect the terms of any indebtedness of the Gruppo BEST Companies, or result in the creation of any Encumbrance upon any of the property or assets of the Gruppo BEST Companies. (b) Except as set forth in Schedule 3.5, the assets of the Gruppo BEST Companies constitute all of the property and property rights (including contract rights) used in the conduct of the Business in the manner and to the extent presently conducted since June 30, 1995 and as proposed to be conducted. (c) There are no agreements to which any of the Gruppo BEST companies are a party or by which any of the Gruppo BEST Companies is bound which restrict the ability of any of the Gruppo BEST Companies to carry on the Business anywhere in the world. There are no agreements between any of the Gruppo BEST Companies and any other person or entity affiliated with the Sellers which require the repayment or reimbursement of any amounts owed or advanced. Except as described in Schedule 3.5, there are no agreements to which any of the Gruppo BEST Companies is a party which upon the consummation of the transactions contemplated hereby create rights in any third party, including without limitation "dirigente" (as such term is used under Italian law to differentiate employees from those managers who are granted a special status under Italian law upon a change in control of an Italian corporation) enforceable against any of Gruppo BEST Companies as a consequence of a change in control of any of the Gruppo BEST Companies, and no consent, approval, order or authorization of, recording, or registration, declaration or filing with any governmental authority is required in connection with the execution and delivery of this Agreement or the consummation of any of the other transactions contemplated hereby by any of the Gruppo BEST Companies or the Sellers. 3.6 Financial Statements. (a) Attached hereto as Schedule 3.6 are true and correct copies of (i) the audited combined Balance Sheet of the Gruppo BEST Companies at December 31, 1994 and the related combined statements of operations and cash flows for the twelve months ended December 31, 1994, together with the auditor's report thereon and (ii) the unaudited combined balance sheet of the Gruppo BEST Companies at June 30, 1995 and the related combined statements of operations and cash flows for the six months ended June 30, 1995 (collectively, the "Gruppo BEST Financial Statements"). (b) Except as otherwise indicated in the respective reports of the auditors for the Gruppo BEST companies or in the notes thereto, all of the Gruppo BEST Financial Statements have been prepared in accordance with Italian GAAP consistently applied throughout the periods indicated, and fairly present, in all material respects, the financial condition of the Gruppo BEST Companies and the results of their operations and cash flows as of the dates and for the periods covered thereby. (c) The Gruppo BEST Financial Statements are in accordance with the books and records of the Gruppo BEST Companies. All material transactions occurring during the periods covered by the Gruppo BEST Financial Statements have been disclosed in the Gruppo BEST Financial Statements to the extent required to be disclosed under the applicable generally accepted accounting principles referred to above. 3.7 Absence of Undisclosed Liabilities. Except as set forth in Schedule 3.7 and other than liabilities which have arisen after [December 31, 1994] in the ordinary course of business and consistent with past practice, none of the Gruppo BEST Companies has any material liabilities or obligations of any nature, whether absolute, contingent or otherwise which are required to be reflected or reserved against in, or otherwise provided for in the notes to, the Gruppo BEST Financial Statements under Italian GAAP and which are not so reflected or reserved against therein or in the notes thereto. 3.8 Absence of Changes. Except as set forth in Schedule 3.8 since December 31, 1994, (a) there has been no material adverse change in the condition, financial or otherwise, properties, assets, liabilities, business or operations or prospects (a "Material Adverse Change") of the Gruppo BEST Companies and (b) none of the Gruppo BEST Companies has: (i) declared, set aside, made or paid any dividend or other distribution in respect of its capital stock or agreed to do any of the foregoing, or purchased or redeemed or agreed to purchase or redeem, directly or indirectly, any shares of its capital stock; (ii) issued or sold any shares of its capital stock of any class or any options, warrants, conversion or other rights to purchase any such shares or any securities convertible into or exchangeable for such shares; (iii) incurred any indebtedness for purchase money or borrowed money other than in the ordinary course of business consistent with past practice; (iv) mortgaged, pledged, or subjected to any Encumbrance, any of its properties or assets, tangible or intangible, except Permitted Encumbrances (as defined in Section 3.10.1); (v) acquired or disposed of any assets or properties in any transaction involving money or value in excess of Lit. 16.4 million with any officer, director or salaried employee, or any relative by blood or marriage, or except in the ordinary course of business acquired or disposed of any assets or properties having a value in excess of Lit. 41 million in any transaction with any other person; (vi) forgiven or canceled any debts or claims, or waived any rights, except in the ordinary course of business and consistent with past practices; (vii) (A) granted to any officer, director or consultant or to any employee during the year ended December 31, 1994, any material increase in compensation in any form (including any material increase in scope of any benefits), other than annual salary increases consistent with prior practice, or (B) become subject to any request for severance or termination pay, or granted any severance or termination pay, or entered into any employment or severance agreement with any officer or employee during the year ended December 31, 1994; (viii) adopted, or amended in any material respect, any bonus, profit-sharing, compensation, stock option, pension, welfare, security, retirement, deferred compensation or other material plan, agreement, trust, fund or arrangement for the benefit of any employee or employees; (ix) except as disclosed on Schedule 3.8 experienced any actual or threatened dispute with a supplier involving more than Lit. 16.4 million or with a customer involving more than the lower of (a) Lit. 12.3 million or (b) the full contract value which is the subject of the dispute; (x) except as disclosed on Schedules 3.8 and 3.11, made any capital expenditures or commitment therefor in excess of Lit. 41 million; (xi) incurred any liability (absolute, accrued or contingent) except current liabilities incurred, liabilities under contracts entered into, borrowings under short-term lines of credit and liabilities in respect of letters of credit issued under credit facilities, in each case incurred in the ordinary course of business consistent with past practices; (xii) suffered a loss, damage or destruction, whether or not covered by insurance, in excess of Lit. 41 million; or (xiii) extended or modified in any material respect the terms or provisions of any lease of real property of the character set forth or described in Section 3.10.2. (xiv) made any changes in accounting principles or accounting practices. (xv) none of the Gruppo BEST Companies has entered into any currency hedging or similar swap transactions which are not reflected in the Gruppo BEST Financial Statements. 3.9 Taxes. (a) The following defined terms shall have the meanings set forth below: (i) "Tax" means any (and in the plural "Taxes" shall mean all) income, gross receipts, license, payroll, employment, agency, excise, manufacturing, severance, stamp, occupation, premium, windfall profits, environmental, customs, capital stock, net worth, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, turnover, alternative or add-on minimum, estimated or other tax, duty, or other fiscal charge of any kind whatsoever (whether payable directly, or by way of withholding or on account, and including those paid or withheld in the capacity as withholding tax agent), including without limitation any interest, penalty, or addition thereto, whether disputed or not, imposed by any foreign or national or local taxing authority or other authority having jurisdiction to administer or enforce any of the foregoing. (ii) "Tax Return" means any return, declaration, report, claim for refund, or information return relating to Taxes, including without limitation any schedule or attachment thereto, and any amendment thereof. (b) Except as set forth on Schedule 3.9: (i) Each of the Gruppo BEST Companies has filed or caused to be filed and, from the date hereof until the Closing Date, will file or cause to be filed all Tax Returns required to be filed by them in accordance with applicable laws on or before the date hereof or the Closing Date (as applicable) with respect to Taxes. None of the Gruppo BEST Companies is a beneficiary of any extension of time within which to file any Tax Returns required to be filed by them, and all Tax Returns filed by the Gruppo BEST Companies were correct and complete in all respects. (ii) All Taxes, whether or not shown on Tax Returns filed on or before the date hereof as due from or payable by any of the Gruppo BEST Companies as well as any other Tax that was or is required to be withheld and/or paid by any of the Gruppo BEST Companies under any applicable laws and/or regulations, have been duly and timely withheld and/or paid in full or adequately disclosed and fully provided for in the Gruppo BEST Financial Statements, and all Taxes which are shown on Tax Returns filed after the date hereof and on or before the Closing Date as due from or payable by any of the Gruppo BEST Companies as well as any other Tax that was or is required to be withheld and/or paid by any of the Gruppo BEST Companies under any applicable laws and/or regulations, will be duly and timely withheld and/or paid in full or adequately disclosed and fully reserved for. (iii) There are no actions, suits, proceedings, examinations, audits, claims, assessments or material disputes concerning any of the Gruppo BEST Companies concerning any Taxes or Tax Returns either (A) claimed or raised by any Italian or foreign governmental authority; or (B) as to which any of the Sellers or the directors and officers of any of the Gruppo BEST Companies has knowledge. (iv) There are no outstanding agreements or waivers between any of the Gruppo BEST Companies and any governmental authority extending the statute of limitations applicable to any Tax Return of any of the Gruppo BEST Companies for any period; (v) The Sellers have delivered to Nortek correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies for tax years for each of the Gruppo BEST Companies which are still open to inspection and assessment and shall deliver all Tax Returns that are filed between the date hereof and the Closing Date. No Tax deficiency has been assessed against or proposed in writing to be assessed against any of the Gruppo BEST Companies by any governmental authority except for Tax deficiencies that have been paid in full or adequately disclosed and fully provided for in the Gruppo BEST Financial Statements. (vi) None of the Gruppo BEST Companies is a party to any Tax sharing agreement. (vii) None of the Gruppo BEST Companies is liable, by contract or as a matter of law, primarily or otherwise, for the payment of any Taxes for which another person is liable. 3.10 Property. 3.10.1 Title; Encumbrances. Schedule 3.10 sets forth the location of all real property owned or leased by any of the Gruppo BEST Companies. Except as stated in Schedule 3.10, each of the Gruppo BEST Companies (as indicated in Schedule 3.10) has good and marketable title to all real properties owned by it and to all material tangible personal property reflected in the December 31, 1994 combined balance sheets included in the Gruppo BEST Financial Statements or acquired after such dates (except to the extent of property disposed of since such dates in the ordinary course of business), and valid leasehold interests in all real properties leased by the Gruppo BEST Companies and all material tangible personal properties leased by the Gruppo BEST Companies, in each case free and clear of all mortgages, liens, charges, encumbrances, easements, security interests or title imperfections except (a) liens for current taxes not due and payable or the validity of which is being contested in good faith, (b) liens securing Indebtedness reflected on the December 31, 1994 balance sheet included in the Gruppo BEST Financial Statements, which liens are listed on Schedule 3.10, (c) purchase money security interests and liens securing rental payments under leases incurred in the ordinary course of business, (d) liens arising by operation of law in favor of mechanics, materialmen and similar parties for work done to the extent that the obligation secured thereby is not at the time required to be paid and (e) other encumbrances on real property, such as ordinary utility easements, rights of way, zoning, building and use restrictions, that do not materially interfere with the existing use of such property in the conduct of the Business or materially detract from the value of such property (the exceptions described in the foregoing clauses (a), (b), (c), (d) and (e) being referred to herein as "Permitted Encumbrances"). None of the Gruppo BEST Companies has received any notice or has any knowledge of any violation of any zoning restrictions and ordinances, health and fire codes and ordinances, laws or regulations, affecting any such parcel in any material respect, and have no reason to believe that any authority contemplates issuing the same. None of the Gruppo BEST Companies has received any notice of any condemnation or eminent domain proceeding for any taking of any such parcel, or any part thereof or of any negotiations for the purchase of any such parcel, or any part thereof in lieu of condemnation and, to the best of their knowledge, no condemnation or eminent domain proceedings or negotiations have been commenced or threatened in connection with any such property. 3.10.2 Leases. Except as set forth on Schedule 3.10.2, the Gruppo BEST Companies enjoy peaceful and undisturbed possession under all leases of real and personal property to which they are parties (which in the case of personal property means any lease having an unexpired term of one or more years and remaining rental payments aggregating in excess of Lit. 16 million) and all such leases are valid and subsisting. Each of the Gruppo BEST Companies have paid all rent due and payable under all such leases, and there exists no material default on the part of any of the Gruppo BEST Companies, or, to the best of Sellers' knowledge, the lessors, existing thereunder. 3.10.3 Condition. Except as set forth in Schedule 3.10.3, all structures and other improvements, including fixtures, located on the real property owned or leased by each of the Gruppo BEST Companies and all tangible personal property owned or leased by each of the Gruppo BEST Companies, which in each case are necessary for the conduct of the Business as presently conducted and as proposed to be conducted, are in good operating condition in all material respects for property of its type and age. 3.11 Material Contracts. Schedule 3.11 contains a complete and correct list of all agreements, contracts and commitments of the following types, written or oral, to which any of the Gruppo BEST Companies is a party or by which any of their property is bound as of the date hereof (collectively the "Material Contracts"): (a) notes, loans, credit agreements, overdraft facilities, mortgages, indentures, security agreements and other agreements and instruments relating to the borrowing of money or extension of credit to any of the Gruppo BEST Companies or to any guarantee by any of the Gruppo BEST Companies of any obligations of a third party; (b) consulting or professional services agreements, or employment agreements; (c) all distribution, agency, commission or sales representative agreements; (d) agreements, orders, or commitments for the purchase of raw materials exceeding Lit. 12.3 million or for the purchase of supplies or finished products exceeding Lit. 12.3 million or; (e) agreements, orders or commitments for the sale to customers of products or services exceeding Lit. 82 million in any case; (f) all licenses by or to any of the Gruppo BEST Companies (other than solely intercompany licenses between any of the Gruppo BEST Companies) of any Intellectual Property (as defined in Section 3.12) to or from any affiliated or unaffiliated third party (excluding any end-user licenses available through normal commercial channels); (g) agreements or commitments for capital expenditures in excess of Lit. 16.4 million for any single project or series of related projects; and (h) other agreements or obligations material to any of the Gruppo BEST Companies involving payments, receipts, assets or obligations of more than Lit. 16.4 million. The Sellers have delivered or made available to Nortek complete and correct copies of all written Material Contracts and accurate summaries of all oral Material Contracts. Except as disclosed in Schedule 3.11, all such Material Contracts are in full force and effect and none of the Gruppo BEST Companies has any outstanding powers of attorney, except routine powers of attorney relating to representation before governmental agencies or given in connection with qualification to conduct business in another jurisdiction. 3.12 Accounts Receivable; Inventories. (a) The accounts receivable of the Gruppo BEST Companies reflected on the combined balance sheets of the Gruppo BEST Companies as at December 31, 1994 contained in the Gruppo BEST Financial Statements arose out of bona fide sales and deliveries of goods or the performance of services in the ordinary course of the Business in accordance with past practice and are subject to no set offs or counterclaims and are collectible in the ordinary course of business. (b) The inventories reflected on such combined balance sheet as at December 31, 1994 are in good, usable or saleable condition and have been reflected on such balance sheet in accordance with Italian GAAP consistently applied. 3.13 Intellectual Property. (a) For purposes of this Section 3.13, the term "Intellectual Property" shall mean all patents and patent applications, registered or unregistered trademarks, copyrights, service marks, applications for registration thereof, trade names, inventions, processes, designs and design rights, formulas, trade secrets, know-how, software and computer programs, including all other items of intellectual property and propriety rights. (b) BEST and BEST Deutschland own all rights to the name "BEST" and the other names listed on Schedule 3.13 for all products, and no other person has acquired or owns any rights thereto. Schedule 3.13 also contains a complete and correct list of all patents, patent applications, registered or unregistered trademarks, trade names or service marks, registered trademarks, trade names or service marks applications, and all copyrights or copyright applications (which copyrights are listed by general category only), which are, in the case of each item on said lists, owned by each of the Gruppo BEST Companies or in which any of the Gruppo BEST Companies has any rights or licenses. Schedule 3.13 also sets forth the principal products (or features such as controls) which utilize or are covered by the software programs which the Gruppo BEST Companies own or have the right to use. Each of the Gruppo BEST Companies owns, or possesses adequate rights to use, all Intellectual Property necessary for the conduct of the Business as presently conducted and as proposed to be conducted. Except as set forth on Schedule 3.13, none of the Gruppo BEST Companies has any obligation to make payments of royalties or other amounts or transfer any interest in such Intellectual Property to any third party, including Sellers and their other affiliates. (c) Except as indicated in Schedule 3.13, none of the Gruppo BEST Companies have granted, transferred or assigned, or acquiesced in or permitted use without a license of, any right or interest in the Intellectual Property to any person or entity, except pursuant to non exclusive end-user license agreements for internal purposes only. 3.14 Insurance. Each of the Gruppo BEST Companies has for the past 10 years maintained and now maintains, as the case may be, (i) insurance in scope and amount customary and reasonable on the Business covering property damage and loss of income by fire and other casualty to the limits and with the deductibles shown on Schedule 3.14 and (ii) insurance protection against such liabilities, claims and risks including product liability, and in such amounts, as is shown on such Schedule. The Sellers have heretofore delivered to Nortek complete and correct copies of all such policies together with all riders and amendments thereto. Such policies are legal, valid and binding and in full force and effect, all premiums due thereon have been paid, and each of the Gruppo BEST Companies has complied in all material respects with the provisions of such policies and has not received notice of cancellation or of any material increase in insurance premiums payable. All of such policies will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following consummation of the transactions contemplated hereby. 3.15 Litigation. (a) Except for the matters described in Schedules 3.9 and 3.15, there are no judicial or administrative actions, suits, proceedings or arbitrations or investigations (domestic or foreign) pending or, to the best knowledge of Sellers, threatened against any of the Gruppo BEST Companies or their respective assets, including the BEST Shares or the Maninvest Shares, or which were pending or threatened at any time since January 1, 1991. Sellers have heretofore furnished or made available to Nortek true and complete copies of all relevant court papers, proceeding administrative request, and other documents relating to the matters specifically set forth on Schedules 3.9 and 3.15. 3.16 Compliance with Laws; Governmental Authorizations. None of the Gruppo BEST Companies are in violation of or default in any material respect under any statute, law, ordinance, rule, regulation, judgment, order, decree, permit, concession, grant, franchise, license or other governmental authorization or approval including without limitation any laws, rules or regulations of the European Union ("EU Law") applicable to them or to any of their assets, properties, products or services. All permits, concessions, grants, franchises, licenses and other governmental authorizations and approvals necessary for the conduct of the Business have been duly obtained and are in full force and effect and there are no proceedings pending or, to the Seller's knowledge, threatened that may result in the revocation, cancellation or suspension, or any materially adverse modification, of any thereof. 3.17 Environmental, Health and Safety Matters. Schedule 3.17 is a true and complete list of all known conditions or states of fact existing on the date hereof and as of the Closing Date based on or resulting from the presence in or discharge, spill, disposal, emission, generation, storage or release of any chemical, pollutant, contaminant, waste, toxic or hazardous substance or petroleum product into the environment caused by any of the Gruppo BEST Companies at any location owned or leased (including any adjacent or adjoining property), currently or in the past, by any of the Gruppo BEST Companies which constitutes a violation of or requires remediation under any Health and Environmental Laws (as defined below). "Health and Environmental Laws" means any decree, order (including any administrative act issued by any authority requiring compliance with applicable laws, statutes, rules and regulations before the issue of a formal order) or arbitration award of, any EU Regulation and Decision (as defined below) or any law, statute, or binding decision or regulation of or any agreement with, or any license, authorization or permit from, any EU Institution, national, regional or local governmental authority or court relating to occupational and public health and safety (including fire prevention), or the environment in effect as of the date hereof and the Closing Date including, without limitation, national, regional and local laws, statutes, rules and regulations relating to environmental matters and contamination of any type whatsoever. "EU Institution" shall mean the EU Council, the European Commission and the European Court of Justice. "EU Regulations and Decisions" means all applicable regulations and decisions adopted by the EU Council (or the former Council of the European Community) or the European Commission (or the former Commission of the European Community). 3.17.1 Each of the Gruppo BEST Companies has complied and is in compliance with all applicable Health and Environmental Laws with respect to the use, transport, import, export, temporary or final storage, recycling or disposal of any waste, chemical substance or mixture, pollutant, including without limitation, any contaminant, irritant, or pollutant or other hazardous or toxic substance ("Hazardous Materials"), which are identified as such in any jurisdiction in which any of the Gruppo BEST Companies either owns or leases real property or conducts its business. 3.17.2 Except as disclosed on Schedule 3.17, (i) none of the Gruppo BEST Companies has received notice from any governmental authority (or has knowledge that any governmental authority may give notice) that it is in violation of any applicable Health and Environmental Laws with respect to the use, transport, import, export, temporary or final storage, recycling or disposal of any such Hazardous Materials; (ii) each of the Gruppo BEST Companies has obtained and has complied with all financial or other conditions contained in all permits, licenses, authorizations and consents which are required under any applicable Health and Environmental Laws or may be required for the use, transport, import, export, temporary or final storage, recycling and disposal of all Hazardous Materials used in the conduct of the Business; and (iii) there have been no direct or indirect discharges, spills, leaks or releases, whether accidental or voluntary, of any Hazardous Materials caused by any of the Gruppo BEST Companies on any real property (a) now leased or previously leased or (b) now owned or previously owned by any of the Gruppo BEST Companies, which in any case constitutes a violation of or requires remediation under any Health and Environmental Law. 3.18 Brokers, Finders, etc. Neither the Seller's, nor any of the Gruppo BEST Companies has retained any financial advisor, broker, agent or finder or paid or agreed to pay for any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby, or any transaction of like character that would be required to be paid. 3.19 Directors, Officers and Employees; Compensation. The Company has delivered to Nortek a true and complete list of directors and officers of each of the Gruppo BEST Companies and of all employees and consultants of each of the Gruppo BEST Companies whose current total compensation was for the calendar year ended 1994 at an annual rate in excess of Lit. 60 million, which list states the annual rate of compensation of, and the positions held by, the persons listed. 3.20 Labor and Employment. 3.20.1 Except as set forth on Schedule 3.20.1: (a) each of the Gruppo BEST Companies is in compliance in all material respects with all applicable EU Regulations and Decisions, national and state or local laws, rules and regulations with respect to its employees and employment practices, and terms and conditions of employment, including without limitation any provisions thereof relating to wages, bonuses, hours of work and social security pensions and other mandatory contributions, medical laws and safety insurance laws and regulations (including INPS, INAIL and other similar authorities as well as other funds, entities or agencies, as provided for by the applicable national collective bargaining agreements); (b) there is not pending or threatened, and there has not occurred since January 1, 1991, any material trade union or collective labor-related disputes or strikes involving any of the Gruppo BEST Companies; (c) there are no grievance or arbitration proceedings arising out of or under any national collective bargaining agreement pending or threatened, and no claim therefor has been asserted against any of the Gruppo BEST Companies, in each case for an amount in excess of Lit. 25 million or in the aggregate Lit. 82 million; (d) all pension plans and severance funds required by law to be funded by any of the Gruppo BEST Companies are funded in accordance with applicable laws, regulations or statutes; none of the Gruppo BEST Companies maintains any employee benefit plan that would subject it to the US Employee Retirement Income Security Act of 1974, as amended; (e) there are no material written agreements or understandings with any unions or shop committees (in regard to employees outside the United States), except under the provisions of the applicable national collective bargaining agreements; (f) Neither of the Sellers is now or has ever been an employee of any of the Gruppo BEST Companies and, except where required by law, there are no employment or independent labor agreements (other than those the terms of which are solely prescribed by laws, regulations and applicable national collective bargaining agreements) or agreements for provision of services or consultancy of whatever nature, which (A) are not terminable by any of the Gruppo BEST Companies on 90 or fewer days notice at any time without penalty, (B) have a remaining term, as of the date hereof, of more than one year in length of obligation on the part of any of the Gruppo BEST Companies or (C) involve payment by any of the Gruppo BEST Companies, subsequent to the date hereof, of more than Lit. 82 million; (g) there are no employment agreements whatsoever that may be terminated solely as a result of a change of control of any of the Gruppo BEST Companies, other than as provided for by any applicable national collective bargaining agreements; and (h) no employee or "dirigente" has the right to severance pay or other benefits for any period of time following the Closing as a result of a change in control of any of the Gruppo BEST Companies, other than as provided for by any applicable national collective bargaining agreements. 3.20.2 Schedule of Employee Benefit Plans. Schedule 3.20.2 contains a true and complete list, as of the date of this Agreement, of all profit sharing, deferred compensation, severance pay, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, change-in-control, welfare or incentive plans, contracts, arrangements, policies, programs or practices, vacation pay (or socalled "thirteen months' pay") or other plans, policies or agreements for the benefit of employees, other than as provided for by any applicable national collective bargaining agreements(collectively, the "Plans"). True, current and complete copies of such Plans, all amendments and written interpretations with respect thereto, if any, have been furnished to Nortek. 3.20.3 Subcontractors. Schedule 3.20.3 sets forth the name and address of each subcontractor that has performed any services for or on behalf of any of the Gruppo BEST Companies during the last three fiscal years. Each of the named subcontractors is an "independent enterprise" under Italian law and none of the Gruppo BEST Companies is liable to INPS, INAIL or any other Italian authority with jurisdiction over employer/employee relations or the terms and conditions of employment, including without limitation, wages, bonuses, hours of work, social security pensions and other mandatory contributions. Schedule 3.20.3 sets forth for each subcontractor identified therein (i) the term of the contract (start and end date, if any) and the identity of the goods or services which are the subject matter of the subcontract, (ii) the aggregate amount of payments made to such subcontractor during the term of the subcontract, (iii) the aggregate number of employees used by such subcontractor in the performance of such services or supply of such goods and (iv) whether any of the Gruppo Best Companies supplies the subcontractor with equipment or provides work space. 3.21 Government Grants. Attached as Schedule 3.23 is a true and correct list of grants from governmental bodies to the any of the Gruppo BEST Companies as reflected on the combined balance sheet at December 31, 1994 included in the Gruppo BEST Financial Statements. Except as set forth in Schedule 3.23, the funds represented by such grants have been disbursed by the relevant governmental bodies and received by the relevant Gruppo BEST Companies, and no Gruppo BEST Company which is a recipient of any such grant is in default of any of the terms and conditions specified in the governmental authorization of such grant. 3.22 Product Warranty. Each product manufactured, sold, leased, or delivered by any of the Gruppo BEST Companies has been in conformity with all applicable contractual commitments and all express and implied warranties, and none of the Gruppo BEST Companies has any liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the most recent combined balance sheet of the Gruppo BEST Financial Statements (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Gruppo BEST Companies. No product manufactured, sold, leased or delivered by any of the Gruppo BEST Companies is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease. Schedule 3.22 includes copies of the standard terms and conditions of sale or lease for each of the Gruppo BEST Companies (containing applicable guaranty, warranty, and indemnity provisions). 3.23 Product Liability. None of the Gruppo BEST Companies has any liability (and there is no basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by any of the Gruppo BEST Companies. 3.24 Customers and Suppliers. Set forth on Schedule 3.24 is a list of all suppliers and customers of the Business that accounted for over 5% each of the total sales and purchases, respectively, during the twelve-month period ended December 31, 1994, together with the amount paid to each such supplier or sold to each such customer. Except as set forth in Schedule 3.24, none of the Sellers believes, nor has any of them received any notice which should lead him or it to believe, that any of the suppliers or customers listed on Schedule 3.24 will terminate or materially reduce its business with Gruppo BEST Companies. 3.25 No Illegal Payments, etc. None of the Gruppo BEST Companies nor any of their respective officers, employees or agents, has (a) directly or indirectly given or agreed to give any illegal gift, contribution, payment or similar benefit to any supplier, customer, governmental official or employee or other person who was, is or may be in a position to help or hinder the Gruppo BEST Companies (or assist in connection with any actual or proposed transaction) or made or agreed to make any illegal contribution, or reimbursed any illegal political gift or contribution made by any other person, to any candidate for national, state, local or foreign public office (i) which would subject any of the Gruppo BEST Companies to any damage or penalty in any civil, criminal or governmental litigation or proceeding or (ii) the non- continuation of which has had or will have, individually or in the aggregate, a material adverse effect on any of the Gruppo BEST Companies or, after giving effect to the transactions contemplated hereby, Nortek, under the laws of any jurisdiction including the U.S. Prohibited Foreign Trade Practices Act or (b) established or maintained any unrecorded fund or asset or made any false entries on any books or records for any purpose. 3.26 Disclosure. Neither this Agreement (including without limitation the Schedules hereto), nor the Gruppo BEST Financial Statements, nor any other document, certificate, financial statement or other instrument furnished or to be furnished by or on behalf of Sellers, contains or will contain any untrue statement of a material fact, nor, considered as a whole, omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. 4 Representations and Warranties by Nortek. Nortek represents and warrants to the Sellers as follows: 4.1 Corporate Status. Nortek is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to carry on its business as now conducted. 4.2 Authority for Agreement. Nortek has all necessary corporate power to execute and deliver this Agreement and to carry out its obligations hereunder and to cause any of its subsidiaries to carry out any of its obligations. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary actions on behalf of Nortek on the date hereof. This Agreement constitutes the valid and legally binding obligation of Nortek and is enforceable against Nortek in accordance with its terms, subject to bankruptcy, insolvency, reorganization or similar laws of general application affecting the rights and remedies of creditors and to general equity principles. 4.3 Brokers, Finders, etc. Neither Nortek nor any of its subsidiaries has retained any financial advisor, broker, agent or finder or paid or agreed to pay for any financial advisor, broker, agent, or finder on account of this Agreement or any transaction contemplated hereby, or any transaction of like character that would be required to be paid. 5 Expenses. Each of the parties hereto shall assume and bear all expenses, costs and fees (including any fees of investment banks, financial advisors, professional advisers and legal counsel) incurred or assumed by such party in the preparation and execution of this Agreement and compliance herewith, whether or not the transactions herein provided for shall be consummated except that the fees and expenses of Studio Legale Verna, Deloitte and Touche and Mr. Latanzi in the aggregate not greater than Lit. 600,000,000 may be paid by the Gruppo BEST Companies. Notwithstanding the foregoing, all excise, documentary, transfer (including indirect transfer of stock of BEST Deutschland), value added taxes and like taxes, (such as the "fiscata boilato") or fees (including notarial fees) for the like payable in connection with the sale, transfer and delivery of the BEST Shares and the Maninvest Shares to Nortek or its designees (including indirect transfer of subsidiary shares provisions) shall be paid by Sellers. 6 Additional Covenants of the Parties. The parties further covenant and agree as follows: 6.1 General. Each of the parties will use his or its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Sections 10 and 11 below). 6.2 Conduct of Business. From and after the date of this Agreement and until the Closing Date, except as Nortek shall otherwise specifically consent to in writing, each of the Sellers will cause each of the Gruppo BEST Companies to conduct their affairs so that they: (a) carry on their respective businesses in, and only in, the usual, regular and ordinary course in substantially the same manner as conducted since January 1, 1995 and use reasonable efforts to preserve intact their respective present business organizations, to the extent reasonably possible keep available the services of present officers and employees, and preserve their respective relationships with customers, suppliers and others having business dealings with them; (b) not sell or withdraw assets, including factoring of receivables, except for inventory in the ordinary course of business or disposal of assets which are replaced in the ordinary course. (c) maintain all of the material structures, equipment and other tangible personal property used in the conduct of their respective businesses as conducted since January 1, 1995 in good repair, order and condition except for ordinary wear and tear; (d) keep in full force and effect insurance comparable in amount and scope of coverage to the insurance now carried by them; (e) perform in all material respects all obligations under all Material Contracts; (f) maintain their books of account and records in the usual, regular and ordinary manner; (g) comply in all material respects with all applicable statutes, laws, ordinances, rules and regulations; (h) not take or permit to be taken any action or incur any liability or obligation which if taken or incurred prior to the date hereof would have been required to be disclosed pursuant to any of the representations and warranties made by Sellers; (i) not issue any capital stock or other securities; and 6.3 Notices and Consents. The Sellers will cause each of the Gruppo BEST Companies to give any notices to third parties, and will cause each of the Gruppo BEST Companies to use its best efforts to obtain any third party consents, that Nortek may request in order to permit the consummation of the transactions contemplated hereby. Each of the parties will (and the Sellers will cause each of the Gruppo BEST Companies to) give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies required to consummate the transactions contemplated hereby. 6.4 Full Access. Each of the Sellers will permit, and the Sellers will cause each of the Gruppo BEST Companies to permit, representatives of Nortek to have full access to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to each of the Gruppo BEST Companies. 6.5 Notice of Developments. The Sellers will give prompt written notice to Nortek of any material adverse development causing a breach of any of the representations and warranties in set forth in Section 3 hereof. No disclosure by any Party pursuant to this Section 6.5, however, shall be deemed to amend or supplement any Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant. 6.6 Exclusivity. None of the Sellers will (and the Sellers will not cause or permit any of the Gruppo BEST Companies to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any person or other entity relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of, any of the Gruppo BEST Companies (including any acquisition structured as a merger, consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any efforts or attempt by any person or other entity to do or seek any of the foregoing. None of the Sellers will vote their BEST Shares or Maninvest Shares in favor of any such acquisition structured as a merger, consolidation, or share exchange. The Sellers will notify Nortek immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing. 7 Survival of Representations and Warranties. Except as otherwise specifically provided for in this Agreement, all representations, warranties and agreements of Sellers contained herein or in any document, certificate or other instrument required to be delivered hereunder in connection with the transactions contemplated hereby shall, subject to any applicable statute of limitations, survive indefinitely. 8 Indemnification. 8.1 Indemnity by Sellers. Sellers, jointly and severally hereby agree to indemnify, defend and hold harmless Nortek and its directors, officers and affiliates against and in respect of any damage that results from (i) the inaccuracy of any representation or warranty made by Sellers herein, or resulting from any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant of Sellers contained herein or in any agreement or instrument required to be entered into in connection herewith and specifically identified herein or from any misrepresentation in or omission from any schedule, document, certificate or other instrument required to be furnished by or on behalf of Sellers hereunder and specifically identified herein; (ii) any liability of any Gruppo BEST Company for indebtedness in excess of permitted indebtedness on the Closing Date; (iii) any liability of any of the Gruppo BEST Companies in respect of any Taxes attributable to periods beginning before and ending on June 30, 1995 that have not been paid or accrued on the combined balance sheet of the Gruppo BEST companies through such date; and (iv) any and all claims, actions, suits and proceedings resulting from any of the foregoing (hereinafter called a "Nortek Claim" or "Nortek Claims"). For purposes of clause (iii) of this Section 8.1, income Taxes paid for taxable years beginning before the Closing Date that include the Closing Date shall be prorated on a daily basis to determine the income Taxes attributable to the period ending on the Closing Date. Notwithstanding the foregoing, Sellers shall have no obligation to indemnify Nortek under this Section 8.1 unless, and only to the extent that, the aggregate of all amounts for which indemnity would otherwise be due as a result of or arising out of the matters set forth in clauses (i) through (iii) of Section 8.1 above exceed Lit. 40 million, provided that in computing such amount each single indemnity amount (or any series of amounts relating to a class action or series of claims arising out of a common set of facts) of less than Lit.8 million shall be disregarded. 8.2 Nortek Indemnity. Nortek hereby agrees to indemnify and hold harmless Sellers against and in respect of any damage resulting from (i) the inaccuracy of any representation or warranty made by Nortek or resulting from any misrepresentation, breach of warranty or non- fulfillment of any agreement or covenant of Nortek contained herein or in any agreement or instrument required to be entered into in connection herewith and specifically identified herein or from any misrepresentation in or omission from any document, certificate or other instrument required to be furnished by Nortek hereunder and specifically identified herein; and (ii) any and all claims, actions, suits and proceedings resulting from any of the foregoing (hereinafter called an "Sellers" or "Sellers Claims"). Notwithstanding the foregoing, Nortek shall have no obligation to indemnify Sellers under this Section 8.2 unless, and only to the extent that, the aggregate of all amounts for which indemnity would otherwise be due as a result of or arising out of the matters set forth in clauses (i) and (ii) above exceed $25,000; provided that in computing such amount each single indemnity amount (or any series of amounts relating to a class action or series of claims arising out of a common set of facts) of less than $5,000 shall be disregarded. 8.3 Certification of Claims. If Nortek or any Seller is of the opinion that any Nortek Claim or any Seller Claim, as the case may be, has occurred or will or may reasonably occur, Nortek or any Seller, as the case may be, shall so notify the other, and each such notice shall specify the circumstances of such asserted Nortek Claim or any Seller Claim. 8.4 Third Party Actions. (a) In the event any claim is made, suit is brought or tax audit or other proceeding is instituted against Nortek or any Gruppo BEST Company or any of their respective directors, officers or affiliates which involves or appears reasonably likely to involve a Nortek Claim for which indemnification may be sought against the Sellers hereunder, Nortek will, promptly (and in any event within 15 days) after receipt of notice of any such claim, suit, tax audit or proceeding, notify the Sellers of the commencement thereof. The failure to so notify Sellers of the commencement of any such claim, suit, tax audit or proceeding will relieve Sellers from liability only to the extent that such failure materially adversely affects the ability of Sellers to defend its interests in such claim, suit, tax audit or proceeding. Whenever permitted under applicable law, Nortek or any Gruppo BEST Company or any of their respective directors, officers or affiliates, as the case may be, shall have the right and option to bring Sellers as a formal party into the proceedings, and the Sellers shall have the right and option to join in such proceedings as a formal party in accordance with applicable procedural rules. In all cases in which Sellers do not participate in the proceedings as a formal party, Sellers (at their expense) shall have the right and shall be given the opportunity to participate in the defense of such claim, suit, tax audit or proceeding, provided that Nortek and its counsel shall maintain the conduct of all matters pertaining to the defense or settlement of such claim, suit, tax audit or proceeding. Whether or not Sellers elect to participate in such defense, Nortek shall not, except at its own cost, make any settlement with respect to any such claim, suit, tax audit or proceeding without the prior consent of Sellers, which may not be unreasonably withheld. In the event that Nortek determines to settle any such claim, suit, tax audit or proceeding without the prior consent of Sellers (as provided above), Sellers shall have no indemnification obligations with respect to such claim, suit, tax audit or proceeding. Nortek's consent to the settlement of any such claim, suit, tax audit or proceeding by Sellers shall be required and shall not be unreasonably withheld. (b) In the event any claim is made, suit is brought or tax audit or other proceeding is instituted against Sellers which involves or appears reasonably likely to involve a Seller Claim for which indemnification may be sought against Nortek hereunder, the Sellers will, promptly (and in any event within 15 days) after receipt of notice of any such claim, suit, tax audit or proceeding, notify Nortek of the commencement thereof. The failure to so notify Nortek of the commencement of any such claim, suit, tax audit or proceeding will relieve Nortek from liability only to the extent that such failure materially adversely affects the ability of Nortek to defend its interest in such claim, suit, tax audit or proceeding. Whenever permitted under applicable law, Nortek or any Gruppo BEST Company or any of their respective directors, officers or affiliates, as the case may be, shall have the right and option to bring Nortek as a formal party into the proceedings, and Nortek shall have the right and option to join in such proceedings as a formal party in accordance with applicable procedural rules. In all cases in which Nortek does not participate in the proceedings as a formal party, Nortek (at its expense) shall have the right and shall be given the opportunity to participate in the defense of such claim, suit, tax audit or proceeding, provided that Sellers and their counsel shall maintain the conduct of all matters pertaining to the defense or settlement of such claim, suit, tax audit or proceeding. Whether or not Nortek elects to participate in such defense, Sellers shall not, except at its own cost, make any settlement with respect to any such claim, suit, tax audit or proceeding without the prior consent of Nortek, which may not be unreasonably withheld. In the event that Sellers determines to settle any such claim, suit, tax audit or proceeding without the prior consent of Nortek (as provided above), Nortek shall have no indemnification obligations with respect to such claim, suit, tax audit or proceeding. Seller's consent to the settlement of any such claim, suit, tax audit or proceeding by Nortek shall be required and shall not be unreasonably withheld. 8.5 Definition of Damages. For purposes of this Section 8, the term "damages" shall mean the amount of any loss, claim, demand, damage, deficiency, assessment, judgment, remediation, cost or expense (including reasonable attorneys', consultants' and experts' fees and expenses) actually incurred. Notwithstanding the foregoing, neither party will be entitled to any special, exemplary or consequential damages, including without limitation lost profits, good will or investments. In the event that an indemnified party hereunder pays a claim covered by the indemnified party's insurance for which it is entitled to indemnification by another party hereunder, such indemnified party shall pay such claim and the indemnifying party shall reimburse the indemnified party the full amount of such claim (less the amount of any insurance proceeds previously recovered by the indemnified party with respect to such claim). If the indemnified party subsequently receives insurance proceeds with respect to such claim, the indemnified party shall pay the indemnifying party such insurance proceeds up to the amount actually paid by the indemnifying party. In the event of any claim by any third party based on facts which, if true as alleged, would give rise to any liability for damages as to which indemnification exists under this Agreement, the amount of the damages shall be deemed to include the reasonable costs of the defense thereof, whether or not successful, subject to the rights of the indemnifying party to assume such defense pursuant to Section 8.4 hereof. 8.6 Right of Set-off. Each of the parties may set off against any claim for indemnification any amounts owed to the other party pursuant to this Agreement, including without limitation any purchase price installments; provided that such amount has been finally determined. 9 Post-Closing Covenants. The parties agree as follows with respect to the period following the Closing. 9.1 General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties will take such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor under Section 8). The Sellers acknowledge and agree that from and after the Closing, Nortek will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Gruppo BEST Companies. 9.2 Litigation Support. In the event and for so long as any party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any of the Gruppo BEST Companies, each of the other parties will cooperate with him or it and his or its counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (unless the contesting or defending Party is entitled to indemnification therefor under Section 8). 9.3 Transition. None of the Sellers will take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of any of the Gruppo BEST Companies from maintaining the same business relationships with the Gruppo BEST Companies after the Closing as it maintained with the Gruppo BEST Companies prior to the Closing. Each of the Sellers will refer all customer inquiries relating to the businesses of the Gruppo BEST Companies to Nortek or such other persons as it may designate from and after the Closing. 9.4 Confidentiality. Each of the Sellers will treat and hold as such all of the Confidential Information (as defined below), refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to Nortek or destroy, at the request and option of Nortek, all tangible embodiments (and all copies) of the Confidential Information which are in his or its possession. In the event that any of the Sellers is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, the Seller will notify Nortek promptly of the request or requirement so that Nortek may seek an appropriate protective order or waive compliance so that Nortek may seek an appropriate protective order or waive compliance with the provisions of this Section 9.4. If, in the absence of a protective order or the receipt of a waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, that Seller may disclose the Confidential Information to the tribunal; provided, however, that the disclosing Seller shall use his or its best efforts to obtain, at the request of Nortek, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as Nortek shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public immediately prior to the time of disclosure. For purposes of this Section 9.4, "Confidential Information" means any information regarding the Gruppo BEST Companies that is not already generally available to the public. 9.5 Tax Matters. 9.5.1 Tax Periods Ending on or Before the Closing Date. Nortek shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for the Gruppo BEST Companies for all periods ending on or prior to the Closing Date which are filed after the Closing Date. Nortek shall permit Sellers to review and comment on each such Tax Return described in the preceding sentence prior to filing and shall make such revisions to such Tax Returns as are reasonably requested by Sellers. Sellers shall reimburse Nortek for Taxes of the Gruppo BEST Companies with respect to any period ending on or before June 30, 1995 within fifteen (15) days after payment by Nortek to the extent such Taxes are not accrued on the combined balance sheet of the Gruppo BEST Companies through June 30, 1995. 9.5.2 Tax Periods Beginning Before and Ending after the Closing Date. Nortek shall prepare or cause to be prepared and file or cause to be filed any Tax Returns of the Gruppo BEST Companies for Tax periods which begin before the Closing Date and end after the Closing Date. Sellers shall reimburse Nortek within fifteen (15) days after payment by Nortek for Taxes of the Gruppo BEST Companies with respect to such periods an amount equal to the portion of such Taxes paid for the Taxable period ending on the Closing Date to the extent such Taxes are payable in respect of any period ending on of before June 30, 1995 and have not been accrued on the combined balance sheet of the Gruppo BEST Companies at such date; provided that Sellers shall only be liable in respect of such Taxes required to be accrued through June 30, 1995, and only to the extent that accrual for such Taxes is required under Italian GAAP. 9.6 Non-Competition. Each of the Sellers severally covenants and agrees that for a period which expires at the later of five (5) years following the Closing or three (3) years after he ceases to be a director or employee of any of the Gruppo BEST Companies, such Seller shall not, (a) directly or indirectly, either as principal, agent, employee, consultant, officer, director, stockholder (except as a holder of two percent (2%) or less of the capital stock of a company whose securities are publicly traded), partner or in any other capacity, engage in or have a financial interest in, any business which is competitive with the business of the Gruppo BEST Companies as conducted either at the Closing Date or as proposed to be conducted at the time such Seller ceases to be affiliated or associated with any of the Gruppo BEST Companies, (b) induce any employee of the Gruppo BEST Companies to join with him in any capacity, direct or indirect, in any business in which he may be or become interested whether or not competitive with any of the Gruppo BEST Companies, or (c) solicit in competition with any of the Gruppo BEST Companies, any customers, suppliers, consultants, or employees of any of the Gruppo BEST Companies in existence at any time. During any period in which a Seller is in breach of this Section 9.6, the non-competition period shall be tolled (but only with respect to such breaching Sellers and shall recommence when such breach has ceased. 10 Conditions Precedent to Nortek's Obligations. All obligations of Nortek under this Agreement are subject to the fulfillment to the satisfaction of Nortek and its counsel prior to or at Closing of each of the following conditions, any of which may be waived in writing by Nortek: 10.1 Performance by Sellers; Certificate. Sellers shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing, including without limitation, the transfer of equity interests held by third parties in any of the Gruppo BEST companies to Nortek or persons designated by Nortek pursuant to Section 1.1 hereof, and shall deliver to Nortek a certificate or certificates, dated the Closing Date, to such effect. 10.2 Representations and Warranties; Certificate. The representations and warranties of Sellers contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date and Nortek shall have received from the Sellers a certificate or certificates dated the Closing Date to the foregoing effect. 10.3 Opinions of Counsel. Nortek shall have received such opinions of counsel for Sellers and the Gruppo BEST Companies with respect to the subject matter of this Agreement as Nortek and its counsel shall deem necessary, the form and substance of such opinions of counsel to be determined by Nortek and its counsel. 10.4 Absence of Litigation. No action or proceeding shall have been instituted or threatened prior to or at the Closing Date before any court or governmental agency, body or authority pertaining to the transactions contemplated hereby, the result of which could prevent or make illegal the consummation of such transactions. 10.5 No Material Adverse Change. There shall not have occurred any Material Adverse Change in the financial condition, prospects, assets or the Business of any of the Gruppo BEST Companies between December 31, 1994 and the Closing. 10.6 Due Diligence. Nortek and its representatives and counsel shall have completed their due diligence review of the Gruppo BEST Companies and shall be satisfied with the results of such review on or prior to the Closing. 10.7 Management Consulting Agreements. Messrs Mancini and Mantini shall have entered into management consulting agreements with Nortek or its designee(s) in form and substance satisfactory to Nortek. 10.8 Non-competition Agreements. Mr. Cannavari as well as other key employees of the Gruppo BEST Companies, to be designated by Nortek prior to the Closing, shall have entered into non-competition and confidentiality agreements with Nortek and its designee(s), including any of the Gruppo BEST Companies, in form and substance satisfactory to Nortek. 10.9 Relationships with Customers and Suppliers. None of the customers and suppliers identified on Schedule 3.21 shall have indicated to the Sellers or to any officer or director of any of the Gruppo BEST Companies that it intends to alter its relationship with any of the Gruppo BEST Companies in a manner which is less favorable than its existing relationship to the Gruppo BEST Companies. 10.10 Other Consents. The consent of every other party necessary to approve or consent to the transactions contemplated hereby, if any, shall have been obtained, except any as may be required to be obtained by Nortek. 10.11 [RESERVED]. 10.12 Limitation on Dividends. None of the Gruppo BEST Companies shall have declared and paid or set aside for payment any dividends or other distribution on account of the capital stock of such companies subsequent to December 31, 1994 except for dividends payable to the Sellers which have been contributed to the capital of BEST net of any withholding or other applicable Taxes. 10.13 Governmental Clearance and Approval. All required filings with all United States, European, federal, national, state, local and foreign governmental agencies or authorities, the notification of which, or consent, approval or clearance by which, is necessary in connection with the consummation of the transactions (or any of them) contemplated hereby shall have been made, and all clearances or consents required in order to effect the transactions contemplated hereby shall have been obtained, or any applicable waiting period under any applicable statute or regulation shall have expired or been terminated, without any objection or notice of intent to challenge the transactions contemplated hereby having been received by any of the parties hereto or their subsidiaries and not withdrawn by the objecting or challenging agency. 10.14 Approval of Proceedings; Documentation. All corporate and other proceedings in connection with the transactions contemplated by this Agreement, and the form and substance of all opinions, certificates and other documents hereunder shall be reasonably satisfactory in form and substance to Nortek and its counsel. 10.15 [RESERVED]. 10.16 Resignations of Members of the Board of Directors and Board of Auditors. All of the members of the boards of directors and boards of auditors of the Gruppo BEST Companies shall have submitted their resignations as directors effective upon the Closing. 11 Conditions Precedent to the Obligations of Sellers. The obligation of Sellers to consummate the transactions contemplated hereby shall be subject to the fulfillment prior to or at the Closing of each of the following conditions, any of which may be waived by Sellers: 11.1 Performance by Nortek; Certificate. Nortek shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing on the Closing Date and Nortek shall delivered a certificate of its President, dated the Closing Date, to such effect. 11.2 Representations and Warranties; Certificate. The representations and warranties of Nortek contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, except for changes contemplated by this Agreement or specifically consented to or approved by Sellers, and Sellers shall have received a certificate of the President of Nortek to that effect. 11.3 Opinion of Counsel. Sellers shall have received an opinion of Ropes & Gray, counsel to Nortek and Studio Legale Macchi di Cellere e Gangemi, special Italian counsel to Nortek, with respect to the subject matter of this Agreement in form and substance reasonably satisfactory to Sellers and their counsel. 11.4 Management Consulting Agreements. Messrs Mancini and Mantini shall have entered into management consulting agreements with Nortek or its designee(s) in form and substance satisfactory to such of the Sellers as may be contemplated thereby. 11.5 Non-competition Agreements. Messrs. Cannavari as well as other key employees of the Gruppo BEST Companies, to be designated by Nortek five days prior to the Closing, shall have entered into non competition and confidentiality agreements with Nortek and its designee(s), including any of the Gruppo BEST Companies, in form and substance satisfactory to such of the Sellers as may be contemplated thereby. 11.6 Absence of Litigation. No action or proceeding shall have been instituted or threatened prior to or at the Closing Date before any court or governmental agency, body or authority pertaining to the transactions contemplated hereby, the result of which could prevent or make illegal the consummation of such transactions. 11.7 Governmental Clearance and Approval. All required filings with all United States, European, federal, state, local and foreign governmental agencies or authorities, the notification of which, or consent, approval or clearance by which, is necessary in connection with the consummation of the transactions contemplated hereby shall have been made, and all clearances or consents required in order to effect the transactions contemplated hereby shall have been obtained, or any applicable waiting period under any applicable statute or regulation shall have expired or been terminated, without any objection or notice of intent to challenge the transactions contemplated hereby having been received by any of the parties hereto and not withdrawn by the objecting or challenging agency. 11.8 Other Consents. The consent of every other party necessary to approve or consent to the transactions contemplated hereby, if any, shall have been obtained, except any as may be required to be obtained by Sellers. 11.9 Approval of Proceedings; Documentation. All corporate and other proceedings in connection with the transactions contemplated by this Agreement, and the form and substance of all opinions, certificates and other documents hereunder shall be satisfactory in form and substance to Sellers and its counsel. 12 Entire Agreement. This Agreement, together with the schedules and exhibits hereto, constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations, or other agreements between the parties in connection with the subject matter hereof except as specifically set forth or incorporated herein 13 Amendment. This Agreement may be amended by the parties hereto at any time, but only by an instrument in writing duly executed and delivered on behalf of each of the parties hereto. 14 Press Releases. Each of the parties agrees that they (and their respective affiliate and subsidiaries) will not issue any announcements or reports, or confirm any statements by third parties pertaining to any of the proposed transactions until after the Closing Date under this Agreement except as may be advisable for Nortek under U.S. securities laws or except as may be mutually agreed upon by the parties. 15 Headings. Section headings are not to be considered part of this Agreement and are included solely for convenience and are not intended to be full or accurate descriptions of the content thereof. References to sections are to portions of this Agreement unless the context requires otherwise. 16 Exhibits, etc. Exhibits and schedules referred to in this Agreement are an integral part of this Agreement. 17 Assignment, Successors and Assigns; Benefits of Agreement. This Agreement may not be assigned by any party without the prior written consent of the other parties hereto, except that Nortek may designate one or more of its subsidiaries to acquire all or some of the BEST Shares or the Maninvest Shares in which case Nortek may assign its rights under this Agreement to such subsidiary. All of the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective transferees, successors and, subject to the foregoing, their assigns, and shall not inure to the benefit of, or be enforceable by, any other person or entity. 18 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or courier or delivery service or mailed, first-class postage prepaid, (a) if to Nortek: Nortek, Inc. 50 Kennedy Plaza Providence, RI 02903 USA Attn: Chairman and Chief Executive Officer In each case, with a copy to: Ropes & Gray One International Pace Boston, MA 02110-2624 USA Attn: Douglass N. Ellis, Jr., Esq. and a further copy to: Studio Legale Macchi di Cellere e Gangemi Via G Cuboni 12-00197 Rome ITALY Attn: Bruno Gangemi (b) if to Sellers: c/o BEST S.p.A. 18 Via Euplo Natali 60044 Fabriano (AN) ITALY Address Attn: in each case, with a copy to: Avv. Edmondo Verna Studio Legale Verna Viale della Vittoria 2/B 60044 Fabriano (AN), ITALY or, in each case, at such other address as the party receiving notice shall have furnished in writing to the party giving notice. 19 Intentionally Omitted. 20 Severability. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable, the remaining provisions shall remain in full force and effect. 21 Arbitration. All disputes, differences, controversies or claims arising in connection with, or questions occurring under, this Agreement or any other agreements, documents or instruments executed in connection with the transactions contemplated hereby (other than the management consulting agreements to which such Sellers are parties) shall be finally settled under the Rules of Arbitration (the "Rules") of the International Chamber of Commerce ("ICC") by an arbitral tribunal composed of three arbitrators appointed in accordance with said Rules. 21.1 Each of Nortek and the Sellers acting jointly shall each nominate one arbitrator in accordance with the Rules. If a party fails to nominate an arbitrator within thirty (30) days from the date when the claimant's request for arbitration has been communicated to the other party, such appointment shall be made by the ICC International Court of Arbitration. 21.2 The two arbitrators so appointed shall agree upon the third arbitrator who shall act as Chairman of the arbitral tribunal. If said two arbitrators fail to nominate a Chairman within 45 days of the later of the two appointments referred to in Section 22.1, the Chairman shall be selected by the ICC International Court of Arbitration. 21.3 In all cases the Chairman of the arbitral tribunal shall be a lawyer fluent in English and not of the same nationality as either party. 21.4 The place of arbitration shall be London, England. 21.5 The arbitral proceedings shall be conducted in the English language. 21.6 The parties hereby exclude any right of appeal to any court on the merits of the dispute. 21.7 Judgment on the award may be entered in any court having jurisdiction over the award or any of the parties or their assets. 21.8 At the time of the arbitration, the parties may agree in writing to submit the dispute to a single arbitrator. In addition, if nomination of an arbitrator by the Sellers is impossible because of a disagreement among the Sellers, the arbitral tribunal shall consist of a sole arbitrator. In either event said single arbitrator shall be appointed by the ICC International Court of Arbitration, and shall be subject to the same qualifications as would have been the Chairman under Section 22.3 hereof. 21.9 Nothing contained in this Section 22 shall prevent either party from seeking injunctive relief to enforce any of its rights under Sections 6 and 9 or under any non-competition agreements entered into by the parties or interim measures of protection in the form of a pre- award attachment of assets from a court of competent jurisdiction. 22 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws (other than those with respect to conflict of laws) of the State of Delaware provided that any question related to Arbitration shall be governed by the laws of England. 23 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the day and year first above written. NORTEK, INC. By /s/Richard L. Bready Title: President /s/ Sergio Mancini Sergio Mancini /s/ Franco Mantini Franco Mantini EXHIBITS AND SCHEDULES TO ACQUISITION AGREEMENT DATED AS OF OCTOBER 31, 1995 BETWEEN NORTEK, INC. AND SERGIO MANCINI AND FRANCO MANTINI OMITTED ARE AS FOLLOWS: EXHIBITS -------- None. SCHEDULES --------- Schedule 3.3 Subsidiaries of BEST and Maninvest Schedule 3.5 Authority for Agreement Schedule 3.6 Financial Statements Schedule 3.7 Undisclosed Liabilities Schedule 3.8 Absence of Changes Schedule 3.9 Taxes Schedule 3.10 Property Schedule 3.10.2 Leases Schedule 3.10.3 Condition of Structures and Other Improvements Schedule 3.11 Material Contracts Schedule 3.13 Intellectual Property Schedule 3.14 Insurance Schedule 3.15 Litigation Schedule 3.17 Environmental, Health and Safety Matters Schedule 3.20.1 Labor and Employment Schedule 3.20.2 Employee Benefit Plans Schedule 3.20.3 Subcontractors Schedule 3.22 Terms and Conditions of Sale or Lease Schedule 3.23 Government Grants Schedule 3.24 Customers and Suppliers Pursuant to Section 601(b)(2) of Regulation S-K, the exhibits and schedules listed above have been omitted and registrant agrees to furnish supplementally a copy of any such schedule or exhibit to the Commission on request. EX-23 3 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To Nortek, Inc.: As independent public accountants, we hereby consent to the incorporation of our report on BEST-MANINVEST GROUP dated October 20, 1995, included in this Form 8-K, into the Company's previously filed Registration Statements on Form S- 8 (File Nos. 33-22527 and 33-47897). /s/DELOITTE & TOUCHE S.n.c. Ancona, Italy November 6, 1995 -----END PRIVACY-ENHANCED MESSAGE-----