S-4

As filed with the Securities and Exchange Commission on April 22, 2004

Registration No. 333-          

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Nortek Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	3634	16-1638891
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

50 Kennedy Plaza

Providence, RI 02903

Telephone: (401) 751-1600

(Address, including zip code, and telephone number, including

area code, of each registrant’s principal executive offices)

Richard L. Bready

Nortek Holdings, Inc

50 Kennedy Plaza

Providence, RI 02903

Telephone: (401) 751-1600

(Name and address, including zip code, and telephone

number, including area code, of agent for service of process for each registrant)

copy to:

Kevin W. Donnelly, Esq.	John B. Ayer, Esq.
Nortek Holdings, Inc.	Ropes & Gray LLP
50 Kennedy Plaza	One International Place
Providence, RI 02903	Boston, MA 02110
Telephone: (401) 751-1600	Telephone: (617) 951-7000

      Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

      If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:     o

      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering:     o

      If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:     o

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum
Title of Each Class of	Amount to be	Offering Price	Aggregate	Amount of
Securities to be Registered	Registered	Per Unit(1)	Offering Price(1)	Registration Fee
10% Series B Senior Discount Notes due 2011	$515,000,000	67.849%	$349,422,350	$44,272.00

(1)  Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933.

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 22, 2004.

PROSPECTUS

Nortek Holdings, Inc.

Offer to Exchange

$515,000,000 Aggregate Principal Amount due at Maturity of Our 10% Series B

Senior Discount Notes due 2011, which have been registered under the Securities Act,

for any and all of our outstanding 10% Senior Discount Notes due 2011

Exchange Offer

      We are offering to exchange our 10% Series B Senior Discount Notes due 2011 for our currently outstanding 10% Senior Discount Notes due 2011. The exchange notes are substantially identical to the outstanding notes, except that the exchange notes have been registered under the federal securities laws, are not subject to transfer restrictions and are not entitled to certain registration rights relating to the outstanding notes. The exchange notes will represent the same debt as the outstanding notes, and we will issue the exchange notes under the same indenture.

      The exchange notes will be our senior unsecured obligations, ranking equal in right of payment with all of our existing and future senior unsecured obligations.

      The principal features of the exchange offer are as follows:

•  The exchange offer expires at 5:00 p.m., New York City time, on                     , 2004, unless extended. We do not currently intent to extend the expiration date of the exchange offer.

•  The exchange offer is not subject to any condition other than that the exchange offer not violate applicable law or any applicable interpretation of the Staff of the Securities and Exchange Commission.

•  We will exchange all outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer.

•  You may withdraw tendered outstanding notes at any time prior to the expiration of the exchange offer.

•  The exchange of outstanding notes for the exchange notes pursuant to the exchange offer will not be a taxable event for U.S. federal income tax purposes, but you should see the discussion under the caption “Material United States Federal Income Tax Consequences” beginning on page 139 for more information.

•  We do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system.

•  We will not receive any proceeds from the exchange offer. We will pay all expenses incurred by us in connection with the exchange offer and the issuance of the exchange notes.

Broker-Dealers

•  Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. The letters of transmittal state that, by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended.

•  This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where the outstanding notes were acquired by the broker-dealer as a result of market-making activities or other trading activities.

•  We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with the resale of exchange notes. See “Plan of Distribution.”

       You should consider carefully the risk factors beginning on page 12 of this prospectus before participating in the exchange offer.

       Neither the U.S. Securities and Exchange Commission nor any other federal or state agency has approved or disapproved of the securities to be distributed in the exchange offer, nor have any of these organizations determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                     , 2004.

TABLE OF CONTENTS

Ex-5.1 Opinion of Ropes & Gray LLP

Ex-12.1 Statement re: Computation of Ratios

Ex-21.1 Subsidiaries of Nortek Holdings, Inc.

Ex-23.1 Consent of Ernst & Young LLP

Ex-25.1 Form T-1

Ex-99.1 Form of Letter of Transmittal

Ex-99.2 Form of Notice of Guaranteed Delivery

Ex-99.3 Form of Exchange Agency Agreement

TABLE OF CONTENTS

Note Regarding Forward-Looking Statements	ii
Prospectus Summary	1
Risk Factors	12
Use of Proceeds	18
Capitalization	19
Selected Historical Consolidated Financial Data	21
Unaudited Pro Forma Condensed Consolidated Financial Data	23
Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Business	72
Management	80
Executive Compensation	82
Security Ownership of Certain Beneficial Owners and Management	90
Certain Relationships and Related Transactions	92
Description of Outstanding Indebtedness	94
Description of the Exchange Notes	97
The Exchange Offer	130
Material United States Federal Income Tax Consequences	139
Plan of Distribution	145
Legal Matters	145
Experts	145
Where You Can Find More Information	146
Index to Consolidated Financial Statements	F-1

      This exchange offer is not being made to, and we will not accept surrenders for exchange from, holders of the outstanding notes in any jurisdiction in which the exchange offer or its acceptance would not comply with the securities or blue sky laws of that jurisdiction.

      All resales must be made in compliance with state securities or blue sky laws. Compliance with these laws may require that the exchange notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility for compliance with these requirements.

      This prospectus and the accompanying letter of transmittal contain important information. You should read this prospectus and the letter of transmittal carefully before deciding whether to tender your outstanding notes.

      This prospectus contains summaries of the terms of several material documents. These summaries include the terms that we believe to be material, but are qualified in their entirety by reference to the full and complete text of the related documents. We will make copies of these documents available to you at your request. Any such request should be sent to Almon C. Hall, Vice President and Chief Financial Officer, Nortek Holdings, Inc., 50 Kennedy Plaza, Providence, RI 02903-2360, (401)751-1600. To obtain timely delivery, holders of outstanding notes must request the information no later than five business days before the date they must make their investment decision.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this prospectus, words such as “intends,” “plans,” “estimates,” “believes,” “anticipates” and “expects” or similar expressions are intended to identify forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties, over which we have no control, that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and operating results to differ include the availability and cost of certain raw materials (including, among others, steel, copper, packaging materials, plastics, glass, wood and aluminum) and purchased components, the level of domestic and foreign construction and remodeling activity affecting residential and commercial markets, interest rates, employment, inflation, foreign currency fluctuations, consumer spending levels, exposure to foreign economies, the rate of sales growth, price, and product and warranty liability claims.

      Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Readers are also urged to carefully review and consider the various disclosures made by us and Nortek, Inc. in our and its periodic reports filed with the Securities and Exchange Commission.

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PROSPECTUS SUMMARY

      This summary contains basic information about us and this exchange offer. Because it is a summary, it does not contain all of the information that you should carefully consider. You should read the entire prospectus carefully, including the section entitled “Risk Factors.” When used in this prospectus, unless otherwise indicated, the terms “we,” “our,” “us,” “Holdings” and “the Company” refer to Nortek Holdings, Inc. and its subsidiaries.

The Exchange Offer

      On November 24, 2003, we completed the private offering of $515 million aggregate principal amount at maturity of our 10% Senior Discount Notes due 2011, referred to in this prospectus as the “Outstanding Notes.” We entered into a registration rights agreement with the initial purchasers in the private offering in which we agreed, among other things, to use our reasonable best efforts to file the registration statement of which this prospectus forms a part within 180 days of the issuance of the Outstanding Notes. You are entitled to exchange in this exchange offer your Outstanding Notes for 10% Series B Senior Discount Notes due 2011 (referred to in this prospectus as the “Exchange Notes”), which have been registered under the federal securities laws and have substantially identical terms as the Outstanding Notes, except for the elimination of certain transfer restrictions and registration rights. You should read the discussion under the heading “— Summary Description of the Exchange Notes” and “Description of the Exchange Notes” for further information regarding the Exchange Notes.

Our Holding Company Structure

      We are a holding company with no material assets other than cash and cash equivalents and our ownership of the common stock of our wholly-owned subsidiary Nortek, Inc., referred to in this prospectus as Nortek. All of our issued and outstanding capital stock is owned by affiliates and designees of Kelso & Company, L.P. and certain members of our management.

Our Business

      We are a diversified manufacturer of residential and commercial building products, operating within two principal segments:

•  residential building products, and

•  air conditioning and heating products.

Through these segments, we manufacture and sell, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction market, the manufactured housing market, and the do-it-yourself and professional remodeling and renovation market.

      The levels of residential replacement and remodeling, new residential construction and non-residential construction significantly impact our performance. Interest rates, seasonality, inflation, consumer spending habits and unemployment are several factors that affect these levels.

Residential Building Products

      We manufacture and distribute built-in products primarily for the residential new construction, do-it-yourself (“DIY”) and professional remodeling and renovation markets. The principal products that we sell through this segment are:

•  kitchen range hoods,

•  built-in exhaust fans (such as bath fans and fan, heater and light combination units),

•  indoor air quality products,

•  bath cabinets,

•  door chimes,

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•  radio intercoms,

•  central vacuum systems,

•  surround sound systems, and

•  multi-room audio and video distribution equipment.

We are the largest supplier in North America of range hoods, bath fans and combination units, indoor air quality products (such as continuous-ventilation systems and energy-recovery ventilators) and one of the leading suppliers in Western Europe and South America of luxury “Eurostyle” range hoods. We sell these products to distributors and dealers of electrical and lighting products, kitchen and bath dealers, retail home centers and original equipment manufacturers under the Broan®, NuTone®, Nautilus®, Venmar®, vanEE®, Best®, Channel Plus®, Elan®, SpeakerCraft® and OmniMount® brand names, among others. A key component of our operating strategy for this segment is to introduce new products that capitalize on our strong brand names and on our extensive distribution system. Other products sold by this segment include, among others, trash compactors, attic and whole house ventilators, air quality and HEPA whole-house filtration systems, ceiling fans, as well as wireless security products, garage door and gate operators, and infrared control equipment.

      We offer a broad array of products with various features and styles across a range of price points. We believe that our variety of product offerings helps us maintain and improve our market position for our principal products. At the same time, we believe that our status as a low-cost producer, which is in large part due to our advanced manufacturing processes, provides us with a competitive advantage. Our primary residential building products compete with many domestic and international suppliers in various markets. We compete with suppliers of competitive products primarily on the basis of quality, distribution, delivery and price. Although we believe we compete favorably with other suppliers of residential building products, some of our competitors in this area have greater financial and marketing resources than we do.

Air Conditioning and Heating Products

      We manufacture and sell heating, ventilating, and air conditioning systems and products (“HVAC”) for site-built residential and manufactured housing structures and custom-designed commercial applications and standard light commercial products.

Residential HVAC Products

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

      Demand for replacing and modernizing existing equipment and the level of housing starts and manufactured housing shipments are the principal factors that affect the market for our residential HVAC products. We anticipate that the replacement market will continue to expand as a large number of previously installed heating and cooling products become outdated or reach the end of their useful lives.

      We sell our manufactured housing products to manufactured housing builders and, through distributors, to manufactured housing retailers and owners. The majority of our sales to manufactured housing builders consists of furnaces designed and engineered to meet or exceed certain standards mandated by HUD and other federal agencies. These standards differ in several important respects from the standards for furnaces used in site-built residential homes. The aftermarket channel of distribution includes sales of both new and replacement air conditioning units and heat pumps and replacement furnaces. We believe that we have one major competitor in the furnace segment of this market, York International Corporation, which markets its products primarily under the “Coleman” name. We compete with most major industry manufacturers for the air conditioning segment of the market.

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      We sell residential HVAC products for use in site-built homes through independently-owned distributors who sell to HVAC contractors. The site-built residential HVAC market is very competitive. In this market, we compete with, among others, Carrier Corporation, Rheem Manufacturing Company, Lennox Industries Inc., The Trane Company, York International Corporation and Goodman Manufacturing. We compete in both the site-built and manufactured housing markets on the basis of breadth and quality of our product line, distribution, product availability and price. We believe that we compete favorably with respect to these factors, although most of our competitors have greater financial and marketing resources and some competitors may enjoy greater brand awareness than we do.

      We estimate that more than half of our sales of residential HVAC products in 2003 were attributable to the replacement market, which tends to be less cyclical than the new construction market.

Commercial HVAC Products

      We manufacture and sell HVAC systems that are custom-designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. We design these systems primarily to operate on building rooftops (including large self-contained walk-in units) or on individual floors within a building and to have cooling capacities ranging from 40 to 600 tons. We market our commercial HVAC products under the Governair®, Mammoth®, Temtrol®, Venmar®, Ventrol® and Webco®. Also, our subsidiary Eaton-Williams Group manufactures and markets custom and standard air conditioning and humidification equipment throughout Western Europe under the Vapac®, Cubit®, Qualitair®, Edenaire®, Colman^TM and Moducel^TM brand names.

      The market for commercial HVAC equipment is divided into standard and custom-designed equipment. Standard equipment suppliers generally have a larger share of the overall commercial HVAC market than custom-designed equipment suppliers, including us. Unlike standard equipment, our commercial HVAC equipment can be designed to match a customer’s exact space, capacity and performance requirements. Our packaged rooftop and self-contained walk-in equipment rooms maximize a building’s rentable floor space because our equipment is located outside the building. In addition, the manner of construction and timing of installation of commercial HVAC equipment can often favor custom-designed systems over standard systems. We seek to maintain strong relationships nationwide with design engineers, owners and developers, and the persons who are most likely to value the benefits and long-term cost efficiencies of our custom-designed equipment.

      We estimate that about one-third of our air conditioning and heating product commercial sales in 2003 came from replacement and retrofit activity, which generally benefit from higher profit margins. Also, replacement and retrofit activity is typically less cyclical than new construction activity. We continue to develop product and marketing programs to increase market penetration in the growing replacement and retrofit market.

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

Headquarters

      Our principal executive offices are located at 50 Kennedy Plaza, Providence, Rhode Island 02903-2360 and our telephone number is (401) 751-1600.

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Recent Developments

      On February 12, 2004, we sold the windows, doors and siding segment of our business, through the sale of our subsidiary, Ply Gem Industries, Inc. (“Ply Gem”), in a transaction valued at approximately $560 million. Ply Gem is a manufacturer and distributor of a range of products for use in the residential new construction, DIY and professional renovation markets, including vinyl siding, windows, patio doors, fencing, railing, decking and accessories.

      On March 1, 2004, we completed the sale of $200 million of Senior Floating Rate Notes due 2010, issued by Nortek. The Nortek floating rate notes will bear interest at a rate per annum equal to LIBOR, as defined, plus 3% (which was 4.17% as of April 3, 2004). The notes are unsecured obligations of Nortek and may be redeemed in whole or in part prior to maturity on December 31, 2010 at redemption prices described in the indenture governing those notes.

      Using existing cash and proceeds from the sale of Ply Gem and from the issuance of the Nortek floating rate notes, we purchased on the open market or redeemed, at various times during the first quarter of 2004, all of Nortek’s outstanding 9 1/4% Senior Notes due 2007 ($175 million in principal), 9 1/8% Senior Notes due 2007 ($310 million in principal) and 8 7/8% Senior Notes due 2008 ($210 million in principal).

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Summary of the Terms of the Exchange Offer

      On November 24, 2003, we completed an offering of $515 million in aggregate principal amount at maturity of 10% Senior Discount Notes due 2011, which was exempt from registration under the Securities Act of 1933, as amended.

      We sold the Outstanding Notes to Deutsche Bank Securities Inc., UBS Securities LLC, Credit Suisse First Boston LLC and Bear, Stearns & Co. Inc. The initial purchasers subsequently resold the Outstanding Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act.

      In connection with the sale of the Outstanding Notes, we entered into a registration rights agreement with the initial purchasers. Under the terms of that agreement, we agreed to use reasonable best efforts to consummate the exchange offer contemplated by this prospectus.

      The following is a brief summary of the terms of the exchange offer. Certain of the terms and conditions described below are subject to important limitations and exceptions. For a more complete description of the exchange offer, see “The Exchange Offer.”

Securities Offered	$515,000,000 in aggregate principal amount at maturity of 10% Senior Discount Notes due 2011.
Exchange Offer	The Exchange Notes are being offered in exchange for a like principal amount of Outstanding Notes. We will accept any and all Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on                     , 2004. Holders may tender some or all of their Outstanding Notes pursuant to the exchange offer. However, Outstanding Notes may be tendered only in integral multiples of $1,000 in principal amount. The form and terms of the Exchange Notes are the same as the form and terms of the Outstanding Notes except that:
	• The Exchange Notes have been registered under the federal securities laws and will not bear any legend restricting their transfer;
	• The Exchange Notes bear a different CUSIP number than the Outstanding Notes; and
	• The holders of the Exchange Notes will not be entitled to certain rights under the registration rights agreement, including the provisions for an increase in the interest rate on the Outstanding Notes in some circumstances relating to the timing of the exchange offer.
	See “The Exchange Offer.”
Resale	Based on an interpretation by the Staff of the Securities and Exchange Commission (SEC) set forth in no-action letters issued to third parties, we believe that the Exchange Notes issued in the exchange offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
	• you are acquiring the Exchange Notes in the ordinary course of your business;

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	• you have not participated in, do not intend to participate in, and have no arrangement or understanding with any person to participate in the distribution of Exchange Notes; and
	• you are not an “affiliate” of Nortek Holdings, Inc. within the meaning of Rule 405 of the Securities Act.
	Each participating broker-dealer that receives Exchange Notes for its own account during the exchange offer in exchange for Outstanding Notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Notes. Prospectus delivery requirements are discussed in greater detail in the section captioned “Plan of Distribution.”
	Any holder of Outstanding Notes who:
	• is an affiliate of Nortek Holdings, Inc.,
	• does not acquire Exchange Notes in the ordinary course of its business, or
	• tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of Exchange Notes,
	cannot rely on the position of the Staff of the SEC enunciated in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters and, in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the Exchange Notes.
Expiration Date	The exchange offer will expire at 5:00 p.m., New York City time on                     , 2004, unless we decide to extend the exchange offer. Any Outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holders promptly after expiration or termination of the exchange offer.
Conditions to the Exchange Offer	The exchange offer is subject to certain customary conditions, some of which may be waived by us.
Procedures for Tendering Outstanding Notes	If you wish to accept the exchange offer, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, in accordance with the instructions contained in this prospectus and in the letter of transmittal. You should then mail or otherwise deliver the letter of transmittal, or facsimile, together with the Outstanding Notes to be exchanged and any other required documentation, to the exchange agent at the address set forth in this prospectus and the letter of transmittal. If you hold Outstanding Notes through The Depository Trust Company, or DTC, and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the applicable letter of transmittal.

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	By executing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things:
	• any Exchange Notes to be received by you will be acquired in the ordinary course of business;
	• you have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of Exchange Notes in violation of the provisions of the Securities Act;
	• you are not an “affiliate” (within the meaning of Rule 405 under the Securities Act) of Nortek Holdings, Inc. or if you are an affiliate, you will comply with any applicable registration and prospectus delivering requirements of the Securities Act; and
	• if you are a broker-dealer that will receive Exchange Notes for your own account in exchange for Outstanding Notes that were acquired as a result of market-making or other trading activities, then you will deliver a prospectus in connection with any resale of such Exchange Notes.
	See “The Exchange Offer — Procedures for Tendering” and “Plan of Distribution.”
Effect of Not Tendering in the Exchange Offer	Any Outstanding Notes that are not tendered or that are tendered but not accepted will remain subject to the restrictions on transfer. Since the Outstanding Notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of a specific exemption from registration. Upon the completion of the exchange offer, we will have no further obligations to register, and we do not currently anticipate that we will register, the Outstanding Notes under the Securities Act. See “The Exchange Offer — Consequences of Failure to Exchange.”
Special Procedures for Beneficial Owners	If you are a beneficial owner of Outstanding Notes which are not registered in your name, and you wish to tender Outstanding Notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the applicable letter of transmittal and delivering your Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in your name or obtain a properly completed bond power from the registered holder.
Guaranteed Delivery Procedures	If you wish to tender your Outstanding Notes and your Outstanding Notes are not immediately available or you cannot deliver your Outstanding Notes, the applicable letter of transmittal or any other documents required by the applicable letter of transmittal or comply with the applicable procedures under DTC’s Automated Tender Offer Program prior to the expiration date, you must tender your Outstanding Notes according to the

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	guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.”
Interest on the Exchange Notes and the Outstanding Notes	Interest will accrue on the Exchange Notes in the form of an increase in the accreted value of the Exchange Notes. Interest on the Outstanding Notes accepted for exchange will cease to accrue upon the issuance of the Exchange Notes.
Withdrawal Rights	Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.
Material United States Federal Income Tax Consequences	The exchange of Outstanding Notes for Exchange Notes in the exchange offer should not be a taxable event for U.S. federal income tax purposes. Please read the section of this prospectus captioned “Material United States Federal Income Tax Consequences” for more information on tax considerations of the exchange offer.
Use of Proceeds	We will not receive any cash proceeds from the issuance of Exchange Notes pursuant to the exchange offer.
Exchange Agent	U.S. Bank National Association, the trustee under the indenture, is serving as exchange agent in connection with the exchange offer. The address and telephone number of the exchange agent are set forth under the heading “The Exchange Offer — Exchange Agent.”

Summary Description of the Exchange Notes

      The following is a brief summary of the terms of the Exchange Notes. We refer to the Exchange Notes and the Outstanding Notes together as the “Notes.” For a more complete description of the terms of the Exchange Notes, see “Description of the Exchange Notes.”

Issuer	Nortek Holdings, Inc., also referred to in this prospectus as “Holdings.”
Securities Offered	$515,000,000 aggregate principal amount at maturity of 10% Series B Senior Discount Notes due 2011.
Maturity	May 15, 2011.
Interest Rate	Prior to November 15, 2007 (the “Full Accretion Date”), interest will accrue on the Notes in the form of an increase in the accreted value of such Notes. Thereafter, cash interest on the Notes will accrue and be payable semiannually in arrears on May 15 and November 15 of each year, commencing on May 15, 2008, at a rate of 10% per annum. The accreted value of each note will increase from the date of issuance until November 15, 2007 at a rate of 10% per annum compounded semi-annually, reflecting the accrual of non-cash interest, such that the accreted value will equal the principal amount at maturity on November 15, 2007.

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Ranking	The Exchange Notes will be unsecured obligations of Holdings and will:
	• rank equally in right of payment to all of Holdings’ future senior unsecured indebtedness;
	• rank senior in right of payment to any of Holdings’ future unsecured subordinated indebtedness;
	• be effectively subordinated in right of payment to future secured debt of Holdings, to the extent of the value of the assets securing such debt; and
	• be structurally subordinated to all existing and future indebtedness and obligations of each of Holdings’ subsidiaries, including Nortek, Inc.
Optional Redemption	We cannot redeem the Exchange Notes, in whole or in part, until November 15, 2007 except as provided below in “— Optional Redemption After Equity Offerings” and “— Optional Redemption Upon a Change of Control.” Thereafter, we may redeem the Exchange Notes, in whole or in part, at the redemption prices listed in the “Description of the Exchange Notes” section under the heading “Optional Redemption,” plus accrued interest.
Optional Redemption After Equity Offerings	At any time (which may be more than once) before November 15, 2006, we can choose to redeem up to 35% of the Notes with money that we raise in one or more equity offerings, as long as:
	• we pay 110% of the accreted value of the Notes, plus interest;
	• we redeem the Notes within 90 days of completing the equity offering; and
	• at least 65% of the aggregate principal amount of the Notes issued remains outstanding afterwards.
Mandatory Redemption	On May 15, 2009, if any Notes are outstanding, we will be required to redeem 25.3661% of each then outstanding Note’s aggregate accreted value (the “mandatory principal redemption amount”) ($130,635,415 aggregate accreted value of the Notes, assuming all of the Notes remain outstanding on such date) at a redemption price of 100% of the accreted value of the portion of Notes so redeemed; provided, that we shall simultaneously be required to redeem an additional portion of each Note to the extent required to prevent such Note from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended. The mandatory principal redemption amount represents (i) the excess of the aggregate accreted value of all the Notes outstanding on May 15, 2009 over the aggregate original issue price thereof less (ii) an amount equal to one year’s simple uncompounded interest on the aggregate original issue price of such Notes at a rate per annum equal to the yield to maturity on the Notes.

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Optional Redemption Upon a Change Of Control	At any time prior to November 15, 2006, we can choose to redeem all, but not less than all, the Notes upon the occurrence of a change of control at the redemption prices listed in the “Description of the Exchange Notes” section under the heading “Optional Redemption,” provided that such redemption occurs within 60 days of the occurrence of such change of control.
Change of Control Offer	If a change in control of Holdings occurs, we must give holders of the Exchange Notes the opportunity to sell to us their Exchange Notes at 101% of their accreted value, plus accrued interest.
	We might not be able to pay you the required price for the Exchange Notes you present to us at the time of a change of control, because we might not have enough funds at that time.
Springing Guarantee	Under certain limited circumstances, Nortek may be required in the future to guarantee the Exchange Notes on a senior subordinated basis. This requirement will not apply if the terms of any senior indebtedness of Nortek restrict the issuance of such guarantee. There can be no assurance that the issuance of such guarantee will be permitted by the terms of our senior indebtedness. See “Description of the Exchange Notes — Certain Covenants — Limitation on Additional Indebtedness.”
Asset Sale Proceeds	If we or our subsidiaries engage in asset sales, or sales of the stock of our subsidiaries, outside the ordinary course of business, we generally must either invest the net cash proceeds from such sales in our business within a period of time, use such proceeds to pay down certain indebtedness or make an offer to purchase a principal amount of the Notes equal to the excess net cash proceeds. The purchase price of the Notes will be 100% of the accreted value, plus accrued interest.
Certain Indenture Provisions	The indenture governing the Exchange Notes contains covenants limiting our (and most or all of our subsidiaries’) ability to:
	• incur additional debt;
	• pay dividends or distributions on our capital stock or repurchase our capital stock;
	• make certain investments;
	• create liens on our assets to secure debt;
	• enter into transactions with affiliates;
	• merge or consolidate with another company; and
	• transfer and sell assets.
	These covenants are subject to a number of important limitations and exceptions as described under “Description of the Exchange Notes.”
Absence of a Public Market for the Exchange Notes	The Exchange Notes generally will be freely transferable but will also be new securities for which there will not initially be a

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market. Accordingly, we cannot assure you that a market for the Exchange Notes will develop or make any representation as to the liquidity of any market. We do not intend to apply for the listing of the Exchange Notes on any securities exchange or automated dealer quotation system. The initial purchasers in the private offering of the Outstanding Notes have advised us that they currently intend to make a market in the Exchange Notes. However, they are not obligated to do so, and any market making with respect to the Exchange Notes may be discontinued at any time without notice. See “Plan of Distribution.”

Risk Factors

Investing in the Exchange Notes involves substantial risks. See “Risk Factors” for a discussion of certain of the risks you should consider before deciding to exchange your Outstanding Notes.

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RISK FACTORS

      You should carefully consider the following factors, in addition to other information in this prospectus, before tendering your Outstanding Notes in this exchange offer.

Risks Related to the Notes

Our substantial debt could negatively impact our business and prevent us from fulfilling our obligations under the Notes.

      We have a substantial amount of debt. At December 31, 2003, after giving pro forma effect to the sale of Ply Gem, the sale of Nortek’s Senior Floating Rate Notes due 2010 and the redemption of Nortek’s 9 1/4% Senior Notes due 2007, 9 1/8% Senior Notes due 2007 and 8 7/8% Senior Notes due 2008, we would have had approximately $834.6 million of total debt outstanding and a debt to equity ratio of approximately 3.2 to 1.0. The terms of the Notes and our other outstanding debt limit, but do not prohibit, us from incurring additional debt.

      The amount of total debt that we incur could have important consequences to you, including the following:

•  our ability to obtain additional financing for working capital, capital expenditures, acquisitions, refinancing indebtedness, or other purposes could be impaired;

•  a substantial portion of our cash flow from operations will be dedicated to paying principal and interest on our debt, thereby reducing funds available for expansion or other purposes;

•  we may be more leveraged than some of our competitors, which may result in a competitive disadvantage;

•  our financing agreements contain certain restrictions that restrict the ability of our subsidiaries to pay dividends to us or to make other distributions to us (see “Description of Outstanding Indebtedness”);

•  our failure to comply with the restrictions in our or our subsidiaries’ financing agreements would have a material adverse effect on us;

•  some of our subsidiaries’ debt agreements have floating rates of interest, which could make us more vulnerable to changes in prevailing interest rates; and

•  our significant amount of debt could make us more vulnerable to changes in general economic conditions or increases in prevailing interest rates.

      We believe that we will need to access the capital markets in the future to raise the funds to repay our debt. We have no assurance that we will be able to complete a refinancing or that we will be able to raise any additional financing, particularly in view of our anticipated high levels of debt and the restrictions under our current debt agreements and the indenture which governs the Notes (the “Indenture”). If we are unable to satisfy or refinance our current debt as it comes due, we may default on our debt obligations. If we default on our debt obligations, virtually all of our other debt, including the Notes, could become immediately due and payable.

The terms of our debt covenants could limit how we conduct our business and our ability to raise additional funds.

      The agreements which govern the terms of our debt, including the Indenture, contain covenants that restrict our ability to:

•  make investments and other restricted payments;

•  incur additional debt;

•  issue preferred stock of our subsidiaries;

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•  create liens;

•  engage in transactions with affiliates;

•  sell our assets or assets of our subsidiaries; and

•  enter into mergers and consolidations.

      In addition, Nortek has a credit facility that contains a financial maintenance covenant that will apply under certain conditions, and we cannot assure you that such covenant would always be met. See “Description of Outstanding Indebtedness — Senior Secured Credit Facility.” A breach of our covenants under the indentures or agreements governing our existing notes and Nortek’s credit facility could result in a default under the applicable indebtedness and trigger cross-defaults under other indebtedness. Upon an event of default under the Nortek credit facility or existing notes, all amounts outstanding under the facility or series of notes, could be declared immediately due and payable. An event of default under the credit facility could also terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under Nortek’s credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of their borrowings, we cannot assure you that we and our subsidiaries would have sufficient assets to repay the credit facility, our existing notes, or these Notes.

      Our future financing arrangements will likely contain similar or more restrictive covenants. As a result of these restrictions, we may be:

•  limited in how we conduct our business;

•  unable to raise additional debt or equity financing to operate during general economic or business downturns; and

•  unable to compete effectively or to take advantage of new business opportunities.

      These restrictions may affect our ability to grow in accordance with our plans.

Holdings is the sole obligor under the Notes and its subsidiaries, including Nortek, do not guarantee Holdings’ obligations under the Notes and do not have any obligation with respect to the Notes; the Notes are structurally subordinated to the debt and liabilities of Holdings’ subsidiaries, including Nortek, and are effectively subordinated to any future secured debt of Holdings.

      Holdings has no operations of its own and derives all of its revenues and cash flow from its subsidiaries. Holdings’ subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payments.

      The Notes are structurally subordinate to all debt and liabilities, including trade payables, of Holdings’ subsidiaries, including Nortek. You are only entitled to participate with all other holders of Holdings’ indebtedness and liabilities in the assets of Holdings’ subsidiaries remaining after Holdings’ subsidiaries have paid all of their debt and liabilities. Holdings’ subsidiaries may not have sufficient funds or assets to permit payments to Holdings in amounts sufficient to permit Holdings to pay all or any portion of its indebtedness and other obligations, including its obligations on the Notes. At December 31, 2003, the aggregate debt of Holdings’ subsidiaries equaled approximately $987.0 million and the aggregate amount of trade payables, accrued liabilities and other balance sheet liabilities (other than debt) of Holdings’ subsidiaries equaled approximately $550.9 million. In addition, as of April 3, 2004, Nortek had approximately 151.7 million of additional borrowings available under its $175 million credit facility after giving effect to approximately 7.9 million of outstanding letters of credit under the credit facility.

      The Indenture, the indentures governing indebtedness of our subsidiaries and Nortek’s credit facility permit us and/or our subsidiaries to incur additional debt, including secured debt, under certain circumstances. See “Description of Outstanding Indebtedness.” If Holdings incurs any secured debt in the future, holders of such secured debt will have claims that are prior to your claims as holders of the

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Notes to the extent of the value of the assets securing that other debt. In the event of bankruptcy, liquidation or a reorganization or similar proceeding relating to us, holders of secured debt will have a prior claim to the assets that constitute their collateral.

      Although the Notes are only the obligation of Holdings, the Indenture requires Holdings to cause Nortek to issue a senior subordinated guarantee of the Notes if Nortek refinances or redeems its 9 7/8% Senior Subordinated Notes due 2011 or if Nortek issues additional subordinated indebtedness. However, this requirement does not apply if the terms of any senior indebtedness of Nortek restrict the issuance of any such guarantee. The terms of the indentures governing Nortek’s existing senior indebtedness and of Nortek’s credit facility contain such restrictions, and the terms of future senior indebtedness may also contain such restrictions. There can be no assurance that the issuance of such guarantee will be permitted by the terms of our senior indebtedness.

Holdings may not have access to the cash flow and other assets of its subsidiaries that may be needed to make payment on the Notes.

      Holdings’ operations are conducted through its subsidiaries and its ability to make payment on the Notes is dependent on the earnings and the distribution of funds from its subsidiaries. However, none of its subsidiaries is obligated to make funds available to Holdings for payment on the Notes. In addition, the terms of the indentures governing Nortek’s existing senior and senior subordinated notes and of Nortek’s credit facility significantly restrict Nortek and its subsidiaries from paying dividends and otherwise transferring assets to Holdings. Furthermore, Holdings’ subsidiaries will be permitted under the terms of Nortek’s credit facility and other indebtedness (including under the Indenture) to incur additional indebtedness that may severely restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to Holdings.

      We cannot assure you that the agreements governing the current and future indebtedness of Holdings’ subsidiaries will permit Holdings’ subsidiaries to provide Holdings with sufficient dividends, distributions or loans to fund scheduled interest and principal payments on the Notes when due. See “Description of Outstanding Indebtedness.”

Our subsidiaries may not be able to generate sufficient cash to service all of their and our indebtedness, including the Notes, and may be forced to take other actions to satisfy their and our obligations under such indebtedness, which may not be successful.

      Our subsidiaries’ ability to make scheduled payments on or to refinance their and our debt obligations depends on our subsidiaries’ financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business and other factors beyond their or our control. We cannot assure you that our subsidiaries will maintain a level of cash flows from operating activities sufficient to permit them and us to pay or refinance their and our indebtedness, including the Notes. If our subsidiaries’ cash flows and capital resources are insufficient to fund our and their debt service obligations, we and our subsidiaries may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our and their indebtedness, including the Notes. These alternative measures may not be successful and may not permit us and our subsidiaries to meet our and their scheduled debt service obligations. In the absence of such operating results and resources, we and they could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our and their debt service and other obligations. Our subsidiaries may not be able to consummate those dispositions or to obtain the proceeds which could be realized from them and these proceeds may not be adequate to meet any debt service obligations then due.

You will be required to pay U.S. federal income tax on accrual of original issue discount on the Notes even if Holdings does not pay cash interest.

      The Notes were originally issued at a substantial discount from their principal amount at maturity. Although cash interest will not accrue on the Notes prior to November 15, 2007, original issue discount

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(the difference between the stated redemption price at maturity and the issue price of the Notes) will accrue from the issue date of the Notes. Consequently, holders of the Notes generally will be required to include amounts in gross income for United States federal income tax purposes in advance of their receipt of the cash payments to which the income is attributable. Such amounts in the aggregate will be equal to the difference between the stated redemption price at maturity (inclusive of stated interest on the Notes) and the issue price of the Notes. See “Material United States Federal Income Tax Consequences.”

Federal and state statutes allow courts, under specific circumstances, to void the Notes and require Holders to return payments received from us.

      Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer laws, the Notes could be voided, or claims in respect of the Notes could be subordinated to all of our other debts if, among other things, we, at the time we incurred the indebtedness evidenced by the Notes:

•  were insolvent or rendered insolvent by reason of such indebtedness; or

•  were engaged in a business or transaction for which our remaining assets constituted unreasonably small capital; or

•  intended to incur, or believed that we would incur, debts beyond our ability to pay such debts as they mature.

      In addition, any payment by us pursuant to the Notes could be voided and required to be returned to us, or to a fund for the benefit of our creditors.

      The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, we would be considered insolvent if:

•  the sum of our debts, including contingent liabilities, were greater than the fair saleable value of all of our assets, or

•  if the present fair saleable value of our assets were less than the amount that would be required to pay our probable liability on existing debts, including contingent liabilities, as they become absolute and mature, or

•  we could not pay our debts as they become due.

On the basis of historical financial information, recent operating history and other factors, we believe that we, after giving effect to the indebtedness incurred in the offering of the Notes and the application of the proceeds therefrom, including the distribution of these proceeds to holders of our capital stock and other equity interests, were not and will not be insolvent, do not and will not have unreasonably small capital for the business in which we are engaged and have not incurred debts beyond our ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard.

We may be unable to raise the funds necessary to finance the change of control repurchase provisions of our Indenture.

      We will be required to offer to repurchase the Notes at 101% of their accreted value, plus accrued and unpaid interest and certain additional interest, if any, through the date of repurchase, upon the occurrence of a “change of control” as defined in the Indenture. Certain events involving such a change of control could result in acceleration of, or similar repurchase obligations with respect to, other of our or our subsidiaries’ debt, including the existing senior notes of Nortek. We cannot assure you that we will have sufficient resources to repurchase the Notes in the event we become obligated to do so, particularly in the event of the acceleration of, or the need to comply with repurchase obligations with respect to, other debt of Nortek and our other subsidiaries that is effectively senior to the Notes. If we fail to repurchase all of the tendered Notes in the event of a “change of control,” it is an event of default under the Indenture,

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which may result in the acceleration of the maturity of the Notes. See “Description of the Exchange Notes — Change of Control,” “— Certain Covenants” and “— Events of Default and Remedies.”

There will be no public trading market for the Notes and your ability to transfer them is limited.

      No active trading market currently exists for the Notes. If these securities are traded, they may trade at a discount from the Outstanding Notes’ initial offering price, depending on prevailing interest rates, the market for similar securities and other factors, including general economic conditions and our financial condition, performance and prospects, as well as recommendations of securities analysts. The Initial Purchasers have informed us that they intend to make a market in the Notes. They are not obligated to do so, however, and may discontinue such market making at any time without notice. In addition, any market making activities will be subject to the limitations imposed by the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and may be limited during the effectiveness of a registration statement relating to the Notes. We cannot assure you that an active trading market for the Notes will develop, or if one does develop, that it will be sustained.

      In addition, changes in the overall market for high yield securities and changes in our financial performance or prospects or in the prospects for companies in our industry generally may adversely affect the liquidity of the trading market in the Exchange Notes and the market price quoted for the Exchange Notes.

      All resales must be made in compliance with state securities or “blue sky” laws. Compliance with these laws may require that the Exchange Notes be registered or qualified in a state or that the resales be made by or through a licensed broker-dealer, unless exemptions from these requirements are available. We assume no responsibility with regard to compliance with these requirements.

Your failure to exchange your Notes in the exchange offer will restrict your ability to resell them.

      Untendered Outstanding Notes that you do not exchange for the registered Exchange Notes pursuant to the exchange offer will remain restricted securities, subject to the following restrictions on transfer:

•  you may resell only if registered pursuant to the Securities Act or if an exemption from registration is available;

•  the Notes will bear a legend restricting transfer in the absence of registration or an exemption; and

•  a holder of the Notes who wants to sell or otherwise dispose of all or any part of its Notes under an exemption from registration under the Securities Act, if requested by us, must deliver to us an opinion of independent counsel experienced in Securities Act matters, reasonably satisfactory in form and substance to us, that an exemption is available.

Risks Related to Our Business

Our business is sensitive to economic cycles and to the availability and pricing of raw materials, and adverse changes in these factors could have a negative impact on our business.

      A significant percentage of our sales of residential and commercial building products is attributable to new residential and nonresidential construction, which are affected by cyclical factors such as interest rates, seasonality, inflation, consumer spending habits and employment. This exposure to cyclicality in the new construction market is partially offset by our increasing emphasis on the repair and replacement markets, which are typically less cyclical. In addition, we are dependent upon raw materials (including, among others, steel, copper, packaging material, plastics and aluminum) and components that we purchase from third parties. Accordingly, our results of operations and financial condition have in the past been, and may again in the future be, adversely affected by such cyclicality and increases in raw material or component costs or their lack of availability.

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If we fail to integrate the businesses we have acquired or will acquire in the future, it could negatively impact our business.

      Historically, we have engaged in a significant number of acquisitions. We will continue to review future acquisition opportunities. We cannot assure you that we will continue to locate and secure acquisition candidates on terms and conditions that are acceptable to us. There are several risks in acquisitions, including:

•  the difficulty and expense that we incur in connection with the acquisition;

•  the difficulty and expense that we incur in the subsequent assimilation of the operations of the acquired company into our operations;

•  adverse accounting consequences of conforming the acquired company’s accounting policies to ours;

•  the difficulty in operating acquired businesses;

•  the diversion of management’s attention from our other business concerns; and

•  the potential loss of key employees previously employed at acquired companies.

We cannot assure you that any acquisition we may make will be successfully integrated into our on-going operations or that we will achieve our estimated cost savings from the acquisition. If the operations of an acquired business do not meet expectations, we may be required to restructure the acquired business or write-off the value of some or all of the assets of the acquired business.

Because we compete against competitors with substantially greater resources, we face external competitive risks that may negatively impact our business.

      Substantially all of the markets in which we operate are highly competitive and many of our competitors and potential competitors have substantially greater resources than we have. These competitive factors could require us to reduce prices or increase spending on product development, marketing and sales that would adversely affect our operating results.

A significant portion of our workforce is unionized and labor disruptions could adversely affect our business.

      As of December 31, 2003, after giving effect to our sale of Ply Gem, approximately 12.8% of our workforce was subject to various collective bargaining agreements. Collective bargaining agreements covering approximately 8.3% of our workforce (after giving effect to our sale of Ply Gem) will expire through the end of 2004. We cannot assure you that we will be able to negotiate these or other collective bargaining agreements on the same or more favorable terms as the current agreements or at all and without production interruptions, including labor stoppages.

We face risks of litigation and liability claims on environmental, product liability, workers compensation and other matters, the extent of which exposure can be difficult or impossible to estimate and which can negatively impact our financial condition and results of operations.

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

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USE OF PROCEEDS

      This exchange offer is intended to satisfy our obligations under the registration rights agreement, dated November 24, 2003, by and among us and the Initial Purchasers of the Outstanding Notes. We will not receive any proceeds from the issuance of the Exchange Notes in the exchange offer. In exchange for the Exchange Notes, we will receive Outstanding Notes in like principal amount. We will retire or cancel all of the Outstanding Notes tendered in the exchange offer. Accordingly, issuance of the Exchange Notes will not result in any change in our capitalization.

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CAPITALIZATION

      The following table shows our capitalization as of December 31, 2003:

      (A) on an actual basis; and

      (B) on an as adjusted basis to reflect:

•  the exchange of the Exchange Notes for the Outstanding Notes,

•  the sale of our Ply Gem subsidiary,

•  the redemption of all of Nortek’s outstanding 9 1/4% Senior Notes due 2007 and 9 1/8% Senior Notes due 2007 (collectively, the “Debt Redemptions”), and

•  the sale by Nortek of Senior Floating Rate Notes due 2010 and the application of the net proceeds, together with existing cash on hand, to redeem all of Nortek’s outstanding 8 7/8% Senior Notes due 2008 (the “8 7/8% Senior Notes Redemption”).

      You should read this table in conjunction with our consolidated financial statements and the related notes thereto included in this prospectus and the unaudited pro forma condensed consolidated financial data included elsewhere herein.

			December 31, 2003
					As
			Actual		Adjusted(1)
			(Dollars in millions)
Short-term debt:
	Short-term obligations		$	8.1	$	8.1
	Current maturities of long-term debt			7.2		7.2
		Total short-term debt		15.3		15.3
Long-term debt:
	Nortek Senior Secured Credit Facility(2)			—		—
	Notes, mortgage notes and obligations payable, less current maturities(3)			15.8		15.8
	9- 7/8% Senior Subordinated Notes due 2011.			250.0		250.0
	9- 1/4% Senior Notes due 2007.			175.0		—
	9- 1/8% Senior Notes due 2007.			310.0		—
	8- 7/8% Senior Notes due 2008.			210.0		—
	Premium on Senior and Senior Subordinated Notes(4)			10.9		0.6
	Senior Floating Rate Notes due 2010			—		200.0
	10% Senior Discount Notes due 2011.			352.9		—
	10% Series B Senior Discount Notes due 2011			—		352.9
		Total long-term debt		1,324.6		819.3

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			December 31, 2003
					As
			Actual		Adjusted(1)
			(Dollars in millions)
Stockholders’ investment(5):
	Series B Preference Stock, $1.00 par value; 19,000,000 shares authorized; 8,130,442 shares issued and outstanding, actual and as adjusted			8.1		8.1
	Class A Common Stock, $1.00 par value; 19,000,000 shares authorized; 397,380 shares issued and outstanding, actual and as adjusted			0.4		0.4
	Class B Common Stock, $1.00 par value; 14,000,000 shares authorized; none issued and outstanding, actual and as adjusted			—		—
	Additional paid-in capital			172.3		172.3
	Retained earnings(6)			—		64.1
	Accumulated other comprehensive income			19.4		19.4
		Total stockholders’ investment		200.2		264.3
		Total capitalization	$	1,524.8	$	1,083.6

(1)	The As Adjusted amounts reflect the exchange of the Exchange Notes for the Outstanding Notes, the sale of Ply Gem, the Debt Redemptions, the sale of the Senior Floating Rate Notes due 2010 and the 8 7/8% Senior Notes Redemption.
(2)	See Note 6 of Notes to the Consolidated Financial Statements included elsewhere herein this prospectus for a description of the terms of the Nortek Senior Secured Credit Facility.
(3)	Notes, mortgage notes and obligations payable primarily consist of mortgage, capital lease and other debt of various continuing operations of subsidiaries of Nortek, which in certain cases are secured by the applicable property and equipment financed by the subsidiary.
(4)	Actual long-term indebtedness includes approximately $10.9 million of unamortized premium related to Nortek’s senior and senior subordinated notes at December 31, 2003 that was recorded as part of the purchase accounting adjustments in connection with our recapitalization in 2003. The reduction in the As Adjusted column reflects the impact of the Debt Redemptions and the 8 7/8 Senior Notes Redemption.
(5)	Stockholders’ investment does not include management stock options to purchase approximately 2.3 million shares of Class A common stock and 0.8 million shares of Class B common stock that were outstanding as of December 31, 2003.
(6)	As Adjusted retained earnings reflects the net pro forma impact of the estimated gain on the sale of Ply Gem of approximately $71.4 million and the losses from debt retirement incurred in connection with the Debt Redemptions and the 8 7/8% Senior Notes Redemption of approximately $7.3 million.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

      On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”) with Holdings becoming the successor public company and Nortek becoming its wholly owned subsidiary. On January 9, 2003, Holdings completed a reorganization transaction, which resulted in the acquisition of Holdings by certain affiliates and designees of Kelso & Company L.P. and certain members of Holdings and Nortek management (the “Recapitalization”). Beginning on January 9, 2003, Holdings accounted for the Recapitalization as a purchase in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations”, which resulted in a new valuation for the assets and liabilities of Holdings based upon their fair values as of the date of the Recapitalization (the “Purchase Accounting”). Accordingly, the selected historical consolidated financial data presented below includes the results of operations for the pre-recapitalization periods prior to January 10, 2003 and the post-recapitalization period subsequent to January 9, 2003. The Purchase Accounting was finalized by Holdings in the fourth quarter of 2003.

      On February 12, 2004, Holdings sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”) in a transaction valued at approximately $560 million, including debt assumed by the buyer. Holdings treated the sale of Ply Gem as a discontinued operation and, accordingly, the results of Ply Gem were excluded from continuing operations in the statements of operations and the assets and liabilities of Ply Gem were reflected as assets and liabilities from discontinued operations in the consolidated balance sheets in Holding’s consolidated financial statements included elsewhere herein. Accordingly, the selected historical consolidated financial data presented below reflects Ply Gem as a discontinued operation for all periods presented.

      The following table summarizes Holding’s selected historical consolidated financial data for the periods indicated during the five years ended December 31, 2003. The selected historical consolidated data for the periods from January 1, 2001 to December 31, 2001, January 1, 2002 to December 31, 2002, January 1, 2003 to January 9, 2003 and January 10, 2003 to December 31, 2003 have been derived from Holding’s consolidated financial statements, which were audited by Ernst & Young LLP, independent auditors and included elsewhere herein. The selected historical consolidated financial data for the periods from January 1, 1999 to December 31, 1999 and January 1, 2000 to December 31, 2000 have been derived from Holding’s consolidated financial statements, which were audited by Ernst & Young LLP, independent auditors, as restated on an unaudited basis to reflect Ply Gem as a discontinued operation.

      The selected historical consolidated financial data should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the registration statement of which this prospectus forms a part and the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization” included elsewhere herein.

	For the Periods
	Post-
	Recapitalization		Pre-Recapitalization
	Jan. 10, 2003-		Jan. 1, 2003-			Jan. 1, 2002-		Jan. 1, 2001-			Jan. 1, 2000-			Jan. 1, 1999-
	Dec. 31, 2003		Jan. 9, 2003			Dec. 31, 2002		Dec. 31, 2001			Dec. 31, 2000			Dec. 31, 1999
Consolidated Summary of Operations(1)(2):
Net sales	$	1,490.1	$	24.9		$	1,384.1	$	1,293.8		$	1,297.4		$	1,180.2
Operating earnings (loss)		159.5		(81.8	)		119.6		109.7			140.2			138.3
Earnings (loss) from continuing operations		62.0		(60.9	)		43.6		32.8			58.3			56.4
Earnings (loss) from discontinued operations		12.2		(1.0	)		18.9		(24.8	)		(16.7	)		(7.1	)
Net earnings (loss)		74.2		(61.9	)		62.5		8.0			41.6			49.3

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		For the Periods
		Post-
		Recapitalization			Pre-Recapitalization
		Jan. 10, 2003-			Jan. 1, 2003-		Jan. 1, 2002-			Jan. 1, 2001-			Jan. 1, 2000-			Jan. 1, 1999-
		Dec. 31, 2003			Jan. 9, 2003		Dec. 31, 2002			Dec. 31, 2001			Dec. 31, 2000			Dec. 31, 1999
Financial Position(1)(2):
Unrestricted cash, investments and marketable securities		$	194.1		$	283.6	$	294.8		$	255.6		$	138.5		$	111.4
Working capital			686.4			711.6		813.3			742.3			727.9			723.5
Total assets			2,100.0			1,781.2		1,830.8			1,819.9			1,836.8			1,791.4
Total debt —
	Current		15.3			4.4		5.5			10.0			20.5			12.9
	Long-term		1,324.6			953.7		953.8			959.7			919.4			918.2
Current ratio			2.6:1			2.7:1		3.0:1			2.6:1			2.4:1			2.4:1
Debt to equity ratio			6.7:1			6.1:1		3.0:1			3.6:1			3.3:1			3.6:1
Depreciation and amortization expense including non-cash interest			38.3			0.8		32.9			40.7			36.1			35.1
Amortization of goodwill included in depreciation and amortization expense			—			—		—			8.7			8.8			8.2
Capital expenditures			24.7			0.2		19.1			27.1			29.7			21.8
Stockholders’ investment(3)			200.2			272.1		317.5			271.3			282.2			259.8
Ratio of earnings to fixed charges(4)			2.7	x		—		2.3	x		2.1	x		2.9	x		2.9	x

(1)	See Notes 1, 2, 3, 10 and 11 to the Notes to the Consolidated Financial Statements of Nortek Holdings, Inc. and Subsidiaries included elsewhere in this prospectus for additional information with respect to the Recapitalization, other acquisitions and discontinued operations.
(2)	See Notes 6 and 16 to the Notes to the Consolidated Financial Statements of Nortek Holdings, Inc. and Subsidiaries and the information contained in “Capitalization” and “Unaudited Pro Forma Condensed Consolidated Financial Data” included elsewhere in this prospectus for additional information and the pro forma impact of certain debt offerings and redemptions completed in late 2003 and early 2004 by Holdings and Nortek, including the Outstanding Notes and Exchange Notes described in this prospectus.
(3)	See Notes 1 and 7 to the Notes to the Consolidated Financial Statements of Nortek Holdings, Inc. and Subsidiaries included elsewhere in this prospectus for a discussion of dividends paid to common stockholders and other distributions made to certain stock option holders from the net proceeds received in connection with the sale of the Outstanding Notes.
(4)	For purposes of calculating this ratio, “earnings” consist of earnings from continuing operations before provision for income taxes and fixed charges. “Fixed charges” consist of interest expense and the estimated interest portion of rental payments on operating leases. Such earnings were insufficient to cover fixed charges by approximately $81.5 million for the period from January 1, 2003 to January 9, 2003.

22

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

      On November 2002, Nortek, Inc. (“Nortek”) was reorganized in a holding company structure and each outstanding share of capital stock of Nortek was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings” or the Company), with Holdings becoming the successor public company and Nortek becoming its wholly-owned subsidiary. On January 9, 2003, Holdings completed a recapitalization transaction, which resulted in the company’s acquisition by certain affiliates and designees of Kelso & Company L.P. and certain members of the company’s management (the “Recapitalization”).

      On February 12, 2004, Holdings sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”), in a transaction valued at approximately $560 million, including debt assumed by the buyer. Holdings treated the sale of Ply Gem as a discontinued operation in its consolidated statements of operations included elsewhere herein and, accordingly, the results of Ply Gem were excluded from continuing operations for all periods presented. In addition, the assets and liabilities of Ply Gem were reflected as assets and liabilities from discontinued operations in the consolidated balance sheets included elsewhere herein.

      On February 13, 2004, Nortek called for redemption on March 15, 2004 all of its outstanding 9 1/4% Senior Notes due March 15, 2007 (the “9 1/4% Senior Notes”) and on March 14, 2004 all of its outstanding 9 1/8% Senior Notes due September 1, 2007 (the “9 1/8% Senior Notes”). The 9 1/4% Senior Notes and the 9 1/8% Senior Notes were redeemed in the first quarter of 2004 at a redemption price of 101.542% and 103.042%, respectively, of the principal amount thereof plus accrued and unpaid interest (collectively, the “Debt Redemptions”).

      On March 1, 2004, Nortek completed the sale of $200,000,000 of Senior Floating Rate Notes due 2010 (the “Floating Rate Notes”). The Floating Rate Notes bear interest at a rate per annum equal to LIBOR, as defined, plus 3% (4.17% as of March 1, 2004). Nortek incurred fees and expenses, including the initial purchaser’s discount, of approximately $4 million in connection with the sale. The net proceeds received from the sale of approximately $196 million, together with existing cash on hand, were used to redeem in the first quarter of 2004 all of Nortek’s 8 7/8% Senior Notes due August 1, 2008 (the “8 7/8% Senior Notes, $60 million of which were called for redemption on February 13, 2003 and $150 million of which were called for redemption on March 1, 2003, at a redemption price of 104.438% of the principal amount thereof plus accrued and unpaid interest (the “8 7/8% Senior Notes Redemption”).

      The following unaudited pro forma condensed consolidated financial data includes the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2003 and the unaudited pro forma condensed consolidated balance sheet as of December 31, 2003. The unaudited pro forma condensed consolidated data gives pro forma effect, where applicable, to the Recapitalization, the sale of the Outstanding Notes in November 2003 and the application of the net proceeds, the sale of Ply Gem and the Debt Redemptions and the sale of the Floating Rate Notes and the 8 7/8% Senior Notes Redemption.

      The pro forma condensed consolidated balance sheet as of December 31, 2003 has been prepared by adjusting the historical audited consolidated balance sheet of Holdings as of December 31, 2003 to give effect to the sale of Ply Gem, the Debt Redemptions, the sale of the Floating Rate Notes and the 8 7/8% Senior Notes Redemption, as if those transactions had occurred as of that date. The Recapitalization and the sale of the Outstanding Notes and the application of the net proceeds are already reflected in the historical audited consolidated balance sheet of Holdings as of December 31, 2003 so no pro forma adjustments are required.

      The pro forma condensed consolidated statement of operations for the year ended December 31, 2003 has been prepared by adjusting the combined actual results for the period from January 1, 2003 to January 9, 2003 and the period from January 10, 2003 to December 31, 2003 to give effect to the Recapitalization, the sale of the Outstanding Notes and the application of the net proceeds, the sale of Ply Gem, the Debt Redemptions, the sale of the Floating Rate Notes and the 8 7/8% Senior Notes Redemption

23

as if those transactions had occurred as of January 1, 2003. The pro forma condensed consolidated statement of operations for the year ended December 31, 2003 exclude non-recurring items directly attributable to the Recapitalization, the sale of Ply Gem, the Debt Redemptions and the 8 7/8% Senior Notes Redemption, including expenses and charges arising from the Recapitalization, the estimated gain on the sale of Ply Gem and the losses from debt retirement incurred in connection with the Debt Redemptions and 8 7/8% Senior Notes Redemption.

      The unaudited pro forma condensed consolidated financial data is presented for informational purposes only and is not necessarily indicative of the financial condition and results of operations that would have occurred had the transactions described above taken place on the dates indicated above, nor are they necessarily indicative of Holding’s future financial position or results of operations.

      The unaudited pro forma condensed consolidated financial data should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the registration statement of which this prospectus forms a part.

24

NORTEK HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2003

	Holdings			Holdings																		Sale of Floating
	Historical			Historical									Sale of						Sale of Ply Gem			Rate Notes and
	for the			for the									Outstanding						and Debt			8 7/8% Senior
	Period from			Period from			Recapitalization						Notes						Redemptions			Note Redemption
	Jan. 1, 2003 to			Jan. 10, 2003 to			Pro Forma						Pro Forma						Pro Forma			Pro Forma			Holdings
	Jan. 9, 2003			Dec. 31, 2003			Adjustments			Subtotal			Adjustments			Subtotal			Adjustments			Adjustments			Pro Forma
	(In thousands, except ratios)
	(Unaudited)
Net Sales	$	24,951		$	1,490,073		$	—		$	1,515,024		$	—		$	1,515,024		$	—		$	—		$	1,515,024
Cost and Expenses:
Cost of products sold		18,635			1,060,004			(86	)(a)		1,078,553			—			1,078,553			—			—			1,078,553
Selling, general and administrative expense		88,014			261,569			(82,715	)(b)		266,868			—			266,868			—			—			266,868
Amortization of intangible assets		67			9,055			192	(c)		9,314			—			9,314			—			—			9,314
		106,716			1,330,628			(82,609	)		1,354,735			—			1,354,735			—			—			1,354,735
Operating earnings (loss)		(81,765	)		159,445			82,609			160,289			—			160,289			—			—			160,289
Interest expense		(1,054	)		(57,627	)		142	(d)		(58,539	)		(33,205	)(g)		(91,744	)		4,159	(i)		9,284	(l)		(78,301	)
Investment income		119			1,482			(23	)(e)		1,578			—			1,578			(613	)(j)		(311	)(m)		654
Earnings (loss) from continuing operations before provision (benefit) for income taxes		(82,700	)		103,300			82,728			103,328			(33,205	)		70,123			3,546			8,973			82,642
Provision (benefit) for income taxes		(21,800	)		41,300			22,208	(f)		41,708			(11,622	)(h)		30,086			1,241	(k)		3,140	(n)		34,467
Earnings (loss) from continuing operations	$	(60,900	)	$	62,000		$	60,520		$	61,620		$	(21,583	)	$	40,037		$	2,305		$	5,833		$	48,175
Ratio of Earnings to Fixed Charges		—	(o)		2.7	x																				2.0	x

See Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations

25

NORTEK HOLDINGS, INC.

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended
	December 31, 2003
	Pro Forma
	Adjustments
	(In thousands)
ADJUSTMENTS RELATED TO THE RECAPITALIZATION:
(a) Cost of Products Sold
Change in depreciation expense related to property, plant and equipment fair value adjustment and changes in estimated lives	$	(86	)
(b) Selling, General and Administrative Expense
Elimination of expenses of a Supplemental Executive Retirement Plan (“SERP”)	$	(380	)
Elimination of a Life Insurance Policy to partially fund expenses related to a SERP		211
Contractual salary increases		36
Kelso management fees		37
Curtailment loss related to the termination of a SERP		(70,142	)
Management retention payments		(425	)
Insurance costs of Recapitalization		(1,210	)
Expenses of Nortek related to the consummation of the Recapitalization		(10,833	)
Post retirement medical plan fair value adjustment and other		(9	)
	$	(82,715	)
(c) Amortization of Intangible Assets
Change in amortization of intangible assets related to intangible asset fair value adjustment and changes in lives	$	192
(d) Interest Expense
Change in interest expense related to fair value adjustments to debt		(142	)
(e) Investment Income
Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to fund the Recapitalization and related transactions	$	(23	)
(f) Provision (Benefit) for Income Taxes
Impact of fair value adjustments related to the Recapitalization	$	(39	)
Elimination of expenses of a SERP		133
Contractual salary increases		(13	)
Kelso management fees		(13	)
Change in interest expense		50
Reduction in investment income		(8	)
Curtailment loss related to the termination of a SERP		21,324
Management retention payments		149
Insurance costs of Recapitalization		424
Expenses of Nortek related to the consummation of the Recapitalization		201
	$	22,208

ADJUSTMENTS RELATED TO THE SALE OF OUTSTANDING NOTES AND APPLICATION OF PROCEEDS:

(g) Interest Expense
Interest expense of Outstanding Notes	$	33,205
(h) Provision (Benefit) for Income Taxes
Interest expense of Outstanding Notes	$	(11,622	)

26

NORTEK HOLDINGS, INC.

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

ADJUSTMENTS RELATED TO THE SALE OF PLY GEM AND DEBT REDEMPTIONS:

(i) Interest Expense

Reduction in cash interest expense for the Debt Redemptions	$	(44,476	)
Elimination of amortization of debt premium and discount and deferred financing costs, net for the Debt Redemptions		1,717
Allocate interest expense to Ply Gem’s discontinued operations		38,600
	$	(4,159	)

(j) Investment Income

Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the Debt Redemptions $ (613 )

(k) Provision (Benefit) for Income Taxes

Reduction in cash interest expense for the Debt Redemptions	$	15,567
Elimination of amortization of debt premium and discount and deferred financing costs, net for the Debt Redemptions		(601	)
Allocate interest expense to Ply Gem’s discontinued operations		(13,510	)
Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the Debt Redemptions		(215	)
	$	1,241

ADJUSTMENTS RELATED TO THE SALE OF FLOATING RATE NOTES AND 8 7/8%
SENIOR NOTES REDEMPTION:

(l) Interest Expense

Cash interest expense for Floating Rate Notes	$	8,340
Amortization of deferred financing costs on Floating Rate Notes		585
Reduction in cash interest expense for the 8 7/8% Senior Notes Redemption		(18,637	)
Elimination of amortization of debt premium and discount and deferred financing costs, net for the 8 7/8% Senior Notes Redemption		428
	$	(9,284	)

(m) Investment Income

Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the 8 7/8% Senior Notes Redemption $ (311 )

(n) Provision (Benefit) for Income Taxes

Cash interest expense for Floating Rate Notes	$	(2,919	)
Amortization of deferred financing costs on Floating Rate Notes		(205	)
Reduction in cash interest expense for the 8 7/8% Senior Notes Redemption		6,523
Elimination of amortization of debt premium and discount and deferred financing costs, net for the 8 7/8% Senior Notes Redemption		(150	)
Reduction in investment income related to a reduction in cash, cash equivalents and marketable securities to partially fund the 8 7/8% Senior Notes Redemption		(109	)
	$	3,140

RATIO OF EARNINGS TO FIXED CHARGES:

(o) Ratio of Earnings to Fixed Charges

      For purposes of calculating this ratio, “earnings” consist of earnings from continuing operations before provision for income taxes and fixed charges. “Fixed charges” consist of interest expense and the estimated interest portion of rental payments on operating leases. Such earnings were insufficient to cover fixed charges by approximately $81.5 million for Holding’s historical results for the period from January 1, 2003 to January 9, 2003.

27

NORTEK HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2003

								Sale of Floating
					Sale of Ply Gem			Rate Notes and
					and Debt			8 7/8% Senior
					Redemptions			Notes Redemption
			Holdings		Pro Forma			Pro Forma			Holdings
			Historical		Adjustments			Adjustments			Pro Forma
			(In thousands)
			(Unaudited)
ASSETS
Current Assets:
Unrestricted:
	Cash and Cash Equivalents		$	194,120	$	(61,279	)(a)	$	(31,086	)(j)	$	101,755
Restricted:
	Cash and Marketable Securities			1,223		—			—			1,223
Accounts Receivable				214,267		—			—			214,267
Inventories, net				159,415		—			—			159,415
Prepaid Expenses				6,765		—			—			6,765
Other Current Assets				14,868		—			—			14,868
Prepaid Income Taxes				17,826		1,770	(b)		—			19,596
Assets of Discontinued Operations				494,851		(494,851	)(c)		—			—
		Total Current Assets		1,103,335		(554,360	)		(31,086	)		517,889
Property, Plant and Equipment, net				194,455		—			—			194,455
Goodwill				678,063		—			—			678,063
Intangible Assets				94,645		—			—			94,645
Deferred Debt Expense				12,589		—			4,000	(k)		16,589
Restricted Investments and Marketable Securities				1,123		—			—			1,123
Other Assets				15,770		—			—			15,770
		Total Assets	$	2,099,980	$	(554,360	)	$	(27,086	)	$	1,518,534
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Notes Payable and Other Short Term Obligations			$	8,120	$	—		$	—		$	8,120
Current Maturities of Long-Term Debt				7,229		—			—			7,229
Accounts Payable				112,772		—			—			112,772
Accrued Expenses and Taxes, net				151,048		(7,886	)(d)		(10,084	)(l)		133,078
Liabilities of Discontinued Operations				137,683		(137,683	)(e)		—			—
		Total Current Liabilities		416,852		(145,569	)		(10,084	)		261,199
Deferred Income Taxes				21,461		1,291	(f)		—			22,752
Other Long-Term Liabilities				136,833		14,059	(g)		—			150,892
Notes, Mortgage Notes and Obligations Payable, Less Current Maturities				1,324,626		(492,592	)(h)		(12,698	)(m)		819,336
Stockholders’ Investment:
Series B Preference Stock				8,130		—			—			8,130
Class A Common Stock				397		—			—			397
Additional Paid-In Capital				172,244		—			—			172,244
Retained Earnings				—		68,451	(i)		(4,304	)(n)		64,147
Accumulated Other Comprehensive Income				19,437		—			—			19,437
		Total Stockholders’ Investment		200,208		68,451			(4,304	)		264,355
		Total Liabilities and Stockholders’ Investment	$	2,099,980	$	(554,360	)	$	(27,086	)	$	1,518,534

See Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet

28

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED BALANCE SHEET

		As of
		December 31, 2003
		Pro Forma
		Adjustments
		(Unaudited)
		(In thousands)
ADJUSTMENTS RELATED TO THE SALE OF PLY GEM AND DEBT REDEMPTIONS:
(a) Cash and Cash Equivalents
Total Sources:
	Net estimated after-tax proceeds from the sale of Ply Gem	$	450,000
Total Uses:
	Payment of principal related to Debt Redemptions		(485,000	)
	Payment of call premiums related to Debt Redemptions		(12,129	)
	Payment of accrued interest expense related to Debt Redemptions		(14,150	)
		$	(61,279	)
(b) Prepaid Income Taxes
Prepaid income taxes related to liabilities retained in connection with the sale of Ply Gem		$	1,770
(c) Assets of Discontinued Operations
Eliminate assets of discontinued operations related to the sale of Ply Gem		$	(494,851	)
(d) Accrued Expenses and Taxes, net
Indemnified and retained accrued liabilities in connection with sale of Ply Gem		$	7,852
Payment of accrued interest expense related to Debt Redemptions			(14,150	)
Reduction in accrued federal income taxes payable related to loss on Debt Redemptions			(1,588	)
		$	(7,886	)
(e) Liabilities of Discontinued Operations
Eliminate liabilities of discontinued operations related to the sale of Ply Gem		$	(137,683	)
(f) Deferred Income Taxes
Deferred income taxes related to the sale of Ply Gem		$	1,291
(g) Other Long-term Liabilities
Other long-term liabilities retained in connection with the sale of Ply Gem		$	14,059
(h) Notes, Mortgage Notes and Other Obligations Payable, less Current Maturities
Payment of principal related to Debt Redemptions		$	(485,000	)
Elimination of unamortized debt premium related to Debt Redemptions			(7,592	)
		$	(492,592	)

29

		As of
		December 31, 2003
		Pro Forma
		Adjustments
		(Unaudited)
		(In thousands)
(i) Retained Earnings
Estimated gain on sale of Ply Gem, net of provision for income taxes		$	71,400
Loss on debt retirement related to Debt Redemptions, net of federal tax benefit			(2,949	)
		$	68,451
ADJUSTMENTS RELATED TO THE SALE OF FLOATING RATE NOTES AND 8 7/8% SENIOR NOTES REDEMPTION:
(j) Cash and Cash Equivalents
Total Sources:
	Borrowings from sale of Floating Rate Notes	$	200,000
Total Uses:
	Financing costs related to the sale of Floating Rate Notes		(4,000	)
	Payment of principal related to 8 7/8% Senior Notes Redemption		(210,000	)
	Payment of call premiums related to 8 7/8% Senior Notes Redemption		(9,320	)
	Payment of accrued interest expense related to 8 7/8% Senior Notes Redemption		(7,766	)
		$	(31,086	)
(k) Deferred Debt Expense
Financing costs related to the sale of Floating Rate Notes		$	4,000
(l) Accrued Expenses and Taxes, net
Payment of accrued interest expense related to 8 7/8% Senior Notes Redemption		$	(7,766	)
Reduction in accrued federal income taxes payable related to loss on 8 7/8% Senior Notes Redemption			(2,318	)
		$	(10,084	)
(m) Notes, Mortgage Notes and Other Obligations Payable, less Current Maturities
Borrowing from the sale of Floating Rate Notes		$	200,000
Payment of principal related to 8 7/8% Senior Notes Redemption			(210,000	)
Elimination of unamortized debt premium related to 8 7/8% Senior Notes Redemption			(2,698	)
		$	(12,698	)
(n) Retained Earnings
Loss on debt retirement related to 8 7/8% Senior Notes Redemption, net of federal tax benefit		$	(4,304	)

30

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

      On January 17, 2003, the Company through its wholly owned subsidiary, Linear Corporation (“Linear”) acquired Elan Home Systems L.L.C. (“Elan”). Elan is located in Lexington, KY and manufactures and sells home automation and audio video distribution equipment. On July 11, 2003, the Company through Linear, acquired SpeakerCraft, Inc. (“SPC”). SPC is located in Riverside, CA and manufactures and sells in-wall and in-ceiling speakers, amplifiers and subwoofers. On December 15, 2003, the Company, through Linear, acquired all of the capital stock of Operator Specialty Company, Inc. (“OSCO”). OSCO is located in Casnovia, MI and manufactures and sells gate operators and door

31

openers. On June 15, 2001, the Company acquired Senior Air Systems (“SAS”) from a wholly owned subsidiary of Senior Plc. These acquisitions have been accounted for under the purchase method of accounting. Accordingly, the results of Elan, SPC, OSCO and SAS are included in the Company’s consolidated results since the date of their acquisition. (See “Liquidity and Capital Resources” and Note 3 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

Critical Accounting Policies

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

Revenue Recognition and Related Expenses

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

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

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

      Provisions for the estimated costs for future product warranty claims and bad debts are recorded in cost of sales and selling, general and administrative expense, respectively, at the time a sale is recorded. The amounts recorded are generally based upon historically derived percentages while also factoring in any new business conditions that might impact the historical analysis such as new product introduction for warranty and bankruptcies of particular customers for bad debts. The Company also periodically evaluates

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the adequacy of its reserves for warranty and bad debts recorded in its consolidated balance sheet as a further test to ensure the adequacy of the recorded provisions. Warranty claims can extend far into the future and bad debt analysis often involves subjective analysis of a particular customer’s ability to pay. As a result, significant judgment is required by the Company in determining the appropriate amounts to record and such judgments may prove to be incorrect in the future. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Inventory Valuation

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

Prepaid Income Tax Assets and Deferred Tax Liabilities

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

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Goodwill and Other Long-Lived Assets

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

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

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

Pensions and Post Retirement Health Benefits

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

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Insurance Liabilities

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

Contingencies

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

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

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

Overview

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

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been strong over the past several years and has contributed positively to our operating performance. Key industry activity affecting our businesses in the United States for the past three years was as follows:

			% Increase (Decrease)
	Source
	of Data		2003			2002			2001
Residential construction spending		1		11.0	%		9.0	%		4.0	%
Single family housing starts		1		10.0			7.0			4.0
New home sales		1		12.0			7.0			3.0
Residential improvement spending		1		2.0			13.0			(1.0	)
Air conditioning and heat pump shipments		2		1.0			7.0			(6.0	)
Manufactured housing shipments		1,3		(22.0	)		(13.0	)		(23.0	)
Non-residential construction spending		1		(1.5	)%		(13.3	)%		(5.6	)%

Source of data:

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

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

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as compared to 2002 we will talk about the significance of a number of factors that affected our operations including, among others, the following:

•  The effect of the Acquisition by Kelso and the changes in our accounting

•  The strong growth of our residential site-built HVAC business from our brand strategy

•  The effect of acquisitions in RBP for our electronics businesses

•  The softness in manufactured housing and commercial markets

•  The effect of changes in foreign exchange

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

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Results of Operations

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

		Pre-Recapitalization			Post-Recapitalization			Combined
		January 1, 2003 -			January 10, 2003			Year Ended
		January 9, 2003			December 31, 2003			December 31, 2003
		(Dollar amounts in millions)
Net sales:
Residential Building Products		$	16.3		$	814.8		$	831.1
Air Conditioning and Heating Products			8.6			675.3			683.9
	Consolidated net sales	$	24.9		$	1,490.1		$	1,515.0
Operating earnings (loss)*:
Residential Building Products		$	2.7		$	137.3		$	140.0
Air Conditioning and Heating Products			(1.2	)		58.4			57.2
	Subtotal	$	1.5		$	195.7		$	197.2
Unallocated:
Expenses and charges arising from the Recapitalization			(83.0	)		—			(83.0	)
Strategic sourcing, software and systems development expense			(0.1	)		(3.4	)		(3.5	)
Stock based compensation charges			—			(1.8	)		(1.8	)
Other, net			(0.2	)		(31.0	)		(31.2	)
	Consolidated operating earnings (loss)	$	(81.8	)	$	159.5		$	77.7
Depreciation and amortization expense*:
Residential Building Products		$	0.3		$	19.6		$	19.9
Air Conditioning and Heating Products			0.3			11.8			12.1
Other			—			0.6			0.6
		$	0.6		$	32.0		$	32.6
Operating earnings (loss) margin:
Residential Building Products			16.6	%		16.9	%		16.8	%
Air Conditioning and Heating Products			(14.0	)		8.6			8.4
	Consolidated		(328.5	)%		10.7	%		5.1	%
Depreciation and amortization expense as a % of net sales:
Residential Building Products			1.8	%		2.4	%		2.4	%
Air Conditioning and Heating Products			3.5			1.7			1.8
	Consolidated		2.4	%		2.1	%		2.2	%

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

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

												Net Change
			Year Ended December 31,									2003 to 2002						2002 to 2001
			2003(1)			2002			2001			$			%			$			%
			(Dollar amounts in millions)
Net Sales:
Residential Building Products			$	831.1		$	729.6		$	660.0		$	101.5			13.9	%	$	69.6			10.5	%
Air Conditioning and Heating Products				683.9			654.5			633.8			29.4			4.5			20.7			3.3
			$	1,515.0		$	1,384.1		$	1,293.8		$	130.9			9.5	%	$	90.3			7.0	%
Operating Earnings:
Residential Building Products			$	140.0		$	122.9		$	93.7		$	17.1			13.9	%	$	29.2			31.2	%
Air Conditioning and Heating Products				57.2			61.5			53.8			(4.3	)		(7.0	)		7.7			14.3
	Subtotal			197.2			184.4			147.5			12.8			6.9			36.9			25.0
Unallocated:
Recapitalization fees and expenses				(83.0	)		(6.6	)		—			(76.4	)		*			(6.6	)		*
Re-audit fees and expenses				—			(2.1	)		—			2.1			*			(2.1	)		*
1999 equity performance plan incentive				—			(4.4	)		—			4.4			*			(4.4	)		*
Strategic sourcing, software and systems development expense				(3.5	)		(3.7	)		(5.5	)		0.2			5.4			1.8			32.7
Stock based compensation charges				(1.8	)		(0.7	)		—			(1.1	)		(157.1	)		(0.7	)		*
Other, net				(31.2	)		(47.3	)		(32.3	)		16.1			34.0			(15.0	)		(46.4	)
		Consolidated Operating Earnings (loss)	$	77.7		$	119.6		$	109.7		$	(41.9	)		(35.0	)%	$	9.9			9.0	%
Depreciation and Amortization Expense:
Residential Building Products			$	19.9		$	15.6		$	22.9		$	4.3			27.6	%	$	(7.3	)		(31.9	)%
Air Conditioning and Heating Products				12.1			13.2			13.8			(1.1	)		(8.3	)		(0.6	)		(4.3	)
Other				0.6			0.3			0.4			0.3			100.0			(0.1	)		(25.0	)
			$	32.6		$	29.1		$	37.1		$	3.5			12.0	%	$	(8.0	)		(21.6	)%
Operating Earnings Margin:
Residential Building Products				16.8	%		16.8	%		14.2	%
Air Conditioning and Heating Products				8.4			9.4			8.5
		Consolidated		5.1	%		8.6	%		8.5	%
Depreciation and Amortization Expense as a % of Net Sales:
Residential Building Products				2.4	%		2.1	%		3.5	%
Air Conditioning and Heating Products				1.8			2.0			2.2
		Consolidated		2.2	%		2.1	%		2.9	%

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

* not applicable or not meaningful

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

	Pre-			Post-
	Recapitalization			Recapitalization			Combined
	Jan. 1, 2003 -			Jan. 10, 2003 -			Year Ended
	Jan. 9, 2003			December 31, 2003			December 31, 2003
	(Dollar amounts in millions)
Net sales	$	24.9		$	1,490.1		$	1,515.0
Cost of products sold		18.6			1,060.0			1,078.6
Selling, general and administrative expenses, net		5.0			261.6			266.6
Amortization of intangible assets		0.1			9.0			9.1
Expenses and charges arising from the Recapitalization		83.0			—			83.0
Operating earnings (loss)		(81.8	)		159.5			77.7
Interest expense		(1.0	)		(57.7	)		(58.7	)
Investment income		0.1			1.5			1.6
Earnings (loss) before provision (benefit) for income taxes		(82.7	)		103.3			20.6
Provision (benefit) for income taxes		(21.8	)		41.3			19.5
Earnings (loss) from continuing operations		(60.9	)		62.0			1.1
Earnings (loss) from discontinued operations		(1.0	)		12.2			11.2
Net earnings (loss)	$	(61.9	)	$	74.2		$	12.3

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	Percentage of Net Sales
	Pre-			Post-
	Recapitalization			Recapitalization			Combined
	Jan. 1, 2003 -			Jan. 10, 2003 -			Year Ended
	Jan. 9, 2003			December 31, 2003			December 31, 2003
Net sales		100.0	%		100.0	%		100.0	%
Cost of products sold		74.7			71.1			71.2
Selling, general and administrative expenses, net		20.1			17.6			17.6
Amortization of intangible assets		0.4			0.6			0.6
Expenses and charges arising from the Recapitalization		333.3			—			5.5
Operating earnings (loss)		(328.5	)		10.7			5.1
Interest expense		(4.0	)		(3.9	)		(3.8	)
Investment income		0.4			0.1			0.1
Earnings (loss) before provision (benefit) for income taxes		(332.1	)		6.9			1.4
Provision (benefit) for income taxes		(87.5	)		2.7			1.3
Earnings (loss) from continuing operations		(244.6	)		4.2			0.1
Earnings (loss) from discontinued operations		(4.0	)		0.8			0.7
Net earnings (loss)		(248.6	)%		5.0	%		0.8	%

41

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

										Percentage Change
	Year Ended December 31,									2003			2002
										to			to
	2003(1)			2002			2001			2002			2001
	(Dollar amounts in millions)
Net sales	$	1,515.0		$	1,384.1		$	1,293.8			9.5	%		7.0	%
Cost of products sold		1,078.6			992.3			945.6			(8.7	)		(4.9	)
Selling, general and administrative expense, net		266.6			262.6			226.5			(1.5	)		(15.9	)
Amortization of goodwill and intangible assets		9.1			3.0			12.0			(203.3	)		75.0
Expenses and charges arising from the Recapitalization		83.0			6.6			—			*			*
Operating earnings		77.7			119.6			109.7			(35.0	)		9.0
Interest expense		(58.7	)		(52.4	)		(51.8	)		(12.0	)		(1.2	)
Loss from debt retirement		—			—			(5.5	)		*			100.0
Investment income		1.6			5.9			8.2			(72.9	)		(28.0	)
Earnings from continuing operations before provision for income taxes		20.6			73.1			60.6			(71.8	)		20.6
Provision for income taxes		19.5			29.5			27.8			33.9			(6.1	)
Earnings from continuing operations		1.1			43.6			32.8			(97.5	)		32.9
Earnings (loss) from discontinued operations		11.2			18.9			(24.8	)		(40.7	)		176.2
Net earnings	$	12.3		$	62.5		$	8.0			(80.3	)%		681.2	%

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

* not applicable or not meaningful

42

										Percentage
										Change
	Percentage of Net Sales
	Year Ended December 31,									2003			2002
										to			to
	2003(1)			2002			2001			2002			2001
Net sales		100.0	%		100.0	%		100.0	%		—	%		—	%
Cost of products sold		71.2			71.7			73.1			0.5			1.4
Selling, general and administrative expense, net		17.6			19.0			17.5			1.4			(1.5	)
Amortization of goodwill and intangible assets		0.6			0.2			0.9			(0.4	)		0.7
Expenses and charges arising from the Recapitalization		5.5			0.5			—			(5.0	)		(0.5	)
Operating earnings		5.1			8.6			8.5			(3.5	)		0.1
Interest expense		(3.8	)		(3.8	)		(4.0	)		—			0.2
Loss from debt retirement		—			—			(0.4	)		—			0.4
Investment income		0.1			0.5			0.6			(0.4	)		(0.1	)
Earnings from continuing operations before provision for income taxes		1.4			5.3			4.7			(3.9	)		0.6
Provision for income taxes		1.3			2.1			2.1			0.8			—
Earnings from continuing operations		0.1			3.2			2.6			(3.1	)		0.6
Earnings (loss) from discontinued operations		0.7			1.3			(2.0	)		(0.6	)		3.3
Net earnings		0.8	%		4.5	%		0.6	%		(3.7	)%		3.9	%

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

* not applicable or not meaningful

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

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

      Overall, increases in sales levels in the year ended December 31, 2003 reflect the ongoing stability of the housing construction and remodeling markets and our expanded branding effort in our line of air conditioning and heating products, partially offset by the general slowdown in commercial construction

43

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

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

      Material costs were approximately 43.7% and 44.0% of net sales for the years ended December 31, 2003 and 2002, respectively. Cost reductions due to strategic sourcing software and systems development were primarily responsible for the decrease in material costs as a percentage of net sales in 2003 as compared to 2002. Manufacturing cost reduction measures implemented in 2002 and 2003 combined with

44

net sales increases contributed to the decrease in cost of products sold as a percentage of net sales in the year ended December 31, 2003 as compared to 2002. Increased sales volume of HVAC products to residential site built customers in the Air Conditioning and Heating Products Segment, without a proportionate increase in cost (in part, reflecting increased sales without an increase in fixed costs) was a factor in the decrease in costs in the year ended December 31, 2003. Cost of products sold for the Air Conditioning and Heating Products Segment for the year ended December 31, 2003 include approximately $5,800,000 of severance and other costs associated with the closure of certain manufacturing facilities and include approximately $1,100,000 of expenses associated with the start-up of a new manufacturing facility.

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

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

      Combined selling, general and administrative expense (“SG&A”) was approximately $266,600,000 for the year ended 2003 and approximately $262,600,000 for the year ended 2002. SG&A as a percentage of net sales decreased from approximately 19.0% in 2002 to approximately 17.6% in 2003. SG&A in 2003 includes approximately $15,200,000 of SG&A from the acquisitions of Elan and SPC in the Residential Building Products Segment, and an increase of approximately $6,400,000 related to the effect of changes in foreign currency exchange rates, of which approximately $4,200,000 is included in the Residential Building Products Segment and $2,200,000 is included in the Air Conditioning and Heating Products Segment. SG&A also includes in unallocated, approximately $3,500,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development. SG&A in 2003 is also higher due to approximately $1,400,000 of stock based compensation from adopting SFAS No. 123,

45

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

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

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

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

      Consolidated operating earnings have been reduced by depreciation and amortization expense (other than amortization of deferred debt expense and debt premium and discount) of approximately $32,600,000 and $29,100,000 for the years ended December 31, 2003 and 2002, respectively. Consolidated operating

46

earnings for the year ended December 31, 2003 includes approximately $5,400,000 of amortization expense from purchase price allocated to inventory and approximately $6,300,000 of additional amortization expense of intangible assets, partially offset by approximately $8,100,000 of lower depreciation expense of property, plant and equipment as a result of the fair value adjustments arising from acquisitions and the Recapitalization.

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

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

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

47

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

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

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

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

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

48

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

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

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

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

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

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

      In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). Along with new disclosure requirements, FIN 45 requires guarantors to recognize, at the inception of

49

certain guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee. This differs from the prior practice to record a liability only when a loss is probable and reasonably estimable. The recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The Company adopted the disclosure provisions of FIN 45 as of December 31, 2002 and adopted the entire interpretation on January 1, 2003. Adoption of FIN 45 was not material to the Company’s Consolidated Financial Statements (see Note 9 of the Notes to the Consolidated Financial Statements included elsewhere herein).

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

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

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

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

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

      EBITDA is defined as net earnings (loss) before interest, taxes, depreciation and amortization expense. EBITDA is not a measure of operating performance under generally accepted accounting principles in the United States (“GAAP”) and should not be considered as an alternative or substitute for

50

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

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

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

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

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

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

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

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

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

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

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

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

      Selling, general and administrative expense increased from $226,500,000 or approximately 17.5% as a percentage of net sales in the year 2001 to approximately $262,600,000 or approximately 19.0% as a percentage of net sales in the year 2002. SG&A in 2002 includes approximately $3,700,000 of direct expenses and fees associated with the Company’s strategic sourcing software and systems development, approximately $2,100,000 of fees and expenses incurred in connection with Nortek’s re-audit of Nortek’s

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Consolidated Financial Statements for each of the three years in the period ended December 31, 2001, and a $4,400,000 charge relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan all of which are recorded in unallocated and approximately $1,000,000 in the fourth quarter of 2002 relating to restructuring charges in the Residential Building Products Segment. The direct expenses and third party fees associated with the Company’s strategic sourcing software and systems development, the fees and expenses related to the re-audit of Nortek’s Consolidated Financial Statements and the charge relating to an incentive earned by certain of Nortek’s officers under Nortek’s 1999 Equity Performance Plan are forth separately in the segment data. Selling, general and administrative expense in 2001 included approximately $5,500,000 of fees and expenses related to the Company’s strategic sourcing software and systems development recorded in unallocated. All of the above amounts are set forth separately in the segment data except for the restructuring charges in the fourth quarter of 2002, which were recorded in the Residential Building Products Segment.

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

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

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

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

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

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

      The increase in operating earnings in the Residential Building Products Segment was primarily as a result of increased sales volume due to continued strength in 2002 in new home construction and remodeling markets, favorable weather conditions, increases in sales volume and higher average unit sales prices of range hoods due to changes in product mix and increased sales of garage door openers. The

54

increase in operating earnings in the Air Conditioning and Heating Products Segment in 2002 was principally due to increased sales volume of HVAC products to customers serving the residential site built market, partially offset by a decrease in operating earnings of commercial products principally due to the softness in the commercial construction market. During 2002, both segments realized benefits associated with the Company’s strategic sourcing software and systems development.

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

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

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

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

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

55

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

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

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

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

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

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

      Comprehensive income included in stockholders’ investment was approximately $44,700,000 for 2002. Included in comprehensive income was a loss of approximately $22,700,000 (net of tax benefit of approximately $12,900,000) primarily as a result of actuarial losses due to market declines in plan assets,

56

compensation increases and changes in discount rates and a gain recorded on the change in the cumulative amount of currency translation adjustment of approximately $5,250,000. (See Notes 1 and 8 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

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

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

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

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evaluated by investors in conjunction with the traditional GAAP performance measures discussed earlier in this Results of Operations section for a complete evaluation of the Company’s operating performance.

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

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

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

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

Liquidity and Capital Resources

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

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

      Approximately $60,000,000 principal amount of the 8 7/8% Notes ceased to accrue interest as of March 14, 2004 and approximately $150,000,000 principal amount of such Notes will cease to accrue interest as of March 31, 2004. Nortek will use the net proceeds of approximately $196,000,000 from the

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sale of the Floating Rate Notes, together with existing cash on hand, to fund the redemption of the 8 7/8% Notes.

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

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

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

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indebtedness restricts the issuance of such guarantee. Nortek’s Senior Secured Credit Facility does not permit such a guarantee. In addition the issuance of such a guarantee by Nortek would constitute a restricted payment under the terms of Nortek’s indentures.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Senior Subordinated Notes due 2011 (“9 7/8% Notes”) and (vii) $352,916,000 of 10% Senior Discount Notes due 2011.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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letter of credit requirements. (See Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein.)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EBITDA includes approximately $83,000,000 and $6,600,000 of expenses and charges arising from the Recapitalization recorded in the period from January 1, 2003 to January 9, 2003 and the year ended December 31, 2002, respectively (see Notes 2 and 11 of the Notes to the Consolidated Financial Statements included elsewhere herein) and approximately $1,500,000 of stock based compensation from

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adopting SFAS No. 123 and $600,000 of compensation expense in the fourth quarter of 2003 from the sale of stock (see Note 1 of the Notes to the Consolidated Financial Statements included elsewhere herein).

Inflation, Trends and General Considerations

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

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

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

Market Risk

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

A. Interest Rate Risk

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

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

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

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

B. Foreign Currency Risk

      The Company’s results of operations are affected by fluctuations in the value of the U.S. dollar as compared to the value of currencies in foreign markets primarily related to changes in the Euro, the Canadian Dollar and the British Pound. In 2003, the net impact of foreign currency changes was not material to the Company’s financial condition or results of operations. The impact of foreign currency changes related to translation resulted in an increase in stockholders’ investment of approximately

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

C. Commodity Pricing Risk

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

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

D. Long-term Debt

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

Long-term Debt:

	Scheduled Maturity						Average Interest Rate
	Fixed		Variable				Fixed			Variable
Year-ending	Rate		Rate		Total		Rate			Rate			Total
	(Dollar amounts in millions)
December 31, 2004	$	5.3	$	1.9	$	7.2		7.5	%		3.6	%		6.5	%
2005		1.1		1.6		2.7		7.0			3.7			5.0
2006		1.2		0.2		1.4		7.1			3.3			6.7
2007		485.9		—		485.9		9.2			—			9.2
2008		210.9		—		210.9		8.9			—			8.9
Thereafter(1)		612.9		—		612.9		9.9			—			9.9
Total Principal		1,317.3		3.7		1,321.0		9.5	%		3.6	%		9.4	%
Unamortized Debt Premium		10.9		—		10.9
Total Long-term Debt at December 31, 2003	$	1,328.2	$	3.7	$	1,331.9
Fair Market Value of Long-term Debt at December 31, 2003	$	1,387.1	$	3.7	$	1,390.8

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

Recent Acquisitions

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

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

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BUSINESS

Our Holding Company Structure

      We are a holding company with no material assets other than cash and cash equivalents, deferred debt expense and our ownership of the common stock of our wholly owned subsidiary Nortek. Nortek was originally established in 1967. In June 2002, Holdings was incorporated as a Delaware corporation, and in November 2002 each outstanding share of capital stock of Nortek was converted into an identical share of Holdings’ capital stock, with Holdings becoming the successor public company and Nortek becoming its wholly owned subsidiary. On January 9, 2003, we completed a recapitalization transaction, which resulted in our acquisition by certain affiliates and designees of Kelso & Company L.P. and certain members of Nortek’s management. We refer to the reorganization and recapitalization generally in this prospectus as the “Recapitalization”.

General

      We are a diversified manufacturer of residential and commercial building products, operating within two principal segments: the Residential Building Products Segment and the Air Conditioning and Heating Products Segment. Through these segments, we manufacture and sell, primarily in the United States, Canada and Europe, a wide variety of products for the residential and commercial construction, manufactured housing, and the do-it-yourself (“DIY”) and professional remodeling and renovation markets.

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

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

      Additional information concerning our business is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus and incorporated herein by reference. Information on foreign and domestic operations, including financial data regarding our two principal segments, is set forth in Note 11 of the “Notes to the Consolidated Financial Statements” included in this prospectus.

Residential Building Products Segment

      We manufacture and distribute built-in products primarily for the residential new construction, DIY and professional remodeling and renovation markets. The principal products that we sell through this segment are:

•  kitchen range hoods,

•  built-in exhaust fans (such as bath fans and fan, heater and light combination units),

•  indoor air quality products,

•  bath cabinets,

•  door chimes,

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•  radio intercoms,

•  central vacuum systems,

•  surround sound systems, and

•  multi-room audio and video distribution equipment.

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

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

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

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

      We offer a broad array of products with various features and styles across a range of price points. We believe that our variety of product offerings helps us maintain and improve our market position for our principal products. At the same time, we believe that our status as a low-cost producer, which is in large part due to our advanced manufacturing processes, provides us with a competitive advantage.

      Our primary residential building products compete with many domestic and international suppliers in their various markets. We compete with suppliers of competitive products primarily on the basis of quality, distribution, delivery and price. Although we believe we compete favorably with other suppliers of residential building products, some of our competitors in this area have greater financial and marketing resources than we do.

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

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Air Conditioning and Heating Products Segment

      We manufacture and sell heating, ventilating and air conditioning systems and products (“HVAC”) for site-built residential and manufactured housing structures and custom-designed commercial applications and standard light commercial products.

Residential Products

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

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

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

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

      We compete in both the site-built and manufactured housing markets on the basis of breadth and quality of our product line, distribution, product availability and price. Although we believe that we compete favorably with respect to certain of these factors, most of our competitors have greater financial and marketing resources than we do and certain competitors may enjoy greater brand awareness.

Commercial Products

      Our commercial products consist of HVAC systems that are custom-designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. Such systems are primarily designed to operate on building rooftops (including large self-contained walk-in-units) or on individual floors within a building, and range from 40 to 600 tons of cooling capacity. The Segment markets its commercial products under the Governair®, Mammoth®, Temtrol®, Venmar®, Ventrol® and Webco^TM brand names. Also part of this segment, our subsidiary,

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Eaton-Williams Group Limited (“Eaton-Williams”), manufactures and markets custom and standard air conditioning and humidification equipment throughout Western Europe under the Vapac®, Cubit®, Qualitair®, Edenaire®, Colman^TM and Moducel^TM brand names.

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

      We estimate that about one-third of our commercial sales in 2003 were attributable to replacement and retrofit activity, which typically is less cyclical than new construction activity and generally commands higher margins. We continue to develop product and marketing programs to increase penetration in the growing replacement and retrofit market.

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

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

      This segment had 14 manufacturing plants and employed approximately 3,271 full-time people as of December 31, 2003, 171 of whom are covered by a collective bargaining agreement which expires in 2005. We believe that our relationships with our employees are satisfactory.

General Considerations

Employees

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

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Backlog

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

Research and Development

      Our research and development activities are principally new product development and represent approximately 1.5%, 1.4% and 1.4% of our consolidated net sales in 2003, 2002 and 2001, respectively.

Patents and Trademarks

      We hold numerous design and process patents that we consider important, but no single patent is material to the overall conduct of our business. It is our policy to obtain and protect patents whenever such action would be beneficial to us. We own or license numerous trademarks that we consider material to the marketing of our products, including Broan®, NuTone®, Nautilus®, Venmar®, Guardian Plus^TM Air Systems, vanEE®, Best®, Governair®, Mammoth®, Temtrol®, Miller®, Intertherm®, Frigidaire®, Tappan®, Philco®, Kelvinator®, Gibson®, Westinghouse®, Maytag®, Ventrol®, Webco^TM, Vapac®, Cubit®, Qualitair®, Edenaire®, Linear®, Channel Plus®, Open House®, Xantech®, Elan®, Via!®, SpeakerCraft®, OSCO® and OmniMount®. We believe that our rights in these trademarks are adequately protected.

Raw Materials

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

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

      We are subject to significant market risk with respect to the pricing of our principal raw materials. If prices of these raw materials were to increase dramatically, we may not be able to pass such increases on to our customers and, as a result, gross margins could decline significantly. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus and incorporated herein by reference, for further discussion.

Working Capital

      The carrying of inventories to support customers and to permit prompt delivery of finished goods requires substantial working capital. Substantial working capital is also required to carry receivables. The demand for our products is seasonal, particularly in the Northeast and Midwest regions of the United States and in Canada where inclement weather during the winter months usually reduces the level of building and remodeling activity in both the home improvement and new construction markets. Certain of

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the residential product businesses in the HVAC Segment have in the past been more seasonal in nature than our other businesses’ product categories. As a result, the demand for working capital of our subsidiaries is greater from late in the first quarter until early in the fourth quarter. See the Liquidity and Capital Resources section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this prospectus and incorporated herein by reference.

Website

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

Properties

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

			Approximate
Location	Description		Square Feet
Residential Building Products Segment:
Union, IL		Manufacturing/Warehouse/Administrative		197,000	(1)
Hartford, WI		Manufacturing/Warehouse/Administrative		498,000
Mississauga, ONT, Canada		Manufacturing/Administrative		110,000	(1)
Sylmar, CA		Manufacturing/Administrative		35,000	*
Xiang, Bao An County, Shenzhen, PRC		Manufacturing		113,000	*
Fabriano, Italy		Manufacturing/Administrative		168,000
Cerreto D’Esi, Italy		Manufacturing/Administrative		135,000
Montefano, Italy		Manufacturing/Administrative		84,000
Cleburne, TX		Manufacturing/Administrative		210,000
Los Angeles, CA		Manufacturing/Administrative		177,000
Drummondville, QUE, Canada		Manufacturing/Administrative		76,000
Cincinnati, OH		Manufacturing		836,000
Saint-Ouen l’Aumone, France		Manufacturing/Administrative		31,000	*
Lexington, KY		Manufacturing/Administrative		26,000	*
Carlsbad, CA		Manufacturing/Administrative		31,000	(1)
Riverside, CA		Manufacturing/Administrative		66,000	*
Casnovia, MI		Manufacturing/Administrative		27,000	*
Phoenix, AZ		Manufacturing/Administrative		45,000	*
Air Conditioning and Heating Products Segment:
St. Leonard d’Aston, QUE, Canada		Manufacturing/Administrative		95,000	*
O’Fallon, MO		Administrative		70,000	*
St. Peters, MO		Warehouse/Administrative		250,000	*
St. Louis, MO		Manufacturing		214,000	(2)
St. Louis, MO		Manufacturing		103,000	*(2)

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			Approximate
Location	Description		Square Feet
Holland, MI		Manufacturing/Warehouse		45,000	*
Boonville, MO		Manufacturing		250,000
Tipton, MO		Manufacturing		50,000
Poplar Bluff, MO		Manufacturing		445,000	**(1)
Dyersburg, TN		Manufacturing		368,000	**
Chaska, MN		Manufacturing/Administrative		230,000	*
Oklahoma City, OK		Manufacturing/Administrative		127,000
Okarche, OK		Manufacturing/Administrative		210,000
Saskatoon, Canada		Manufacturing		49,000	*
Springfield, MO		Manufacturing		77,000	*
Montreal, QUE, Canada		Manufacturing		122,000	*
Edenbridge, U.K.		Manufacturing		93,000	*
Fenton, Stoke, U.K.		Manufacturing/Administrative		104,000	*
Other:
Providence, RI		Administrative		23,900	*

(1)	These facilities are pledged as security under various subsidiary debt agreements. (See Note 6 of the Notes to the Consolidated Financial Statements included elsewhere in this prospectus.)
(2)	During 2003, we initiated restructuring activities related to the closure of two facilities in St. Louis, Missouri, in order to relocate the operations to other facilities by the end of the first quarter of 2004. (See Note 13 of the Notes to the Consolidated Financial Statements included elsewhere in this prospectus.)

Legal Proceedings

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

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

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

      We do not expect that any of the above described proceedings will have a material adverse effect, either individually or in the aggregate, on our financial position, results of operations, liquidity or competitive position. (See Note 9 of the Notes to the Consolidated Financial Statements, included elsewhere in this prospectus and incorporated herein by reference.)

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MANAGEMENT

Directors

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

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

      Under our charter, the holders of our common stock are entitled to elect 51% (or such next higher whole number) of the number of directors to be elected to our board of directors, provided that one-third (or such next higher whole number) of those directors are independent directors, as defined in our charter. The holders of our Series B Preference Stock are entitled to elect the remaining members of our board of directors, of which number half (of such next higher whole number) must be independent directors. Members of management, Nortek, Holdings, Kelso and other stockholders are party to a Stockholders Agreement under which they have agreed that under certain circumstances and until certain future events occur, Mr. Bready shall nominate the directors to be elected by the common stockholders and Kelso shall nominate the directors to be elected by the by Series B Preference Stock. Under these arrangements, Messrs. Bready, Hiley and Cianciolo were elected to our board of directors by the common stockholders and Messrs. Berney and Bloomberg were elected to our board of directors by the holders of the Series B Preference Stock.

Executive Officers

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

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

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EXECUTIVE COMPENSATION

Summary Compensation Table

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

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

(1)	Except for Messrs. Bready and Ractliffe in 2003 and Mr. Bready in 2002, the aggregate amount of any compensation in the form of perquisites and other personal benefits paid in each of the years, based on our incremental cost, did not exceed the lesser of 10% of any executive officer’s annual salary and bonus or $50,000. The amount for Messrs. Bready and Ractliffe in 2003 includes $246,142 and $78,346 respectively, relating to installation of our products. The amount for Mr. Bready in 2002 includes $49,410 relating to personal use of automobiles provided by us.
(2)	The amounts in 2003, for each of Messrs. Bready and Hall, include premiums paid by us for split dollar life insurance under agreements between us and each of them, of which $31,791 and $49 represent the term life portion of the premiums and $79,540 and $16,711 represent the non-term portion, in each case for Messrs. Bready and Hall, respectively. Subsequent to 2003, these agreements were terminated.
	For each of Messrs. Ractliffe, Hall, Donnelly and Cooney, includes change in control payments of $120,000, $82,000, $53,000 and $48,000, respectively, made in 2003 in connection with the Recapitalization.
	Includes in 2003, $329,445 in relocation expenses for Mr. Ractliffe.
	Includes $6,000 in matching contributions and $10,000 in profit sharing contributions by Nortek in 2003 for each of Messrs. Bready, Ractliffe, Hall, Donnelly and Cooney under Nortek’s 401(k) Savings Plan, which is a defined contribution retirement plan.
(3)	Mr. Ractliffe’s date of hire was January 1, 2002.
(4)	Mr. Cooney’s date of hire was August 20, 2001.

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Stock Option Tables

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

Options Granted in Last Fiscal Year

      The following table provides information regarding stock options for our common stock granted to named executive officers in 2003, all of which were granted under our 2002 stock option plan.

				% of Total
	No. of Shares			Options
	Underlying			Granted to					Exercise
	Options			Employees			Exercise		Price as of			Expiration		Grant Date
Name	Granted			in 2003			Price(1)		Grant Date			Date		Present Value(2)
Richard L. Bready		1,398,849	(3)		44.29	%	$	10.50	$	23.31	(5)		01/09/2013	$	39,250,164
		470,300	(4)		14.89			11.00		46.00			01/09/2013		3,226,258
Robert E.G. Ractliffe		87,000	(3)		2.75			10.50		24.38	(5)		01/09/2013		2,384,279
		80,000	(4)		2.53			11.00		46.00			01/09/2013		548,800
Almon C. Hall		67,900	(3)		2.15			10.50		25.95	(5)		01/09/2013		1,808,326
		80,000	(4)		2.53			11.00		46.00			01/09/2013		548,800
Kevin W. Donnelly		46,047	(3)		1.46			10.50		24.72	(5)		01/09/2013		1,251,746
		50,000	(4)		1.58			11.00		46.00			01/09/2013		343,000
Edward J. Cooney		7,500	(3)		0.24			10.50		20.25			01/09/2013		225,975
		35,000	(4)		1.11			11.00		46.00			01/09/2013		240,100

(1)	On November 26, 2003, we declared a dividend of $35.00 per share which resulted in an equal reduction of the exercise price of options to purchase shares of our common stock.
(2)	Pre-tax amounts based on Black-Scholes option pricing model with the following assumptions: interest rates are based on the risk-free interest rate at grant date, a maximum expected life of 5 years, expected volatility of 38% for rolled-over options and 0% for Class A and B options and a dividend yield of 0%.
(3)	Represent rolled-over options which were exercisable in full as of the date of the grant.
(4)	One-third of the shares underlying these options are Class A options and two-thirds are Class B options to purchase shares of our common stock. Under the terms of our 2002 stock option plan, Class A options generally become exercisable in equal quarterly installments over a three-year period, although Class A options will become exercisable in full when certain of the investors affiliated with Kelso have sold or disposed of at least 90% of their equity securities for cash or marketable securities in Holdings. In addition, Class A options will become exercisable in full in any liquidity event which results in the Class B options becoming exercisable in full. Our 2002 stock option plan defines a liquidity event as the receipt of cash or marketable securities by certain of the investors affiliated with Kelso in respect of their equity investment in Holding.

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

(5)  This exercise price is based upon a weighted average.

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Aggregated Option Exercises in 2003 and Year-End Option Values

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

(1)	Calculated by multiplying the relevant number of unexercised options by the difference between the stock price for our common stock on December 31, 2003 of $69.25 (based upon a valuation prepared on November 19, 2003) and the exercise price of the options.
(2)	Includes rolled-over options for the named individuals for the following amounts: Bready 1,398,849; Ractliffe 87,000; Hall 67,900; Donnelly 46,047; and Cooney 7,500 and exercisable Class A options.
(3)	Includes unexercisable Class A options and all of the Class B options to purchase shares of our common stock.

Pension and Similar Plans

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

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

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

Employment Contracts and Termination of Employment and Change in Control Arrangements

Employment Arrangement for Mr. Bready

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

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

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

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

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

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

      If it is determined that any payment or benefit provided by Nortek and Holdings to Mr. Bready under the employment agreement or any other agreement or plan is subject to the 20% excise tax imposed by Section 4999 of the Code, Nortek and Holdings will make an additional lump-sum payment to Mr. Bready

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sufficient, after giving effect to all federal, state and other taxes and charges with respect to that payment, to restore him to the same after-tax position that he would have been in if the excise tax had not been imposed.

Employment Arrangements for Messrs. Hall and Donnelly

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

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

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

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

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

      In addition the respective employee shall become irrevocably entitled to 100% of his lifetime medical coverage upon a change of control regardless of whether such employee is terminated. Following their termination of employment for any reason or in the event of a change of control, in lieu of lifetime

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medical coverage, Messrs. Hall and Donnelly may request a lump sum payment in an amount to be established by the board of directors as reasonably sufficient to provide the percentage of lifetime medical coverage to which he has become irrevocably entitled. In no event will the reimbursement obligations of Nortek and Holdings, exclusive of tax gross-up obligations, to provide lifetime medical coverage under the employment agreement exceed $1,000,000 in the aggregate during the lifetime of the employee and his spouse. Nortek and Holdings have also agreed to make payments to Messrs. Hall and Donnelly to cover any and all state and federal income taxes that may be due as a result of the provision of lifetime medical coverage as described in this paragraph.

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

Retention Plan

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

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

Deferred Compensation Arrangements

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

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Compensation Committee Report on Executive Compensation

      Our executive compensation program was administered for the 2003 fiscal year by our board of directors through its Compensation Committee, for all executives, except for Mr. Bready whose compensation was determined and administered by the full board of directors. During fiscal year 2003, the Compensation Committees of the board of directors of Nortek, and of Holdings as the successor company, consisted of Richard L. Bready and Philip E. Berney.

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

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

      The full board of directors approves changes in the compensation arrangement with the Chief Executive Officer and the named executive officers.

      During 2003, Mr. Bready earned a $5,000,000 bonus under his employment agreement with us.

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

Director Compensation

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

Compensation Committee Interlocks and Insider Participation

      From January 1, 2003 through the completion of the Recapitalization on January 9, 2003, the Compensation Committee of our board of directors consisted of William I. Kelly and Phillip L. Cohen. After January 9, 2003 and through the end of 2003, our board’s Compensation Committee has consisted of Mr. Bready, President and Chief Executive Officer of Holdings, and Mr. Berney. The committee determines compensation of our executive officers other than Mr. Bready. Mr. Bready’s compensation is determined by the full board of directors. With respect to Mr. Berney, see the section of this prospectus entitled “Certain Relationships and Related Transactions — Financial Advisory Arrangement with Kelso.”

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Five-Year Shareholder Return Comparison

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

Comparison of 5 Year Cumulative Total Return*

among Nortek Holdings, Inc.,

the Russell 2000 Index and a Peer Group

*  $100 invested on 12/31/1997 in stock or index — including reinvestment of dividends. Last period includes calendar year 2002 through January 9, 2003.

      The peer group companies are:

Armstrong World Industries, Inc.

Fedders Corporation

Masco Corporation

Maytag Corporation

The Stanley Works

Whirlpool Corporation

York International Corp.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

	Class A Common Stock					Series B Convertible Preference Stock
	Amount and Nature of		Percent of			Amount and Nature of		Percent of
Name(1)	Beneficial Ownership(2)		Class(3)			Beneficial Ownership(4)		Class
Philip E. Berney		—		—			8,130,442		100	%
Jeffrey C. Bloomberg		15,036		3.7	%		—		—
Richard L. Bready		1,722,319		92.5			—		—
Joseph M. Cianciolo		4,167		1.0			—		—
Edward J. Cooney		12,361		3.0			—		—
Kevin W. Donnelly		58,702		13.0			—		—
Almon C. Hall		96,011		20.2			—		—
David B. Hiley		11,945		2.9			—		—
Robert E.G. Ractliffe		111,111		22.4			—		—
All directors and executive officers as a group		2,031,652		95.6	%		8,130,442		100	%

(1)	The address of all such persons is c/o Nortek, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903. Certain of the shares shown in the table are shown as to which the persons named in the table have the right to acquire beneficial ownership, as specified in Rule 13d-3(d)(1) promulgated under the Securities Exchange Act of 1934, as amended. Unless otherwise indicated, the persons identified in this table have sole voting and investment power with respect to all shares shown as beneficially held by them, subject to community property laws where applicable.
(2)	Includes shares subject to options outstanding and exercisable within sixty (60) days after March 30, 2004 as follows: Bready 1,464,169 shares, Hall 79,011 shares, Donnelly 52,992 shares, Ractliffe 98,111 shares, Cooney 12,361 shares, Bloomberg 4,167 shares, Cianciolo 4,167 shares and Hiley 11,945 shares.
(3)	Assuming the exercise by all of our directors and executive officers of all options to acquire our Class A common stock exercisable or, pursuant to Rule 13d-3(d)(1), deemed exercisable, ownership percentages would be as follows: Bready 81.1%; Hall 4.5%; Donnelly 2.8%; Ractliffe 5.2%; Cooney .6%; Bloomberg .7%; Cianciolo .2%; Hiley .6%; and all directors and executive officers as a group 95.6%.
(4)	Mr. Berney may be deemed to share beneficial ownership of shares of Series B convertible preference stock owned of record by Kelso Investment Associates VI, L.P., Kelso Nortek Investors LLC and KEP VI, LLC, by virtue of his status as a managing member of KEP VI, LLC and Kelso GP VI, LLC (which is the general partner of Kelso Investment Associates VI, L.P. and the managing member of Kelso Nortek Investors, LLC). Mr. Berney shares investment and voting power with respect to the shares of Series B convertible preference stock owned by Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC and KEP VI, LLC but disclaims beneficial ownership of such shares, except with respect to his pecuniary interest therein.

      Each share of our Series B convertible preference stock is convertible at any time into one full share of our Class A common stock, and, upon occurrence of certain events, will be automatically converted. Our Series B convertible preference stock does not provide for distributions to shareholders and has a liquidation preference of $0.01 per share. In addition to the election of directors, the consent of a majority of our Series B preference stockholders is required: i) to amend our certificate of incorporation to modify

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the powers, preferences or special rights of the holders of our Series B convertible preference stock, ii) to authorize or issue any series of capital stock ranking senior to or on parity with our Series B convertible preference stock as to either payments of dividends or rights on liquidation, iii) to enter into a material transaction in excess of $50,000,000, iv) to incur indebtedness outside the ordinary course of business, v) to make certain capital expenditures, vi) to enter into agreements and arrangements with members of our senior management, vii) to create, issue, grant, deliver or sell equity securities, including warrants and options, other than under our 2002 stock option plan and other agreements and arrangements in existence on or prior to the date of the completion of the Recapitalization, viii) to enter into legal settlements in excess of $25,000,000 and ix) to take any other significant actions involving us.

Other Transactions

      Other transactions between us and certain of our executive officers are described in footnote 2 of the Summary Compensation Table above and in the section entitled “Employment Arrangements and Severance Agreements” above.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Recapitalization

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

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

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

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

Fees Paid to Consultant

      David B. Hiley, one of our directors, provided us with consulting services in 2003 for a fee of $12,500 per month, plus a $325,000 year-end bonus and will do so in 2004 for a fee of $16,667 per month, plus a discretionary year-end bonus.

Financial Advisory Arrangement with Kelso

      Philip E. Berney, one of our directors, is also a managing director of Kelso. Upon completion of the Recapitalization, we paid Kelso and its designees a fee of $10,500,000 and reimbursed Kelso and its

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

Equity Purchase by Director

      In October 2003, Mr. Bloomberg, a member of our board of directors, purchased, individually and in the name of a family trust, directly from Holdings, 10,869 shares of our Class A common stock for a purchase price of $499,974.

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DESCRIPTION OF OUTSTANDING INDEBTEDNESS

      The following is a description of our principal debt obligations for borrowed money other than the Outstanding Notes.

Senior Secured Credit Facility

      Nortek has a $175 million senior secured credit facility, provided by a syndicate of lenders, under which, as of April 3, 2004, it had availability of approximately 151.7 million after giving effect to approximately 7.9 million of outstanding letters of credit under the credit facility. Each material domestic subsidiary of Nortek is jointly and severally liable with respect to the entire credit facility as a co-borrower and a guarantor. The facility provides that up to $15 million of financings will be available to Nortek’s material Canadian subsidiaries. Each of Nortek’s material Canadian subsidiaries is jointly and severally liable with respect to the Canadian portion of the facility as a co-borrower.

      The facility represents a revolving line of credit, a portion of which may be used for standby letters of credit aggregating no more than $70 million. The facility expires on July 25, 2007.

      The facility is secured by a first priority lien on substantially all of the accounts receivable, inventory and intellectual property of Nortek and its domestic and Canadian subsidiaries. Borrowings under the facility are limited at any one time to the lesser of the facility commitment and the sum of (a) 85% of eligible trade accounts receivable, plus (b) the lesser of (1) 50% of eligible inventory or (2) 87.5% of the liquidation value of eligible inventory, minus (c) certain reserves described in the definitive documentation relating to the facility.

      The amounts borrowed under the facility bear interest at floating rates ranging from 200 to 250 basis points over the one-, two-, three- or six-month London InterBank Offered Rate, or “LIBOR,” or, in the alternative, at floating rates ranging from 50 to 100 basis points over the prime rate of Fleet National Bank or its successor. Nortek also is obligated to pay a fee, payable quarterly in arrears, on the average daily unused portion of the facility at floating rates ranging from 37.5 basis points to 50 basis points per annum. Nortek is required to prepay revolving borrowings under the facility in some circumstances relating to assets sales, receipt of insurance proceeds and proceeds from debt and equity offerings. These prepayments will not reduce the amounts available to be borrowed and, assuming that no default then exists, any such prepayment will be available to be immediately borrowed again.

      The facility also contains customary covenants, including restrictions on liens, mergers, consolidations and sales of assets, the payment of dividends and the incurrence of other debt. The facility contains one financial covenant, which requires that, during any period when the available borrowing base of the facility (less outstanding loans and letters of credit) is less than $40 million, aggregate EBITDA as of the end of each of the immediately preceding four fiscal quarters cannot be less than $175 million.

Notes

9 7/8% Senior Subordinated Notes

      Nortek issued senior subordinated notes under an indenture dated June 12, 2001. The terms of these senior subordinated notes are as follows:

•  Principal Amount — $250 million

•  Maturity — June 15, 2011

•  Interest Rate — 9 7/8%

•  Interest Payments — Every six months on June 15 and December 15

•  Optional Redemption — The 9 7/8% Senior Subordinated Notes are redeemable in whole or in part prior to maturity at Nortek’s option at any time on or after June 15, 2006, at a premium declining to par in 2009.

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•  Offer to Purchase — Upon a change of control, Nortek is required to make an offer to purchase the 9 7/8% Senior Subordinated Notes at a purchase price equal to 101% of their principal amount. Nortek may also be required to make an offer to purchase the 9 7/8% Senior Subordinated Notes if it sells certain assets and does not apply the proceeds as specified in the indenture.

•  Ranking — The 9 7/8% Senior Subordinated Notes are subordinated to all of Nortek’s existing and future senior debt, rank equally with all of Nortek’s existing and future subordinated debt, rank ahead of all of Nortek’s existing and future debt that expressly provides that it is subordinated to the 9 7/8% Senior Subordinated Notes, and are structurally senior to the Notes.

•  Basic Covenants of the Indenture — The indenture for the 9 7/8% Senior Subordinated Notes contains certain covenants that, among other things, limited Nortek’s ability to:

•  make investments and other restricted payments,

•  incur additional debt,

•  issue preferred stock of its subsidiaries,

•  enter into transactions with affiliates,

•  create liens,

•  sell its assets or assets of its subsidiaries, or

•  enter into mergers and consolidations.

Senior Floating Rate Notes

      Nortek issued senior floating rate notes under an indenture dated March 1, 2004. The terms of these senior floating rate notes are as follows:

•  Principal Amount — $200.0 million

•  Maturity — December 31, 2010

•  Interest Rate — LIBOR (as defined in the indenture governing such notes) plus 3.00%, determined semi-annually.

•  Interest Payments — Every six months on June 30 and December 31

•  Optional Redemption — The senior floating rate notes are redeemable in whole or in part prior to maturity at Nortek’s option at any time, at a premium declining to par in 2007.

•  Offer to Purchase — Upon a change of control, Nortek is required to make an offer to purchase the senior floating rate notes at a purchase price equal to 101% of their principal amount. Nortek may also be required to make an offer to purchase the senior floating rate notes if it sells certain assets and does not apply the proceeds as specified in the indenture.

•  Ranking — The senior floating rate notes rank equally with all of Nortek’s existing and future senior debt, are senior in right of payment to all of Nortek’s existing and future subordinated debt, and are structurally senior to the Notes.

•  Basic Covenants of the Indenture — The indenture for the senior floating rate notes contains certain covenants that, among other things, limit Nortek’s ability to:

•  make investments and other restricted payments,

•  incur additional debt,

•  issue preferred stock of its subsidiaries,

•  enter into transactions with affiliates,

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•  create liens,

•  sell its assets or assets of its subsidiaries, or

•  enter into mergers and consolidations.

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DESCRIPTION OF THE EXCHANGE NOTES

General

      Holdings issued the Outstanding Notes, and will issue the Exchange Notes, pursuant to an indenture (the “Indenture”) dated as of November 24, 2003 between Holdings and U.S. Bank National Association, as trustee (the “Trustee”). Any Outstanding Notes that remain outstanding after the completion of the exchange offer, together with the Exchange Notes issued in connection with the exchange offer, will be treated as a single class of securities under the Indenture. We refer to the Outstanding Notes and the Exchange Notes, collectively in this section as the “Notes.” The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended, as in effect on the date of the Indenture. The Notes are subject to all of those terms, and holders of the Notes (the “Holders”) are referred to the Indenture and the Trust Indenture Act for a statement of those terms.

      The following summary of certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions included in the Indenture of certain terms used below. We urge you to read the Indenture because it defines your rights. Copies of the Indenture will be made available to Holders as set forth below under “Where You Can Find More Information.” The definitions of certain capitalized terms used in the following description of the Notes are set forth below under “— Certain Definitions.” In this description, “Holdings” refers only to us, Nortek Holdings, Inc., and not to any of our subsidiaries, and “Nortek” refers only to Nortek, Inc. and not to any of its subsidiaries.

      The Notes are unsecured senior obligations of Holdings. The Notes rank senior in right of payment to all existing and future unsecured subordinated Indebtedness of Holdings, and pari passu in right of payment with all existing and future senior unsecured Indebtedness of Holdings. The Notes are structurally subordinated to all existing and future Indebtedness and other obligations (including trade payables) of Nortek and its Subsidiaries, including the Existing Notes and the Nortek Credit Facility.

      Although the Indenture contains certain covenants and provisions that afford certain protections to Holders, such covenants and provisions would not necessarily afford the Holders protection in the event of a highly leveraged transaction involving Holdings or Nortek, including a leveraged transaction initiated or supported by Holdings or Nortek, the management of Holdings or Nortek or any affiliate of either party. See “— Certain Covenants” below.

Principal, Maturity and Interest

      Holdings issued $515 million aggregate principal amount at maturity of Outstanding Notes in November 2003. The Notes will mature on May 15, 2011. The Outstanding Notes were issued at a substantial discount from their principal amount at maturity to generate gross proceeds of approximately $349.4 million.

      The Indenture governing the Notes provides for the issuance of additional notes having identical terms and conditions to the Notes (the “Additional Notes”), subject to compliance with the covenants contained in the Indenture. Any Additional Notes will be part of the same issue as the Notes and will vote on all matters with the Notes.

      Until November 15, 2007, interest accrues on the Notes at the rate of 10% per annum in the form of an increase in the Accreted Value (representing amortization of original issue discount) between the date of original issuance and November 15, 2007, on a semi-annual basis using a 360-day year comprised of twelve 30-day months, such that the Accreted Value shall be equal to the full principal amount at maturity of the Notes on the Full Accretion Date. Beginning on the Full Accretion Date, cash interest on the Notes will accrue at the rate of 10% per annum and will be payable semiannually on May 15 and November 15 of each year to Holders of record at the close of business on the May 1 or November 1 immediately preceding such interest payment dates, commencing May 15, 2008. Holdings will issue the

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Notes in fully registered form, without coupons, in denominations of $1,000 principal amount at maturity and any integral multiple of $1,000.

      Holdings will also pay Additional Interest to Holders under certain circumstances described under the heading “Exchange Offer — General.”

      No cash interest will accrue on the Notes prior to the Full Accretion Date, although for U.S. federal income tax purposes a significant amount of original issue discount, taxable as ordinary income, will be recognized by a Holder as such discount accretes. See “Material United States Federal Income Tax Consequences” for a discussion regarding the taxation of such original issue discount.

      Principal of, premium, if any, interest on, and Additional Interest, if any, with respect to the Notes will be payable by wire transfer of immediately available funds to the Holders; provided that payments of interest and Additional Interest, if any, may be made at the office or agency of Holdings maintained for such purpose or, at the option of Holdings, by check mailed to the Holders at their respective addresses set forth in the register of Holders. Unless otherwise designated by Holdings, Holdings’ office or agency for such purpose will be the corporate trust office of the Trustee in Boston, Massachusetts. The Outstanding Notes are and the Exchange Notes will be issued only in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Trustee is Paying Agent and Registrar under the Indenture. Holdings may act as Paying Agent or Registrar under the Indenture, and Holdings may change the Paying Agent or Registrar without notice to the Holders.

Holding Company Structure

      Holdings is a holding company and does not have any material assets or operations other than ownership of Capital Stock of Nortek and some cash and cash equivalents. All of Holdings’ operations are conducted through its Subsidiaries. Claims of creditors of such Subsidiaries, including trade creditors, and claims of preferred stockholders (if any) of such Subsidiaries generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of Holdings’ creditors, including Holders. The Notes, therefore, are structurally subordinated to creditors (including trade creditors) and preferred stockholders (if any) of our Subsidiaries including Nortek. As of December 31, 2003, Holdings had approximately $352.9 million of Indebtedness outstanding. At December 31, 2003, the aggregate debt of Holdings’ Subsidiaries equaled approximately $987.0 million, and the aggregate amount of trade payables, accrued liabilities and other balance sheet liabilities (other than debt) of Holdings’ Subsidiaries equaled approximately $550.9 million. In addition, as of April 3, 2004, Nortek had approximately 151.7 million of additional borrowings available under its $175 million credit facility after giving effect to approximately 7.9 million of outstanding letters of credit under the credit facility. Although the Indenture limits the incurrence of Indebtedness and the issuance of preferred stock of our Restricted Subsidiaries, such limitation is subject to a number of significant exceptions. Moreover, the Indenture does not impose any limitation on the incurrence by our Restricted Subsidiaries of liabilities that are not considered Indebtedness under the Indenture. See “Risk Factors.”

      Holdings’ operations are conducted through its Subsidiaries and its ability to make payment on the Notes is dependent on the earnings of, and the distribution of funds from, its Subsidiaries. However, none of its Subsidiaries is obligated to make funds available to Holdings for payment on the Notes. In addition, the terms of the indentures governing the Existing Notes and the Nortek Credit Facility significantly restrict Nortek and its Subsidiaries from paying dividends and otherwise transferring assets to Holdings. Furthermore, Holdings’ Subsidiaries will be permitted under the terms of the Nortek Credit Facility and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such Subsidiaries to Holdings.

Optional Redemption

      The Notes will be redeemable by Holdings, in whole or in part, on or after November 15, 2007 at the following redemption prices (expressed as a percentage of the Accreted Value) if redeemed during the

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12-month period beginning November 15 of the years indicated below, in each case, together with accrued and unpaid interest and Additional Interest, if any, to the redemption date:

Year	Percentage
2007		105.000%
2008		102.500%
2009 and thereafter		100.000%

      In addition, at any time prior to November 15, 2006, Holdings may on any one or more occasions redeem with the net cash proceeds of one or more Equity Offerings up to 35% of the aggregate principal amount at maturity of Notes issued under the Indenture at a redemption price of 110% of the Accreted Value thereof at the redemption date; provided that:

      (1) at least 65% of the aggregate principal amount at maturity of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by Holdings and its Subsidiaries); and

      (2) the redemption occurs within 90 days of the date of the closing of such Equity Offering.

      In addition, prior to November 15, 2006, upon the occurrence of a Change of Control, the Notes may be redeemed by Holdings, in whole and not in part, at a redemption price equal to 100% of the Accreted Value thereof on the redemption date plus the Change of Control Premium; provided, that such redemption (the “Change of Control Redemption”) occurs within 60 days of the occurrence of such Change of Control.

      Notice of the redemption must be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder to be redeemed at such Holder’s registered address. If any Note is to be redeemed in part only, the notice of redemption relating to that Note will state the principal amount at maturity thereof to be redeemed and a new Note in principal amount at maturity equal to the unredeemed portion will be issued in the name of the Holder upon cancellation of the original Note. On and after the redemption date, interest ceases to accrete or accrue, as applicable, on Notes or portions of Notes called for redemption, unless Holdings shall default in the payment of the redemption price. If less than all the outstanding Notes are to be redeemed at any time, selection of the Notes for redemption will be made by the Trustee by lot or, if such method is prohibited by the rules of any stock exchange on which the Notes are then listed, any other method the Trustee considers reasonable; provided that Notes shall be redeemed in principal amounts at maturity of $1,000 or integral multiples thereof.

Mandatory Redemption

      On May 15, 2009, if any Notes are outstanding, Holdings will be required to redeem 25.3661% of each Note (provided that if such percentage results in a Holder owning less than a $1,000 principal amount increment, Holdings shall redeem such additional principal amount of such Holder’s Notes to result in $1,000 increments) then outstanding (the “Mandatory Principal Redemption Amount”) ($130,635,415 aggregate Accreted Value of the Notes, assuming all of the Notes remain outstanding on such date) at a redemption price of 100% of the Accreted Value of the portion of the Notes so redeemed; provided, that Holdings shall simultaneously be required to redeem an additional portion of each Note to the extent required to prevent such Note from being treated as an “Applicable High Yield Discount Obligation” within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended. The Mandatory Principal Redemption Amount represents (i) the excess of the aggregate Accreted Value of all Notes outstanding on May 15, 2009 over the aggregate original issue price thereof less (ii) an amount equal to one year’s simple uncompounded interest on the aggregate original issue price of such Notes at a rate per annum equal to the yield to maturity on the Notes.

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Change of Control

      Upon the occurrence of a Change of Control, each Holder will have the right to require the repurchase of all or any part of such Holder’s Notes pursuant to the offer described below (the “Change of Control Offer”) at a purchase price equal to 101% of the Accreted Value thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (the “Change of Control Payment”).

      Immediately following any Change of Control, Holdings is required to mail a notice to the Trustee and to each Holder stating:

      (i) that the Change of Control Offer is being made pursuant to the Repurchase Upon Change of Control covenant of the Indenture and that all Notes tendered will be accepted for payment;

      (ii) the amount of the Change of Control Payment and the purchase date (the “Change of Control Payment Date”), which may not be earlier than 30 days nor later than 60 days from the date such notice is mailed;

      (iii) that any Note not tendered will continue to accrete or accrue interest;

      (iv) that, unless Holdings defaults in the payment thereof, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrete or accrue interest on and after the Change of Control Payment Date;

      (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes to be purchased to the Paying Agent at the address specified in the notice prior to the close of business on the third business day preceding the Change of Control Payment Date;

      (vi) that Holders will be entitled to withdraw Notes they have tendered on the terms and conditions set forth in such notice; and

      (vii) that Holders whose Notes are being purchased only in part will be issued new notes (or book-entry notation made with respect thereto) equal in principal amount at maturity to the unpurchased portion of the Notes tendered; provided that the portion of each Note purchased and each such new note issued (or book-entry notation, if applicable) shall be in a principal amount of $1,000 at maturity or an integral multiple thereof.

      On the Change of Control Payment Date, Holdings will, to the extent lawful,

      (i) accept for payment all Notes or portions thereof tendered pursuant to the Change of Control Offer and not withdrawn,

      (ii) deposit with the Paying Agent an amount sufficient to pay the Change of Control Payment in respect of all Notes or portions thereof so tendered and not withdrawn, and

      (iii) deliver or cause to be delivered to the Trustee all Notes so tendered and not withdrawn together with an Officers’ Certificate specifying the Notes or portions thereof tendered to Holdings.

      The Paying Agent will promptly mail to each Holder of Notes so tendered and not withdrawn the Change of Control Payment in respect of such Notes, and the Trustee will promptly authenticate and mail to such Holder a new note (or cause to be transferred by book entry) equal in principal amount at maturity to any unpurchased portion of the Notes surrendered; provided that each such new note shall be in a principal amount at maturity of $1,000 or an integral multiple thereof. Holdings will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. Holdings shall not be required to make a Change of Control Offer as described above if it shall have provided a notice of redemption to the Trustee pursuant to the optional redemption provisions of the last paragraph under “— Optional Redemption.”

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      Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes triggered by a Change of Control.

      A “Change of Control” will be deemed to have occurred at such time as any of the following events occur:

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

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

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

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

      The Nortek Credit Agreement contains, and existing and future indebtedness of Holdings and its Subsidiaries may contain, prohibitions on the occurrence of certain events that would constitute a Change of Control or require such indebtedness to be repaid or purchased upon a Change of Control. There can be no assurance that sufficient funds will be available when necessary to make any required purchases. The Nortek Credit Agreement does not permit Nortek to pay dividends or make distributions to Holdings for the purpose of purchasing notes in the event of a Change of Control. Even if sufficient funds were otherwise available, the terms of certain of Holdings’ Indebtedness could prohibit the prepayment of Notes prior to their scheduled maturity. Consequently, if Holdings is not able to prepay such Indebtedness, Holdings will be unable to fulfill its repurchase obligations if Holders exercise their repurchase rights following a Change of Control. The failure to make or consummate the Change of Control Offer or pay the purchase price when due will give the Trustee and the Holders the rights described under “— Events

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of Default and Remedies.” In the event Holdings is required to purchase outstanding Notes pursuant to a Change of Control Offer, Holdings expects to seek third party financing to the extent it lacks available funds to meet its purchase obligations. However, there can be no assurance that we would be able to obtain such financing.

      Neither the Board of Directors of Holdings nor the Trustee may waive the Change of Control repurchase feature of the Indenture.

      One of the events that constitutes a Change of Control under the Indenture is a sale, lease or other transfer or conveyance of all or substantially all of the assets of Holdings. There is no precise established definition under applicable law of the term “substantially all” and, accordingly, if Holdings were to engage in transactions in which it disposed of less than all of its assets, a question could arise as to whether such disposition was of “substantially all” of its assets and whether because of such disposition Holdings was required to repurchase the Notes as a result of a Change of Control.

Certain Covenants

      Limitation on Restricted Payments. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

      (i) declare or pay any dividend on, or make any distribution in respect of Holdings’ or any of its Restricted Subsidiary’s Capital Stock or other Equity Interests, except to the extent any such dividend or other distribution is (a) actually received by Holdings or a Restricted Subsidiary thereof or (b) payable solely in shares of Capital Stock or other Equity Interests (other than Redeemable Stock or Capital Stock convertible into any security other than such Capital Stock) of Holdings or such Restricted Subsidiary, as the case may be;

      (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock or other Equity Interests of Holdings or any of its Restricted Subsidiaries (other than Capital Stock or other Equity Interests held by Holdings or any Wholly-Owned Subsidiary of Holdings that is a Restricted Subsidiary);

      (iii) prepay, repay, purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to a scheduled repayment date, scheduled mandatory sinking fund payment date or maturity date any Indebtedness of Holdings that is subordinate in right of payment to the Notes (other than in connection with any refinancing of such Indebtedness permitted by the Indenture); or

      (iv) make any Investment other than Permitted Investments (each such action described in any of clauses (i) through (iv) above being referred to as a “Restricted Payment”), if, at the time of such Restricted Payment,

      (1) a Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof;

      (2) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made on or after the Issue Date (including, without duplication, Restricted Payments described in the next succeeding paragraph (other than clause (v) thereof), exceeds the sum of

      (A) the sum of (i) $25 million plus (ii) 50% of cumulative Consolidated Net Income of Holdings for the period commencing on October 5, 2003 through the last day of the fiscal quarter immediately preceding the date of such proposed Restricted Payment (it being understood that for purposes of determining cumulative Consolidated Net Income of Holdings pursuant to this clause (2)(A) only, Holdings’ non cash interest expense and amortization of original issue discounts shall be excluded) (provided that if the amount of cumulative Consolidated Net Income of Holdings divided by the number of full fiscal quarters of Holdings in the applicable period exceeds $5.25 million, then such amount shall equal (i) 50% of the product of $5.25 million multiplied by the number of full fiscal quarters

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in such period plus (ii) 75% of the amount in excess of the product of $5.25 million multiplied by the number of full fiscal quarters in such period) (or, if cumulative Consolidated Net Income of Holdings shall be a deficit, minus 100% of such deficit);

      (B) the aggregate net cash proceeds, and the Fair Market Value of any property other than cash, if any, received by Holdings (other than from a Restricted Subsidiary of Holdings) from the issuance and sale at any time after the Issue Date of either Capital Stock of Holdings (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock) or Indebtedness that is convertible into Capital Stock of Holdings (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock), to the extent such Indebtedness is actually converted into such Capital Stock;

      (C) an amount equal to any cash and the Fair Market Value (at the time of receipt) of other assets received by Holdings or any of its Restricted Subsidiaries after the Issue Date as a dividend or other distribution from any Unrestricted Subsidiary; and

      (D) the Fair Market Value of any Investment held by either Holdings or any Restricted Subsidiary of Holdings in any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is redesignated as a Restricted Subsidiary in accordance with the provisions of the Indenture; or

      (3)(a) in the case of a Restricted Payment made by Holdings, Holdings could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (a) of the first paragraph of the “Limitation on Additional Indebtedness” covenant or, (b) in the case of a Restricted Payment made by Nortek or any of its Restricted Subsidiaries, Nortek could not incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (b) of the first paragraph of the “Limitation on Additional Indebtedness” covenant.

      The foregoing provisions shall not prohibit, so long as no Default or Event of Default shall have occurred and be continuing or shall occur as a consequence thereof,

      (i) the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment would have complied with the provisions of the Indenture;

      (ii) the declaration and payment by a Restricted Subsidiary of Holdings which is required to file periodic reports under Section 13 or 15(d) of the Exchange Act (a “Reporting Subsidiary”) of dividends on its common stock to all holders of such common stock on a pro rata basis out of funds legally available for the payment of dividends; provided that the amount of such dividends in any fiscal year of such Reporting Subsidiary shall not exceed 25% of the Consolidated Net Income of such Reporting Subsidiary for the immediately preceding fiscal year;

      (iii) the purchase, redemption, acquisition, cancellation or other retirement for value of shares of Capital Stock of Holdings, options to purchase such shares or related stock appreciation rights or similar securities held by current or former officers, employees or directors (or their estates or beneficiaries under their estates) of Holdings or any Restricted Subsidiary; provided that the aggregate consideration paid for such purchase, redemption, cancellation or other retirement after the date hereof does not exceed $7.5 million in the aggregate in any fiscal year of Holdings;

      (iv) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of Holdings that is subordinated in right of payment to the Notes in exchange for, or out of the proceeds of a substantially concurrent offering of, shares of Capital Stock of Holdings (other than Redeemable Stock or any Capital Stock convertible into any security other than such Capital Stock); or

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      (v) the declaration and payment of dividends or other distributions to the holders of capital stock of or other equity interests in Holdings with the proceeds received on the Issue Date by Holdings from the sale of the Notes.

      Limitation on Additional Indebtedness. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to (each, an “incurrence”) any Indebtedness, including, without limitation, Acquired Indebtedness; provided, however, that (a) Holdings may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of Holdings for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0 and (b) Nortek may incur Indebtedness if (i) no Default or Event of Default shall have occurred and be continuing at the time or after giving effect to the incurrence of such Indebtedness and (ii) the Consolidated Cash Flow Coverage Ratio of Nortek for the four full fiscal quarters ending immediately prior to the date of the incurrence of such additional Indebtedness is at least 2.0 to 1.0.

      The foregoing limitations shall not apply, without duplication, to:

      (i) Existing Indebtedness;

      (ii) Indebtedness of Holdings represented by the Notes issued on the Issue Date;

      (iii) Indebtedness of Holdings and its Restricted Subsidiaries under the Nortek Credit Facility; provided that the aggregate principal amount of Indebtedness (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iii) and outstanding on such date, shall not exceed the greater of (a) $75 million and (b) the sum of 85% of Eligible Receivables of Nortek and its Subsidiaries plus 65% of Eligible Inventory of Nortek and its Subsidiaries;

      (iv) Indebtedness of (a) Broan-NuTone Canada, Inc. and any Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility; provided that (1) the aggregate outstanding principal amount (including the available undrawn amount of any letters of credit issued thereunder) so incurred on any date, together with all other Indebtedness incurred pursuant to this clause (iv) and outstanding on such date, shall not exceed the greater of (x) $50 million (Canadian) and (y) the sum of 85% of Eligible Receivables of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries plus 65% of Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries (but without duplication of any such Eligible Receivables or Eligible Inventory of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries used as a basis to incur Indebtedness pursuant to clause (iii) above) and (2) such Indebtedness shall be secured only by Liens on assets of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries, and (b) Nortek under its limited guarantee of not more than $30 million (Canadian) of the Indebtedness of Broan-NuTone Canada, Inc. and the Canadian Subsidiaries which are Restricted Subsidiaries under the Broan-NuTone Canada, Inc. Credit Facility;

      (v) Indebtedness of NuTone and any NuTone Subsidiary not exceeding at any time $6 million in aggregate outstanding principal amount and, if secured, secured only by Liens on assets of NuTone and any NuTone Subsidiary;

      (vi) Indebtedness of Holdings to any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (provided that such Indebtedness is contractually subordinated in right of payment to the Notes) or Indebtedness of any Subsidiary of Holdings that is a Restricted Subsidiary to Holdings or to any other Wholly-Owned Subsidiary of Holdings that is a Restricted Subsidiary; provided that if Holdings or any of its Restricted Subsidiaries incurs Indebtedness to a Wholly-Owned Subsidiary of Holdings that is a Restricted Subsidiary which, at any time after such incurrence, ceases to be a Wholly-Owned Subsidiary or ceases to be a Restricted Subsidiary, then all such Indebtedness in excess of the amount of Allowable Subsidiary Loans shall be deemed to have been incurred at the

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time such former Wholly-Owned Subsidiary ceases to be a Wholly-Owned Subsidiary of Holdings or ceases to be a Restricted Subsidiary;

      (vii) Indebtedness of Holdings and its Restricted Subsidiaries under Interest Rate Agreements, Currency Agreements and Commodity Agreements; provided that (a) in the case of Interest Rate Agreements, such Interest Rate Agreements relate to Indebtedness permitted to be incurred under the Indenture and the notional principal amount of the obligations of Holdings and its Restricted Subsidiaries under such Interest Rate Agreements does not exceed the principal amount of such Indebtedness, and (b) in the case of Currency Agreements that relate to other Indebtedness, such Currency Agreements do not increase the Indebtedness of Holdings and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;

      (viii) Indebtedness of Holdings and its Restricted Subsidiaries incurred in the ordinary course of business under guaranties of Indebtedness of suppliers, licensees, franchisees or customers;

      (ix) Indebtedness incurred by Holdings and its Restricted Subsidiaries consisting of Purchase Money Obligations and Capital Lease Obligations not exceeding at any time $30 million in aggregate outstanding principal amount;

      (x) Acquired Indebtedness incurred by a Restricted Subsidiary of Nortek to the extent such Indebtedness could have been incurred by Nortek under the Consolidated Cash Flow Coverage Ratio test set forth in clause (b) of the preceding paragraph of this “Limitation on Additional Indebtedness” covenant, after giving pro forma effect to the acquisition of such Restricted Subsidiary by Nortek;

      (xi) Indebtedness of any Restricted Subsidiary existing at the time of the designation of such Subsidiary as a Restricted Subsidiary in accordance with the terms of the Indenture if immediately prior to such designation such Subsidiary was an Unrestricted Subsidiary; provided that, after giving pro forma effect to such designation, such Indebtedness could have been incurred by Nortek under the limitations set forth in clause (b) of the preceding paragraph of this “Limitation on Additional Indebtedness” covenant; and provided, further, that none of Holdings or any of its other Restricted Subsidiaries shall provide credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), or otherwise be at any time, directly or indirectly liable (as a guarantor or otherwise), for such existing Indebtedness, except to the extent Holdings or any of its Restricted Subsidiaries could become so liable in accordance with the provisions of this “Limitation on Additional Indebtedness” covenant (other than solely in accordance with clause (vi) above or this clause (xi)).

      (xii) Indebtedness of Holdings and its Restricted Subsidiaries in respect of performance bonds, bankers’ acceptances, letters of credit, short-term overdraft facilities and surety or appeal bonds incurred or provided in the ordinary course of business;

      (xiii) Indebtedness of (a) Nortek Holding B.V. and its Subsidiaries arising out of advances on exports, advances on imports, advances on trade receivables, factoring of receivables and similar transactions in the ordinary course of business and, if secured, secured only by Liens on assets of Nortek Holding B.V. and its Subsidiaries and (b) Nortek under its limited guarantee of not more than $20 million of any such Indebtedness of Nortek Holding B.V. and its Subsidiaries;

      (xiv) other Indebtedness of Holdings and its Restricted Subsidiaries not to exceed at any time $35 million in aggregate outstanding principal amount;

      (xv) Liens permitted under the Limitation on Liens covenant; and

      (xvi) Indebtedness (“Refinancing Indebtedness”) created, incurred, issued, assumed or guaranteed in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, substitute

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or refund (“refinance”), Indebtedness described in the preceding paragraph or referred to in clauses (i) through (xiv) above; provided, however, that

      (a) the principal amount of such Refinancing Indebtedness (or if such Refinancing Indebtedness is issued at a price less than the principal amount thereof, the original issue amount of such Refinancing Indebtedness), together with the principal amount of any remaining Indebtedness under the agreement or instrument governing the Indebtedness being refinanced,

      (1) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (iii), (iv), (v) and (xiv) above, shall not, when added to all other Indebtedness outstanding under such clause, exceed the aggregate amount of Indebtedness permitted to be incurred under such clause (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof), and

      (2) in the case of Refinancing Indebtedness incurred to refinance Indebtedness permitted to be incurred under any of clauses (i), (ii) and (vi) through (xiii) above, shall not exceed the aggregate amount of such Indebtedness outstanding at the time of such refinancing, in each case, after giving effect to any mandatory reductions in principal or other repayments required under the agreement or instrument governing such Indebtedness (plus accrued interest on the Indebtedness to be refinanced and the amount of reasonable expenses, costs and fees and the amount of prepayment premiums and penalties incurred in connection with the refinancing thereof);

      (b) such Refinancing Indebtedness shall be subordinated in right of payment to the Notes at least to the same extent as the Indebtedness to be refinanced;

      (c) such Refinancing Indebtedness shall have an Average Life and Stated Maturity equal to, or greater than, the Average Life and Stated Maturity of the Indebtedness to be refinanced at the time of such incurrence;

      (d) the proceeds of such Refinancing Indebtedness, if incurred by a Restricted Subsidiary of Holdings, shall not be used to refinance Indebtedness of Holdings or another Subsidiary of Holdings; and

      (e) the incurrence of any such Refinancing Indebtedness is substantially simultaneous with the refinancing of the Indebtedness to be refinanced.

      In addition, Holdings will not permit Nortek to refinance or redeem the 9 7/8% Notes or issue additional Indebtedness (other than Senior Indebtedness) unless Nortek executes a guarantee satisfactory in form and substance to the Trustee, pursuant to which Nortek fully and unconditionally guarantees the Notes; provided that such guarantee shall be subordinated to Senior Indebtedness of Nortek in substantially the same manner that the 9 7/8% Notes are subordinated to Senior Indebtedness; provided further, that the obligation to execute any such guarantee shall not apply if and for as long as such guarantee is restricted by the terms of any Senior Indebtedness of Nortek. Holdings will not permit Nortek to issue any Indebtedness (other than Senior Indebtedness) after the Issue Date that restricts or prohibits the guarantee of Nortek required by the prior sentence.

      For purposes of this “Limitation on Additional Indebtedness” covenant, the accretion of original issue discount on Indebtedness shall not be deemed to be an incurrence of Indebtedness.

      Limitation on Sale or Issuance of Preferred Stock of Restricted Subsidiaries. Holdings shall not (i) permit any of its Restricted Subsidiaries to issue or sell to any Person except Holdings or a Wholly-Owned Subsidiary of Holdings that is a Restricted Subsidiary any preferred stock of any Restricted Subsidiary, or (ii) sell or otherwise convey or dispose of, or permit any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary to sell or otherwise convey or dispose of, any such preferred stock so issued

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or sold to Holdings or any of its Wholly-Owned Subsidiaries that is a Restricted Subsidiary (except to the issuer thereof, Holdings or any of its other Wholly-Owned Subsidiaries that is a Restricted Subsidiary).

      Limitation on Liens. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on

      (i) any Principal Property,

      (ii) any shares of Capital Stock of any Restricted Subsidiary of Holdings held by Holdings or, in the case of a Lien securing Indebtedness of Holdings, any shares of Capital Stock of any Restricted Subsidiary of Holdings held by any other Restricted Subsidiary of Holdings or,

      (iii) any Indebtedness owed by any Restricted Subsidiary of Holdings to Holdings or, in the case of a Lien securing Indebtedness of Holdings, any Indebtedness owed by any Restricted Subsidiary of Holdings to any other Restricted Subsidiary of Holdings, without making effective provision for the Notes and all other amounts due under the Indenture to be directly secured equally and ratably with (or, if the Indebtedness or other obligation or liability to be secured by such Lien is subordinated in right of payment to the Notes, prior to) the Indebtedness or other obligation or liability secured by such Lien.

      The foregoing limitation does not apply to

      (i) Liens existing on the Issue Date;

      (ii) Liens securing Indebtedness under the Nortek Credit Facility;

      (iii) Liens securing Indebtedness of a Restricted Subsidiary that is permitted to be incurred under the “Limitation on Additional Indebtedness” covenant; provided that this clause (iii) will only permit Liens securing Indebtedness incurred by Nortek if such Indebtedness constitutes Senior Indebtedness of Nortek.

      (iv) Liens with respect to the assets of a Restricted Subsidiary of Holdings granted by such Restricted Subsidiary to Holdings to secure Indebtedness owing to Holdings;

      (v) Liens in respect of Indebtedness permitted by clauses (iv), (v), (ix), (xii) or (xiii) of the “Limitation on Additional Indebtedness” covenant;

      (vi) Liens securing Refinancing Indebtedness incurred to refinance Indebtedness that has been secured by a Lien permitted under the Indenture; provided that such Liens do not extend to or cover any property or assets of Holdings or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and

      (vii) Permitted Liens.

      Limitation on Certain Restrictions Affecting Subsidiaries. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or enter into or otherwise cause or permit to exist or become effective any agreement with any Person that would cause any consensual encumbrance or restriction on the ability of any such Restricted Subsidiary to:

      (i) pay dividends or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits, owned by Holdings or any of its Restricted Subsidiaries,

      (ii) pay or repay any Indebtedness owed to Holdings or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary,

      (iii) make loans or advances to Holdings or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary,

      (iv) transfer any of its properties or assets to Holdings or any of its Restricted Subsidiaries which owns Equity Interests in such Restricted Subsidiary,

      (v) guarantee any Indebtedness of Holdings or any other Restricted Subsidiary of Holdings, or

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except, in each case, for such encumbrances or restrictions existing under or by reason of

      (a) applicable law,

      (b) the Indenture,

      (c) customary nonassignment provisions of any lease governing a leasehold interest of Holdings or any of its Restricted Subsidiaries,

      (d) any instrument governing Indebtedness of a Person acquired by Holdings or any of its Restricted Subsidiaries at the time of such acquisition, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired,

      (e) agreements existing as of the Issue Date,

      (f) the Nortek Credit Facility,

      (g) the Broan-NuTone Canada, Inc. Credit Facility, and

      (h) (i) any agreement effecting a refinancing of Indebtedness issued pursuant to any agreement or instrument referred to in clause (d) or (e) above or this clause (h), or (ii) any other agreement pursuant to which any Restricted Subsidiary of Holdings incurs Indebtedness after the Issue Date in accordance with the “Limitation on Additional Indebtedness” covenant, and, in each case, either:

      (A) the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to Holdings, taken as a whole, as determined by the Board of Directors of Holdings in good faith than the provisions contained in the Nortek Credit Facility or in the indentures governing the Existing Notes, in each case, as in effect on the Issue Date, or

      (B) any encumbrance or restriction contained in such Indebtedness is not expected to prohibit (except upon a default or event of default thereunder) the payment of dividends in an amount sufficient, as determined by the Board of Directors of Holdings in good faith, to make scheduled payments of cash interest on the Notes when due.

      The foregoing shall not restrict the ability of any Restricted Subsidiary of Holdings to grant any Lien to the extent otherwise permitted in the Indenture.

      Repurchase upon Change of Control. See “— Change of Control” above.

      Limitation on Use of Proceeds from Asset Sales. Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:

      (i) Holdings or such Restricted Subsidiary, as the case may be, receives consideration at the time of any such Asset Sale having a value (including the Fair Market Value of any non-cash consideration) at least equal to the Fair Market Value of the securities or assets being sold or otherwise disposed of, and

      (ii) at least 75% of the consideration from such Asset Sale is received in the form of cash, Cash Equivalents (together with cash, “Cash Proceeds”) or indebtedness for borrowed money of Holdings or such Restricted Subsidiary that is assumed by the transferee of any such assets or any such indebtedness of any Restricted Subsidiary of Holdings whose stock is purchased by the transferee.

      Any Net Cash Proceeds

      (a) in excess of the amount of cash applied by Holdings or any Restricted Subsidiary of Holdings during the period beginning 12 months prior to the date of the Asset Sale and ending 12 months after the date of such Asset Sale to purchase any business that is, or any properties and assets used primarily in, the same or a related business as those owned and operated by Holdings and its Subsidiaries as of the Issue Date or at the date of such Asset Sale and

      (b) not applied within 13 months after the date of the Asset Sale to reduce Indebtedness under the Nortek Credit Agreement, Indebtedness of a Restricted Subsidiary or other Indebtedness of

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Holdings that ranks pari passu with the Notes (provided that if Holdings shall so reduce Indebtedness of Holdings that ranks pari passu with the Notes, it will equally and ratably reduce Indebtedness under the Notes by making an offer (in accordance with the procedures set forth below for an Excess Proceeds Offer) to all Holders to purchase a pro rata amount of Accreted Value of the Notes at a purchase price equal to 100% of the Accreted Value thereof, plus accrued and unpaid interest, if any) shall be deemed to be “Excess Proceeds”; provided that, if an offer to purchase any Indebtedness of Nortek or any of its Restricted Subsidiaries is made in accordance with the terms of such Indebtedness, the obligation to reduce Indebtedness of such Restricted Subsidiary will be deemed to be satisfied to the extent of the amount of the offer, whether or not accepted by the holders thereof, and no Excess Proceeds in the amount of such offer will be deemed to exist following such offer.

      When the aggregate amount of Excess Proceeds exceeds $10 million, Holdings shall make an offer (the “Excess Proceeds Offer”) to apply the Excess Proceeds to purchase the Notes. The Excess Proceeds Offer must be in cash in an amount equal to 100% of the Accreted Value of the Notes plus accrued and unpaid interest, if any, thereon and Additional Interest, if any, to the date fixed for the closing of such offer, substantially in accordance with the procedures for a Change of Control Offer described in the Repurchase upon Change of Control covenant. To the extent that the aggregate Accreted Value of Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess Proceeds, Holdings may use the remaining Excess Proceeds for general corporate purposes and such amounts shall no longer be deemed Excess Proceeds. If the aggregate Accreted Value of Notes surrendered by Holders exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis, subject to the limitation on the authorized denominations of the Notes.

      Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws are applicable in connection with the repurchase of Notes pursuant to an Excess Proceeds Offer.

      Limitation on Transactions with Affiliates. Except as otherwise permitted by the Indenture, Holdings shall not, and shall not permit any of its Restricted Subsidiaries to, make any Investment, loan, advance, guarantee or capital contribution to, or for the benefit of, or sell, lease or otherwise transfer or dispose of any of its properties or assets to, or for the benefit of, or purchase or lease any property or assets from, or enter into or amend any contract, agreement or understanding with, or for the benefit of, any Affiliate of Holdings or any of its Restricted Subsidiaries, unless:

      (i) such transaction or series of transactions is in the best interests of Holdings or such Restricted Subsidiary based on all relevant facts and circumstances;

      (ii) such transaction or series of transactions is fair to Holdings or such Restricted Subsidiary and on terms that are no less favorable to Holdings or such Restricted Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arms’ length basis from a Person that is not an Affiliate of Holdings or any of its Restricted Subsidiaries; and

      (iii) (a) with respect to a transaction or series of related transactions involving aggregate payments in excess of $5 million, the Board of Directors and a majority of the Disinterested Directors shall approve such transaction or series of transactions by a Board Resolution evidencing their determination that such transaction or series of transactions complies with clauses (i) and (ii) above, and (b) with respect to a transaction or series of transactions involving aggregate payments equal to or greater than $15 million, Holdings receives a written opinion from a nationally recognized investment bank or valuation firm or, with respect to a transaction requiring the valuation of real property, a nationally recognized real estate appraisal firm, that such transaction or series of transactions is fair to Holdings or such Restricted Subsidiary from a financial point of view.

      Certain transactions subject to this covenant, such as the repurchase of Capital Stock from, or an Investment in, an Affiliate of Holdings or any of its Restricted Subsidiaries may also be subject to the “Limitation on Restricted Payments” covenant.

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      The foregoing limitation shall not apply to:

      (i) any payment of money or issuance of securities by Holdings or any Restricted Subsidiary of Holdings pursuant to employment agreements or arrangements and employee benefit plans, including reimbursement or advancement of out-of-pocket expenses and directors’ and officers’ liability insurance;

      (ii) reasonable and customary payments and other benefits (including indemnification) provided to directors for service on the Board of Directors of Holdings or any of its Restricted Subsidiaries and reimbursement of expenses related thereto;

      (iii) agreements and instruments to which Kelso & Company, L.P. or any of its Affiliates is a party which are in effect on the Issue Date or any instruments or securities held by Kelso & Company, L.P. or any of its Affiliates on the Issue Date or the payment of fees, reimbursements, indemnifications and other amounts and other transactions pursuant to such agreements, instruments or securities; or

      (iv) transactions between Holdings and any Restricted Subsidiary of Holdings, or between one Restricted Subsidiary of Holdings and another Restricted Subsidiary of Holdings; provided that not more than 20% of any such Restricted Subsidiary is owned by any Affiliate of Holdings or any of its Restricted Subsidiaries (other than Holdings or a Wholly-Owned Subsidiary of Holdings which is a Restricted Subsidiary).

      Limitation on Guarantees by Certain Subsidiaries. At any time upon the occurrence of the guarantee of any Indebtedness of Holdings by any Restricted Subsidiary of Holdings, Holdings will cause such Restricted Subsidiary to execute a guarantee, satisfactory in form and substance to the Trustee (and with such documentation relating thereto as the Trustee shall require, including, without limitation, the execution of a supplemental Guarantee and opinions of counsel as to the enforceability of such guarantee), pursuant to which such Restricted Subsidiary will fully and unconditionally guarantee the Notes; provided, however, that if such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Indebtedness that is expressly subordinated to the Notes, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such subordinated Indebtedness shall be subordinated to the guarantee of the Notes pursuant to customary subordination provisions.

      Notwithstanding the foregoing and the other provisions of the Indenture, any guarantee by a Restricted Subsidiary shall provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer to any Person not an Affiliate of Holdings of a majority of the Capital Stock or all or substantially all of the assets of any such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture), (ii) the release or discharge of the Indebtedness that resulted in the creation of such guarantee (except a discharge or release by or as a result of payment under such guarantee), or (iii) the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Indenture.

      Payments for Consents. Neither Holdings nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders which so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

      Provision of Reports. The Indenture provides that whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, Holdings will furnish to the Holders within the time periods specified in SEC rules and regulations:

      (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if Holdings were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that

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describes the financial condition and results of operations of Holdings and its Subsidiaries, and, with respect to the annual information only, a report thereon by Holdings’ independent certified public accountants, as applicable; and

      (ii) all reports that would be required to be filed with the SEC on Form 8-K if Holdings were required to file such reports.

      In addition, following the consummation of the exchange offer, whether or not required by the rules and regulations of the SEC, Holdings will file a copy of all such information and reports with the SEC for public availability within the time periods specified in the SEC’s rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, Holdings has agreed that, if it is not subject to and in compliance with the informational requirements of Section 13 or 15(d) of the Exchange Act at any time while the Notes constitute “restricted securities” within the meaning of the Securities Act, it will furnish to Holders and beneficial owners of the Notes and to prospective purchasers designated by such Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with resales of the Notes.

Merger, Consolidation or Transfer Of Assets

      Holdings shall not consolidate with, merge with or into, or transfer all or substantially all of its assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into it, or permit any of its Subsidiaries to enter into any such transaction or transactions if such transaction or transactions in the aggregate would result in a transfer of all or substantially all of the assets of Holdings and its Subsidiaries on a consolidated basis, unless:

      (1) Holdings, shall be the continuing Person, or the Person, if other than Holdings, formed by such consolidation or into which Holdings is merged, or to which the properties and assets of Holdings, or of Holdings and its Subsidiaries on a consolidated basis, substantially as an entirety, are transferred shall be a person organized and existing under the laws of the United States or any state thereof or the District of Columbia (provided that if such person is not a corporation, such person shall be required to cause a Subsidiary of such person that is a corporation to be a co-obligor under the Notes) and shall expressly assume, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of Holdings under the Notes and the Indenture and the Indenture remains in full force and effect;

      (2) immediately before and immediately after giving effect to such transaction, no Event of Default and no Default shall have occurred and be continuing;

      (3) the Person which is formed by or survives such consolidation or merger or to which such assets are transferred (the “surviving entity”), after giving pro forma effect to such transaction, could incur $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth, in clause (a) of the first paragraph of the “Limitation on Additional Indebtedness” covenant; and

      (4) immediately after giving effect to such transaction on a pro forma basis the Consolidated Net Worth of the surviving entity shall be equal to or greater than the Consolidated Net Worth of Holdings immediately before such transaction.

      In connection with any such consolidation, merger or transfer, Holdings shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers’ Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereto comply with the Indenture and that all conditions precedent therein provided for relating to such transactions have been complied with.

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      Upon any consolidation or merger, or any transfer of all or substantially all of the assets of Holdings and its Subsidiaries on a consolidated basis, in accordance with the second preceding paragraph, the successor Person formed by such consolidation or into which Holdings is merged or the successor Person to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, Holdings under the Indenture with the same effect as if such successor Person had been named as Holdings in the Indenture, and when a successor Person assumes all the obligations of its predecessor under the Indenture or the Notes, the predecessor shall be released from those obligations; provided, however, that in the case of a transfer by lease, the predecessor shall not be released from the payment of the principal of, premium, if any, interest on, and Additional Interest, if any, with respect to the Notes.

Events of Default and Remedies

      The Indenture provides that each of the following constitutes an “Event of Default”:

      (1) Holdings defaults in the payment, when due and payable, of (i) interest on or Additional Interest, if any, with respect to any Note and the default continues for a period of 30 days, or (ii) principal or Accreted Value of or premium, if any, on any Notes when the same becomes due and payable at maturity, by acceleration, on the Redemption Date, on the Change of Control Payment Date, on any payment date respecting an Excess Proceeds Offer or otherwise;

      (2) Holdings fails to comply with any of the provisions set forth under “— Merger, Consolidation or Transfer of Assets” above;

      (3) Holdings fails to comply with any of its covenants or agreements in the Notes or the Indenture (other than those referred to in clause (1) or (2) above) and such failure continues for the period and after receipt by Holdings of the notice specified below;

      (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by Holdings or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Holdings or any of its Restricted Subsidiaries), whether such indebtedness or guarantee is now existing or hereafter created, if such default shall constitute a failure to pay any portion of the principal of such indebtedness when due and payable or if as a result of such default the maturity of such indebtedness has been accelerated prior to its stated maturity and, in either case, the principal amount of such indebtedness, together with the principal amount of any other such indebtedness for money borrowed which has not been paid when due and payable or the maturity of which has been accelerated as a result of such default, aggregates $15 million or more;

      (5) Holdings or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) pursuant to or within the meaning of any bankruptcy law:

      (A) commences a voluntary case or proceeding;

      (B) consents to the entry of an order for relief against it in an involuntary case or proceeding;

      (C) consents to the appointment of a custodian of it or for all or substantially all of its property;

      (D) makes a general assignment for the benefit of its creditors; or

      (E) admits in writing its inability to pay its debts generally as they become due;

      (6) a court of competent jurisdiction enters an order or decree under any bankruptcy law that:

      (A) is for relief against Holdings or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) in an involuntary case or proceeding;

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      (B) appoints a custodian of Holdings or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary) for all or substantially all of its properties; or

      (C) orders the liquidation of Holdings or any of its Significant Subsidiaries that is a Restricted Subsidiary (or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary), and such order or decree with respect to clause (A), (B) or (C) remains unstayed and in effect for 60 days; or

      (7) final judgments for the payment of money which in the aggregate exceed $15 million shall be rendered against Holdings or any of its Restricted Subsidiaries by a court and shall remain unstayed or undischarged for a period of 60 days.

      A Default under clause (3) above is not an Event of Default until the Trustee notifies Holdings, or the Holders of at least 25% in aggregate principal amount at maturity of the Notes at the time outstanding notify Holdings and the Trustee, of the Default and Holdings does not cure such Default within 30 days after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”

      In the case of any Event of Default (other than as a result of the failure to comply with the “Repurchase upon Change of Control” covenant) occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Holdings with the intention of avoiding payment of the premium which Holdings would have to pay if Holdings then had elected to redeem the Notes, an equivalent premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to the acceleration provisions of the Indenture to the extent permitted by law, anything in the Indenture or in the Notes contained to the contrary notwithstanding.

      In the case of an Event of Default as a result of a failure to comply with the “Repurchase upon Change of Control” covenant occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Holdings with the intention of avoiding payment of the premium which Holdings would have to pay pursuant to the Repurchase upon Change of Control covenant, such premium shall also become and be immediately due and payable at such time as the principal and interest on the Notes become due and payable pursuant to the acceleration provisions of the Indenture to the extent permitted by law, anything in the Indenture or in the Notes contained to the contrary notwithstanding.

      If any Event of Default (other than an Event of Default specified in clause (5) or (6) above) occurs and is continuing, the Trustee or the Holders of at least 25% of the principal amount at maturity of the Notes then outstanding, by written notice to Holdings (and to the Trustee if such notice is given by such Holders), may, and such Trustee at the request of such Holders shall, declare all unpaid Accreted Value, premium, if any, accrued interest on, and Additional Interest, if any, with respect to the Notes to be due and payable immediately. If an Event of Default specified in clause (5) or (6) above occurs, all unpaid Accreted Value, premium, if any, accrued interest on and Additional Interest, if any, with respect to the Notes then outstanding shall ipso facto become and be immediately due and payable without declaration or other act on the part of the Trustee or any Holder.

      The Holders of at least a majority in principal amount at maturity of the Notes then outstanding by written notice to the Trustee may rescind an acceleration and its consequences (except an acceleration due to default in payment of Accreted Value, premium, if any, accrued interest on, and Additional Interest, if any, with respect to the Notes) if all existing Events of Default have been cured or waived except non-payment of the Accreted Value, premium, if any, accrued interest on, and Additional Interest, if any, with respect to the Notes that have become due solely because of the acceleration. Subject to certain restrictions set forth in the Indenture, the Holders of at least a majority in principal amount at maturity of the outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a default in the payment of the Accreted Value, premium, if any, interest on, or

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Additional Interest, if any, with respect to the Notes or a Default under a provision which requires consent of all Holders to amend. When a Default or Event of Default is waived, it is cured and ceases.

      A Holder may not pursue any remedy with respect to the Indenture or the Notes unless: (i) the Holder gives to the Trustee written notice that an Event of Default is continuing; (ii) the Holders of at least 25% in aggregate principal amount at maturity of any Notes outstanding make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee reasonable indemnity or security against any loss, liability or expense satisfactory to the Trustee; (iv) the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity or security; and (v) during such 30-day period the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction which is inconsistent with the request.

Discharge and Defeasance

      When (1) Holdings delivers to the Trustee all outstanding Notes (other than Notes replaced because of mutilation, loss, destruction or wrongful taking) for cancellation or (2) all outstanding Notes have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption as described above, and Holdings irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption the principal of, premium, if any, interest on, and Additional Interest, if any, with respect to all outstanding Notes, and in the case of either clause (1) or (2) Holdings pays all other sums payable under the Indenture by Holdings, then the Indenture will, subject to certain surviving provisions, cease to be of further effect.

      Holdings will be permitted to, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes (“Legal Defeasance”) except for:

      (1) the rights of Holders to receive payments in respect of the principal of, premium, if any, interest on, and Additional Interest, if any, with respect to the Notes when the payments are due from the trust referred to below;

      (2) Holdings’ obligations with respect to the Notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;

      (3) the rights, powers, trusts, duties and immunities of the Trustee, and Holdings’ obligations in connection therewith; and

      (4) the Legal Defeasance provisions of the Indenture.

      In addition, Holdings will be permitted to, at its option and at any time, elect to have the obligations of Holdings released with respect to certain covenants that are described in the Indenture (“Covenant Defeasance”) and thereafter any omission to comply with those obligations will not constitute a Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment and bankruptcy and insolvency events) described under “— Events of Default and Remedies” will no longer constitute Events of Default with respect to the Notes.

      In order to exercise either Legal Defeasance or Covenant Defeasance:

      (1) Holdings will be required to deposit irrevocably with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, Government Securities or a combination thereof, in an amount that will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, interest on, and Additional Interest, if any, with respect to the outstanding Notes on the stated maturity or on the applicable date fixed for redemption, as the case may be, and Holdings must specify whether the Notes are being defeased to maturity or to a particular date fixed for redemption;

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      (2) in the case of Legal Defeasance, Holdings will have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that:

      (a) Holdings has received from, or there has been published by, the Internal Revenue Service a ruling, or

      (b) since the date of the Indenture, there has been a change in the applicable federal income tax law,

in either case to the effect that, and based thereon, the opinion of counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Legal Defeasance had not occurred;

      (3) in the case of Covenant Defeasance, Holdings will have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of the Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the Covenant Defeasance had not occurred;

      (4) 91 days pass after the deposit is made and during the 91-day period no Default described in clause (5) or (6) under “— Events of Default and Remedies” occurs with respect to Holdings which is continuing at the end of the period;

      (5) no Default or Event of Default has occurred and is continuing on the date of such deposit and after giving effect thereto;

      (6) the Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture) to which Holdings or any of its Subsidiaries is a party or by which Holdings or any of its Subsidiaries is bound;

      (7) Holdings will have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by Holdings with the intent of defeating, hindering, delaying or defrauding creditors of Holdings or others; and

      (8) Holdings will have delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent to the Legal Defeasance or the Covenant Defeasance have been satisfied.

Transfer and Exchange

      A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Registrar is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

      The registered Holder will be treated as the owner of it for all purposes.

Amendment, Supplement and Waiver

      Subject to certain exceptions, with the written consent of the Holders of at least a majority in aggregate principal amount at maturity of the Notes then outstanding, Holdings and the Trustee may amend the Indenture or the Notes, or may waive compliance by Holdings with any provision of the

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Indenture or the Notes. However, without the consent of each Holder affected, a waiver or an amendment to the Indenture or the Notes may not:

      (i) reduce the percentage of principal amount at maturity of the Notes whose Holders must consent to an amendment or waiver;

      (ii) make any change to the Stated Maturity or time for payment of the principal or Accreted Value of, premium, if any, interest on, or Additional Interest, if any, with respect to the Notes or any Redemption Price thereof, or impair the right to institute suit for the enforcement of any such payment or make any Note payable in money or securities other than that stated in the Note;

      (iii) change the method of calculation of Accreted Value;

      (iv) waive a default in the payment of principal or Accreted Value of, premium, if any, interest on, or Additional Interest, if any, with respect to any exchange note;

      (v) make any change in the provisions of the Repurchase upon Change of Control covenant or the Limitation on Use of Proceeds of Asset Sales covenant; or

      (vi) make any change in the amendment provisions of the Indenture.

      Notwithstanding the foregoing, without the consent of any Holder, Holdings and the Trustee may amend or supplement the Indenture or the Notes:

      (i) to cure any ambiguity, defect or inconsistency;

      (ii) to comply with the provisions described under “— Merger, Consolidation or Transfer of Assets”;

      (iii) to provide for uncertificated notes in addition to or in place of certificated notes so long as such uncertificated notes are in registered form for purposes of the Internal Revenue Code of 1986, as amended;

      (iv) to make any other change that does not adversely affect the rights of any Holder; or

      (v) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act.

Concerning the Trustee

      U.S. Bank National Association is the Trustee under the Indenture and has been appointed by Holdings as Registrar and Paying Agent with respect to the Notes.

      The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of Holdings, to obtain payment of claims in certain cases, or to realize certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest it must eliminate such conflict within 90 days, or apply to the SEC for permission to continue or resign.

      The Holders of not less than a majority in principal amount at maturity of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur and be continuing (and shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care and skill of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holders, unless they shall have offered to the Trustee reasonable security or indemnity satisfactory to it against any loss, liability or expense.

      The Trustee serves as trustee under the indentures governing our Existing Notes and may from time to time engage in some banking services with us or our subsidiaries in the ordinary course.

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Certain Definitions

      Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

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

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

Semi-Annual Accrual Date	Accreted Value
May 15, 2004	$	710.68
November 15, 2004	$	746.22
May 15, 2005	$	783.53
November 15, 2005	$	822.70
May 15, 2006	$	863.84
November 15, 2006	$	907.03
May 15, 2007	$	952.38
November 15, 2007	$	1,000.00

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

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

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

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

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

      “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. A Person shall be deemed to “control” (including the correlative meanings, the terms “controlling,” “controlled by” and

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“under common control with”) another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by agreement or otherwise.

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

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

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

      (ii) the sale, lease or other transfer or disposition of assets in accordance with the provisions described under “Merger, Consolidation or Transfer of Assets”;

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

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

      (v) the granting of any Lien permitted under the “Limitation on Liens” covenant (and any foreclosure or other sale under any such Lien, except to the extent there are surplus proceeds from such foreclosure);

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

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

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

      “Broan-NuTone Canada, Inc. Credit Facility” means a credit facility between Broan-NuTone Canada, Inc. or any of the Canadian Subsidiaries, and one or more banks or other institutional lenders, as

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the same may be amended, extended, amended and restated, supplemented or otherwise modified or replaced from time to time.

      “Canadian Subsidiary” means any Subsidiary of Broan-NuTone Canada, Inc. and any Subsidiary of Holdings whose headquarters is located in Canada.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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(other than restrictions or limitations permitted under the “Limitation on Certain Restrictions Affecting Subsidiaries” covenant);

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

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

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

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

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

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

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

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

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

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

      “Equity Offering” means any public or private issuance by Holdings of Capital Stock (other than Redeemable Stock) of Holdings for cash.

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

      “Existing Indebtedness” means Indebtedness of Holdings and its Restricted Subsidiaries in existence on the Issue Date; provided, that all Indebtedness outstanding under the Nortek Credit Facility on the Issue Date shall not be Existing Indebtedness and shall be deemed to have been incurred under clause (iii) of the second paragraph under the “Limitation on Additional Indebtedness” covenant.

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

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

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

      “GAAP” means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, from time to time; provided, however, that with respect to the obligations of Holdings described under “Certain Covenants” and “Merger, Consolidation or Transfer of Assets” and the definitions used therein, GAAP shall be determined on the basis of such principles as in effect on the Issue Date.

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

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

      “Interest Rate Agreement” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement,

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interest rate collar agreement, interest rate hedge agreement, or other similar agreement or arrangement entered into in the ordinary course of business and designed to protect Holdings or any of its Restricted Subsidiaries against fluctuations in interest rates to or under which Holdings or any of its Restricted Subsidiaries is a party or a beneficiary thereof.

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

      “Issue Date” means November 24, 2003, the original issue date of the Notes.

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

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

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

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

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

      “Non-Recourse Debt” means Indebtedness (i) as to which neither Holdings or any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Holdings or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of Holdings or any of its Restricted Subsidiaries.

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

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

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

      “Permitted Investments” means any of the following:

      (i) Cash Equivalents;

      (ii) Existing Investments;

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

      (iv) guaranties by Restricted Subsidiaries of Holdings permitted under the “Limitation on Additional Indebtedness” covenant;

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

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

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

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

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

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

      (xi) so long as no Default or Event of Default shall have occurred and be continuing, other Investments made after the Issue Date not exceeding in the aggregate at any time outstanding (A) $40 million, if at the time of the making of such Investment the implied senior subordinated debt rating of Nortek is not BB+ or better by S&P or Ba1 or better by Moody’s, or (B) $50 million, if at the time of the making of such Investment the implied senior subordinated debt rating of Nortek is BB+ or better by S&P or Ba1 or better by Moody’s;

      (xii) any Lien permitted under the “Limitation on Liens” covenant; and

      (xiii) Investments by Restricted Subsidiaries of Holdings not exceeding in the aggregate $10 million at any one time outstanding in Cash Equivalents described in clause (ii) of the definition of such term in the Indenture; provided that for purposes of this clause (xiii) an instrument referred

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to in such clause (ii) may be issued by any commercial banking institution having capital and surplus of not less than $100 million.

      “Permitted Liens” means

      (i) Liens for taxes, assessments, governmental charges or claims that are not yet due or are being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

      (ii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings; provided that any reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

      (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security;

      (iv) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

      (v) easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of Holdings or any of its Subsidiaries, taken as a whole;

      (vi) Liens securing Purchase Money Obligations permitted to be incurred by the provisions of the Indenture;

      (vii) leases or subleases or licenses or sublicenses granted to others in the ordinary course of business of Holdings or any of its Restricted Subsidiaries, taken as a whole;

      (viii) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of Holdings or any of its Restricted Subsidiaries relating to such property or assets;

      (ix) any interest or title of a lessor in the property subject to any Capital Lease Obligation;

      (x) Liens arising from filing Uniform Commercial Code financing statements regarding leases;

      (xi) Liens on property of, or on shares of stock or Indebtedness of, any Person existing at the time (A) such Person becomes a Restricted Subsidiary of Holdings or (B) such Person or such property becomes a part of Holdings or any Restricted Subsidiary of Holdings;

      (xii) Liens in favor of Holdings or any Restricted Subsidiary of Holdings;

      (xiii) Liens securing any real property or other assets of Holdings or any Restricted Subsidiary of Holdings in favor of the United States of America or any State, or any department, agency, instrumentality or political subdivision thereof, in connection with the financing of industrial revenue bond facilities or of any equipment or other property designed primarily for the purpose of air or water pollution control; provided that any such Lien on such facilities, equipment or other property shall not apply to any other assets of Holdings or such Restricted Subsidiary of Holdings;

      (xiv) Liens arising from the rendering of a final judgment or order against Holdings or any Restricted Subsidiary of Holdings that does not give rise to an Event of Default;

      (xv) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

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      (xvi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

      (xvii) Liens encumbering customary initial deposits and margin deposits, and other Liens that are either within the general parameters customary in the industry and incurred in the ordinary course of business or otherwise permitted under the terms of the Nortek Credit Facility, in each case securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements; and

      (xviii) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by Holdings or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of Holdings and its Restricted Subsidiaries prior to the Issue Date.

      “Person” means any individual, corporation, partnership, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.

      “Principal Property” means any manufacturing or processing plant, warehouse or other building used by Holdings or any Restricted Subsidiary of Holdings, other than a plant, warehouse or other building that, in the good faith opinion of the Board of Directors as reflected in a Board Resolution, is not of material importance as of the date such Board Resolution is adopted to the businesses conducted by Holdings and its Subsidiaries, on a consolidated basis, or conducted by any Significant Subsidiary of Holdings.

      “Purchase Money Obligations” means any Indebtedness of Holdings or any of its Restricted Subsidiaries incurred to finance the acquisition or construction of any property or business (including Indebtedness incurred within one year following such acquisition or construction), including Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of Holdings or assumed by Holdings or a Restricted Subsidiary of Holdings in connection with the acquisition of assets from such Person; provided, however, that (i) any Lien on such Indebtedness shall not extend to any property other than the property so acquired or constructed and (ii) at no time shall the aggregate principal amount of outstanding Indebtedness secured thereby be increased.

      “Redeemable Stock” means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable before the Stated Maturity of the Notes), or upon the happening of any event, matures or is mandatorily redeemable or is redeemable at the sole option of the holder thereof, in whole or in part, prior to the Stated Maturity of the Notes.

      “Registration Rights Agreement” means the registration rights agreement dated as of the Issue Date of the Notes between Holdings and the Initial Purchasers named therein.

      “Restricted Subsidiary” means (i) when referring to a Subsidiary of Holdings, Nortek, (ii) any Subsidiary of Nortek in existence on the Issue Date, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of Holdings as provided in and in compliance with the definition of “Unrestricted Subsidiary,” (iii) any Subsidiary of Nortek (other than a Subsidiary that is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after the date of the Indenture, unless such Subsidiary shall have been designated as an Unrestricted Subsidiary by resolution of the Board of Directors of Holdings as provided in and in compliance with the definition of “Unrestricted Subsidiary” and (iv) any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the Board of Directors of Holdings; provided that immediately after giving effect to the designation referred to in clause (iv), no Default or Event of Default shall have occurred and be continuing and Nortek could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Cash Flow Coverage Ratio test set forth in clause (b) of the first paragraph of the “Limitation on Additional Indebtedness” covenant. Holdings shall evidence any such designation to the Trustee by promptly filing with the Trustee an Officers’ Certificate certifying that such designation has been made and stating that such designation complies with the requirements of the immediately preceding sentence.

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      “Senior Indebtedness” means all Indebtedness of Nortek whether outstanding on the Issue Date or thereafter incurred (unless, in the case of any particular Indebtedness, the instrument under which such Indebtedness is incurred expressly provides that such Indebtedness shall not be senior or superior in right of payment to any other Indebtedness of Nortek), and all Obligations of Nortek with respect thereto, but excluding: (i) any Indebtedness of Nortek to any of its Subsidiaries or other Affiliates; (ii) amounts owed for goods, materials or services purchased in the ordinary course of business or for compensation to employees; (iii) any Indebtedness in respect of any Capital Lease Obligation created, incurred, assumed or guaranteed prior to or, unless designated in the instrument evidencing such Capital Lease Obligation as “Senior Indebtedness,” after the Issue Date; (iv) any Indebtedness of Nortek represented by Redeemable Stock; and (v) any Indebtedness that is incurred in violation of the Indenture.

      “Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X promulgated by the SEC, as such regulation is in effect on the date of the Indenture, and shall always include Nortek.

      “Stated Maturity” means, with respect to any security or Indebtedness, the date specified therein as the fixed date on which the principal of such security or Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security or Indebtedness at the option of the holder thereof upon the happening of any contingency).

      “Subsidiary” of any Person means any corporation, partnership, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors or, in the case of a Person which is not a corporation, the members of the appropriate governing board or other group is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof.

      “Trustee” means the party named as the “Trustee” in the first paragraph of the Indenture until a successor replaces it pursuant to the applicable provisions of the Indenture and, thereafter, shall mean such successor.

      “Unrestricted Subsidiary” means, until such time as any of the following shall be designated as a Restricted Subsidiary of Holdings by the Board of Directors of Holdings as provided in and in compliance with the definition of “Restricted Subsidiary,” (i) any Subsidiary of Holdings (other than Nortek) or of a Restricted Subsidiary organized or acquired after the Issue Date that is designated concurrently with its organization or acquisition as an Unrestricted Subsidiary by resolution of the Board of Directors of Holdings, (ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted Subsidiary of Holdings (other than Nortek) that is designated as an Unrestricted Subsidiary by resolution of the Board of Directors of Holdings; provided that (a) immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing, (b) any such designation shall be deemed the making of a Restricted Payment at the time of such designation in an amount equal to the Fair Market Value of the Investment in such Subsidiary and shall be subject to the restrictions contained in the “Limitation on Restricted Payments” covenant, and (c) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold any Lien on any property of, Holdings or any other Restricted Subsidiary of Holdings that is not a Subsidiary of the Subsidiary to be so designated. Any Subsidiary formed or acquired after the Issue Date by Holdings that is not also a Subsidiary of Nortek shall be required to be designated and maintained as an Unrestricted Subsidiary, and the formation or acquisition of such Subsidiary shall be subject to the satisfaction of the conditions on designation set forth in clause (iii) of the prior sentence. A Person may be designated as an Unrestricted Subsidiary only if and for so long as such Person (i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to which neither Holdings nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to make any payment to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results, except to the extent any such direct or indirect obligation would then be permitted in

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accordance with the Limitation on Restricted Payments covenant; and (iii) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Holdings or any of its Restricted Subsidiaries. Nortek may not be designated as an Unrestricted Subsidiary. Holdings shall evidence any designation pursuant to clause (i) or (iii) of the first sentence hereof to the Trustee by filing with the Trustee within 45 days of such designation an Officers’ Certificate certifying that such designation has been made and that such designation complies with the requirements of the Indenture and all conditions thereto have been satisfied.

      “Wholly-Owned Subsidiary” of any Person means any Subsidiary of such Person to the extent the entire voting share capital of such Subsidiary (other than directors’ qualifying shares) is owned by such Person (either directly or indirectly through Wholly-Owned Subsidiaries).

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THE EXCHANGE OFFER

General

      We and the Initial Purchasers entered into a registration rights agreement (the “Registration Rights Agreement”) on the original issue date of the Outstanding Notes (“Issue Date”) under which we agreed that we will, at our expense, for the benefit of the Holders, (i) use our reasonable best efforts to file, within 180 days after the Issue Date (the “Filing Date”), a registration statement on an appropriate registration form (the “Exchange Offer Registration Statement”) with respect to the exchange offer to exchange the Outstanding Notes for Exchange Notes, which Exchange Notes will have terms substantially identical in all material respects to the Outstanding Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions) and (ii) use our reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 240 days after the Issue Date. Upon the Exchange Offer Registration Statement being declared effective, we will offer the Exchange Notes in exchange for surrender of the Outstanding Notes. We will keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the Holders. For each of the Outstanding Notes surrendered to us pursuant to the exchange offer, the Holder who surrendered such Outstanding Note will receive an Exchange Note having a principal amount equal to that of the surrendered Outstanding Note. Interest on each Exchange Note will accrete (A) from the later of (i) the last interest payment date on which interest was paid on the Outstanding Note surrendered in exchange therefor, or (ii) if the Outstanding Note is surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on such Outstanding Note, from the Issue Date.

      Under existing interpretations of the SEC contained in several no-action letters to third parties, the Exchange Notes will be freely transferable by Holders thereof (other than our affiliates) after the exchange offer without further registration under the Securities Act; provided, however, that each Holder that wishes to exchange its Outstanding Notes for Exchange Notes will be required to represent (i) that any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) that at the time of the commencement or consummation of the exchange offer it has no intention to engage in, nor any arrangement or understanding with any person to participate in, the distribution (within the meaning of Securities Act) of the Exchange Notes in violation of the Securities Act, (iii) that it is not an “affiliate” (as defined in Rule 405 promulgated under Securities Act) of Holdings, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of Exchange Notes and (v) if such Holder is a broker-dealer (a “Participating Broker-Dealer”) and will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making or other trading activities, that Participating Broker-Dealer will deliver a prospectus in connection with any resale of such Exchange Notes. We will agree to make available, during the period required by the Securities Act, a prospectus meeting the requirements of the Securities Act for use by Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements for use in connection with any resale of Exchange Notes.

      If (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, we are not permitted to effect the exchange offer, (ii) the exchange offer is not consummated within 285 days of the Issue Date, (iii) in certain circumstances, certain Holders of unregistered Exchange Notes so request, or (iv) in the case of any Holder that participates in the exchange offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as our affiliate within the meaning of the Securities Act), then in each case, we will (x) promptly deliver to the Holders and the Indenture trustee (the “Trustee”) written notice thereof and (y) at our sole expense, (a) as promptly as practicable, file a shelf registration statement covering resales of the Outstanding Notes (the “Shelf Registration Statement”), (b) use our reasonable best efforts to keep effective the Shelf Registration Statement until the earlier of two years after the Issue Date or such time as all of the applicable Notes

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have been sold thereunder. We will, in the event that a Shelf Registration Statement is filed, provide to each Holder copies of the prospectus that is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement for the Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Notes. A Holder that sells Notes pursuant to the Shelf Registration Statement will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such a Holder (including certain indemnification rights and obligations).

      If we fail to meet the targets listed above, then additional interest (the “Additional Interest”) shall become payable in respect of the applicable Notes as follows:

      (i) if (A) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement is filed with the SEC on or prior to 180 days after the Issue Date or (B) notwithstanding that we have consummated or will consummate an exchange offer, we are required to file a Shelf Registration Statement and such Shelf Registration Statement is not filed on or prior to the date required by the Registration Rights Agreement, then commencing on the day after either such required filing date, Additional Interest shall accrue on the principal amount of the affected Notes at a rate of 0.25% per annum for the first 90 days immediately following each such filing date, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or

      (ii) if (A) neither the Exchange Offer Registration Statement nor a Shelf Registration Statement is declared effective by the SEC on or prior to 240 days after the Issue Date or (B) notwithstanding that we have consummated or will consummate an exchange offer, we are required to file a Shelf Registration Statement and such Shelf Registration Statement is not declared effective by the SEC on or prior to the 60th day following the date such Shelf Registration Statement was filed, then, commencing on the day after either such required effective date, Additional Interest shall accrue on the principal amount of the affected Outstanding Notes at a rate of 0.25% per annum for the first 90 days immediately following such date, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or

      (iii) if (A) we have not exchanged Exchange Notes for all Outstanding Notes validly tendered in accordance with the terms of the exchange offer on or prior to the 45th day after the date on which the Exchange Offer Registration Statement was declared effective or (B) if applicable, the Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of the Issue Date (other than after such time as all Notes have been disposed of thereunder), then Additional Interest shall accrue on the principal amount of the affected Notes at a rate of 0.25% per annum for the first 90 days commencing on (x) the 46th day after such effective date, in the case of (A) above, or (y) the day such Shelf Registration Statement ceases to be effective, in the case of (B) above, such Additional Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period;

provided, however, that the Additional Interest rate on the Notes may not accrue under more than one of the foregoing clauses (i) – (iii) at any one time and at no time shall the aggregate amount of Additional Interest accruing exceed in the aggregate 1.0% per annum; provided, further, however, that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (ii) above), (3) upon the exchange of Exchange Notes for all Outstanding Notes tendered (in the case of clause (iii)(A) above), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii)(B) above), or (4) upon the second anniversary of the Issue Date (in the case of a default related to a Shelf Registration Statement only under any of clauses (i) through (iii) above), Additional Interest on the

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Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. Under certain circumstances, we may delay filing or delay or temporarily cease to maintain the effectiveness of the Shelf Registration Statement. Any such delay or suspension shall not result in a registration default requiring payment of Additional Interest.

      All Additional Interest that accrues on or prior to November 15, 2007 shall be added to the Accreted Value of each Note, and all additional interest that accrues thereafter shall be payable in cash to Holders on each scheduled interest payment date.

      In the event the exchange offer is consummated, we will not be required to file a shelf registration statement relating to any Outstanding Notes other than those held by persons not eligible to participate in the exchange offer, and the interest rate on such Outstanding Notes will remain at its initial level of 10%. The exchange offer shall be deemed to have been consummated upon the earlier to occur of (i) our having issued Exchange Notes for all Outstanding Notes (other than Outstanding Notes held by persons not eligible to participate in the exchange offer) pursuant to the exchange offer and (ii) our having exchanged, pursuant to the exchange offer, Exchange Notes for all Outstanding Notes that have been tendered and not withdrawn on the Expiration Date (defined below in “— Expiration Dates, Extensions, and Amendments”).

      Following the completion of the exchange offer, Holders of Outstanding Notes seeking liquidity in their investment would have to rely on exemptions to registration requirements under the securities laws, including the Securities Act. See “Risk Factors — Your failure to exchange your notes in the exchange offer will restrict your ability to resell them.”

      Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept all Outstanding Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration Date of the exchange offer. We will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of Outstanding Notes accepted in the exchange offer. Holders may tender some or all of their Outstanding Notes pursuant to the exchange offer in denominations of $1,000 and integral multiples thereof.

      Based on no-action letters issued by the Staff of the SEC to third parties, we believe that the Exchange Notes issued pursuant to the exchange offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by any Holder thereof (other than (i) a broker-dealer who purchased such Outstanding Notes directly from us to resell or (ii) a person that is an “affiliate” of ours within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that the Holder is acquiring the Exchange Notes in its ordinary course of business, is not one of our affiliates and is not participating, and has no arrangements or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Outstanding Notes wishing to accept the exchange offer must represent to us that such conditions have been met. If our belief is inaccurate, Holders who transfer Exchange Notes in violation of the prospectus delivery provisions of the Securities Act and without an exemption from registration may bear liability under the Securities Act. We do not assume or indemnify Holders against such liability.

      Each broker-dealer that receives Exchange Notes in exchange for Outstanding Notes held for its own account, as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, such broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by such broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes. We have agreed that, for a period of 180 days after the Expiration Date, we will make this prospectus and any amendment or supplement to this prospectus available to any such broker-dealer for use in connection with any such resale. See “Plan of Distribution.”

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      As of the date of this prospectus, $515 million aggregate principal amount at maturity of the Outstanding Notes is outstanding. In connection with the issuance of the Outstanding Notes, we arranged for the Outstanding Notes initially purchased by qualified institutional buyers to be issued and transferable in book-entry form through the facilities of DTC, acting as depositary. The Exchange Notes will also be issuable and transferable in book-entry form through DTC.

      This prospectus, together with the accompanying letter of transmittal, is being sent to all registered Holders of the Outstanding Notes as of the close of business on                 , 2004, which is the record date for purposes of the exchange offer. We fixed the record date accordingly solely for reasons of administration.

      We shall be deemed to have accepted validly tendered Outstanding Notes when, as and if we have given oral or written notice thereof to the exchange agent. See “— Exchange Agent.” The exchange agent will act as agent for the tendering Holders of Outstanding Notes for the purpose of receiving Exchange Notes from us and delivering Exchange Notes to such Holders.

      If any tendered Outstanding Notes are not accepted for exchange because of an invalid tender or the occurrence of certain other events set forth herein, certificates for any such unaccepted Outstanding Notes will be returned, without expense, to the tendering Holder thereof as promptly as practicable after the Expiration Date.

      Holders of Outstanding Notes who tender in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Outstanding Notes pursuant to the exchange offer. We will pay all charges and expenses, other than certain applicable taxes in connection with the exchange offer. See “— Fees and Expenses.”

      The Holders of Outstanding Notes do not have any appraisal or dissenters’ rights under the General Corporation Law of Delaware or the Indenture governing the Notes.

Expiration Dates, Extensions, and Amendments

      The term “Expiration Date” shall mean                     , 2004 unless we, in our sole discretion, extend the exchange offer, in which case the term “Expiration Date” shall mean the latest date to which the exchange offer is extended.

      In order to extend the Expiration Date, we will notify the exchange agent of any extension by oral or written notice and will mail to the record Holders of Outstanding Notes an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that we are extending the exchange offer for a specified period of time.

      We reserve the right (i) to delay acceptance of any Outstanding Notes, to extend the exchange offer or to terminate the exchange offer and to refuse to accept Outstanding Notes not previously accepted, if any of the conditions set forth in this prospectus under “— Termination” shall have occurred and shall not have been waived by us (if permitted to be waived by us), by giving oral or written notice of such delay, extension or termination to the exchange agent, and (ii) to amend the terms of the exchange offer in any manner deemed by us to be advantageous to the Holders of the Outstanding Notes. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment in a manner reasonably calculated to inform the record Holders of the Outstanding Notes of such amendment and, if necessary, the Expiration Date will be extended.

      Without limiting the manner by which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to a financial service.

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Procedure for Tendering

      To tender in the exchange offer, a Holder must complete, sign and date the letter of transmittal, or a facsimile of the letter, have the signature on it guaranteed if required by the letter of transmittal and mail or otherwise deliver the letter of transmittal or facsimile of it, together with the Outstanding Notes (unless the tender is being effected pursuant to the procedure for book-entry transfer described below) and any other required documents, to the exchange agent so that it is received by the exchange agent prior to 5:00 p.m., New York City time, on the Expiration Date.

      Any financial institution that is a participant in DTC’s Book-Entry Transfer Facility system may make book-entry delivery of the Outstanding Notes by causing DTC to transfer those Outstanding Notes into the exchange agent’s account in accordance with DTC’s Automated Tender Offer Program, or ATOP. To tender in the exchange offer, the DTC participant must transmit its acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the exchange agent’s account at DTC. DTC will then send a computer-generated message, or Agent’s Message, to the exchange agent for its acceptance in which the DTC participant acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the letter of transmittal as fully as if it had completed the information required by the letter of transmittal and executed and delivered the letter of transmittal to the exchange agent. Delivery of the Agent’s Message by DTC to the exchange agent will satisfy the terms of the exchange offer as to execution and delivery of a letter of transmittal and must occur prior to 5:00 p.m., New York City time, on the Expiration Date.

      The tender by a Holder of Outstanding Notes will constitute an agreement between that Holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal.

      Delivery of all documents must be made to the exchange agent at its address set forth in this prospectus. Holders may also request that their respective brokers, dealers, commercial banks, trust companies, or nominees effect the tender for those Holders.

      The method of delivery of Outstanding Notes and the letters of transmittal and all other required documents to the exchange agent is at the election and risk of the Holders. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No letter of transmittal or Outstanding Notes should be sent to us.

      Only a Holder of Outstanding Notes may tender those Outstanding Notes in the exchange offer. The term “Holder” with respect to the exchange offer means any person in whose name Outstanding Notes are registered on the books of the company or any other person who has obtained a properly completed bond power from the registered Holder, or any person whose Outstanding Notes are held of record by DTC who desires to deliver such Outstanding Notes by book-entry transfer at DTC.

      Any beneficial Holder whose Outstanding Notes are registered in the name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact that registered Holder promptly and instruct that registered Holder to tender on his behalf. If the beneficial Holder wishes to tender on his own behalf, that beneficial Holder must, prior to completing and executing the letter of transmittal and delivering his Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in the Holder’s name or obtain a properly completed bond power from the registered Holder. The transfer of record ownership may take considerable time.

      Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act (an “Eligible Guarantor Institution”) unless the Outstanding Notes tendered pursuant thereto are tendered (i) by a registered Holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal or (ii) for the account of an Eligible Guarantor Institution.

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      If the letter of transmittal is signed by a person other than the registered Holder of any Outstanding Notes listed in that letter, those Outstanding Notes must be endorsed or accompanied by appropriate bond powers, which authorize that person to tender the Outstanding Notes on behalf of the registered Holder, in either case signed as the name of the registered Holder or Holders appears on the Outstanding Notes, and also must be accompanied by opinions of counsel, certifications and other information required by us. Signatures on the Outstanding Notes or bond powers must be guaranteed by an Eligible Guarantor Institution.

      If the letter of transmittal or any Outstanding Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing, and unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal.

      All the questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered Outstanding Notes will be determined by us in our sole discretion, which determinations will be final and binding. We reserve the absolute right to reject any and all Outstanding Notes not validly tendered or any Outstanding Notes our acceptance of which would, in the opinion of counsel for us, be unlawful. We also reserve the absolute right to waive any irregularities or conditions of tender as to particular Outstanding Notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Notes must be cured within such time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Notes nor shall any of them incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Outstanding Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the exchange agent to the tendering Holder of such Outstanding Notes unless otherwise provided in the letter of transmittal, as soon as practicable following the Expiration Date.

      In addition, we reserve the right in our sole discretion to (a) purchase or make offers for any Outstanding Notes that remain outstanding subsequent to the Expiration Date, or, as set forth under “— Termination,” to terminate the exchange offer and (b) to the extent permitted by applicable law, purchase Outstanding Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the exchange offer.

      By tendering, each Holder of Outstanding Notes will represent to us that among other things, the Exchange Notes acquired pursuant to the exchange offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the Holder, that neither the Holder nor such other person intends to distribute or has an arrangement or understanding with any person to participate in the distribution of the Exchange Notes and that neither the Holder nor such other person is our “affiliate” within the meaning of Rule 405 under the Securities Act.

Guaranteed Delivery Procedure

      Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available, (ii) who cannot deliver their Outstanding Notes, the letter of transmittal, and any other required documents to the exchange agent prior to 5:00 p.m., New York City time, on the Expiration Date, or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if:

      (a) the tender is made through an Eligible Guarantor Institution;

      (b) prior to 5:00 p.m., New York City time, on the Expiration Date, the exchange agent receives from such Eligible Guarantor Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and

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address of the Holder of the Outstanding Notes, the certificate number or numbers of such Outstanding Notes and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the Expiration Date, the letter of transmittal (or facsimile thereof), together with the certificate(s) representing the Outstanding Notes to be tendered in proper form for transfer and any other documents required by the letter of transmittal, will be deposited by the Eligible Guarantor Institution with the exchange agent; and

      (c) such properly completed and executed letter of transmittal (or facsimile thereof), together with the certificate(s) representing all tendered Outstanding Notes in proper form for transfer (or confirmation of a book-entry transfer into the exchange agent’s account at DTC of Outstanding Notes delivered electronically), and all other documents required by the letter of transmittal are received by the exchange agent within five business days after the Expiration Date.

Withdrawal of Tenders

      Except as otherwise provided herein, tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.

      To withdraw a tender of Outstanding Notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth in this prospectus prior to 5:00 p.m., New York City time, on the Expiration Date and prior to acceptance for exchange thereof by us. The notice of withdrawal must (i) specify the name of the person having deposited the Outstanding Notes to be withdrawn (the “Depositor”), (ii) identify the Outstanding Notes to be withdrawn (including the certificate number or numbers and principal amount of such Outstanding Notes or, in the case of Outstanding Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited), (iii) include a statement that the holder is withdrawing its election to have its Outstanding Notes exchanged, (iv) be signed by the Depositor in the same manner as the original signature on the letter of transmittal, including any required signature guarantees or be accompanied by documents of transfers sufficient to permit the Trustee with respect to the Outstanding Notes to register the transfer of such Outstanding Notes into the name of the Depositor withdrawing the tender and (v) specify the name in which any such Outstanding Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices will be determined by us, and our determination shall be final and binding on all parties. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no Exchange Notes will by issued with respect thereto unless the Outstanding Notes so withdrawn are validly tendered. Any Outstanding Notes which have been tendered but which are not accepted for exchange will be returned to the Holder thereof without cost to such Holder as promptly as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Outstanding Notes may be tendered by following one of the procedures described above under “— Procedure for Tendering” at any time prior to the Expiration Date.

Termination

      Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or issue Exchange Notes for, any Outstanding Notes not previously accepted for exchange, and may terminate or amend the exchange offer as provided herein before the acceptance of such Outstanding Notes if any law, statute, rule or regulation is adopted or enacted, or any existing law, statute, rule or regulation is interpreted by the Staff of the SEC in a manner, which, in our judgment, might materially impair our ability to proceed with the exchange offer.

      If we determine that we may terminate the exchange offer, as set forth above, we may (i) refuse to accept any Outstanding Notes and return any Outstanding Notes that have been tendered to the Holders thereof, (ii) extend the exchange offer and retain all Outstanding Notes that have been tendered prior to the expiration of the exchange offer, subject to the rights of the Holders of tendered Outstanding Notes to

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withdraw their tendered Outstanding Notes, or (iii) waive such termination event with respect to the exchange offer and accept all properly tendered Outstanding Notes that have not been withdrawn.

Consequences of Failure to Exchange

      Holders of Outstanding Notes who do not exchange their Outstanding Notes for Exchange Notes in the exchange offer will remain subject to the restrictions on transfer of such Outstanding Notes:

•  as set forth in the legend printed on the Outstanding Notes as a consequence of the issuance of the Outstanding Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and

•  otherwise set forth in the offering memorandum distributed in connection with the private offering of the Outstanding Notes.

      In general, you may not offer or sell the Outstanding Notes unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the Registration Rights Agreement, we do not intend to register resales of the outstanding notes under the Securities Act. Based on interpretations of the SEC staff, Exchange Notes issued pursuant to the exchange offer may be offered for resale, resold or otherwise transferred by their Holders, other than any such Holder that is our “affiliate” within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the Holders acquired the Exchange Notes in the ordinary course of the Holders’ business and the Holders have no arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired in the exchange offer. Any Holder who tenders in the exchange offer for the purpose of participating in a distribution of the exchange notes:

•  could not rely on the applicable interpretations of the SEC; and

•  must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction.

Accounting Treatment

      We will record the Exchange Notes in our accounting records at the same carrying value as the Outstanding Notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will record the expenses of the exchange offer as incurred. The costs of the exchange offer will be amortized over the term of the Exchange Notes.

Exchange Agent

      U.S. Bank National Association, the Trustee under the Indenture governing the Notes, has been appointed as exchange agent for the exchange offer. Questions and requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent addressed as follows:

By Mail or Hand Delivery:	U.S. Bank National Association
	60 Livingston Avenue
	1st Floor — Bond Drop Window
	St. Paul, Minnesota 55104
	Facsimile Transmission: 800-934-6802
	Confirm by Telephone:  651-495-8158

Fees and Expenses

      The expense of soliciting tenders pursuant to the exchange offer will be borne by us. We will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. The

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principal solicitation for tenders pursuant to the exchange offer is being made by mail. Additional solicitations may be made by officers and regular employees of ours and our affiliates in person, by facsimile or telephone.

      The expenses to be incurred in connection with the exchange offer, including fees and expenses of the exchange agent and trustee and accounting and legal fees, will be paid by us.

      We will pay all transfer taxes, if any, applicable to the exchange of Outstanding Notes pursuant to the exchange offer. If, however, certificates representing Exchange Notes or Outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any other person other than the registered Holder of the Outstanding Notes tendered, or if tendered Outstanding Notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of Outstanding Notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder.

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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

In General

      The following is a summary of certain U.S. federal income tax (and, with respect to non-U.S. Holders, estate tax) consequences to you of the ownership and disposition of the Exchange Notes, and where so indicated, the Outstanding Notes. This summary is subject to the following limitations and assumptions:

•  It is based on the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed U.S. Treasury Department regulations, judicial decisions and administrative pronouncements, all of which are subject to change (possibly with retroactive effect) or to different interpretations.

•  It assumes that you acquire the Exchange Notes pursuant to the exchange offer.

•  It assumes that you hold the Exchange Notes as capital assets within the meaning of Section 1221 of the Code (that is, for investment purposes).

•  It does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances (such as the application of the alternative minimum tax) or that may be relevant to you because you are subject to special rules, such as rules applicable to financial institutions, tax-exempt entities, insurance companies, dealers in securities or foreign currencies, persons holding the Exchange Notes as part of a hedge, straddle, “constructive sale,” “conversion” or other integrated transaction, or former U.S. citizens or long-term residents subject to taxation as expatriates under Section 877 of the Code.

•  Except as expressly provided below, it does not discuss the effect of any other federal tax laws (i.e., estate and gift tax), or any state, local or foreign laws.

•  It does not discuss tax consequences to an owner of Exchange Notes who is a partnership or other pass-through entity or who holds the Exchange Notes through a partnership or other pass-through entity.

•  It assumes that, for U.S. federal income tax purposes:

•  the Exchange Notes are properly characterized as debt;

•  the Exchange Notes are not “applicable high yield discount obligations;”

•  the Exchange Notes will not be integrated with any other financial instrument; and

•  subject to the discussion below, the Exchange Notes are not “contingent payment debt instruments” based on our view that certain payment contingencies with respect to the Exchange Notes are remote or incidental.

      Please consult your own tax advisor regarding the application of U.S. federal income tax laws to your particular situation and the consequences of federal estate and gift tax laws, state, local and foreign laws, and tax treaties.

      As used in this section, a U.S. Holder of an Exchange Note means a beneficial owner of an Exchange Note that is, for U.S. federal income tax purposes:

•  a citizen or resident of the United States;

•  a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

•  an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

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•  a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) a valid election is in place to treat the trust as a U.S. person.

      As used in this section, a non-U.S. Holder means a beneficial owner of an Exchange Note that is not a U.S. Holder.

Exchange Offer

      The exchange of Outstanding Notes for Exchange Notes will not be a taxable event. Instead, your adjusted tax basis in the Outstanding Notes will carry over to the Exchange Notes received and the holding period of the Exchange Notes will include the holding period of the Outstanding Notes surrendered. In general, your adjusted tax basis is the cost of the Outstanding Notes to you, increased by any OID included in your income with respect to the Outstanding Notes and decreased by the amount of any cash payments you have received with respect to the Outstanding Notes.

Tax Consequences to U.S. Holders

      This section applies to you if you are a U.S. Holder.

Interest and Original Issue Discount

      The Exchange Notes are issued with original issue discount (“OID”) in an amount equal to the difference between their “stated redemption price at maturity” (the sum of all amounts payable on the Notes other than any “qualified stated interest”) and their “issue price.” You should be aware that you generally must include OID in gross income in advance of the receipt of cash attributable to that income, but will not be taxed again when such cash is received.

      For tax purposes, the “issue price” of the Exchange Notes is the first offering price to the public at which a substantial amount of the Outstanding Notes were sold. The term “qualified stated interest” means stated interest that is unconditionally payable in cash or in property (other than debt instruments issued by us or a related party) at least annually throughout the term of a note at a single fixed rate or, subject to certain conditions, based on one or more interest indices. Because the Exchange Notes do not provide for stated cash interest to be paid until May 15, 2008, none of the stated interest payments on the Exchange Notes are qualified stated interest.

      If you are an initial purchaser of an Outstanding Note, the amount of the OID you should include in income generally will equal the sum of the daily accruals of the OID for the related Exchange Note for each day during the taxable year, or portion of the taxable year, in which you hold the Exchange Note. The daily accrual for a particular accrual period is determined by allocating the OID allocable to that accrual period pro rata to each day of the accrual period. An accrual period may be of any length and the accrual periods may vary in length over the term of the Exchange Notes, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs either on the first day of an accrual period or on the final day of an accrual period.

      The amount of OID allocable to an accrual period with respect to an Exchange Note is equal to the product of the “adjusted issue price” of the Exchange Note at the beginning of the accrual period and its yield to maturity (computed generally on a constant yield method and compounded at the end of each accrual period, taking into account the length of the particular accrual period). The “adjusted issue price” of an Exchange Note at the beginning of any accrual period is the sum of the issue price of the Exchange Note plus the amount of OID allocable to all prior accrual periods reduced by any payments you received on the Exchange Note.

      Under these rules, you generally will have to include in income increasingly greater amounts of OID in successive accrual periods.

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      If you purchased Outstanding Notes subsequently to the initial offering for an amount that is in excess of the adjusted issue price of such Notes as of the purchase date, but less than or equal to the face value of such Notes, you will have purchased the related Exchange Notes at an acquisition premium. In that case, the amount of OID which you must include in your gross income for any taxable year (or portion thereof), will be reduced (but not below zero) by the portion of the acquisition premium allocated to the period.

      Payments received by you upon the mandatory retirement of a portion of each Exchange Note in 2009 will be treated as a tax-free payment of OID to the extent of all then previously accrued and unpaid OID with respect to such Exchange Note in its entirety (including the portion not redeemed) and thereafter as a repayment of the principal with respect to such Exchange Note in its entirety.

      The rules regarding OID are complex and the rules described above may not apply in all cases. Accordingly, you should consult your own tax adviser regarding their application.

Certain Contingent Payments

      Under the terms of the Exchange Notes, we are obligated to pay you amounts in excess of the Accreted Value of the Exchange Notes upon a change in control. Although the matter is not free from doubt, we intend to take the position that the payment of such additional amounts is a “remote” or “incidental” contingency and that the additional amounts should be taxable as ordinary interest at the time they are received or accrued in accordance with your regular accounting method. Our determination of whether a contingency is remote will be binding on you unless you explicitly disclose your contrary position to the Internal Revenue Service (the “IRS”) in the manner required by the applicable Treasury Regulations. Our determination is not, however, binding on the IRS, and if the IRS successfully challenged this determination, you could be required to accrue interest income on the Exchange Notes at a rate higher than the stated interest rate on the Exchange Notes.

Sale, Exchange or Retirement of the Notes

      Subject to the discussion below, on any sale, exchange or retirement of an Exchange Note:

•  You will generally have taxable gain or loss equal to the difference between the amount received by you (including amounts representing accrued and unpaid OID) and your adjusted tax basis in the Exchange Note.

•  Your gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if you held the Exchange Note for more than one year. Long-term capital gain recognized by an individual or other non- corporate U.S. Holder generally is subject to a reduced U.S. federal income tax rate. The deductibility of capital losses is subject to certain limitations.

Market Discount

      If you have purchased Outstanding Notes for an amount less than their adjusted issue price, the difference is treated as market discount. Subject to a de minimis exception, gain realized on the maturity, sale, exchange or retirement of a market discount note will be treated as ordinary income to the extent of any accrued market discount not previously recognized (including, in the case of an Exchange Note, any market discount accrued on the related Outstanding Note). You may elect to include market discount in income currently as it accrues, on either a ratable or constant yield method. In that case, your tax basis in your Exchange Notes will increase by such income inclusions. An election to include market discount in income currently, once made, will apply to all market discount obligations acquired by you during the taxable year of the election and thereafter, and may not be revoked without consent of the IRS. If you do not make such an election, in general, all or a portion of your interest expense on any indebtedness incurred or continued in order to purchase or carry your Exchange Notes may be deferred until the maturity of the Exchange Notes, or certain earlier dispositions. Unless you elect to accrue market discount

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under a constant yield method, any market discount will accrue ratably during the period from the date of acquisition of the related Outstanding Note to its maturity date.

      You are urged to consult your own tax adviser regarding the market discount rules.

Information Reporting and Backup Withholding

      Under the tax rules concerning information reporting and backup withholding to the IRS:

•  If you hold the Exchange Notes through a broker or other securities intermediary, the intermediary must provide information to the IRS and to you on IRS Form 1099 concerning certain payments of principal and interest (including any OID) paid on the Exchange Notes, unless an exemption applies.

•  Similarly, unless an exemption applies, you must provide the intermediary or us with your Taxpayer Identification Number (“TIN”) for use in reporting information to the IRS. If you are an individual, this is your social security number. You are also required to comply with other IRS requirements concerning information reporting, including a certification that you are not subject to backup withholding and that you are a U.S. person.

•  If you are subject to these requirements but do not comply, the intermediary must withhold a percentage of all amounts payable to you on the Exchange Notes, including principal payments. Under current law, this percentage will be 28% through 2010, and 31% thereafter. This is called backup withholding. Backup withholding may also apply if we are notified by the IRS that such withholding is required or that the TIN you provided is incorrect.

•  Backup withholding is not an additional tax. You may use the withheld amounts, if any, as a credit against your federal income tax liability.

•  All individuals are subject to these requirements. Some non-individual Holders, including all corporations, tax-exempt organizations and individual retirement accounts, are exempt from these requirements.

Tax Consequences to Non-U.S. Holders

      This section applies to you if you are a non-U.S. Holder.

Interest and OID

      Subject to the discussion below concerning effectively connected income and backup withholding, payments of interest and OID on the Exchange Notes by us or any paying agent to you will not be subject to U.S. federal withholding tax, provided that you satisfy one of two tests.

•  The first test (the “portfolio interest exception”) is satisfied if:

•  you do not own, actually or constructively, 10% or more of the combined voting power of all classes of our stock entitled to vote,

•  you are not a controlled foreign corporation (within the meaning of the Code) that is related, directly or indirectly, to us,

•  you are not a bank receiving interest or OID on the Exchange Notes on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of your trade or business,

•  you certify to us or our paying agent on IRS Form W-8BEN (or appropriate substitute form) under penalties of perjury, that you are not a U.S. person. If you hold the Exchange Notes through a financial institution or other agent acting on your behalf, you will be required to provide appropriate documentation to the agent and your agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries.

•  The second test is satisfied if you are otherwise entitled to the benefits of an income tax treaty under which such interest and OID is exempt from U.S. federal withholding tax, and you or your

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agent provides to us a properly executed IRS Form W-8BEN (or an appropriate substitute form evidencing eligibility for the exemption).

      Payments of interest and OID on the Exchange Notes that do not meet the above-described requirements (and are not effectively connected income) will be subject to a U.S. federal income tax of 30% (or such lower rate provided by an applicable income tax treaty if you establish that you qualify to receive the benefits of such treaty) collected by means of withholding. However, if you have purchased Exchange Notes with acquisition premium please see your tax adviser regarding the application of the acquisition premium rules.

Sale, Exchange or Retirement of the Exchange Notes

      Subject to the discussion below concerning effectively connected income and backup withholding, you will not be subject to U.S. federal income tax on any gain (including gain attributable to market discount) realized on any other sale, exchange or retirement of an Exchange Note unless you are an individual, you are present in the United States for at least 183 days during the year in which you dispose of the Exchange Note, and other conditions are satisfied.

Effectively Connected Income

      The preceding discussion assumes that the interest, OID and gain received by you is not effectively connected with the conduct by you of a trade or business in the United States. If you are engaged in a trade or business in the United States and your investment in an Exchange Note is effectively connected with such trade or business:

•  You will be exempt from the 30% withholding tax on interest and OID (provided a certification requirement, generally on IRS Form W-8ECI, is met) and will instead generally be subject to regular U.S. federal income tax on any interest, OID and gain with respect to the Exchange Notes in the same manner as if you were a U.S. Holder.

•  If you are a foreign corporation, you may also be subject to an additional branch profits tax of 30% or such lower rate provided by an applicable income tax treaty if you establish that you qualify to receive the benefits of such treaty.

•  If you are eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax only if it is also attributable to a permanent establishment maintained by you in the United States.

U.S. Federal Estate Tax

      An Exchange Note held or beneficially owned by an individual who, for estate tax purposes, is not a citizen or resident of the United States at the time of death will not be includable in the decedent’s gross estate for U.S. estate tax purposes, provided that (i) such Holder or beneficial owner did not at the time of death actually or constructively own 10% or more of the combined voting power of all of our classes of stock entitled to vote, and (ii) at the time of death, payments with respect to such Exchange Note would not have been effectively connected with the conduct by such Holder of a trade or business in the United States. In addition, the U.S. estate tax may not apply with respect to such Exchange Note under the terms of an applicable estate tax treaty.

Information Reporting and Backup Withholding

      U.S. rules concerning information reporting and backup withholding applicable to non-U.S. Holders are as follows:

•  Payments of interest and OID you receive will be automatically exempt from the usual backup withholding rules if such payments are subject to the 30% withholding tax on interest or if they are exempt from that tax by application of a tax treaty or the portfolio interest exception. The exemption does not apply if the withholding agent or an intermediary knows or has reason to know that you should be subject to the usual information reporting or backup withholding rules. In

143

addition, information reporting may still apply to payments of interest and OID (on Form 1042-S) even if certification is provided and the interest and OID is exempt from the 30% withholding tax.

•

Proceeds you receive on a sale (including a redemption) of your Exchange Notes through a broker may be subject to information reporting and/or backup withholding if you are not eligible for an exemption, or do not provide the certification described above. In particular, information reporting and backup withholding may apply if you use the U.S. office of a broker, and information reporting (but generally not backup withholding) may apply if you use the foreign office of a broker that has certain connections to the United States.

144

PLAN OF DISTRIBUTION

      Each broker-dealer that receives Exchange Notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of those Exchange Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes where the Outstanding Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the Expiration Date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resales. In addition, we agreed, with exceptions, that we would not for a period of 180 days from                     , 2004, the date of the prospectus distributed in connection with the sale of the Outstanding Notes, directly or indirectly offer, sell, grant any options to purchase or otherwise dispose of any debt securities other than in connection with this exchange offer.

      We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an “underwriter” within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

      The initial purchasers of the Outstanding Notes have advised us that following completion of the exchange offer they intend to make a market in the Exchange Notes to be issued in the exchange offer. However, the initial purchasers are under no obligation to do so and any market activities with respect to the Exchange Notes may be discontinued at any time.

LEGAL MATTERS

      The validity of the issuance of the Exchange Notes offered by this prospectus will be passed upon for us by Ropes & Gray LLP, Boston, Massachusetts. Some partners of Ropes & Gray LLP are members of RGIP, LLC, which owns 5,434 shares of Class A common stock, $1.00 par value per share, of Holdings.

EXPERTS

      The consolidated financial statements of Nortek Holdings, Inc. and its subsidiaries as of December 31, 2003 and 2002, and for the periods from January 10, 2003 to December 31, 2003, the period January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002, appearing in this prospectus and registration statement have been audited by Ernst & Young, LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

145

WHERE YOU CAN FIND MORE INFORMATION

      We have filed a registration statement on Form S-4 under the Securities Act with the SEC with respect to the issuance of the Exchange Notes. This prospectus, which is included in the registration statement, does not contain all of the information included in the registration statement. Certain parts of this registration statement are omitted in accordance with the rules and regulations of the SEC. For further information about us and the Exchange Notes, we refer you to the registration statement. You should be aware of the statements made in this prospectus as to the contents of any agreement or other document filed as an exhibit to the registration statement are not complete. Although we believe that we have summarized the material terms of these documents in the prospectus, these statements are qualified in their entirety by reference to the full and complete text of the related documents.

      We have agreed that, whether or not we are required to do so by the SEC, for so long as any of the Exchange Notes remain outstanding, we will furnish to the Holders of the Exchange Notes within the time periods specified in the rules and regulations of the SEC:

      (1) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if we were required to file these forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and, with respect to the annual information only, a report thereon by our independent certified public accountants; and

      (2) all current reports that would be required to be filed with the SEC on Form 8-K if we were required to file these reports.

      Any reports or documents we file with the SEC, including the registration statement, may be inspected and copied at the Public Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these reports or other documents may be obtained at prescribed rates from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) 732-0330. In addition, the SEC maintains a web site that contains reports and other information that is filed through the SEC’s Electronic Data Gathering Analysis and Retrieval System. The web site can be accessed at http://www.sec.gov.

146

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Consolidated Statement of Operations for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001		F-2
Consolidated Balance Sheet as of December 31, 2003 and 2002		F-3
Consolidated Statement of Cash Flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001		F-5
Consolidated Statement of Stockholders’ Investment for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and the years ended December 31, 2002 and 2001		F-7
Notes to Consolidated Financial Statements		F-11
Report of Independent Auditors		F-59

F-1

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

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

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

F-2

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

		Post-		Pre-
		Recapitalization		Recapitalization
		December 31,
		2003		2002
		(Amounts in thousands)
ASSETS
Current Assets:
Unrestricted
	Cash and cash equivalents	$	194,120	$	294,804
Restricted
	Cash, investments and marketable securities at cost, which approximates fair value		1,223		2,808
Accounts receivable, less allowances of $5,880,000 and $6,003,000			214,267		179,780
Inventories:
	Raw materials		54,144		51,245
	Work in process		19,229		16,110
	Finished goods		86,042		65,049
			159,415		132,404
Prepaid expenses			6,765		8,528
Other current assets			14,868		9,571
Prepaid income taxes			17,826		15,964
Assets of discontinued operations			494,851		567,457
	Total current assets		1,103,335		1,211,316
Property and Equipment, at Cost:
Land			7,591		8,250
Buildings and improvements			67,814		85,909
Machinery and equipment			136,769		243,749
			212,174		337,908
Less accumulated depreciation			17,719		194,533
	Total property and equipment, net		194,455		143,375
Other Assets:
Goodwill			678,063		287,164
Intangible assets, less accumulated amortization of $9,122,000 and $21,081,000			94,645		43,205
Deferred income taxes			—		9,882
Deferred debt expense			12,589		19,494
Restricted investments and marketable securities held by pension trusts (including related party amounts — see Note 8)			1,123		76,503
Other			15,770		39,887
			802,190		476,135
		$	2,099,980	$	1,830,826

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

F-3

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET — (Continued)

		Post-		Pre-
		Recapitalization		Recapitalization
		December 31,
		2003		2002
		(Amounts in thousands)
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current Liabilities:
Notes payable and other short-term obligations		$	8,120	$	3,338
Current maturities of long-term debt			7,229		2,208
Accounts payable			112,772		109,073
Accrued expenses and taxes, net			151,048		133,569
Liabilities of discontinued operations			137,683		149,859
	Total current liabilities		416,852		398,047
Other Liabilities:
Deferred income taxes			21,461		—
Other long-term liabilities			136,833		161,428
			158,294		161,428
Notes, Mortgage Notes and Obligations Payable, Less Current Maturities			1,324,626		953,846
Commitments and Contingencies (Note 9)
Stockholders’ Investment:
Preference stock, $1.00 par value; authorized 7,000,000 shares; none issued as of December 31, 2002			—		—
Series B Preference Stock, $1.00 par value; authorized 19,000,000 shares; 8,130,442 shares issued and outstanding as of December 31, 2003			8,130		—
Class A Common Stock, $1.00 par value; authorized 19,000,000 shares; 397,380 shares issued and outstanding as of December 31, 2003			397		—
Class B Common Stock, $1.00 par value; authorized 14,000,000 shares outstanding; none issued as of December 31, 2003			—		—
Common Stock, $1.00 par value; authorized 40,000,000 shares; 10,502,627 shares issued and outstanding as of December 31, 2002			—		10,503
Special Common Stock, $1.00 par value; authorized 5,000,000 shares; 501,224 shares issued and outstanding as of December 31, 2002			—		501
Additional paid-in capital			172,244		108,617
Retained earnings			—		255,366
Accumulated other comprehensive income (loss)			19,437		(57,482	)
	Total stockholders’ investment		200,208		317,505
		$	2,099,980	$	1,830,826

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

F-4

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

		For the Periods
		Post-
		Recapitalization			Pre-Recapitalization
		Jan. 10, 2003-			Jan. 1, 2003			Jan. 1, 2002			Jan. 1, 2001
		Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
		(Amounts in thousands)
Cash Flows from operating activities:
Earnings (loss) from continuing operations		$	62,000		$	(60,900	)	$	43,600		$	32,800
Earnings (loss) from discontinued operations			12,200			(1,000	)		18,900			(24,800	)
Net earnings (loss)			74,200			(61,900	)		62,500			8,000
Adjustments to reconcile net earnings (loss) provided by (used in) operating activities:
Depreciation and amortization expense, including amortization of purchase price allocated to inventory			31,962			653			29,118			37,121
Non-cash interest expense, net			6,352			125			3,827			3,565
Stock option and other stock compensation expense			2,071			—			—			—
(Gain) loss on sale of discontinued operations			—			—			(2,400	)		34,000
Loss from debt retirement			—			—			—			5,500
Deferred federal income tax (credit) provision from continuing operations			(4,800	)		5,900			(200	)		(2,800	)
Deferred federal income tax provision (credit) from discontinued operations			500			—			2,000			(2,000	)
Effect of the Recapitalization, net			—			62,397			—			—
Changes in certain assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable, net			(18,390	)		4,298			(8,782	)		6,588
Inventories			(595	)		(4,457	)		8,426			7,356
Prepaids and other current assets			(2,145	)		268			(2,742	)		(1,727	)
Net assets of discontinued operations			3,808			1,717			(53,143	)		(11,261	)
Accounts payable			(6,251	)		(777	)		(2,403	)		7,112
Accrued expenses and taxes			60,546			(19,766	)		(1,143	)		20,724
Long-term assets, liabilities and other, net			(9,180	)		5,837			16,218			(1,595	)
	Total adjustments to net earnings (loss)		63,878			56,195			(11,224	)		102,583
	Net cash provided by (used in) operating activities		138,078			(5,705	)		51,276			110,583

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

F-5

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS — (Continued)

		For the Periods
		Post-
		Recapitalization			Pre-Recapitalization
		Jan. 10, 2003-			Jan. 1, 2003			Jan. 1, 2002			Jan. 1, 2001
		Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
		(Amounts in thousands)
Cash Flows from investing activities:
Capital expenditures		$	(17,150	)	$	(207	)	$	(19,095	)	$	(27,141	)
Net cash paid for businesses acquired			(76,016	)		—			—			(1,900	)
Redemption of publicly held shares in connection with the Recapitalization			(469,655	)		—			—			—
Payment of fees and expenses in connection with the Recapitalization			(27,900	)		—			—			—
Purchase of investments and marketable securities			(30,015	)		—			(332,069	)		(240,366	)
Proceeds from the sale of investments and marketable securities			30,015			—			428,307			152,170
Proceeds from the sale of discontinued businesses			—			—			29,516			45,000
Change in restricted cash and investments			1,028			(49	)		(2,867	)		(34,194	)
Other, net			(663	)		109			(4,097	)		1,822
	Net cash provided by (used in) investing activities	$	(590,356	)	$	(147	)	$	99,695		$	(104,609	)
Cash Flows from financing activities:
Sale of 10% Senior Discount Notes due 2011, net of fees		$	339,522		$	—		$	—		$	—
Sale of 9 7/8% Senior Subordinated Notes due 2011			—			—			—			241,800
Redemption of 9 7/8% Senior Subordinated Notes due 2004			—			—			—			(207,700	)
Increase (decrease) in borrowings, net			2,658			(1,313	)		(12,143	)		(12,558	)
Issuance of preferred and common stock in connection with the Recapitalization			359,185			—			—			—
Dividend to preferred and common stockholders			(298,474	)		—			—			—
Cash distributions to stock option holders			(41,600	)		—			—			—
Purchase of common and special common stock			—			—			(1	)		(3	)
Issuance of 32,608 shares of Class A common stock			1,500			—			—			—
Exercise of stock options			—			—			631			1,307
Other, net			7			(4,039	)		(4,022	)		48
Net cash provided by (used in) financing activities			362,798			(5,352	)		(15,535	)		22,894
Net increase (decrease) in unrestricted cash and cash equivalents			(89,480	)		(11,204	)		135,436			28,868
Unrestricted cash and cash equivalents at the beginning of the period			283,600			294,804			159,368			130,500
Unrestricted cash and cash equivalents at the end of the period		$	194,120		$	283,600		$	294,804		$	159,368

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

F-6

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ INVESTMENT

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

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

F-7

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ INVESTMENT

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

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

F-8

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ INVESTMENT

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

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

F-9

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ INVESTMENT

		For the Period from January 10, 2003 to December 31, 2003
												Accumulated
		Series B				Additional						Other
		Preference		Common		Paid in			Retained			Comprehensive			Comprehensive
		Stock		Stock		Capital			Earnings			Income (Loss)			Income (Loss)
		(Dollar Amounts in thousands)
Balance, January 9, 2003		$	8,130	$	365	$	434,474		$	—		$	—		$	—
Net earnings			—		—		—			74,200			—			74,200
Other comprehensive income (loss):
	Currency translation adjustment		—		—		—			—			19,501			19,501
	Minimum pension liability, net of tax of $35		—		—		—			—			(64	)		(64	)
Comprehensive income															$	93,637
Issuance of 32,608 shares of Class A Common Stock			—		32		1,468			—			—
Dividend to common and preferred stockholders			—		—		(224,274	)		(74,200	)		—
Cash distribution to stock option holders			—		—		(41,600	)		—			—
Stock option and other stock compensation expense			—		—		2,179			—			—
Other, net			—		—		(3	)		—			—
Balance, December 31, 2003		$	8,130	$	397	$	172,244		$	—		$	19,437

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

F-10

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003

1. Summary of Significant Accounting Policies

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

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

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

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

F-11

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

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

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

F-12

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

      Goodwill associated with the Recapitalization will not be deductible for income tax purposes. Approximately $7,300,000 of the goodwill associated with acquisitions during the period from January 10,

F-13

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

2003 to December 31, 2003 will be deductible for income tax purposes. Purchase accounting adjustments relate principally to final revisions resulting from the completion of fair value adjustments and adjustments to deferred income taxes that impact goodwill.

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

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

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

F-14

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

Principles of Consolidation

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

Accounting Policies and Use of Estimates

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

Recognition of Sales and Related Costs, Incentives and Allowances

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

F-15

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

Cash, Investments and Marketable Securities

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

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

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

Disclosures About Fair Value of Financial Instruments

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

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

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

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

Inventories

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

F-16

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

Depreciation and Amortization

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

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

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

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

Intangible Assets and Goodwill

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

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

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

      In accordance with SFAS No. 144, the Company has evaluated the realizability of non-goodwill long-lived assets, which primarily consist of property, plant and equipment and intangible assets (the “SFAS No. 144 Long-Lived Assets”) based on expectations of non-discounted future cash flows for each

F-17

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

								Weighted
	Gross					Net		Average
	Carrying		Accumulated			Intangible		Remaining
	Amount		Amortization			Assets		Useful Lives
	(Amounts in thousands except for
	Useful Lives)
December 31, 2003:
Trademarks	$	51,396	$	(3,257	)	$	48,139		15.0
Patents		16,908		(680	)		16,228		16.1
Customer relationships		29,965		(4,883	)		25,082		4.6
Other		5,498		(302	)		5,196		4.7
	$	103,767	$	(9,122	)	$	94,645		8.5
December 31, 2002:
Trademarks	$	43,613	$	(8,365	)	$	35,248
Patents		8,331		(1,658	)		6,673
Other		12,342		(11,058	)		1,284
	$	64,286	$	(21,081	)	$	43,205

F-18

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

Pensions and Post Retirement Health Benefits

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

Insurance Liabilities

      The Company records insurance liabilities and related expenses for health, workers compensation, product and general liability losses and other insurance reserves and expenses in accordance with either the contractual terms of its policies or, if self-insured, the total liabilities that are estimable and probable as of

F-19

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

Income Taxes

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

Interest Allocation to Dispositions

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

Stock-Based Compensation of Employees, Officers and Directors

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

F-20

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

2003, October 4, 2003 and December 31, 2003, respectively. In addition, in the fourth quarter of 2003, the Company recorded a $600,000 compensation based charge related to the sale of certain capital stock.

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

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

Stock Options Issued:

							Weighted
							Average
		Number			Option Price		Exercise
		of Shares			Per Share		Price
Options outstanding at December 31, 2000			2,040,663			$ 8.75-$33.06	$	23.39
	Granted		33,100			20.25- 27.65		24.30
	Exercised		(65,954	)		8.75- 22.94		21.45
	Canceled		(24,000	)		21.63- 27.65		23.07
Options outstanding at December 31, 2001			1,983,809			$ 8.75-$33.06	$	23.47
	Granted		133,300			26.33- 44.16		26.44
	Exercised		(28,963	)		20.44- 22.94		21.79
	Canceled		(2,600	)		21.63- 22.94		21.93
Options outstanding at December 31, 2002			2,085,546			$ 8.75-$44.16	$	23.69
	Exercised and tendered in connection with the Recapitalization		(217,226	)		20.25- 44.16		24.81
Options canceled and exchanged for new Class A stock options in connection with the Recapitalization on January 9, 2003			1,868,320			$ 8.75- 33.06	$	23.56
	Granted		443,266			46.00- 46.00		46.00
	Canceled		(2,333	)		46.00- 46.00		46.00
Options outstanding at December 31, 2003			2,309,253			$10.50-$11.00	$	10.62

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

F-21

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

F-22

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

F-23

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

Commitments and Contingencies

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

Comprehensive Income (Loss)

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

F-24

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

Foreign Currency Translation

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

Derivative Instruments and Hedging Activities

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

F-25

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

Other New Accounting Pronouncements

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

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

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

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

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities — an Interpretation of ARB No. 51” (“FIN 46”). FIN 46 clarifies the application of ARB No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The consolidation

F-26

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

requirements on FIN 46 apply to the Company immediately for all variable interest entities created after December 31, 2003 and begin on January 1, 2005 for all variable interest entities created prior to January 1, 2004. The adoption of FIN 46 is not expected to have an impact on the Company’s consolidated financial statements.

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

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

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

2.     Recapitalization Transaction

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

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

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

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

F-27

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

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

      Under the terms of one of Nortek’s supplemental executive retirement plans (“SERP”), Nortek was required to make one-time cash payments to participants in such plan in satisfaction of obligations under that plan when the Recapitalization was completed. Accordingly, Nortek made a distribution of approximately $75,100,000 to the participants in the plan from funds included in the Company’s Consolidated Balance Sheet at December 31, 2002 and classified in long-term assets in restricted investments and marketable securities held by pension trusts and transferred to one of the participants a

F-28

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

life insurance policy with approximately $10,300,000 of cash surrender value to satisfy a portion of the SERP’s obligation to such participant’s obligation upon the Stockholder Approval. The termination and settlement of the obligation of this SERP resulted in a curtailment loss on January 9, 2003 (see Notes 8 and 14).

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

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

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

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

3.     Acquisitions

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

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

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

F-29

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

4.     Cash Flows

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

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

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

5.     Income Taxes

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

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

F-30

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

F-31

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

Effective tax rate %:

	For the Periods
	Post-
	Recapitalization			Pre-Recapitalization
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
Income tax provision (benefit) from continuing operations at the federal statutory rate		35.0	%		(35.0	)%		35.0	%		35.0	%
Net change from statutory rate:
Amortization of goodwill not deductible for income tax purposes		—			—			—			4.9
State income tax provision, net of federal income tax effect		2.1			—			1.2			0.9
Non-deductible expenses, net		(0.3	)		5.9			2.9			1.8
Tax effect resulting from foreign activities		3.2			0.3			0.7			2.1
Other, net		—			2.4			0.6			1.2
		40.0	%		(26.4	)%		40.4	%		45.9	%

F-32

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

F-33

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

6.     Notes, Mortgage Notes and Obligations Payable

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

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

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

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

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

      On November 24, 2003, the Company completed the sale of $515,000,000 aggregate principal amount at maturity ($349,400,000 gross proceeds) of its 10% Senior Discount Notes due May 15, 2011 (“Senior Discount Notes”). The Notes, which are structurally subordinate to all debt and liabilities of the Company’s subsidiaries, were issued and sold in a private Rule 144A offering to institutional investors. The net proceeds of the offering were used to pay a dividend of approximately $298,474,000 to holders of the Company’s capital stock and approximately $41,000,000 of these proceeds were used by the Company to purchase additional capital stock of Nortek. Nortek used these proceeds to fund the majority of a cash distribution of approximately $41,600,000 to option holders of the Rollover Options in the fourth quarter of 2003 (see Note 1). The accreted value of the 10% Senior Discount Notes will increase from the date of

F-34

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

issuance at a rate of 10% per annum compounded semi-annually such that the accreted value will equal the principal amount of $515,000,000 on November 15, 2007. No cash interest will accrue on the 10% Senior Discount Notes prior to November 15, 2007 and, thereafter, cash interest will accrue at 10% per annum payable semi-annually in arrears on May 15 and November 15 of each year. The Senior Discount Notes are unsecured obligations of the Company, which mature on May 15, 2011, and may be redeemed in whole or in part at the redemption prices as defined in the indenture governing the Senior Discount Notes (the “Indenture”). The Indenture contains covenants that limit the Company’s ability to engage in certain transactions, including incurring additional indebtedness and paying dividends or distributions. The terms of the Senior Discount Notes require the Company to register notes having substantially identical terms (the “Holdings Exchange Notes”) with the SEC as part of an offer to exchange freely tradable Holdings Exchange Notes for the Senior Discount Notes (the “Holdings Exchange”). In the event the Company does not complete the Holdings Exchange in accordance with the timing requirements outlined in the Indenture, the Company may be required to pay a higher interest rate. The Company expects to complete the Holdings Exchange within the required time period. Under certain limited circumstances, Nortek may be required in the future to guarantee the Senior Discount Notes on a senior subordinated basis. This requirement will not apply if the terms of any of Nortek’s senior indebtedness restricts the issuance of such guarantee. Nortek’s Senior Secured Credit Facility does not permit such a guarantee. In addition the issuance of such a guarantee by Nortek would constitute a restricted payment under the terms of Nortek’s indentures.

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

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

F-35

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

asset sale and such net cash proceeds were not applied to permanently reduce Senior Indebtedness (as defined in the indentures).

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

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

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

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

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

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

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

7. Common Stock, Special Common Stock, Preference Stock, Stock Options and Deferred Compensation

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

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

F-36

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

      The Company’s Preference Stock is convertible at any time subsequent to January 9, 2004 into one full share of Class A Common Stock. Upon occurrence of certain events, the preference stock can automatically be converted into Class A Common Stock. The preference stock does not provide for distributions to shareholders and has a liquidation preference of $0.01 per share. In addition to the election of directors, the Preference Stock has the following rights with the consent of at least the majority of the outstanding shares; i) amend the certificate of incorporation of Nortek to modify the powers, preferences or special rights of the holders of the Series B Preference Stock, ii) authorize or issue any series of capital stock ranking senior to or on parity with the Series B Preference Stock as to either payments of dividends

F-37

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

or rights on liquidation, iii) material transactions in excess of $50,000,000, iv) incurrence of indebtedness outside the ordinary course of business, v) certain capital expenditures, vi) agreements and arrangements with members of senior management of Nortek, vii) creation, issuance, grant, delivery or sale of equity securities, including warrants and options, other than under the 2002 Stock Option Plan and other agreements and arrangements in existence on or prior to the date of the completion of the Recapitalization, viii) legal settlements in excess of $25,000,000 and ix) any other significant matters involving the Company.

8. Pension, Profit Sharing and Other Post Retirement Benefits

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

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

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

		Pension Benefits
		2003			2002
		(Amounts in thousands)
Change in benefit obligation:
	Benefit obligation at October 1	$	238,910		$	187,478
	Service cost		2,035			2,833
	Interest cost		9,655			12,399
	Plan participant contributions		342			446
	Amendments		690			302
	Actuarial loss due to exchange rate		2,930			2,491
	Actuarial (gain) loss excluding assumption changes		(2,460	)		30,822
	Actuarial loss due to assumption changes		2,692			15,703
	Actuarial loss due to Recapitalization		1,548			—
	Benefits and expenses paid		(94,643	)		(13,564	)
	Benefit obligation at September 30	$	161,699		$	238,910

F-38

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

	For the Periods
	Jan. 10, 2003 -			Jan. 1, 2003 -			Jan. 1, 2002 -			Jan. 1, 2001 -
	Dec. 31, 2003			Jan. 9, 2003			Dec. 31, 2002			Dec. 31, 2001
Discount rate for projected benefit obligation		6.00	%		6.25	%		6.25	%		7.00	%
Discount rate for pension costs		6.25	%		6.25	%		7.00	%		7.75	%
Expected long-term average return on plan assets		7.75	%		7.75	%		8.50	%		8.50	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%

F-40

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

	Plan Assets at
	December 31,
Asset Category	2003			2002
Cash and cash equivalents		3.4	%		4.4	%
Equity securities		56.9			64.9
Fixed income securities		39.2			30.2
Other		0.5			0.5
		100.0	%		100.0	%

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

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

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NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

		Non-Pension
		Post Retirement
		Health Benefits
		2003			2002
		(Amounts in
		thousands)
Change in benefit obligation:
	Benefit obligation at October 1,	$	40,174		$	26,257
	Service cost		994			352
	Interest cost		2,237			2,148
	Plan participant contributions		134			129
	Amendments		(1,857	)		2,686
	Actuarial loss excluding assumption changes		(3,068	)		3,735
	Actuarial loss due to assumption changes		4,520			6,417
	Actuarial gain due to Recapitalization		(33	)		—
	Benefits and expenses paid		(1,609	)		(1,550	)
	Benefit obligation at September 30,	$	41,492		$	40,174
Change in plan assets:
	Fair value of plan assets at October 1,	$	—		$	—
	Employer contribution		1,474			1,421
	Plan participant contributions		135			129
	Benefits and expenses paid		(1,609	)		(1,550	)
	Fair value of plan assets at September 30,	$	—		$	—

		Non-pension
		Post Retirement
		Health Benefits
		2003			2002
		(Amounts in thousands)
Funded status and statement of financial position:
	Fair value of plan assets at September 30,	$	—		$	—
	Benefit obligation at September 30,		(41,492	)		(40,174	)
	Funded status		(41,492	)		(40,174	)
	Amount contributed during fourth quarter		411			343
	Unrecognized actuarial loss		3,888			18,607
	Unrecognized prior service cost		—			2,633
	Accrued benefit cost	$	(37,193	)	$	(18,591	)

F-42

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

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

9.     Commitments and Contingencies

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

      At December 31, 2003, the Company and its subsidiaries are obligated under lease agreements for the rental of certain real estate and machinery and equipment used in its operations. Future minimum rental

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NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

obligations related to continuing operations aggregate approximately $69,849,000 at December 31, 2003. The obligations are payable as follows:

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

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

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

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

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

      The Company sells a number of products and offers a number of warranties including in some instances, extended warranties. The specific terms and conditions of these warranties vary depending on the product sold and country in which the product is sold. The Company estimates the costs that may be incurred under its warranties, with the exception of extended warranties, and records a liability for such costs at the time of sale. Proceeds received from extended warranties are amortized over the life of the

F-44

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

warranty and reviewed to ensure that the liability recorded is equal to or greater than estimated future costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary. Changes in the Company’s combined short-term and long-term warranty liabilities (see Note 12) during the periods presented are as follows:

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

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

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

      While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. It is possible, however, that future

F-45

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’s control.

10.     Discontinued Operations

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

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

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

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

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

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

F-46

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

F-47

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

11. Operating Segment Information and Concentration of Credit Risk

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

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

      On February 12, 2004, the Company sold its Ply Gem subsidiary, which encompasses the WDS Segment and the corporate costs of Ply Gem that were formerly included in Unallocated other, net in the Company’s segment reporting. On November 22, 2002, the Company sold the capital stock of Richwood. On April 2, 2002, the Company sold the capital stock of Hoover. On September 21, 2001, the Company sold the capital stock of Peachtree and SNE. Accordingly, the results of Ply Gem which were previously

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NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

the WDS Segment, Hoover, which were previously part of the Other Segment, and Richwood, Peachtree and SNE, which were previously part of the WDS Segment prior to the sale of Ply Gem, have been excluded from earnings from continuing operations and classified separately as discontinued operations for all periods presented (see Notes 1 and 10). Accordingly the segment information presented below excludes the WDS Segment, Richwood, Hoover, Peachtree and SNE for all periods.

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

F-49

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

F-50

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

F-51

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

      The Company operates internationally and is exposed to market risks from changes in foreign exchange rates. Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company’s customer base and their

F-52

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

dispersion across many different geographical regions. At December 31, 2003, the Company had no significant concentrations of credit risk.

12. Accrued Expenses and Taxes, Net

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

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

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

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

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

13. Restructuring Charges

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

      Within the Air Conditioning and Heating Products Segment, the Company, in the second quarter of 2003, initiated restructuring activities related to the closure of two facilities in St. Louis, Missouri, in order to relocate the operations to other facilities by the end of the first quarter of 2004. Approximately 293

F-53

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

employees have been terminated to date and approximately 159 additional employees are expected to be terminated during 2004. The facilities currently support manufacturing, warehousing and distribution activities of the segment’s residential HVAC products. During the year ended December 31, 2003, the Company provided approximately $5,800,000 in cost of goods sold related to liabilities incurred as a result of the restructuring and expects to provide an additional estimated $2,400,000 of costs through early 2004. The facilities to be closed are owned by the Company and are expected to be sold in 2004.

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

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

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

14. Other Income and Expense

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

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

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

F-54

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

compensation expense of approximately $600,000 in the fourth quarter of 2003 in connection with the issuance of common stock.

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

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

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

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

F-55

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

15. Summarized Quarterly Financial Data (Unaudited)

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

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

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

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

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

F-56

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

16. Subsequent Events (Unaudited)

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

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

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

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

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

F-57

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2003

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

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

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

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

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

F-58

REPORT OF INDEPENDENT AUDITORS

To Nortek Holdings, Inc.:

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

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nortek Holdings, Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for the period from January 10, 2003 to December 31, 2003, the period from January 1, 2003 to January 9, 2003 and for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

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

ERNST & YOUNG, LLP

Boston, Massachusetts

March 26, 2004

F-59

$515,000,000

Nortek Holdings, Inc.

Offer to Exchange

10% Series B Senior Discount Notes due 2011,

which have been registered under the Securities Act,

for any and all of our outstanding

10% Senior Discount Notes due 2011

       Until                     , 2004 all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Indemnification Under the Delaware General Corporation Law and the Certificate of Incorporation and Bylaws of Nortek Holdings, Inc..

      Nortek Holdings, Inc. is a corporation incorporated under the laws of the State of Delaware. Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided, however, that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, which relates to unlawful payment of dividends and unlawful stock purchases and redemptions, or (iv) for any transaction from which the director derived an improper personal benefit.

      Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful.

      Section 145 of the Delaware General Corporation Law further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145 of the Delaware General Corporation Law.

      Nortek Holdings, Inc.’s certificate of incorporation provides that its directors shall not be liable to it or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that the exculpation from liabilities is not permitted under the Delaware General Corporation Law as in effect at the time such liability is determined. In addition, Nortek Holdings, Inc.’s certificate of incorporation provides that it shall indemnify its directors, officers or employees to the full extent permitted by the laws of the State of Delaware.

      Nortek Holdings, Inc.’s certificate of incorporation further provides that Nortek Holdings, Inc. shall pay the expenses, including attorney’s fees, incurred by an indemnitee in connection with any action, suit or proceeding brought or threatened to be brought against such indemnitee by virtue of his or her service as an officer or director of Nortek Holdings, Inc. or his or her service as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, at the request of Nortek Holdings, Inc. The certificate of incorporation also provides that the indemnification rights provided therein are not exclusive of any other indemnification or similar protection to which any indemnitee may be entitled under any by-law, agreement, vote of stockholders or directors or otherwise.

II-1

Item 21. Exhibits and Financial Statement Schedules.

      (a) Exhibits:

      See Exhibit Index immediately following the Financial Statement Schedules included in this Registration Statement.

      (b) Financial Statement Schedules:

      The following financial statement schedules are included in Part II of the Registration Statement:

Schedule I — Condensed Financial Information of Registrant and Nortek, Inc.	S-1
Schedule II — Valuation and Qualifying Accounts	S-11
Report of Independent Auditors	S-12

      All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore has been omitted.

Item 22.     Undertakings.

      (a) The undersigned registrant hereby undertakes:

      (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

      (i) to include any prospectus required by Section 10(a)(3) of the Securities Act;

      (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

      (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

      (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and

      (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

      (b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

II-2

      (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

      (d) Insofar as indemnification for liabilities arising under Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

      (e) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.

      (f) The undersigned registrant hereby undertakes that every prospectus (i) that is filed pursuant to the immediately preceding paragraph or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Providence, state of Rhode Island, on the 22nd day of April, 2004.

NORTEK HOLDINGS, INC.

By:  /s/ RICHARD L. BREADY

     Name:  Richard L. Bready

Title:	Chairman of the Board, President,
	Chief Executive Officer and Director

POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Richard L. Bready, Almon C. Hall and Kevin W. Donnelly, and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, making such changes in this registration statement as such person or persons so acting deems appropriate, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

* * * *

      Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ RICHARD L. BREADY Richard L. Bready	Chairman of the Board, President, Chief Executive Officer and Director	April 22, 2004
/s/ ALMON C. HALL Almon C. Hall	Vice President and Chief Financial Officer	April 22, 2004
/s/ DAVID B. HILEY David B. Hiley	Director	April 22, 2004
/s/ PHILLIP E. BERNEY Phillip E. Berney	Director	April 22, 2004
/s/ JEFFREY C. BLOOMBERG Jeffrey C. Bloomberg	Director	April 22, 2004
/s/ JOSEPH M. CIANCIOLO Joseph M. Cianciolo	Director	April 22, 2004

II-4

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEET

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

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

S-1

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENT OF OPERATIONS

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

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

S-2

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENT OF CASH FLOWS

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

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

S-3

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Notes to Condensed Financial Statements December 31, 2003

      1. On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of the Company was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”), a Delaware corporation formed on June 19, 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). From June 19, 2002 through November 20, 2002, Holdings was a wholly owned subsidiary of Nortek, which had no operating or cash flow activity. Prior to the Holdings Reorganization, Nortek was the Registrant and parent company for all filings required by the Securities and Exchange Commission (“SEC”). As of December 31, 2001, Nortek met the restricted net asset requirements under SEC rules and regulations for financial statement schedules and, accordingly, Nortek filed Schedule I — Condensed Financial Information of the Registrant in its Form 10-K for the year ended December 31, 2001. As of December 31, 2003 and 2002, Holdings also met the restricted net asset requirements under SEC rules and regulation, which required Holdings to file Schedule I — Condensed Financial Information of the Registrant in its Form 10-K. Schedule I — Condensed Financial Information of Registrant provides all parent company information for the periods subsequent to the Holdings Reorganization, when Holdings became the parent company, that are required to be presented in accordance with SEC rules and regulations for financial statement schedules. The Nortek, Inc. (Parent Company) — Schedule I — Condensed Financial Information of Nortek, Inc., which cover the required periods prior to the Holdings Reorganization, are included elsewhere in this Registration Statement and are incorporated herein by reference. The accompanying condensed financial statements have been prepared in accordance with the reduced disclosure requirements permitted by Form S-4, Item 21, Schedule I — Condensed Financial Information of the Registrant. The Consolidated Financial Statements and related notes of Nortek Holdings, Inc. are included elsewhere in this Registration Statement and are incorporated herein by reference.

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

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

      On February 12, 2004, Nortek sold its subsidiary, Ply Gem Industries, Inc. (“Ply Gem”). In 2002 and 2001, Nortek sold certain former subsidiaries of Ply Gem. The sale of the former subsidiaries of Ply Gem in 2002 and 2001 and their related operating results, together with the operating results of Ply Gem, have been excluded from earnings (loss) from continuing operations and have been classified as

S-4

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Notes to Condensed Financial Statements December 31, 2003 — (Continued)

discontinued operations for all periods presented. Information pertaining to Ply Gem and its subsidiaries is included in Note 10 of the Notes to the Nortek Holdings, Inc. and Subsidiaries Consolidated Financial Statements, which are incorporated herein by reference.

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

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

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

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

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

S-5

NORTEK HOLDINGS, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Notes to Condensed Financial Statements December 31, 2003 — (Continued)

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

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

S-6

NORTEK, INC. (PARENT COMPANY)

SCHEDULE I CONDENSED FINANCIAL INFORMATION OF NORTEK, INC.

CONDENSED STATEMENT OF OPERATIONS

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

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

S-7

NORTEK, INC. (PARENT COMPANY)

SCHEDULE 1 CONDENSED FINANCIAL INFORMATION OF NORTEK, INC.

CONDENSED STATEMENT OF CASH FLOWS

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

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

S-8

NORTEK, INC. (PARENT COMPANY)

SCHEDULE 1 CONDENSED FINANCIAL INFORMATION OF NORTEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

For the Period from January 1, 2002 to December 31, 2002

      1. On November 20, 2002, Nortek, Inc. (“Nortek”) reorganized into a holding company structure and each outstanding share of capital stock of the Company was converted into an identical share of capital stock of Nortek Holdings, Inc. (“Holdings”), a Delaware corporation formed in 2002, with Holdings becoming the successor public company and Nortek becoming a wholly-owned subsidiary of Holdings (the “Holdings Reorganization”). Prior to the Holdings Reorganization, Nortek was the Registrant and parent company for all filings required by the Securities and Exchange Commission (“SEC”). As of December 31, 2001, Nortek met the restricted net asset requirements under SEC rules and regulations for financial statement schedules and, accordingly, Nortek filed Schedule I — Condensed Financial Information of the Registrant in its Form 10-K for the year ended December 31, 2001. As of December 31, 2003 and 2002, Holdings also met the restricted net assets requirements under SEC rules and regulation, which required Holdings to file Schedule I — Condensed Financial Information of the Registrant in its Form 10-K. Schedule I — Condensed Financial Information of Nortek provides all parent company information for the periods prior to the Holdings Reorganization, when Nortek was the parent company, that are required to be presented in this Form 10-K in accordance with SEC rules and regulations for financial statement schedules. The Nortek Holdings, Inc. (Parent Company) — Schedule I — Condensed Financial Information of Registrant, which cover the required periods subsequent to the Holdings Reorganization, are included elsewhere in this Registration Statement and are incorporated herein by reference. The accompanying condensed financial statements have been prepared in accordance with the reduced disclosure requirements permitted by Form S-4, Item 21, Schedule I — Condensed Financial Information of the Registrant. The Consolidated Financial Statements and related notes of Nortek Holdings, Inc. are included elsewhere in this Registration Statement and are incorporated herein by reference.

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

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

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

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

S-9

NORTEK, INC. (PARENT COMPANY)

SCHEDULE 1 CONDENSED FINANCIAL INFORMATION OF NORTEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

accompanying condensed statement of operations for the period from January 1, 2002 to November 20, 2002 and the year ended December 31, 2001 is approximately $37,800,000 and $41,800,000, respectively.

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

S-10

NORTEK HOLDINGS, INC. AND SUBSIDIARIES

SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS

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

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

S-11

REPORT OF INDEPENDENT AUDITORS

      We have audited the consolidated financial statements of Nortek Holdings, Inc. and subsidiaries as of December 31, 2003 and 2002, and for the period from January 10, 2003 to December 31, 2003, January 1, 2003 to January 9, 2003, and for each of the two years in the period ended December 31, 2002 and have issued our report thereon dated March 26, 2004 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedules listed in Item 21b of this Registration Statement. These schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.

      In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

ERNST & YOUNG, LLP

March 26, 2004

Boston, Massachusetts

S-12

EXHIBIT LIST

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

No.		Exhibit
	2.1	Agreement and Plan of Recapitalization, dated as of June 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit 2 to Nortek Inc.’s Form 8-K filed June 24, 2002).
	2.2	Amendment No. 1 to Agreement and Plan of Recapitalization, dated as of September 16, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit 2 to Nortek Inc.’s Form 8-K filed September 16, 2002).
	2.3	Agreement and Plan of Merger by and among Nortek, Inc. and Nortek Holdings, Inc. and Nortek Holdings Merger Sub, Inc., dated as of November 20, 2002. (Exhibit 2.1 to Nortek Inc.’s Form 8-K filed November 20, 2002).
	2.4	Amendment No. 2 to Agreement and Plan of Recapitalization, dated November 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit (d)(13) to Amendment No. 3 to Schedule 13E-3 filed November 27, 2002).
	2.5	Amendment No. 3 to Agreement and Plan of Recapitalization, dated December 4, 2002, by and among Nortek, Inc., Nortek Holdings, Inc. and K Holdings, Inc. (Exhibit (d)(15) to Amendment No. 4 to Schedule 13E-3 filed December 4, 2002).
	2.6	Stock Purchase Agreement among CI Investment Holdings, Inc., Nortek, Inc. and WDS LLC dated as of December 19, 2003 (Exhibit 2.1 to Nortek, Inc.’s Form 8-K filed December 22, 2003).
	3.1	Amended and Restated Certificate of Incorporation of Nortek Holdings, Inc. (Exhibit 3.1 to Form 10-K filed March 30, 2004).
	3.2	Amended and Restated Bylaws of Nortek Holdings, Inc. (Exhibit 3.2 to Form 10-K filed March 30, 2004).
	4.1	Indenture dated as of November 24, 2003 by and between Nortek Holdings, Inc. and U.S. Bank National Association, relating to the 10% Senior Discount Notes due 2001. (Exhibit 4.1 to Form 10-K filed March 30, 2004).
	4.2	Form of 10% Senior Discount Note due 2011 (filed as an exhibit to Exhibit 4.1 to Form 10-K filed March 30, 2004).
	4.3	Registration Rights Agreement dated as of November 24, 2003 by and among Nortek Holdings, Inc, Deutsche Bank Securities Inc., UBS Securities LLC, Credit Suisse First Boston LLC and Bear, Stearns & Co. Inc. (Exhibit 4.4 to Form 10-K filed March 30, 2004).
	4.4	Indenture dated as of June 12, 2001 between Nortek, Inc. and State Street Bank and Trust Company, as Trustee, relating to the 9 7/8% Senior Subordinated Notes due 2011 (Exhibit 4.1 to Nortek, Inc.’s Registration Statement No. 333-64130 filed July 11, 2001).
	4.5	Registration Rights Agreement, dated as of January 9, 2003, among Nortek Holdings, Inc., Nortek, Inc., Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC, KEP VI, LLC, the Third Party Investors and the Management Stockholders (Exhibit 4.8 to Nortek, Inc.’s (File No. 01-6112) Form 10-K filed March 27, 2003).
	4.6	Indenture dated as of March 1, 2004 by and between Nortek, Inc. and U.S. Bank National Association, as Trustee relating to the Senior Floating Rate Notes due 2010 (Exhibit 4.3 to Nortek, Inc.’s Form 10-K filed March 30, 2004).
	4.7	Registration Rights Agreement dated as of March 1, 2004 by and among Nortek, Inc., Deutsche Bank Securities, Inc., Fleet Securities, Inc. and UBS Securities LLC (Exhibit 4.5 to Nortek, Inc.’s Form 10-K filed March 30, 2004).
	*5.1	Opinion of Ropes & Gray LLP.
	9.1	Voting Agreement, dated as of June 20, 2002, by and among Nortek, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 9 to Nortek, Inc.’s Form 8-K filed June 24, 2002, File No. 1-6112).

No.		Exhibit
	**10.1	Change in Control Severance Benefit Plan for Key Employees adopted February 10, 1986, and form of agreement with employees (Exhibit 10.19 to Nortek, Inc.’s Form 10-K filed March 31, 1986, File No. 1-6112).
	**10.2	Change in Control Severance Benefit Plan for Key Employees as Amended and Restated June 12, 1997, and form of agreement with employees (Exhibit 10.1 to Nortek, Inc.’s Form 10-Q filed August 8, 1997, file No. 1-6112).
	**10.3	Form of Indemnification Agreement between Nortek, Inc. and its directors and certain officers (Appendix C to Proxy Statement dated March 23, 1987 for Annual Meeting of Nortek Stockholders, File No. 1-6112).
	10.4	Split Dollar Agreement dated as of June 29, 1999 between Nortek, Inc. and Douglass N. Ellis, Jr. as trustee of The Richard L. Bready and Cheryl A. Bready 1998 Irrevocable Trust, together with appendix prepared by Nortek, Inc. (Exhibit 10.7 to Nortek, Inc.’s Form 10-Q filed August 11, 2000, File No. 1-6112).
	10.5	Split Dollar Agreement dated as of June 29, 1999 between Nortek, Inc. and Mark Richard Harris and Pamela Jean Harris as trustees of the Richard J. and Carole M. Harris 1999 Irrevocable Trust, together with appendix prepared by Nortek, Inc. (Exhibit 10.9 to Nortek, Inc.’s Form 10-Q filed August 11, 2000, File No. 1-6112).
	**10.6	Exchange Agreement, dated June 20, 2002, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 5 to Schedule 13D filed by Richard L. Bready on June 24, 2002).
	10.7	$200,000,000 Loan and Security Agreement, dated as of July 25, 2002, among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporation, Individually and as Administrative Agent and Fleet Capital Canada Corporation, Individually and as Canadian Agent. (Exhibit 10.1 to Nortek, Inc.’s Form 10-Q filed August 13, 2002, File No. 1-6112).
	10.8	Amendment No. 1 to Exchange Agreement, dated September 16, 2002, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 2 to Schedule 13D filed by Richard L. Bready on September 18, 2002).
	**10.9	Nortek, Inc., Nortek Holdings, Inc. and Richard L. Bready Employment Agreement dated January 9, 2003 (Exhibit 10.13 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	**10.10	Nortek, Inc., Nortek Holdings, Inc. and Kevin W. Donnelly Employment Agreement dated January 9, 2003 (Exhibit 10.14 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	**10.11	Nortek, Inc., Nortek Holdings, Inc. and Almon C. Hall, III Employment Agreement dated January 9, 2003 (Exhibit 10.15 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	**10.12	Amendment No. 2 to Exchange Agreement, dated January 9, 2003, by and among Nortek, Inc., Nortek Holdings, Inc., K Holdings, Inc. and Richard L. Bready (Exhibit 10.16 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	10.13	Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and RGIP, LLC (Exhibit 10.17 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	10.14	Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and Magnetitte Asset Investors III, LLC (Exhibit 10.18 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	10.15	Equity Subscription Agreement, dated January 9, 2003, between Nortek Holdings, Inc., Nortek, Inc. and Daroth Investors LLC (Exhibit 10.19 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	10.16	Stockholders Agreement, dated as of January 9, 2003 by and among Nortek Holdings, Inc., Nortek, Inc., Kelso Investment Associates VI, L.P., Kelso Nortek Investors, LLC, KEP VI, LLC, the Third Party Investors and the Management Stockholders (Exhibit 10.20 to Nortek, Inc.’s Form 10-K filed March 27, 2003, File No. 1-6112).
	10.17	Nortek Holdings, Inc. 2002 Stock Option Plan (Exhibit 10.9 to Nortek, Inc.’s Form 10-Q filed May 19, 2003, File No. 1-6112).

No.		Exhibit
	10.18	Equity Subscription Agreement, dated October 31, 2003 among Nortek Holdings, Inc., Jeffrey C. Bloomberg and Jeffrey C. Bloomberg as Trustee of the Jeffrey C. Bloomberg Family Trust. (Exhibit 10.20 to Form 10-K filed March 30, 2004).
	10.19	Equity Subscription Agreement, dated July 11, 2003, between Nortek Holdings, Inc. and Jeremy Burkhardt (Exhibit 10.19 to Form 10-K filed March 30, 2004).
	10.20	Amendment No. 1 to the Credit Agreement, dated as of February 12, 2004, by and among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporate, individually and as Administrative Agent and Fleet Capital Canada Corporation, individually and as Canadian Agent (Exhibit 10.21 to Nortek, Inc.’s Form 10-K filed March 30, 2004).
	10.21	Amendment No. 2 to the Credit Agreement, dated as of February 20, 2004 by and among Nortek, Inc., certain of its subsidiaries, certain banks, Fleet Capital Corporate, individually and as Administrative Agent and Fleet Capital Canada Corporation, individually and as Canadian Agent (Exhibit 10.22 to Nortek, Inc.’s Form 10-K filed March 30, 2004).
	**10.22	Nortek, Inc. Supplement Executive Retirement Plan C, dated December 18, 2003 (Exhibit 10.23 to Nortek, Inc.’s Form 10-K filed March 30, 2004).
	*12.1	Statement regarding Computation of Ratios.
	16.1	Letter from Nortek, Inc.’s former independent accountant regarding its concurrence or disagreement with statements made by Nortek, Inc. in the current report concerning the resignation or dismissal as Nortek, Inc.’s principal accounts. (Exhibit 16 to Nortek, Inc.’s Form 8-K filed June 28, 2002).
	*21.1	Subsidiaries of Nortek Holdings, Inc.
	*23.1	Consent of Ernst & Young, LLP.
	*23.2	Consent of Ropes & Gray LLP (included in the opinion filed as Exhibit 5.1).
	*24.1	Power of attorney pursuant to which amendments to this registration statement may be filed (included on the signature pages in Part II hereof).
	*25.1	Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank National Association.
	*99.1	Form of Letter of Transmittal.
	*99.2	Form of Notice of Guaranteed Delivery.
	*99.3	Form of Exchange Agency Agreement.

EX-5.1

                                                                     Exhibit 5.1





                                 April 22, 2004



Nortek Holdings, Inc.
50 Kennedy Plaza
Providence, RI  02903

Ladies and Gentlemen:


      This opinion is rendered to you in connection with a registration
statement (the "Registration Statement") on Form S-4 filed today with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), relating to the exchange offer (the "Exchange Offer") by Nortek
Holdings, Inc. ("Holdings") to exchange its $515,000,000 in aggregate principal
amount at maturity 10% Series B Senior Discount Notes due 2011 (the "Exchange
Notes") for its outstanding $515,000,000 aggregate amount at maturity 10% Senior
Discount Notes due 2011 (the "Original Notes"). The Original Notes were issued
pursuant to the provisions of an indenture dated as of November 24, 2003 (the
"Indenture") entered into between Holdings and U.S. Bank National Associate, a
national banking association, as Trustee (the "Trustee").

      We have acted as special counsel for Holdings in connection with the
Exchange Offer and the preparation of the Registration Statement. For purposes
of this opinion, we have examined and relied upon the information set forth in
the Registration Statement and such other documents and records as we have
deemed necessary.

      We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any laws other than the federal laws of the United
States of America, the laws of the State of New York and the General Corporation
Law of the State of Delaware.

      Based upon the foregoing, we are of the opinion that, when the Exchange
Notes have been duly authorized, executed, issued and delivered as provided in
the Indenture, and delivered in exchange for the Original Notes, as described in
the Registration Statement, and assuming due authentication by the Trustee, the
Exchange Notes will constitute valid and binding obligations of Holdings,
enforceable against Holdings, in accordance with their terms, except as
enforceability (i) may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally (including, without
limitation, Section 548 of Title 11 of The United States Code and fraudulent
conveyance or similar provisions of state law) and (ii) is

                                      -2-



subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and will be
entitled to the benefits of the Indenture.

      We hereby consent to the filing of this opinion as part of the
Registration Statement and to the use of our name therein and in the related
prospectus under the caption "Legal Matters."


                                       Very truly yours,

                                       /s/ Ropes & Gray LLP

                                       Ropes & Gray LLP

EX-12.1

                                                                               .
                                                                               .
                                                                               .

                                                                    EXHIBIT 12.1

NORTEK, INC.
RATIO OF EARNINGS TO FIXED CHARGES
FOR S-4 FILING



                                                                          ACTUAL
                                            -----------------------------------------------------------------     PRO FORMA
                                              YEAR ENDED DECEMBER 31,         PERIOD FROM        PERIOD FROM     -------------
                                            -----------------------------   JAN. 1, 2003 TO     JAN. 10, 2003     YEAR ENDED
                                            1999    2000    2001    2002     JAN. 9, 2003     TO DEC. 31, 2003   DEC. 31, 2003
                                            -----   -----   -----   -----   ---------------   ----------------   -------------
                                                                         (IN MILLIONS EXCEPT RATIOS)
                                                                                            
EARNINGS:
Earnings (loss) from continuing
  operations                                 56.4    58.3    32.8    43.6        (60.9)             62.0             48.2
Provision (benefit) for income taxes         40.2    39.1    27.8    29.5        (21.8)             41.3             34.4

                                            -----   -----   -----   -----        -----             -----            -----
     "Earnings"                              96.6    97.4    60.6    73.1        (82.7)            103.3             82.6
                                            -----   -----   -----   -----        -----             -----            -----

FIXED CHARGES:
  Interest expense including
      amortization of debt expense
      and discount                           47.4    47.6    51.7    52.4          1.1              57.6             78.3
  Interest portion of rental expense          3.0     4.1     4.5     4.7          0.1               5.0              5.0

                                            -----   -----   -----   -----        -----             -----            -----
     "Fixed Charges"                         50.4    51.7    56.2    57.1          1.2              62.6             83.3
                                            -----   -----   -----   -----        -----             -----            -----

Earnings Available for Fixed Charges        147.0   149.1   116.8   130.2        (81.5)(1)         165.9            165.9
                                            -----   -----   -----   -----        -----             -----            -----

Ratio of Earnings to Fixed Charges            2.9x    2.9x    2.1x    2.3x                           2.7x             2.0x

(1) Earnings were insufficient to cover fixed charges by approximately $81.5
million for the period from January 1, 2003 to January 9, 2003.

EX-21.1

                                                                    EXHIBIT 21.1

                              LIST OF SUBSIDIARIES

      Set forth below is a list of all subsidiaries of Nortek Holdings, Inc. the
assets and operations of which are included in the consolidated financial
statements of Nortek, Inc., except subsidiaries that, considered in the
aggregate as a single subsidiary, would not constitute a significant subsidiary:




NAME OF SUBSIDIARY                                        JURISDICTION
- ------------------                                        ------------
                                                       
Nortek, Inc.                                              Delaware
     Best S.p.A                                           Italy
          Best Deutschland GmbH                           Germany
          Best France S.A                                 France
     Broan-NuTone Canada, Inc.                            Ontario, Canada
          Venmar Ventilation Inc.                         Quebec, Canada
               Innergy Tech Inc.                          Quebec, Canada
               Venmar CES, Inc.                           Saskatchewan, Canada
               Venmar Ventilation (H.D.H.) Inc.           Quebec, Canada
     Broan-NuTone LLC                                     Delaware
          Aubrey Manufacturing, Inc.                      Delaware
          NuTone Inc.                                     Delaware
          Rangaire LP                                     Delaware
     Eaton-Williams Holding Limited                       United Kingdom
     Elektromec S.p.A                                     Italy
     Jensen Industries, Inc.                              Delaware
     LaConue International, Inc.                          Delaware
     Linear LLC                                           California
          Elan Home Systems, L.L.C                        Kentucky
          Linear H.K. Manufacturing Ltd.                  Hong Kong
          Multiplex Technology, Inc.                      California
          Operator Specialty Company, Inc.                Michigan
          SpeakerCraft, Inc.                              Delaware
          We Monitor America Incorporated                 Colorado
          Xantech Corporation                             California
     Nordyne Inc.                                         Delaware
                Governair Corporation                     Oklahoma
                Mammoth, Inc.                             Delaware
                    Mammoth China, Ltd.                   Delaware
                Temtrol, Inc.                             Oklahoma
                Ventrol Air Handling Systems Inc.         Quebec, Canada
                Webco, Inc.                               Missouri

EX-23.1

                                                                   Exhibit 23.1

                        CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 26, 2004 in this Registration Statement on Form
S-4 and related Prospectus of Nortek Holdings, Inc. for the registration of
$515,000,000 aggregate principal amount due at maturity 10% Series B Senior
Discount Notes due 2011.


                                                /s/ Ernst & Young LLP

Boston, Massachusetts
April 16, 2004

EX-25.1

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           --------------------------

                                    FORM T-1

                         STATEMENT OF ELIGIBILITY UNDER
                      THE TRUST INDENTURE ACT OF 1939 OF A
                    CORPORATION DESIGNATED TO ACT AS TRUSTEE

             [ ] Check if an Application to Determine Eligibility of
                     a Trustee Pursuant to Section 305(b)(2)

             -------------------------------------------------------

                         U.S. BANK NATIONAL ASSOCIATION
               (Exact name of Trustee as specified in its charter)

                                   31-0841368
                       I.R.S. Employer Identification No.

           800 Nicollet Mall
         Minneapolis, Minnesota                           55402
(Address of principal executive offices)               (Zip Code)

                                TODD R. DI NEZZA
                         U.S. Bank National Association
                               One Federal Street
                                Boston, MA 02110
                                 (617) 603-6573

            (Name, address and telephone number of agent for service)

                                     NORTEK
                              NORTEK HOLDINGS, INC.
                     (Issuer with respect to the Securities)

                DELAWARE                               16-1638891
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)

    50 KENNEDY PLAZA, PROVIDENCE, RI                      02902
(Address of Principal Executive Offices)               (Zip Code)


                       10% SENIOR DISCOUNT NOTES DUE 2011
                       (TITLE OF THE INDENTURE SECURITIES)

================================================================================

                                    FORM T-1

ITEM 1.      GENERAL INFORMATION. Furnish the following information as to the
             Trustee.

             a)   Name and address of each examining or supervising authority to
                  which it is subject.

                       Comptroller of the Currency
                       Washington, D.C.

             b)   Whether it is authorized to exercise corporate trust powers.
                  Yes

ITEM 2.      AFFILIATIONS WITH OBLIGOR.  If the obligor is an affiliate of the
             Trustee, describe each such affiliation.
                  None

ITEMS 3-15   Items 3-15 are not applicable because to the best of the Trustee's
             knowledge, the obligor is not in default under any Indenture for
             which the Trustee acts as Trustee.

ITEM 16.     LIST OF EXHIBITS:  List below all exhibits filed as a part of this
             statement of eligibility and qualification.

             1.   A copy of the Articles of Association of the Trustee.*

             2.   A copy of the certificate of authority of the Trustee to
                  commence business.*

             3.   A copy of the certificate of authority of the Trustee to
                  exercise corporate trust powers.*

             4.   A copy of the existing bylaws of the Trustee.*

             5.   A copy of each Indenture referred to in Item 4.  Not
                  applicable.

             6.   The consent of the Trustee required by Section 321(b) of the
                  Trust Indenture Act of 1939, attached as Exhibit 6.

             7.   Report of Condition of the Trustee as of DECEMBER 31, 2003,
                  published pursuant to law or the requirements of its
                  supervising or examining authority, Attached as Exhibit 7.

             8.   A copy of any order pursuant to which the foreign trustee is
                  authorized to act as sole trustee under indentures qualified
                  or to be qualified under the Act: Not applicable.

      * Incorporated by reference to Registration Number 333-67188 dated
November 16, 2001.


                                       2

                                      NOTE

      The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.

                                    SIGNATURE

      Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Boston,
Commonwealth of Massachusetts on the 13th DAY OF APRIL 2004.


                                 U.S. BANK NATIONAL ASSOCIATION

                                 By:   /S/ TODD R. DINEZZA
                                       -----------------------------------------
                                       TODD R. DINEZZA
                                       ASSISTANT VICE PRESIDENT




By:   /S/ JOHN BRENNAN
      --------------------------------------
      JOHN A. BRENNAN
      TRUST OFFICER


                                       3

                                    EXHIBIT 6

                                     CONSENT

      In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.

DATED:  APRIL 13, 2004


                                 U.S. BANK NATIONAL ASSOCIATION

                                 By:   /s/ Todd R..DiNezza
                                       -----------------------------------------
                                       Todd R. DiNezza
                                       Assistant Vice President




By:   /s/ John A. Brennan
      --------------------------------------
      John A. Brennan
      Trust Officer



                                       4

                                    EXHIBIT 7
                         U.S. BANK NATIONAL ASSOCIATION
                        STATEMENT OF FINANCIAL CONDITION
                                AS OF 12/31/2003

                                    ($000'S)



                                                  12/31/2003
                                                 ------------
                                              
ASSETS
   Cash and Due From Depository Institutions     $  8,631,361
   Federal Reserve Stock                                    0
   Securities                                      42,963,396
   Federal Funds                                    2,585,353
   Loans & Lease Financing Receivables            114,718,888
   Fixed Assets                                     1,911,662
   Intangible Assets                               10,254,736
   Other Assets                                     8,093,654
                                                 ------------
      TOTAL ASSETS                               $189,159,050

LIABILITIES
   Deposits                                      $128,249,183
   Fed Funds                                        5,098,404
   Treasury Demand Notes                            3,585,132
   Trading Liabilities                                213,447
   Other Borrowed Money                            21,664,023
   Acceptances                                        123,996
   Subordinated Notes and Debentures                5,953,524
   Other Liabilities                                5,173,011
                                                 ------------
   TOTAL LIABILITIES                             $170,060,720

EQUITY
   Minority Interest in Subsidiaries             $  1,002,595
   Common and Preferred Stock                          18,200
   Surplus                                         11,677,397
   Undivided Profits                                6,400,138
                                                 ------------
      TOTAL EQUITY CAPITAL                       $ 19,098,330

TOTAL LIABILITIES AND EQUITY CAPITAL             $189,159,050


To the best of the undersigned's determination, as of the date hereof, the above
financial information is true and correct.

U.S. BANK NATIONAL ASSOCIATION

By:   /s/ Richard Prokosch
      -------------------------------
      Vice President

Date: April 13, 2004

                                      NOTE

                                       5

EX-99.1

Exhibit 99.1

LETTER OF TRANSMITTAL

for

Offer to Exchange All Outstanding

10% Senior Discount Notes due 2011

for

10% Series B Senior Discount Notes due 2011

of

Nortek Holdings, Inc.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON                         , 2004 (THE “EXPIRATION DATE”) UNLESS EXTENDED.

The Exchange Agent is:

U.S. BANK NATIONAL ASSOCIATION

By Mail, Hand or Overnight Delivery:

U.S. Bank National Association
60 Livingston Avenue
First Floor — Bond Drop Window
St. Paul, Minnesota 55104 By Facsimile:

800-934-6802
For Information or Confirmation by Telephone:
651-495-8158

      Delivery of this Letter of Transmittal to an address other than as set forth above or transmission via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery.

      The undersigned acknowledges receipt of the Prospectus dated                           , 2004 (as the same ay be amended or supplemented from time to time, the “Prospectus”) of Nortek Holdings, Inc. (the “Issuer”), and this Letter of Transmittal (the “Letter of Transmittal”), which together describe the Issuer’s offer (the “Exchange Offer”) to exchange its 10% Series B Senior Discount Notes due 2011 (the “Exchange Notes”), which have been registered under the Securities Act of 1933, as amended (the “Securities Act”) for its outstanding 10% Senior Discount Notes due 2011 (the “Outstanding Notes” and, together with the Exchange Notes, the “Notes”) from the holders thereof.

      The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus).

      Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.

      YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

      The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.

PLEASE READ THE ENTIRE

LETTER OF TRANSMITTAL AND THE PROSPECTUS

CAREFULLY BEFORE CHECKING ANY BOX BELOW.

      List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
		Aggregate
		Principal
		Amount
		Represented by
Name(s) and Address(es) of Registered Holder(s)	Certificate	Outstanding	Principal Amount
(Please fill in)	Number(s)*	Notes*	Tendered**
	Total:
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Notes. See instruction 2.

      Holders of Outstanding Notes whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes, this Letter of Transmittal, and any other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus.

      Unless the context otherwise requires, the term “holder” for purposes of this Letter of Transmittal means any person in whose name Outstanding Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Notes are held of record by The Depository Trust Company (“DTC”).

o CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:

Name of Registered Holder(s):

Name of Eligible Guarantor Institution that Guaranteed Delivery:

Date of Execution of Notice of Guaranteed Delivery:

If Delivered by Book-Entry Transfer:

Name of Tendering Institution:

Account Number:

2

Transaction Code Number:

o CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO A PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL:

Name:

Address:

o CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO AN ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:

Name:

Address:

o CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

Name:

Address:

      If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Outstanding Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an “affiliate” of the Issuer or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Outstanding Notes from the Issuer to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act.

3

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

      Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the principal amount of the Outstanding Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Outstanding Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Outstanding Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Issuer, in connection with the Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and exchanged.

      The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Outstanding Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Issuer to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Outstanding Notes or transfer ownership of such Outstanding Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Outstanding Notes by the Issuer and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Issuer of its obligations under the Registration Rights Agreement dated November 24, 2003, among Nortek Holdings, Inc., Deutsche Bank Securities Inc., UBS Securities LLC, Credit Suisse First Boston LLC and Bear, Stearns & Co. Inc. (the “Registration Rights Agreement”), and that the Issuer shall have no further obligations or liabilities thereunder. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer.

      The undersigned understands that tenders of Outstanding Notes pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Issuer’s acceptance for exchange of such tendered Outstanding Notes, constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under circumstances set forth in the Prospectus, the Issuer may not be required to accept for exchange any of the Outstanding Notes.

      By tendering shares of Outstanding Notes and executing this Letter of Transmittal, the undersigned represents: (1) that Exchange Notes acquired in the exchange will be obtained in the ordinary course of business of the person receiving the Exchange Notes, whether or not the undersigned is such person, (2) that the undersigned, at the time of the commencement or consummation of the Exchange Offer has no intention to engage in, or an arrangement or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of such Exchange Notes in violation of the Securities Act, (3) that the undersigned is not an “affiliate” of the Issuer within the meaning of Rule 405 under the Securities Act and (4) that if the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is not a broker-dealer, undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned or the person receiving such Exchange Notes, whether or not such person is the undersigned, is a broker-dealer the undersigned represents that it will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, and acknowledges that it will comply with the applicable provisions of the Securities Act, including delivering a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

      Any holder of Outstanding Notes using the Exchange Offer to participate in a distribution of the Exchange Notes (i) cannot rely on the position of the staff of the Securities and Exchange Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or similar

4

interpretive letters and (ii) must comply with the registration and prospectus requirements of the Securities Act in connection with a secondary resale transaction.

      All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable.

      Certificates for all Exchange Notes delivered in exchange for tendered Outstanding Notes and any Outstanding Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned.

      The undersigned, by completing the box entitled “Description of Outstanding Notes Tendered Herewith” above and signing this letter, will be deemed to have tendered the Outstanding Notes as set forth in such box.

5

TENDERING HOLDER(S) SIGN HERE

(Complete accompanying substitute Form W-9)

      Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Outstanding Notes hereby tendered or in whose name Outstanding Notes are registered on the books of DTC or one of its participants, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person. See Instruction 3.

(Signature(s) of Holder(s))

Date

Name(s)

(Please Print)

Capacity (full title)

Address

(Including Zip Code)

Daytime Area Code and Telephone No.

Taxpayer Identification No.

GUARANTEE OF SIGNATURE(S)

(If Required — See Instruction 3)

Authorized Signature

Dated

Name

Title

Name of Firm

Address of Firm

(Include Zip Code)

Area Code and Telephone No.

6

SPECIAL ISSUANCE INSTRUCTIONS

(See Instructions 3 and 4)

   To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to be issued in the name of someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above.

Issue: o Outstanding Notes not tendered to:

o Exchange Notes to:

Name(s)

Address:

(Include Zip Code)

Daytime Area Code and

Telephone No.

Tax Identification No.

SPECIAL DELIVERY INSTRUCTIONS

(See Instructions 3 and 4)

   To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to be sent to someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above.

Mail: o Outstanding Notes not tendered to:

o Exchange Notes to:

Name(s)

Address:

(Include Zip Code)

Area Code and

Telephone No.

7

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER

1. Delivery of this Letter of Transmittal and Certificates; Guaranteed Delivery Procedures.

      A holder of Outstanding Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Outstanding Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below.

      Holders of Outstanding Notes may tender Outstanding Notes by book-entry transfer by crediting the Outstanding Notes to the Exchange Agent’s account at DTC in accordance with DTC’s Automated Tender Offer Program (“ATOP”) and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent’s account at DTC. DTC will then send a computer-generated message (an “Agent’s Message”) to the Exchange Agent for its acceptance in which the holder of the Outstanding Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal or the DTC participant confirms on behalf of itself and the beneficial owners of such Outstanding Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent’s Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent’s Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP.

      The method of delivery of this Letter of Transmittal, the Outstanding Notes and any other required documents is at the election and risk of the holder, and except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If such delivery is by mail, it is suggested that registered mail with return receipt requested, properly insured, be used. In all cases sufficient time should be allowed to permit timely delivery. No Outstanding Notes or Letters of Transmittal should be sent to the Issuer.

      Holders whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and all other required documents to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Outstanding Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Under such procedure: (i) the tender must be made by or through an Eligible Guarantor Institution (as defined below); (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must have received from such Eligible Guarantor Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Outstanding Notes, the certificate number or numbers of such Outstanding Notes and the principal amount of Outstanding Notes tendered, stating that the tender is being made thereby, and guaranteeing that, within five business days after the Expiration Date, this Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the Outstanding Notes to be tendered in proper form for transfer and any other documents required by this Letter of Transmittal, will be deposited by the Eligible Guarantor Institution with the exchange agent; and (iii) this properly completed and executed Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing all tendered Outstanding Notes in proper form for transfer (or confirmation of a book-entry transfer into the Exchange Agent’s account at DTC of Outstanding Notes delivered electronically), and all other documents required by this Letter of Transmittal are received by the Exchange Agent within five business days after the Expiration Date.

      No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Notes for exchange.

8

2. Partial Tenders; Withdrawals.

      If less than the entire principal amount of Outstanding Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Outstanding Notes tendered in the box entitled “Description of Outstanding Notes Tendered Herewith.” A newly issued certificate for the Outstanding Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated.

      A tender pursuant to the Exchange Offer may be withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date.

      To be effective with respect to the tender of Outstanding Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at the address for the Exchange Agent set forth above prior to 5:00 p.m., New York City time, on the Expiration Date and before the Issuer notifies the Exchange Agent that it has accepted the tender of Outstanding Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Outstanding Notes to be withdrawn; (iii) identify the Outstanding Notes to be withdrawn (including the principal amount of such Outstanding Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Outstanding Notes and the principal amount of Outstanding Notes represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Outstanding Notes exchanged; (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee) or be accompanied by documents of transfers sufficient to permit the trustee with respect to the Outstanding Notes to register the transfer of such Outstanding Notes into the name of the holder who tendered the notes and is withdrawing them; and (vi) specify the name in which any such Outstanding Notes are to be registered if different from that of the holder who tendered the notes. The Exchange Agent will return the properly withdrawn Outstanding Notes as soon as practicable after withdrawal. If Outstanding Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Outstanding Notes or otherwise comply with the book-entry transfer facility’s procedures. All questions as to the validity, form and eligibility of notices of withdrawals, including time of receipt, will be determined by the Issuer, and such determination will be final and binding on all parties.

      Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agent’s account at the book entry transfer facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described under the caption “The Exchange Offer — Procedure for Tendering” in the Prospectus at any time prior to 5:00 p.m., New York City time, on the Expiration Date.

3. Signature on this Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures.

      If this Letter of Transmittal is signed by the registered holder(s) of the Outstanding Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Outstanding Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.

      If a number of Outstanding Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Outstanding Notes.

      When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner

9

of the Outstanding Notes) of Outstanding Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required.

      If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Outstanding Notes listed, such Outstanding Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Issuer and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Outstanding Notes.

      If this Letter of Transmittal, any Outstanding Notes, or written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority so to act must be submitted.

      Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Guarantor Institution.

      Signatures on this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution, unless Outstanding Notes are tendered: (i) by a holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on this Letter of Transmittal; or (ii) for the account of an Eligible Guarantor Institution (as defined below). In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an “Eligible Guarantor Institution”). If Outstanding Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Outstanding Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Guarantor Institution.

4. Special Issuance and Delivery Instructions.

      Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Outstanding Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that Outstanding Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate.

5. Transfer Taxes.

      The Issuer shall pay all transfer taxes, if any, applicable to the transfer and exchange of Outstanding Notes to it or its order pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any other person other than the registered holder of the Outstanding Notes tendered, or if tendered Outstanding Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and exchange of Outstanding Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder.

6. Waiver of Conditions.

      The Issuer reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus.

10

7. Mutilated, Lost, Stolen or Destroyed Securities.

      Any holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated above for further instructions.

8. Substitute Form W-9

      Each holder of Outstanding Notes whose Outstanding Notes are accepted for exchange (or other payee) is generally required to provide a correct taxpayer identification number (“TIN”) (e.g., the holder’s Social Security or federal employer identification number) and certain other information, on Substitute Form W-9, which is provided under “Important Tax Information” below, and to certify under penalties of perjury that the holder (or other payee) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 28% federal income tax backup withholding on payments made in connection with the Outstanding Notes or the Exchange Notes. The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or other payee) has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is not provided by the time any payment is made in connection with the Outstanding Notes or the Exchange Notes, 28% of all such payments will be withheld until a TIN is provided and, if a TIN is not provided within 60 days, such withheld amounts will be paid over to the Internal Revenue Service.

9. Requests for Assistance or Additional Copies.

      Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above.

      IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

IMPORTANT TAX INFORMATION

      Under U.S. federal income tax law, a holder of Outstanding Notes whose Outstanding Notes are accepted for exchange may be subject to backup withholding unless the holder provides U.S. Bank National Association, as Paying Agent (the “Paying Agent”), through the Exchange Agent, with either (i) such holder’s correct taxpayer identification number (“TIN”) on Substitute Form W-9 attached hereto, certifying (A) that the TIN provided on Substitute Form W-9 is correct (or that such holder of Outstanding Notes is awaiting a TIN), (B) that the holder of Outstanding Notes is not subject to backup withholding because (x) such holder of Outstanding Notes is exempt from backup withholding, (y) such holder of Outstanding Notes has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (z) the Internal Revenue Service has notified the holder of Outstanding Notes that he or she is no longer subject to backup withholding and (C) that the holder of Outstanding Notes is a U.S. person (including a U.S. resident alien); or (ii) an adequate basis for exemption from backup withholding. If such holder of Outstanding Notes is a U.S. individual, the TIN is such holder’s social security number. If the Paying Agent is not provided with the correct TIN, the holder of Outstanding Notes may also be subject to certain penalties imposed by the Internal Revenue Service.

      Certain holders of Outstanding Notes (including, among others, all corporations and certain foreign individuals and entities) are not subject to these backup withholding requirements. However, exempt holders of Outstanding Notes should indicate their exempt status on Substitute Form W-9. For example, a corporation should complete the Substitute Form W-9, provide its TIN and indicate by checking the appropriate boxes in Part 4 of the Substitute Form W-9 that it is a corporation and that it is exempt from backup withholding. In order for a foreign individual to

11

qualify as an exempt recipient, the holder must submit the appropriate Form W-8, rather than a Form W-9, signed under penalties of perjury, attesting to that individual’s exempt status. The appropriate Form W-8 can be obtained from the Paying Agent. See the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for more instructions.

      If backup withholding applies, the Paying Agent is required to withhold 28% of any payments made to the holder of Outstanding Notes or Exchange Notes or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service, provided the required information is furnished.

      The box in Part 3 of the Substitute Form W-9 may be checked if the surrendering holder of Outstanding Notes has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder of Outstanding Notes or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Paying Agent will withhold 28% of all payments made prior to the time a properly certified TIN is provided to the Paying Agent and, if the Paying Agent is not provided with a TIN within 60 days, such amounts will be paid over to the Internal Revenue Service.

      The holder of Outstanding Notes is required to give the Paying Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Outstanding Notes. If the Outstanding Notes are in more than one name or are not in the name of the actual owner, consult the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for additional guidance on which number to report.

12

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

      GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYING AGENT. — Social Security numbers and individual taxpayer identification numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.

		Give name and the SOCIAL SECURITY number (or
For this type of account:		individual taxpayer identification number) of —
1.	An individual’s account	The individual
2.	Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account
3.	Custodian account of a minor (Uniform Gift to Minors Act)	The minor
4.	Account in the name of guardian or committee for a designated ward, minor, or incompetent person	The ward, minor, or incompetent person
5.	a. The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee
	b. So-called trust account that is not a legal or valid trust under State law.	The actual owner
6.	Sole proprietorship account or single owner LLC	The owner (or the owner’s Social Security number or individual taxpayer identification number) (you must show the name of the owner but you may also enter your business or “doing business as” name)

		Give the name and the EMPLOYER
For this type of account:		IDENTIFICATION number of —
7.	A valid trust, estate or pension trust	The legal entity (do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title)
8.	Corporate or LLC electing corporate status	The corporation
9.	Religious, charitable, or educational organization account or an association, club or other tax-exempt organization	The organization
10.	Partnership or multi-member LLC	The partnership
11.	A broker or registered nominee	The broker or nominee
12.	Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments)	The public entity

*  Note: If no name is circled when there is more than one name listed, the TIN will be considered to be that of the first name listed.

13

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Obtaining a Number

If you do not have a taxpayer identification number, obtain Form SS-5, Application for a Social Security Card, Form SS-4, Application for Employer Identification Number or Form W-7, Application for Individual Taxpayer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number.

To complete Substitute Form W-9, if you do not have a taxpayer identification number, check the box in Part 3, sign and date the Form, and give it to the requester. In addition, you must complete the Certificate of Awaiting Taxpayer Identification Number.

Payee Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments include the following:

•  An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodian account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2).

•  The United States, or any agency or instrumentality thereof.

•  A State, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities.

•  An international organization or any agency, or instrumentality thereof.

•  A foreign government or any of its political subdivisions, agencies or instrumentalities.

Payees that may be specifically exempted from backup withholding on certain payments include the following:

•  A corporation.

•  A financial institution.

•  A futures commission merchant registered with the Commodity Futures Trading Commission.

•  A dealer in securities or commodities registered in the United States, the District of Columbia or a possession of the United States.

•  A real estate investment trust.

•  A nominee or custodian.

•  A common trust fund operated by a bank under section 584(a).

•  A trust exempt from tax under section 664 or described in section 4947.

•  An entity registered at all times during the taxable year under the Investment Company Act of 1940.

•  A foreign central bank of issue.

EXEMPT PAYEES SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYING AGENT, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, CHECK THE BOX LABELLED “EXEMPT FROM BACKUP WITHHOLDING”, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.

Privacy Act Notice. — Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA or Archer MSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws. We may also disclose this information to other countries under a tax treaty, or to Federal and state agencies to enforce Federal nontax criminal laws and to combat terrorism.

Penalties

1.     Penalty for Failure to Furnish Taxpayer identification Number. — If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

2.     Civil Penalty for False Information With Respect to Withholding. — If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a penalty of $500.

3.     Criminal Penalty for Falsifying Information. — Falsifying certifications or affirmations may be subject to criminal penalties including fines and/or imprisonment.

4.     Misuse of Taxpayer Identification Numbers. — If the requester discloses or uses taxpayer identification numbers in violation of Federal Law, the requester may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT

YOUR TAX ADVISOR OR THE

INTERNAL REVENUE SERVICE.

14

PAYER’S NAME: U.S. Bank National Association, as Exchange Agent
SUBSTITUTE FORM W-9	Part 1 — PLEASE PROVIDE YOUR TIN AND CERTIFY BY SIGNING AND DATING BELOW	Name --------------------------------------- Social Security Number OR --------------------------------------- Employer Identification Number

Department of the Treasury Internal Revenue Service	Part 2 — Certification — Under the penalties of perjury, I certify that:	Part 3 —  Awaiting TIN  o
Payor’s Request for Taxpayer Identification Number (“TIN”)	(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. person (including a U.S. resident alien).
	Part 4 — Check appropriate boxes: Individual/Sole proprietor o Exempt from backup withholding o Partnership o Corporation o Other (specify) o
	Certificate Instructions — You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2).
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.
Signature		Date

NOTE:	FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
	YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.

15

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

      I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 28% of all reportable payments made to me will be withheld.

Signature ______________________________  Date _________________________ 

16 EX-99.2 9 b48701nhexv99w2.htm EX-99.2 FORM OF NOTICE OF GUARANTEED DELIVERY

Exhibit 99.2

NOTICE OF GUARANTEED DELIVERY

for

Offer to Exchange All Outstanding

10% Senior Discount Notes due 2011

for

10% Series B Senior Discount Notes due 2011

of

NORTEK HOLDINGS, INC.

THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON                         , 2004 (THE “EXPIRATION DATE”) UNLESS EXTENDED.

       Registered holders of outstanding 10% Senior Discount Notes due 2011 (the “Outstanding Notes”) who wish to tender their Outstanding Notes in exchange for a like principal amount of new 10% Series B Senior Discount Notes due 2011 (the “Exchange Notes”) and whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes, Letter of Transmittal, and any other documents required by the Letter of Transmittal to U.S. Bank National Association (the “Exchange Agent”) prior to 5:00 p.m., New York City time, on the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mail to the Exchange Agent. See “The Exchange Offer — Guaranteed Delivery Procedure” in the Prospectus.

The Exchange Agent is:

U.S. BANK NATIONAL ASSOCIATION

For Delivery by Mail or Hand

U.S. Bank National Association

60 Livingston Avenue

1st Floor — Bond Drop Window

St. Paul, Minnesota 55104

Facsimile Transmission: 800-934-6802

For Information or Confirmation by Telephone:

(651) 495-8158

      Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery.

      This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Guarantor Institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures.

Ladies and Gentlemen:

      The undersigned hereby tenders to Nortek Holdings, Inc. (the “Issuer”) the principal amount of Outstanding Notes indicated below, upon the terms and subject to the conditions contained in the Issuer’s Prospectus dated                           , 2004 (as the same may be amended or supplemented from time to time, the “Prospectus”) and the related Letter of Transmittal, receipt of which is hereby acknowledged, pursuant to the guaranteed delivery procedure set forth in the Prospectus under the caption “The Exchange Offer — Guaranteed Delivery Procedure.”

      All authority herein conferred or agreed to be conferred in this Notice of Guaranteed Delivery and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, and legal representatives of the undersigned and shall not be affected by and shall survive the death or incapacity of the undersigned.

Name(s) of Tendering Holder(s):

Please Print

Address(es): 

Zip Code

Daytime Area Code and Tel. No.: 

Signature(s): 

Certificate Nos. of Outstanding Notes Tendered: 

Principal Amount of Outstanding Notes Tendered: 

(Check box if Outstanding Notes will be tendered by book-entry transfer)

o The Depository Trust Company

Account Number: 

Date: 

          This Notice of Guaranteed Delivery must be signed by the registered holder(s) of the Outstanding Notes tendered hereby exactly as their name(s) appear on the certificates for such Outstanding Notes or on a security position listing such holder(s) as the owner(s) of the Outstanding Notes, or by person(s) authorized to become registered holder(s) of such Outstanding Notes by endorsements and documents submitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in the fiduciary or representative capacity, such person must provide the preceding information and, unless waived by the Issuer, submit with the Letter of Transmittal evidence satisfactory to the Issuer of such person’s authority to so act.

2

THE FOLLOWING GUARANTEE MUST BE COMPLETED

GUARANTEE OF DELIVERY

(Not to be used for signature guarantee)

      The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at its address set forth above, the certificates representing the Outstanding Notes (or a confirmation of book-entry transfer of such Outstanding Notes into the Exchange Agent’s account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within five business days after the Expiration Date (as defined in the Letter of Transmittal). The undersigned acknowledges that it must deliver the Letter(s) of Transmittal (or facsimile thereof or Agent’s Message in lieu thereof) and the Outstanding Notes tendered thereby to the Exchange Agent within the time period set forth above and that the failure to do so could result in a financial loss to the undersigned.

Name of Firm: 

Address: 

Zip Code

Area Code and Telephone No.: 

Authorized Signature: 

Name: 

Please Type or Print

Title: 

Dated: 

NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

EX-99.3 10 b48701nhexv99w3.txt EX-99.3 FORM OF EXCHANGE AGENCY AGREEMENT EXHIBIT 99.3 FORM OF EXCHANGE AGENCY AGREEMENT U.S. Bank National Association Corporate Trust Services One Federal Street, 3rd Floor Boston, Massachusetts 02110 Re: Exchange Agency Agreement dated as of _____________, _____. Ladies and Gentlemen: Nortek Holdings, Inc., a Delaware corporation, (the "Company") intends to make an offer (the "Exchange Offer") to exchange up to $515,000,000 aggregate principal amount of its 10% Series B Senior Discount Notes due 2011 (the "New Notes") issued by the Company and guaranteed by the guarantors, if any (the "Guarantors"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus (as defined below) is a part, for a like principal amount of outstanding 10% Senior Discount Notes due 2011 (the "Existing Notes") issued by the Company in transactions exempt from or not subject to registration under the Securities Act. The terms and conditions of the Exchange Offer as currently contemplated are set forth in a prospectus, dated _____________, _____ (the "Prospectus"), proposed to be distributed to all holders of the Existing Notes. The Existing Notes and the New Notes are collectively referred to herein as the "Notes." Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Indenture, dated as of November 24, 2003, between the Company and U.S. Bank National Association, as Trustee ("USB"). The Company hereby appoints USB to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to USB. The Exchange Offer is expected to be commenced by the Company on or about the date of the Prospectus. The Letter of Transmittal accompanying the Prospectus is to be used by the holders of the Existing Notes to accept the Exchange Offer, and contains instructions with respect to the delivery of certificates representing the Existing Notes tendered. In the event any holder of the Existing Notes is tendering by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), such holders may tender through the DTC Automated Tender Offer Program ("ATOP"). DTC participants will transmit their acceptance of the Exchange Offer to DTC, which will verify the acceptance and execute a book-entry delivery to your account at DTC. DTC will then send an "Agent's Message" to you for its acceptance. The Exchange Offer shall expire at 5:00 p.m., New York City time, on ____, ____ or on such later date or time to which the Company may extend the Exchange Offer (the "Expiration Date"), written notice of such extension shall be given to you by the Company. The Company shall give written notice to you of the effective date of the Registration Statement promptly after the Registration Statement becomes effective, and until your receipt of such written notice you shall be entitled to assume in good faith that such effective date has not occurred. Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving written notice to you of such on or before [9:00 a.m.], New York City time, on the next business day after the previously scheduled Expiration Date. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth herein (each of which is ministerial and shall not be construed as fiduciary, and further no implied duties shall be construed or read into this Agreement against you); provided, however, that your shall perform such duties in good faith and in accordance with customary practice. 2. Subject to applicable ATOP procedures, you are to examine each Letter of Transmittal that you receive and each original Existing Note that you receive (and any other documents that you may receive from or on behalf of holders of the Existing Notes) to ascertain whether: (i) such Letters of Transmittal (and any such other documents) are duly executed and properly completed in accordance with the instructions set forth in the Letter of Transmittal, and (ii) such Existing Notes have otherwise been properly tendered. In each case where any such Letter of Transmittal (or other such document) received by you has been improperly completed or executed, or any such Existing Note received by you is not in proper form for transfer, or some other irregularity in connection with the acceptance of the Exchange Offer is apparent on the face of any such Letter of Transmittal or Existing Note (or any such other document) received by you, you will endeavor promptly to inform the presenters of the need for fulfillment of all requirements and promptly to take any other action as may be necessary or advisable to cause such irregularity to be corrected, and you will promptly notify the Company thereof. With respect to any Letters of Transmittal and Existing Notes tendered through the ATOP (or applicable guaranteed delivery procedure) you shall be entitled to rely conclusively on information or confirmations you receive from DTC (or other applicable institution, as the case may be) with respect thereto. 3. With the approval of any of the Chairman, the Chief Executive Officer, the President, any Vice President and the Secretary (each, a "Designated Officer") of the Company, or of counsel to the Company (such approval, if given orally, to be confirmed in writing) or any other party designated by such a Designated Officer, you are authorized to waive any irregularities in connection with any tender of Existing Notes pursuant to the Exchange Offer, without incurring any liability (subject to the proviso in paragraph 1 hereof). 4. Tenders of Existing Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer -- Procedure for Tendering", and Existing Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 4, Existing Notes that a Designated Officer, counsel to the Company, or any other party designated by such Designated Officer shall approve as having been properly tendered shall be considered by you, without incurring any liability (subject to the proviso in paragraph 1 hereof), to be properly tendered. 5. You shall advise the Company with respect to any Existing Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Existing Notes. -2- 6. Subject to applicable ATOP procedures, you shall accept tenders: (a) in cases where the Existing Notes received by you are registered in two or more names, only if signed by all named holders; (b) in cases where the signing person indicated on a Letter of Transmittal received by you is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) in cases where tender of an Existing Note received by you is made by a person other than the registered holder of such Existing Note, if customary transfer requirements have been satisfied. You shall accept partial tenders of Existing Notes where so indicated and as permitted in the Letter of Transmittal and, in your capacity as transfer agent, split-up and return any untendered principal amount of the Existing Notes to the holder (or such other person as may be designated in the Letter of Transmittal), as promptly as practicable after the expiration or termination of the Exchange Offer. 7. The Company will exchange Existing Notes duly tendered for New Notes on the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal. Delivery of Existing Notes will be made on behalf of the Company at the rate of $1,000.00 of principal amount of New Notes for each $1,000.00 of principal amount of Existing Notes tendered as soon as practicable after notice (such notice if given orally, to be confirmed in writing) of acceptance of said principal amount of Existing Notes by the Company; provided, however, that in all cases, Existing Notes tendered pursuant to the Exchange Offer will be exchanged only after timely tender to you of the related Existing Note representing such principal amount, and a properly completed and duly executed Letter of Transmittal, in each case in accordance with and subject to the Prospectus and the terms of the Letter of Transmittal. 8. Tenders of Existing Notes pursuant to the Exchange Offer may be withdrawn prior to 5:00 p.m. New York City time on the Expiration Date, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal. 9. The Company shall not be required to exchange any Existing Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to exchange any Existing Notes tendered shall be given (and confirmed in writing) by the Company to you. 10. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Existing Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer -- Procedure for Tendering" or otherwise, you shall as soon as practicable after the Expiration Date (and receipt of notification from the Company of such non-acceptance) return any certificates in your possession representing (or, if applicable, effect appropriate book-entry transfer) unaccepted Existing Notes, together with any accompanying Letters of Transmittal (and related documents delivered to you pursuant to the Letter of Transmittal) that are in your possession, to the persons who deposited them. -3- 11. All certificates in your possession representing returned Existing Notes, unaccepted Existing Notes or New Notes shall be forwarded by first-class certified mail, return receipt requested, if in the U.S., or by two day courier, if outside the U.S. 12. If any holder shall report to you that his/her failure to surrender Existing Notes registered in his/her name is due to the loss, misplacement or destruction of a certificate or certificates, you shall request such holder (i) to furnish to you an affidavit of loss and, if required by the Company or the Guarantors, a corporate bond of indemnity in an amount and evidenced by such certificate or certificates of a surety, as may be satisfactory to the Company or the Guarantors, and (ii) to execute and deliver an agreement to indemnify the Company, the Guarantors and you in such form as is acceptable to the Company, the Guarantors and you. The obligees to be named in each such indemnity bond shall include the Company, the Guarantors and you. You shall report in writing to the Company the names of all holders who claim that their Existing Notes have been lost, misplaced or destroyed and the principal amount of such Existing Notes. 13. As Exchange Agent hereunder: (a) you shall have no duties or obligations other than those specifically set forth herein or as may be subsequently agreed to in writing by you and the Company (provided that the foregoing shall not be construed to discharge your general duty to act in good faith); (b) you will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the Existing Notes represented thereby deposited with you pursuant to the Exchange Offer; (c) you shall not be obligated to expend or risk your own funds, or to take any legal or other action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with indemnity satisfactory to you; (d) you may rely on, and shall be protected in acting (or in forbearing from action) in reliance upon any certificate, statement, request, agreement, instrument, opinion, notice, letter, telegram or other document, security or communication received by you and reasonably believed by you to be genuine and (if applicable) to have been signed by the proper party or parties; (e) you may rely on and shall be protected in acting upon written or oral instructions from any Designated Officer or counsel to the Company, or any other party designated by a Designated Officer of the Company; (f) you may consult with your counsel with respect to any questions relating to your duties and responsibilities and the written opinion of such independent counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the written opinion of such counsel; -4- (g) you shall not advise any person tendering Existing Notes pursuant to the Exchange Offer as to the wisdom of making such tender or as to the market value or decline or appreciation in market value of any Existing Notes; (h) you shall not be deemed to have notice of any fact, claim or demand with respect hereto unless actually known by an officer in your Corporate Trust Office charged with responsibility for administering this Agreement or unless in writing received by you and making specific reference to this Agreement or the Exchange Offer; (i) you shall not be under any responsibility for the validity, genuineness or due authorization or execution of, or with respect to any signatures appearing on, any Letter of Transmittal (or with respect to the truth or accuracy of any information therein contained), any certificate representing the Notes or any book-entry transfer of the Notes; and (j) neither you nor any of your directors, officers or employees shall be liable to anyone for any error of judgment, or for any act done or step taken or omitted to be taken by you or any of your directors, officers or employees, or for any mistake of fact or law, or for anything which you or any of your directors, officers or employees, may do or refrain from doing in connection with or in the administration of this Agreement, unless and except to the extent the same constitutes gross negligence, willful misconduct or bad faith on your part. 14. You shall take such action as may from time to time be requested by the Company (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. 15. You shall advise by facsimile transmission, electronic mail or telephone (and, in the case of advice by telephone, promptly thereafter confirm in writing) to the following designated person (or such other person as such person may subsequently designate by written notice to you) at the Company, upon such person's written request from time to time made not more frequently than once per business day (as defined below), as to the total principal amount of Existing Notes that have been tendered pursuant to the Exchange Offer and the items received by you pursuant to this Agreement as of the close of business or the immediately preceding business day, separately reporting and giving cumulative totals as to items properly received and items improperly received: Nortek Holdings, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Attn: Kevin W. Donnelly Tel: (401) 751-1600 Fax: (401) 751-4610 email: donnelly@nortek-inc.com -5- For purposes of this Agreement, the term "business day" shall mean any day on which the Exchange Agent is open for business at its offices in St. Paul, Minnesota or its office in Boston, Massachusetts. In addition, you will also inform, and cooperate in making available to, such person at the Company (upon oral request reasonably made from time to time prior to the Expiration Date) such other information in your possession regarding the items received by you in connection with the Exchange Offer as he or she reasonably requests. After the Expiration Date, you shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Existing Notes tendered, the aggregate principal amount of Existing Notes accepted and deliver said list to the Company. 16. Any Letters of Transmittal and Notices of Guaranteed Delivery actually received by you shall be stamped by you as to the date and the time of your receipt thereof and shall be preserved by you for a period of time at least equal to (without any obligation on your part to preserve longer than) the period of time you preserve other records pertaining to the transfer of securities. You shall dispose of unused Letters of Transmittal and other surplus materials in your possession by returning them to the Company. 17. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reason of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with your or for compensation owed to you hereunder. 18. For services rendered as Exchange Agent hereunder, you shall be entitled to compensation as set forth on Schedule I attached hereto, and shall be entitled to reimbursement for out-of-pocket disbursements and expenses (including the reasonable fees of your counsel) incurred in connection with the preparation of this Agreement and your performance and observance of, or pursuant to, the terms of this Agreement, each of which the Company agrees to pay (as billed by you). 19. The Company hereby represents and warrants that it has provided to you a complete, accurate and final copy of the Prospectus and the Letter of Transmittal; and you hereby acknowledge receipt of the copies of the foregoing that have been provided to you by the Company (or its counsel) and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time and provided to you), on the other hand, with respect to the terms and conditions of the Exchange Offer shall be resolved in favor of the latter two documents (except with respect to the duties, immunities, liabilities, protections and indemnification of, or in favor of, you as Exchange Agent, which shall be resolved and controlled by this Agreement). 20. The Company covenants and agrees to indemnify and hold you in your capacity as Exchange Agent hereunder (and your directors, officers and employees) harmless against any loss, liability, cost and expense, including (but not limited to) reasonable attorneys' fees and expenses that may be suffered or incurred by you and arising out of or in connection with your appointment as Exchange Agent hereunder, or your performance or observance of this Agreement, or pursuant to the terms of this Agreement, including without limitation any loss, liability cost or expense arising from any act, omission, delay or refusal made by you in reasonable reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, -6- genuine and sufficient and in accepting any tender or effecting any transfer of Existing Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Existing Notes; provided, however, that the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence, willful misconduct or bad faith. The foregoing indemnity and agreement to hold harmless shall survive the termination of this Agreement. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action, and, if the Company so elects, the Company shall assume the defense of any suit brought to enforce any such claim. In the event that the Company shall assume the defense of any such suit, the Company shall not be liable for the fees and expenses of any additional counsel thereafter retained by you, so long as the Company shall retain counsel reasonably satisfactory to you to defend such suit, unless in your judgment, which must be reasonable and made in good faith, it is advisable for you to be represented or advised by separate counsel. The Company hereby agrees to indemnify and hold you harmless from any liability on account of taxes, assessments for late payment or other governmental charges or any other such tax-related loss, costs or expenses (including reasonable legal fees and expenses) that may be assessed against you as a result of your duties hereunder, including without limitation any liability for the withholding or deduction or the failure to withhold or deduct taxes, and any liability for failure to obtain proper certifications or to properly report to governmental authorities. The foregoing indemnity shall survive the termination of this Agreement. 21. (a) You agree to comply with all applicable requirements under the tax laws of the United States, including any back-up withholding and withholding requirements, and shall file any appropriate reports with the Internal Revenue Service in a timely manner. The provisions of this section shall survive the termination of this Agreement until such time as the last applicable due date for any required reports, withholdings or taxes. (b) The Company hereby agrees to assume any and all obligations imposed now or hereafter by any applicable tax law with respect to your duties hereunder (other than income tax obligations in respect of income earned by you). The Company understands that you are required to make a deduction (which percentage deduction on the date hereof is 28%) on payments made to U.S. persons on account of New Notes issued pursuant to the Exchange Offer who have not supplied the correct taxpayer identification number or required certification, and hereby undertakes to instruct you in writing with respect to any other responsibility known by the Company that you may have for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting in connection with your duties under this Agreement. 22. You shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Existing Notes, the Company's check in the amount of all transfer taxes so payable; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. The provisions of this section shall survive the termination of this Agreement. -7- 23. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflict of law principles thereof, and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of each of the parties hereto. 24. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 25. In case any provisions of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 26. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. This Agreement may not be modified orally. 27. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company: Nortek Holdings, Inc. 50 Kennedy Plaza Providence, Rhode Island 02903 Attn: Kevin W. Donnelly Tel: (401) 751-1600 Fax: (401) 751-4610 If to the Exchange Agent: U.S. Bank National Association Corporate Trust Services One Federal Street Boston, Massachusetts 02110 Attention: Todd DiNezza (Tel.: 617-603-6573) (Fax: 617-603-6668) 28. Unless terminated earlier by the parties hereto, this Agreement shall terminate ninety (30) days following the Expiration Date. Notwithstanding the foregoing, Sections 20, 21 and 22 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates, funds or property then held by you as Exchange Agent under this Agreement. -8- 29. This Agreement shall be binding and effective as of the date hereof. Please acknowledge receipt of this Agreement and confirm the arrangement herein provided by signing and returning the enclosed copy. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -9- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered on its behalf by a duly authorized officer, intending the same to be effective as of the____ day of _______, 200__. NORTEK HOLDINGS, INC. By: ______________________________________ Name: Title: Accepted as of the date first above written. 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EX-99.2

Ex-99.2 Form of Notice of Guaranteed Delivery

EX-99.3

                                                                    EXHIBIT 99.3

                        FORM OF EXCHANGE AGENCY AGREEMENT

U.S. Bank National Association
Corporate Trust Services
One Federal Street, 3rd Floor
Boston, Massachusetts 02110

      Re:   Exchange Agency Agreement dated as of _____________, _____.

Ladies and Gentlemen:

      Nortek Holdings, Inc., a Delaware corporation, (the "Company") intends to
make an offer (the "Exchange Offer") to exchange up to $515,000,000 aggregate
principal amount of its 10% Series B Senior Discount Notes due 2011 (the "New
Notes") issued by the Company and guaranteed by the guarantors, if any (the
"Guarantors"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus (as defined below) is a part, for a like principal amount of
outstanding 10% Senior Discount Notes due 2011 (the "Existing Notes") issued by
the Company in transactions exempt from or not subject to registration under the
Securities Act. The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated _____________, _____ (the
"Prospectus"), proposed to be distributed to all holders of the Existing Notes.
The Existing Notes and the New Notes are collectively referred to herein as the
"Notes." Capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Indenture, dated as of November 24, 2003, between
the Company and U.S. Bank National Association, as Trustee ("USB").

      The Company hereby appoints USB to act as exchange agent (the "Exchange
Agent") in connection with the Exchange Offer. References hereinafter to "you"
shall refer to USB.

      The Exchange Offer is expected to be commenced by the Company on or about
the date of the Prospectus. The Letter of Transmittal accompanying the
Prospectus is to be used by the holders of the Existing Notes to accept the
Exchange Offer, and contains instructions with respect to the delivery of
certificates representing the Existing Notes tendered.

      In the event any holder of the Existing Notes is tendering by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), such holders may tender through the DTC Automated Tender Offer Program
("ATOP"). DTC participants will transmit their acceptance of the Exchange Offer
to DTC, which will verify the acceptance and execute a book-entry delivery to
your account at DTC. DTC will then send an "Agent's Message" to you for its
acceptance.

      The Exchange Offer shall expire at 5:00 p.m., New York City time, on ____,
____ or on such later date or time to which the Company may extend the Exchange
Offer (the "Expiration Date"), written notice of such extension shall be given
to you by the Company. The Company shall give written notice to you of the
effective date of the Registration Statement promptly after the Registration
Statement becomes effective, and until your receipt of such written notice you
shall be entitled to assume in good faith that such effective date has not
occurred. Subject to the terms and conditions set forth in the Prospectus, the
Company expressly reserves the right to extend the Exchange Offer from time to
time and may extend the Exchange Offer by giving




written notice to you of such on or before [9:00 a.m.], New York City time, on
the next business day after the previously scheduled Expiration Date.

      In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:

      1. You will perform such duties and only such duties as are specifically
set forth herein (each of which is ministerial and shall not be construed as
fiduciary, and further no implied duties shall be construed or read into this
Agreement against you); provided, however, that your shall perform such duties
in good faith and in accordance with customary practice.

      2. Subject to applicable ATOP procedures, you are to examine each Letter
of Transmittal that you receive and each original Existing Note that you receive
(and any other documents that you may receive from or on behalf of holders of
the Existing Notes) to ascertain whether: (i) such Letters of Transmittal (and
any such other documents) are duly executed and properly completed in accordance
with the instructions set forth in the Letter of Transmittal, and (ii) such
Existing Notes have otherwise been properly tendered. In each case where any
such Letter of Transmittal (or other such document) received by you has been
improperly completed or executed, or any such Existing Note received by you is
not in proper form for transfer, or some other irregularity in connection with
the acceptance of the Exchange Offer is apparent on the face of any such Letter
of Transmittal or Existing Note (or any such other document) received by you,
you will endeavor promptly to inform the presenters of the need for fulfillment
of all requirements and promptly to take any other action as may be necessary or
advisable to cause such irregularity to be corrected, and you will promptly
notify the Company thereof. With respect to any Letters of Transmittal and
Existing Notes tendered through the ATOP (or applicable guaranteed delivery
procedure) you shall be entitled to rely conclusively on information or
confirmations you receive from DTC (or other applicable institution, as the case
may be) with respect thereto.

      3. With the approval of any of the Chairman, the Chief Executive Officer,
the President, any Vice President and the Secretary (each, a "Designated
Officer") of the Company, or of counsel to the Company (such approval, if given
orally, to be confirmed in writing) or any other party designated by such a
Designated Officer, you are authorized to waive any irregularities in connection
with any tender of Existing Notes pursuant to the Exchange Offer, without
incurring any liability (subject to the proviso in paragraph 1 hereof).

      4. Tenders of Existing Notes may be made only as set forth in the Letter
of Transmittal and in the section of the Prospectus captioned "The Exchange
Offer -- Procedure for Tendering", and Existing Notes shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein.

            Notwithstanding the provisions of this paragraph 4, Existing Notes
that a Designated Officer, counsel to the Company, or any other party designated
by such Designated Officer shall approve as having been properly tendered shall
be considered by you, without incurring any liability (subject to the proviso in
paragraph 1 hereof), to be properly tendered.

      5. You shall advise the Company with respect to any Existing Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Existing Notes.


                                      -2-


      6.    Subject to applicable ATOP procedures, you shall accept tenders:

            (a)   in cases where the Existing Notes received by you are
      registered in two or more names, only if signed by all named holders;

            (b) in cases where the signing person indicated on a Letter of
      Transmittal received by you is acting in a fiduciary or a representative
      capacity only when proper evidence of his or her authority so to act is
      submitted; and

            (c) in cases where tender of an Existing Note received by you is
      made by a person other than the registered holder of such Existing Note,
      if customary transfer requirements have been satisfied.

            You shall accept partial tenders of Existing Notes where so
      indicated and as permitted in the Letter of Transmittal and, in your
      capacity as transfer agent, split-up and return any untendered principal
      amount of the Existing Notes to the holder (or such other person as may be
      designated in the Letter of Transmittal), as promptly as practicable after
      the expiration or termination of the Exchange Offer.

      7. The Company will exchange Existing Notes duly tendered for New Notes on
the terms and subject to the conditions set forth in the Prospectus and the
Letter of Transmittal. Delivery of Existing Notes will be made on behalf of the
Company at the rate of $1,000.00 of principal amount of New Notes for each
$1,000.00 of principal amount of Existing Notes tendered as soon as practicable
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said principal amount of Existing Notes by the Company; provided,
however, that in all cases, Existing Notes tendered pursuant to the Exchange
Offer will be exchanged only after timely tender to you of the related Existing
Note representing such principal amount, and a properly completed and duly
executed Letter of Transmittal, in each case in accordance with and subject to
the Prospectus and the terms of the Letter of Transmittal.

      8. Tenders of Existing Notes pursuant to the Exchange Offer may be
withdrawn prior to 5:00 p.m. New York City time on the Expiration Date, subject
to the terms and upon the conditions set forth in the Prospectus and the Letter
of Transmittal.

      9. The Company shall not be required to exchange any Existing Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Existing Notes
tendered shall be given (and confirmed in writing) by the Company to you.

      10. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Existing Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer -- Procedure for Tendering" or otherwise, you
shall as soon as practicable after the Expiration Date (and receipt of
notification from the Company of such non-acceptance) return any certificates in
your possession representing (or, if applicable, effect appropriate book-entry
transfer) unaccepted Existing Notes, together with any accompanying Letters of
Transmittal (and related documents delivered to you pursuant to the Letter of
Transmittal) that are in your possession, to the persons who deposited them.


                                      -3-


      11. All certificates in your possession representing returned Existing
Notes, unaccepted Existing Notes or New Notes shall be forwarded by first-class
certified mail, return receipt requested, if in the U.S., or by two day courier,
if outside the U.S.

      12. If any holder shall report to you that his/her failure to surrender
Existing Notes registered in his/her name is due to the loss, misplacement or
destruction of a certificate or certificates, you shall request such holder (i)
to furnish to you an affidavit of loss and, if required by the Company or the
Guarantors, a corporate bond of indemnity in an amount and evidenced by such
certificate or certificates of a surety, as may be satisfactory to the Company
or the Guarantors, and (ii) to execute and deliver an agreement to indemnify the
Company, the Guarantors and you in such form as is acceptable to the Company,
the Guarantors and you. The obligees to be named in each such indemnity bond
shall include the Company, the Guarantors and you. You shall report in writing
to the Company the names of all holders who claim that their Existing Notes have
been lost, misplaced or destroyed and the principal amount of such Existing
Notes.

      13.   As Exchange Agent hereunder:

            (a) you shall have no duties or obligations other than those
      specifically set forth herein or as may be subsequently agreed to in
      writing by you and the Company (provided that the foregoing shall not be
      construed to discharge your general duty to act in good faith);

            (b) you will be regarded as making no representations and having no
      responsibilities as to the validity, sufficiency, value or genuineness of
      any of the Existing Notes represented thereby deposited with you pursuant
      to the Exchange Offer;

            (c) you shall not be obligated to expend or risk your own funds, or
      to take any legal or other action hereunder which might in your reasonable
      judgment involve any expense or liability, unless you shall have been
      furnished with indemnity satisfactory to you;

            (d) you may rely on, and shall be protected in acting (or in
      forbearing from action) in reliance upon any certificate, statement,
      request, agreement, instrument, opinion, notice, letter, telegram or other
      document, security or communication received by you and reasonably
      believed by you to be genuine and (if applicable) to have been signed by
      the proper party or parties;

            (e) you may rely on and shall be protected in acting upon written or
      oral instructions from any Designated Officer or counsel to the Company,
      or any other party designated by a Designated Officer of the Company;

            (f) you may consult with your counsel with respect to any questions
      relating to your duties and responsibilities and the written opinion of
      such independent counsel shall be full and complete authorization and
      protection in respect of any action taken, suffered or omitted to be taken
      by you hereunder in good faith and in accordance with the written opinion
      of such counsel;


                                      -4-


            (g) you shall not advise any person tendering Existing Notes
      pursuant to the Exchange Offer as to the wisdom of making such tender or
      as to the market value or decline or appreciation in market value of any
      Existing Notes;

            (h) you shall not be deemed to have notice of any fact, claim or
      demand with respect hereto unless actually known by an officer in your
      Corporate Trust Office charged with responsibility for administering this
      Agreement or unless in writing received by you and making specific
      reference to this Agreement or the Exchange Offer;

            (i) you shall not be under any responsibility for the validity,
      genuineness or due authorization or execution of, or with respect to any
      signatures appearing on, any Letter of Transmittal (or with respect to the
      truth or accuracy of any information therein contained), any certificate
      representing the Notes or any book-entry transfer of the Notes; and

            (j) neither you nor any of your directors, officers or employees
      shall be liable to anyone for any error of judgment, or for any act done
      or step taken or omitted to be taken by you or any of your directors,
      officers or employees, or for any mistake of fact or law, or for anything
      which you or any of your directors, officers or employees, may do or
      refrain from doing in connection with or in the administration of this
      Agreement, unless and except to the extent the same constitutes gross
      negligence, willful misconduct or bad faith on your part.

      14. You shall take such action as may from time to time be requested by
the Company (and such other action as you may reasonably deem appropriate) to
furnish copies of the Prospectus, Letter of Transmittal and the Notice of
Guaranteed Delivery or such other forms as may be approved from time to time by
the Company, to all persons requesting such documents and to accept and comply
with telephone requests for information relating to the Exchange Offer, provided
that such information shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer. The Company will furnish you with copies
of such documents at your request.

      15. You shall advise by facsimile transmission, electronic mail or
telephone (and, in the case of advice by telephone, promptly thereafter confirm
in writing) to the following designated person (or such other person as such
person may subsequently designate by written notice to you) at the Company, upon
such person's written request from time to time made not more frequently than
once per business day (as defined below), as to the total principal amount of
Existing Notes that have been tendered pursuant to the Exchange Offer and the
items received by you pursuant to this Agreement as of the close of business or
the immediately preceding business day, separately reporting and giving
cumulative totals as to items properly received and items improperly received:

                        Nortek Holdings, Inc.
                        50 Kennedy Plaza
                        Providence, Rhode Island 02903
                        Attn:  Kevin W. Donnelly
                        Tel:  (401) 751-1600
                        Fax:  (401) 751-4610
                        email:  donnelly@nortek-inc.com


                                      -5-


            For purposes of this Agreement, the term "business day" shall mean
any day on which the Exchange Agent is open for business at its offices in St.
Paul, Minnesota or its office in Boston, Massachusetts. In addition, you will
also inform, and cooperate in making available to, such person at the Company
(upon oral request reasonably made from time to time prior to the Expiration
Date) such other information in your possession regarding the items received by
you in connection with the Exchange Offer as he or she reasonably requests.
After the Expiration Date, you shall prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Existing Notes
tendered, the aggregate principal amount of Existing Notes accepted and deliver
said list to the Company.

      16. Any Letters of Transmittal and Notices of Guaranteed Delivery actually
received by you shall be stamped by you as to the date and the time of your
receipt thereof and shall be preserved by you for a period of time at least
equal to (without any obligation on your part to preserve longer than) the
period of time you preserve other records pertaining to the transfer of
securities. You shall dispose of unused Letters of Transmittal and other surplus
materials in your possession by returning them to the Company.

      17. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for the
payment of transfer taxes by reason of amounts, if any, borrowed by the Company,
or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with your or for compensation owed to you hereunder.

      18. For services rendered as Exchange Agent hereunder, you shall be
entitled to compensation as set forth on Schedule I attached hereto, and shall
be entitled to reimbursement for out-of-pocket disbursements and expenses
(including the reasonable fees of your counsel) incurred in connection with the
preparation of this Agreement and your performance and observance of, or
pursuant to, the terms of this Agreement, each of which the Company agrees to
pay (as billed by you).

      19. The Company hereby represents and warrants that it has provided to you
a complete, accurate and final copy of the Prospectus and the Letter of
Transmittal; and you hereby acknowledge receipt of the copies of the foregoing
that have been provided to you by the Company (or its counsel) and further
acknowledge that you have examined each of them. Any inconsistency between this
Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as
they may be amended from time to time and provided to you), on the other hand,
with respect to the terms and conditions of the Exchange Offer shall be resolved
in favor of the latter two documents (except with respect to the duties,
immunities, liabilities, protections and indemnification of, or in favor of, you
as Exchange Agent, which shall be resolved and controlled by this Agreement).

      20. The Company covenants and agrees to indemnify and hold you in your
capacity as Exchange Agent hereunder (and your directors, officers and
employees) harmless against any loss, liability, cost and expense, including
(but not limited to) reasonable attorneys' fees and expenses that may be
suffered or incurred by you and arising out of or in connection with your
appointment as Exchange Agent hereunder, or your performance or observance of
this Agreement, or pursuant to the terms of this Agreement, including without
limitation any loss, liability cost or expense arising from any act, omission,
delay or refusal made by you in reasonable reliance upon any signature,
endorsement, assignment, certificate, order, request, notice, instruction or
other instrument or document reasonably believed by you to be valid,


                                      -6-


genuine and sufficient and in accepting any tender or effecting any transfer of
Existing Notes reasonably believed by you in good faith to be authorized, and in
delaying or refusing in good faith to accept any tenders or effect any transfer
of Existing Notes; provided, however, that the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence, willful misconduct or bad faith.
The foregoing indemnity and agreement to hold harmless shall survive the
termination of this Agreement.

      The Company shall be entitled to participate at its own expense in the
defense of any such claim or other action, and, if the Company so elects, the
Company shall assume the defense of any suit brought to enforce any such claim.
In the event that the Company shall assume the defense of any such suit, the
Company shall not be liable for the fees and expenses of any additional counsel
thereafter retained by you, so long as the Company shall retain counsel
reasonably satisfactory to you to defend such suit, unless in your judgment,
which must be reasonable and made in good faith, it is advisable for you to be
represented or advised by separate counsel.

      The Company hereby agrees to indemnify and hold you harmless from any
liability on account of taxes, assessments for late payment or other
governmental charges or any other such tax-related loss, costs or expenses
(including reasonable legal fees and expenses) that may be assessed against you
as a result of your duties hereunder, including without limitation any liability
for the withholding or deduction or the failure to withhold or deduct taxes, and
any liability for failure to obtain proper certifications or to properly report
to governmental authorities. The foregoing indemnity shall survive the
termination of this Agreement.

      21. (a) You agree to comply with all applicable requirements under the tax
laws of the United States, including any back-up withholding and withholding
requirements, and shall file any appropriate reports with the Internal Revenue
Service in a timely manner. The provisions of this section shall survive the
termination of this Agreement until such time as the last applicable due date
for any required reports, withholdings or taxes.

          (b) The Company hereby agrees to assume any and all obligations
imposed now or hereafter by any applicable tax law with respect to your duties
hereunder (other than income tax obligations in respect of income earned by
you). The Company understands that you are required to make a deduction (which
percentage deduction on the date hereof is 28%) on payments made to U.S. persons
on account of New Notes issued pursuant to the Exchange Offer who have not
supplied the correct taxpayer identification number or required certification,
and hereby undertakes to instruct you in writing with respect to any other
responsibility known by the Company that you may have for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting in connection with your duties under this Agreement.

      22. You shall deliver or cause to be delivered, in a timely manner to each
governmental authority to which any transfer taxes are payable in respect of the
exchange of Existing Notes, the Company's check in the amount of all transfer
taxes so payable; provided, however, that you shall reimburse the Company for
amounts refunded to you in respect of your payment of any such transfer taxes,
at such time as such refund is received by you. The provisions of this section
shall survive the termination of this Agreement.


                                      -7-


      23. This Agreement and your appointment as Exchange Agent hereunder shall
be construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts, without regard to conflict of law principles thereof, and shall
inure to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.

      24. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

      25. In case any provisions of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

      26. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.

      27. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:

            If to the Company:

            Nortek Holdings, Inc.
            50 Kennedy Plaza
            Providence, Rhode Island 02903
            Attn:  Kevin W. Donnelly
            Tel:  (401) 751-1600
            Fax:  (401) 751-4610


            If to the Exchange Agent:

            U.S. Bank National Association
            Corporate Trust Services
            One Federal Street
            Boston, Massachusetts 02110
            Attention:   Todd DiNezza
            (Tel.: 617-603-6573)
            (Fax:  617-603-6668)

      28. Unless terminated earlier by the parties hereto, this Agreement shall
terminate ninety (30) days following the Expiration Date. Notwithstanding the
foregoing, Sections 20, 21 and 22 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates, funds or property then held by you as Exchange
Agent under this Agreement.


                                      -8-


      29.   This Agreement shall be binding and effective as of the date
hereof.

      Please acknowledge receipt of this Agreement and confirm the arrangement
herein provided by signing and returning the enclosed copy.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      -9-



IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
and delivered on its behalf by a duly authorized officer, intending the same to
be effective as of the____ day of _______, 200__.

                                    NORTEK HOLDINGS, INC.


                              By:   ______________________________________
                                    Name:

                                    Title:

Accepted as of the date first above written.

U.S. BANK NATIONAL ASSOCIATION, as Exchange Agent


By:   ______________________________________
Name:
Title:


                                      -10-