Split Dollar Agreement between Nortek, Inc. and Trustee of The Richard L. Bready 1996 Irrevocable Trust

Summary

This agreement is between Nortek, Inc. and Douglass N. Ellis, Jr., as trustee of The Richard L. Bready 1996 Irrevocable Trust. Nortek agrees to pay premiums on life insurance policies for its CEO, Richard L. Bready, with the trustee owning the policies. Nortek retains certain rights to recover its interest in the policies, such as the cash value or premiums paid, if the agreement ends or upon the employee's death. The agreement outlines each party's rights and obligations and can be terminated by either party or upon specific events like the employee's death or end of employment.

EX-10.2 4 0004.txt EXHIBIT 10.2 SPLIT DOLLAR AGREEMENT This Split Dollar Agreement (the "Agreement") is made and entered into as of December 20, 1996 by and between Nortek, Inc., a Delaware corporation having a principal place of business in Providence, Rhode Island (the "Corporation"), and Douglass N. Ellis, Jr., of Brookline, Massachusetts (the "Trustee"), for himself and his successors in office as trustee of The Richard L. Bready 1996 Irrevocable Trust established as of December 20, 1996 by Richard L. Bready, of said Providence (the Corporation and the Trustee are hereinafter referred to together as the "Parties"). WITNESSETH: WHEREAS, Richard L. Bready ("the Employee") is employed by the Corporation as its chief executive officer; and WHEREAS, the Corporation desires to assist the Trustee in funding insurance on the Employee's life, the Corporation believing that providing such assistance is in its best interests; and WHEREAS, the Trustee is the owner of policies numbered [policy numbers redacted] (the "Policies") issued by New York Life Insurance Company ("the Insurer") on the Employee's life; and NOW, THEREFORE, for and in consideration of the promises and mutual covenants expressed herein by each of the Parties, the Parties agree as follows: 1. The Corporation shall pay each premium on the Policies due on or after the date of this Agreement, on or before the due date or within the applicable grace period. Immediately thereafter, the Corporation may require payment from the Trustee of the Trustee's share (as defined below). If payment from the Trustee is not so required, the Corporation shall treat its payment of the Trustee's share (as so defined) as additional compensation to the Employee. The Trustee's share of each premium shall be that portion of the premium that is equal to the economic benefit which the Employee would be deemed to have received and which would be taxable to him for federal income tax purposes under Revenue Rulings 64-328, 66-110 and any subsequent rulings or regulations if the entire premium were paid by the Corporation. 2. The Trustee shall be the owner the Policies and, except to the extent of the Corporation's Interest in each of the Policies as provided herein, shall have and may exercise all the rights of a policy owner. Dividends shall not be applied to the payment of premiums unless otherwise agreed by the Corporation and the Trustee. 3. The Trustee hereby assigns to the Corporation the following limited ownership rights in the Policies: (a) The right to obtain one or more loans or advances on each of the Policies to the extent of the Corporation's Interest in the particular policy. (b) The right upon termination of this Agreement to realize against the cash value of each of the Policies or the death proceeds payable under the terms of each of the Policies, as the case may be, the Corporation's Interest in the particular policy. For purposes of this subparagraph, the sale, surrender, or transfer of ownership of one of the Policies by the Trustee shall be deemed a termination of the Agreement with respect to that policy unless consented to by the Corporation. If this Agreement terminates during the Employee's lifetime with respect to a particular policy, the Corporation shall have no right of recovery against the Trustee in excess of the then cash value of such policy. The Trustee shall upon execution of this Agreement execute collateral assignments evidencing and securing the Corporation's Interest in the Policies. 4. The Corporation's "Interest" in each of the Policies as of any given date shall equal the greater of (a) the cash value of such policy as of such date and (b) the sum of the Corporation's cumulative premiums paid to the Insurer with respect to the policy, in either case reduced by the amount of any outstanding indebtedness on the particular policy. The term "cash value" means the gross cash value of the particular policy, including accumulated dividends and the value of any paid up additions. 5. This Agreement may be terminated by either party, with or without the consent of the other party, by giving notice to the other party. If not sooner terminated, this Agreement shall terminate upon the first to occur of any one of the following events: (a) The total cessation of the business of the Corporation; (b) Termination of the Employee's employment with the Corporation (employment shall include any period during which Employee serves as a consultant to the Corporation); (c) The bankruptcy, insolvency or dissolution of the Corporation; or (d) The death of the Employee. Upon termination, the rights of the Parties shall be as provided herein. 6. The Parties agree to execute any and all documents necessary or proper to carry out the purpose and intent of this Agreement. 7. The Parties agree that this is a private agreement to which the Insurer is not a party and for which it can assume no responsibility and, therefore, a copy need not be filed with the Insurer. The Insurer shall be fully protected from all liability under each policy covered by this Agreement in dealing exclusively with the owner of the Policies and in paying the proceeds of the Policies in accordance with any collateral assignment and beneficiary designation provided to the Insurer. 8. If this Agreement is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), it shall constitute an employee welfare benefit plan. If required, the Vice President and Treasurer of the Corporation is hereby designated as the named fiduciary under this Agreement for ERISA purposes. The Vice President and Treasurer shall have discretionary authority to control and manage the operation, interpretation and administration of this Agreement and to establish any claims procedures required by ERISA. 9. Any of the provisions of this Agreement may be amended or altered, and such changes shall become effective when reduced to writing and signed by both of the Parties. 10. This Agreement shall be binding upon and inure to the benefit of the Corporation, and its successors and assigns, and the Trustee, and his successors and assigns. 11. Except to the extent that federal law applies, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Rhode Island. However, if and to the extent that ERISA applies, ERISA shall pre-empt any state laws (including the laws of the State of Rhode Island) relating to this Agreement. SIGNED and SEALED in two original counterparts as of the date first above written. NORTEK, INC. By: /s/Richard J. Harris Its:Vice President and Treasurer, duly authorized /s/ Douglass N. Ellis, Jr. Douglass N. Ellis, Jr., for himself and his successors in office as trustee of The Richard L. Bready 1996 Irrevocable Trust, and not individually Appendix (prepared by the Company for SEC filing purposes) to Exhibit 10.2 -- Split Dollar Agreement dated as of December 20, 1996 between the Company and Douglass N. Ellis, Jr., as trustee of The Richard L. Bready 1996 Irrevocable Trust The life insurance policies covered by this Split Dollar Agreement (the "Agreement") currently provide for death benefits in the following amounts to be divided between the beneficiary of the policy and the Company pursuant to the Agreement: First Policy $8,778,907 Second Policy $17,806,847