Confirmatory Split Dollar Agreement No. 1 between Nortek, Inc. and Richard L. Bready

Summary

This agreement is between Nortek, Inc. and its CEO, Richard L. Bready, regarding life insurance policies owned by the company on Bready's life. Nortek will pay the premiums, and Bready or his family may receive a portion of the death benefit as an employment benefit. The company retains ownership and certain rights over the policies, while Bready can designate beneficiaries for any proceeds above the company's interest. The agreement outlines termination conditions and clarifies the parties' rights and obligations regarding the policies.

EX-10.3 5 0005.txt EXHIBIT 10.3 CONFIRMATORY SPLIT DOLLAR AGREEMENT NO. 1 This Confirmatory Split Dollar Agreement No. 1 (the "Agreement") is made and entered into by and between Nortek, Inc., a Delaware corporation having a principal place of business in Providence, Rhode Island (the "Corporation"), and Richard L. Bready, of said Providence (the "Employee") (the Corporation and the Employee are hereinafter referred to together as the "Parties"). WITNESSETH: WHEREAS, the Employee is employed by the Corporation as its chief executive officer; and WHEREAS, the Corporation is the owner of policies numbered [policy numbers redacted] (the "Policies") issued by New York Life Insurance Company (the "Insurer") on the life of the Employee; and WHEREAS, on January 12, 1996 the Corporation executed new beneficiary designations with respect to the Policies, it being the Corporation's desire to make a portion of the death benefit available to the Employee's family as an employment benefit to the Employee; and WHEREAS, the Corporation continues to desire to assist the Employee by providing insurance on the Employee's life, the Corporation believing that providing such assistance is in its best interests; and WHEREAS, the Parties now wish to clarify and confirm the arrangements in place between them with respect to the Policies; 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 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 Employee of the Employee's share (as defined below). If payment from the Employee is not so required, the Corporation shall treat its payment of the Employee's share (as so defined) as additional compensation to the Employee. The Employee'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 Corporation shall continue to be the sole owner of the Policies, and to the extent of its Interest in the Policies (as defined in Section 6 below) shall have and may exercise all the rights of policy owner, including but not limited to the right to designate the beneficiaries, select settlement options, apply dividends, borrow on the security of the policy and surrender the policy. 3. Upon termination of this Agreement during the Employee's lifetime, all rights to the Policies shall vest in the Corporation, the Corporation shall have no further right of recovery against the Employee or his assignee, and the Employee or his assignee shall have no further rights with respect to any of the Policies. Upon termination of this Agreement as a result of the Employee's death, the Corporation shall be the direct beneficiary of an amount equal to its Interest in each policy (as defined in Section 6 below) as of the Employee's date of death. 4. With respect to each of the Policies, the Employee or his assignee shall have the right to designate and change direct and contingent beneficiaries of any proceeds payable as a result of the Employee's death in excess of the Corporation's Interest in the particular policy. 5. The Parties shall upon execution of this Agreement simultaneously execute a policy endorsement with respect to each of the Policies to put into effect the provisions of this Agreement. 6. 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 (whether paid before or after the date of this Agreement), 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. 7. This Agreement may be terminated by either party or its or his assignee, with or without the consent of the other party, by giving written notice to the other party. If not sooner terminated, the Agreement shall terminate automatically 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. 8. The Parties intend for this Agreement to confirm the terms of all split dollar insurance arrangements between them with respect to the Policies. To that end, as between the Parties this Agreement supersedes any inconsistent split dollar documentation concerning any of the Policies that predates this Agreement, whether or not such documentation has been filed with the Insurer. 9. The Parties agree to execute any and all documents necessary or proper to carry out the purpose and intent of this Agreement. 10. 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 the Policies in dealing exclusively with the owner of the particular policy and in paying the proceeds of the policy in accordance with any policy endorsement and beneficiary designation provided to the Insurer. 11. 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. 12. The Employee shall have the right to assign any part or all of the Employee's interest in this Agreement and any of the Policies to any person, entity or trust by execution of a written assignment delivered to the Corporation and a new designation of beneficiary to the Insurer. 13. 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. 14. This Agreement shall be binding upon and inure to the benefit of the Corporation, and its successors and assigns, and the Employee, and his successors and assigns. 15. 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 31st day of December, 1996. NORTEK, INC. By: /s/ Richard J. Harris Its:Vice President and Treasurer, duly authorized /s/ Richard L. Bready Richard L. Bready Appendix (prepared by the Company for SEC filing purposes) to Exhibit 10.3 -- Confirmatory Split Dollar Agreement No. 1 dated as of December 31, 1996 between the Company and Richard L. Bready 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 $183,122 Second Policy $123,352 Third Policy $2,970,773