Confirmatory Split Dollar Agreement No. 2 between Nortek, Inc. and Richard L. Bready

Summary

This agreement is between Nortek, Inc. and its CEO, Richard L. Bready, confirming their split dollar life insurance arrangement. Nortek will pay the premiums on a life insurance policy owned by Bready, with the company entitled to recover its payments from the policy’s value. Bready remains the policy owner and can exercise most rights, but Nortek retains a secured interest. The agreement outlines how premiums are handled, the company’s rights, and conditions for termination, such as Bready’s employment ending or his death. It supersedes prior inconsistent agreements regarding this policy.

EX-10.5 7 0007.txt EXHIBIT 10.5 CONFIRMATORY SPLIT DOLLAR AGREEMENT NO. 2 This Confirmatory Split Dollar Agreement No. 2 (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 Employee is the owner of policy number [policy number redacted] (the "Policy") issued by New York Life Insurance Company ("the Insurer") on his life; and WHEREAS, in 1988 the Parties agreed that the premiums on the Policy would be funded through a split dollar arrangement, it being the intention of the Corporation to provide assistance to the Employee by paying the premiums due on the Policy, with the Corporation ultimately being entitled to receive an interest in the Policy; and WHEREAS, in 1988 the Insured executed a collateral assignment in favor of the Corporation to secure its interest in the Policy; and WHEREAS, the Corporation continues to desire to assist the Employee in funding 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 confirm their respective obligations with respect to the Policy; 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 Policy 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 Employee shall continue to be the owner the Policy and, except to the extent of the Corporation's Interest in the Policy as provided herein, shall have and may exercise all the rights of a policy owner, including but not limited to the right to designate the beneficiaries, select settlement options, borrow on the security of the Policy and surrender the Policy. Dividends shall not be applied to the payment of premiums unless otherwise agreed by the Corporation and the Employee. 3. The Employee hereby affirms his assignment to the Corporation of the following limited ownership rights in the Policy: (a) The right to obtain one or more loans or advances on the Policy to the extent of the Corporation's Interest in the Policy. (b) The right upon termination of this Agreement to realize against the cash value of the Policy or the death proceeds payable under the terms of the Policy, as the case may be, the Corporation's Interest in the Policy. For purposes of this subparagraph, the sale, surrender, or transfer of ownership of the Policy by the Employee or his assignee shall be deemed a termination of the Agreement unless consented to by the Corporation. If this Agreement terminates during the Employee's lifetime, the Corporation shall have no right of recovery against the Employee or his assignee in excess of the then cash value of the Policy. The Employee shall upon execution of this Agreement simultaneously execute a confirmatory collateral assignment evidencing the Corporation's Interest in the Policy. 4. Subject to the provisions of Section 6 below, the Corporation's "Interest" in the Policy shall equal the sum of the Corporation's cumulative premiums paid to the Insurer with respect to the Policy, including any additional amounts invested in the Policy by the Corporation (such as for the purpose of repaying indebtedness on the Policy arising before the Policy was being treated as subject to a split dollar agreement), since the time that the Parties first treated the Policy as being subject to a split dollar agreement. The Corporation's Interest shall be reduced by the amount of outstanding indebtedness on the Policy incurred for the benefit of the Corporation since the time that the Parties first treated the Policy as being subject to a split dollar agreement. For purposes of this Section, the Policy shall be deemed to have been treated as being subject to a split dollar agreement from the date the Corporation first paid a premium on the Policy unless at some later time the Corporation relinquished all its rights in the Policy to the Employee and the Employee became the sole owner of the Policy, without any obligation to the Corporation for payment of prior premiums. 5. This Agreement may be terminated by either party or its or his assignee, 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 intend for this Agreement to confirm the terms of all split dollar insurance arrangements between them with respect to the Policy. To that end, as between the Parties this Agreement supersedes any inconsistent split dollar documentation concerning the Policy that predates this Agreement, whether or not such documentation has been filed with the Insurer. Notwithstanding the foregoing, the Parties do not intend that this Agreement in any way reduce the interest the Corporation had in the Policy immediately prior to the Agreement's execution, and therefore any prior documentation that establishes that the Corporation's interest in the Policy is greater than the Interest given it under the provisions of Section 4 above is not hereby superseded, and the Corporation's Interest in the Policy for purposes of this Agreement shall be such greater interest. 7. The Parties agree to execute any and all documents necessary or proper to carry out the purpose and intent of this Agreement. 8. 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 Policy and in paying the proceeds of the Policy in accordance with any collateral assignment and beneficiary designation provided to the Insurer. 9. 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. 10. 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. 11. 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. 12. 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 10.5 -- Confirmatory Split Dollar Agreement No. 2 dated as of December 31, 1996 between the Company and Richard L. Bready The life insurance policy covered by this Split Dollar Agreement (the "Agreement") currently provides for a death benefit of $1,542,280 to be divided between the beneficiary of the policy and the Company pursuant to the Agreement.