Split Dollar Agreement between Nortek, Inc. and Trustee of The Richard L. and Cheryl A. Bready 1998 Irrevocable Trust

Summary

This agreement is between Nortek, Inc. and Douglass N. Ellis, Jr., as trustee of The Richard L. and Cheryl A. Bready 1998 Irrevocable Trust. Nortek agrees to pay premiums on a life insurance policy covering Richard L. Bready and his wife, with the trustee owning the policy. Nortek retains a right to recover the premiums it pays from the policy’s cash value or death benefit. The agreement outlines each party’s rights, how the policy is managed, and conditions for termination. It is governed by Rhode Island law unless federal law applies.

EX-10.7 9 0009.txt EXHIBIT 10.7 SPLIT DOLLAR AGREEMENT This Split Dollar Agreement (the "Agreement") is made and entered into this 29th day of June, 1999 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 Nantucket, Massachusetts (the "Trustee"), for himself and his successors in office as trustee of The Richard L. and Cheryl A. Bready 1998 Irrevocable Trust established December 21, 1998 by Richard L. Bready and Cheryl A. Bready, both 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 joint lives of the Employee and his wife, Cheryl A. Bready (the "Insureds"), the Corporation believing that providing such assistance is in its best interests; and WHEREAS, the Trustee is the owner of policy [policy number redacted] (the "Policy") issued by New York Life Insurance Company (the "Insurer") on the joint lives of the Insureds; 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 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 of 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. 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 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, in each case only with the prior consent of the Trustee. (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 Trustee shall be deemed a termination of the Agreement unless consented to by the Corporation. If this Agreement terminates during the lifetime of either of the Insureds, the Corporation shall have no right of recovery against the Trustee in excess of the then cash surrender value of such policy. 4. The Corporation's "Interest" in the Policy as of any given date shall equal 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), reduced by the amount of any outstanding indebtedness on the Policy incurred for the benefit of the Corporation. 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) The bankruptcy, insolvency or dissolution of the Corporation; or (c) The death of the survivor of the Insureds. Upon termination, the rights of the Parties shall be as provided herein. Notwithstanding the foregoing, the Corporation agrees that this Agreement shall be subject to the terms of Section 10 (relating to split dollar insurance) of the employment agreement entered into as of February 26, 1997, as from time to time amended, between the Corporation and the Employee as if this Agreement were listed on Schedule 1 of said employment agreement, and the terms of said Section 10 are hereby incorporated into this Agreement. 6. To secure the repayment to the Corporation of the amounts due to it under the terms of this Agreement, the Trustee hereby assigns the Policy to the Corporation as collateral to the full extent of the Corporation's Interest in the Policy. This collateral assignment of the Policy to the Corporation shall not be terminated, altered, amended, adversely affected or reduced in any way by the Trustee, without the express written consent of the Corporation. The Parties hereto agree to execute any additional collateral assignment forms or documents required by the Insurer, or which may otherwise be necessary to implement 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 of the Agreement need not be filed with the Insurer. The Insurer shall be fully protected from all liability under the Policy in dealing exclusively with the owner of the Policy and in paying the proceeds of the Policy in accordance with the 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. and Cheryl A. Bready 1998 Irrevocable Trust, and not individually Appendix (prepared by the Company for SEC filing purposes) to Exhibit 10.7 -- Split Dollar Agreement dated as of June 29, 1999 between the Company and Douglass N. Ellis, Jr. as trustee of The Richard L. Bready and Cheryl A. Bready 1998 Irrevocable Trust The life insurance policy covered by this Split Dollar Agreement (the "Agreement") currently provides for a death benefit of $15,000,000 to be divided between the beneficiary of the policy and the Company pursuant to the Agreement.