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:
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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
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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
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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.
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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
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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.
