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
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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.
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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
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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
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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.
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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
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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.
