Exhibit (d)(10)
FORM OF
NORTEK, INC., NORTEK HOLDINGS, INC. and _____________
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made between
NORTEK, INC., a Delaware corporation ("Nortek"), NORTEK HOLDINGS, INC., a
Delaware corporation ("Nortek Holdings") (Nortek and Nortek Holdings,
collectively referred to hereinafter as "Employer"), and _____________, a
resident of (hereinafter called "Employee"), effective as of _____________
(the "Effective Date.")
WHEREAS, pursuant to the Agreement and Plan of Recapitalization,
dated as of June 20, 2002 by and among Nortek, Nortek Holdings and K
Holdings, Inc. ("K Holdings") (the "Recapitalization Agreement"), after the
consummation of the "Transactions" (as defined in the Recapitalization
Agreement) Nortek will become a subsidiary of Nortek Holdings;
WHEREAS, Employee is a party to the Stockholders Agreement to be
entered into by Nortek Holdings and certain of its stockholders (the
"Stockholders Agreement") as of the closing of the Transactions;
WHEREAS, Employee and Employer desire to enter into this
Agreement, which shall govern the terms of Employee's continued employment
with Employer on and following the "Effective Time" (as defined in the
Recapitalization Agreement);
WHEREAS, Employer desires to assure that it will have the benefit
of the continued service and experience of Employee who is the
_____________ of the Employer and an integral part of its management and
Employee is willing to enter into an agreement to such ends upon the terms
and conditions set forth in this Agreement. In consideration of the
foregoing and the mutual agreements herein contained, the parties mutually
agree as follows:
1. Employment Period and Duties
(a) Commencing from the Effective Time and ending on the
termination of the Employee's employment as provided herein
(hereinafter called the "Employment Period"), Employer shall
employ Employee, and Employee shall serve as an employee of
Employer.
(b) During the Employment Period, Employee shall serve as
_____________of Employer, or in such other executive capacity
at a similar level of responsibility and with such other
duties as the Chief Executive Officer of Employer (the "CEO")
and Employee may from time to time mutually determine, and
Employee accepts employment on the terms and conditions
contained herein and agrees to devote a substantial part of
his working time and energies to the business of Employer and
to faithfully and diligently perform the customary duties of
his office and such other duties, reasonable vacations (of
not less than weeks per year) and time devoted to charitable
and community service, and absences due to illness and
holidays excepted. Such other duties may include the
performance of services for any of Employer's subsidiaries
and, without further remuneration (except as otherwise
agreed), may also include service as an officer or director
of one or more of Employer's subsidiaries.
(c) During the Employment Period, Employer shall maintain an
appropriately appointed executive office for Employee in
Providence, Rhode Island (or at such other location as
Employee and Employer shall mutually agree) of not less than
the size of Employee's current office and associated
administrative space from which Employee shall perform his
duties and shall provide Employee with executive secretarial
and other administrative staff and services suitable to his
offices and duties.
2. Compensation
(a) Basic Salary. Employee shall, during the Employment Period,
receive a basic annual salary of not less than his salary in
effect as of the Effective Date, subject to such adjustments
as the CEO shall make at the beginning of each year
(hereinafter called the "Basic Salary") payable monthly.
(b) Incentive Compensation. In each year of the Employment
Period, Employee shall receive incentive compensation in an
amount recommended by the CEO and approved by the
Compensation Committee of the Board of Directors.
(c) SERP Payment. In satisfaction of all liabilities and
obligations under the Nortek, Inc. Supplemental Retirement
Plan (the "SERP"), Employee shall be entitled to a lump sum
cash payment of $________, less applicable withholding,
payable on the Effective Time. Such payment, however, does
not release Employer from its obligations to pay the Employee
an additional amount as a Gross Up, pursuant to Sections 6.3
of the SERP or Section 5 of this Agreement.
(d) Stock Options.
(i) Employer shall grant to Employee, effective as of the
Effective Time, (A) ________ Class A Options (as defined
in the Nortek Holdings, Inc. 2002 Stock Option Plan (the
"Option Plan")), subject to the terms and conditions of
the Option Plan and the applicable stock option
agreement and (B) ________ Class B Options, as defined
in the Option Plan, subject to the terms and conditions
of the Option Plan and the applicable stock option
agreement.
(ii) Notwithstanding the terms of the Recapitalization
Agreement, each option held by Employee to acquire
shares of common stock and/or special common stock of
Employer (each, a "Nortek Option") shall be treated in
accordance with the terms of (A) the Agreement and Plan
of Merger by and among Nortek, Nortek Holdings and
Nortek Holdings Merger Sub dated June 20, 2002, as
amended, pursuant to which the Nortek Options shall be
converted into options to purchase shares of common
stock and special common stock of Nortek Holdings (each,
a "Nortek Holdings Option") and (B) the Exchange
Agreement to be entered into by Employee, Employer,
Nortek Holdings and K Holdings, pursuant to which each
Nortek Holdings Option shall be converted into an
Exchange Option to acquire shares of Class A Common
Stock, par value $1.00 per share of Nortek Holdings
("Common Stock"), subject to the terms and conditions of
the Option Plan and the applicable stock option
agreement.
(e) Lifetime Medical Coverage.
(i) Subject to the conditions set forth below, Employer
shall provide Employee, his Spouse and dependents with
lifetime Medical Coverage at no cost to Employee,
beginning upon Employee's termination of employment with
Employer (the "Triggering Date"). For purposes of this
Agreement, (A) "Spouse" shall mean any individual
married to Employee only during the time such individual
is married to Employee, provided that an individual who
is married to Employee at the time of Employee's death
shall be a Spouse for the remainder of such individual's
lifetime and (B) "Medical Coverage" shall mean all
medical and dental benefits that are provided Employee
at the Effective Time, any medical or dental expense
that would be deductible by Employee under section 213
of the Internal Revenue Code of 1986, as amended (the
"Code"), including insurance premiums, co-payments and
deductible amounts (determined without regard to the
deductible threshold set forth in 213(a)) if paid by the
Employee directly, and such other reasonable medical and
dental expenses that Employer may approve from time to
time, but in no event shall Employer's reimbursement
obligation for Employee, his Spouse or dependents under
this Section 2(e) exceed an amount equal to the
applicable Vested Percentage (defined below) multiplied
by $1,000,000 (exclusive of any gross up for taxes
pursuant to Sections 2(e)(vi) or 5 hereof and determined
without regard to reimbursements made prior to the
Triggering Date under the Nortek Executive Health
Reimbursement Plan) in the aggregate during Employee's
and his Spouse's lifetimes. Such Medical Coverage shall
be extended to any dependent of Employee but only for so
long as such person remains a "dependent" under the
terms and conditions of Employer's health plan in
existence at the Effective Time. Employer shall make all
reasonable efforts to include Employee, his Spouse and
dependents in any comprehensive medical and/or dental
plan provided to active employees from time to time.
Employee must make all reasonable effort to obtain and
to maintain (at Employer's expense as provided herein)
any form of comprehensive medical and/or dental
insurance that Employer may require from time to time.
If Employee is or becomes eligible for Medicare
benefits, the coverage provided by this Section shall be
supplemental to Medicare coverage, Parts A and B, and
the Participant shall be required to submit claims to
Medicare before making any claim for medical care under
this Section.
(ii) Employee shall become irrevocably entitled to ("vested"
in) 25% of the Medical Coverage on the first anniversary
of the Effective Time and shall become vested in an
additional 25% on each of the following three
anniversaries of the Effective Time, if he is then
employed by the Employer. The percentage of Medical
Coverage to which the Employee is irrevocably entitled
as of the applicable Triggering Date shall be the
"Vested Percentage". For this purpose, the benefits to
which the Employee is entitled following the Triggering
Date shall be determined as the Vested Percentage
multiplied by the dollar value of Medical Coverage
benefits that would be provided to Employee if he were
fully vested in the Medical Coverage. For clarification,
in the event that the Employee receives Medical Coverage
benefits rather than the lump sum described in Section
2(e)(iii), the Employer shall pay to the Employee the
Vested Percentage of the amount of reimbursement with
respect to the Medical Coverage benefits that otherwise
would have been paid to the Employee, his Spouse and his
dependents.
(iii) Employee shall immediately become fully vested in the
Medical Coverage if, at any time, (A) his employment is
terminated by Employer other than for Cause (defining
"Cause" for this purpose to include only clause (ii) of
Section 3(d) of this Agreement), (B) his employment
terminates as a result of death, Disability or a medical
emergency in his immediate family, (C) he terminates his
employment for Good Reason, or (D) there occurs a Change
in Control. For this purpose, "Change in Control" means
an "Exit Event" as defined in the Option Plan, or an
"IPO" or "Change in Control" as defined in the
Stockholders Agreement. Upon termination of employment
of the Employee for any reason other than those set
forth at A, B or C above, any then unvested portion of
the Medical Coverage shall be immediately forfeited.
(iv) From and after the Triggering Date or the occurrence of
a Change in Control, upon the written request of
Employee or his Spouse, Employer shall authorize and pay
to Employee or his Spouse a lump sum cash payment in
lieu of Vested Percentage of the Medical Coverage in an
amount established by the Board of Directors of Employer
that is reasonably sufficient to provide the Vested
Percentage of lifetime Medical Coverage, but in no event
less than $650,000 multiplied by the applicable Vested
Percentage. Such amount is calculated before the
gross-up provided in Sections 2(e)(vi) and 5. At the
time of such lump-sum payment, Employer shall also pay
such amount as is necessary to cover the income tax
gross-up provided in Section 2(e)(vi).
(v) As long as he remains employed by the Employer, Employee
shall continue to be covered by the Nortek Executive
Health Reimbursement Plan as in effect on the Effective
Date, and benefits received under that Plan prior to the
Triggering Date shall have no effect on benefits to be
provided under the Medical Coverage or the amount of any
lump-sum payment to be made under (iv) above.
(vi) Employer agrees to make a "gross-up" payment to Employee
to cover any and all state and federal income taxes and
section 4999 taxes (as defined in Section 5 herein), and
the tax on any such reimbursement or payment, that may
be due as a result of the benefits provided under
Section 2(e)(i) above and on any lump sum payment under
Section 2(e)(iv) above.
(vii) Following the Triggering Date, Employee shall notify
the Company of any change in (A) his marital status or
(B) the status of his dependents as "dependents", as
soon as practicable following such change.
(f) Benefits. Employee shall be eligible to participate in any
deferred compensation, supplemental executive retirement,
pension, bonus, incentive or other benefit plan in which
executive personnel of Employer are eligible to participate
and shall be eligible for discretionary bonuses. In addition,
Employee shall be entitled to receive all other benefits or
participate in any employee benefit plans generally available
to executive personnel of Employer, including without
limitation, any hospital, medical, accident, disability, life
insurance, and dental coverage, tax return preparation, any
stock option or savings plans, or any pension or other
retirement benefit plans.
(g) Reimbursement and Perquisites. Employer shall promptly
reimburse Employee for all business expenses incurred by
Employee during the Employment Period; shall promptly pay or
reimburse Employee for professional association dues,
assessments and fees for at least such associations as
Employee was a member of and Employer was making such
payments or reimbursements on the date of this Agreement;
shall pay or reimburse Employee for membership dues,
assessments and fees at one country/golf club of Employee's
choice; and shall provide to Employee for his exclusive
business and personal use an automobile (selected by Employee
not inconsistent with type of automobile provided to Employee
on the Effective Time), pay all expenses of ownership,
operation, repair and maintenance of such vehicle and permit
the Employee to replace such automobile not less often than
the earlier of every three years or 50,000 miles.
(h) Stockholders Agreement. Employee shall be listed on the
Schedule of Management Stockholders and Exhibit B of the
Stockholders Agreement.
3. Termination
(a) In the event of Employee's death, the Employment Period shall
be deemed to end on the date of his death.
(b) If Employee is incapacitated by accident, sickness, or
otherwise so as to render him, for a period of 365
consecutive days, mentally or physically incapable of
performing the services required of him under this Agreement
which, if requested by Employee, the basis for such
incapacity is certified by a licensed physician, then
Employer or Employee may terminate the Employment Period.
Such incapacity shall be referred to herein as a
"Disability."
(c) Employee shall have the right to terminate the Employment
Period without Good Reason at any time by written notice to
the Board.
(d) Employer, shall have the right to terminate the Employment
Period for Cause (as hereinafter defined), without further
obligation hereunder on the part of Employer or Employee
except payment to Employee of amounts earned or accrued
hereunder to the date of termination, pursuant to the
procedures specified in this Section 3(d); provided that the
Employment Period shall not be terminated for Cause if the
Employment Period shall have terminated for any other reason.
Except as provided in Section 2(e)(iii), for purposes of this
Agreement, "Cause" shall mean good faith determination by the
CEO that either of the following has occurred: (i) the
willful and continued failure of Employee to perform
Employee's material duties as of Employer (or such other
duties as the CEO and Employee may from time to time mutually
determine), after written notice to Employee which notice
specifically identifies the manner in which Employee has not
substantially performed his material duties and provides the
Employee a reasonable time to cure such failure, or (ii)
because of the conviction of Employee of a crime involving
theft, embezzlement or fraud against Employer or a civil
judgment in which Employer is awarded damages from Employee
in respect of a claim of loss of funds through fraud or
misappropriation by Employee, which in either case has become
final and is not subject to further appeal, continued
employment of Employee would be demonstrably injurious to
Employer.
(e) Employer, shall have the right to terminate the Employment
Period without Cause, by written notice to Employee not less
than 20 business days in advance of such termination.
(f) Employee shall have the right to terminate the Employment
Period at any time with Good Reason (as defined in Section
4(b)) by written notice to Employer not less than 20 business
days in advance of such termination.
(g) Any amounts due Employee hereunder in the event of
termination of the Employment Period shall be considered
severance pay in consideration of his past services and in
consideration of his continued services from the date hereof,
are considered reasonable by Employer and not in the nature
of a penalty, shall not be reduced by compensation or income
received by Employee from any other employment or other
source and shall not be offset by any claims Employer may
have against Employee; timely payment of such amounts is
further agreed by the parties hereto to be in full
satisfaction and compromise of any claims arising out of the
performance or nonperformance of this Agreement that either
party might have against the other, other than any claims
Employee may have under the provisions of Sections 5 and 6
hereof.
4. Termination Benefit
(a) If the Employment Period shall terminate by reason of
Employer's exercise of its right under Section 3(e) to
terminate without Cause or in the event Employee elects to
terminate the Employment Period for Good Reason or the
Employment Period is terminated on account of Employee's
death or Disability, then Employer shall thereafter be
obligated to pay Employee (or his estate) and Employee (or
his estate) shall be entitled to receive as severance pay
hereunder, for a period of two years beginning on the first
day following such termination (or if longer, for a period
commencing on such date and ending on the third anniversary
of the Effective Time) (the "Severance Period"), an amount
for each year, equal to his Basic Salary as of the date of
such termination plus the highest amount of bonus or
incentive compensation (exclusive of the Nortek, Inc. 1999
Equity Performance Plan) paid or payable in cash to Employee
in any one of the three calendar years immediately prior to
the Effective Time (or, if higher, the three calendar years
immediately prior to such termination). Payments will be made
in the same manner as Employee's Basic Salary was paid
immediately prior to termination and will be subject to
appropriate tax withholding.
In the event of such a termination, Employee shall continue,
during the Severance Period, to be covered at the expense of
the Employer by the same or equivalent accident, disability
and life insurance coverage as he was covered immediately
prior to the Effective Time (or, if greater, immediately
prior to such termination), including the payment of premiums
that may become due under any split-dollar life insurance
contract provided by Employer covering the life of the
Employee and/or his spouse.
(b) Termination for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean a material adverse change in the
Employee's terms of employment, including:
(i) any reduction of, or failure to pay, Employee's Basic
Salary or other compensation as described in Sections
2(a) and (b) hereof;
(ii) any failure to provide the benefits or payments required
by Sections 2(c), (d) and (e), 5 and 7 hereof or Section
6.5(a) of the Stockholders Agreement and the
registration rights provided in the Registration Rights
Agreement to be entered into by Employee, Nortek
Holdings and other parties named therein (the
"Registration Rights Agreement");
(iii) assignment to Employee of any duties materially
inconsistent with his position (including status,
offices and titles), authority, duties or
responsibilities as contemplated by Section 1(b) above
or any other action by Employer which results in a
material diminution of such position, authority, duties
or responsibilities;
(iv) relocation of Employer's principal executive offices, or
any event that causes Employee to have his principal
place of work changed, to any location outside
Providence, Rhode Island;
(v) any requirement by Employer that Employee travel away
from his office in the course of his duties
significantly more than the number of consecutive days
or aggregate days in any calendar year than was required
of him prior to the Effective Time; and
(vi) without limiting the generality or effect of the
foregoing, any other material breach by Employer or any
successor thereto or transferee of substantially all the
assets thereof, of this Agreement, the Stockholders
Agreement and the Registration Rights Agreement.
5. Gross-up Payment
(a) All payments and benefits provided to Employee by Employer
are intended to be reasonable compensation for services by
Employee, and the Employer intends that Employee receives the
full economic benefit of such payments and benefits. In the
event that it is determined that any payment or benefit
provided by Employer to or for the benefit of Employee,
either under this Agreement or otherwise, whether paid before
or after the Effective Time, and regardless of under what
plan or arrangement it was made, will be subject to the
excise tax imposed by section 4999 of the Code or any
successor provision ("section 4999"), Employer will, prior to
the date on which any amount of the excise tax must be paid
or withheld, make an additional lump-sum payment (the
"gross-up payment") to Employee. The gross-up payment will be
sufficient, after giving effect to all federal, state and
other taxes and charges (including interest and penalties, if
any) with respect to the gross-up payment, to make Employee
whole for all taxes (including withholding taxes) and any
associated interest and penalties, imposed under or as a
result of section 4999.
(b) Determinations under this Section 5 will be made by the
Employer's tax accountant unless Employee has reasonable
objections to the use of that firm, in which case the
determinations will be made by a comparable firm chosen by
Employee after consultation with Employer (the firm making
the determinations to be referred to as the "Firm"). The
determinations of the Firm will be binding upon Employer and
Employee except as the determinations are established in
resolution (including by settlement) of a controversy with
the Internal Revenue Service to have been incorrect. All fees
and expenses of the Firm will be paid by Employer.
(c) If the Internal Revenue Service asserts a claim that, if
successful, would require Employer to make a gross-up payment
or an additional gross-up payment, Employer and Employee will
cooperate fully in resolving the controversy with the
Internal Revenue Service. Employer will make or advance such
gross-up payments as are necessary to prevent Employee from
having to bear the cost of payments made to the Internal
Revenue Service in the course of, or as a result of, the
controversy. The Firm will determine the amount of such
gross-up payments or advances and will determine after
resolution of the controversy whether any advances must be
returned by Employee to Employer. Employer will bear all
expenses of the controversy and will gross Employee up for
any additional taxes that may be imposed upon Employee as a
result of its payment of such expenses.
(d) Employer's obligations under this paragraph 5 shall survive
the termination of the Employment Period and any termination
of this Agreement.
6. Non-competition and Confidentiality.
(a) Employee agrees that he shall not compete with Employer as
hereinafter provided for a period (the "Noncompete Period")
equal to:
(i) if the Employment Period is terminated pursuant to
Section 3(c) or (d) hereof, one year beginning as of the
first day following such termination, or
(ii) if the Employment Period is terminated pursuant to
Section 3(b), (e) or (f) hereof, the longer of (A) two
years beginning as of the first day following such
termination of the Employment Period and (B) a period
commencing on such date and ending on the third
anniversary of the Effective Time.
(b) Employee's agreement not to compete with Employer during the
Noncompete Period shall be limited to prohibiting Employee
from owning a greater than 5% equity interest in, serving as
a director, officer, employee or partner of, or being a
consultant to or co-venturer with any business enterprise or
activity that competes in North America with any line of
business conducted by Employer or any of its subsidiaries at
the termination of the Employment Period and accounting for
more than 5% of Employer's gross revenues for its fiscal year
ending immediately prior to the year in which the Employment
Period ends. During the Noncompete Period, Employee agrees
that he will not hire or attempt to hire any person employed
by Employer or any of its subsidiaries during the 24 month
period prior to the termination of the Employment Period,
assist such a hiring by any other person or entity, encourage
any such employee to terminate his relationship with Employer
(or any such subsidiary) or solicit or encourage any customer
or vendor of Employer to terminate its relationship with
Employer.
(c) Employee shall hold in a fiduciary capacity for the benefit
of Employer all secret or confidential information, knowledge
or data relating to Employer or any of its subsidiaries, and
their respective businesses, which shall have been obtained
by Employee during Employee's employment by Employer and
which shall not be or become public knowledge (other than by
acts by Employee or representatives of Employee in violation
of this Agreement). After termination of Employee's
employment with Employer, Employee shall not, without the
prior written consent of Employer or as may otherwise be
required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than
Employer and those designated by it.
7. Indemnification
Anything in this Agreement to the contrary notwithstanding,
Employer agrees to pay all costs and expenses incurred by
Employee in connection with the enforcement of this Agreement
and will indemnify and hold harmless Employee from and
against any damages, liabilities and expenses (including
without limitation fees and expenses of counsel) incurred by
Employee in connection with any litigation or threatened
litigation, including any regulatory proceedings, arising out
of the making, performance or enforcement of this Agreement
or termination of the Employment Period. Employer's
obligations under this paragraph 7 shall survive the
termination of any other provisions of the Agreement.
8. Prior Agreement
This Agreement shall be binding on all parties as of the
Effective Date. If the Effective Time does not occur, this
Agreement shall be of no force and effect. This Agreement
shall replace, as of the Effective Time, Employee's
participation in the Nortek, Inc. Change in Control Severance
Benefit Plan for Key Employees (As Amended and Restated June
12, 1997 and as clarified on June 20, 2002), except for the
obligation of Employer in Section 4 of such agreement to pay
Employee, within 30 days of the Effective Time, an amount
equal to 20% of his basic salary immediately prior to the
Effective Time.
9. Notices
All notices or other Communications given hereunder shall be
in writing and shall be deemed to have been duly given if
mailed by certified mail or hand delivered, if to Employer,
at 00 Xxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000-0000, or
at such other address as Employer shall have furnished to
Employee in writing, or if to Employee, at _____________ or
at such other address as Employee shall have furnished to
Employer in writing.
10. Governing Law
This Agreement shall be governed by the laws of the State of
Rhode Island and Providence Plantations.
11. Severability
The provisions of this Agreement are severable, and in the
event that any one or more paragraphs are deemed illegal or
unenforceable, the remaining paragraphs shall remain in full
force and effect.
12. Assignments
This agreement is personal to Employee and without the prior
written consent of Employer shall not be assignable by
Employee other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by Employer's legal representative. This
Agreement shall inure to the benefit of and be binding upon
Employer and its successors and assigns.
13. Counterparts
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and
the same agreement.
14. Amendments
No changes, alterations or modifications may be made to this
Agreement, except by a writing signed by each of the parties
hereto. Notwithstanding the preceding sentence, prior to the
Effective Time, this Agreement may not be changed, altered or
modified without the express written consent of K Holdings
and, for such purposes, K Holdings shall be a third party
beneficiary to this Section 14.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of ______________
NORTEK, INC.
By: ____________________________
EMPLOYEE
_______________________________
