Exhibit 10.3
NORTEK, INC. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, effective as of the dates provided
below, between NORTEK, INC., a Delaware corporation ("hereinafter
called "Employer"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of Rhode
Island (hereinafter called "Employee").
Employer desires to assure that it will have the benefit of
the continued service and experience of Employee who is the chief
executive officer of the Employer and an integral part of its
management for a period of time and also seeks to assure itself
and Employee of the continuity of management of Employer in the
event of any actual or threatened change of control of Employer,
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 January 1, 1998 and ending, unless
sooner terminated pursuant to the provisions hereof, five years
from said date or on the expiration date of any extension as
provided for 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
chairman and chief executive officer of Employer, or in such
other executive capacity at a similar level of responsibility and
with such other duties as the board of directors of Employer 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 four 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. Nothing
herein shall prohibit Employee from managing or supervising his
personal investments or from devoting attention to his other
business interests that do not materially interfere with his
obligations to Employer hereunder or compete with Employer or its
subsidiaries. In the event that any person ("Person"), as that
term is defined or used in Section 13(d) or 14(d)(2) of the
Securities Exchange Act of 1934 ("Exchange Act"), begins a tender
or exchange offer, solicits proxies from Employer's security
holders or takes other actions to effect a "Change of Control"
(as defined in Section 6 hereof), Employee agrees not to
voluntarily terminate the Employment Period until such Person has
abandoned or terminated such efforts to effect a Change of
Control or until a Change of Control has occurred.
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
shall approve) 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, staffed by persons approved
by Employee and with such staff members' salaries and benefits as
Employee shall approve.
(c) The Employment Period shall be extended for an
additional year at the end of each year of the Employment Period
until such time as Employee or Employer has given written notice
to the other that the Employment Period is not to be further
extended; such that the Employment Period as so extended shall
expire five years after January 1 of the year in which such
notice is given.
2. Compensation
(a) During the Employment Period, Employee shall receive a
basic annual salary of not less than $825,000 subject to increase
as hereinafter provided (hereinafter called the "Basic Salary"),
payable in equal monthly installments on the 15th day of each
month.
(b) During the Employment Period, Basic Salary shall be
increased as of the first day of each calendar year commencing
January 1, 1999 based upon percentage increases in the Consumer
Price Index (the "CPI") as first published in each year by the
Bureau of Labor Statistics of the United States Department of
Labor for all items for the nation as a whole as compared with
the CPI first published for calendar year 1998. In the event
that the CPI for any year shall be lower than the CPI for any
prior year, there shall be no reduction in Basic Salary.
(c) In addition to Basic Salary Employee shall be entitled
to receive the following incentive compensation ("Incentive
Compensation"):
(i) A payment in cash, stock or a combination thereof,
as determined by Employee, based upon the performance goal
denominated "Earnings Before Taxes" (as hereinafter defined)
for each calendar year during the Employment Period
determined as follows:
Earnings Before Taxes Incentive
Realized in a Calendar Year Compensation Payable
Up to $10,000,000 1% of such amount, plus
$10,000,000 up to $15,000,000 2% of such amount, plus
$15,000,000 up to $20,000,000 3% of such amount, plus
$20,000,000 or more 4% of such amount
subject to such maximum for any year of two and one-half
times Basic Salary for such year. For purposes of this
subsection (c), "Earnings Before Taxes" shall mean the
consolidated net earnings of Employer and its subsidiary
companies before provision for income taxes, domestic
(federal, state and municipal) and foreign. Incentive
Compensation payable in respect of such goal for a calendar
year shall be paid by the 15th day of March of the next
year.
Payments of Incentive Compensation in stock shall be in
shares of Employer's common stock or special common stock as
determined by the compensation committee of the board of
directors of Employer (the "Committee") with such shares
valued at fair market value as determined by the Committee.
(ii) As soon as practicable after the date hereof,
Employer shall make a ten-year loan to Employee in the
original principal amount of $3,000,000 bearing interest at
the applicable federal long-term rate (determined in
accordance with Section 1274 of the Internal Revenue Code of
1986, as amended (the "Code")) payable annually in arrears,
and repayable annually as of each anniversary of the making
of such loan in equal installments of principal of $300,000
plus accrued interest. If this Agreement is approved by
Employer's shareholders as contemplated by Section 16
hereof, payment of each installment of principal and
interest will be deferred until determination of Employer's
Operating Earnings for the prior fiscal year. If this
Agreement is so approved, and if Employee remains in the
employ of Employer on the date an installment is due and if
Employer has met the goal of Operating Earnings of
$35,000,000 or more for the prior year, such installment and
accrued interest shall be forgiven; and all remaining
installments and accrued interest shall be forgiven in the
event of termination of the Employment Period pursuant to
Sections 5, 7 or 8 hereof. Such loan shall be evidenced by a
promissory note of Employee in the form of Exhibit 1 hereto,
with appropriate insertions. For purposes of this subsection
(c), "Operating Earnings" shall mean Earnings Before Taxes
before provisions for interest income and expense, gain or
loss on investments (and marketable securities), gain or
loss on businesses sold and before write-up or write-down of
assets.
(iii) Prior to payment of Incentive Compensation, the
Committee must certify in writing that either the
performance goal Earnings Before Taxes or the Operating
Earnings goal has been met.
(d) Employee shall be eligible to participate in any
deferred compensation, supplemental executive retirement, pension
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 coverages, any stock
option or savings plans (including, without limitation, the 1997
Equity and Cash Incentive Plan), or any pension or other
retirement benefit plans.
(e) Employer shall promptly reimburse Employee for all
business expenses incurred by Employee during the Employment
Period; shall promptly pay or reimburse Employee for club and
professional association dues, assessments and fees for at least
such clubs and associations as Employee was a member of and
Employer was making such payments or reimbursements on the date
of this Agreement; and shall provide to Employee for his
exclusive business and personal use an automobile of his
selection, pay all expenses of ownership, operation, repair and
maintenance of such vehicle, provide suitable substitute vehicle
in the event such automobile is not available for use by Employee
for any reason and replace such automobile not less often than
biannually with a new vehicle at the option of Employee.
3. Termination
(a) if Employee dies, the Employment Period or the
"Noncompete Period" (as hereinafter defined) shall end and his
employment hereunder shall be deemed to cease as of 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 and, if requested by
Employee, the basis for such incapacity is certified by a
licensed physician, Employer, acting through its board of
directors, may terminate the Employment Period.
(c) Employee shall have the right to terminate the
Employment Period at any time by written notice to the board of
directors of Employer.
(d) Employer, acting through its board of directors, 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 after a Change of Control or if prior to the finding of the
board of directors with respect thereto, the Employment Period
shall have terminated for any other reason. For purposes of this
Agreement, "cause" shall mean: (i) the willful and continued
failure of Employee to perform substantially Employee's material
duties pursuant to Section 1(b) hereof (other than any such
failure resulting from, or contributed to by, incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to Employee by the board of
directors which notice is adopted at an in-person meeting of the
board of directors called and held for such purpose (after
reasonable notice is provided to Employee and Employee is given
an opportunity, together with counsel, to be heard before the
board of directors) and which notice specifically identifies the
manner in which Employee has not substantially performed his
material duties, or (ii) because of 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.
Performance by Employee of his duties under Section 1(b) hereof
shall be presumed to be substantially performed, and any act, or
failure or act, based upon authority given pursuant to a
resolution duly adopted by the board of directors or any
committee of the board of directors or based upon the advice of
counsel for Employer (including members of its legal staff) or
which has been acquiesced in by the board of directors shall be
conclusively presumed to be done, or omitted to be done, by
Employee consistent with his obligations under Section 1(b)
hereof. Termination of the Employment Period for cause shall not
occur unless and until there shall have been delivered to
Employee a copy of a resolution duly adopted by the affirmative
vote of all of the members of the board of directors excluding
Employee at an in-person meeting of the board of directors called
and held for such purpose (after notice of not less than 20
business days is provided to Employee and Employee is given an
opportunity, together with counsel, to be heard before the board
of directors), finding that, in the good faith opinion of the
board of directors, termination for cause is justified based
solely on information presented at such meeting.
(e) Employer, acting through its board of directors, shall
have the right to terminate Employee without cause, by written
notice to Employee, not less than 20 business days in advance of
such termination
(f) 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 Section
11 hereof.
4. Noncompetition and Confidentiality
(a) If the Employment Period is terminated by reason of
voluntary termination by Employee pursuant to Section 3(c) hereof
or by reason of disability of Employee pursuant to Section 3(b)
hereof, then Employee agrees that he shall not for a period of
five years (the "Noncompete Period") compete with Employer as
hereinafter provided, and in consideration of Employee's
agreement not to compete during the Noncompete Period, Employer
shall pay to Employee a fee, payable in the manner set forth in
Section 2 hereof, at the annual rate of (i) 60 percent of the
Basic Salary at the date of such termination, plus (ii) 60
percent of the greater of (a) the average of the Incentive
Compensation earned pursuant to Section 2(c)(i) (irrespective of
any decision to defer any payment with respect thereto) for the
preceding three calendar years under this Agreement (or incentive
compensation earned under any prior agreement between Employee
and Employer relating to employment of Employee by Employer), or
(b) Incentive Compensation pursuant to Section 2(c)(i) which
would have been payable to Employee for the year in which the
Noncompete Period begins as if the Employment Period had not
terminated. In the event of a Change of Control occurring during
the period beginning 12 months prior to the commencement of the
Noncompete Period or at any time during the Noncompete Period,
Employee may elect to be paid in cash, within ten days after
giving notice of such election to Employer, an amount equal to
the balance of the fee payable under this Section 4 for the five-
year term of the Noncompete Period, with Incentive Compensation
for the purpose of such payment to be calculated on the basis of
the average of Incentive Compensation earned for the preceding
three calendar years under this Agreement (or any such prior
agreement).
In addition, during the Noncompete Period, Employee shall be
entitled to participate at the expense of Employer in all
employee benefits generally available to executive personnel of
Employer or available to him alone immediately prior to
termination of the Employment Period, including without
limitation, any hospital, accident, disability, life insurance or
dental coverages, provided that participation by Employee in any
such plan is not prohibited by the terms of any contract with any
provider of services under any such plan or prohibited by the
Code or the regulations thereunder or by any other applicable
legal requirements governing the qualification or administration
of such plans. Employer shall maintain an executive office for
Employee within Providence, Rhode Island for Employee's use
during the term of the Noncompete Period and shall provide
Employee with secretarial and other administrative services, all
reasonably suitable to his then current needs and consistent with
his former offices and duties during the Employment Period.
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.
(b) 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.
5. Severance Pay-Termination by Employer
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" (as hereinafter defined),
Employer shall thereafter be obligated to pay and Employee shall
be entitled to receive as severance pay hereunder, for a period
of five years beginning as of the first day following such
termination, an amount for each year, payable in the manner set
forth in Section 2 hereof, equal to (i) 70 percent of the Basic
Salary as of the date of such termination, plus (ii) 70 percent
of the greater of (a) the average of the Incentive Compensation
earned pursuant to Section 2(c)(i) (irrespective of any decision
to defer any payment with respect thereto) for the preceding
three calendar years under this Agreement (or incentive
compensation earned under any prior agreement between Employee
and Employer relating to employment of Employee by Employer), or
(b) Incentive Compensation pursuant to Section 2(c)(i) which
would have been payable to Employee for the year in which
termination occurs as if the Employment Period had not
terminated. If there shall have occurred a Change of Control
within the 24 months preceding such a termination of the
Employment Period or during the 12 months following such a
termination of the Employment Period, Employee may elect to be
paid in cash, within ten days after giving notice of such
election to Employer, an amount equal to the balance of severance
pay to Employee under this Section 5 with Incentive Compensation
for the purpose of such payment to be calculated on the basis of
the average of the Incentive Compensation earned pursuant to
Section 2(c)(i) for the preceding three calendar years under this
Agreement as if the Employment Period had not terminated (or
incentive compensation earned under any such prior agreement).
For purposes of this Agreement, "good reason" shall mean:
(i) any reduction of, or failure to pay, Employee's
Basic Salary or Incentive Compensation as described in
Section 2(a), (b) and (c) hereof;
(ii) any failure to provide the benefits or payments
required by Sections 2(d) and (e), 9, 10, 11 and 12 hereof;
(iii) assignment to Employee of any duties
inconsistent in any respect with his position (including
status, offices and tides), authority, duties or
responsibilities as contemplated by Section 1(b) above or
any other action by Employer which results in a diminution
of such position, authority, duties or responsibilities;
(iv) failure after a Change of Control to comply with
and satisfy Section 6(b) hereof;
(v) 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;
(vi) 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 date of this Agreement; and
(vii) without limiting the generality or effect of
the foregoing, any other material breach of this Agreement
by Employer or any successor thereto or transferee of
substantially all the assets thereof.
For purposes of this agreement, any good faith determination of
good reason made by Employee shall be conclusive.
In the event of such a termination of the Employment Period,
Employee shall continue for a period of 60 months after
termination of the Employment Period to be covered at the expense
of Employer by the same or equivalent hospital, medical,
accident, disability and life insurance coverages as he was
covered immediately prior to termination of the Employment
Period; provided, however, that Employee may elect to be paid in
cash, within 15 days after termination of the Employment Period,
an amount equal to Employer's cost of providing such coverages
during such period.
6. Change of Control
(a) For purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred if and when:
(i) Employer ceases to be a publicly owned corporation
having at least 500 stockholders; or
(ii)There occurs any event or series of events that
would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the
Exchange Act, in a Form 8-K filed under the Exchange Act or
in any other filing by Employer with the Securities and
Exchange Commission; or
(iii) Employer executes an agreement of
acquisition, merger, or consolidation which contemplates
that after the effective date provided for in the agreement,
all or substantially all of the business and/or assets of
Employer shall be controlled by another Person; provided,
however, for purposes of this clause (iii) that (x) if such
an agreement requires as a condition precedent approval by
Employer's shareholders of the agreement or transaction, a
Change of Control shall not be deemed to have taken place
unless and until such approval is secured and, (y) if the
voting shareholders of such other Person shall, immediately
after such effective date, be substantially the same as the
voting shareholders of Employer immediately prior to such
effective date, the execution of such agreement shall not,
by itself, constitute a "Change of Control"; or
(iv) Any Person which does not include Employee becomes
the beneficial owner, directly or indirectly (either as a
result of the acquisition of securities or as the result of
an arrangement or understanding, including the holding of
proxies, with or among security holders), of securities of
Employer representing 25% or more of the votes that could
then be cast in an election for members of Employer's board
of directors unless within 15 days of being advised that
such ownership level has been reached, Employer's board of
directors adopts a resolution approving the acquisition of
that level of securities ownership by such Person; or
(v) During any period of 24 consecutive months,
commencing after the effective date of this Agreement,
individuals who at the beginning of such 24-month period
were directors of Employer shall cease to constitute at
least a majority of Employer's board of directors, unless
the election of each director who was not a director at the
beginning of such period has been approved in advance by
directors representing at least two thirds of (x) the
directors then in office who were directors at the beginning
of the 24-month period, or (y) the directors specified in
clause (x) plus directors whose election has been so
approved by directors specified in clause (x).
(b) If Employer is at any time before or after a Change of
Control merged with or consolidated into or with any other Person
(whether or not Employer is the surviving entity), or if
substantially all of the assets of Employer are transferred to
another Person, the Person resulting from such merger or
consolidation, or the acquirer of such assets, shall (by
agreement in form and substance satisfactory to Employee)
expressly assume the obligations of Employer under this
Agreement. In any event, however, the provisions of this
Agreement shall be binding upon and inure to the benefit of the
Person resulting from such merger or consolidation or the
acquirer of such assets, and this Section 6(b) will apply in the
event of any subsequent merger or consolidation or transfer of
assets. In the event of any such merger, consolidation or sale of
assets, nothing contained in this Agreement will detract from or
otherwise limit Employee's right to or privilege of participation
in any stock option or purchase plan or any bonus, profit
sharing, pension, group insurance, hospitalization or other
incentive or benefit plan or arrangement which may be or become
applicable to executives of the Person from such merger or
consolidation or acquiring such assets of Employer. In the event
of any such merger, consolidation or sale of assets, references
to Employer in this Agreement shall unless the context suggests
otherwise be deemed to include the Person resulting from such
merger or consolidation or acquiring of such assets of Employer.
7. Death Benefit
If the Employment Period or the Noncompete Period shall
terminate by reason of Employee's death, his estate or designated
beneficiary shall thereafter be entitled to receive from Employer
a death benefit (i) in the case of such a termination of the
Employment Period, for a period of five years beginning as of the
first day following his death, in an amount equal to 60 percent
of the Basic Salary as of the date of his death, plus 60 percent
of the greater of (a) the average of the Incentive Compensation
earned pursuant to Section 2(c)(i) (irrespective of any decision
to defer any payment with respect thereto) for the preceding
three calendar years under this Agreement (or incentive
compensation earned under any prior agreement between Employee
and Employer relating to employment of Employee by Employer), or
(b) Incentive Compensation pursuant to Section 2(c)(i) which
would be payable to Employee if the Employment Period had not
terminated, such death benefit shall be payable in the manner set
forth in Section 2 hereof; or (ii) in the case of such a
termination of the Noncompete Period, for the remainder of the
Noncompete Period, an amount equal to the annual rate of the fee
payable to Employee at the date of such termination; such death
benefit shall be payable in the manner set forth in Section 2
hereof.
8. Disability Benefit
If the Employment Period shall terminate by reason of
Employee's physical or mental disability, Employee, or in the
event of his death, his estate, shall thereafter be entitled to
receive from Employer: (i) for a period of five years commencing
from the date of such termination, a disability benefit in an
amount equal to 60 percent of the Basic Salary as of the date of
such termination, plus 60 percent of the greater of (a) the
average of the Incentive Compensation earned pursuant to Section
2(c)(i) (irrespective of any decision to defer any payment with
respect thereto) for preceding three calendar years under this
Agreement (or incentive compensation earned under any prior
agreement between Employee and Employer relating to employment of
Employee by Employer), or (b) Incentive Compensation pursuant to
Section 2(c)(i) which would be payable to Employee if the
Employment Period had not terminated, payable in the manner set
forth in Section 2 hereof; and (ii) for what would have been the
duration of the Employment Period without such termination unless
Employee should earlier die, Employer will not terminate the
Insurance Agreements (as defined in Section 10 hereof).
9. Deferred Compensation
Employee may defer receipt of all or any part of the
Incentive Compensation pursuant to Section 2(c)(i) otherwise due
him under this Agreement in respect of any year of the Employment
Period, provided that prior to the end of such year for which
such Incentive Compensation would otherwise be payable, Employee
notifies Employer of his irrevocable election to so defer such
receipt, stating in such notice the period during which such
receipt is to be deferred and the period over which such
Incentive Compensation is to be paid once such deferral has
terminated. Any such deferred Incentive Compensation shall be a
general unsecured obligation of Employer to Employee and shall
bear interest at the interest rate per annum announced and made
effective from time to time by Fleet National Bank (or its
successor) as its prime rate (the "Rate") which shall accrue and
be paid in equal monthly increments over the period the Incentive
Compensation to which it relates is to be paid with the unpaid
amount of such Incentive Compensation and unpaid interest to bear
interest at the Rate which shall be paid in arrears as each such
installment of deferred Incentive Compensation is payable.
10. Split Dollar Life Insurance.
Employer and Employee or a trust established by him have
entered into the split dollar life insurance agreements listed on
Schedule 1 hereto (the "Insurance Agreements"). In the event of
a Change of Control during the Employment Period or the
Noncompete Period, Employer agrees not to terminate any of the
Insurance Agreements until the Employment Period or the
Noncompete Period, as the case may be, would have terminated,
provided that in such event Employer's obligation to pay premiums
pursuant to the Insurance Agreements shall be limited to applying
the cash value of the policies (including accumulated dividends
and the value of any paid-up additions) to premium payments. If
in such event such cash value is insufficient to pay all required
premiums, Employer shall consult with Employee and apply cash
value to payment of premiums as directed by Employee. As to
policies where such premiums are not to be paid by the
application of cash value, at the election of Employee Employer
will either permit Employee to pay premiums to the extent not
paid from the application of cash value or transfer such policies
to Employee, conditioned upon Employee's executing any additional
instruments reasonably necessary to preserve Employer's rights
under the Insurance Agreements.
11. Gross-up Payment
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, 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.
Determinations under this Section 11 will be made by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP 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.
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.
12. 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.
13. 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 ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, 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.
14. Governing Law
This Agreement shall be governed by the laws of the State of
Rhode Island and Providence Plantations.
15. 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.
16. Shareholder Approval/Prior Agreements
This Agreement shall be submitted to Employer's shareholders
for approval at Employer's next annual meeting of shareholders
occurring after the date hereof. In the event this Agreement is
so approved by Employer's shareholders, this Agreement together
with the employment agreement dated as of January 1, 1984 between
Employer and Employee, as amended (the "1984 Agreement), will
constitute the entire agreement between Employee and Employer,
and as of January 1, 1998 this Agreement will supersede all prior
negotiations and written or oral agreements with respect to the
full time employment of Employee by Employer, except that no
rights arising under the 1984 Agreement prior to January 1, 1998,
including without limitation the right of Employee to incentive
compensation or other compensation or benefits under the 1984
Agreement, shall be affected hereby. In the event this Agreement
is not so approved, the 1984 Agreement shall continue in effect.
No changes, alterations or modifications hereof may be made,
except by a writing signed by each of the parties hereto.
17. Assignment
This agreement is personal to Employee and without the prior
written consent of Employer shall not be assignable by Employee
otherwise 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.
18. 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.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of February 26, 1997.
ATTEST: NORTEK, INC.
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------- --------------------
Secretary ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
WITNESS:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------- --------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Employee
Exhibit 1
NOTE
February __, 1997
FOR VALUE RECEIVED, the undersigned ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇"), hereby promises to pay Nortek, Inc., a Delaware
corporation (the "Lender"), on or before February __ 2007, THREE
MILLION DOLLARS ($3,000,000), with interest accruing daily from
the date hereof on the aggregate principal amount of such loan
from time to time unpaid at the applicable federal long-term rate
(determined in accordance with Section 1274 of the Internal
Revenue Code of 1986) in effect on such day (the "Rate"), such
interest to be payable annually in arrears on the date provided
below for prepayments of principal or upon maturity or prepayment
in full hereof. ▇▇▇▇▇▇ also promises to pay interest at the Rate
on overdue principal and, to the extent permitted by applicable
law, on overdue installments of interest. Interest shall be
computed on the basis of a 365-day year.
On the last business day of February in each year from 1998
through 2007 inclusive, ▇▇▇▇▇▇ shall prepay, without premium, the
lesser of $300,000 of principal of this Note or the aggregate
amount of principal of this Note then outstanding; provided,
however, that the aggregate unpaid principal of the loan
represented by this Note, plus accrued interest thereon, shall,
without the requirement of any action on the part of the Lender,
become immediately due and payable if ▇▇▇▇▇▇ shall: (i) commence
a voluntary case under Title 11 of the United States Code or any
successor statute (the "Bankruptcy Code") or authorize the
commencement of such a voluntary case; (ii) have filed against
him a petition commencing an involuntary case under the
Bankruptcy Code which shall not have been dismissed within 60
days after the date on which such petition is filed; (iii) file
an answer or other pleading in an involuntary case under the
Bankruptcy Code admitting or failing to deny the material
allegations of the petition commencing such involuntary case, or
seeking, consenting to or acquiescing in the relief requested by
such petition; (iv) have entered against him an order for relief
in any involuntary case commenced under the Bankruptcy Code; (v)
seek relief as a debtor under any applicable law, other than the
Bankruptcy Code, of any jurisdiction relating to the modification
or alteration of the rights of creditors, or consent to or
acquiesce in such relief; (vi) have entered against him an order
by a court of competent jurisdiction (a) finding him to be
bankrupt or insolvent, (b) ordering or approving any modification
or alteration of the rights of his creditors or (c) assuming
custody of, or appointing a receiver or other custodian for, all
or a substantial portion of his property; or (vii) make an
assignment for the benefit of, or enter into a composition with,
his creditors, or appoint, or consent to the appointment of, or
suffer to exist a receiver or other custodian for, all of his
property. The principal of this Note may be prepaid in whole or
in part without premium.
Payments hereunder shall be made to the Lender at its
principal offices at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, or at such other location as the Lender shall have from
time to time designated to ▇▇▇▇▇▇ in writing.
The parties hereto, including ▇▇▇▇▇▇ and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and
all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note and assent
to extensions of time of payment, forbearance or other indulgence
without notice.
▇▇▇▇▇▇ agrees to pay all costs and expenses incurred by
Lender in connection with the enforcement of this Note and will
indemnify and hold harmless Lender from and against any damages,
liabilities and expenses (including without limitation fees and
expenses of counsel) incurred by Lender in connection with any
litigation or threatened litigation, including any regulatory
proceedings, arising out of the making, performance or
enforcement of this Note.
This Note shall be governed by and construed in accordance
with the laws of the State of Rhode Island and Providence
Plantations.
WITNESS:
_____________________________ ______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Schedule 1
SPLIT DOLLAR AGREEMENTS BENEFITING ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Agreement Policies Covered by
Agreement
New York Life
Policy No. Face Amount
------------- -----------
Split Dollar Agreement dated as of 45 954 985} $15,000,000
December 20, 1996 between Nortek 45 954 942} Combined
and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., as
trustee of The ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1996 Irrevocable Trust
Confirmatory Split Dollar Agreement 37 324 765 $ 150,000
No. 1 dated as of December 31, 1996 37 367 086 $ 97,000
between Nortek and ▇▇▇▇▇▇▇ ▇. 37 679 014 $ 2,000,000
▇▇▇▇▇▇
Confirmatory Split Dollar Agreement 38 977 829 $ 1,200,000
No. 2 dated as of December 31, 1996
between Nortek and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
