Employment Agreement- Clarke

Employment Agreement- Bready

Amendment to Employment Agreement- Bready

Severance Agreement- Bready

 

 

 

EX-10.1 2 b89598exv10w1.htm EX-10.1

Exhibit 10.1

Execution Version

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into this 16th day of December, 2011 by and between Michael J. Clarke (the “Executive”) and Nortek, Inc., a Delaware corporation (the “Company”). This Agreement shall be effective as the 30th day of December, 2011 (the “Effective Date”).

     WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed on the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions and conditions set forth in this Agreement, the parties hereby agree:

     1. Employment. Subject to the terms and conditions set forth in this Agreement, the Company hereby offers and the Executive hereby accepts employment.

     2. Term. Subject to earlier termination as hereinafter provided, the Executive’s employment shall be for an initial term of three years commencing on the Effective Date. Commencing on the third anniversary of the Effective Date and on each succeeding anniversary of the Effective Date thereafter (each such anniversary date shall hereinafter be referred to as the “Renewal Date”), unless previously terminated, the term of the Executive’s employment shall be automatically extended for one additional year, unless at least thirty (30) days prior to any Renewal Date, the Company or the Executive shall give notice to the other party that the Executive’s employment hereunder shall not be so extended. The term of the Executive’s employment hereunder as from time to time extended or renewed is hereafter referred to as the “Term.”

     3. Capacity and Performance.

     (a) During the Term, the Executive shall serve as Chief Executive Officer of the Company. He shall be employed by the Company on a full-time basis and shall perform the duties and responsibilities of his position and such other duties and responsibilities on behalf of the Company and its Affiliates, consistent with his position as Chief Executive Officer, as reasonably may be designated from time to time by the Board of Directors of the Company (the “Board”) or its designees. In addition, and without further compensation, the Executive shall serve as a director and/or officer of one or more of the Company’s Affiliates if so elected or appointed from time to time.

     (b) During the Term, the Executive shall devote his full business time and his best efforts, business judgment, skill and knowledge exclusively to the advancement of the business and interests of the Company and its Affiliates and to the discharge of his duties and responsibilities hereunder. The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the Term, except as may be expressly approved in advance by the Board or its designee in writing; provided, however, that the Executive may without advance consent engage in charitable activities and personal investment activities, provided that such activities do not, individually or in the aggregate, interfere with the performance of

 


 

Executive’s duties under this Agreement and are not in conflict with the business interests of the Company or its Affiliates or otherwise violative of Sections 7, 8 or 9 of this Agreement.

     4. Compensation and Benefits. As compensation for all services performed by the Executive hereunder during the Term, and subject to performance of the Executive’s duties and of the obligations of the Executive to the Company and its Affiliates, pursuant to this Agreement or otherwise:

     (a) Base Salary. During the Term, the Company shall pay the Executive an annualized base salary of $925,000, subject to annual review for increase in the discretion of the Board, payable in accordance with the normal payroll practices of the Company for its executives (“Base Salary”).

     (b) Signing Bonus; Retention Bonus.

     (i) Within fifteen days (15) following the Effective Date, the Company shall pay to the Executive a one-time signing bonus (the “Signing Bonus”) in an amount equal to $500,000.

     (ii) On the first anniversary of the Effective Date, the Executive shall be paid a one-time bonus of $500,000 (the “Retention Bonus”), subject to his remaining continuously employed by the Company through such date. Notwithstanding the foregoing, in the event that the Executive terminates his employment for Good Reason or his employment is terminated by the Company without Cause or due to the Executive’s disability (as defined in Section 5(b) below) or due to his death, in each case, prior to the first anniversary of the Effective Date, the Company shall pay the Executive (or his Designated Beneficiary (as defined below) or estate, if applicable) the Retention Bonus on a date that is the sixtieth (60th) day following the date his employment terminates; provided, however, that any obligation of the Company to pay the Retention Bonus upon the Executive’s termination of employment under this subsection (ii) is conditioned on the Executive’s (or his Designated Beneficiary or estate, if applicable) signing and returning a timely and effective Release of Claims (as defined below) in a manner set forth in Section 5(d) of this Agreement.

     (c) Annual Bonus Compensation. For each full fiscal year completed during the Term, the Executive shall be entitled to receive an annual bonus (the “Annual Bonus”) on the following terms and conditions. The Annual Bonus shall be determined under, and subject to, the terms of the Company’s short-term incentive plan for its executives generally, as in effect from time to time (the “Bonus Plan”). The Executive’s target Annual Bonus (“Target Bonus”) shall be equal to one-hundred percent (100%) of the Base Salary, with the actual amount of the Annual Bonus, if any, to be based on the attainment of pre-established performance goals as determined by the Board or the Compensation Committee of the Board (the “Compensation Committee”) in accordance with the terms of the Bonus Plan. Notwithstanding the foregoing, for the 2012 fiscal year, the payout level for the Executive under the Bonus Plan will be guaranteed at fifty percent (50%) of the Base Salary. Under the Bonus Plan currently in effect, which is

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subject to change from time to time, seventy percent (70%) of the Annual Bonus is based on the achievement of an adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) performance goal (the “EBITDA Bonus”). Under the Bonus Plan currently in effect, which is subject to change from time to time, participants are entitled to receive a 50% payout of their EBITDA Bonus if EBITDA is 85% of the EBITDA target established for the year (the “EBITDA Target”), increasing linearly to a 100% payout of their EBITDA Bonus if EBITDA equals the EBITDA Target, and further increasing linearly to a 200% payout of their EBITDA Bonus if EBITDA is equal to or greater than 120% of the EBITDA Target. Additionally, under the Bonus Plan currently in effect, which is subject to change from time to time, thirty percent (30%) of the Annual Bonus is based on the achievement of individual performance goals, as determined by the Board or the Compensation Committee, provided that adjusted EBITDA is greater than a minimum threshold. Any bonus due to the Executive hereunder shall be paid in the time and manner set forth in the Bonus Plan.

     (d) Equity Compensation.

     (i) On or promptly following the Effective Date, subject to the receipt of any required Board or Compensation Committee approval, the Company shall grant to the Executive an option to purchase 200,000 shares of Common Stock (the “Option”). The Option shall be granted under the Company’s 2009 Omnibus Incentive Plan (as amended from time to time, the “EIP”). The Option will vest in equal installments on each of the first five (5) anniversaries of its date of grant, subject to the Executive remaining continuously employed by the Company through each such date. The Option shall be subject to the terms of the EIP and the award agreement evidencing such Option. For purposes of this Agreement, “Common Stock” means common stock of the Company, par value $0.01 per share.

     (ii) On or promptly following the Effective Date, subject to the receipt of any required Board or Compensation Committee approval, the Company shall grant to the Executive 50,000 shares of restricted Common Stock (the “Time-Based Restricted Stock Grant”). The Time-Based Restricted Stock Grant will be subject to the terms of the EIP and the restricted stock award agreement evidencing such grant. The Time-Based Restricted Stock Grant will vest in equal installments on each of the first five (5) anniversaries of its date of grant, subject to the Executive remaining continuously employed by the Company through each such date.

     (iii) On or promptly following the Effective Date, subject to the receipt of any required Board or Compensation Committee approval, the Company shall grant to Executive 100,000 shares of restricted Common Stock (the “Performance-Based Restricted Stock Grant”). The Performance-Based Restricted Stock Grant will vest in five (5) annual installments, subject to the attainment of performance goals as established and determined by the Board or the Compensation Committee and further subject to the Executive remaining continuously employed by the Company through each applicable vesting date. The vesting date shall occur, with respect to each subject fiscal year, on the date

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the Board or the Compensation Committee determines, upon receipt of audited financial statements for such fiscal year, whether the performance goals have been satisfied. Subject to the attainment of performance goals, the Executive shall be eligible to vest in 0% to 100% of the number of shares of restricted Common Stock underlying the Performance-Based Restricted Stock Grant, with target performance resulting in the vesting of 50% of the shares underlying such grant.

     (iv) Future Equity Awards. The Executive shall be eligible to be considered for the grant of additional annual equity awards during the Term, beginning in fiscal year 2013, in the sole discretion of, and in a form and amount determined by, the Board or the Compensation Committee. The annual target grant date award value of any such future award is expected to be approximately $1,000,000; provided, however, that nothing herein shall be deemed to be, nor construed as, a commitment or obligation by the Company to make any additional equity or equity-based awards in any specified amount to the Executive or to have the Executive remain in the Company’s employ. Any such equity awards shall be subject to the receipt of any required shareholder, Board or Compensation Committee approvals, the terms of the EIP or the Company’s equity incentive plan as then in effect and the award agreement evidencing such award.

     (v) Acceleration. In the event of a Change in Control (as defined in the EIP), upon such Change in Control, in all cases, to the extent then outstanding in accordance with the terms of the applicable award agreements evidencing such awards, the vesting of the Option and the Time-Based Restricted Stock Grant to be granted to Executive pursuant to Sections 4(d)(i) and 4(d)(ii) above will accelerate in full and fifty percent (50%) of the then unvested portion of the Performance-Based Restricted Stock Grant to be granted to Executive pursuant to Section 4(d)(iii) above will accelerate.

     (e) Vacations. During the Term, the Executive shall be entitled to four (4) weeks of vacation per annum (pro-rated for partial years), to be taken at such times and intervals as shall be determined by the Executive, subject to the reasonable business needs of the Company. Vacation shall otherwise be governed by the policies of the Company, as in effect from time to time.

     (f) Other Benefits. During the Term and subject to any contribution therefor generally required of employees of the Company, the Executive shall be entitled to participate in any and all employee benefit plans from time to time in effect for senior executive officers of the Company generally, except to the extent such plans or benefits are otherwise expressly provided to the Executive (e.g., a severance pay plan). Such participation shall be subject to (i) the terms of the applicable plan documents, (ii) generally applicable Company policies and (iii) the discretion of the Board or any administrative or other committee provided for in or contemplated by such plan (the “Employee Benefit Plans”). The Company may prospectively alter, modify, add to or terminate its Employee Benefit Plans at any time as it, in its sole judgment, determines to be appropriate, without recourse by the Executive.

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     (g) Relocation Expenses. The Executive agrees to relocate from his current residence in California to a location that is a reasonable commuting distance from the Company’s principal executive offices in Providence, Rhode Island (the “New Residence”) by December 31, 2012. The Company shall make available to the Executive relocation assistance through a professional relocation service provider. In addition, the Company shall pay or reimburse the Executive for his reasonable costs, up to a maximum amount of $150,000, incurred in connection with relocating to the New Residence, subject to such reasonable substantiation and documentation as may be specified by the Board or Company policy from time to time, and provided such relocation is completed not later than December 31, 2012. Such permitted payments or reimbursements, if any, shall include (i) any penalty fee incurred by the Executive in connection with cancelling the lease on his current residence, (ii) temporary housing for the Executive and his immediate family through December 31, 2012, (iii) upon the Executive’s children’s enrollment at a school near the New Residence, the reasonable cost of tuition fees for each child under the age of eighteen (18) through June 30, 2012, provided such child is in a grade of kindergarten through twelfth (12th) grade, (iv) four (4) house hunting or school selection trips, including roundtrip airline tickets for the Executive and his immediate family, and (v) transportation and storage of household goods and motor vehicles. The Company shall also provide the Executive with a tax gross-up for applicable federal, state and local taxes paid by the Executive in connection with the allowance provided under this subsection (g). This gross-up payment shall be paid no later than April 15th of the year following the year to which such taxable income relates.

     (h) Tax Preparation. The Company shall pay or reimburse the Executive for the reasonable cost of tax preparation services incurred by Executive in connection with the preparation of his personal income tax returns, subject to such reasonable substantiation and documentation as may be specified by the Board or Company policy from time to time.

     (i) Business Expenses. The Company shall pay or reimburse the Executive for reasonable, customary and necessary business expenses incurred or paid by the Executive in the performance of his duties and responsibilities hereunder, subject to applicable Company policies and such reasonable substantiation and documentation as may be specified by the Board or Company policy from time to time.

     (j) Timing of Payments. Any payments or reimbursements under Sections 4(g), 4(h) or 4(i) shall be made within thirty (30) days after submission of written documentation substantiating such expenses, in a form reasonably acceptable to the Company. Any payments or reimbursements provided for under this Agreement that would constitute nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), shall be subject to the following additional rules: (i) no reimbursement of any such expense shall affect the Executive’s right to reimbursement of any such expense in any other taxable year, (ii) reimbursement of the expense shall be made, if at all, promptly, but not later than the end of the calendar year following the calendar year in which the expense was incurred, and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit.

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     5. Termination of Employment and Severance Pay. The Executive’s employment hereunder shall terminate under the following circumstances:

     (a) Death. In the event of the Executive’s death during the Term, the date of death shall be the date of termination of the Executive’s employment, and the Company shall pay or provide to the Executive’s Designated Beneficiary or, if no beneficiary has been designated by the Executive in a notice received by the Company, to his estate: (i) any Base Salary earned but not paid through the date of termination; (ii) pay for any vacation time earned but not used through the date of termination; (iii) any bonus compensation awarded for the fiscal year preceding that in which termination occurs, but unpaid on the date of termination; (iv) any amounts accrued and payable under any Employee Benefit Plan pursuant to Section 4(f) above; (v) any tax gross-up payment owed under Section 4(g) above with respect to the period prior to the date of termination that is unpaid on such date; (vi) any unpaid or unreimbursed expenses pursuant to Sections 4(g), 4(h) or 4(i) incurred by the Executive but unreimbursed on the date of termination, provided that such expenses and required substantiation and documentation are submitted within sixty (60) days following termination and that any business expenses incurred pursuant to Section 4(i) are reimbursable under Company policy (all of the foregoing, payable subject to the timing limitations described herein, “Final Compensation”); (vii) a pro rata portion of the Annual Bonus for the year in which such termination occurs, pro-rated based on the number of days the Executive was employed during such year prior to the date of termination, which bonus shall be determined based on actual Company performance for the full year in which such termination occurs (it being understood that if any portion of the Annual Bonus is based on the attainment of individual performance goals, for purposes of determining the amount of the pro-rata bonus, 100% of the bonus shall be deemed to be based on attainment of Company performance goals) (the “Pro-Rata Bonus”); and (vii) if the Executive’s employment is terminated prior to the first anniversary of the Effective Date, the Retention Bonus, which shall be paid in accordance with the terms of Section 4(b)(ii) of this Agreement. The Company shall have no further obligation or liability to the Executive. The Pro-Rata Bonus shall be paid at the same time that bonuses under the Bonus Plan are paid to active employees in accordance with Section 4(c) of this Agreement. Other than the tax gross-up described in Section 5(a)(v) herein, which shall be paid at the time provided in Section 4(g) above, the expenses described in Section 5(a)(vi) herein, which shall be paid at the time provided in Section 4(j), and any bonus described in Sections 5(a)(iii), which shall be paid at the time provided in Section 4(c), Final Compensation shall be paid to the Executive’s Designated Beneficiary or estate, as applicable, within thirty (30) days following the date of death.

     (b) Disability.

     (i) The Company may terminate the Executive’s employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled during his employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of his duties and responsibilities hereunder (notwithstanding the provision of any reasonable accommodation) for one

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hundred eighty (180) days during any period of three hundred and sixty-five (365) consecutive calendar days. A termination on account of disability shall be treated in the same manner as a termination due to the Executive’s death, provided that references to Designated Beneficiary shall refer to the Executive or his personal representative, as applicable.

     (ii) The Board may designate another employee to act in the Executive’s place during any period of the Executive’s disability. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and to participate in Employee Benefit Plans in accordance with Section 4(f), to the extent permitted by the then-current terms of the applicable Employee Benefit Plans, until the Executive becomes eligible for disability income benefits under the Company’s disability income plan, if any, or until the termination of his employment, whichever shall first occur. While receiving disability income payments under the Company’s disability income plan, the Executive shall not be entitled to receive any Base Salary under Section 4(a) hereof, but shall continue to participate in the Employee Benefit Plans in accordance with Section 4(f) and the then-current terms of such plans, until the termination of his employment hereunder.

     (iii) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform substantially all of his duties and responsibilities hereunder, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company, to determine whether the Executive is so disabled and such determination shall for the purposes of this Agreement be conclusive. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

     (c) By the Company for Cause. The Company may terminate the Executive’s employment hereunder for Cause at any time upon notice to the Executive setting forth in reasonable detail the nature of such Cause. The following shall constitute Cause for termination:

     (i) other than the result of disability, the Executive’s willful failure to perform, or gross negligence in the performance of, the Executive’s material duties and responsibilities to the Company or any of its Affiliates, which failure or neglect, if susceptible of cure, remains uncured or continues or recurs fourteen (14) days after the Executive receives written notice from the Company specifying in reasonable detail the nature of such failure or neglect;

     (ii) the Executive’s material breach of any of the terms of this Agreement or any other agreement with the Company or any of its Affiliates, which breach, if susceptible of cure, remains uncured or continues or recurs fourteen (14) days after the Executive receives written notice from the Company specifying in reasonable detail the nature of such breach;

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     (iii) the Executive’s indictment for or charge of a felony or other crime involving moral turpitude; or

     (iv) the Executive’s engaging in illegal misconduct or gross misconduct that is materially harmful to the Company or its Affiliates.

Upon the giving of notice of termination of the Executive’s employment hereunder for Cause, the Company shall have no further obligation to the Executive, other than for Final Compensation. Other than the tax gross-up described in Section 5(a)(v) herein, which shall be paid at the time provided in Section 4(h) above, the expenses described in Section 5(a)(vi), which shall be paid at the time provided in Section 4(j), and any bonus described in Section 5(a)(iii), which shall be paid at the time provided in Section 4(c), Final Compensation shall be paid to the Executive within sixty (60) days following the date of termination of employment.

     (d) By the Company Other Than for Cause. The Company may terminate the Executive’s employment hereunder other than for Cause at any time upon notice to the Executive. A termination of the Executive’s employment that occurs on the last day of the Term following the Company’s notice to the Executive of non-renewal of the Term under Section 2 hereof shall be treated as a termination by the Company other than for Cause. In the event of such termination, in addition to any Final Compensation due to the Executive, (i) the Company will pay the Executive severance pay, at the same rate as the Base Salary in effect on the date of termination, for a period of twenty-four (24) months following the date of termination of his employment (the “Severance Pay”); (ii) if the Executive’s employment is terminated prior to the first anniversary of the Effective Date, the Executive shall be entitled to receive the Retention Bonus in accordance with the terms of Section 4(b)(ii) of this Agreement; and (iii) if the Executive timely elects COBRA continuation coverage, the Company will pay the full amount of Executive’s monthly COBRA premiums for the eighteen (18)-month period commencing on the day after the date of termination, such payments to be made on a monthly basis within ten (10) days of the first day of each month, to the extent permitted under the terms of the Company’s medical plan and to the extent the making of such payments would not violate, or result in any penalty or fine to the Company, under applicable law (the “Health Care Coverage”). Other than the tax gross-up described in Section 5(a)(v) herein, which shall be paid at the time provided in Section 4(g) above, the expenses described in Section 5(a)(vi), which shall be paid at the time provided in Section 4(j), and any bonus described in Section 5(a)(iii), which shall be paid at the time provided in Section 4(c), Final Compensation shall be paid to the Executive within sixty (60) days following the date of termination of employment. Any obligation of the Company to provide the Severance Pay or Health Care Coverage is conditioned, however, on the Executive signing and returning to the Company (without revoking) a timely and effective separation agreement containing a release of claims and other customary terms in the form provided by the Company by the deadline specified therein, which in all events shall be no later than the sixtieth (60th) day following the date of termination (any such release submitted by such deadline, the “Release of Claims”) and on the Executive’s continued compliance with the obligations of the Executive to the Company and its Affiliates that survive termination of his employment, including without limitation under Sections 7, 8 and 9 of this Agreement. All Severance Pay to which the Executive is

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entitled hereunder shall be in the form of salary continuation, payable in accordance with the normal payroll practices of the Company for its executives, with the first payment, which shall be retroactive to the day immediately following the date the Executive’s employment terminated, being due and payable on the Company’s next regular payday for executives that follows the expiration of sixty (60) calendar days from the date the Executive’s employment terminates. The Release of Claims required for separation benefits in accordance with Section 4(b)(ii), this Section 5(d) or Section 5(e) creates legally binding obligations on the part of the Executive and the Company therefore advises the Executive to seek the advice of an attorney before signing the Release of Claims.

     (e) By the Executive for Good Reason. The Executive may terminate his employment hereunder for Good Reason by (i) providing notice to the Company specifying in reasonable detail the condition giving rise to the Good Reason no later than the thirtieth (30th) day following the occurrence of that condition; (ii) providing the Company a period of fourteen (14) days to remedy the condition and so specifying in the notice and (iii) terminating his employment for Good Reason within thirty (30) days following the expiration of the period to remedy if the Company fails to remedy the condition. The following, if occurring without the Executive’s consent, shall constitute “Good Reason” for termination by the Executive: (a) any reduction of Executive’s Base Salary or Target Bonus percentage; (b) failure to pay the Executive’s Base Salary in accordance with the terms of this Agreement or failure to pay the Annual Bonus to the extent due and payable under the Bonus Plan, in either case, which failure to pay continues for more than two (2) weeks; (c) a material diminution of Executive’s position, authority, duties or responsibilities; (d) relocation of the Company’s principal executive offices, or any event that causes Executive to have his principal place of work changed, to any location greater than fifty (50) miles from Providence, Rhode Island, other than to Boston, Massachusetts; and (e) any other material breach of this Agreement by the Company. A termination of employment by the Executive under this Section 5(e) shall be treated as a termination by the Company other than for Cause under Section 5(d) above; provided that the Executive satisfies all conditions to such entitlement as set forth in Section 5(d), including, without limitation, the signing of an effective Release of Claims.

     (f) By the Executive Without Good Reason. The Executive may terminate his employment hereunder at any time upon thirty (30) days’ prior written notice to the Company. In the event of termination of the Executive’s employment pursuant to this Section 5(f), the Board may elect to waive the period of notice, or any portion thereof, and, if the Board so elects, the Company will pay the Executive his Base Salary for the notice period (or for any remaining portion of the period). The Company shall also pay the Executive the Final Compensation (other than the tax gross-up described in Section 5(a)(v) herein, which shall be paid at the time provided in Section 4(g) above, the expenses described in Section 5(a)(vi), which shall be paid at the time provided in Section 4(j), and any bonus described in Section 5(a)(iii), which shall be paid at the time provided in Section 4(c)) in a lump sum within sixty (60) days following the date of the termination of employment. A termination of the Executive’s employment that occurs by reason of the Executive’s notice to the Company

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of non-renewal of the Term under Section 2 hereof will be treated as a termination by the Executive without Good Reason.

     (g) Timing of Payments and Section 409A.

     (i) Notwithstanding anything to the contrary in this Agreement, if at the time of the Executive’s termination of employment, the Executive is a “specified employee,” as defined below, any and all amounts payable under this Agreement on account of such separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Executive’s death; except (A) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (B) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (C) other amounts or benefits that are not subject to the requirements of Section 409A.

     (ii) For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i).

     (iii) Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

     (h) Post-Agreement Employment. In the event the Executive remains in the employ of the Company or any of its Affiliates following the termination of this Agreement, then such employment shall be at will on terms to be determined by the Board or its designee.

     (i) Exclusive Right to Severance. The Executive’s right to severance payments and benefits upon termination of employment shall be as expressly set forth in this Agreement. In no event shall the Executive participate in, or receive benefits under, any other plan, program or policy of the Company providing for severance or termination pay or benefits.

     6. Effect of Termination. The provisions of this Section 6 shall apply to any termination of the Executive’s employment under this Agreement.

     (a) Provision by the Company of Final Compensation, Severance Pay, Pro-Rata Bonus and Health Care Coverage, if any, and the Retention Bonus, if applicable, that are due to the Executive in each case under the applicable termination provision of Section 5 shall constitute the entire obligation of the Company to the Executive.

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     (b) Except for any right of the Executive to continue medical and dental plan participation in accordance with applicable law and the Health Care Coverage, if applicable under Section 5, the Executive’s participation in all Employee Benefit Plans shall be determined pursuant to the terms of the applicable plan documents based on the date of termination of the Executive’s employment without regard to any continuation of Base Salary or other payment to or on behalf of the Executive following such date of termination. The Executive shall be entitled to retain any then vested benefits under the Employee Benefit Plans in accordance with the terms of such plans.

     (c) Provisions of this Agreement shall survive any termination of the Executive’s employment if so provided herein or if necessary or desirable fully to accomplish the purposes of other surviving provisions, including without limitation the obligations of the Executive under Sections 7, 8 and 9 hereof. The obligation of the Company to provide Severance Pay hereunder, and the Executive’s right to retain such payments, is expressly conditioned on the Executive’s continued full performance in accordance with Sections 7, 8 and 9 hereof.

     7. Confidential Information.

     (a) The Executive acknowledges that the Company and its Affiliates continually develop Confidential Information, that the Executive may develop Confidential Information for the Company or its Affiliates and that the Executive may learn of Confidential Information during the course of employment. The Executive agrees that all Confidential Information which the Executive creates or to which he has access as a result of his employment or service with the Company or any of its Affiliates is and shall remain the sole and exclusive property of the Company or its Affiliate, as applicable. The Executive shall comply with the policies and procedures of the Company and its Affiliates for protecting Confidential Information and shall never disclose to any Person (except as required by applicable law or for the proper performance of his duties and responsibilities to the Company and its Affiliates), or use for his own benefit or gain or the benefit or gain of any other Person, any Confidential Information obtained by the Executive incident to his employment or service with the Company or any of its Affiliates. The Executive understands that this restriction shall continue to apply after his employment terminates, regardless of the reason for such termination. Further, the Executive agrees to furnish prompt notice to the Company of any required disclosure of Confidential Information sought pursuant to subpoena, court order or any other legal process or requirement, and agrees to provide the Company a reasonable opportunity to seek protection of the Confidential Information prior to any such disclosure. The confidentiality obligation under this Section 7 shall not apply to information that has become generally known through no wrongful act on the part of the Executive or any other Person having an obligation of confidentiality to the Company or any of its Affiliates.

     (b) All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company or any of its Affiliates and any copies or derivatives (including without limitation electronic), in whole or in part, thereof (the “Documents”), whether or not prepared by the Executive, shall be the sole and exclusive property of the Company and its Affiliates. Except as required for

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the proper performance of the Executive’s regular duties for the Company or as expressly authorized in writing in advance by the Board or its expressly authorized designee, the Executive will not copy any Documents or remove any Documents or copies or derivatives thereof from the premises of the Company. The Executive shall safeguard all Documents and shall surrender to the Company at the time his employment terminates, and at such earlier time or times as the Board or its designee may specify, all Documents and other property of the Company or any of its Affiliates and all documents, records and files of the customers and other Persons with whom the Company or any of its Affiliates does business (“Third-Party Documents”) and each individually a “Third-Party Document”) then in the Executive’s possession or control; provided, however, that if a Document or Third-Party Document is on electronic media, the Executive may, in lieu of surrendering the Document or Third-Party Document, provide a copy to the Company on electronic media and delete and overwrite all other electronic media copies thereof. The Executive also agrees that, upon request of any duly authorized officer of the Company, the Executive shall disclose all passwords and passcodes necessary or desirable to enable the Company or any of its Affiliates or the Persons with whom the Company or any of its Affiliates do business to obtain access to the Documents and Third-Party Documents.

     8. Assignment of Rights to Intellectual Property. The Executive shall promptly and fully disclose all Intellectual Property to the Company. The Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive’s full right, title and interest in and to all Intellectual Property. The Executive agrees to execute any and all applications for domestic and foreign patents, copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the Intellectual Property to the Company and to permit the Company to enforce any patents, copyrights or other proprietary rights to the Intellectual Property. The Executive will not charge the Company for time spent in complying with these obligations. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company.

     9. Restricted Activities. The Executive agrees that the following restrictions on his activities during and after his employment are necessary to protect the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates.

     (a) While the Executive is employed by the Company and for a period of twenty-four (24) months after his employment terminates, regardless of the basis or timing of that termination (the “Non-Competition Period”), the Executive shall not, directly or indirectly, whether as owner, partner, investor, consultant, agent, employee, co-venturer or otherwise, compete with the business that the Company or any of its Affiliates conducts or conducted at any time during the Executive’s employment or which the Company or any of its Affiliates is actively engaged in planning to conduct at the time of the Executive’s termination of employment (collectively, the “Business”) within any state of the United States or any country in which the Company or its Affiliates conducts or, at the time of the Executive’s termination of employment, is actively engaged in planning to conduct the Business. Executive further agrees not to work or provide services, in any capacity, whether as an employee, independent

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contractor or otherwise, whether with or without compensation, to any Person who is engaged in the Business. The foregoing, however, shall not prevent the Executive’s passive ownership of two percent (2%) or less of the equity securities of any publicly traded company.

     (b) The Executive agrees that during his employment and during the Non-Competition Period, the Executive will not hire or attempt to hire any person employed by the Company or any of its Affiliates during the 24-month period prior to the termination of Executive’s employment, assist such a hiring by any other person or entity, encourage any such employee to terminate his relationship with the Company (or any Affiliate) or solicit or encourage any independent contractor, customer or vendor of the Company to terminate or reduce its relationship with the Company. Nothing herein, however, shall prohibit the Executive from soliciting business from customers or suppliers of the Company not otherwise in violation of this Agreement.

     10. Notification Requirement. Until the conclusion of the Non-Competition Period, the Executive shall give notice to the Company within 5 business days of undertaking an activity related to or involving the Business. Such notice shall state the name and address of the Person for whom such activity is undertaken and the nature of the Executive’s business relationship(s) and position(s) with such Person. The Executive shall provide the Company with such other pertinent information concerning such business activity as the Company may reasonably request in order to determine the Executive’s continued compliance with his obligations under Sections 7, 8 and 9 hereof.

     11. Enforcement of Covenants. The Executive acknowledges that he has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed upon him pursuant to Sections 7, 8 and 9 hereof. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information and other legitimate interests of the Company and its Affiliates; that each and every one of these restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent him from obtaining other suitable employment during the period in which the Executive is bound by them. The Executive further acknowledges that, were he to breach any of the covenants contained in Sections 7, 8 or 9 hereof, the damage to the Company would be irreparable. The Executive therefore agrees that the Company, in addition to any other remedies available to it, shall be entitled to apply for preliminary and permanent injunctive relief against any breach or threatened breach by the Executive of any of said covenants, without having to post bond, and, to the extent the Company prevails in whole or in part on any claim related to the provisions contained in Sections 7, 8 or 9 of this Agreement as determined by a court or other tribunal of competent jurisdiction, including without limitation an arbitrator, the Company will additionally be entitled to an award of attorney’s fees incurred in connection with securing any relief hereunder. The parties further agree that, in the event that any provision of Sections 7, 8 or 9 hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. The Executive agrees that the Non-Competition Period shall be tolled, and shall not run, during any period of time in which he is in

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violation of the terms thereof, in order that the Company and its Affiliates shall have all of the agreed-upon temporal protection recited herein. No failure of the Company to provide the Executive with the severance payments and benefits upon a termination of employment provided for under this Agreement based on the Company’s good faith belief that the Executive has breached his obligations hereunder, or any other claimed breach of contract or violation of law, or change in the nature or scope of the Executive’s employment relationship with the Company, shall operate to extinguish the Executive’s obligation to comply with Sections 7, 8 and 9 hereof.

     12. No Conflicting Agreements. The Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which the Executive is a party or is bound and that the Executive is not now subject to any covenants against competition or similar covenants or any other obligations to any Person or to any court order, judgment or decree that would affect the performance of his obligations hereunder. The Executive will not disclose to or use on behalf of the Company any proprietary information of a third party without such party’s consent.

     13. Indemnification. The Company shall indemnify and hold harmless the Executive from and against any damages, liabilities and expenses (including without limitation fees and expenses of counsel) incurred by Executive and provide the Executive with advancement of expenses to the fullest extent permitted by applicable law and the Amended and Restated Certificate of Incorporation of the Company. The Executive agrees to promptly notify the Company of any actual or threatened claim arising out of or as a result of his employment with the Company. The Company’s obligations under this Section 13 shall survive the termination of this Agreement to the extent provided by the Amended and Restated Certificate of Incorporation of the Company and applicable law.

     14. Definitions. Words or phrases which are initially capitalized or are within quotation marks shall have the meanings provided in this Section 14 and as provided elsewhere herein. For purposes of this Agreement, the following definitions apply:

     (a) “Affiliates” means any person or entity directly or indirectly controlling, controlled by or under common control with the Company, where control may be by either management authority or equity interest.

     (b) “Confidential Information” means any and all information of the Company and its Affiliates that is not generally known by Persons with whom they compete or do business, or with whom they plan to compete or do business, and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its Affiliates, would assist in competition against them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Affiliates, (ii) the Products, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Affiliates, (iv) the identity and special needs of the customers of the Company and its Affiliates and (v) the people and organizations with whom the Company and its Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes information that the Company or any of its Affiliates has received, or may receive hereafter, belonging to

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others or that was received by the Company or any of its Affiliates with any understanding, express or implied, that it would not be disclosed.

     (c) “Designated Beneficiary” shall mean the beneficiary or beneficiaries designated by the Executive to the Company from time to time by written notice hereunder, and if no such designation is made, the Executive’s estate or personal representative

     (d) “Intellectual Property” means inventions, discoveries, developments, methods, processes, compositions, works, recipes, concepts and ideas (whether or not patentable or copyrightable or constituting trade secrets) conceived, made, created, developed or reduced to practice by the Executive (whether alone or with others, whether or not during normal business hours or on or off Company premises) during the Executive’s employment and during the period of two (2) months immediately following termination of his employment that relate to either the business or any prospective activity of the Company or any of its Affiliates or that make use of Confidential Information or any of the equipment or facilities of the Company or any of its Affiliates.

     (e) “Person” means an individual, a corporation, an association, a partnership, an estate, a trust and any other entity or organization, other than the Company or any of its Affiliates.

     (f) “Products” means all products planned, researched, developed, tested, sold, licensed, leased, or otherwise distributed or put into use by the Company or any of its Affiliates, together with all services provided or otherwise planned by the Company or any of its Affiliates, during the Executive’s employment.

     15. Withholding. All payments made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

     16. Assignment. Neither the Company nor the Executive may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under this Agreement without the consent of the Executive in the event that the Company shall hereafter effect a reorganization, consolidate with, or merge into, an Affiliate or any Person or transfer all or substantially all of its properties, stock, or assets to an Affiliate or any Person. This Agreement shall inure to the benefit of and be binding upon the Company and the Executive, and their respective successors, executors, administrators, heirs and permitted assigns.

     17. Severability. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

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     18. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of either party to require the performance of any term or obligation of this Agreement, or the waiver by either party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

     19. Notices. Any and all notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be effective when delivered in person, consigned to a reputable national courier service or deposited in the United States mail, postage prepaid, registered or certified, and addressed to the Executive at his last known address on the books of the Company or, in the case of the Company, at its principal place of business, attention of General Counsel and Secretary, with a copy to Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, MA 02199, Attention: John B. Ayer and Renata J. Ferrari or to such other address as either party may specify by notice to the other actually received.

     20. Entire Agreement. This Agreement and any other agreements specifically referred to herein, constitutes the entire agreement between the parties and supersedes and terminates all prior communications, agreements and understandings, written or oral, with respect to the terms and conditions of the Executive’s employment with the Company.

     21. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by an expressly authorized representative of the Company.

     22. Headings. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement.

     23. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

     24. Governing Law. This is a State of Rhode Island and Providence Plantations contract and shall be construed and enforced under and be governed in all respects by the laws of the State of Rhode Island and Providence Plantations, without regard to the conflict of laws principles thereof. In the event of any alleged breach or threatened breach of this Agreement, the Executive hereby consents and submits to the jurisdiction of the federal and state courts in and of the State of Rhode Island and Providence Plantations.

[The remainder of this page has been left blank intentionally.]

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     IN WITNESS WHEREOF, this Agreement, as amended and restated, has been executed as a sealed instrument by each of Company, by its duly authorized representative, and by the Executive, as of the Effective Date.

 

 

 

 

 

 

 

 

 

 

 

THE EXECUTIVE:

 

 

 

THE COMPANY:

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ MICHAEL J. CLARKE

 

 

 

By:

 

/s/ KEVIN W. DONNELLY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael J. Clarke

 

 

 

 

 

Name: Kevin W. Donnelly

 

 

 

 

 

 

 

 

 

 

Title: Senior Vice President, General Counsel and Secretary

 

 

 

 

 

 

EX-10.2 10 b79854exv10w2.htm EX-10.2

Exhibit 10.2

EXECUTION COPY

NORTEK, INC., NORTEK HOLDINGS, INC. and RICHARD L. BREADY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (this “Agreement”) among NORTEK, INC, a Delaware corporation (“Nortek”), NORTEK HOLDINGS, INC., a Delaware corporation (“Nortek Holdings”) (Nortek and Nortek Holdings, collectively being referred to hereinafter as “Employer”), and Richard L. Bready, a resident of Rhode Island (hereinafter called “Employee”), amends and restates that certain Employment Agreement among Nortek, Prior Holdings (as defined below) and Employee dated as of January 9, 2003 (the “Prior Agreement”).

     WHEREAS, on July 15, 2004, THL Buildco Holdings, Inc. and THL Buildco, Inc., companies affiliated with Thomas H. Lee Partners, L.P., entered into a stock purchase agreement with affiliates of Kelso & Company, L.P., Employee and certain other parties (the “Stock Purchase Agreement”), pursuant to which THL Buildco, Inc. agreed to purchase all the outstanding capital stock of the then-existing Nortek Holdings, Inc. (“Prior Holdings”);

     WHEREAS, immediately following the Closing, as defined in the Stock Purchase Agreement, (A) THL Buildco, Inc. merged with and into Prior Holdings and Prior Holdings merged with and into Nortek, with Nortek continuing as the surviving corporation, and (B) THL Buildco Holdings, Inc. became the new parent company of Nortek and was renamed “Nortek Holdings, Inc” (which acquisition by THL Buildco, Inc. and the related mergers are collectively referred to hereinafter as the “Acquisition.”);

     WHEREAS, Employee was employed by Nortek and Prior Holdings as Chairman and Chief Executive Officer and Employee possesses intimate knowledge of the business and affairs of Nortek and has acquired certain confidential information and data with respect to Nortek;

     WHEREAS, at the time of the Acquisition, Employee was employed by Nortek and Prior Holdings under the Prior Agreement;

     WHEREAS, Employer desires to assure that it will have the benefit of the continued service and experience of Employee as Chairman, President and Chief Executive Officer of Employer and an integral part of its management for a period of time and Employee is willing to enter into an agreement to such ends upon the terms and conditions set forth in this Agreement; and

     WHEREAS, Employee and Employer desire to enter into this Agreement, which shall amend and restate the Prior Agreement and govern the terms of Employee’s employment with Employer as of the date of, and immediately following, the Acquisition (the “Effective Time”). In consideration of the foregoing and the mutual agreements herein contained, the parties mutually agree as follows:


 

     1. Employment Period and Duties

     (a) During the Employment Period, Employer shall employ Employee, and Employee shall serve as an employee of Employer, provided, however, that if the Stock Purchase Agreement is terminated according to its terms, then at the time of such termination, this Agreement shall terminate and be of no force or effect. For purposes of this Agreement, “Employment Period” shall mean the period of time commencing at the Effective Time and ending, unless sooner terminated pursuant to the provisions hereof, on December 31, 2009; provided that on December 31, 2009 and each anniversary thereof, the Employment Period shall automatically extend for one additional year unless written notice of intent not to extend is delivered by Employer to Employee at least 90 days prior to the scheduled end of the Employment Period.

     (b) During the Employment Period, Employee shall serve as Chairman, President 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 Nortek Holdings (the “Board”) 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.

     (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, staffed by persons approved by Employee and with such staff members’ salaries and benefits as Employee shall approve.

     (d) During the Employment Period, Employer shall not, without obtaining Employee’s consent, terminate the employment of any employee listed in Exhibit A hereto.

     2. Compensation

     (a) Basic Salary. Employee shall receive a basic annual salary of not less than $3,500,000 or such greater amount as determined from time to time at the discretion of the Board (hereinafter called the “Basic Salary”) during the Employment Period, payable in equal monthly installments on the 15th day of each month.

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     (b) Incentive Compensation.

          (i) Employer shall pay Employee incentive compensation determined by multiplying $5,000,000 by a fraction, the numerator of which is the number of days from January 1, 2004 to the Effective Time and the denominator of which is 366. Such incentive compensation shall be paid in cash at the Effective Time.

          (ii) Employee shall not be entitled to earn any incentive or bonus compensation during the Employment Period, other than as set forth in Section 2(b)(i) immediately above. The Board, however, may elect to award Employee incentive or bonus compensation from time to time; provided that it does so through an award that specifically designates Employee as the recipient and provided further that any decision to make such an award, the amount of any such award made, and all other terms and conditions thereof shall be at the discretion of the Board. An award in one year shall not entitle Employee to an award in any other year. Employee acknowledges that there is no direct or implied agreement, promise or understanding of any kind to grant him incentive or bonus compensation, other than as provided in Section 2(b)(i) hereof.

     (c) Equity Issuance. THL-Nortek Investors, LLC (the “LLC”) shall issue to Employee at the Effective Time 23,586.66 Class C Units of the LLC, subject to the terms and conditions of the Management Unit Subscription Agreement, dated as of August 27, 2004, between Employee and the LLC.

     (d) Life Time Medical Coverage.

     (i) From and after the date upon which the Employment Period expires or terminates for any reason (the “Triggering Date”), Employer shall provide Employee and his Spouse for so long as they shall live with lifetime Medical Coverage at no cost to Employee. For purposes of this Agreement, (x) “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 (y) “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, long term care benefits (determined without regard to any limitation under section 213 of the Code), co-payments and deducible amounts (all determined without regard to the deductible threshold set forth in section 213(a) of the Code) 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(d) exceed $1,000,000 (exclusive of any gross up for taxes pursuant to Sections 2(d)(iii) or 8 hereof) 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

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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 Employee shall be required to submit claims to Medicare before making any claim for medical care under this Section.

     (ii) Upon the Triggering Date, or any time thereafter, upon the written request of Employee or his Spouse, Employer shall authorize a lump sum cash payment in lieu of lifetime Medical Coverage in an amount established by the Board that is reasonably sufficient to provide the lifetime Medical Coverage. For illustrative purposes, a sample calculation of such lump sum cash payment is set forth in Exhibit B hereto.

     (iii) Employer agrees to make a “gross up” payment to Employee to cover any and all state and federal income taxes that may be due as a result of the benefits provided under Section 2(d)(i) above and on any lump sum payment under Section 2(d)(ii) above (and the tax on any such “gross up” payment) as a consequence of providing such lifetime Medical Coverage to Employee, his Spouse and his dependents.

     (iv) Following the Triggering Date, Employee shall notify the Employer of any change in (x) his marital status or (y) the status of his dependents as “dependents,” as soon as practicable following such change.

     (e) Benefits. Employee shall be eligible to participate in any deferred compensation, pension or other benefit plan in which executive personnel of Employer are eligible to participate. In addition, other than as provided in Section 16 hereof, 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, any stock option or savings plans, or any pension or other retirement benefit plans.

     (f) 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 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 at the Effective Time; and shall provide to Employee for his exclusive business and personal use two automobiles of his selection, pay all expenses of ownership, operation, repair and maintenance of such vehicles, provide a suitable substitute vehicle in the event either automobile is not available for use by Employee for any reason and replace each such automobile not less often than biannually with a new vehicle at the option of Employee. Employer shall provide Employee with use of (or reimburse Employee for use of) a private aircraft for business and personal travel in a manner consistent with Employer’s practice prior to the Effective Time, provided that, notwithstanding the foregoing, Employee use of the

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private aircraft for personal travel shall be limited to not more than fifty (50) hours per year. Any tax liability to Employee resulting from any of any of payments, reimbursements or other provision of perquisites provided pursuant to this Section 2(f) shall be solely Employee’s responsibility.

     3. Termination

     (a) If Employee dies, the Employment Period or the Noncompete Period (as defined in Section 4 hereof) 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 (such incapacity, a “Disability”) and, if requested by Employee, the basis for such incapacity is certified by a licensed physician, Employer, acting through its Board, may terminate the Employment Period.

     (c) Employee shall have the right to terminate the Employment Period without Good Reason at any time by written notice to the Board, not less than 20 business days in advance of such termination.

     (d) Employer, acting through the Board, 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 prior to the finding of the Board 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 which notice is adopted at an in-person meeting of the Board 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) 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. 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 or any committee of the Board or based upon the advice of counsel for Employer (including members of its legal staff) or which has been acquiesced in by the Board 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 excluding Employee at an in-person meeting of the Board 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

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counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, termination for Cause is justified based solely on information presented at such meeting.

     (e) Employer, acting through the Board, 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) Good Reason. Employee shall have the right to terminate the Employment Period at any time with Good Reason (as defined in Section 5) by written notice to the Board.

     (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 Section 8 hereof.

     4. Noncompetition 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 or as described in Section 5(a), clause (y), the longer of (x) one year beginning as of the first day following such termination of the Employment Period and (y) a period commencing on the first day following such termination and ending on December 31, 2009.

     (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.

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     (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 or any of their predecessors 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.

     (d) It is agreed that Employer, in addition to any other remedies available to it, shall be entitled to preliminary and permanent injunctive relief against any breach or threatened breach by Employee of any of the covenants in this Section 4. Employee and Employer further agree that, in the event that any provision of this Section 4 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

     5. Severance Pay-Termination by Employer

     (a) If (x) 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 (y) Employee’s employment is terminated due to the Employer’s delivery of notice not to extend the Employment Period pursuant to Section 1(a) hereof, Employer shall thereafter be obligated to provide and Employee, or in the event of his death, his estate, shall be entitled to receive, for a period of one year beginning as of the first day following such termination (or, if longer, for a period commencing on such date and ending on December 31, 2009):

     (i) an amount for each year, payable in the manner set forth in Section 2 hereof, equal to $1,750,000;

     (ii) continued coverage, at the expense of the Employer, under the same or equivalent disability, accident and life insurance policies as Employee was covered by immediately prior to termination of the Employment Period;

     (iii) an executive office for Employee located outside of Employer’s headquarters but within Providence, Rhode Island and secretarial and other administrative services, all reasonably suitable to Employee’s then current needs and consistent with his former offices and duties during the Employment Period.; and

     (iv) continuation of the perquisites specified in Section 2(f) hereof.

     (b) For purposes of this Agreement, “Good Reason” shall mean:

     (i) any reduction of, or failure to pay, Employee’s Basic Salary or other compensation as described in Section 2(a) and 2(b)(i) hereof;

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     (ii) any failure to provide the benefits or payments required by Sections 2(c) (“Equity Issuance”), 2(d) (“Lifetime Medical Coverage”), 8 (Gross-Up Payment) and 10 (Indemnification) of this Agreement, any deferred compensation plan established on or after the Effective Time in which Employee is a participant, or Sections 6.4(a), 7.1, 8.2 or Article X of the Securityholders Agreement by and among Employee, the LLC and certain other parties, dated as of August 27, 2004 (the “Securityholders Agreement”) or the registration rights provided in the Registration Rights Agreement (as defined in the Securityholders Agreement) when in effect.

     (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, LLC or any successor thereto or transferee of substantially all the assets thereof, of this Agreement, the Securityholders Agreement or the Registration Rights Agreement or any material breach by the LLC of the Limited Liability Company Agreement with respect to Employee;

provided, however, that Employee may not terminate the Employment Period for Good Reason unless and until he has given Employer notice specifically identifying the nature of the Good Reason and provided Employer a reasonable opportunity to cure and the Good Reason continues uncured.

     6. Death Benefit

     If the Employment 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 for a period of one year beginning as of the first day following his death (or, if longer, for a period commencing on such date and ending on December 31, 2009) in an annual amount equal to $1,750,000, such death benefit shall be payable in the manner set forth in Section 2 hereof.

     7. Disability Benefit

     If the Employment Period shall terminate by reason of Employee’s Disability, Employee, or in the event of his death, his estate, shall thereafter be entitled to receive from Employer: (i)

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for a period of one year commencing from the date of such termination (or, if longer, for a period commencing on such date and ending on December 31, 2009), a disability benefit in an annual amount equal to $1,750,000, payable in the manner set forth in Section 2 hereof.

     8. Gross-up Payment

     (a) In the event that it is determined that any payment or benefit provided by Employer or any of their predecessors to or for the benefit of Employee, either under this Agreement or otherwise, and whether before or after the date hereof, 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 8 will be made by the Employer’s tax accountant as of the Effective Time 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 shall provide Employee with a letter of credit no later than the Effective Time covering Employee’s potential exposure, if any, to the excise tax imposed by section 4999 (or any payment resulting from such exposure) on terms reasonably acceptable to Employer and Employee.

     9. Expenses

     Employer agrees to reimburse Employee for all reasonable expenses incurred by Employee in connection with the negotiation of this Agreement, the Stock Purchase Agreement and any other agreements and transactions contemplated thereby.

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     10. 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.

     11. Survival

     Provisions of this Agreement shall survive any expiration or termination of this Agreement, if so provided herein or if necessary or desirable to accomplish the purposes of such provisions, including without limitation Sections 4, 8 and 10 hereof.

     12. 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 50 Kennedy Plaza, Providence, Rhode Island 02903-2360, attention of the General Counsel, with a copy to Thomas H. Lee Partners, L.P., 75 State Street Boston, MA 02109, attention of Anthony DiNovi, or at such other address(es) as Employer shall have furnished to Employee in writing, or if to Employee, at 280 Irving Avenue, Providence RI 02906, or at such other address as Employee shall have furnished to Employer in writing.

     13. Governing Law

     This Agreement shall be governed by the laws of the State of Rhode Island and Providence Plantations.

     14. 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.

     15. Effectiveness/Prior Agreements

     This Agreement shall be binding on Employee and Employer as of the date hereof. If the Effective Time does not occur, this Agreement shall be of no force and effect. As of the Effective Time, the Prior Agreement shall terminate and no payments shall thereafter be made thereunder. Under no circumstances shall the Closing or the Acquisition or any shareholder approval thereof or any event relating thereto be deemed a “Change of Control” for any purposes under the Prior Agreement. This Agreement will constitute the entire agreement between Employer and Employee and will supersede all prior negotiations and written or oral agreements with respect to the full time employment of Employee by Employer, including the Prior Agreement and all other prior employment agreements between Employee and Employer or any

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of its predecessors, except as explicitly provided herein. No changes, alterations or modifications may be made to this Agreement, except by a writing signed by each of the parties hereto.

     16. Waivers and Acknowledgements

     Employee acknowledges that he is not a participant in the Nortek, Inc. Change in Control Severance Benefit Plan for Key Employees, As Amended and Restated June 12, 1997 or any similar plan and waives any and all rights to participate in the Nortek, Inc. Second Amended and Restated Change in Control Severance Benefit Plan for Key Employees or any other such plans. Employee acknowledges that he is not now a participant in any SERP sponsored by Nortek, Nortek Holdings or any of their affiliates and he hereby waives any right to such participation hereafter. Employee acknowledges that Exhibit C hereto sets forth all life insurance policies to which Employer and he, or any trust established by him, are a party and agrees that, upon the transfer of those life insurance policies from Employer to Employee, any split dollar agreements associated with any of those policies has terminated and Employer has no further obligation with respect to those policies and agreements, including without limitation the payment of any further premiums.

     17. Assignment

     Neither Employer nor Employee may make any assignment of this Agreement or any interest herein, by operation of law or otherwise, without the prior written consent of the other; provided, however, that Nortek and Nortek Holdings each, in the event that it shall hereafter, consolidate with, or merge into, any other entity or transfer all or substantially all of its properties or assets to another entity, may assign its rights and obligations under this Agreement without the consent of Employee to such other entity. This Agreement shall inure to the benefit of and be binding upon Employer and Employee, their respective successors, executors, administrators, heirs and permitted 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.

     19. Acknowledgements.

     The parties agree that the following are to be accomplished at the Effective Time: (a) payment to Employee of incentive compensation as specified in Section 2(b)(i) hereof; (b) payment to Employee in accordance with Section 6 of the amended and restated agreement between Nortek and Employee dated as of the 1st of June, 2001; (c) forgiveness of the principal and interest outstanding at the Effective Time on the loan to Employee described in section 2(f) of the Prior Agreement; and (d) transfer to Employee of all life insurance policies listed on Exhibit C hereto.

[Remainder of page intentionally blank]

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     IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of August 27, 2004.

 

 

 

 

 

 

NORTEK, INC.
 

 

 

By:  

/s/ Kevin W. Donnelly  

 

 

 

Name:  

Kevin W. Donnelly 

 

 

 

Title:  

Vice President 

 

 

 

NORTEK HOLDINGS, INC.
 

 

 

By:  

/s/ Kevin W. Donnelly  

 

 

 

Name:  

Kevin W. Donnelly 

 

 

 

Title:  

Vice President 

 

 

 

 

 

 

 

/s/ Richard L. Bready  

 

 

 

Richard L. Bready 

 

 

 

 

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EXHIBIT A

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EX-10.3 11 b79854exv10w3.htm EX-10.3

Exhibit 10.3

AMENDMENT
TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amendment is made and entered into this 17th day of December, 2009 by and between NORTEK, INC. (“Employer”) and Richard L. Bready (“Employee”):

RECITALS

 

1.

 

Employee, Employer and the Nortek Holdings, Inc. (“Holdings”) entered into that certain Amended and Restated Employment Agreement dated August 27, 2004 (the “Agreement”).

 

 

2.

 

Employee and Employer desire to further amend the Agreement as provided herein and Employee, Employer and Holdings agree that Holdings shall cease to be a party to the Agreement and shall no longer be considered an “Employer” thereunder.

NOW THEREFORE, in consideration of the foregoing recitals, and of the promises, covenants, terms and conditions contained herein, the parties hereto agree as follows:

 

A.

 

Section 5(a) of the Agreement is amended by deleting such Section in its entirety and replacing it with the following:

 

 

 

 

“5. Severance Pay

     (a)(i) If the Employment Period shall terminate for any reason, other than by reason of termination by Employer for Cause under Section 3(d) of this Agreement, Employer shall thereafter be obligated to provide and Employee, or in the event of his death, his estate, shall be entitled to receive, for a period of 18 months beginning as of the date following such termination (the “Benefit Period”) an amount for each month, payable in the manner set forth in Section 2 hereof, equal to one-twelfth of the Basic Salary.

     (a)(ii) Upon a termination of employment or the Employment Period for any reason set forth in subsection (a)(i), above other than by reason of Employee’s death, during the Benefit Period, Employee shall also receive:

(A) continued coverage, at the expense of Employer, under the same or equivalent disability, accident and life insurance policies as Employee was covered by immediately prior to the termination of the Employment Period;

 


 

(B) an executive office for Employee located outside of Employer’s headquarters but within Providence, Rhode Island and secretarial and other administrative services, all reasonably suitable to Employee’s then current needs and consistent with his former offices and duties during the Employment Period; and

(C) continuation of the perquisites specified in Section 2(f) hereof.”

 

B.

 

Section 6 of the Agreement is hereby amended by deleting such Section in its entirety.

 

 

C.

 

Section 7 of the Agreement is hereby amended by deleting such Section in its entirety.

 

 

D.

 

A new Section 18 is added to the Agreement, which Section shall read as follows:

 

 

 

 

“18. Section 409A

 

 

 

 

Notwithstanding any other provision of this Agreement or any other plan, agreement, or arrangement to the contrary, the terms of the Policy adopted by Nortek, Inc. and Subsidiaries, dated December 28, 2008, governing the timing of payments by reason of ‘separation from service’ to ‘specified employees’, shall govern any applicable amounts payable under this Agreement. Further notwithstanding any other provision of this Agreement or any other plan, agreement, or arrangement to the contrary, the terms of the Nortek, Inc. and Subsidiaries 409A Reimbursement Policy, dated December 28, 2008, governing the timing of certain reimbursement payments, shall govern any applicable amounts payable under this Agreement.”

 

 

E.

 

Each of Holdings, Employer and Employee acknowledge and agree that, as of the date hereof, Holdings shall cease to be a party to the Agreement and shall no longer be considered an “Employer” thereunder.

 

 

F.

 

This Amendment shall be governed by the laws of the State of Rhode Island and Providence Plantations.

 

 

G.

 

All sections and cross-references in the Agreement are hereby renumbered appropriately.

 

 

H.

 

Except as expressly amended by this Amendment, the Agreement shall remain in effect and continue in accordance with its terms. For the avoidance of doubt, except as provided in Section G of this Amendment, nothing in this Amendment shall be interpreted to modify, alter or amend the provisions of Section 2(d) of the Agreement, and Employer shall not take any position inconsistent with the foregoing.

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IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as of December 17, 2009.

 

 

 

 

 

 

NORTEK, INC.
 

 

 

By:  

/s/ Kevin W. Donnelly  

 

 

 

Name:  

Kevin W. Donnelly 

 

 

 

Title:  

Vice President, General
Counsel and Secretary 

 

 

 

 

 

 

 

/s/ Richard L. Bready  

 

 

 

Richard L. Bready 

 

 

 

 

 

 

Acknowledged and Agreed:

NORTEK HOLDINGS, INC.

 

 

 

 

 

By:  

/s/ Kevin W. Donnelly  

 

 

Name:  

Kevin W. Donnelly 

 

 

Title:  

Vice President, General Counsel and Secretary 

 

 

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EXHIBIT B

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EXHIBIT C

LIFE INSURANCE POLICIES

AIG Sun America, Policy No. 7013959A

Prudential Policy No. 79-789-625

New York Life Policy No. 62-782-609

New York Life Policy No. 75-500-312

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EX-10.1 2 ex101.htm RLB SEPARATION AGREEMENT

 

 

 

EXECUTION DRAFT

 

 

SEPARATION AGREEMENT

SEPARATION AGREEMENT (this “Agreement”) dated as of June 30, 2011 by and between Nortek, Inc., a Delaware corporation (the “Company”), and Richard L. Bready (the “Executive”) (each a “Party,” and together, the “Parties”).

WHEREAS, the Executive has been employed by the Company as its President and Chief Executive Officer in accordance with the terms of the Amended and Restated Employment Agreement dated as of August 27, 2004, as amended as of December 17, 2009 (such employment agreement, the “Employment Agreement”);

WHEREAS, the Parties wish to confirm the termination of the Executive's employment with the Company and set forth their agreement as to certain payments, benefits, rights and obligations of the Parties in connection therewith;

NOW, THEREFORE, in consideration of the covenants and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties, intending to be legally bound, hereby agree as follows:

1.    Retirement from the Company and Resignation from Positions. The Parties hereby mutually agree that the Executive will retire from the Company, and consequently his employment with the Company will terminate, effective as of July 1, 2011 (the “Separation Date”). The parties agree that, except as expressly provided herein, the Employment Agreement shall terminate on the Separation Date and each party hereby waives any notice that may be required from the other party pursuant to the Employment Agreement. Accordingly, the Executive hereby resigns, effective as of the Separation Date, from all positions, titles, duties, authorities and responsibilities with, arising out of or relating to his employment with the Company and subsidiaries and its affiliates (the “Company Group”), including without limitation as the Chairman, President and Chief Executive Officer of the Company and as a member of the Board of Directors of the Company (the “Board”), and agrees to execute all additional documents and take such further steps as may be required to effectuate such resignations. For purposes of clarity, this Section 1 shall survive any revocation of Section 7 of this Agreement by the Executive.

2.    Severance Benefits; Treatment of Company Equity; Reimbursement of Expenses. In connection with the Executive's termination of employment, the Company shall pay and provide to the Executive, and the Executive shall only be entitled to from the Company Group, the following severance payments and benefits set forth in this Section 2 of this Agreement, at the time or times set forth herein:

(a)Severance Payments. Pursuant to the terms of the Employment Agreement, Executive shall be paid an amount equal to $291,666.67 per month (the “Monthly Severance Amount”) for a period of 18 months following the Separation Date (the “Continuation Period”), for an aggregate severance payment to Executive equal to $5,250,000. Pursuant to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A” and the “Code,” respectively), and the terms of the policy adopted by the Company and its Subsidiaries dated December 28, 2008, governing the timing of payments by reason of “separation from service” to “specified employees” incorporated in Section 18 of the Employment Agreement, the severance payments shall be delayed for a period of six months following the Separation Date. The severance payments to the Executive shall commence on January 3, 2012, and such first payment shall be equal to $1,750,000; thereafter, commencing in the

 

 


 

 

seventh month following the Separation Date and concluding in the month that the Continuation Period ends, the Monthly Severance Amount shall be paid to the Executive each month during such 12-month period at such times in accordance with the Company's payroll practices.

(b)Lump-Sum Payment in Lieu of Health Insurance. Pursuant to the terms of the Employment Agreement, the Executive shall receive a lump-sum cash payment (in lieu of Company-purchased health insurance coverage) in the amount of $1,000,000, plus an additional amount as a tax “gross up” payment, as determined in good faith by the Company, to cover any and all state and federal income taxes that may be due as a result of such lump sum payment (and the tax on any such “gross up” payment). Pursuant to Section 409A, and the terms of the Company's relevant policies, the payments under this subsection (b) shall be delayed for a period of six months following the Separation Date, and shall be paid to the Executive on January 3, 2012. The parties acknowledge and agree that the Executive shall not be permitted to participate in the Executive Health Reimbursement Plan following the Separation Date.

(c)Payment in Lieu of Perquisites. Pursuant to the terms of the Employment Agreement, Executive shall be paid an amount equal to approximately $500,000 per annum during the Continuation Period (in lieu of certain specified perquisites pursuant to the terms of the Employment Agreement), in equal monthly installments, for a period of 18 months following the Separation Date; provided however, that the exact amount of such annual amount and corresponding monthly installments shall be determined prior to the first payment date set forth below in a mutually agreed upon manner. Pursuant to Section 409A, and the terms of the Company's relevant policies, the payments under this subsection (c) shall be delayed for a period of six months following the Separation Date, and shall commence on January 3, 2012, with such first payment equal to six months' payment of the monthly amount described herein; thereafter, commencing in the seventh month following the Separation Date and concluding in the month that the Continuation Period ends, the monthly amount described herein shall be paid to the Executive each month during such 12-month period at such times in accordance with the Company's payroll practices.

(d)Company Equity. All equity awards granted to the Executive that are outstanding as of the Separation Date that are unvested (including but not limited to any of the Executive's unvested stock options and unvested restricted stock awards) shall be forfeited; providedhowever that, effective on the Separation Date (i) fifty-percent of the incentive stock options that would have vested and become exercisable on December 17, 2011 (in accordance with Section 2.B(ii) of Executive's Incentive Stock Option Award Agreement dated December 17, 2009 (the “ISO Agreement”)), shall be deemed to be vested and exercisable; and (ii) fifty-percent of the nonqualified stock options that would have vested and become exercisable on December 17, 2011 (in accordance with Section 2.B(ii) of the Executive's Nonqualified Stock Option Award Agreement dated December 17, 2009 (the “NQSO Agreement”)), shall be deemed to be vested and exercisable (the Executive's incentive stock options and nonqualified stock options collectively, the “Stock Options”). For the avoidance of doubt, on the Separation Date, Executive shall vest in 2,857 incentive stock options issued pursuant to his ISO Agreement and 28,991 nonqualified stock options issued pursuant to his NQSO Agreement. In respect of any of the Stock Options that are vested as of the Separation Date (including by virtue of the proviso in the immediately preceding sentence), such vested Stock Options shall remain exercisable until the earlier of (i) five years from the Separation Date, or (ii) the original expiration date of the relevant Stock Option, at which earlier date such Stock Options shall expire. The Parties agree and acknowledge that terms of the relevant Stock Option agreements between the Company and the Executive are hereby amended to effectuate, to the extent necessary, the provisions of this Section 2(d).

(e)Expense Reimbursement. The Company shall promptly reimburse the Executive, subject to the requirements of its reimbursement policies (including but not limited to the Policy adopted by the Company and its Subsidiaries dated December 28, 2008 in respect of reimbursements incorporated in Section 18 of the Employment Agreement) applied consistently with prior

 

 


 

 

practice, for any business expenses incurred by the Executive prior to, and not reimbursed as of, the Separation Date.

(f)Vacation Pay. The Company shall pay the Executive, on the next regular payday following the Separation Date, pay, at his final base rate of pay, for the 2 months of vacation the Executive had earned but not used as of the Separation Date.

3.    Restrictions. In addition (i) for a one year period following the Separation Date, the Executive agrees to continue to be bound by the non-competition and non-solicitation covenants provided in Section 4(b) of the Employment Agreement, and (ii) in perpetuity, the Executive agrees to continue to be bound by the confidential information restrictions provided in Section 4(c) of the Employment Agreement.

4.    Remedies. The Parties acknowledge and agree that the Executive's breach or threatened breach of any of the restrictions set forth in Section 3 will result in irreparable and continuing damage to the Company Group for which there may be no adequate remedy at law and that the Company Group shall be entitled to equitable relief, including specific performance and injunctive relief as remedies for any such breach or threatened or attempted breach. As provided in Section 4(d) of the Employment Agreement, the Executive hereby consents to the grant of an injunction (temporary or otherwise) against the Executive or the entry of any other court order against the Executive prohibiting and enjoining him from violating, or directing him to comply with, any provision of Section 3. The Executive also agrees that such remedies shall be in addition to any and all remedies, including damages, available to the Company and its subsidiaries against him for such breaches or threatened or attempted breaches.

5.    Mutual Non-Disparagement. From and after the Separation Date, (i) the Executive agrees not to defame or disparage, or otherwise engage in any act that is intended or may be reasonably be expected to harm the reputation, business, prospects or other operations of the Company Group, any member of their management, boards of directors, any of their respective subsidiaries or affiliates, or any investor or shareholder in the Company or the Company Group, unless as required by law or an order of a court or governmental agency with jurisdiction, and (ii) the officers and directors of the Company agree not to defame or disparage, or otherwise engage in any act that is intended or may be reasonably be expected to harm the reputation, business, prospects or other interests of the Executive, unless as required by law or an order of a court or governmental agency with jurisdiction. For the avoidance of doubt, nothing contained in this Section 5 shall prevent the Executive from engaging in competitive business activities; provided that such activities are conducted in a manner, or at times, such that they do not violate Section 3 and provided further that such activities do not in themselves constitute defamation or disparagement of the nature described herein.

6.    Executive's Consulting and Cooperation Obligations During the Continuation Period. During the Continuation Period, the Executive shall provide consulting services, support and information to the Company as a non-employee consultant to the Company in connection with any reasonable transition services as the Board may require of the Executive on an as-needed basis from time to time during such period. Without limiting the scope of the previous sentence, the Executive shall make himself reasonably available to the Company during the Continuation Period, and shall cooperate with requests from the Board for consulting services, support and/or information concerning any business or legal matters involving facts or events relating to the Company Group that may be within the Executive's knowledge and experience. In addition, the Executive shall cooperate with requests by the Board, upon reasonable notice, in connection with any litigation, regulatory proceeding or investigation that may be brought by or against the Company Group. It is acknowledged by the Parties that the Executive's consulting services as delineated in this Section 6 are to be provided by the Executive only at the direction of, and in the manner requested by, the Board from time to time, and, for clarity, shall be provided by the Executive without any additional compensation to the Executive. Notwithstanding the foregoing, the Executive will not be required to provide the services set forth in this Section 6 for a time

 

 


 

 

commitment of greater than twenty percent (20%) of the average level of services he provided as Chief Executive Officer of the Company during the thirty-six (36) month period ending on the Separation Date.

7.    Mutual Release.

7.1    Release of Claims. The Executive agrees that, on behalf of himself and his heirs, legal representatives, successors and assigns (hereinafter, collectively, the “Executive Released Parties”), and each of them, for good and valuable consideration does hereby unconditionally, knowingly, and voluntarily release and forever discharge the Company Released Parties (as defined below), and the Company agrees that, on behalf of itself and the other Company Released Parties, and each of them, for good and valuable consideration, does hereby unconditionally, knowingly, and voluntarily release and forever discharge the Executive Released Parties, from any and all known or unknown claims, demands, actions or causes of action that now exist or that may arise in the future, based upon events occurring or omissions on or before the date of the execution of this Agreement, including, but not limited to, any and all claims whatsoever pertaining in any way to the Executive's employment at the Company or with any of the Company Released Parties (including any of their predecessors) or the termination of the Executive's employment, including, but not limited to, any claims under, as applicable: (1) the Americans with Disabilities Act; the Family and Medical Leave Act; Title VII of the Civil Rights Act; 42 U.S.C. Section 1981; the Older Workers Benefit Protection Act; the Age Discrimination in Employment Act of 1967, as amended; the Employee Retirement Income Security Act of 1974; the Civil Rights Act of 1866, 1871, 1964, and 1991; the Rehabilitation Act of 1973; the Equal Pay Act of 1963; the Vietnam Veteran's Readjustment Assistance Act of 1974; the Occupational Safety and Health Act; and the Immigration Reform and Control Act of 1986; and any and all other federal, state or local laws, statutes, ordinances, or regulations pertaining to employment, discrimination or pay; (2) any state tort law theories under which an action could have been brought, including, but not limited to, claims of negligence, negligent supervision, training and retention or defamation; (3) any claims of alleged fraud and/or inducement, including alleged inducement to enter into this Agreement; (4) any and all other tort claims; (5) all claims for attorneys' fees and costs; (6) all claims for physical, mental, emotional, and/or pecuniary injuries, losses and damages of every kind, including, but not limited to, earnings, punitive, liquidated and compensatory damages, and employee benefits; (7) any and all claims whatsoever arising under any of the Company Released Parties' or Executive Released Parties' express or implied contracts or under any federal, state, or local law, ordinance, or regulation; (8) any and all claims whatsoever against any of the Company Released Parties for wages, bonuses, benefits, fringe benefits, vacation pay, or other compensation or for any damages, fees, costs, or benefit; and (9) any and all claims whatsoever to reinstatement; providedhowever, that, notwithstanding anything to the contrary contained herein, this Agreement does not cover and specifically excludes the Executive's rights and claims directly or indirectly arising from or under or related to (A) any obligation of the Company to provide the benefits or payments described in this Agreement, (B) any indemnification, advancement of expenses, and/or contribution claims or rights that the Executive might have under any agreement, plan, program, policy, or arrangement of the Company and/or any other Company Released Parties (including, without limitation, Section 10 of the Employment Agreement), (C) the Consolidated Omnibus Budget Reconciliation Act (COBRA), (D) any earned but unpaid wages through the Executive's final payroll period and the 2 months of vacation earned but not used by the Executive as of the Separation Date, (E) any vested Stock Options or other equity, (F) Section 8 of the Employment Agreement and/or (G) any profit-sharing and/or retirement plans or other benefits in which the Executive has vested rights. The Executive and the Company also intend that this Section 7 operate as a waiver of all unknown claims of the type being released hereunder. The Executive warrants, on the one hand, that he is currently unaware of any such claim, demand, action, or cause of action against any Company Released Party, and the Company hereby warrants, on the other hand, that it is currently unaware of any such claim, demand, action, or cause of action against any Executive Released Party, which the Executive, or the Company, as appropriate, has not released pursuant to this Section 7 except for the rights and/or claims relating to the matters specifically

 

 


 

 

excluded above. For purposes of this Section 7, “Company Released Parties” means, collectively, the Company and its present and former related companies, subsidiaries and affiliates, and all of their present and former employees, officers, directors, owners, shareholders, shareholders' employees, agents, attorneys, insurers, and operators, including in their individual capacity, and each of its and their successors and assigns.

7.2    Executive Acknowledgements. Effectiveness of this Agreement. The Executive acknowledges that he has been given the opportunity to review and consider this Agreement for 21 days from the date that the Executive received a copy. If the Executive elects to sign this Agreement before the expiration of the 21 days, the Executive acknowledges that he has agreed to waive his right to the full 21 day period. The Executive may revoke this Section 7 after signing it by giving written notice to the Company's General Counsel within 7 days after signing it. This Section 7, provided it is not revoked, will be effective on the 8th day after Executive signs and returns this Agreement to the Company. If the Executive revokes this Section 7, then Section 2 of this Agreement shall be void ab initio, and, for clarity, the Company Group shall have no obligations under this Agreement or otherwise to provide the Executive with any severance payments or benefits. The Executive acknowledges that the Executive has been advised to consult with an attorney before signing this Agreement, and that the Executive is signing this Agreement knowingly, voluntarily and with full understanding of its terms and effects, of his own free will without any duress, being fully informed and after due deliberation. The Executive voluntarily accepts the consideration provided to him for the purpose of making full and final settlement of all claims referred to above.

8.    Other Provisions.

8.1    Notices. Any notice or other communication required or which may be given hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express or overnight mail, postage prepaid, and shall be deemed given when so delivered personally, telegraphed, telexed, or sent by facsimile transmission (with written confirmation received) or, if mailed, four (4) days after the date of mailing or the next day after overnight mail, as follows:

 

(a)    If the Company, to:

Nortek, Inc

50 Kennedy Plaza

Providence, Rhode Island 02903-2360

Attention:     General Counsel

Telephone:    (401) 278-2621    

Fax:        (401) 751-4610

 

With a copies to:

Sullivan & Cromwell LLP

1888 Century Park East

Los Angeles, California 90067-1725

Attention:     Alison Ressler, Esq.

Telephone:    (310) 712-6600

Fax:        (310) 407-2681

 

(b)    If the Executive, to the Executive's home and office addresses reflected in the Company's records

 

8.2    Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements,

 

 


 

 

written or oral, with respect thereto, excluding only Sections 8 and 10 of the Employment Agreement which shall remain in full force and effect in accordance with their terms.

8.3    Waiver and Amendments. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

8.4    Governing Law and Venue.

(a)    This Agreement shall be governed and construed in accordance with the laws of the State of Rhode Island applicable to agreements made and not to be performed entirely within such state, without regard to conflicts of laws principles.

(b)The Parties agree irrevocably to submit to the exclusive jurisdiction of the federal courts or, if no federal jurisdiction exists, the state courts, located in Providence, RI, for the purposes of any suit, action or other proceeding brought by any Party arising out of any breach of any of the provisions of this Agreement and hereby waive, and agree not to assert by way of motion, as a defense or otherwise, in any such suit, action, or proceeding, any claim that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that the provisions of this Agreement may not be enforced in or by such courts. SUBJECT TO APPLICABLE LAW, THE PARTIES HEREBY WAIVE THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY DISPUTE ARISING FROM THIS AGREEMENT.

8.5    Assignability by the Company and the Executive. The Executive's rights and obligations may not be assigned by the Executive, but the Company may assign its rights, together with its obligations, to any other entity which will succeed to all or substantially all of the assets and substantially carry on the business of the Company.

8.6    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

8.7    Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.

8.8    Severability. If any term, provision, covenant or restriction of this Agreement, or any part thereof, is held by a court of competent jurisdiction of any foreign, federal, state, county or local government or any other governmental, regulatory or administrative agency or authority to be invalid, void, unenforceable or against public policy for any reason, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected or impaired or invalidated. The Executive acknowledges that the restrictive covenants contained in Section 3 are reasonable and valid in temporal scope and in all other respects.

8.9    Judicial Modification. If any court determines that any of the covenants in Section 3, or any part of any of them, is invalid or unenforceable, the remainder of such covenants and parts thereof shall not thereby be affected and shall be given full effect, without regard to the invalid portion. If any court determines that any of such covenants, or any part thereof, is invalid or unenforceable because of the geographic or temporal scope of such provision, such court shall reduce such scope to the minimum extent necessary to make such covenants valid and enforceable.

8.10    Compliance with Law. This Agreement is intended to comply with the requirements of Section 409A of the Code and the parties hereto agree to treat payments and entitlements hereunder consistent with that intent. To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A, the provision shall be read in such a manner so that all payments hereunder shall comply with Section 409A.

 

 


 

 

8.11    Tax Withholding. Each payment under this Agreement is set forth as a gross amount and is subject to all applicable tax withholdings. The Company is hereby authorized to withhold from any payment due hereunder the amount of withholding taxes due any federal, state or local authority in respect of such payment and to take such other action as may be necessary to satisfy all Company obligations for the payment of such withholding taxes.

 

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IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby, have executed this Agreement as of the day and year first above mentioned.

EXECUTIVE

/s/ Richard L. Bready

Richard L. Bready

 

NORTEK, INC.

By: /s/ Kevin W. Donnelly             

Kevin W. Donnelly

Vice President, General Counsel & Secretary