EXECUTION COPY
NORTEK, INC., NORTEK HOLDINGS, INC. AND ALMON C. HALL, III
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 referred to
hereinafter as "Employer"), and Almon C. Hall, III, 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, Employer desires to assure that it will have the benefit of the
continued service and experience of Employee as Vice President and Chief
Financial 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) Commencing at the Effective Time and ending on the termination of
the Employee's employment as provided herein (hereinafter called the
"Employment Period"), Employer shall employ Employee, and Employee
shall serve as an employee of Employer.
(b) During the Employment Period, Employee shall serve as Vice President
and Chief Financial Officer of Employer, or in such other executive
capacity at a similar level of responsibility and with such other
duties as the Chief Executive Officer of Employer (the "CEO") and
Employee may from time to time mutually determine, and Employee
accepts employment on the terms and conditions contained herein and
agrees to devote a substantial part of his working time and energies
to the business of Employer and to faithfully and diligently perform
the customary duties of his office and such other duties, reasonable
vacations (of not less than five weeks per year) and time devoted to
charitable and community service, and absences due to illness and
holidays excepted. Such other duties may include the performance of
services for any of Employer's subsidiaries and, without further
remuneration (except as otherwise agreed), may also include service
as an officer or director of one or more of Employer's subsidiaries.
(c) During the Employment Period, Employer shall maintain an
appropriately appointed executive office for Employee in Providence,
Rhode Island (or at such other location as Employee and Employer
shall mutually agree) of not less than the size of Employee's
current office and associated administrative space from which
Employee shall perform his duties and shall provide Employee with
executive secretarial and other administrative staff and services
suitable to his offices and duties.
2. Compensation
(a) Basic Salary. Employee shall, during the Employment Period, receive
a basic annual salary of not less than $430,000, subject to such
adjustments as the CEO shall make at the beginning of each year
(hereinafter called the "Basic Salary") payable monthly.
(b) Incentive Compensation. In each year of the Employment Period,
Employee shall receive incentive compensation in an amount
recommended by the CEO and approved by the Compensation Committee
(the "Committee") of the Board of Directors of Nortek Holdings (the
"Board").
(c) Equity Issuance. THL-Nortek Investors, LLC (the "LLC") shall issue
to Employee at the Effective Time 4,246.02 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) Lifetime Medical Coverage.
(i) Employer shall provide Employee, his Spouse and dependents
with lifetime Medical Coverage at no cost to Employee,
beginning upon the termination of Employee's employment with
Employer, howsoever caused, (the "Triggering Date"). For
purposes of this
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Agreement, (A) "Spouse" shall mean any individual married to
Employee only during the time such individual is married to
Employee, provided that an individual who is married to
Employee at the time of Employee's death shall be a Spouse for
the remainder of such individual's lifetime and (B) "Medical
Coverage" shall mean all medical and dental benefits that are
provided Employee at the Effective Time, any medical or dental
expense that would be deductible by Employee under section 213
of the Internal Revenue Code of 1986, as amended (the "Code"),
including insurance premiums, long term care benefits
(determined without regard to any limitation under section 213
of the Code), co-payments and deductible 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)(v) or 5 hereof and determined
without regard to reimbursements made prior to the Triggering
Date under the Nortek Executive Health Reimbursement Plan) in
the aggregate during Employee's and his Spouse's lifetimes.
Such Medical Coverage shall be extended to any dependent of
Employee but only for so long as such person remains a
"dependent" under the terms and conditions of Employer's
health plan in existence at the Effective Time. Employer shall
make all reasonable efforts to include Employee, his Spouse
and dependents in any comprehensive medical and/or dental plan
provided to active employees from time to time. Employee must
make all reasonable effort to obtain and to maintain (at
Employer's expense as provided herein) any form of
comprehensive medical and/or dental insurance that Employer
may require from time to time. If Employee is or becomes
eligible for Medicare benefits, the coverage provided by this
Section shall be supplemental to Medicare coverage, Parts A
and B, and the Participant shall be required to submit claims
to Medicare before making any claim for medical care under
this Section.
(ii) From and after the Triggering Date or the occurrence of a
Change in Control after the Effective Time, upon the written
request of Employee or his Spouse, Employer shall authorize
and pay to Employee or his Spouse a lump sum cash payment in
lieu of lifetime Medical Coverage in an amount established by
the Board that is reasonably sufficient to provide the
lifetime Medical Coverage, but in no event less than $650,000.
Such amount is calculated before the gross-up provided in
Sections 2(d)(v) and 5.
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At the time of such lump-sum payment, Employer shall also pay
such amount as is necessary to cover the income tax gross-up
provided in Section 2(d)(v). For illustrative purposes, a
sample calculation of such lump sum cash payment is set forth
in Exhibit A hereto.
(iii) For purposes of Section 2(d)(ii), "Change in Control" means an
"Exit Event" as defined in the Limited Liability Company
Agreement of the LLC dated as of August 27, 2004, or an "IPO"
or "Change in Control" as defined in the Securityholders
Agreement of the LLC dated as of August 27, 2004 (the
"Securityholders Agreement")
(iv) As long as he remains employed by the Employer, Employee shall
continue to be covered by the Nortek Executive Health
Reimbursement Plan as in effect on the Effective Time, and
benefits received under that Plan prior to the Triggering Date
shall have no effect on benefits to be provided under the
Medical Coverage or the amount of any lump-sum payment to be
made under (ii) above.
(v) Employer agrees to make a "gross-up" payment to Employee to
cover any and all state and federal income taxes and section
4999 taxes (as defined in Section 5 herein), and the tax on
any such reimbursement or payment, that may be due as a result
of the benefits provided under Section 2(d)(i) above and on
any lump sum payment under Section 2(d)(ii) above.
(vi) Following the Triggering Date, Employee shall notify the
Company of any change in (A) his marital status or (B) the
status of his dependents as "dependents", as soon as
practicable following such change.
(e) Benefits. Employee shall be eligible to participate in any deferred
compensation, supplemental executive retirement, pension, bonus,
incentive or other benefit plan in which executive personnel of
Employer are eligible to participate and shall be eligible for
discretionary bonuses. In addition, Employee shall be entitled to
receive all other benefits or participate in any employee benefit
plans generally available to executive personnel of Employer,
including without limitation, any hospital, medical, accident,
disability, life insurance, and dental coverage, tax return
preparation, any stock option or savings plans, or any pension or
other retirement benefit plans.
(f) Reimbursement and Perquisites. Employer shall promptly reimburse
Employee for all business expenses incurred by Employee during the
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Employment Period; shall promptly pay or reimburse Employee for
professional association dues, assessments and fees for at least
such associations as Employee was a member of and Employer was
making such payments or reimbursements at the Effective Time; shall
pay or reimburse Employee for membership dues, assessments and fees
at one country/golf club of Employee's choice; and shall provide to
Employee for his exclusive business and personal use an automobile
(selected by Employee not inconsistent with type of automobile
provided to Employee at the Effective Time), pay all expenses of
ownership, operation, repair and maintenance of such vehicle and
permit the Employee to replace such automobile not less often than
the earlier of every three years or 50,000 miles.
(g) Securityholders Agreement. Employee shall be listed on the Schedule
of Management Securityholders and Exhibit A of the Securityholders
Agreement.
3. Termination
(a) In the event of Employee's death, the Employment Period shall be
deemed to end on the date of his death.
(b) If Employee is incapacitated by accident, sickness, or otherwise so
as to render him, for a period of 365 consecutive days, mentally or
physically incapable of performing the services required of him
under this Agreement and, if requested by Employee, the basis for
such incapacity is certified by a licensed physician, then Employer
or Employee may terminate the Employment Period. Such incapacity
shall be referred to herein as a "Disability."
(c) Employee shall have the right to terminate the Employment Period
without Good Reason at any time by written notice to the Board not
less than 20 business days in advance of such termination.
(d) Employer shall have the right to terminate the Employment Period for
Cause (as hereinafter defined), without further obligation hereunder
on the part of the Employer or Employee except payment to Employee
of amounts earned or accrued hereunder to the date of termination,
pursuant to the procedures specified in this Section 3(d); provided
that the Employment Period shall not be terminated for Cause if the
Employment Period shall have terminated for any other reason. For
purposes of this Agreement, "Cause" shall mean good faith
determination by the CEO that either of the following has occurred:
(i) the willful and continued failure of Employee to perform (other
than as a result of disability) Employee's material duties as Vice
President and Chief Financial Officer of Employer (or such other
duties as the CEO and Employee may from time to time
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mutually determine), after written notice to Employee which notice
specifically identifies the manner in which Employee has not
substantially performed his material duties and provides the
Employee a reasonable time to cure such failure, or (ii) because of
the conviction of Employee of a crime involving theft, embezzlement
or fraud against Employer or a civil judgment in which Employer is
awarded damages from Employee in respect of a claim of loss of funds
through fraud or misappropriation by Employee.
(e) Employer shall have the right to terminate the Employment Period
without Cause, by written notice to Employee not less than 20
business days in advance of such termination.
(f) Employee shall have the right to terminate the Employment Period at
any time with Good Reason (as defined in Section 4(b)) by written
notice to Employer not less than 20 business days in advance of such
termination.
(g) Any amounts due Employee hereunder in the event of termination of
the Employment Period shall be considered severance pay in
consideration of his past services and in consideration of his
continued services from the date hereof, are considered reasonable
by Employer and not in the nature of a penalty, shall not be reduced
by compensation or income received by Employee from any other
employment or other source and shall not be offset by any claims
Employer may have against Employee; timely payment of such amounts
is further agreed by the parties hereto to be in full satisfaction
and compromise of any claims arising out of the performance or
nonperformance of this Agreement that either party might have
against the other, other than any claims Employee may have under the
provisions of Sections 5 and 6 hereof.
4. Termination Benefit
(a) If the Employment Period shall terminate by reason of Employer's
exercise of its right under Section 3(e) to terminate without Cause
or in the event Employee elects to terminate the Employment Period
for Good Reason or the Employment Period is terminated on account of
Employee's death or Disability, then Employer shall thereafter be
obligated to pay Employee (or his estate) and Employee (or his
estate) shall be entitled to receive as severance pay hereunder, for
a period of two years beginning on the first day following such
termination (or if longer, for a period commencing on such date and
ending on the third anniversary of the Effective Time) (the
"Severance Period"), an amount for each year, equal to his Basic
Salary as of the date of such termination plus the highest amount of
bonus or incentive compensation (exclusive of the Nortek, Inc. 1999
Equity Performance Plan) paid or payable in cash to Employee with
respect to any one of the three calendar years immediately prior to
the
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Effective Time (or, if higher, the three calendar years immediately
prior to such termination). For purposes of the preceding sentence,
the term "bonus or incentive compensation" shall mean, with respect
to any calendar year, (i) compensation awarded once annually on the
basis of over-all performance (whether performance of Employee or
Employer or both and whether paid in a single lump sum or in
installments, but excluding without limitation base salary) earned
by Employee pursuant to Section 2(b) hereof or previously pursuant
to the equivalent provision of a previous employment agreement or,
if none, then pursuant to the annual cash bonus plan or arrangement
that was applicable to him in that year plus (ii) any compensation
awarded with respect to that calendar year as bonus or incentive
compensation for the achievement of one or more specific projects or
goals. Payments under this Section 4(a) will be made in the same
manner as Employee's Basic Salary was paid immediately prior to
termination and will be subject to appropriate tax withholding.
In the event of such a termination, Employee shall continue, during
the Severance Period, to be covered at the expense of the Employer
by the same or equivalent accident, disability and life insurance
coverage as he was covered immediately prior to the Effective Time
(or, if greater, immediately prior to such termination).
(b) Termination for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean a material adverse change in the Employee's terms
of employment, including:
(i) any reduction of or failure to pay, Employee's Basic Salary or
other compensation as described in Sections 2(a) and (b)
hereof;
(ii) any failure to provide the benefits or payments required by
Sections 2(c) ("Equity Issuance"), 2(d) ("Lifetime Medical
Coverage"), 5 ("Gross-Up Payment") and 7 ("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;
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(iv) relocation of Employer's principal executive offices, or any
event that causes Employee to have his principal place of work
changed, to any location outside Providence, Rhode Island;
(v) any requirement by Employer that Employee travel away from his
office in the course of his duties significantly more than the
number of consecutive days or aggregate days in any calendar
year than was required of him prior to the Effective Time; and
(vi) without limiting the generality or effect of the foregoing,
any other material breach by Employer or 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.
5. Gross-up Payment
(a) All payments and benefits provided to Employee by Employer or any of
their predecessors are intended to be reasonable compensation for
services by Employee, and the Employer intends that Employee
receives the full economic benefit of such payments and benefits. In
the event that it is determined that any payment or benefit provided
by Employer or any of their predecessors to or for the benefit of
Employee, either under this Agreement or otherwise, whether paid
before or after the Effective Time, and regardless of under what
plan or arrangement it was made, will be subject to the excise tax
imposed by section 4999 of the Code or any successor provision
("section 4999"), Employer will, prior to the date on which any
amount of the excise tax must be paid or withheld, make an
additional lump-sum payment (the "gross-up payment") to Employee.
The gross-up payment will be sufficient, after giving effect to all
federal, state and other taxes and charges (including interest and
penalties, if any) with respect to the gross-up payment, to make
Employee whole for all taxes (including withholding taxes) and any
associated interest and penalties, imposed under or as a result of
section 4999.
(b) Determinations under this Section 5 will be made by the Employer's
tax accountant unless Employee has reasonable objections to the use
of that firm, in which case the determinations will be made by a
comparable firm chosen by Employee after consultation with Employer
(the firm making the determinations to be referred to as the
"Firm"). The determinations of
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the Firm will be binding upon Employer and Employee except as the
determinations are established in resolution (including by
settlement) of a controversy with the Internal Revenue Service to
have been incorrect. All fees and expenses of the Firm will be paid
by Employer.
(c) If the Internal Revenue Service asserts a claim that, if successful,
would require Employer to make a gross-up payment or an additional
gross-up payment, Employer and Employee will cooperate fully in
resolving the controversy with the Internal Revenue Service.
Employer will make or advance such gross-up payments as are
necessary to prevent Employee from having to bear the cost of
payments made to the Internal Revenue Service in the course of, or
as a result of, the controversy. The Firm will determine the amount
of such gross-up payments or advances and will determine after
resolution of the controversy whether any advances must be returned
by Employee to Employer. Employer will bear all expenses of the
controversy and will gross Employee up for any additional taxes that
may be imposed upon Employee as a result of its payment of such
expenses.
(d) Employer's obligations under this paragraph 5 shall survive the
termination of the Employment Period and any termination of this
Agreement.
6. Non-competition and Confidentiality.
(a) Employee agrees that he shall not compete with Employer as
hereinafter provided for a period (the "Noncompete Period") equal
to:
(i) if the Employment Period is terminated pursuant to Section
3(c) or (d) hereof, one year beginning as of the first day
following such termination, or
(ii) if the Employment Period is terminated pursuant to Section
3(b), (e) or (f) hereof, the longer of (A) two years beginning
as of the first day following such termination of the
Employment Period and (B) a period commencing on such date and
ending on the third anniversary of the Effective Time.
(b) Employee's agreement not to compete with Employer during the
Noncompete Period shall be limited to prohibiting Employee from
owning a greater than 5% equity interest in, serving as a director,
officer, employee or partner of, or being a consultant to or
co-venturer with any business enterprise or activity that competes
in North America with any line of business conducted by Employer or
any of its subsidiaries at the termination of the Employment Period
and accounting for more than 5% of Employer's gross revenues for its
fiscal year ending immediately prior
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to the year in which the Employment Period ends. During the
Noncompete Period, Employee agrees that he will not hire or attempt
to hire any person employed by Employer or any of its subsidiaries
during the 24 month period prior to the termination of the
Employment Period, assist such a hiring by any other person or
entity, encourage any such employee to terminate his relationship
with Employer (or any such subsidiary) or solicit or encourage any
customer or vendor of Employer to terminate its relationship with
Employer.
(c) Employee shall hold in a fiduciary capacity for the benefit of
Employer all secret or confidential information, knowledge or data
relating to Employer or any of its subsidiaries, and their
respective businesses, which shall have been obtained by Employee
during Employee's employment by Employer or any of its 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 6. Employee and
Employer further agree that, in the event that any provision of this
Section 6 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.
7. Indemnification
Anything in this Agreement to the contrary notwithstanding, Employer
agrees to pay all costs and expenses incurred by Employee in
connection with the enforcement of this Agreement and will indemnify
and hold harmless Employee from and against any damages, liabilities
and expenses (including without limitation fees and expenses of
counsel) incurred by Employee in connection with any litigation or
threatened litigation, including any regulatory proceedings, arising
out of the making, performance or enforcement of this Agreement or
termination of the Employment Period. Employer's obligations under
this paragraph 7 shall survive the termination of any other
provisions of the Agreement.
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8. Effectiveness / Prior Agreement
This Agreement shall be binding on Employee and Employer as of
Effective Time. 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 of its predecessors
9. Notices
All notices or other communications given hereunder shall be in
writing and shall be deemed to have been duly given if mailed by
certified mail or hand delivered, if to Employer, at 50 Kennedy
Plaza, Providence, Rhode Island 02903-2360, attention of the
Chairman and CEO, 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 23 Halsey Street, Providence,
Rhode Island 02906 or at such other address as Employee shall have
furnished to Employer in writing.
10. Governing Law
This Agreement shall be governed by the laws of the State of Rhode
Island and Providence Plantations.
11. Severability
The provisions of this Agreement are severable, and in the event
that any one or more paragraphs are deemed illegal or unenforceable,
the remaining paragraphs shall remain in full force and effect.
12. Assignments
This Agreement is personal to Employee and without the prior written
consent of Employer shall not be assignable by Employee other than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Employer's legal
representative. This Agreement shall inure to the benefit of and be
binding upon Employer and its successors and assigns.
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13. Counterparts
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
14. Amendments
No changes, alterations or modifications may be made to this
Agreement, except by a writing signed by each of the parties hereto.
15. Waivers and Acknowledgements
(a) 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
Exhibit B 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 shall terminate and Employer shall have no
further obligation with respect to those policies and agreements,
including without limitation the payment of any further premiums.
(b) The parties agree that the following are to be accomplished at the
Effective Time: (a) 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 and (b) transfer to Employee of
the life insurance policy listed on Exhibit B 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:______________________________
Name:
Title:
NORTEK HOLDINGS, INC.
By:______________________________
Name:
Title:
_________________________________
Almon C. Hall, III
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EXHIBIT A
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EXHIBIT B
LIFE INSURANCE POLICY
New York Life Policy No. 75-500-650
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