AMENDED AND RESTATED
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This AMENDED AND RESTATED SPLIT-DOLLAR LIFE INSURANCE AGREEMENT is made and
effective as of the 12th day of October, 1995, by and between Vari-Lite
Holdings, Inc. ("Employer"), Xxxxx Brothers Xxxxxxxx Trust Company of Texas,
trustee of the Xxxxx X. Xxxxxxxx III Insurance Trust, dated October 6, 1995
("Owner"), and Xxxxx X. Xxxxxxxx III ("Insured").
W I T N E S S E T H:
WHEREAS, Insured has served as Chief Executive Officer of Employer and on
the Board of Directors of Employer and has contributed substantially to the
success of Employer; and
WHEREAS, Employer desired for Insured to continue to serve as its Chief
Executive Officer and on its Board of Directors; and
WHEREAS, to retain the services of Insured, Employer assisted him in
establishing and maintaining an adequate life insurance program; and
WHEREAS, Employer and Insured entered into a split-dollar life insurance
agreement effective as of December 12, 1990 (the "Agreement") to define their
respective rights, duties and obligations regarding a $2,000,000 face amount
whole life insurance policy with supplemental insurance option, policy number
8592771 (the "Policy"), issued to Xxxxx X. Xxxxxxxx III as owner and insured by
Massachusetts Mutual Life Insurance Company (the "Insurer") insuring the life of
Insured, a copy of which is attached hereto as Exhibit A; and
WHEREAS, the face amount of the Policy was subsequently reduced to
$1,200,000; and
WHEREAS, pursuant to the Agreement, Employer made the entire premium
payment to Insurer and Insured recognized as taxable income each year an amount
equal to the economic benefit received by Insured during that year and Employer
and Insured recognized and acknowledged the interest of Employer in the benefits
and values of the Policy to the extent of the premium payments made by Employer
to Insurer; and
WHEREAS, Employer desires to continue assisting Insured in maintaining an
adequate insurance program; and
WHEREAS, Insured has assigned all of his ownership, rights and interests in
the Policy to Xxxxx Brothers Xxxxxxxx Trust Company of Texas, in their capacity
as trustee of the Xxxxx X. Xxxxxxxx III Insurance Trust, dated October 6, 1995;
and
WHEREAS, the Employer, Insured and Owner desire to amend and restate the
Agreement in order to (i) restate the rights, duties and obligations of
Employer, Insured and Owner relative
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 1
to the Policy and the Agreement, (ii) provide for the reimbursement by Owner
each year to Employer of a portion of the annual premium payment made by
Employer equal to the economic benefit received by Insured during that year,
and (iii) confirm the limited policy security rights specifically granted in
the Policy to Employer as collateral;
NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants herein contained, the parties hereto agree as follows:
I. BENEFICIARY DESIGNATION RIGHTS
Owner may designate a beneficiary or beneficiaries to receive any proceeds
payable under the Policy on death of Insured which are in excess of
Employer's share of such proceeds as determined by this Agreement.
II. PREMIUM PAYMENT METHOD
Each year, Employer agrees to forward the full amount of the annual premium
due under the Policy for that year to Insurer on the date such premium is
due until the occurrence of a termination event under Article VI. Each
year, Owner agrees that he will pay to Employer, as partial reimbursement
by Owner to Employer of the annual premium for the Policy, an amount equal
to the economic benefit received by Insured during that tax year. The
amount payable by Owner may be paid to Employer by payroll deduction or
according to any other method which is agreeable to the parties.
Alternatively, if Employer and Owner agree that Employer shall pay to
Insurer or that Owner shall reimburse to Employer some amount other than
the amount stated in this Article II, the rights of Employer and Owner
under the Policy shall be adjusted accordingly. If Employer is not
reimbursed by Owner for a year for the full amount of the entire economic
benefit received by Insured during that year, the economic benefit to the
extent not reimbursed shall be reported by Employer as taxable income for
that year to Insured.
III. OWNER'S RETAINED INCIDENTS OF OWNERSHIP
Except as to the limited policy security rights specifically granted
Employer in the Assignment of Life Insurance Policy as Collateral in the
form attached hereto as Exhibit B (the "Assignment") and as provided in
Article VI, Owner retains all incidents of ownership in the Policy
(including the right to surrender or cancel the Policy and the right to
borrow against the Policy).
Owner is required to apply all dividends declared on the Policy to purchase
paid-up insurance on the life of Insured. Owner agrees not to terminate or
alter this dividend option without the consent of Employer.
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 2
Owner's right to borrow against the Policy shall be limited to an amount
equal to the maximum loan value reduced by the Cumulative Unreimbursed
Premiums (as defined in Article IV) paid or advanced by Employer under
Article II.
Owner's right to withdraw from the Policy's cash value under the Policy's
partial surrender provisions shall be limited to the "partial surrender
value" of the Policy, reduced by the Cumulative Unreimbursed Premiums. For
purposes of this paragraph, "partial surrender value" of the Policy means
the cash value of the Policy less any indebtedness and the cost of
insurance until the next annual premium due date.
IV. DIVISION OF POLICY DEATH PROCEEDS
Division of the death proceeds of the Policy shall be made as follows:
A. Employer shall be entitled to an amount equal to the cumulative
premiums paid to Insurer by Employer less the amount of aggregate
reimbursements paid to Employer by Owner under Article II (the
"Cumulative Unreimbursed Premiums"). The beneficiary or beneficiaries
designated by Owner in accordance with Article I shall be entitled to
any remainder of such proceeds.
B. If any interest is due upon the death proceeds under the terms of the
Policy, Owner and Employer shall share such interest in the same
manner that their respective share of the death proceeds (as defined
in the preceding paragraph) bears to the total death proceeds,
excluding such interest.
C. If, upon the death of Insured, there is a refund of unearned premiums
under the Policy provisions, then, in such event, any refund shall be
apportioned as follows:
1. Where Owner (or his assignee) has contributed to the Policy
premium at the last required premium interval, the refund of
unearned premiums shall be divided between Employer and Owner (or
his assignee) as their respective share of the premium payment
shall bear to the total premium for such interval.
2. Where Owner (or his assignee) has not contributed to the premium
at the last premium interval, the refund of unearned premium
shall be refunded in total to Employer.
V. DIVISION OF THE NET CASH SURRENDER VALUE
Division of the net cash surrender value of the Policy prior to death of
Insured shall be made as follows:
Employer shall be entitled to an amount equal to the Cumulative
Unreimbursed Premiums. Owner shall be entitled to any remainder of such
net cash surrender value. To the extent
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 3
that the Cumulative Unreimbursed Premiums exceed the net cash surrender
value of the Policy, Owner shall be solely responsible for repayment of
same to Employer.
VI. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any one of the
following events:
A. Termination of Insured's Employment Agreement with Employer dated as
of July 1, 1995 (the "Employment Agreement") in accordance with its
terms;
B. Delivery by Owner to Employer of Owner's request, at any time, to
receive a release of the Assignment from Employer and agreement by
Owner to pay the premiums;
C. Owner's failure to reimburse Employer upon 30 days' written notice
from Employer for Owner's proportionate share of premiums to Employer,
if any, as mutually agreed upon by Owner and Employer pursuant to
Article II; or
D. Death of Insured; or
E. Breach of the terms of this Agreement by Employer.
Except as provided below with respect to a breach of this Agreement by
Employer, upon termination of this Agreement, Owner shall have a 90-day
option to pay to Employer an amount equal to the Cumulative Unreimbursed
Premiums and receive a release of the Assignment from Employer. Employer
agrees that Owner may obtain this amount from the Policy by effectuating a
policy loan or a withdrawal or by partial surrender of the Policy, as long
as Employer receives reimbursement of the full amount of the Cumulative
Unreimbursed Premiums. To assure that Employer will receive its entire
interest, Employer may request that Owner provide Employer with collateral
which is satisfactory to Employer, in its sole discretion.
Alternatively, if Insured is to perform future services for Employer and if
Insured is entitled to receive deferred compensation for these services
pursuant to a separate agreement or agreements between Insured and
Employer, then Employer shall have the right under this Agreement to
release to Owner its interest in all or any portion of such compensation in
partial or complete satisfaction of that deferred payment obligation.
If this Agreement is terminated (i) on account of a breach of this
Agreement by Employer, (ii) in connection with the retirement by Insured
from the employment of Employer on or after age 55, or (iii) in connection
with a "change of control" of Employer as defined in Section 9(e) of the
Employment Agreement, Employer shall waive its right to repayment of the
Cumulative Unreimbursed Premiums paid as of the termination date. Within
30 days of such termination date, Employer shall release the Assignment and
Owner shall become the sole and absolute owner of the Policy. Owner
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 4
may thereafter elect to continue to keep the Policy in effect by paying the
premiums thereon, or alternatively, may elect to surrender the Policy
pursuant to the terms thereof. If Employer does not release the Assignment
of the Policy within this 30-day period, the Assignment will automatically
terminate pursuant to the terms hereof.
Nothing herein shall be construed to represent an ownership right or
interest of Owner or Insured in or to any particular asset of Employer, nor
shall Owner or Insured be deemed to be in constructive receipt of such
amount. Owner does not have any right to a release of the Assignment by
Employer without reimbursement of the Cumulative Unreimbursed Premiums but,
instead, such right shall vest solely with Employer. Owner may not
anticipate, pledge, assign, hypothecate or, in any manner, exercise rights,
ownership or control over this interest of Employer.
Should Owner (or his assignees) fail to exercise one of these options
within the prescribed 90-day period, the Policy will be surrendered to
Insurer and the proceeds distributed between Employer and Owner as
prescribed by Article V.
VII. OWNER'S ASSIGNMENT RIGHTS
Owner may, at any time, assign to any individual, trust or other
organization all of his right, title and interest in the Policy and all of
his rights, options, privileges and duties created under this Agreement.
VIII. STATUS OF AGREEMENT AS ERISA PLAN
This Agreement, together with the Policy and the Assignment attached
hereto, constitutes an employee welfare benefit plan as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").
IX. NAMED FIDUCIARY
Employer is hereby designated the "Named Fiduciary" as defined in Section
402(a)(2) of ERISA until resignation or removal by Employer's Board of
Directors. The business address of Employer is 000 Xxxxx Xxx, Xxxxxx,
Xxxxx 00000.
The Named Fiduciary is hereby granted sole and absolute authority to
manage, control and administer the Agreement and to make all benefit
entitlement determinations under the Agreement. The Named Fiduciary may
allocate to others certain aspects of the management and operation
responsibilities of the Agreement, including the designation of persons who
are not named fiduciaries to carry out fiduciary responsibilities under the
Agreement. The Named Fiduciary shall effect such allocation of its
responsibilities by delivering to Employer a written instrument signed by
it that specifies the nature and extent of the responsibilities allocated,
including if appropriate the designation of persons who are not named
fiduciaries to carry out fiduciary responsibilities under this Agreement.
All documents related to the Agreement shall be retained by the Named
Fiduciary and
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 5
made available for examination at the above address. Copies of the
Agreement, Assignment and Policy have been provided to Owner upon the
execution of this Agreement.
X. FUNDING
The funding policy for the Agreement shall be to maintain the Policy in
force by paying, when due, all premiums required.
XI. BASIS OF PREMIUM PAYMENTS AND BENEFITS
Payments under this Agreement shall be in accordance with the provisions of
Articles II through V, herein.
XII. CLAIMS PROCEDURE
If Owner or his beneficiary ("Claimant") fails to receive benefits to which
he believes he is entitled under this Agreement, such person may file with
the Named Fiduciary, at the address noted above, a written claim for such
benefits.
If a claim for benefits is denied, the Claimant may within 60 days
following such denial, file with the Named Fiduciary a written claim
objecting to the denial of such benefits. The Claimant or his
representative may review the Agreement and any other documents which
relate to the claim and may submit written comments to the Named Fiduciary.
The Named Fiduciary shall render a written decision concerning the claim
not later than 90 days after receipt of such claim. If the claim is
denied, in whole or in part, such decision shall include (a) the reason or
reasons for the denial; (b) a reference to the Agreement provisions
constituting the basis of the denial; (c) a description of any additional
material or information necessary for the Claimant to perfect his claim;
(d) an explanation as to why such information or material is necessary; and
(e) an explanation of the Agreement's appeal procedure. The claim shall be
deemed to be denied if no response is received by the end of the review
period.
The Claimant may file with the Named Fiduciary a written notice of appeal
of the Named Fiduciary's decision not later than 60 days after receiving
the Named Fiduciary's written decision. The Named Fiduciary shall render a
written decision on the appeal not later than 60 days after the appeal.
Such decision shall include the specific reasons for the decision,
including a reference to the Agreement's specific provisions where
appropriate. The Named Fiduciary may extend the foregoing 90-day and 60-
day periods during which it must respond to the Claimant by up to an
additional 90 and 60 days respectively, if special circumstances beyond its
control so require; provided that notice of such extension is given to the
Claimant prior to the expiration of the initial 90-day or 60-day period, as
the case may be.
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 6
XIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any premium waived shall
be considered for all purposes of this Agreement as having been paid by
Owner.
XIV. AMENDMENT
This Agreement may be amended at any time and from time to time by a
written instrument executed by Employer, Owner and Insured, and, if
appropriate, their respective heirs, successors, personal representatives
and assignees.
XV. AGREEMENT BINDING UPON PARTIES
This Agreement shall bind Employer, Owner and Insured, and their respective
heirs, successors, personal representatives and assignees.
XVI. INSURER NOT A PARTY TO AGREEMENT
Insurer is not responsible for the legal or tax validity or effect of this
Agreement. Further, Insurer shall not be deemed a party to this Agreement
but will respect the rights of the parties as herein developed upon
receiving an executed copy of this Agreement.
Insurer shall not be responsible to account for the actual premium
contributions of the parties hereunder but shall rely solely upon the
written declarations of the parties in any distributions or settlement of
the Policy's lifetime or death values. Payment or other performance of its
contractual obligations in accordance with the Policy provisions shall
fully discharge Insurer from any and all liability.
XVII. CONTROLLING STATE LAW
This Agreement shall be subject to and construed under the laws of the
State of Texas, to the extent not preempted by ERISA.
[THE NEXT FOLLOWING PAGE IS THE SIGNATURE PAGE.]
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 7
This Amended and Restated Split-Dollar Life Insurance Agreement is executed
and effective as of the date first above written.
INSURED:
/s/ Xxxxx X. Xxxxxxxx III
-----------------------------------------
Xxxxx X. Xxxxxxxx III
OWNER:
XXXXX BROTHERS XXXXXXXX TRUST COMPANY
OF TEXAS, as Trustee of the Xxxxx X.
Xxxxxxxx III Insurance Trust, dated
October 6, 1995
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------------
Title: Vice President
----------------------------------
EMPLOYER:
VARI-LITE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx
Vice President--Finance
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 8
INSURER: Massachusetts Mutual Life Insurance Company
POLICY: Whole Life Policy with Supplemental Insurance Option;
Policy Number 8592771
INSURED: Xxxxx X. Xxxxxxxx III
OWNER: Xxxxx Brothers Xxxxxxxx Trust Company of Texas, as Trustee of
the Xxxxx X. Xxxxxxxx III Insurance Trust, dated October 6, 1995
EMPLOYER: Vari-Lite Holdings, Inc.
EFFECTIVE DATE: December 12, 1990
This Amended and Restated Split-Dollar Life Insurance Agreement was recorded by
Insurer on August 12, 1997.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------
Title: Assistant Secretary
---------------------------------
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 9
