SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
INSURER: Xxxx Xxxxxxx Mutual Life Insurance Company
POLICY: Modified Premium Whole Life Policy;
Policy Number 67151530
INSURED: Xxxxx X. Xxxxxxxx III
OWNER: Xxxxx Brothers Xxxxxxxx Trust Company of Texas, trustee of
the Xxxxx X. Xxxxxxxx III Insurance Trust, dated October 6,
1995
EMPLOYER: Vari-Lite Holdings, Inc.
EFFECTIVE DATE: October 12, 1995
This SPLIT-DOLLAR LIFE INSURANCE AGREEMENT is made and effective as of the
12th day of October, 1995 by and between Owner, Insured and Employer
(collectively, the "Parties") to define the rights, duties and obligations of
the Parties relative to the modified premium whole life insurance policy, policy
number 67151530 (the "Policy"), issued effective as of October 12, 1995 to Owner
by Insurer insuring the life of Insured. A copy of the Policy is attached
hereto as Exhibit A.
Owner, Employer and Insured hereby 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.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 1
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'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:
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 2
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 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;
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 aggregate of 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 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.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 3
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
the 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 discretion 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 made available for examination at the above address. A
copy 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.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 4
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 its beneficiary ("Claimant") fails to receive benefits to
which it believes it 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 its
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.
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.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 5
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.]
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 6
This Split-Dollar Life Insurance Agreement is executed and
effective as of the date first above written.
INSURED:
/s/ Xxxxx X. Xxxxxxxx
--------------------------------------------------
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: /s/ Xxxxx Xxxxxx
----------------------------------------------
Title: Vice President
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EMPLOYER:
VARI-LITE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx
Vice President--Finance
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 7
INSURER: Xxxx Xxxxxxx Mutual Life Insurance Company
POLICY: Modified Premium Whole Life Policy;
Policy Number 67151530
INSURED: Xxxxx X. Xxxxxxxx III
OWNER: Xxxxx Brothers Xxxxxxxx Trust Company of Texas, trustee of the Xxxxx
X. Xxxxxxxx III Insurance Trust, dated October 6, 1995
EMPLOYER: Vari-Lite Holdings, Inc.
This Split-Dollar Life Insurance Agreement was recorded by Insurer on July 22,
1997.
Xxxx Xxxxxxx Mutual Life Insurance Company
By: /s/ Xxx Xxxx
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Name: Xxx Xxxx
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Title: Secretary
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SPLIT-DOLLAR LIFE INSURANCE AGREEMENT Page 8
