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 Xxxx X. Xxxxxx 1995 Irrevocable Trust, dated October 11, 1995
("Owner") and Xxxx X. Xxxxxx ("Insured").
W I T N E S S E T H:
WHEREAS, Insured has served 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 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 during and effective as of December 1990 (the "Original Agreement") to
define their respective rights, duties and obligations regarding a $2,000,000
face amount whole life insurance policy (the "Original Policy") issued to Xxxx
X. Xxxxxx as owner and insured by Massachusetts Mutual Life Insurance Company
(the "Original Insurer"); and
WHEREAS, pursuant to the Original Agreement, Employer made the entire
premium payment to Original Insurer and Insured recognized as taxable income
each year an amount equal to the economic benefit received by Insured during the
year and Employer and Insured have recognized and acknowledged the interest of
Employer in the benefits and values of the Original Policy to the extent of the
premium payments made by Employer to Original Insurer; and
WHEREAS, Employer desires to continue assisting Insured in maintaining an
adequate insurance program; and
WHEREAS, Employer and Insured desire to amend and restate the Original
Agreement in order to (i) restate the rights, duties and obligations of the
parties under the Original Agreement, (ii) surrender the Original Policy and to
contribute the cash surrender value of the Original Policy toward the purchase
of flexible premium adjustable life insurance insuring the life of Xxxx X.
Xxxxxx, policy number A10137201L (the "New Policy"), issued by American General
Life Insurance Company (the "Insurer") to Xxxxx Brothers Xxxxxxxx Trust Company
of Texas, in their capacity as trustee of the Xxxx X. Xxxxxx 1995 Irrevocable
Trust, dated October 11, 1995, a copy of which is attached as Exhibit A, (iii)
provide for the reimbursement
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 1
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 (iv) confirm the limited policy security rights specifically
granted in the New Policy to Employer as collateral, including the extent to
which such rights accrued to Employer with respect to premium payments by
Employer to Original Insurer on the Original Policy;
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 New 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
Employer was obligated by the terms of the Original Policy and the Original
Agreement to pay all premiums required to keep the Original Policy in
force, including any additional premiums required because the Original
Policy was issued with a substandard rating. As of October 12, 1995,
Employer's interest in the Original Policy was $205,006.22, which is an
amount equal to the total premiums for the Original Policy paid by Employer
to Original Insurer (hereinafter referred to as "Employer's Interest in the
Original Policy").
Employer and Insured agree to surrender the Original Policy and to
contribute the cash surrender value of the Original Policy as an
unscheduled premium toward the purchase of the New Policy and that Employer
will have an initial interest in the New Policy equal to Employer's
Interest in the Original Policy.
Each year thereafter, Employer agrees to forward the full amount of the
annual premium due under the New 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
New 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 New Policy shall be adjusted accordingly. If Employer is not
reimbursed by Owner for a year for the full amount of the 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.
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 2
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 New Policy
(including the right to surrender or cancel the New Policy and the right to
borrow against the New Policy).
Owner's right to borrow against the New 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 New Policy's cash value under the New
Policy's partial surrender provisions shall be limited to the "partial
surrender value" of the New Policy, reduced by the Cumulative Unreimbursed
Premiums. For purposes of this paragraph, "partial surrender value" of the
New Policy means the cash value of the New Policy less any indebtedness and
the cost of insurance until the next annual premium date.
IV. DIVISION OF POLICY DEATH PROCEEDS
Division of the death proceeds of the New Policy shall be made as follows:
A. Employer shall be entitled to an amount equal to the SUM of (i)
Employer's Interest in the Original Policy and (ii) the cumulative
premiums paid to Insurer by Employer less the amount of aggregate
reimbursements paid to Employer by Owner under Article II with respect
to the New Policy (collectively 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
New 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 New Policy provisions, then, in such event, any refund shall
be apportioned as follows:
1. Where Owner (or his assignee) has contributed to the New 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.
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 3
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 New 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 the Cumulative Unreimbursed
Premiums exceed the net cash surrender value of the New 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 both Insured's Consulting Agreement (the "Consulting
Agreement") with Employer dated as of July 1, 1995 in accordance with
its terms and Insured's directorship with Employer for any reason;
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 Cumulative Unreimbursed
Premiums and receive a release of the Assignment from Employer. Employer
agrees that Owner may obtain this amount from the New Policy by
effectuating a policy loan or a withdrawal or by partial surrender of the
New 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.
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 4
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 his directorship and consulting relationship with Employer on or after
age 60, or (iii) in connection with a "change of control" of Employer as
defined in Section 6(e) of the Consulting 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.
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 New 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 its right, title and interest in the New Policy and all
of its rights, options, privileges and duties created under this Agreement.
VIII. STATUS OF AGREEMENT AS ERISA PLAN
This Agreement, together with the New 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").
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 5
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 made available for examination at the above address. A copy
of the Agreement, Assignment and New 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 New 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 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
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 6
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. 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.
XIV. AGREEMENT BINDING UPON PARTIES
This Agreement shall bind Employer, Owner and Insured, and their respective
heirs, successors, personal representatives and assignees.
XV. 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 New Policy's lifetime or death values. Payment or other performance of
its contractual obligations in accordance with the New Policy provisions
shall fully discharge Insurer from any and all liability.
XVI. 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/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
OWNER:
XXXXX BROTHERS XXXXXXXX TRUST COMPANY
OF TEXAS, as Trustee of the Xxxx X.
Xxxxxx 1995 Irrevocable Trust, dated
October 11, 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: American General Life Insurance Company
POLICY: Flexible Premium Adjustable Life Policy;
Policy Number A10137201L
INSURED: Xxxx X. Xxxxxx
OWNER: Xxxxx Brothers Xxxxxxxx Trust Company of Texas, Trustee of the
Xxxx X. Xxxxxx 1995 Irrevocable Trust, dated October 11, 1995
EMPLOYER: Vari-Lite Holdings, Inc.
This Amended and Restated Split-Dollar Life Insurance Agreement was recorded by
Insurer on August 7, 1997.
American General Life Insurance Company
By: /s/ American General Life Ins Co.
-------------------------------------
Name: Xxxxx X. Xxxx
-----------------------------------
Title: Administration Officer
----------------------------------
AMENDED AND RESTATED SPLIT-DOLLAR
LIFE INSURANCE AGREEMENT Page 9
