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 Xxxxxx Xxxxxx Xxxxx ("Owner"),
and Xxxxx X.Xxxxx, Xx. ("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 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
8592938 (the "Policy"), issued to Xxxxx X. Xxxxx, Xx. 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 his ownership, rights and interests in
the Policy to Xxxxx Xxxxxx Xxxxxx Xxxxx; and
WHEREAS, 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 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.
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.
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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 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.
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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.
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
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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 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.
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All documents related to the Agreement shall be retained by the Named
Fiduciary and 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
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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.
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.]
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This Amended and Restated Split-Dollar Life Insurance Agreement is
executed and effective as of the date first above written.
INSURED:
/s/ Xxxxx X. Xxxxx, Xx.
--------------------------------------------
Xxxxx X. Xxxxx, Xx.
OWNER:
/s/ Xxxxx Xxxxxx Xxxxxx Xxxxx
--------------------------------------------
Xxxxx Xxxxxx Xxxxxx Xxxxx
EMPLOYER:
VARI-LITE HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
Vice President--Finance
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INSURER: Massachusetts Mutual Life Insurance Company
POLICY: Whole Life Policy with Supplemental Insurance Option;
Policy Number 8592938
INSURED: Xxxxx X. Xxxxx, Xx.
OWNER: Xxxxx Xxxxxx Xxxxxx Xxxxx
EMPLOYER: Vari-Lite Holdings, Inc.
EFFECTIVE DATE: December 12, 1990
This Amended and Restates 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
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