<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
COMMISSION FILE NUMBER: 0-23159
Vari-Lite International, Inc.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2239444
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Regal Row, Dallas, Texas 75247
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (214) 630-1963
---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No[ ]
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date: As of May 12, 1999, there
were 7,800,003 shares of Common Stock outstanding.
<PAGE>
VARI-LITE INTERNATIONAL, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
PART I. - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
September 30, 1998 and March 31, 1999............................ 3
Condensed Consolidated Statements of Income for
the three months ended March 31, 1998 and 1999................... 4
Condensed Consolidated Statements of Income for
the six months ended March 31, 1998 and 1999..................... 5
Condensed Consolidated Statements of Cash Flows for
the six months ended March 31, 1998 and 1999..................... 6
Notes to Condensed Consolidated Financial Statements............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................12
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings................................................18
Item 4. Submission of Matters to a Vote of Security Holders..............18
Item 6. Exhibits and Reports on Form 8-K.................................18
SIGNATURES................................................................19
</TABLE>
2
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................................ $ 3,838 $ 3,175
Receivables, less allowance for doubtful accounts of $900 and $890.............. 13,471 14,597
Inventory....................................................................... 6,075 5,791
Prepaid expense and other current assets........................................ 1,749 2,442
----------- ------------
TOTAL CURRENT ASSETS......................................................... 25,133 26,005
EQUIPMENT AND OTHER PROPERTY:
Lighting and sound equipment.................................................... 127,763 130,073
Machinery and tools............................................................. 5,097 6,132
Furniture and fixtures.......................................................... 4,439 4,666
Office and computer equipment................................................... 10,399 10,261
Work in progress and raw materials inventory.................................... 5,320 3,431
----------- ------------
153,018 154,563
Less accumulated depreciation and amortization............................... 71,745 76,956
----------- ------------
81,273 77,607
OTHER ASSETS....................................................................... 8,221 8,413
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TOTAL ASSETS................................................................. $ 114,627 $ 112,025
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----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses........................................... $ 13,189 $ 11,848
Unearned revenue................................................................ 1,694 1,353
Income taxes payable............................................................ 999 457
Current portion of long-term obligations........................................ 3,049 2,925
----------- ------------
TOTAL CURRENT LIABILITIES.................................................... 18,931 16,583
LONG-TERM OBLIGATIONS.............................................................. 47,284 47,677
DEFERRED INCOME TAXES.............................................................. 3,708 3,431
----------- ------------
TOTAL LIABILITIES............................................................ 69,923 67,691
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.10 par value (10,000,000 shares authorized; no shares
outstanding)................................................................. - -
Common Stock, $0.10 par value (40,000,000 shares authorized; 7,800,003 and
7,800,003 shares outstanding)................................................ 785 785
Treasury Stock.................................................................. (186) (186)
Additional paid-in capital...................................................... 24,426 24,426
Stockholder notes receivable.................................................... (82) (56)
Stock purchase warrants......................................................... 600 600
Accumulated other comprehensive loss - foreign currency translation
adjustment................................................................. (230) (459)
Retained earnings............................................................... 19,391 19,224
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TOTAL STOCKHOLDERS' EQUITY................................................... 44,704 44,334
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $ 114,627 $ 112,025
----------- ------------
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</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Rental revenues........................................................................ $ 15,965 $ 20,881
Product sales and services revenues ................................................... 3,262 2,289
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TOTAL REVENUES ..................................................................... 19,227 23,170
Rental costs .......................................................................... 7,468 11,003
Product sales and services costs ...................................................... 2,356 1,769
----------- ----------
TOTAL COST OF SALES ................................................................ 9,824 12,772
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GROSS PROFIT ....................................................................... 9,403 10,398
Selling, general and administrative expense ........................................... 7,641 8,860
Research and development expense ...................................................... 1,890 1,236
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TOTAL OPERATING EXPENSES ........................................................... 9,531 10,096
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OPERATING INCOME (LOSS) ............................................................... (128) 302
Interest expense (net) ................................................................ 568 991
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LOSS BEFORE INCOME TAX ............................................................... (696) (689)
Income tax benefit .................................................................... (275) (280)
----------- ----------
NET LOSS .............................................................................. (421) (409)
Other comprehensive income (loss) - foreign currency translation adjustments .......... 29 (52)
----------- ----------
COMPREHENSIVE LOSS..................................................................... $ (392) $ (461)
----------- ----------
----------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING ................................................... 7,800,003 7,800,003
----------- ----------
----------- ----------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING ........................................... 7,800,003 7,800,003
----------- ----------
----------- ----------
PER SHARE INFORMATION
BASIC:
Net loss .......................................................................... $ (0 05) $ (0 05)
DILUTED:
Net loss........................................................................... $ (0.05) $ (0.05)
Dividends declared .................................................................... $ -- $ --
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Rental revenues .......................................................................... $ 35,135 $ 43,515
Product sales and services revenues ...................................................... 6,611 4,903
----------- -----------
TOTAL REVENUES ........................................................................ 41,746 48,418
Rental costs ............................................................................. 15,035 21,966
Product sales and services costs ......................................................... 4,670 3,651
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TOTAL COST OF SALES ................................................................... 19,705 25,617
----------- -----------
GROSS PROFIT .......................................................................... 22,041 22,801
Selling, general and administrative expense .............................................. 15,898 18,563
Research and development expense ......................................................... 3,463 2,482
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TOTAL OPERATING EXPENSES .............................................................. 19,361 21,045
----------- -----------
OPERATING INCOME ......................................................................... 2,680 1,756
Interest expense (net) ................................................................... 1,297 2,032
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INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE .................................................................. 1,383 (276)
Income taxes expense (benefit) ........................................................... 546 (109)
----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE ............................................................................. 837 (167)
Extraordinary loss ....................................................................... 737 --
Cumulative effect of change in accounting principle ...................................... 195 --
----------- -----------
NET LOSS ................................................................................. (95) (167)
Other comprehensive income (loss) - foreign currency translation adjustments ............. 142 (229)
----------- -----------
COMPREHENSIVE INCOME (LOSS) .............................................................. $ 47 $ (396)
----------- -----------
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING ...................................................... 7,624,179 7,800,003
----------- -----------
----------- -----------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING .............................................. 7,638,372 7,800,003
----------- -----------
----------- -----------
PER SHARE INFORMATION
BASIC:
Income (loss) before extraordinary loss and cumulative effect of change in accounting
principle ......................................................................... $ 0.11 $ (0.02)
Extraordinary loss ................................................................... (.10) --
Cumulative effect of change in accounting principle .................................. (0.2) --
Net loss ............................................................................. $ (0.01) $ (0.02)
DILUTED:
Income (loss) before extraordinary loss and cumulative effect of change in accounting
Principle ......................................................................... $ 0.11 $ (0.02)
Extraordinary loss ................................................................... (.10) --
Cumulative effect of change in accounting principle .................................. (0.2) --
Net loss ............................................................................. $ (0.01) $ (0.02)
Dividends declared ....................................................................... $ -- $ --
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................................... $ (95) $ (167)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization ............................................. 6,449 7,882
Amortization of note discount and deferred loan fees ...................... 59 57
Provision for doubtful accounts ........................................... 90 32
Extraordinary loss from early extinguishment of debt ...................... 737 --
Cumulative effect of change in accounting principle ....................... 195 --
Deferred income taxes ..................................................... 580 (277)
(Gain) on sale of Brilliant Stages assets and cancellation of land lease .. -- (599)
(Gain) on sale of equipment ............................................... (34) (138)
Provisions for ESOP and ESEP contributions ................................ 125 125
Net change in assets and liabilities:
Accounts receivable ..................................................... 1,477 (1,157)
Prepaid expenses ........................................................ 958 (693)
Inventory ............................................................... (2,648) (1,657)
Other assets ............................................................ (1,156) 808
Accounts payable, accrued liabilities and income taxes payable .......... (5,011) (2,008)
Unearned revenue ........................................................ (1,379) (341)
-------- --------
Net cash provided by operating activities ............................... 347 1,867
Cash flows from investing activities:
Capital expenditures, including rental equipment ............................. (9,227) (5,660)
Acquisition of European companies ............................................ (1,697) (1,191)
Proceeds from sale of Irideon and Brilliant Stages assets and
cancellation of land lease ................................................. -- 2,892
Proceeds from sale of equipment .............................................. 67 268
-------- --------
Net cash used in investing activities ................................... (10,857) (3,691)
Cash flows from financing activities:
Proceeds from issuance of debt ............................................... 54,283 16,835
Principal payments on debt ................................................... (62,637) (15,908)
Proceeds from issuance of distributor advances ............................... 514 --
Principal payments on distributor advances ................................... (1,242) (172)
Proceeds from payments on stockholder notes receivable ....................... 89 26
Proceeds from public offering of common stock ................................ 21,307 --
-------- --------
Net cash provided by financing activities ............................... 12,314 781
Effect from foreign currency translation adjustment ............................. (74) 380
-------- --------
Net increase during the period .................................................. 1,730 (663)
Cash, beginning of period ....................................................... 1,862 3,838
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Cash, end of period ............................................................. $ 3,592 $ 3,175
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense ............................................... $ 1,321 $ 1,730
Cash paid for income taxes ................................................... $ 539 $ 1,213
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
1. Interim Financial Information
The accompanying unaudited condensed consolidated financial
statements of Vari-Lite International, Inc. (the "Company") have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the condensed consolidated financial
statements contain all adjustments, consisting of normal recurring
adjustments, considered necessary to present fairly the consolidated
financial position, results of operations and cash flows of the Company. The
results of operations for the three-month and six-month periods ended March
31, 1999 are not necessarily indicative of the results of operations that may
be expected for any other interim periods or for the fiscal year ending
September 30, 1999.
For further information, refer to the consolidated financial
statements and accompanying notes included in the Company's Annual Report on
Form 10-K for the year ended September 30, 1998.
2. Inventory
Inventory consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1999
---- ----
<S> <C> <C>
Raw materials.............................................. $5,283 $5,348
Work in progress........................................... 616 443
Finished goods............................................. 176 -
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$6,075 $5,791
------ ------
------ ------
</TABLE>
3. Initial Public Offering
On October 15, 1997, in conjunction with the Company's
reincorporation in Delaware and an initial public offering, the Board of
Directors of the Company created a new class of common stock and authorized
40,000,000 shares. As a result of the reincorporation, stockholders received
3.76368 shares of common stock for each share of the Company's Class A common
stock and Class B common stock held by the stockholders.
The Company filed a Registration Statement (Commission file no.
333-33559) for the public offering of 2,300,000 shares of common stock which
became effective October 16, 1997. The Company sold 2,000,000 shares of
common stock for $12.00 per share for an aggregate amount of $24,000 and
certain stockholders of the Company sold 300,000 shares of common stock for
$12.00 per share for an aggregate amount of $3,600.
7
<PAGE>
4. Long-Term Debt and Extraordinary Loss
On December 19, 1997, the Company entered into a five-year $50,000
multicurrency revolving credit facility (the "New Credit Facility") and
canceled its existing credit facility. The initial $50,000 committment on the
New Credit Facility, as amended in April 1999, decreases by $1,000 during
each of the third and fourth quarters of fiscal 1999 and $1,500 per quarter
thereafter through maturity. Borrowings under the New Credit Facility were
$45,400 at March 31, 1999 and bear interest at the lender's base rate plus a
rate margin ranging from 0.00% to 1.00% or LIBOR plus a rate margin ranging
from 1.00% to 3.50% based upon the Company's ratio of Adjusted Funded Debt to
EBITDA (as defined in the New Credit Facility) and are secured by
substantially all of the assets owned by the Company's domestic subsidiaries
and a pledge of 65% of the outstanding capital stock of the Company's foreign
subsidiaries. A commitment fee is charged on the average daily unused portion
of the New Credit Facility at a rate ranging from 0.20% to 0.50% per annum
based upon the ratio of Adjusted Funded Debt to EBITDA. The New Credit
Facility contains compliance covenants, including requirements that the
Company achieve certain financial ratios. In addition, the New Credit
Facility places limitations on annual capital expenditures and on the ability
to incur additional indebtedness, make certain loans or investments, sell
assets, pay dividends or reacquire the Company's stock. In December 1997, the
Company expensed deferred financing costs related to the prior debt facility
of $737 (net of tax benefit of $481) relating to the early extinguishment of
debt, which have been reflected in the consolidated statements of income as
an extraordinary loss for the six months ended March 31, 1998.
5. Net Income Per Share
Basic earnings per share are computed based upon the weighted
average number of common shares outstanding. Diluted earnings per share
reflects the dilutive effect, if any, of stock options and warrants.
8
<PAGE>
The following is a reconciliation of shares used in calculating
diluted income per share for the three-month and six-month periods ended
March 31, 1998 and 1999:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
March 31, March 31,
-------------------------- -------------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding.... 7,800,003 7,800,003 7,624,179 7,800,003
Dilutive effect of stock options and
warrants after application of
treasury stock method.............. - - 14,193 -
--------- --------- --------- ---------
Shares used in calculating diluted
income per share.................... 7,800,003 7,800,003 7,638,372 7,800,003
--------- --------- --------- ---------
</TABLE>
For the three and six month period ended March 31, 1999, earnings
per share excludes 600,300 stock options and 242,233 warrants which are
anti-dilutive. For the three and six month periods ended March 31, 1998,
earnings per share excludes 544,000 and 41,665 stock options, respectively.
In addition for the three month period ended March 31, 1998, 242,233 warrants
were excluded as they are anti-dilutive.
6. Accounting Standards Changes
In 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities", which requires that such costs be expensed as incurred.
The Company's practice has been to record the costs of bringing significant
new operations into operation as deferred charges and to amortize them over
periods of not more than five years. The Company early adopted the SOP
retroactively as of October 1, 1997, and restated 1998 first quarter results
to record a pre-tax charge of $282 ($195 after taxes, or $0.02 per basic and
diluted share) as a cumulative effect of this accounting change.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", will be effective in 1999 and requires the disclosure
of certain information about the Company's operating segments on a basis
consistent with the way the Company is organized and operated. This standard
expands or modifies disclosures and, accordingly, will have no effect on the
Company's consolidated financial position, results of operations or cash
flows.
In 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. This standard, which establishes new
accounting and reporting standards for derivative financial instruments, must
be adopted no later than 2000. The Company is currently analyzing the effect
of this standard and does not expect it to have a material effect on the
Company's consolidated financial position, results of operations or cash
flows.
9
<PAGE>
7. Acquisitions
In October 1998, the Company acquired the VARI*LITE-R- distribution
rights and related assets of its French distributor for approximately $1,200
in cash, virtually all of which has been recorded as goodwill.
8. Dispositions
During fiscal 1998, the Company made a strategic decision to dispose
of its Irideon-R- architectural automated lighting product line. As a result
of this decision, during 1998 the Irideon-R- assets were written down to
their net realizable value in accordance with SFAS No. 121. On October 30,
1998, the Company sold substantially all of the Irideon-R- assets for its net
book value, after writedown, of approximately $2,000.
On December 31, 1998, the Company sold substantially all of the
assets of Brilliant Stages, Ltd., one of the Company's European subsidiaries,
for approximately $500, resulting in a gain of approximately $99.
9. Lease Cancellation
In December 1995, the Company entered into an operating lease with
an unaffiliated land developer ("Lessor"). In December 1998, the lease was
canceled as a result of the sale of the land by the Lessor, resulting in a
gain to the Company of approximately $500.
10. Legal Proceedings
In August 1995, the Company brought suit asserting a number of
claims of infringement of several of its patents by High End Systems, Inc.
("High End") in the United States District Court for the Northern District of
Texas seeking monetary damages and injunctive relief to prevent future patent
infringement. In December 1998, the court approved a negotiated settlement
between the Company and High End, the specific terms of which are
confidential but included cash paid to the Company, a cross license of
certain patents and authorization for High End to continue to sell all of the
products that were the subject of the suit. The settlement, recorded in
December 1998, does not affect the sale or use of any of the Company's or
High End's products or services that existed at the time of settlement.
In November 1998, the Company brought suit asserting several claims
of patent infringement by Martin Gruppen A/S and Martin Professional A/S in
the United States Federal District Court of Sherman, Texas seeking monetary
damages and injunctive relief to prevent future infringement. Discovery in
this matter is proceeding and a preliminary injunction hearing is currently
scheduled for July 1999.
10
<PAGE>
11. Commitments and Contingencies
In the ordinary course of its business, the Company is from time to
time threatened with or named as a defendant in various lawsuits, including
patent infringement claims. Additionally, the Company has filed lawsuits
claiming patent infringement by third parties in connection with which the
Company has been subject to counterclaims. Management does not believe that
these lawsuits will have a significant impact on the Company's financial
position or results of operations.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES. Total revenues increased 20.5%, or $4.0 million, to $23.2
million in the three-month period ended March 31, 1999, compared to $19.2
million in the three-month period ended March 31, 1998. The revenue increase
was attributable primarily to the factors set forth below.
Rental revenues increased 30.8%, or $4.9 million, to $20.9 million in
the three-month period ended March 31, 1999, compared to $16.0 million in the
three-month period ended March 31, 1998. This increase was primarily due to
the acquisition of several of the Company's European distributors in fiscal
1998. Prior to acquiring each distributor, the Company received and
recognized approximately one-half of the rental revenue earned by the
distributor in accordance with the terms of the distributor agreement. After
acquiring each distributor, the Company's results reflect all of the revenues
the distributor would have earned. In addition, the Company's sales-type
lease revenues increased as a result of the conversion of several of our
North American dealers from a monthly rental arrangement to a fully paid long
term lease program. Sales-type lease revenues increased by $1.9 million to
$2.5 million in the three-month period ended March 31, 1999, compared to $0.6
million in the three-month period ended March 31, 1998. Finally, additional
revenue increases resulted from the opening of two new offices in fiscal 1998.
Product sales and services revenues decreased 29.8%, or $0.9 million,
to $2.3 million in the three-month period ended March 31, 1999, compared to
$3.2 million in the three-month period ended March 31, 1998. This decrease
was primarily due to the sale of the Company's Irideon-R- automated lighting
product line in October 1998 and substantially all of the assets of the
Company's Brilliant Stages, Ltd. subsidiary ("Brilliant Stages") in December
1998.
RENTAL COSTS. Rental costs increased 47.3%, or $3.5 million, to $11.0
million in the three-month period ended March 31, 1999, compared to $7.5
million in the three-month period ended March 31, 1998. Rental costs as a
percentage of rental revenues increased to 52.7% in the three-month period
ended March 31, 1999, from 46.8% in the three-month period ended March 31,
1998. The increase in rental costs as a percentage of total rental revenues
was primarily due to increased costs associated with the higher level of
conventional equipment rentals, pricing pressures from competitors which
resulted in increased costs associated with renting more equipment without a
corresponding increase in revenue and the inclusion of all of the costs of
the operations of the European distributors that were acquired in fiscal
1998. Prior to acquiring each distributor, the Company's rental costs
associated with distributor rental revenues were almost exclusively the
depreciation on the equipment assigned to the distributor. After acquiring
the distributor, the Company's results reflect all of the additional rental
costs incurred from operating the business previously operated by the
distributor.
12
<PAGE>
PRODUCT SALES AND SERVICES COSTS. Product sales and services costs
decreased 24.9%, or $0.6 million, to $1.8 million in the three-month period
ended March 31, 1999, compared to $2.4 million in the three-month period
ended March 31, 1998. Product sales and services costs as a percentage of
product sales and services revenue increased to 77.3% in the three-month
period ended March 31, 1999, from 72.2% in the three-month period ended March
31, 1998. The increase in product sales and services costs as a percentage of
the related revenues was primarily due to costs incurred in connection with a
Brilliant Stages construction contract that was in progress when the
Brilliant Stages business was sold at December 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 16.0%, or $1.3 million, to $8.9 million in
the three-month period ended March 31, 1999, compared to $7.6 million in the
three-month period ended March 31, 1998. This increase resulted primarily
from the acquisition of certain of the Company's European distributors in
fiscal 1998. This expense as a percentage of total revenues decreased to
38.2% in the three-month period ended March 31, 1999, from 39.7% in the
three-month period ended March 31, 1998.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
decreased 34.6%, or $0.7 million, to $1.2 million in the three-month period
ended March 31, 1999, compared to $1.9 million in the three-month period
ended March 31, 1998. This expense as a percentage of total revenues
decreased to 5.3% in the three-month period ended March 31, 1999, from 9.8%
in the three-month period ended March 31, 1998. This decrease was primarily
the result of a decrease in employee-related costs as a result of employee
terminations from the restructuring of the Company in fiscal 1998.
INTEREST EXPENSE. Interest expense increased 74.5%, or $0.4 million, to
$1.0 million in the three-month period ended March 31, 1999, compared to $0.6
million in the three-month period ended March 31, 1998. This increase was due
to higher interest rates and a higher debt level in the period ended March
31, 1999.
INCOME TAXES. Effective tax rates in the three-month periods ended
March 31, 1999 and 1998 were 40.6% and 39.5%, respectively.
SIX MONTHS ENDED MARCH 31, 1999 COMPARED TO SIX MONTHS ENDED MARCH 31, 1998
REVENUES. Total revenues increased 16.0%, or $6.7 million, to $48.4
million in the six-month period ended March 31, 1999, compared to $41.7
million in the six-month period ended March 31, 1998. The revenue increase
was attributable primarily to the factors set forth below.
Rental revenues increased 23.9%, or $8.4 million, to $43.5 million in
the six-month period ended March 31, 1999, compared to $35.1 million in the
six-month period ended March 31, 1998. This increase was primarily due to the
acquisition of several of the Company's European distributors in fiscal 1998.
Prior to acquiring each distributor, the Company received and recognized
approximately one-half of the rental revenue earned by the distributor in
accordance with the terms of the distributor agreement. After acquiring each
distributor, the Company's results reflect all of the revenues the
distributor would have earned. In addition, the Company's
13
<PAGE>
sales-type lease revenues increased as a result of the conversion of several
of our North American dealers from a monthly rental arrangement to a fully
paid long term lease program. Sales-type lease revenues increased by $2.1
million to $3.0 million in the six-month period ended March 31, 1999,
compared to $0.9 million in the six-month period ended March 31, 1998.
Finally, additional revenue increases resulted from the opening of two new
offices in fiscal 1998.
Product sales and services revenues decreased 25.8%, or $1.7 million,
to $4.9 million in the six-month period ended March 31, 1999, compared to
$6.6 million in the six-month period ended March 31, 1998. This decrease was
primarily due to the sale of the Company's Irideon-R- automated lighting
product line in October 1998 and substantially all of the assets of Brilliant
Stages in December 1998.
RENTAL COSTS. Rental costs increased 46.1%, or $7.0 million, to $22.0
million in the six-month period ended March 31, 1999, compared to $15.0
million in the six-month period ended March 31, 1998. Rental costs as a
percentage of rental revenues increased to 50.5% in the six-month period
ended March 31, 1999, from 42.8% in the six-month period ended March 31,
1998. The increase in rental costs as a percentage of total rental revenues
was primarily due to increased costs associated with the higher level of
conventional equipment rentals, pricing pressures from competitors which
resulted in increased costs associated with renting more equipment without a
corresponding increase in revenue and the inclusion of all of the costs of
the European distributors that were acquired in fiscal 1998. Prior to
acquiring each distributor, the Company's rental costs associated with
distributor rental revenues were almost exclusively the depreciation on the
equipment assigned to the distributor. After acquiring the distributor, the
Company's results reflect all of the additional rental costs incurred from
operating the business previously operated by the distributor.
PRODUCT SALES AND SERVICES COSTS. Product sales and services costs
decreased 21.8%, or $1.0 million, to $3.7 million in the six-month period
ended March 31, 1999, compared to $4.7 million in the six-month period ended
March 31, 1998. Product sales and services costs as a percentage of product
sales and services revenue increased to 74.5% in the six-month period ended
March 31, 1999, from 70.6% in the six-month period ended March 31, 1998. The
increase in product sales and services costs as a percentage of the related
revenues was primarily due to costs incurred in connection with a Brilliant
Stages construction contract that was in progress when the Brilliant Stages
business was sold at December 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 16.8%, or $2.7 million, to $18.6 million in
the six-month period ended March 31, 1999, compared to $15.9 million in the
six-month period ended March 31, 1998. This increase resulted primarily from
the acquisition of certain of the Company's European distributors in fiscal
1998, partially offset by a $0.5 million gain from a lease cancellation in
December 1998. This expense as a percentage of total revenues increased to
38.3% in the six-month period ended March 31, 1999, from 38.1% in the
six-month period ended March 31, 1998.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
decreased 28.3%, or $1.0 million, to $2.5 million in the six-month period
ended March 31, 1999, compared to $3.5 million in the six-month period ended
March 31, 1998. This expense as a percentage of total revenues decreased to
5.1% in the six-month period ended March 31, 1999, from 8.3% in the six-
14
<PAGE>
month period ended March 31, 1998. This decrease was primarily the result of
a decrease in employee-related costs as a result of employee terminations
from the restructuring of the Company in fiscal 1998.
INTEREST EXPENSE. Interest expense increased 56.7%, or $0.7 million, to
$2.0 million in the six-month period ended March 31, 1999, compared to $1.3
million in the six-month period ended March 31, 1998. This increase was due
to higher interest rates and a higher debt level in the period ended March
31, 1999.
EXTRAORDINARY LOSS. A non-cash extraordinary loss of $0.7 million was
recorded in the six-month period ended March 31, 1998, net of $0.4 million of
tax benefit, relating to the early extinguishment of debt.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. During the
six-month period ended March 31, 1998, the Company recorded a cumulative
effect of change in accounting principle loss of $0.2 million, net of $0.1
million of tax benefit, relating to start-up costs that had previously been
capitalized.
INCOME TAXES. The effective tax rate in the six-month periods ended
March 31, 1999 and 1998 was 39.5%.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations and capital
expenditures with cash flow from operations, bank borrowings and advances
from distributors and customers. The Company's operating activities generated
cash flow of $0.3 million and $1.9 million for the six-month periods ended
March 31, 1998 and 1999, respectively.
During fiscal 1997, the Company borrowed under a multicurrency
credit agreement (the "Old Credit Agreement") to partially finance its
operations and capital expenditures. On October 21, 1997, the Company
consummated the initial public offering of its common stock and used the net
proceeds thereof, approximately $21.3 million, to repay indebtedness under
the Old Credit Agreement. On December 19, 1997, the Company entered into a
five-year $50.0 million multicurrency revolving credit facility (the "New
Credit Facility") and canceled its existing credit facility. The initial
$50.0 million committment on the New Credit Facility, as amended in April
1999, decreases by $1.0 million during each of the third and fourth quarters
of fiscal 1999 and $1.5 million per quarter thereafter through maturity.
Borrowings under the New Credit Facility were $45.4 million at March 31, 1999
and bear interest at the lender's base rate plus a rate margin ranging from
0.00% to 1.00% or LIBOR plus a rate margin ranging from 1.00% to 3.50% based
upon the Company's ratio of Adjusted Funded Debt to EBITDA (as defined in the
New Credit Facility) and are secured by substantially all of the assets owned
by the Company's domestic subsidiaries and a pledge of 65% of the outstanding
capital stock of the Company's foreign subsidiaries. A commitment fee is
charged on the average daily unused portion of the New Credit Facility at a
rate ranging from 0.20% to 0.50% per annum based upon the ratio of Adjusted
Funded Debt to EBITDA. The New Credit Facility contains compliance covenants,
including requirements that the Company achieve certain financial ratios. In
addition, the New
15
<PAGE>
Credit Facility places limitations on annual capital expenditures and on the
ability to incur additional indebtedness, make certain loans or investments,
sell assets, pay dividends or reacquire the Company's stock. In December
1997, the Company expensed deferred financing costs related to the prior debt
facility of $0.7 million (net of tax benefit of $0.4 million) relating to the
early extinguishment of debt, which have been reflected in the consolidated
statements of income as an extraordinary loss.
The Company has hedged a portion of its currency fluctuation risk by
borrowing in French francs, British pounds sterling and Japanese yen under
its New Credit Facility. Cash generated from the Company's France, England
and Japan offices is typically denominated in French francs, British pounds
sterling and Japanese yen, respectively, and is used to pay expenses incurred
in those currencies and service the foreign currency borrowings. The Company
is a party to two interest rate swap agreements which fix the Company's
effective interest costs under a portion of the New Credit Agreement.
The Company's business requires significant capital expenditures.
Capital expenditures for the six months ended March 31, 1998 and 1999 were
approximately $9.2 million and $5.7 million, respectively, of which
approximately $8.7 million and $5.5 million were for rental equipment
inventories. The majority of the Company's revenues are generated through the
rental of automated lighting and concert sound systems and, as such, the
Company must maintain a significant amount of rental equipment to meet
customer demands.
The Company had a working capital surplus of $12.3 million and $9.4
million at March 31, 1998 and 1999, respectively.
Management believes that cash flow generated from operations and
borrowing capacity under the New Credit Agreement should be sufficient to
fund its anticipated operating needs and capital expenditures for at least
the next twelve months. However, because the Company's future operating
results will depend on a number of factors, including the demand for the
Company's products and services, the level of competition, the success of the
Company's research and development programs, the ability to achieve
competitive and technological advances and general and economic conditions
and other factors beyond the Company's control, there can be no assurance
that sufficient capital resources will be available to fund the expected
expansion of its business beyond such period.
IMPACT OF THE YEAR 2000 ISSUE
The term "year 2000 issue" is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000
is approached and reached. These problems generally arise from the fact that
most of the world's computer hardware and software have historically used
only 2 digits to identify the year in a date, often meaning that the computer
will fail to distinguish dates in the "2000's" from dates in the "1900's".
These problems may also arise from other sources as well, such as the use of
special codes and conventions in software that make use of the date field.
16
<PAGE>
In 1995 and 1996, the Company invested approximately $2.2 million
constructing a wide-area network throughout the United States and
implementing Oracle financial and manufacturing applications. The Company has
conducted a review of its computer systems to identify the systems that could
be affected by the year 2000 issue and is attempting to ensure that its
information systems and technology and computer systems are year 2000 ready.
This review is part of the Company's overall upgrade of its systems and as a
result the Company has no separate budget for year 2000 compliance. Expenses
relating to reviewing and assessing systems are included in historical
operating expenses as part of information systems and technology and have not
been separately identified. The Company's upgrades are substantially complete
and management expects the upgrade to the European-based operations to be
completed by the middle of the 1999 calendar year. Management believes that
with the installation of the new systems, conversion to new software and
modifications to existing software, the year 2000 issue will pose no
significant operational problems for the Company.
The Company is currently discussing with its vendors and customers
the possibility of any year 2000 interface difficulties that may affect the
Company. The ability of third parties with whom the Company transacts
business to adequately address their year 2000 issue is, however, outside the
Company's control.
To date, the Company has not identified any information technology
assets under the control of the Company that represent a material risk of not
being year 2000 ready or for which a suitable alternative cannot be
implemented. The Company does not have a contingency plan with respect to the
year 2000 issue if the information systems and technology upgrade is not
completed or is delayed beyond the end of 1999.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" as that phrase is
defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. When used in this
report, the terms "anticipate," "believe," "estimate," "expect," "will,"
"could," "may" and similar expressions, as they relate to management or the
Company, are intended to identify forward-looking statements. Such statements
reflect the current views of management with respect to future events and are
subject to certain risks, uncertainties and assumptions, including without
limitation the following as they relate to the Company: fluctuations in
operating results and seasonality; ability to introduce new products;
technological changes; reliance on intellectual property; dependence on
entertainment industry; competition; dependence on management; foreign
exchange risk; international trade risk; dependence on key suppliers and
dependence on manufacturing facility; and the year 2000 issue. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein.
17
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1995, the Company brought suit asserting a number of
claims of infringement of several of its patents by High End Systems, Inc.
("High End") in the United States District Court for the Northern District of
Texas seeking monetary damages and injunctive relief to prevent future patent
infringement. In December 1998, the court approved a negotiated settlement
between the Company and High End, the specific terms of which are
confidential but included cash paid to the Company, a cross license of
certain patents and authorization for High End to continue to sell all of the
products that were the subject of the suit. The settlement, recorded in
December 1998, does not affect the sale or use of any of the Company's or
High End's products or services that existed at the time of settlement
In November 1998, the Company brought suit asserting several claims
of patent infringement by Martin Gruppen A/S and Martin Professional A/S in
the United States Federal District Court of Sherman, Texas seeking monetary
damages and injunctive relief to prevent future infringement. Discovery in
this matter is proceeding and a preliminary injunction hearing is currently
scheduled for July 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 26, 1999, the Annual Meeting of
Stockholders was held in Dallas, Texas. The stockholders were
asked to elect two Class II directors to serve until 2002. The
vote was as follows:
<TABLE>
<CAPTION>
Against or
For Withheld Abstentions
--- -------- -----------
<S> <C> <C> <C>
James H. Clark, Jr. 7,231,431 16,851 200
John R. Rettberg 7,231,631 16,651 -
</TABLE>
Messrs. Brutsche', Smith, Maxson and Prothro will
continue as directors of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.40 Amendment No. 1, effective January 1, 1998, to the
Vari-Lite International, Inc. Employees' Stock
Ownership Plan dated September 27, 1995
10.41 Amendment No. 1, effective January 1, 1998, to the
Vari-Lite International, Inc. Employees' Stock
Ownership Trust dated September 27, 1995
10.42 Amendment No. 4, dated April 1, 1999 to the
Multicurrency Credit Agreement, dated as of
December 19, 1997, among the Company and SunTrust
Bank, Atlanta, as agent for the banks thereunder
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter ended
March 31, 1999.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARI-LITE INTERNATIONAL, INC.
Date: May 12, 1999 By: /s/ MICHAEL P. HERMAN
--------------- ---------------------------
Michael P. Herman
Vice President - Finance,
Chief Financial Officer
and Secretary (Principal Financial
and Accounting Officer)
19
<PAGE>
Exhibit 10.40
VARI-LITE INTERNATIONAL, INC.
EMPLOYEES' STOCK OWNERSHIP PLAN
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
Table of Contents .............................................................i
Index ........................................................................ii
Alphabetical Listing of Definitions ........................................viii
Employees' Stock Ownership Plan ...............................................1
ARTICLE I: DEFINITIONS .....................................................2
ARTICLE II: EMPLOYEE PARTICIPANTS ..........................................21
ARTICLE III: EMPLOYER CONTRIBUTIONS AND PARTICIPANT FORFEITURES .............24
ARTICLE IV: PARTICIPANT CONTRIBUTIONS ......................................45
ARTICLE V: TERMINATION OF SERVICE - PARTICIPANT VESTING ...................47
ARTICLE VI: TIME AND METHOD OF PAYMENT OF BENEFITS .........................52
ARTICLE VII: EMPLOYER ADMINISTRATIVE PROVISIONS .............................63
ARTICLE VIII: PARTICIPANT ADMINISTRATIVE PROVISIONS ..........................65
ARTICLE IX: ESOP COMMITTEE DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS .......................................73
ARTICLE X: REPURCHASE OF EMPLOYER SECURITIES ..............................78
ARTICLE XI: PROVISIONS RELATING TO INSURANCE AND INSURANCE
COMPANY ......................................................82
ARTICLE XII: MISCELLANEOUS ..................................................85
ARTICLE XIII: EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION ......................94
</TABLE>
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<PAGE>
INDEX
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<TABLE>
<S> <C>
ARTICLE I: DEFINITIONS
Sec. 1.01. Plan . . . . . . . . . . . . . . . . . . . . . . . . . .2
Sec. 1.02. Employer . . . . . . . . . . . . . . . . . . . . . . . .3
Sec. 1.03. Trustee. . . . . . . . . . . . . . . . . . . . . . . . .3
Sec. 1.04. Plan Administrator . . . . . . . . . . . . . . . . . . .3
Sec. 1.05. ESOP Committee . . . . . . . . . . . . . . . . . . . . .3
Sec. 1.06. Employee . . . . . . . . . . . . . . . . . . . . . . . .3
Sec. 1.07. Highly Compensated Employee. . . . . . . . . . . . . . .3
Sec. 1.08. Participant. . . . . . . . . . . . . . . . . . . . . . .5
Sec. 1.09. Beneficiary. . . . . . . . . . . . . . . . . . . . . . .5
Sec. 1.10. Compensation . . . . . . . . . . . . . . . . . . . . . .5
Sec. 1.11. Account. . . . . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.12. Accrued Benefit. . . . . . . . . . . . . . . . . . . . .7
Sec. 1.13. Nonforfeitable . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.14. Plan Year. . . . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.15. Effective Date . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.16. Plan Entry Date. . . . . . . . . . . . . . . . . . . . .7
Sec. 1.17. Accounting Date. . . . . . . . . . . . . . . . . . . . .7
Sec. 1.18. Trust. . . . . . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.19. Trust Fund . . . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.20. Nontransferable Annuity. . . . . . . . . . . . . . . . .7
Sec. 1.21. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . .7
Sec. 1.22. Code . . . . . . . . . . . . . . . . . . . . . . . . . .8
Sec. 1.23. Service. . . . . . . . . . . . . . . . . . . . . . . . .8
Sec. 1.24. Hour of Service. . . . . . . . . . . . . . . . . . . . .8
Sec. 1.25. Disability . . . . . . . . . . . . . . . . . . . . . . .9
Sec. 1.26. Service for Predecessor Employer . . . . . . . . . . . .9
Sec. 1.27. Related Employers. . . . . . . . . . . . . . . . . . . .9
Sec. 1.28. Leased Employees . . . . . . . . . . . . . . . . . . . 10
Sec. 1.29. Determination of Top Heavy Status. . . . . . . . . . . 10
Sec. 1.30. Disqualified Person. . . . . . . . . . . . . . . . . . 12
Sec. 1.31. Employer Securities. . . . . . . . . . . . . . . . . . 14
Sec. 1.32. Separation from Service. . . . . . . . . . . . . . . . 15
Sec. 1.33. Alternate Payee. . . . . . . . . . . . . . . . . . . . 15
Sec. 1.34. Board of Directors . . . . . . . . . . . . . . . . . . 15
Sec. 1.35. Income of the Trust Fund . . . . . . . . . . . . . . . 15
Sec. 1.36. Participant Employer Securities Account. . . . . . . . 15
Sec. 1.37. Rollover Account . . . . . . . . . . . . . . . . . . . 15
Sec. 1.38. Severance Date . . . . . . . . . . . . . . . . . . . . 15
Sec. 1.39. Valuation Date . . . . . . . . . . . . . . . . . . . . 15
Sec. 1.40. Qualified Participant. . . . . . . . . . . . . . . . . 15
Sec. 1.41. Qualified Election Period. . . . . . . . . . . . . . . 16
Sec. 1.42. Retirement . . . . . . . . . . . . . . . . . . . . . . 16
Sec. 1.43. Participation of Other Employers . . . . . . . . . . . 16
Sec. 1.44. Ineligible Employee. . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Sec. 1.45. Late Retirement Date . . . . . . . . . . . . . . . . . 16
Sec. 1.46. Company. . . . . . . . . . . . . . . . . . . . . . . . 16
Sec. 1.47. Eligible Rollover Distribution . . . . . . . . . . . . 16
Sec. 1.48. Eligible Retirement Plan . . . . . . . . . . . . . . . 17
Sec. 1.49. Distributee. . . . . . . . . . . . . . . . . . . . . . 17
Sec. 1.50. Direct Rollover. . . . . . . . . . . . . . . . . . . . 17
Sec. 1.51. Eligible Employee. . . . . . . . . . . . . . . . . . . 17
Sec. 1.52. Forfeiture . . . . . . . . . . . . . . . . . . . . . . 17
Sec. 1.53. Vested . . . . . . . . . . . . . . . . . . . . . . . . 17
Sec. 1.54. Aggregate Account. . . . . . . . . . . . . . . . . . . 17
Sec. 1.55. Fiduciary. . . . . . . . . . . . . . . . . . . . . . . 17
Sec. 1.56. Former Participant . . . . . . . . . . . . . . . . . . 18
Sec. 1.57. Investment Manager . . . . . . . . . . . . . . . . . . 18
Sec. 1.58. Participant's Account. . . . . . . . . . . . . . . . . 18
Sec. 1.59. Retired Participant. . . . . . . . . . . . . . . . . . 18
Sec. 1.60. Retirement Date. . . . . . . . . . . . . . . . . . . . 18
Sec. 1.61. Terminated Participant . . . . . . . . . . . . . . . . 18
Sec. 1.62. Qualifying Employer Securities . . . . . . . . . . . . 18
Sec. 1.63. Publicly Traded. . . . . . . . . . . . . . . . . . . . 18
Sec. 1.64. Net Profits. . . . . . . . . . . . . . . . . . . . . . 18
Sec. 1.65. Self-Employed Individual . . . . . . . . . . . . . . . 18
Sec. 1.66. Normal Retirement. . . . . . . . . . . . . . . . . . . 19
Sec. 1.67. Annuity Starting Date. . . . . . . . . . . . . . . . . 19
Sec. 1.68. Inactive Participant . . . . . . . . . . . . . . . . . 19
Sec. 1.69. Elective Contributions . . . . . . . . . . . . . . . . 19
Sec. 1.70. ACP. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Sec. 1.71. Regulations. . . . . . . . . . . . . . . . . . . . . . 19
Sec. 1.72. Exempt Loan. . . . . . . . . . . . . . . . . . . . . . 19
Sec. 1.73. Leveraged Employer Securities. . . . . . . . . . . . . 19
Sec. 1.74. Restatement Date . . . . . . . . . . . . . . . . . . . 19
Sec. 1.75. Participant General Investment Account . . . . . . . . 20
Sec. 1.76. Unallocated Employer Securities Account. . . . . . . . 20
Sec. 1.77. Unallocated General Investments Account. . . . . . . . 20
Sec. 1.78. General Investments Accounts . . . . . . . . . . . . . 20
Sec. 1.79. Discretionary Contributions Account. . . . . . . . . . 20
Sec. 1.80. Matching Contributions Account . . . . . . . . . . . . 20
Sec. 1.81. Nonelective Contributions Account. . . . . . . . . . . 20
Sec. 1.82. Qualifying Matching Contributions Account. . . . . . . 20
ARTICLE II: EMPLOYEE PARTICIPANTS
Sec. 2.01. Participation. . . . . . . . . . . . . . . . . . . . . 21
Sec. 2.02. Year of Service - Participation. . . . . . . . . . . . 21
Sec. 2.03. Break in Service - Participation . . . . . . . . . . . 21
Sec. 2.04. Participation upon Re-Employment . . . . . . . . . . . 21
Sec. 2.05. Ineligibility to Become a Participant. . . . . . . . . 21
Sec. 2.06. Continuance as a Participant . . . . . . . . . . . . . 22
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Sec. 2.07. Employment by Employer; Service with Newly Acquired
Entities; Records of Employer. . . . . . . . . . . . 22
Sec. 2.08. Election Not to Participate. . . . . . . . . . . . . . 22
ARTICLE III: EMPLOYER CONTRIBUTIONS AND PARTICIPANT FORFEITURES
Sec. 3.01. Amount . . . . . . . . . . . . . . . . . . . . . . . . 24
Sec. 3.02. Determination of Contribution. . . . . . . . . . . . . 26
Sec. 3.03. Time of Payment of Contribution. . . . . . . . . . . . 26
Sec. 3.04. Allocations. . . . . . . . . . . . . . . . . . . . . . 26
Sec. 3.05. Treatment of Employer Securities Purchased Under
Installment Payment Contracts or with
Borrowed Funds . . . . . . . . . . . . . . . . . . . 32
Sec. 3.06. Accrual of Benefit . . . . . . . . . . . . . . . . . . 34
Sec. 3.07. Limitations on Allocations to Participants' Accounts . 35
Sec. 3.08. Definitions - Article III. . . . . . . . . . . . . . . 37
Sec. 3.09. Nondiscrimination Rules for Employer Matching
Contributions and Employee Contributions . . . . . . 40
Sec. 3.10. Definitions. . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IV: PARTICIPANT CONTRIBUTIONS
Sec. 4.01. Participant Voluntary Contributions. . . . . . . . . . 45
Sec. 4.02. Participant Voluntary Contributions - Special
Discrimination Test. . . . . . . . . . . . . . . . . 45
Sec. 4.03. Participant Rollover Contributions . . . . . . . . . . 45
ARTICLE V: TERMINATION OF SERVICE - PARTICIPANT VESTING
Sec. 5.01. Normal Retirement Age. . . . . . . . . . . . . . . . . 47
Sec. 5.02. Participant Disability or Death. . . . . . . . . . . . 47
Sec. 5.03. Vesting Schedule . . . . . . . . . . . . . . . . . . . 47
Sec. 5.04. Cash-out Distributions to Partially-Vested
Participants and Restoration of Forfeited Accrued
Benefit. . . . . . . . . . . . . . . . . . . . . . . 48
Sec. 5.05. Segregated Account for Repaid Amount . . . . . . . . . 50
Sec. 5.06. Year of Service - Vesting. . . . . . . . . . . . . . . 50
Sec. 5.07. Break in Service - Vesting . . . . . . . . . . . . . . 50
Sec. 5.08. Included Years of Service - Vesting. . . . . . . . . . 51
Sec. 5.09. Forfeiture Occurs. . . . . . . . . . . . . . . . . . . 51
ARTICLE VI: TIME AND METHOD OF PAYMENT OF BENEFITS
Sec. 6.01. Time of Payment of Accrued Benefit . . . . . . . . . . 52
Sec. 6.02. Method of Payment of Accrued Benefit . . . . . . . . . 54
Sec. 6.03. Benefit Payment Elections. . . . . . . . . . . . . . . 58
Sec. 6.04. Annuity Distributions to Participants and Surviving
Spouses. . . . . . . . . . . . . . . . . . . . . . . 59
Sec. 6.05. Default on a Loan. . . . . . . . . . . . . . . . . . . 59
Sec. 6.06. Distributions under Domestic Relations Orders. . . . . 60
Sec. 6.07. Late Retirement. . . . . . . . . . . . . . . . . . . . 60
Sec. 6.08. Limitations on Benefits. . . . . . . . . . . . . . . . 61
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page iv
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<PAGE>
<TABLE>
<S> <C>
Sec. 6.09. Special Distribution and Payment Requirements. . . . . 61
ARTICLE VII: EMPLOYER ADMINISTRATIVE PROVISIONS
Sec. 7.01. Information to ESOP Committee. . . . . . . . . . . . . 63
Sec. 7.02. No Liability . . . . . . . . . . . . . . . . . . . . . 63
Sec. 7.03. Indemnity of Certain Fiduciaries . . . . . . . . . . . 63
Sec. 7.04. Amendment to Vesting Schedule. . . . . . . . . . . . . 63
ARTICLE VIII: PARTICIPANT ADMINISTRATIVE PROVISIONS
Sec. 8.01. Beneficiary Designation. . . . . . . . . . . . . . . . 65
Sec. 8.02. No Beneficiary Designation . . . . . . . . . . . . . . 65
Sec. 8.03. Personal Data to Committee . . . . . . . . . . . . . . 65
Sec. 8.04. Address for Notification . . . . . . . . . . . . . . . 66
Sec. 8.05. Assignment or Alienation . . . . . . . . . . . . . . . 66
Sec. 8.06. Notice of Change in Terms. . . . . . . . . . . . . . . 66
Sec. 8.07. Litigation Against the Trust . . . . . . . . . . . . . 67
Sec. 8.08. Information Available. . . . . . . . . . . . . . . . . 67
Sec. 8.09. Appeal Procedure for Denial of Benefits. . . . . . . . 67
Sec. 8.10. Diversification of Participant's Account . . . . . . . 68
Sec. 8.11. Participant Voting Rights - Employer Securities. . . . 69
Sec. 8.12. Fees and Expenses. . . . . . . . . . . . . . . . . . . 72
ARTICLE IX: ESOP COMMITTEE DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
Sec. 9.01. Members' Compensation, Expenses. . . . . . . . . . . . 73
Sec. 9.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . 73
Sec. 9.03. Powers . . . . . . . . . . . . . . . . . . . . . . . . 73
Sec. 9.04. General. . . . . . . . . . . . . . . . . . . . . . . . 73
Sec. 9.05. Funding Policy . . . . . . . . . . . . . . . . . . . . 74
Sec. 9.06. Manner of Action . . . . . . . . . . . . . . . . . . . 74
Sec. 9.07. Authorized Representative. . . . . . . . . . . . . . . 75
Sec. 9.08. Interested Member. . . . . . . . . . . . . . . . . . . 75
Sec. 9.09. Individual Accounts. . . . . . . . . . . . . . . . . . 75
Sec. 9.10. Value of Participant's Accrued Benefit . . . . . . . . 76
Sec. 9.11. Allocations to Participants' Accounts. . . . . . . . . 76
Sec. 9.12. Individual Statement . . . . . . . . . . . . . . . . . 76
Sec. 9.13. Account Charged. . . . . . . . . . . . . . . . . . . . 76
Sec. 9.14. Unclaimed Account Procedure. . . . . . . . . . . . . . 76
ARTICLE X: REPURCHASE OF EMPLOYER SECURITIES
Sec. 10.01. Put Option . . . . . . . . . . . . . . . . . . . . . . 78
Sec. 10.02. Restriction on Employer Securities . . . . . . . . . . 78
Sec. 10.03. Lifetime Transfer and Right of First Refusal . . . . . 79
Sec. 10.04. Payment of Purchase Price. . . . . . . . . . . . . . . 79
Sec. 10.05. Notice . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page v
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<PAGE>
<TABLE>
<S> <C>
Sec. 10.06. Terms and Definitions. . . . . . . . . . . . . . . . . 80
Sec. 10.07. Certain Rights with Respect to Employer Securities . . 81
Sec. 10.08. Trustee's Put Option . . . . . . . . . . . . . . . . . 81
Sec. 10.09. Provisions Nonterminable . . . . . . . . . . . . . . . 81
ARTICLE XI: PROVISIONS RELATING TO INSURANCE AND
INSURANCE COMPANY
Sec. 11.01. Insurance Benefit. . . . . . . . . . . . . . . . . . . 82
Sec. 11.02. Limitation on Life Insurance Protection. . . . . . . . 82
Sec. 11.03. Definitions. . . . . . . . . . . . . . . . . . . . . . 83
Sec. 11.04. Dividend Plan. . . . . . . . . . . . . . . . . . . . . 83
Sec. 11.05. Insurance Company Not a Party to Agreement . . . . . . 84
Sec. 11.06. Insurance Company Not Responsible for
Trustee's Actions . . . . . . . . . . . . . . . . . 84
Sec. 11.07. Insurance Company Reliance on Trustee's Signature. . . 84
Sec. 11.08. Acquittance. . . . . . . . . . . . . . . . . . . . . . 84
Sec. 11.09. Duties of Insurance Company. . . . . . . . . . . . . . 84
ARTICLE XII: MISCELLANEOUS
Sec. 12.01. Evidence . . . . . . . . . . . . . . . . . . . . . . . 85
Sec. 12.02. No Responsibility for Employer Action. . . . . . . . . 85
Sec. 12.03. Fiduciaries Not Insurers . . . . . . . . . . . . . . . 85
Sec. 12.04. Waiver of Notice . . . . . . . . . . . . . . . . . . . 85
Sec. 12.05. Successors . . . . . . . . . . . . . . . . . . . . . . 85
Sec. 12.06. Word Usage . . . . . . . . . . . . . . . . . . . . . . 85
Sec. 12.07. State Law. . . . . . . . . . . . . . . . . . . . . . . 86
Sec. 12.08. Employment Not Guaranteed. . . . . . . . . . . . . . . 86
Sec. 12.09. Severability . . . . . . . . . . . . . . . . . . . . . 86
Sec. 12.10. Contrary Provisions. . . . . . . . . . . . . . . . . . 86
Sec. 12.11. Notice to Employees. . . . . . . . . . . . . . . . . . 86
Sec. 12.12. Agreement of Participants. . . . . . . . . . . . . . . 86
Sec. 12.13. Action by Employers. . . . . . . . . . . . . . . . . . 86
Sec. 12.14. Adoption of the Plan by a Controlled Group Member. . . 86
Sec. 12.15. Disassociation of Any Employer from Plan . . . . . . . 87
Sec. 12.16. Audit. . . . . . . . . . . . . . . . . . . . . . . . . 87
Sec. 12.17. Bonding. . . . . . . . . . . . . . . . . . . . . . . . 88
Sec. 12.18. Named Fiduciary. . . . . . . . . . . . . . . . . . . . 88
Sec. 12.19. Securities and Exchange Commission Approval. . . . . . 89
Sec. 12.20. Valuation of Trust . . . . . . . . . . . . . . . . . . 89
Sec. 12.21. Exempt Loan. . . . . . . . . . . . . . . . . . . . . . 89
Sec. 12.22. Records and Statements . . . . . . . . . . . . . . . . 91
Sec. 12.23. Parties to Litigation. . . . . . . . . . . . . . . . . 91
Sec. 12.24. Professional Agents. . . . . . . . . . . . . . . . . . 91
Sec. 12.25. Distribution of Trust Fund . . . . . . . . . . . . . . 92
Sec. 12.26. Distribution Directions. . . . . . . . . . . . . . . . 92
Sec. 12.27. Withholding for Any Payment of Taxes . . . . . . . . . 93
Sec. 12.28. USERRA Compliance. . . . . . . . . . . . . . . . . . . 93
</TABLE>
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<TABLE>
<S> <C>
Sec. 12.29. Security Holder. . . . . . . . . . . . . . . . . . . . 93
ARTICLE XIII: EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
Sec. 13.01. Exclusive Benefit. . . . . . . . . . . . . . . . . . . 94
Sec. 13.02. Amendment by Company . . . . . . . . . . . . . . . . . 94
Sec. 13.03. Discontinuance . . . . . . . . . . . . . . . . . . . . 95
Sec. 13.04. Full Vesting on Termination. . . . . . . . . . . . . . 95
Sec. 13.05. Merger and Direct Transfer . . . . . . . . . . . . . . 95
Sec. 13.06. Complete Termination . . . . . . . . . . . . . . . . . 96
Sec. 13.07. Partial Termination. . . . . . . . . . . . . . . . . . 97
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page vii
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<PAGE>
ALPHABETICAL LISTING OF DEFINITIONS
-----------------------------------
<TABLE>
<CAPTION>
DEFINITION SEC.# DEFINITION SEC.#
<S> <C> <C> <C>
Account 1.11 Nonelective Contributions Account 1.81
Accounting Date 1.17 Nonforfeitable 1.13
Accrued Benefit 1.12 Nontransferable Annuity 1.20
ACP 1.70 Normal Retirement 1.66
Aggregate Account 1.54 Normal Retirement Age 5.01
Alternate Payee 1.33 Participant 1.08
Annuity Starting Date 1.67 Participant's Account 1.58
Beneficiary 1.09 Participant Employer Securities Account 1.36
Board of Directors 1.34 Participant General Investment Account 1.75
Code 1.22 Participation of Other Employers 1.43
Company 1.46 Plan 1.01
Compensation 1.10 Plan Administrator 1.04
Determination of Top Heavy Status 1.29 Plan Entry Date 1.16
Direct Rollover 1.50 Plan Year 1.14
Disability 1.25 Publicly Traded 1.63
Discretionary Contributions Account 1.79 Qualified Election Period 1.41
Disqualified Person 1.30 Qualified Participant 1.40
Distributee 1.49 Qualifying Employer Securities 1.62
Effective Date 1.15 Qualifying Matching Contributions Account 1.82
Elective Contributions 1.69 Regulations 1.71
Eligible Employee 1.51 Related Employers 1.27
Eligible Retirement Plan 1.48 Restatement Date 1.74
Eligible Rollover Distribution 1.47 Retired Participant 1.59
Employee 1.06 Retirement 1.42
Employer 1.02 Retirement Date 1.60
Employer Securities 1.31 Rollover Account 1.37
Employment Commencement Date 2.02 Self-Employed Individual 1.65
ERISA 1.21 Separation From Service 1.32
ESOP Committee 1.05 Service 1.23
Exempt Loan 1.72 Service for Predecessor Employer 1.26
Fiduciary 1.55 Severance Date 1.38
Forfeiture 1.52 Terminated Participant 1.61
Former Participant 1.56 Trust 1.18
General Investments Accounts 1.78 Trust Fund 1.19
Highly Compensated Employee 1.07 Trustee 1.03
Hour of Service 1.24 Unallocated Employer Securities Account 1.76
Inactive Participant 1.68 Unallocated General Investments Account 1.77
Income of the Trust Fund 1.35 Valuation Date 1.39
Ineligible Employee 1.44 Vested 1.53
Investment Manager 1.57
Late Retirement Date 1.45
Leased Employee 1.28
Leveraged Employer Securities 1.73
Matching Contributions Account 1.80
Named Fiduciaries 12.18
Net Profits 1.64
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page viii
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<PAGE>
VARI-LITE INTERNATIONAL, INC.
EMPLOYEES' STOCK OWNERSHIP PLAN
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
VARI-LITE INTERNATIONAL, INC., a corporation organized under the laws of
the state of Delaware pursuant to Articles of Incorporation filed with the
Secretary of State of Delaware, hereby amends and restates the VARI-LITE
HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN to be effective on the
Restatement Date and hereafter shall be known as the VARI-LITE INTERNATIONAL,
INC. EMPLOYEES' STOCK OWNERSHIP PLAN (As Amended and Restated, Effective January
1, 1998) for the benefit of certain of its employees and their beneficiaries. It
is intended that the Plan continue to be an eligible individual account stock
bonus plan that qualifies under Section 401(a) of the Code and it is intended
that the Plan qualify as an employee stock ownership plan under Section
4975(e)(7) of the Code and Section 407(d)(6) of ERISA. It is also intended that
the Trust which implements and forms a part of the Plan continue to be exempt
from tax under Section 501(a) of the Code. The Plan shall be interpreted,
wherever possible, to comply with the terms of the Code, ERISA and all
applicable regulations and rulings thereunder.
All contributions made under the Plan will be held, managed, and controlled
by the Trustee. The terms of the Trust are set forth in a trust agreement known
as the VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST (As
Amended and Restated, Effective January 1, 1998).
PURPOSES:
The purposes of this Plan are to reward Eligible Employees of the Employer
for their loyal and faithful service and to provide Employees with an
opportunity to share in the ownership of VARI-LITE INTERNATIONAL, INC. The
benefits provided by this Plan will be in addition to the benefits Employees are
entitled to receive under any other announced programs of the Employer.
VARI-LITE INTERNATIONAL, INC. (formerly known as "AVARI-LITE HOLDINGS,
INC.") established the VARI-LITE HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN
on September 27, 1995, effective January 1, 1995.
The VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN (As
Amended and Restated, Effective January 1, 1998) is a substitution and amendment
of the VARI-LITE HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN, in restated
form, and shall continue to be maintained for the exclusive benefit of Eligible
Employees of the Employer and their Beneficiaries. No part of the Trust Fund can
ever revert to any Employer or be used for or diverted for purposes other than
the exclusive benefit of Employees of the Employer and their Beneficiaries,
except as provided herein. This Plan shall be interpreted in a manner consistent
with this intent and the intent of the Company that the Plan established
hereunder shall satisfy the provisions of ERISA and those of the Code relating
to employee stock ownership plans.
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 1
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
<PAGE>
WITNESSETH:
WHEREAS, VARI-LITE HOLDINGS, INC., a Texas Corporation, established the
VARI-LITE HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN, on September 27, 1995,
effective as of January 1, 1995;
WHEREAS, VARI-LITE HOLDINGS, INC. subsequently changed its name to
VARI-LITE INTERNATIONAL, INC. and reincorporated in the State of Delaware;
WHEREAS, VARI-LITE INTERNATIONAL, INC. registered its common stock on an
established securities market on October 21, 1997;
WHEREAS, VARI-LITE INTERNATIONAL, INC. hereby amends and substitutes the
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN in restated form,
effective January 1, 1998, unless otherwise set forth herein or required by the
Code or the Treasury Regulations thereunder;
WHEREAS, VARI-LITE INTERNATIONAL, INC. hereby continues the VARI-LITE
INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN (As Amended and Restated,
Effective January 1, 1998), as of the Restatement Date, for the administration
and distribution of contributions made by the Employer for the purpose of
providing retirement benefits for eligible employees and their beneficiaries;
WHEREAS, VARI-LITE INTERNATIONAL, INC. continues, in a separate instrument,
the VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST (As Amended
and Restated, Effective January 1, 1998) which is and becomes a part of the
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN (As Amended and
Restated, Effective January 1, 1998); and
WHEREAS, the provisions of the VARI-LITE INTERNATIONAL, INC. EMPLOYEES'
STOCK OWNERSHIP PLAN (As Amended and Restated, Effective January 1, 1998) apply
solely to an Employee whose employment with the Employer terminates on or after
the Restatement Date of the Plan. If an Employee's employment with the Employer
terminates prior to the Restatement Date, the provisions of the Plan in effect
prior to the Restatement Date shall govern the availability of benefits to the
Employee.
NOW, THEREFORE, the Company establishes the following terms and conditions:
ARTICLE I
DEFINITIONS
SEC. 1.01. PLAN. "Plan" means the retirement plan established herein by the
Company designated as the VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK
OWNERSHIP PLAN (As Amended and Restated, Effective January 1, 1998) which was
formerly known as the VARI-LITE HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN.
The Company has designated this Plan to be an eligible individual account stock
bonus plan that qualifies as an employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code and Section 407(d)(6) of ERISA, and to invest
primarily in Employer Securities.
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 2
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
<PAGE>
SEC. 1.02. EMPLOYER. "Employer" means VARI-LITE INTERNATIONAL, INC., a
Delaware corporation, and any corporation, association, partnership, subsidiary,
or other entity or person adopting this Plan pursuant to Section 1.43 hereof.
SEC. 1.03. TRUSTEE. "Trustee" means the trustee or trustees acting at the
time in question under the Trust, and its or his or her or their successor(s) as
such.
SEC. 1.04. PLAN ADMINISTRATOR. "Plan Administrator" is the Company unless
the Company designates another person to hold the position of Plan
Administrator. In addition to its other duties, the Plan Administrator has full
responsibility for compliance with the reporting and disclosure rules under
ERISA.
SEC. 1.05. ESOP COMMITTEE. "ESOP Committee" means the Employees' Stock
Ownership Plan Committee, which members are appointed by the Company, as from
time to time constituted.
SEC. 1.06. EMPLOYEE. "Employee" means any employee of the Employer.
SEC. 1.07. HIGHLY COMPENSATED EMPLOYEE.
(A) For Plan Years beginning on January 1, 1998 and thereafter,
"Highly Compensated Employee" means an Employee who:
(1) Is a more than five percent (5%) owner of the Employer
(applying the constructive ownership rules of Code Section
318, and applying the principles of Code Section 318, for an
unincorporated entity) during the Plan Year or during the
preceding Plan Year; or
(2) For the preceding Plan Year, had Compensation from the
Employer greater than Eighty Thousand Dollars ($80,000) (as
adjusted by the Commissioner of the Internal Revenue Service
for the relevant year), and (if the Employer elects for a
Plan Year) was in the top paid group of Employees. For
purposes of this clause (2), the "top paid group" is the top
twenty percent (20%) of Employees based on their
Compensation.
For purposes of this Section 1.07(A), "Compensation" means the general
definition of "Compensation" as defined in Section 1.10(A) hereof, increased for
Elective Contributions (as defined in Section 1.69 hereof). The ESOP Committee
will not apply any family aggregation rules for purposes of applying any
nondiscrimination test required under the Plan or the Code.
(B) For Plan Years beginning prior to January 1, 1998, "Highly
Compensated Employee" means an Employee who, during the Plan year or during the
preceding twelve (12) month period:
(1) Is a more than five percent (5%) owner of the Employer
(applying the constructive ownership rules of Code
Section 318, and
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 3
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
<PAGE>
applying the principles of Code Section 318, for an
unincorporated entity);
(2) Has Compensation in excess of Seventy-Five Thousand Dollars
($75,000) (as adjusted by the Commissioner of the Internal
Revenue Service for the relevant year);
(3) Has Compensation in excess of Fifty Thousand Dollars
($50,000) (as adjusted by the Commissioner of the Internal
Revenue Service for the relevant year) and is part of the
top-paid twenty percent (20%) group of employees (based on
Compensation for the relevant year); or
(4) Has Compensation in excess of fifty percent (50%) of the
dollar amount prescribed in Code Section 415(b)(1)(A)
(relating to defined benefit plans) and is an officer of the
Employer.
If the Employee satisfies the definition in clause (2), (3) or (4) of this
Section 1.07(B) in the Plan Year but does not satisfy clause (2), (3) or (4) of
this Section 1.07(B) during the preceding twelve (12) month period, or if
elected by the Company, the calendar year ending with or within the applicable
determination year (or, in the case of a determination year that is shorter than
twelve (12) months, the calendar year ending with or within the twelve (12)
month period ending with the end of the applicable determination year), or if
elected by the Company, the twelve (12) month period immediately preceding the
calendar year, and does not satisfy clause (1) of this Section 1.07(B) in either
period, the Employee is a Highly Compensated Employee only if he is one (1) of
the one hundred (100) most highly compensated Employees for the Plan Year. The
number of officers taken into account under clause (4) of this Section 1.07(B)
will not exceed the greater of three (3) or ten percent (10%) of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than fifty (50) officers. If no Employee satisfies the Compensation
requirement in clause (4) of this Section 1.07(B) for the relevant year, the
ESOP Committee will treat the highest paid officer as satisfying clause (4) of
this Section 1.07(B) for that year.
For purposes of this Section 1.07(B), "Compensation" means the general
definition of "Compensation" as defined in Section 1.10(A) hereof, increased for
"Elective Contributions" (as defined in Section 1.69 hereof).
The ESOP Committee must make the determination of who is a Highly
Compensated Employee, including the determinations of the number and identity of
the top paid twenty percent (20%) group, the top one hundred (100) paid
Employees, the number of officers includible in clause (4) of this Section
1.07(B) and the relevant Compensation, consistent with Code Section 414(q) and
Treasury Regulations issued under that Code Section. The Company may make a
calendar year election to determine the Highly Compensated Employees for the
Plan Year, as prescribed by Treasury Regulations. A calendar year election must
apply to all plans and arrangements of the Company. For purposes of applying any
nondiscrimination test required under the Plan or under the Code, in a manner
consistent with applicable Treasury Regulations, the ESOP Committee will treat a
Highly Compensated Employee and all family members (a spouse, a lineal ascendant
or descendant, or a spouse of a lineal ascendant or descendant) as a
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 4
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
<PAGE>
single Highly Compensated Employee, but only if the Highly Compensated Employee
is a more than five percent (5%) owner or is one of the ten (10) Highly
Compensated Employees with the greatest Compensation for the Plan Year. This
aggregation rule applies to a family member even if that family member is a
Highly Compensated Employee without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee
who Separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
fifty-fifth (55th) birthday. If the former Employee's Separation from Service
occurred prior to January 1, 1987, he is a Highly Compensated Employee only if
he satisfied clause (1) of this Section 1.07(B) or received Compensation in
excess of Fifty Thousand Dollars ($50,000) during either of the following: (1)
the year of his Separation from Service (or the prior year); or (2) any year
ending after his fifty-fourth (54th) birthday.
SEC. 1.08. PARTICIPANT. "Participant" is an Eligible Employee who becomes a
Participant in the Plan in accordance with the provisions of Section 2.01
hereof.
SEC. 1.09. BENEFICIARY. "Beneficiary" is a person who is designated by a
Participant who is or may become entitled to a benefit under the Plan. A
Beneficiary who becomes entitled to a benefit under the Plan remains a
Beneficiary under the Plan until his benefit has been fully distributed to him.
A Beneficiary's right to (and the Plan Administrator's or the ESOP Committee's
duty to provide to the Beneficiary) information or data concerning the Plan does
not arise until he first becomes entitled to receive a benefit under the Plan.
SEC. 1.10. COMPENSATION. Any references in this Plan to Compensation is a
reference to the definition in this Section 1.10, unless the Plan reference
specifies a modification to this definition. The ESOP Committee will take into
account only Compensation actually paid for the relevant period.
(A) GENERAL DEFINITION OF COMPENSATION. "Compensation" means the
Participant's base salary for professional service (whether or not paid in cash)
for personal services actually rendered in the course of employment with the
Employer maintaining the Plan but only to the extent includible in the gross
income of the Participant, and Code Section 125 employee salary reductions for
the Participant. This definition of Compensation does not include:
(1) Employer contributions to a plan of deferred compensation to
the extent the contributions are not included in the gross
income of the Employee for the taxable year in which
contributed, on behalf of an Employee to a simplified
employee pension plan to the extent such contributions are
excludable from the Employee's gross income, and any
distributions from a plan of deferred compensation,
regardless of whether such amounts are includible in the
gross income of the Employee when distributed.
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee
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either becomes freely transferable or is no longer subject
to a substantial risk of forfeiture.
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a stock option described
in Part II, Subchapter D, Chapter 1 of the Code.
(4) Amounts paid as bonuses and overtime pay to the Employee.
(5) Other amounts which receive special tax benefits, such as
premiums for group term life insurance (but only to the
extent that the premiums are not includible in the gross
income of the Employee), or contributions made by an
Employer (whether or not under a salary reduction agreement)
towards the purchase of an annuity contract described in
Code Section 403(b) (whether or not the contributions are
excludable from the gross income of the Employee).
(B) DEFINITION OF COMPENSATION FOR ALLOCATION PURPOSES. To determine a
Participant's contribution allocation under Section 3.04(A) hereof, Compensation
means the general definition of Compensation described in Section 1.10(A)
hereof, but excludes the following: (1) reimbursements or other expense
allowances, (2) P.S. 58 costs (as defined in the Code and Treasury regulations
and rulings thereunder), (3) fringe benefits (cash and non-cash), (4) moving
expenses, and (5) deferred compensation and welfare benefits. Compensation,
however, includes Elective Contributions (as defined in Section 1.69 hereof).
(C) LIMITATIONS ON COMPENSATION. The ESOP Committee must take into
account only the first One Hundred Sixty Thousand Dollars ($160,000) (or such
other amount as the Commissioner of Internal Revenue Service may prescribe,
which may be higher or lower) of any Participant's Compensation.
(D) LIMITATIONS ON COMPENSATION FOR PLAN YEARS BEGINNING PRIOR TO
JANUARY 1, 1998. APPLICATION OF COMPENSATION LIMITATION TO CERTAIN FAMILY
MEMBERS. For Plan Years beginning on or before December 31, 1996, the
Compensation Dollar Limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under Section
1.07(B) hereof who is either (i) the Employee's spouse; or (ii) the Employee's
lineal descendant under the age of nineteen (19). If, for a Plan Year, the
combined Compensation of the Employee and such family members who are
Participants entitled to an allocation for that Plan Year exceeds the One
Hundred Fifty Thousand Dollars ($150,000) (or as adjusted) limitation,
"Compensation" for each such Participant, for purposes of the contribution and
allocation provisions of Article III hereof, means his Adjusted Compensation.
"Adjusted Compensation" is the amount which bears the same ratio to the One
Hundred Fifty Thousand Dollars ($150,000) (or as adjusted) limitation as the
affected Participant's Compensation (without regard to the One Hundred Fifty
Thousand Dollars ($150,000), as adjusted, Compensation limitation) bears to the
combined Compensation of all the affected Participants in the family unit. If
the Plan uses permitted disparity, the ESOP Committee must determine the
integration level of each affected family member Participant prior to the
proration of the One Hundred Fifty Thousand Dollar ($150,000), as adjusted,
Compensation Limitation, but the
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combined integration level of the affected Participants may not exceed One
Hundred Fifty Thousand Dollars ($150,000) (or the adjusted limitation). The
combined excess compensation of the affected Participants in the family unit may
not exceed One Hundred Fifty Thousand Dollars ($150,000) (or the adjusted
limitation) minus the affected Participant's combined integration level (as
determined under the preceding sentence). If the combined excess compensation
exceeds this limitation, the ESOP Committee will prorate the excess compensation
limitation among the affected Participants in the family unit in proportion to
each such individual's Adjusted Compensation minus his integration level.
SEC. 1.11. ACCOUNT. "Account" means the separate account(s) which the
Trustee or the ESOP Committee establishes and maintains for a Participant under
the Plan.
SEC. 1.12. ACCRUED BENEFIT. "Accrued Benefit" means the amount standing in
a Participant's Account(s) as of any valuation date derived from Employer
contributions, Participant forfeitures, and Employee contributions, if any.
SEC. 1.13. NONFORFEITABLE. "Nonforfeitable" means a Participant's or
Beneficiary's unconditional claim, legally enforceable against the Plan, to the
Participant's Accrued Benefit.
SEC. 1.14. PLAN YEAR. "Plan Year" means the tax year of the Plan, a twelve
(12) consecutive month period beginning on January 1 of each year and ending on
the following December 31.
SEC. 1.15. EFFECTIVE DATE. "Effective Date" of the Plan is January 1, 1995.
SEC. 1.16. PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and
every January 1, April 1, July 1, and October 1 after the Effective Date.
SEC. 1.17. ACCOUNTING DATE. "Accounting Date" is the last day of the Plan
Year. Unless otherwise specified in the Plan, all Plan allocations for a
particular Plan Year will be made as of the Accounting Date of that Plan Year.
SEC. 1.18. TRUST. "Trust" means the VARI-LITE INTERNATIONAL, INC.
EMPLOYEES' STOCK OWNERSHIP TRUST (As Amended and Restated, Effective January 1,
1998) which implements and forms a part of the Plan. The Trust was formerly
known as the VARI-LITE HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP TRUST.
SEC. 1.19. TRUST FUND. "Trust Fund" means all property of every kind held
or acquired by the Trustee under the Trust. Trust Fund is also referred to as
"Trust Assets."
SEC. 1.20. NONTRANSFERABLE. "Nontransferable Annuity" or "Nontransferable
Annuity Contract" means an annuity which by its terms provides that it may not
be sold, assigned, discounted, pledged as collateral for a loan or security for
the performance of an obligation or for any purpose to any person other than the
insurance company. If the Plan distributes an annuity contract, the contract
must be a Nontransferable Annuity.
SEC. 1.21. ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any successor statute thereto and the
final and
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temporary regulations promulgated, and the applicable rulings issued thereunder.
References herein to Sections of ERISA shall include any successor provisions
thereto.
SEC. 1.22. CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute thereto. References herein to
Sections of the Code shall include any successor provisions thereto.
SEC. 1.23. SERVICE. "Service" means any period of time the Employee is in
the employ of the Employer, including any period the Employee is on an unpaid
leave of absence authorized by the Employer under a uniform, nondiscriminatory
policy applicable to all Employees.
SEC. 1.24. HOUR OF SERVICE.
(A) HOUR OF SERVICE.
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to payment,
for the performance of duties. The ESOP Committee credits Hours of Service under
this paragraph (a) to the Employee for the computation period in which the
Employee performs the duties, regardless of when paid;
(b) Each Hour of Service for back pay, regardless of mitigation of
damages, to which the Employer has agreed or for which the Employee has received
an award. The ESOP Committee credits Hours of Service under this paragraph (b)
to the Employee for the computation period(s) to which the award or the
agreement pertains rather than for the computation period in which the award,
agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee or for which the Employee is entitled to payment
(regardless of whether the employment relationship is terminated) for reasons
other than for the performance of duties during a computation period, such as
leave of absence, vacation, holiday, sick leave, illness, incapacity (including
Disability), layoff, jury duty or military duty. The ESOP Committee will credit
no more than five hundred and one (501) Hours of Service under this paragraph
(c) to an Employee on account of any single continuous period during which the
Employee does not perform any duties (whether or not such period occurs during a
single computation period). The ESOP Committee credits Hours of Service under
this paragraph (c) in accordance with the rules of paragraphs (b) and (c) of
Labor Regulation Section 2530.200b-2, which the Plan, by this reference,
specifically incorporates in full within this paragraph (c).
The ESOP Committee will not credit an Hour of Service under more than
one of the above paragraphs. A computation period for purposes of this Section
1.24 is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the ESOP Committee is
measuring an Employee's Hours of Service. The ESOP Committee will resolve any
ambiguity with respect to the crediting of an Hour of Service in favor of the
Employee.
(B) METHOD OF CREDITING HOURS OF SERVICE. The Employer will credit
every Employee with Hours of Service on the basis of the "actual" method. For
purposes of the Plan,
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"actual" method means the determination of Hours of Service from records of
hours worked and hours for which the Employer makes payment or for which payment
is due from the Employer. Effective January 1, 1995, credit for service shall be
given in accordance with the appropriate equivalency method in the event the
Employer does not maintain records of the actual hours for which an employee is
paid or entitled to payment.
(C) MATERNITY OR PATERNITY LEAVE. Solely for purposes of determining
whether the Employee incurs a Break in Service under any provision of this Plan,
the ESOP Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The ESOP Committee considers
an Employee on maternity or paternity leave if the Employee's absence is due to
the Employee's pregnancy, the birth of the Employee's child, the placement with
the Employee of an adopted child, or the care of the Employee's child
immediately following the child's birth or placement. The ESOP Committee credits
Hours of Service under this paragraph on the basis of the number of Hours of
Service the Employee would receive if he were paid during the absence period or,
if the ESOP Committee cannot determine the number of Hours of Service the
Employee would receive, on the basis of eight (8) hours per day during the
absence period. The ESOP Committee will credit only the number (not exceeding
five hundred and one (501)) of Hours of Service necessary to prevent an
Employee's Break in Service. The ESOP Committee credits all Hours of Service
described in this paragraph to the computation period in which the absence
period begins or, if the Employee does not need these Hours of Service to
prevent a Break in Service in the computation period in which his absence period
begins, the ESOP Committee credits these Hours of Service to the immediately
following computation period.
SEC. 1.25. DISABILITY. "Disability" means total and permanent disability,
the physical or mental condition of a Participant resulting from bodily injury,
disease or mental disorder which renders the Participant incapable of engaging
in his or her usual and customary occupation. The total and permanent disability
of a Participant shall be determined by a physician, selected by the
Participant, in accordance with uniform medical principles consistently applied,
upon the basis of such evidence as the physician deems necessary and desirable.
The Plan considers a Participant disabled on the date the ESOP Committee
determines the Participant satisfies the definition of Disability.
Notwithstanding any provision herein, the ESOP Committee may require a
Participant to submit to another physical examination performed by a physician
selected by the ESOP Committee in order to confirm Disability. The ESOP
Committee shall apply the provisions of this Section 1.25 in a
nondiscriminatory, consistent and uniform manner.
SEC. 1.26. SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the
plan of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as Service with the Employer.
SEC. 1.27. RELATED EMPLOYERS. "Related Employers" means a controlled group
of corporations (as defined in Code Section 414(b)), trades or businesses
(whether or not incorporated) which are under common control (as defined in Code
Section 414(c)) or an affiliated service group (as defined in Code Section
414(m) or in Code Section 414(o)). "Related Employer" means one of the Related
Employers. If the Employer is a Related Employer, the term "Employer" includes
the Related Employers for purposes of crediting Hours of Service, determining
Years of Service and Breaks in Service under Articles II and V hereof, applying
the
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Participation Test and the Coverage Test under the suspension of accrual
requirements of Section 3.06(E) hereof, applying the limitations on allocations
in Part 2 of Article III hereof, applying the top heavy rules and the minimum
allocation requirements of Article III hereof, the definitions of Employee,
Highly Compensated Employee, Compensation and Leased Employee, and for any other
purpose required by the applicable Code section or by a Plan provision. Only an
Employer described in Section 1.02 hereof may contribute to the Plan and only an
Employee employed by an Employer described in Section 1.02 hereof is eligible to
participate in this Plan.
SEC. 1.28. LEASED EMPLOYEES. The Plan treats a Leased Employee as an
Employee of the Employer. A Leased Employee is an individual (who otherwise is
not an Employee of the Employer) who, pursuant to a leasing agreement between
the Employer and any other person, has performed services for the Employer (or
for the Employer and any persons related to the Employer within the meaning of
Code Section 144(a)(3)) on a substantially full time basis for at least one (1)
year and who (a) for Plan Years beginning before January 1, 1997, performs
services historically performed by employees in the Employer's business field,
or (b) for Plan Years beginning after December 31, 1996, performs services under
the primary direction and control of the Employer. If a Leased Employee is
treated as an Employee by reason of this Section 1.28, "Compensation" includes
Compensation from the leasing organization which is attributable to services
performed for the Employer.
The Plan does not treat a Leased Employee as an Employee if the leasing
organization covers the employee in a safe harbor plan and, prior to application
of this safe harbor plan exception, twenty percent (20%) or less of the
Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a non-integrated
contribution formula equal to at least ten percent (10%) of the employee's
compensation without regard to employment by the leasing organization on a
specified date. The safe harbor plan must determine the ten percent (10%)
contribution on the basis of compensation as defined in Code Section 415(c)(3)
plus Elective Contributions (as defined in Section 1.69 hereof).
The ESOP Committee must apply this Section 1.28 in a manner consistent with
Code Sections 414(n) and 414(o) and the regulations issued under those Code
Sections. The ESOP Committee will reduce a Leased Employee's allocation of
Employer contributions under this Plan by the Leased Employee's allocation under
the leasing organization's plan, but only to the extent that allocation is
attributable to the Leased Employee's service provided to the Employer.
SEC. 1.29. DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan Year
if the top heavy ratio as of the Determination Date (as hereafter defined)
exceeds sixty percent (60%). The "top heavy ratio" is a fraction, the numerator
of which is the sum of the present value of Accrued Benefits of all Key
Employees (as hereafter defined) as of the Determination Date and the
denominator of which is a similar sum determined for all Employees. The ESOP
Committee must include in the top heavy ratio, as part of the present value of
Accrued Benefits, any contribution not made as of the Determination Date but
includible under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period (as hereafter defined). The
ESOP Committee must calculate the top heavy ratio by disregarding the Accrued
Benefit (and distributions, if any, of the Accrued Benefit) of any Non-Key
Employee (as hereafter defined)
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who was formerly a Key Employee, and by disregarding the Accrued Benefit
(including distributions, if any, of the Accrued Benefit) of an individual who
has not received credit for at least one (1) Hour of Service with the Employer
during the Determination Period. The ESOP Committee must calculate the top heavy
ratio, including the extent to which it must take into account distributions,
rollovers and transfers, in accordance with Code Section 416 and the Treasury
regulations thereunder.
If the Employer maintains other qualified plans (including a 401(k)
arrangement or simplified employee pension plan), or maintained another such
plan which now is terminated, this Plan is top heavy only if it is part of the
Required Aggregation Group (as hereafter defined), and the top heavy ratio for
the Required Aggregation Group and for the Permissive Aggregation Group (as
hereafter defined), if any, each exceeds sixty percent (60%). The Trustee or
ESOP Committee will calculate the top heavy ratio in the same manner as required
by the first paragraph of this Section 1.29, taking into account all plans that
are aggregated. To the extent distributions to a Participant are taken into
account, distributions from a terminated plan which would have been part of the
Required Aggregation Group if it were in existence on the Determination Date
must be included. The present value of Accrued Benefits under defined benefit
plans or simplified employee pension plans included within the group will be
calculated in accordance with the terms of those plans, Code Section 416 and the
Treasury regulations under that Code Section. If a Participant in a defined
benefit plan is a Non-Key Employee, his Accrued Benefit will be determined under
the accrual method, if any, which is applicable uniformly to all defined benefit
plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code Section 411(b)(1)(C). To calculate the present
value of benefits from a defined benefit plan, the actuarial assumptions
(interest and mortality only) prescribed by the defined benefit plan(s) will be
used to value benefits for top heavy purposes. If an aggregated plan does not
have a valuation date coinciding with the Determination Date, the Accrued
Benefits in the aggregated plan must be valued as of the most recent
valuation date falling within the twelve-month period ending on the
Determination Date, except as Code Section 416 and applicable Treasury
regulations require for the first and second plan year of a defined benefit
plan. The top heavy ratio will be calculated with reference to the
Determination Dates that fall within the same calendar year.
DEFINITIONS. For purposes of applying the provisions of this Section 1.29:
(a) "Key Employee" means, as of any Determination Date, any Employee
or former Employee (or Beneficiary of such Employee) who, for any Plan Year in
the Determination Period: (i) has Compensation in excess of fifty percent (50%)
of the dollar amount prescribed in Code Section 415(b)(1)(A) (relating to
defined benefit plans) and is an officer of the Employer; (ii) has Compensation
in excess of the dollar amount prescribed in Code Section 415(c)(1)(A) (relating
to defined contribution plans) and is one of the Employees owning the ten (10)
largest interests in the Employer; (iii) is a more than five percent (5%) owner
of the Employer; or (iv) is a more than one percent (1%) owner of the Employer
and has Compensation of more than One Hundred Fifty Thousand Dollars ($150,000).
The constructive ownership rules of Code Section 318 (or the principles of that
Section, in the case of an unincorporated Employer,) will apply to determine
ownership in the Employer. The number of officers taken into account under
clause (i) will not exceed the greater of three (3) or ten percent (10%) of the
total number (after application of the Code Section 414(q) exclusions) of
Employees, but no
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more than fifty (50) officers. The ESOP Committee will make the determination of
who is a Key Employee in accordance with Code Section 416(i)(1) and the Treasury
regulations under that Code Section.
(b) "Non-Key Employee" is an employee who does not meet the definition
of Key Employee.
(c) "Compensation" means the general definition of Compensation as
determined under Section 1.10(A) hereof, increased for Elective Contributions
(as defined in Section 1.69 hereof).
(d) "Required Aggregation Group" means: (1) each qualified plan of the
Employer in which at least one Key Employee participates at any time during the
Determination Period; and (2) any other qualified plan of the Employer which
enables a plan described in clause (1) to meet the requirements of Code Section
401(a)(4) or of Code Section 410.
(e) "Permissive Aggregation Group" is the Required Aggregation Group
plus any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Code Sections 401(a)(4)
and 410. The ESOP Committee will determine the Permissive Aggregation Group.
(f) "Employer" means the Employer that adopts this Plan and any
Related Employers described in Section 1.27 hereof.
(g) "Determination Date" for any Plan Year is the Accounting Date of
the preceding Plan Year or, in the case of the first Plan Year of the Plan, the
Accounting Date of that Plan Year.
(h) The "Determination Period" is the five (5) year period ending on
the Determination Date.
(i) "Super Top Heavy Plan" means that, as of the Determination Date,
(i) the present value of Accrued Benefits of Key Employees, and (ii) the sum of
the Aggregate Accounts of Key Employees under this Plan and all plans of an
Aggregation Group, exceeds ninety percent (90%) of the present value of Accrued
Benefits and the Aggregate Accounts of all Participants under this Plan and all
plans of an Aggregation Group.
SEC. 1.30. DISQUALIFIED PERSONS. "Disqualified Person" means a person who
is:
(a) A fiduciary (as hereinafter defined);
(b) A person providing services to the Plan;
(c) An Employer any of whose Employees are covered by the Plan;
(d) An employee organization any of whose members are covered by the
Plan;
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(e) An owner, direct or indirect, of fifty percent (50%) or more of:
(i) The combined voting power of all classes of stock entitled
to vote or the total value of shares of all classes of stock
of a corporation;
(ii) The capital interest or the profits interest of a
partnership, or
(iii) The beneficial interest of a trust or unincorporated
enterprise,
which is an Employer or an employee organization described in subparagraph (c)
or (d) above;
(f) A member of the family (as hereafter defined) of any individual
described in subparagraph (a), (b), (c), or (e) above;
(g) A corporation, partnership, or trust or estate of which (or in
which) fifty percent (50%) or more of:
(i) The combined voting power of all classes of stock entitled
to vote or the total value of shares of all classes of stock
of such corporation;
(ii) The capital interest or profits interest of such
partnership; or
(iii) The beneficial interest of such trust or estate is owned,
directly or indirectly, or held by persons described in
subparagraph (a), (b), (c), (d) or (e) above;
(h) An officer, director (or an individual having powers or
responsibilities similar to those of officers or directors), a ten percent (10%)
or more shareholder, or a highly compensated employee (earning ten percent (10%)
or more of the yearly wages of an Employer) of a person described in
subparagraph (c), (d), (e) or (g) above; or
(i) A ten percent (10%) or more (in capital or profits) partner or
joint venturer of a person described in subparagraph (c), (d), (e) or (g) above.
The Secretary of the Treasury, after consultation and coordination with the
Secretary of Labor or his delegate, may by regulation prescribe a percentage
lower than fifty percent (50%) for subparagraphs (e) and (g) above and lower
than ten percent (10%) for subparagraphs (h) and (i) above.
For purposes of this Section 1.30, the term "fiduciary" means any person
who:
(a) Exercises any discretionary authority or discretionary control
respecting management of the Plan or exercises any authority or control
respecting management or disposition of its assets;
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(b) Renders investment advice for a fee or other compensation, direct
or indirect, with respect to any monies or other property of the Plan, or has
any authority or responsibility to do so; or
(c) Has any discretionary authority or discretionary responsibility in
the administration of the Plan.
The term "fiduciary" includes any person designated under Section
405(c)(1)(B) of ERISA.
For purposes of subparagraphs (e)(i) and (g)(i) above, there shall be taken
into account indirect stockholdings which would be taken into account under
Section 267(c)(4) of the Code, except that, for purposes of this paragraph,
Section 267(c)(4) of the Code shall be treated as providing that the members of
the family of an individual shall include his spouse, ancestor, lineal
descendant, and any spouse of a lineal descendant.
For purposes of subparagraphs (e)(ii) and (iii), (g)(ii) and (iii), and (i)
above, the ownership of profits or beneficial interests shall be determined in
accordance with the rules for constructive ownership of stock provided in
Section 267(c) of the Code (other than paragraph (3) thereof), except that
Section 267(c)(4) of the Code shall be treated as providing that the members of
the family of an individual shall include his spouse, ancestor, lineal
descendant, and any spouse of a lineal descendant.
SEC. 1.31. EMPLOYER SECURITIES.
(A) Effective October 21, 1997, "Employer Securities" means common
stock issued by the Company, or by a corporation which is a member of the same
controlled group of the Company (within the meaning of Code Section 409(1)),
which is readily tradable on an established securities market. If there is no
common stock which meets such requirements, the term "Employer Securities" or
"Company Stock" shall mean common stock issued by the Company or by a
corporation which is a member of the same controlled group of the Company
(within the meaning of Code Section 409(1)), having a combination of voting
power and dividend rights equal to or in excess of:
(a) That class of common stock of the Company (or any other such
corporation) having the greatest voting power; and
(b) That class of common stock of the Company (or any other such
corporation) having the greatest dividend rights.
Noncallable preferred stock shall also be treated as "Employer Securities" if
such stock is convertible at any time into stock which meets the qualifications
above, and if such conversion is at a conversion price which (at the date of the
acquisition by the Trust) is reasonable. For purposes of the preceding sentence,
preferred stock shall be treated as noncallable if, pursuant to Regulations,
after the call there will be a reasonable opportunity for a conversion which
meets such requirements.
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(B) Prior to October 21, 1997, "Employer Securities" means nonvoting
common stock issued by the Company, or by a corporation which is a member of the
same controlled group of the Company.
SEC. 1.32. SEPARATION FROM SERVICE. "Separation from Service", "Separates
from Service", or "Separated from Service" means the Employee no longer has an
employment relationship with the Employer maintaining this Plan. Severance Date
is defined in Section 1.38.
SEC. 1.33. ALTERNATE PAYEE. "Alternate Payee" means a spouse, former
spouse, child, or other dependent of a Participant to whom benefits are payable
under the Plan pursuant to the terms of a qualified domestic relations order (as
defined in Section 414(p) of the Code).
SEC. 1.34. BOARD OF DIRECTORS. "Board of Directors" or "Board" means the
Board of Directors of the Company, as from time to time constituted.
SEC. 1.35. INCOME OF THE TRUST FUND. "Income of the Trust Fund" means the
net gain or loss of the General Investments Accounts of the Trust Fund, as
reflected by interest payments, dividends, realized and unrealized gains and
losses on securities, other than Employer Securities, and on other investment
transactions, and reduced by expenses paid from the Trust Fund. The expenses of
the Trust Fund do not include interest paid on any installment contracts for the
purchase of Employer Securities by the Trust or on any loan of the Trust
incurred to purchase Employer Securities.
SEC. 1.36. PARTICIPANT EMPLOYER SECURITIES ACCOUNT. "Participant Employer
Securities Account" means the Account of a Participant which is credited with
shares and fractional shares of Employer Securities purchased and paid for by
the Trust or contributed to the Trust or shares otherwise allocable to the
Participant's participation in the Plan. Participant Employer Securities Account
is also referred to as "Employer Securities Account."
SEC. 1.37. ROLLOVER ACCOUNT. "Rollover Account" has the meaning given in
Section 4.03 hereof.
SEC. 1.38. SEVERANCE DATE. "Severance Date" means termination of a
Participant's Service prior to Normal Retirement Age (as defined in Section 5.01
hereof) for reasons other than Retirement, Disability or death.
SEC. 1.39. VALUATION DATE. "Valuation Date" means each date on which the
Trust Fund is valued under Section 9.11 hereof.
SEC. 1.40. QUALIFIED PARTICIPANT. "Qualified Participant" means a
Participant who has attained age fifty-five (55) and who, commencing on the
Effective Date, has completed at least ten (10) years of participation in the
Plan. A "year of participation" means a Plan Year commencing on the Date in
which the Participant was eligible for an allocation of Employer contributions,
regardless of whether the Employer actually contributed to the Plan for that
Plan Year.
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SEC. 1.41. QUALIFIED ELECTION PERIOD. "Qualified Election Period" means the
six (6) Plan Years beginning with the Plan Year in which the Participant first
becomes a Qualified Participant.
SEC. 1.42. RETIREMENT. "Retirement" means a Participant's Separation from
Service with an Employer at or after attaining Normal Retirement Age.
SEC. 1.43. PARTICIPATION OF OTHER EMPLOYERS. Subject to Section 12.14
hereof, any other corporation or organization which is a member of a group of
corporations described in Code Section 409(l) that includes the Company may
adopt this Plan, effective as of the date indicated in its instrument of
adoption, if (i) its application is made in writing to the Board and ESOP
Committee; (ii) such application is accepted in writing by the Board and ESOP
Committee; and (iii) such approved Employer executes an instrument in writing
duly authorized by it adopting this Plan and delivers a copy thereof to the ESOP
Committee. Throughout this instrument, a distinction is purposely drawn between
rights and obligations of the Company and rights and obligations of an Employer.
The rights and obligations specified as belonging to the Company shall belong
only to it, including but not limited to, appointment of the ESOP Committee and
amendment of the Plan. An Employer's instrument of adoption may provide for the
following: (i) making of an initial contribution to the Trust, (ii) making such
other changes with respect to the Plan as are approved by the ESOP Committee,
and (iii) the designation of the name of the Plan with respect to its Employees.
Each Employer shall have the obligation, as hereinafter provided and as may be
provided in its instrument of adoption, to make contributions for its own
Participants, and no Employer shall have the obligation to make contributions
for the Participants of any other Employer unless determined by the ESOP
Committee. Any failure by an Employer to fulfill its own obligations under this
Plan shall, except as provided in the next preceding sentence, have no effect
upon any other Employer. An Employer may withdraw from this Plan without
affecting any other Employer. If an Employer withdraws or its participation is
terminated by the Board, such Employer may, in its sole discretion, adopt for
its Employees alone and independent of this Plan its own plan which shall be
considered a continuation of this Plan with respect to itself and
itsParticipants.
SEC. 1.44. INELIGIBLE EMPLOYEE. "Ineligible Employee" means an Employee who
ceases to be an Eligible Employee, but remains in the Service of the Employer or
a Related Employer.
SEC. 1.45. LATE RETIREMENT DATE. "Late Retirement Date" means the date of
Separation from Service with the Employer for any reason other than death where
the termination occurs subsequent to the Employee's attainment of Normal
Retirement Age.
SEC. 1.46. COMPANY. "Company" means VARI-LITE INTERNATIONAL, INC. or its
successor. The Company was formerly known as VARI-LITE HOLDINGS, INC. The tax
identification number of the Company is as follows: 75-2239444.
SEC. 1.47. ELIGIBLE ROLLOVER DISTRIBUTION. An "Eligible Rollover
Distribution" is any distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover Distribution does
not include the following: (1) any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the
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Distributee and the Distributee's designated beneficiary, or for a specified
period of ten (10) years or more; (2) any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and (3) the
portion of any distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
Employer Securities).
SEC. 1.48. ELIGIBLE RETIREMENT PLAN. An "Eligible Retirement Plan" is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the Distributee's Eligible
Rollover Distribution. In the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
SEC. 1.49. DISTRIBUTEE. "Distributee" includes an employee, former
employee, or beneficiary of either an employee or former employee. The
employee's or former employee's surviving spouse and the employee's or former
employee's spouse or former spouse who is the Alternate Payee under a qualified
domestic relations order (as defined in Section 414(p) of the Code) are
Distributees with regard to the interest of the spouse or former spouse.
SEC. 1.50. DIRECT ROLLOVER. A "Direct Rollover" is a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
SEC. 1.51. ELIGIBLE EMPLOYEE. Each Employee becomes an "Eligible Employee",
and thereby eligible to participate in the Plan, coincident with or immediately
following the later of the date on which he completes one (1) Year of Service
and has attained age twenty-one (21). For purposes of an Employee's eligibility,
the Plan takes into account all of his Years of Service (as defined in Section
2.02 hereof) with the Employer.
SEC. 1.52. FORFEITURE. "Forfeiture" refers to the amount of a Participant's
Accrued Benefit which is not Vested.
SEC. 1.53. VESTED. "Vested" refers to the portion of a Participant's
Accrued Benefit which is Nonforfeitable.
SEC. 1.54. AGGREGATE ACCOUNT. "Aggregate Account" means, with respect to
each Participant, the value of all Accounts maintained on behalf of a
Participant, whether attributable to Employer contributions, Participant
Forfeitures, or Employee contributions.
SEC. 1.55. FIDUCIARY. "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control and management of the Plan or
exercises any authority or control and management or disposition of Plan Assets,
(b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Trust or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan and Trust,
including, but not limited to, the Trustee and the Plan Administrator, and any
person designated under ERISA Section 405(c)(1)(B).
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SEC. 1.56. FORMER PARTICIPANT. "Former Participant" means a person who has
been a Participant but has ceased to be a Participant for any reason.
SEC. 1.57. INVESTMENT MANAGER. "Investment Manager" means any person, firm,
or corporation who is a registered investment advisor under the Investment
Advisors Act of 1940, a bank or an insurance company, and who has the power to
manage, acquire, or dispose of Plan Assets, and who acknowledges in writing his
fiduciary responsibility to the Plan.
SEC. 1.58. PARTICIPANT'S ACCOUNT. "Participant's Account" means the
accounts established and maintained under the Plan for each Participant with
respect to his total interest in the Plan.
SEC. 1.59. RETIRED PARTICIPANT. "Retired Participant" means a person who
has been a Participant, but has become entitled to benefits under the Plan.
SEC. 1.60. RETIREMENT DATE. "Retirement Date" means the date as of which a
Participant retires for reasons other than Disability or death, whether such
Retirement occurs on the date of a Participant's Retirement or the Participant's
Late Retirement Date.
SEC. 1.61. TERMINATED PARTICIPANT. "Terminated Participant" means a person
who has been a Participant but whose employment has been terminated other than
by death, Disability, or Retirement.
SEC. 1.62 QUALIFYING EMPLOYER SECURITIES. "Qualifying Employer Securities"
means Employer Securities (as defined in Section 1.31(A) hereof) which are (1)
stock or otherwise an equity security or (2) a bond, debenture, note, or
certificate, or other evidence of indebtedness described in Section 503(e) of
the Code.
SEC. 1.63. PUBLICLY TRADED. "Publicly Traded" means Qualifying Employer
Securities that are listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934 ("Securities Exchange Act") or
that are quoted on a system which is sponsored by a national securities
association registered under Section 15(b) of the Securities Exchange Act.
SEC. 1.64. NET PROFITS. "Net Profits" mean, with respect to any fiscal
year, the Employer's net income or profit for such fiscal year determined upon
the basis of the Employer's books of account in accordance with generally
accepted accounting principles without any reduction for tax based upon income,
or for contributions made by the Employer to the Plan.
SEC. 1.65. SELF-EMPLOYED INDIVIDUAL. "Self-Employed Individual" means, with
respect to any taxable year, an individual who has earned income (as defined in
Code Section 401(c)(2)), for such taxable year. To the extent provided in
Treasury regulations prescribed by the Secretary, such term also includes for
any taxable year:
(a) An individual who would be a self-employed individual within the
meaning of the preceding sentence, but for the fact that the trade or business
carried on by such individual did not have net profits for the taxable year, and
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(b) An individual who has been a self-employed individual within the
meaning of the preceding sentence for any prior taxable year.
SEC. 1.66. NORMAL RETIREMENT. "Normal Retirement" means Separation from
Service on or after reaching Normal Retirement Age.
SEC. 1.67. ANNUITY STARTING DATE. "Annuity Starting Date" means the first
day of the first period for which an amount is payable as an annuity. In the
case of a benefit not payable in the form of an annuity, "Annuity Starting Date"
means the first day on which all events have occurred which entitle the
Participant to the benefit.
SEC. 1.68. INACTIVE PARTICIPANT. An "Inactive Participant" is a Participant
who is no longer an Employee.
SEC. 1.69. ELECTIVE CONTRIBUTIONS. "Elective Contributions" are amounts
excludable from the Employee's gross income under Code Sections 125, 402(e)(3),
402(h)(B), or 403(b), and contributed by the Employer, at the Employee's
election, to the SHOWCO/VARI-LITE 401(k) SAVINGS PLAN or another 401(k) Plan, a
simplified employee pension, a cafeteria plan, or tax-sheltered annuity.
SEC. 1.70. ACP. "ACP" means the actual contribution percentage for a group
of Eligible Employees (as defined in Section 3.10 hereof) for a Plan Year. The
actual contribution percentage for a group of Eligible Employees for a Plan is
the average of the actual contribution ratios of the Eligible Employees in the
group for that Plan Year. An Eligible Employee's actual contribution ratio is
the sum of the Eligible Employee's contribution and matching contributions
allocated to the Eligible Employee's account for the Plan Year, and the
qualified nonelective and elective contributions treated as matching
contributions for the Plan Year, divided by the Eligible Employee's Compensation
taken into account for the Plan Year for which the Employee was actually a
participant.
SEC. 1.71. REGULATIONS. "Regulations" and "Treasury Regulations" means the
final and temporary regulations issued by the Internal Revenue Service which
interpret the provisions of the Internal Revenue Code of 1986, as amended.
"Regulations" and "Labor Regulations" also means the final and temporary
regulations issued by the Department of Labor which interpret the provisions of
the Employee Retirement Income Security Act of 1974, as amended.
SEC. 1.72. EXEMPTION LOAN. "Exempt Loan" means a loan or loans made to the
Trust by a Disqualified Person (as defined in Section 1.30 hereof) or a loan to
the Trust which a Disqualified Person guarantees, provided the loan or loans
satisfies the requirements of Treasury Regulation Section 54.4975-7(b).
SEC. 1.73. LEVERAGED EMPLOYER SECURITIES. "Leveraged Employer Securities"
means Employer Securities (as defined in Section 1.31(A) hereof as effective
October 21, 1997) acquired by the Trust with the proceeds of an Exempt Loan.
SEC. 1.74. RESTATEMENT DATE. "Restatement Date" of the Plan means January
1, 1998, unless otherwise set forth herein or required by the Code or the
Treasury Regulations.
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SEC. 1.75. PARTICIPANT GENERAL INVESTMENTS ACCOUNT. "Participant General
Investments Account" means the Account of a Participant which is increased by
his share of net income (or loss) of the Trust Fund and Employer contributions
and Participant Forfeitures, other than amounts invested in Employer Securities,
and which is decreased by amounts necessary to pay for Employer Securities.
SEC. 1.76. UNALLOCATED EMPLOYER SECURITIES ACCOUNT. "Unallocated Employer
Securities Account" means the suspense account maintained under the Plan to
which will be credited all shares of Employer Securities prior to the allocation
of such shares to the Participant Employer Securities Account.
SEC. 1.77. UNALLOCATED GENERAL INVESTMENTS ACCOUNT. "Unallocated General
Investments Account" means the suspense account maintained under the Plan which
reflects all transactions of the Plan involving cash and assets other than
Employer Securities, prior to the allocation of such cash and other assets to
the Participant General Investments Accounts.
SEC. 1.78. GENERAL INVESTMENT ACCOUNTS. "General Investments Accounts"
means the Participant General Investment Account and the Unallocated General
Investments Account.
SEC. 1.79. DISCRETIONARY CONTRIBUTIONS ACCOUNT. "Discretionary
Contributions Account" means the Account of a Participant which is credited with
such Participant's portion of the discretionary contributions made by the
Employer to the Plan for the Plan Year.
SEC. 1.80. MATCHING CONTRIBUTIONS ACCOUNT. "Matching Contributions Account"
means the Account of a Participant which is credited with such Participant's
portion of the discretionary matching contributions made by the Employer to the
Plan for the Plan Year.
SEC. 1.81. QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT. "Qualified
Nonelective Contributions Account" means the Account of a Participant which is
credited with such Participant's portion of the qualified nonelective
contributions made by the Employer to the Plan for the Plan Year.
SEC. 1.82. QUALIFYING MATCHING CONTRIBUTIONS ACCOUNT. "Qualifying Matching
Contributions Account" means the Account of a Participant which is credited with
such Participant's portion of the qualifying matching contributions made by the
Employer to the Plan for the Plan Year.
END OF ARTICLE I
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ARTICLE II
EMPLOYEE PARTICIPANTS
SEC. 2.01. PARTICIPATION. Each Eligible Employee becomes a Participant in
the Plan on the Plan Entry Date (if employed on such date) coincident with or
immediately following the date on which he became an Eligible Employee.
SEC. 2.02. YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Section 2.01 hereof, the Plan takes into account
all of his Years of Service with the Employer. "Year of Service" means an
eligibility computation period during which the Employee completes not less than
one thousand (1,000) Hours of Service. The initial eligibility computation
period is the first twelve (12) consecutive month period measured from the
Employment Commencement Date. The Plan measures the subsequent periods by
reference to the Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date. "Employment
Commencement Date" means the date on which the Employee first performs an Hour
of Service for the Employer. For purposes of this Section 2.02, "Employer" means
the Employer as defined in Section 1.02 hereof and any corporation, association,
partnership or other entity acquired by the Employer pursuant to Section 2.07
hereof.
SEC. 2.03. BREAK IN SERVICE - PARTICIPATION. For purposes of participation
in the Plan, the Plan does not apply any Break in Service rule.
SEC. 2.04. PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of his
reemployment. An Employee who satisfies the Plan's eligibility conditions but
who terminates employment with the Employer prior to becoming a Participant will
become a Participant on the later of the Plan Entry Date on which he would have
entered the Plan had he not terminated employment or the date of his
reemployment. Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with the
provisions of Section 2.01 hereof.
SEC. 2.05. INELIGIBILITY TO BECOME A PARTICIPANT. Notwithstanding the
provisions of Section 2.01 above, any Eligible Employee shall not be eligible
and shall not become a Participant, and any Employee who is a Participant shall
cease to be eligible to be a Participant, if:
(a) Such Employee is or becomes a member of a collective bargaining
unit if retirement benefits covering such unit were the subject of good faith
bargaining and coverage under this Plan was not agreed to under such bargaining;
(b) Such Employee is employed by a Related Employer that is not an
adopting Employer or is excluded from participation by the terms of the
Employer's adoption agreement;
(c) Such individual is not on the payroll of an Employer, unless such
individual is considered a "Leased Employee" under Section 1.28 hereof;
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(d) Such Employee is a non-resident alien who receives no earned
income from an Employer that constitutes income from sources within the United
States; or
(e) The date the Employee elects not to participate in the Plan,
pursuant to Section 2.08 hereof.
SEC. 2.06. CONTINUANCE AS A PARTICIPANT. Notwithstanding any other
provision herein, a Participant shall continue as a Participant until whichever
of the following dates first occurs:
(a) The date of such Participant's death;
(b) The date the Participant ceases to be an Employee;
(c) The date the Participant becomes ineligible to participate in the
Plan, pursuant to Section 2.05 hereof; or
(d) The date the Participant elects not to participate in the Plan,
pursuant to Section 2.08 hereof.
After an individual ceases to be a Participant, his Accounts shall continue
to be held and invested pursuant to the terms of the Plan, and shall share in
the earnings or losses of the Plan pending distribution pursuant to Article VI
hereof. However, he shall be ineligible to share in Employer contributions or
Participant Forfeitures, except as otherwise provided in Sections 3.06(B) and
3.06(C) hereof.
SEC. 2.07. EMPLOYMENT BY EMPLOYER; SERVICE WITH NEWLY ACQUIRED ENTITIES;
RECORDS OF EMPLOYER. Notwithstanding any other provision herein, this provision
applies, as follows:
(a) In the event the Employer has or shall acquire the control of any
organization by the purchase of assets or stock, merger, amalgamation,
consolidation or any other similar event, the Board of Directors may direct to
what extent, if any, employment by such organization shall be deemed to be
employment by the Employer, and, in connection therewith, may specify a special
Plan Entry Date.
(b) The personnel records of the Employer or any Related Employer
shall be conclusive evidence for the purpose of determining the period of
employment of any and all Employees.
SEC. 2.08. ELECTION NOT TO PARTICIPATE. An Eligible Employee, or any
present Participant, may elect not to participate in the Plan or enter into an
agreement with the Employer not to participate in the Plan. For an election to
be effective for a particular Plan Year, the Employee or Participant must either
(1) file the election in writing with the ESOP Committee not later than thirty
(30) days prior to the Accounting Date of that Plan Year unless accepted by the
ESOP Committee at a different time or (2) enter into an agreement with the
Employer providing the Employee or Participant shall not participate in the Plan
(collectively referred to herein as "election"). The Employer will not make a
contribution under the Plan for the Employee or for
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the Participant for the Plan Year for which the election or agreement is
effective, nor for any succeeding Plan Year. The Employee or Participant may
re-elect to participate in the Plan unless the election or agreement provides
otherwise. After an Employee's or Participant's election not to participate has
been effective for at least two (2) Plan Years, unless the agreement between the
Employee and Employer provides otherwise, the Employee or Participant may
re-elect to participate in the Plan for any Plan Year and subsequent Plan Years.
If the Employee or Participant is permitted to enter or re-enter the Plan, he
may re-elect to participate in the Plan by filing his election in writing with
the ESOP Committee not later than thirty (30) days prior to the Accounting Date
of the Plan Year for which his election is to be effective. An Employee or
Participant who re-elects to participate may not again elect not to participate
in the Plan. If an Employee is a Self-Employed Individual, the Employee's
election must be effective no later than the date the Employee first would
become a Participant in the Plan and the election is irrevocable (except as
permitted by Treasury regulations without creating a Code Section 401(k)
arrangement with respect to that Self-Employed Individual). The ESOP Committee
must furnish an Employee or a Participant any form required for purposes of an
election under this Section 2.08. An election timely filed is effective for the
entire Plan Year.
A Participant who elects not to participate in the Plan may not receive a
distribution of his Accrued Benefit attributable thereto except as provided
under Article VI hereof. However for, each Plan Year for which a Participant's
election not to participate is effective, his Account(s), if any, continues to
share in Trust Fund allocations under Article IX hereof. The Employee or the
Participant receives vesting credit under Article V hereof for each included
Year of Service during the period the election not to participate is effective.
End of Article II
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ARTICLE III
EMPLOYER CONTRIBUTIONS AND PARTICIPANT FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS: SECTIONS 3.01
THROUGH 3.06
SEC. 3.01. AMOUNT.
(a) CONTRIBUTION FORMULA. For each Plan Year, the Employer will
contribute to the Trust the following amounts:
(1) MATCHING CONTRIBUTIONS. An amount equal to a percentage
which the Employer may from time to time deem advisable of
the Participant's Eligible Contributions made to the
SHOWCO/VARI-LITE 401(k) SAVINGS PLAN. The Employer will
determine the amount of its matching contributions to this
Plan by disregarding Participants not entitled to an
allocation of matching contributions under the
SHOWCO/VARI-LITE SAVINGS PLAN. The Employer may make its
matching contributions in cash, Employer Securities, or any
combination thereof as the Employer from time to time may
determine, provided the contribution consisting of all or
part of Employer Securities is not a prohibited transaction
under the Code and under ERISA.
(2) QUALIFYING MATCHING CONTRIBUTIONS. The amount the Employer,
in its sole discretion, designates as qualifying matching
contributions. The Employer may make its qualifying matching
contributions in cash, Employer Securities, or any
combination thereof as the Employer from time to time may
determine, provided the contribution consisting of all or
part of Employer Securities is not a prohibited transaction
under the Code and under ERISA.
(3) QUALIFIED NONELECTIVE CONTRIBUTIONS. The amount the
Employer, in its sole discretion, designates as qualified
nonelective contributions. The Employer may make its
qualified nonelective contributions in cash, Employer
Securities, or any combination thereof as the Employer from
time to time may determine, provided the contribution
consisting of all or part of Employer Securities is not a
prohibited transaction under the Code and under ERISA.
(4) DISCRETIONARY NONELECTIVE CONTRIBUTIONS. The Employer may
make discretionary contributions from time to time. The
Employer, at the time of contribution, may designate whether
such discretionary nonelective contributions will be held in
discretionary Participant Employer Securities Accounts. The
Employer may make its nonelective contributions in cash,
Employer Securities, or any combination thereof as the
Employer
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from time to time may determine, provided the contribution
consisting of all or part of Employer Securities is not a
prohibited transaction under the Code and under ERISA.
(5) RESTRICTIONS ON CONTRIBUTIONS. The Employer may contribute
to this Plan regardless of whether it has Net Profits and
notwithstanding whether some or all of such contributions
may fail to qualify for income tax deductions by the
Employer. However, the Employer may not make a contribution
to the Trust for any Plan Year to the extent the
contribution would exceed the Participants' Maximum
Permissible Amounts pursuant to Part 2 of this Article III.
(6) ELIGIBLE CONTRIBUTIONS. A Participant's "eligible
contributions" are the deferral contributions allocated to
the Participant for the Plan Year in the SHOWCO/VARI-LITE
401(K) SAVINGS PLAN. Eligible contributions do not include
deferral contributions that are excess deferrals as defined
in the SHOWCO/VARI-LITE 401(K) SAVINGS PLAN. For this
purpose:
(a) Excess deferrals relate first to deferral
contributions for the Plan Year not otherwise
eligible for a matching contribution; and
(b) If the Plan Year is not a calendar year, the
excess deferrals for a Plan Year are the last
deferrals made for a calendar year.
(B) RETURN OF CONTRIBUTIONS. The Employer contributes to this Plan on
the condition its contribution is not due to a mistake of fact and the Internal
Revenue Service will not disallow the deduction for its contribution. The
Trustee, upon written request from the ESOP Committee, must return to the
Employer the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution disallowed as a
deduction under Code Section 404. The ESOP Committee will direct the Trustee to
not return any portion of the Employer's contribution under the provisions of
this Paragraph longer than one (1) year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and
then, only to the extent of the disallowance.
The ESOP Committee will direct the Trustee to not increase the amount of
the Employer contribution returnable under this Section 3.01 for any earnings
attributable to the contribution, but the ESOP Committee will direct the Trustee
to decrease the Employer contribution returnable for any losses attributable to
it. The ESOP Committee may direct the Trustee to require the Employer to furnish
it whatever evidence the Company deems necessary to enable
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the ESOP Committee to confirm the amount the Employer has requested be returned
is properly returnable under ERISA.
(C) CONTRIBUTIONS IN EMPLOYER SECURITIES. If the Company makes a
contribution in Employer Securities, the Company will make the contribution of
Employer Securities at fair market value determined at the time of the
contribution.
(D) CORRECTION OF ALLOCATION OF CONTRIBUTIONS. If the Employer
contributes to this Plan and such contributions, all or in part, are allocated
to an incorrect Account or Accounts, or not properly allocated to an Account or
Accounts, the ESOP Committee will direct the Trustee to properly allocate all or
part of the contributions to the proper Account or Accounts for such Plan Year.
SEC. 3.02. DETERMINATION OF CONTRIBUTIONS. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
SEC. 3.03. TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Trust within the time prescribed
by the Code or applicable Treasury Regulations to be deductible on its federal
corporate income tax return.
SEC. 3.04. ALLOCATIONS.
(A) METHOD OF ALLOCATION. To make allocations under the Plan, the ESOP
Committee should, at least, establish a Matching Contributions Account,
Qualifying Matching Contributions Account, Qualified Nonelective Contributions
Account, Discretionary Nonelective Contributions Account, and a Participant
Employer Securities Account for each Participant. The ESOP Committee may also
establish an Unallocated Employer Securities Account, Unallocated General
Investments Account, and Participant General Investments Account as described in
this Section 3.04(A) as required.
(1) MATCHING CONTRIBUTIONS. The ESOP Committee will allocate, or
direct the Trustee to allocate, matching contributions as of
the last day of each Plan Year or as otherwise designated or
specified by the ESOP Committee. The ESOP Committee will
allocate, or direct the Trustee to allocate, the matching
contributions to the Matching Contributions Account of each
Participant who satisfies the accrual requirements for
matching contributions specified in Section 3.06 hereof. The
allocation of matching contributions to a Participant's
Matching Contributions Account is in the same proportion
that each Participant's eligible contributions bears to the
total eligible contributions of all Participants, unless
otherwise designated by the ESOP Committee.
(2) QUALIFYING MATCHING CONTRIBUTIONS. If the Employer, at the
time of contribution, designates a contribution to be a
qualifying matching contribution for the Plan Year, the ESOP
Committee will
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allocate that qualifying matching contribution to the
Qualifying Matching Contributions Account of each
Participant eligible for an allocation of qualifying
matching contributions. The ESOP Committee will make the
allocation to each Eligible Participant's Qualifying
Matching Contributions Account in the same ratio that the
Participant's Compensation for the Plan Year bears to the
total Compensation of all eligible Participants for the Plan
Year unless otherwise determined by the ESOP Committee. For
purposes of allocating the qualified nonelective
contributions, the term "Eligible Participant" means any
Participant.
(3) QUALIFIED NONELECTIVE CONTRIBUTIONS. If the Employer, at the
time of contribution, designates a contribution to be a
qualified nonelective contribution for the Plan Year, the
ESOP Committee will allocate, or direct the Trustee to
allocate, that qualified nonelective contribution to the
Qualified Nonelective Contributions Account of each
Participant eligible for an allocation of qualified
nonelective contributions. The ESOP Committee will make, or
direct the Trustee to make, the allocation to each eligible
Participant's Qualified Nonelective Contributions Account in
the same ratio that the Participant's Compensation for the
Plan Year bears to the total Compensation of all eligible
Participants for the Plan Year. For purposes of allocating
the qualified nonelective contributions, the term "eligible
Participant" means any Participant.
(4) DISCRETIONARY NONELECTIVE CONTRIBUTIONS. Subject to any
restoration allocation required under Section 5.04, the ESOP
Committee will allocate and credit each annual Employer
nonelective contributions (and Participant Forfeitures, if
any) to the Participant Employer Securities Account of each
Participant who satisfies the conditions of Section 3.06 in
the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all
Participants for the Plan Year.
(5) PARTICIPANT EMPLOYER SECURITIES ACCOUNT. The Participant
Employer Securities Account of each Participant shall be
increased by his allocable share (determined under the Plan)
of (i) the shares of Employer Securities (including
fractional shares) purchased and paid for by the Plan and
designated by the Employer to be held in the Participant
Employer Securities Account, (ii) shares of Employer
Securities contributed in kind by the Employer and
designated by the Employer to be held in the Participant
Employer Securities Account; (iii) Forfeitures of Employer
Securities held in another Participant's Employer Securities
Account; (iv) stock (in kind) dividends of Employer
Securities held in his Participant Employer Securities
Account; and (v) Employer Securities released from the
Unallocated Employer Securities Account. Such
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credits shall be recorded in whole shares and fractional
shares of Employer Securities in order that such Account
shall share in any appreciation in the market value of the
shares of Employer Securities in the Participant Employer
Securities Account, or in any decreases in such market
value. All fractional shares shall be computed at least to
the nearest one-one hundredth (1/100th) of a share (i.e., at
least two places to the right of the decimal).
(6) PARTICIPANT GENERAL INVESTMENTS ACCOUNT. The Participant
General Investments Account of each Participant will be
increased (or decreased) by the dollar value of his
allocable share of (i) the net income (or loss) of the Plan
attributable to such Account; (ii) cash dividends and other
rights or warrants received on Employer Securities in his
Participant Employer Securities Account; (iii) Employer
contributions and Participant Forfeitures in other than
Employer Securities and designated by the Employer to be
held in the Participant General Investments Account, and
(iv) appreciation (or depreciation) in the fair market value
of the assets of the Plan (other than Employer Securities)
attributable to such General Investments Account. The
General Investments Account of each Participant will be
decreased for any payments on purchases of Employer
Securities or repayment of debt (including principal and
interest) incurred for the purchase of Employer Securities
which are attributable to such General Investments Account.
(7) UNALLOCATED EMPLOYER SECURITIES ACCOUNTS, UNALLOCATED
GENERAL INVESTMENT ACCOUNTS AND PARTICIPANT GENERAL
INVESTMENTS ACCOUNT.
(i) UNALLOCATED EMPLOYER SECURITIES ACCOUNT. The
Unallocated Employer Securities Account shall be
increased as of each Valuation Date by the number of
shares of Employer Securities purchased with the
proceeds of a loan obligation or installment purchase.
The Unallocated Employer Securities Account shall also
be increased as of each Valuation Date by the stock (in
kind) dividends received with respect to Employer
Securities held in such Account and by any Employer
Securities purchased with funds of the Unallocated
General Investments Account. The Unallocated Employer
Securities Account shall be decreased by the number of
shares of Employer Securities that are to be released
from such Account in accordance with Section 3.05
hereof.
(ii) UNALLOCATED GENERAL INVESTMENTS ACCOUNT. The
Unallocated General Investments Account will be
increased (or decreased) with a dollar value of such
Account's allocable share of (A) the net income (or
loss) of the Plan
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attributable to such Account; (B) cash dividends
and other rights or warrants received on Employer
Securities in the Unallocated Employer Securities
Account; and (C) amounts attributable to such
Account that are used to purchase Employer
Securities or to pay installment purchase
contracts or loan obligations of the Plan in
accordance with Section 3.05 hereof.
(iii) PARTICIPANT GENERAL INVESTMENTS ACCOUNT. The
Participant General Investments Account of each
Participant will be increased (or decreased) by the
dollar value of his allocable share of (i) the net
income (or loss) of the Plan attributable to such
Account; (ii) Employer nonelective contributions and
Participant Forfeitures in other than Employer
Securities; and (iii) appreciation (or depreciation) in
the fair market value of the assets of the Plan (other
than Employer Securities) attributable to such Account.
The Participant General Investments Account of each
Participant will be decreased for any payments on
purchases of Employer Securities or repayment of debt
(including principal and interest) incurred for the
purchase of Employer Securities which are attributable
to such Account.
(8) ALLOCATION PROCEDURES. Subject to Section 3.05 hereof,
accounts shall be adjusted in accordance with the following:
(i) INCOME AND APPRECIATION IN VALUE OF MATCHING
CONTRIBUTIONS ACCOUNTS, QUALIFYING MATCHING
CONTRIBUTIONS ACCOUNTS, QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNTS, DISCRETIONARY NONELECTIVE
CONTRIBUTIONS ACCOUNTS, ROLLOVER ACCOUNTS AND OTHER
ACCOUNTS. The income of Participant's Matching
Contributions Accounts, Qualified Nonelective
Contributions Accounts, Discretionary Nonelective
Contributions Accounts, Qualifying Matching
Contributions Accounts, Rollover Accounts and other
Accounts (including the appreciation or depreciation in
value of the assets in such Accounts) shall be
allocated to such Accounts in proportion to the
balances in such Accounts as of the next preceding
Valuation Date, but after first reducing each such
Account balance by any distributions or charges from
such Account since the next preceding Valuation Date.
Such amounts shall be allocated among the Accounts in
such uniform and reasonable manner as the ESOP
Committee may prescribe.
(ii) INCOME AND APPRECIATION IN VALUE OF EMPLOYER SECURITIES
ACCOUNTS. The income (except stock in kind) dividends
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with respect to Employer Securities (except the
unrealized appreciation or depreciation in value of
Employer Securities) held in Participant Employer
Securities Accounts shall be allocated to the
appropriate Participant Employer Securities Account, in
proportion to the balances, as of the last Valuation
Date, in the respective Participant Employer Securities
Accounts to which the income is attributable but after
first reducing each such Account balance by any
distributions or charges from such Accounts since the
last Valuation Date. Stock (in kind) dividends with
respect to Employer Securities shall be allocated to
the Account which held the Employer Securities that
generated the stock (in kind) dividend.
(iii) INCOME AND APPRECIATION IN VALUE OF GENERAL
INVESTMENTS ACCOUNTS. The income of the Participant
General Investments Accounts and the Unallocated
General Investments Account under the Plan (including
the appreciation or depreciation in value of the assets
in the General Investments Accounts under the Plan)
shall be allocated to such Accounts in proportion to
the balances in such Accounts as of next preceding
Valuation Date, but after first reducing each such
Account balance by any distributions or charges from
such Account since the next preceding Valuation Date.
Such amounts shall be allocated among the Participant
General Investments Accounts and the Unallocated
General Investments Accounts in such uniform and
reasonable manner as the ESOP Committee may prescribe.
(iv) FORFEITURES. Forfeitures occurring during a Plan Year
(net of any amount of Forfeitures allocated to the
restoration of prior Forfeitures) shall be allocated to
the Account of each Participant. Forfeitures shall be
allocated according to the ratio that the Compensation
for the Plan Year of each Participant bears to the
total Compensation of all such Participants for the
Plan Year. If the Participant has an interest in more
than one (1) class of Employer Securities which have
been allocated to the Participant Employer Securities
Account (and any other Account holding Employer
Securities), the ESOP Committee, to the extent
possible, must forfeit the same proportion of each
class of stock held in the Participant Employer
Securities Account (and any other Account holding
Employer Securities). In making a Forfeiture allocation
under this provision, the ESOP Committee will base
Forfeitures of Employer Securities upon fair market
value of the Employer Securities as of the Accounting
Date of the Forfeitures.
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(B) TOP HEAVY MINIMUM ALLOCATION.
(1) MINIMUM ALLOCATION. The ESOP Committee will determine
whether the Plan is top heavy in any Plan Year. If the
Employer satisfies the top heavy minimum benefit
requirements in another qualified retirement plan it
maintains, such as the SHOWCO/VARI-LITE 401(k) SAVINGS PLAN,
this Plan does not guarantee a top heavy minimum allocation.
If another qualified retirement plan maintained by the
Employer does not satisfy the top heavy minimum benefit
requirements and the Plan is top heavy in any Plan Year, the
following provisions apply:
(a) Each Non-Key Employee who is a Participant and is
employed by the Employer on the last day of the Plan
Year will receive a top heavy minimum allocation for
that Plan Year, irrespective of whether he satisfies
the Hours of Service condition under Section 3.06(B)
hereof; and
(b) The top heavy minimum allocation is the lesser of three
percent (3%) of the Non-Key Employee's Compensation for
the Plan Year or the highest contribution rate for the
Plan Year made on behalf of any Key Employee. However,
if a defined benefit plan maintained by the Employer
which benefits a Key Employee depends on this Plan to
satisfy the anti-discrimination rules of Code Section
401(a)(4) or the coverage rules of Code Section 410 (or
another plan benefiting the Key Employee so depends on
such defined benefit plan), the top heavy minimum
allocation is three percent (3%) of the Non-Key
Employee's Compensation regardless of the contribution
rate for the Key Employees.
(2) SPECIAL DEFINITIONS. For purposes of this Section 3.04(B),
the term "Participant" includes any Employee otherwise
eligible to participate in the Plan but who is not a
Participant because of his failure to make elective
deferrals under the Code Section 401(k) arrangement or
because of his failure to make mandatory employee
contributions. For purposes of Section 3.04(B)(1)(b) hereof,
"Compensation" means Compensation as defined in Section
1.10(A) hereof, except: (i) Compensation does not include
Elective Contributions (as defined in Section 1.69 hereof);
(ii) any exclusions from Compensation (other than the
exclusion of Elective Contributions and the exclusions
described in paragraphs (1), (2), (3), and (4) of Section
1.10 (A) hereof) do not apply; and (iii) any modification to
the definition of Compensation in Section 3.06 hereof does
not apply.
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(3) DETERMINING CONTRIBUTION RATES. For purposes of this Section
3.04(B), a Participant's contribution rate is the sum of
Employer contributions (not including Employer contributions
to Social Security) and Participant Forfeitures allocated to
the Participant's Account for the Plan Year divided by his
or her Compensation for the entire Plan Year. However, for
purposes of satisfying a Participant's top heavy minimum in
Plan Years beginning after December 31, 1988, a non-key
employee Participant's contribution rate does not include
any Elective Contributions under a Code Section 401(k)
arrangement nor any Employer matching contributions
necessary to satisfy the nondiscrimination requirements of
Code Section 401(k) or Code Section 401(m). To determine a
Participant's contribution rate, the ESOP Committee must
treat all qualified top heavy defined contribution plans
maintained by the Employer or by any Related Employers
(described in Section 1.27 of the Plan) as a single plan.
(4) NO ALLOCATIONS. If, for a Plan Year, there are no
allocations of Employer contributions or Participant
Forfeitures for any Key Employee, the Plan does not require
any top heavy minimum allocation for the Plan Year, unless a
top heavy minimum allocation applies because of the
maintenance by the Employer of more than one (1) plan.
(5) METHOD OF COMPLIANCE. The Plan will satisfy the top heavy
minimum allocation in accordance with this Section
3.04(B)(5). The ESOP Committee first will allocate the
Employer contributions (and Participant Forfeitures, if any)
for the Plan Year in accordance with the allocation formula
under Section 3.04(A) hereof. The Employer then will
contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top
heavy minimum allocation and whose contribution rate for the
Plan Year, under this Plan, is less than the top heavy
minimum allocation. The additional amount is the amount
necessary to increase the Participant's contribution rate to
the top heavy minimum allocation. The ESOP Committee will
allocate the additional contribution to the Account of the
Participant on whose behalf the Employer makes the
contribution.
SEC. 3.05 TREATMENT OF EMPLOYER SECURITIES PURCHASED UNDER INSTALLMENT
PAYMENT CONTRACTS OR WITH BORROWED FUNDS. Effective as of October 21, 1997, the
following provisions shall apply:
(a) DEBT PURCHASE OF EMPLOYER SECURITIES. Any Employer Securities
purchased by the Plan under an installment payment contract or with borrowed
funds shall initially be allocated to the Unallocated Employer Securities
Account.
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(b) REALLOCATION FROM UNALLOCATED EMPLOYER SECURITIES ACCOUNT. As of
the Accounting Date of each Plan Year, and as of any special Valuation Date if
directed by the ESOP Committee, there shall be transferred from the Unallocated
Employer Securities Account to the Participant Employer Securities Accounts, a
portion of the Employer Securities purchased under an installment purchase
contract or with funds borrowed by the Plan equal to the number of shares
determined by taking the shares so purchased which have not theretofore been
released from the Unallocated Employer Securities Account multiplied in a manner
specified in Section 12.21(F) hereof. Each Participant's share of the Employer
Securities to be allocated pursuant to the preceding sentence shall be
determined by multiplying the number of shares of Employer Securities to be
allocated in a manner specified in Section 12.21(F) hereof.
(c) PAYMENTS ON INSTALLMENT PURCHASE CONTRACTS AND LOAN OBLIGATIONS OF
THE PLAN. As of the Accounting Date of each Plan Year, and as of any special
Valuation Date if directed by the ESOP Committee, installment payments,
including principal and interest, made by the Trust out of Employer
contributions made with respect to the period then ending, under installment
purchase contracts for the purchase of Employer Securities, or under loan
agreements covering funds borrowed by the Trust to finance the purchase of
Employer Securities, will reduce Participant General Investments Accounts in the
same proportion that Employer contributions are allocated under the provisions
of Section 3.04(A)(1) hereof. Unless required by law or herein, dividends paid
on Employer Securities held in the Unallocated Employer Securities Account shall
be allocated in accordance with Section 3.04(A) hereof. For purposes of
determining payments on installment purchase contracts and loan obligations of
the Plan, each such installment purchase contract and/or loan obligation shall
provide for payment of principal and interest substantially in accordance with
the following: All income ("specified income") allocable to the Unallocated
Employer Securities Account and Unallocated General Investments Account that is
attributable to collateral for the obligation or attributable to Employer
contributions made in order to meet the Plan's obligation under such a loan
shall be used, before any Employer contributions are so used, to pay principal
amounts due under such installment purchase contracts or loan obligations;
Employer contributions shall be first applied to repay interest under
installment purchase contracts or loan obligations with any excess used to fund
current principal requirements not otherwise funded by the specified income; if
the specified income of the Unallocated Employer Securities Account and
Unallocated General Investments Account is not sufficient to pay principal due
under the installment purchase contract or loan obligation, then Employer
contributions shall be used to fund the difference; if the specifid income
exceeds the amount necessary to pay principal due on installment purchase
contracts and loan obligations for the Plan Year, then such excess amount shall
be first used to pay interest currently due with respect to the installment
purchase contracts or loan obligations and any remaining amount of income may,
at the direction of the ESOP Committee, be used to prepay principal due on
installment purchase contracts and loan obligations in succeeding Plan Years.
(d) DIVIDENDS USED TO REPAY LOAN. If dividends on allocated shares are
to be used to repay an Exempt Loan (as defined in Section 1.72 hereof), the
following provisions shall apply:
(1) Employer Securities at least equal in value to the dividends
used to make loan payments shall be allocated to the Account
that would otherwise have received the dividend allocations;
and
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(2) Remaining released Employer Securities shall be allocated as a
contribution pursuant to Section 3.04(A)(1) hereof.
If dividends on allocated Employer Securities and unallocated Employer
Securities are not used to repay an Exempt Loan (as defined in Section 1.72
hereof), such dividends shall be allocated to the Participant's General
Investments Account and Unallocated General Investments Account pursuant to
Section 3.04(A)(4)(ii) hereof as income. The ESOP Committee shall direct the
Trustee to distribute the cash to the Participants (and Beneficiaries) within
ninety (90) days after the close of the Plan Year in which the dividends have
been paid to the extent of each Participant's respective Nonforfeitable vesting
percentages determined as of the close of the Plan Year pursuant to Section 5.03
hereof.
SEC. 3.06. ACCRUAL OF BENEFIT. The ESOP Committee will determine the accrual
of benefit (Employer contributions and Participant Forfeitures) on the basis of
the Plan Year.
(A) COMPENSATION TAKEN INTO ACCOUNT. In allocating an Employer
contribution to a Participant's Account, the ESOP Committee, except for purposes
of determining the top heavy minimum contribution under Section 3.04(B) hereof,
will take into account only the Compensation determined for the portion of the
Plan Year in which the Employee actually is a Participant.
(B) HOURS OF SERVICE REQUIREMENT. Subject to the top heavy minimum
allocation requirement of Section 3.04(B) hereof, the ESOP Committee will not
allocate any portion of an Employer contribution and Participant Forfeitures, if
any, for a Plan Year to any Participant's Account if the Participant does not
complete a minimum of one thousand (1,000) Hours of Service during the Plan
Year, unless the Participant terminates employment during the Plan Year because
of death or Disability or on or after the attainment of Normal Retirement Age in
the current Plan Year or in a prior Plan Year.
(C) EMPLOYMENT REQUIREMENT. If the conditions of Section 3.06(B) hereof
are satisfied and the Participant Separates from Service during a Plan Year,
such Participant will not share in the allocation of Employer contributions and
Participant Forfeitures, if any, for that Plan Year unless the Participant
Separates from Service because of death or Disability or on or after the
attainment of Normal Retirement Age in the current Plan Year or in a prior Plan
Year.
(D) PARTICIPATION IN 401(K) PLAN REQUIREMENT. If the conditions of
Sections 3.06(B) and (C) are satisfied, the ESOP Committee will not allocate any
portion of an Employer contribution and Participant Forfeitures, if any, for a
Plan Year to a Participant's Account unless the Participant is a participant in
the SHOWCO/VARI-LITE 401(k) SAVINGS PLAN and making Elective Deferrals therein,
or the Employer contribution is a Qualified Matching Contribution or a Qualified
Nonelective Contribution. If an Employee takes appropriate actions to make
Elective Contributions to the SHOWCO/VARI-LITE 401(K) SAVINGS PLAN the Employer
because of an error does not permit such Employee to make Elective Contributions
to the SHOWCO/VARI-LITE 401(K) SAVINGS PLAN, such Employee shall be considered a
participant in the SHOWCO/VARI-LITE 401(K) SAVINGS PLAN and making Elective
Deferrals therein. In the event a Participant's Elective Contributions to the
SHOWCO/VARI-LITE 401(K) SAVINGS PLAN reaches the Section 402(g) of the Code
maximum permissible amount, the ESOP Committee will take into account the lesser
of (i) the Participant's actual
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Compensation during the Plan Year, or (ii) the maximum Compensation limitation
set forth in Section 1.10(C) of the Plan.
(E) SUSPENSION OF ACCRUAL REQUIREMENTS. The Plan suspends the accrual
requirements under Sections 3.06(B) and (C) hereof if the Plan fails to satisfy
the Participation Test or the Coverage Test. A Plan satisfies the Coverage Test
if, for the Plan Year, the number of Non-highly Compensated Employees (as
hereafter defined) who benefit under the Plan is at least equal to seventy
percent (70%) of the total number of Includible Non-highly Compensated Employees
for the Plan Year. "Includible Employees" are all Employees other than the
following: (1) those Employees excluded from participating in the Plan for the
entire Plan Year by reason of the collective bargaining unit exclusion or the
nonresident alien exclusion described under the Code or by reason of eligibility
requirements of Section 1.51 hereof; and (2) any Employee who incurs a
Separation from Service during the Plan Year and fails to complete at least five
hundred and one (501) Hours of Service for the Plan Year. A "Non-highly
Compensated Employee" is an Employee who is not a Highly Compensated Employee.
For purposes of the Coverage Test, an Employee is benefiting under the Plan for
a Plan Year if, under Section 3.04 hereof, he is entitled to an allocation for
the Plan Year.
If this Section 3.06(E) applies for a Plan Year, the ESOP Committee
will suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend the accrual requirements for each Includible Employee who incurred an
earlier Separation from Service, from the latest to the earliest Separation from
Service date, until the Coverage Test for the Plan Year. If two or more
Includible Employees have a Separation from Service on the same day, the ESOP
Committee will suspend the accrual requirements for all such Includible
Employees, notwithstanding whether the Plan can satisfy the Coverage Test by
accruing benefits for fewer than all such Includible Employees. If the Plan
suspends the accrual requirements for an Includible Employee, that Employee will
share in the allocation of Employer contributions and Participant Forfeitures,
if any, without regard to the number of Hours of Service he has earned for the
Plan Year and without regard to whether he is employed by the Employer on the
last day of the Plan Year.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.07 AND 3.08
SEC. 3.07. LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. The amount
of Annual Additions (as defined in Section 3.08 hereof) which the ESOP Committee
may allocate under this Plan on a Participant's behalf for a Limitation Year (as
defined in Section 3.08 hereof) may not exceed the Maximum Permissible Amount
(as defined in Section 3.08 hereof). If the amount the Employer otherwise would
contribute to the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the Employer will
reduce the amount of its contribution so the Annual Additions for the Limitation
Year will equal the Maximum Permissible Amount. If an allocation of Employer
contributions, pursuant to Section 3.04 hereof, would result in an Excess Amount
(as defined in Section 3.08 hereof) (other than an Excess Amount described in
Section 3.07(B) hereof) to the Participant's Account, the ESOP Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The ESOP Committee will make this reallocation on the
basis
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of the allocation method under the Plan as if the Participant whose Account
otherwise would receive the Excess Amount is not eligible for an allocation of
Employer contributions. If the amount the Employer otherwise would contribute to
the Participant's Account will still cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the ESOP Committee
will dispose of such excess amount in accordance with Section 3.07(B) hereof to
the extent permitted by the Code and the Regulations.
(A) ESTIMATION OF COMPENSATION. Prior to the determination of the
Participant's actual Compensation for a Limitation Year, the ESOP Committee may
determine the Maximum Permissible Amount on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The ESOP Committee must
make this determination on a reasonable and uniform basis for all Participants
similarly situated. The ESOP Committee must reduce any Employer contributions
(including any allocation of Participant Forfeitures) based on estimated annual
Compensation by any Excess Amounts carried over from prior years. As soon as is
administratively feasible after the end of the Limitation Year, the ESOP
Committee will determine the Maximum Permissible Amount for such Limitation Year
on the basis of the Participant's actual Compensation for such Limitation Year.
(B) DISPOSITION OF EXCESS AMOUNT. If, pursuant to Sections 3.07 and
3.07(A) hereof, or because of (i) the allocation of Participant Forfeitures, or
(ii) a recharacterization of proceeds from the sale of Employer Securities as
Annual Additions, there is an Excess Amount with respect to a Participant for a
Limitation Year, the ESOP Committee will dispose of such Excess Amount to the
extent permitted by the Code and Regulations as follows:
(1) The ESOP Committee will return any nondeductible voluntary
Employee contributions, if any, to the Participant to the
extent that the return would reduce the Excess Amount.
(2) If, after the application of paragraph (1), an Excess Amount
still exists, and the Plan covers the Participant at the end
of the Limitation Year, the ESOP Committee will use the Excess
Amount(s) to reduce future Employer contributions (including
any allocation of Participant Forfeitures) under the Plan for
the next Limitation Year and for each succeeding Limitation
Year, as is necessary, for the Participant. The Participant
may elect to limit his Compensation for allocation purposes to
the extent necessary to reduce his allocation for the
Limitation Year to the Maximum Permissible Amount and
eliminate the Excess Amount.
(3) If, after the application of paragraph (1), an Excess Amount
still exists, and the Plan does not cover the Participant at
the end of the Limitation Year, then the ESOP Committee will
hold the Excess Amount unallocated in a suspense account. The
ESOP Committee will apply the suspense account to reduce
Employer contributions (including allocation of Participant
Forfeitures) for all remaining Participants in the next
Limitation Year, and in each succeeding Limitation Year if
necessary.
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(4) Unless required by applicable law, the ESOP Committee will not
distribute any Excess Amount(s) to Participants or to Former
Participants.
(C) MORE THAN ONE PLAN. The Employer may contribute under another
defined contribution plan in addition to its contributions under this Plan. If
the ESOP Committee allocated an Excess Amount to a Participant's Account on an
allocation date of this Plan which coincides with an allocation of the
SHOWCO/VARI-LITE 401(k) SAVINGS PLAN or another defined contribution plan, the
ESOP Committee will attribute the total Excess Amount allocated as of such date
to the SHOWCO/VARI-LITE 401(k) SAVINGS PLAN or any other qualified plan
maintained by the Employer unless the ESOP Committee determines otherwise or
applicable law prohibits such allocation to the other qualified plan maintained
by the Employer.
SEC. 3.08. DEFINITIONS - ARTICLE III. For purposes of Section 3.07 hereof,
the following terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year: (i) all Employer contributions;
(ii) all Participant Forfeitures; and (iii) all Employee contributions. For
purposes of the preceding sentence, the amount of Employer contributions shall
be determined based upon the lesser of (i) the fair market value of Employer
Securities contributed to the Plan (determined at the time of contribution by
the most recent valuation) plus any contributions which were not used to
purchase Employer Securities or pay on an Exempt Loan; or (ii) the amount of
cash contributed to the Plan. Except to the extent provided in Treasury
regulations, Annual Additions include excess contributions described in Code
Section 401(k), and excess aggregate contributions described in Code Section
401(m) regardless of whether the Plan distributes or forfeits such excess
amounts. Excess deferrals under Code Section 402(g) are not Annual Additions
unless distributed after the correction period described in Code Section 402(g).
In addition, proceeds from the sale of unallocated Employer Securities are not
Annual Additions. Annual Additions include Excess Amounts reapplied to reduce
Employer contributions under Section 3.07 hereof. Amounts allocated to an
individual medical account (as defined in Code Section 415(l)(2)) included as
part of a defined benefit plan maintained by the Employer are Annual Additions.
Furthermore, Annual Additions include contributions paid or accrued attributable
to post-retirement medical benefits allocated to the separate account of a key
employee (as defined in Code Section 419A(d)(3)) under a welfare benefit fund
(as defined in Code Section 419(e)) maintained by the Employer, but only for
purposes of the dollar limitation applicable to the Maximum Permissible Amount.
Notwithstanding any provision herein, "Annual Additions" do not include
any Employer contributions applied by the ESOP Committee (not later than the due
date, including extensions, for filing the Employer's federal income tax return
for that Plan Year) to pay interest on an Exempt Loan, and any Leveraged
Employer Securities the ESOP Committee allocates as Forfeitures; provided,
however, the provisions of this sentence do not apply in a Plan Year for which
the ESOP Committee allocated more than one-third (1/3) of the Employer
contributions applied to pay principal and interest on an Exempt Loan to
Restricted Participants (as defined below). The ESOP Committee may reallocate
the Employer contributions in accordance with Section 3.04 hereof to the
Accounts of non-Restricted Participants to the extent necessary in order to
satisfy this special limitation. For purposes of this Section 3.08, "Restricted
Participants"
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means Participants who are Highly Compensated Employees within the meaning of
Code Section 414(q).
(b) For Plan Years beginning prior to January 1, 1998, "Compensation"
means for purposes of applying the limitations of Part 2 of this Article III,
"Compensation" as determined under the general definition of Compensation in
Section 1.10(A) hereof that excludes Elective Contributions (as defined in
Section 1.69 hereof) and excludes (1) reimbursements or other expense
allowances, (2) P.S. 58 costs, (3) fringe benefits (cash or non-cash), (4)
moving expenses, and (5) deferred compensation and welfare benefits. For Plan
Years beginning after December 31, 1997, "Compensation" means for purposes of
applying the limitations of Part 2 of this Article III, "Compensation" as
determined under the general definition of Compensation in Section 1.10(A)
hereof that includes Elective Contributions (as defined in Section 1.69 hereof
to the extent permitted under the Code) and excludes (1) reimbursements or other
expense allowances, (2) P.S. 58 costs, (3) fringe benefits (cash or non-cash),
(4) moving expenses, and (5) deferred compensation and welfare benefits.
(c) "Maximum Permissible Amount" means the lesser of (i) Thirty
Thousand Dollars ($30,000) or (ii) twenty-five percent (25%) of the
Participant's Compensation for the Limitation Year. If there is a short
Limitation Year because of a change in Limitation Year, the ESOP Committee will
multiply the Thirty Thousand Dollars ($30,000) (or adjusted limitation) by the
following fraction:
Number of months in the short Limitation Year
12
(d) "Employer" means the Employer that adopts this Plan and any Related
Employer described in Section 1.27 hereof. Solely for purposes of applying the
limitations of Part 2 of this Article III, the ESOP Committee will determine
Related Employers described in Section 1.27 hereof by modifying Code Sections
414(b) and (c) in accordance with Code Section 415(h).
(e) "Excess Amount" means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(f) "Limitation Year" means the Plan Year. If the Employer amends the
Limitation Year to a different twelve (12) consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year for which the
Employer makes the amendment, creating a short Limitation Year.
(g) "Defined contribution plan" means a retirement plan which provides
for an individual account for each participant and for benefits based solely on
the amount contributed to the participant's account, and any income, expenses,
gains and losses, and any forfeitures of accounts of other participants which
the plan may allocate to such participant's account. The ESOP Committee must
treat all defined contribution plans (whether or not terminated) maintained by
the Employer as a single plan. Solely for purposes of the limitations of Part 2
of this Article III, the ESOP Committee will treat employee contributions made
to a defined benefit plan maintained by the Employer as a separate defined
contribution plan. The ESOP Committee
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also will treat as a defined contribution plan an individual medical account (as
defined in Code Section 415(l)(2)) included as part of a defined benefit plan
maintained by the Employer and a welfare benefit fund under Code Section 419(e)
maintained by the Employer to the extent there are post-retirement medical
benefits allocated to the separate account of a key employee (as defined in Code
Section 419A(d)(3)).
(h) "Defined benefit plan" means a retirement plan which does not
provide for individual accounts for Employer contributions. The ESOP Committee
must treat all defined benefit plans (whether or not terminated) maintained by
the Employer as a single plan.
(i) "Defined benefit plan fraction"
Projected annual benefit of the
PARTICIPANT UNDER THE DEFINED BENEFIT PLAN(S)
The lesser of (i) 125% (subject to the "100%
limitation" in paragraph (k)) of the dollar
limitation in effect under Code Section
415(b)(1)(A) for the Limitation Year, or (ii)
140% of the Participant's average Compensation
for his high 3 consecutive Years of Service
To determine the denominator of this fraction, the ESOP Committee will
make any adjustment required under Code Section 415(b) and will determine a Year
of Service as a Plan Year in which the Employee completed at least one thousand
(1,000) Hours of Service. The "projected annual benefit" is the annual
retirement benefit (adjusted to an actuarially equivalent straight life annuity
if the plan expresses such benefit in a form other than a straight life annuity
or qualified joint and survivor annuity) of the Participant under the terms of
the defined benefit plan on the assumptions he continues employment until his
normal retirement age (or current age, if later) as stated in the defined
benefit plan, his compensation continues at the same rate as in effect in the
Limitation Year under consideration until the date of his normal retirement age
and all other relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year for all future
Limitation Years.
CURRENT ACCRUED BENEFIT: If the Participant accrued benefits in one or
more defined benefit plans maintained by the Employer which were in existence on
May 5, 1986, the dollar limitation used in the denominator of this fraction will
not be less than the Participant's Current Accrued Benefit. A Participant's
"Current Accrued Benefit" is the sum of the annual benefits under such defined
benefit plans which the Participant had accrued as of the end of the 1986
Limitation Year (the last Limitation Year beginning before January 1, 1987),
determined without regard to any change in the terms or conditions of the Plan
made after May 5, 1986, and without regard to any cost of living adjustment
occurring after May 5, 1986. This Current Accrued Benefit rule applies only if
the defined benefit plans individually and in the aggregate satisfied the
requirements of Code Section 415 as in effect at the end of the 1986 Limitation
Year.
(j) "Defined contribution plan fraction"
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The sum, as of the close of the Limitation Year, of
the Annual Additions to the Participant's
ACCOUNT UNDER THE DEFINED CONTRIBUTION PLAN(S)
The sum of the lesser of the following amounts
determined for the Limitation Year and for each
prior Year of Service with the Employer: (i)
125% (subject to the "100% limitation" in
paragraph (k)) of the dollar limitation in
effect under Code Section 415(c)(1)(A) for the
Limitation Year (determined without regard to
the special dollar limitations for employee
stock ownership plans), or (ii) 35% of the
Participant's Compensation for the Limitation
Year
For purposes of determining the defined contribution plan fraction, the
ESOP Committee will not recompute Annual Additions in Limitation Years beginning
prior to January 1, 1987, to treat all Employee contributions as Annual
Additions. If the Plan satisfied Code Section 415 for Limitation Years beginning
prior to January 1, 1987, the ESOP Committee will redetermine the defined
contribution plan fraction and the defined benefit plan fraction as of the end
of the 1986 Limitation Year, in accordance with this Section 3.08. If the sum of
the redetermined fractions exceeds 1.0, the ESOP Committee will subtract
permanently from the numerator of the defined contribution plan fraction an
amount equal to the product of (1) the excess of the sum of the fractions over
1.0, times (2) the denominator of the defined contribution plan fraction. In
making the adjustment, the ESOP Committee must disregard any accrued benefit
under the defined benefit plan which is in excess of the Current Accrued
Benefit. This Plan continues any transitional rules applicable to the
determination of the defined contribution plan fraction under the Employer's
Plan as of the end of the 1986 Limitation Year.
(k) "100% limitation" - If the 100% limitation applies, the ESOP
Committee must determine the denominator of the defined benefit plan fraction
and the denominator of the defined contribution plan fraction by substituting
100% for 125%. The 100% limitation applies only if: (i) the Plan's top heavy
ratio exceeds 90%; or (ii) the Plan's top heavy ratio is greater than 60%, and
the Employer does not provide extra minimum benefits which satisfy Code Section
416(h)(2).
SEC. 3.09. NONDISCRIMINATION RULES FOR EMPLOYER MATCHING CONTRIBUTIONS AND
EMPLOYEE CONTRIBUTIONS. The ESOP Committee must determine whether the annual
Employer matching contributions, if any, and the Employee contributions, if any,
satisfy one of the following average contribution percentage ("ACP") tests: (1)
The ACP for the Highly Compensated Group does not exceed 1.25 times the ACP of
the Nonhighly Compensated Group; or (2) The ACP for the Highly Compensated Group
does not exceed the ACP for the Nonhighly Compensated Group by more than two (2)
percentage points and the ACP for the Highly Compensated Group is not more than
twice the ACP for the Nonhighly Compensated Group.
(A) CALCULATION OF ACP. The average contribution percentage for a
group is the average of the separate contribution percentages calculated for
each Eligible Employee who is a member of that group. An Eligible Employee's
contribution percentage for a Plan Year is
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the ratio of the Eligible Employee's aggregate contributions for the Plan Year
to the Employee's Compensation for the Plan Year. "Aggregate contributions" are
matching contributions and employee contributions. For aggregated family members
treated as a single Highly Compensated Employee, the contribution percentage of
the family unit is the contribution percentage determined by combining the
aggregate contributions and Compensation of all aggregated family members.
The ESOP Committee, in a manner consistent with Treasury regulations,
may determine the contribution percentages of the Eligible Employees by taking
into account qualified nonelective contributions or elective deferrals, or both
made to this Plan or to any other qualified Plan maintained by the Employer. The
ESOP Committee may not include qualified nonelective contributions in the ACP
test unless the allocation of nonelective contributions is nondiscriminatory
when the ESOP Committee takes into account all nonelective contributions
(including the qualified nonelective contributions) and also when the ESOP
Committee takes into account only the nonelective contributions not used in the
ACP test described in this Section 3.09 of the Plan. The ESOP Committee may not
include elective deferrals in the ACP, unless the Plan which includes the
elective deferrals satisfies the ADP test both with and without the elective
deferrals included in this ACP test. The ESOP Committee may not include in the
ACP test any qualified nonelective contributions or elective deferrals under
another qualified plan unless that plan has the same plan year as this Plan. The
ESOP Committee must maintain records to demonstrate compliance with the ACP
test, including the extent to which the Plan used qualified nonelective
contributions or elective deferrals to satisfy the test.
(B) SPECIAL AGGREGATION RULE FOR HIGHLY COMPENSATED EMPLOYEES. To
determine the contribution percentage of any Highly Compensated Employee, the
aggregate contributions taken into account must include any matching
contributions and any employee contributions made on his behalf to any other
plan maintained by the Employer, unless the other plan is an ESOP described in
Code Section 4975(e)(7) or Section 409. If the plans have different plan years,
the ESOP Committee will determine the combined aggregate contributions on the
basis of the plan years ending in the same calendar year as if a single plan.
(C) AGGREGATION OF CERTAIN PLANS. If the Employer treats two plans as
a unit for coverage or nondiscrimination purposes, the Employer must combine the
plans to determine whether either plan satisfies the ACP test. This aggregation
rule applies to the contribution percentage determination for all Eligible
Employees, regardless of whether an Eligible Employee is a Highly Compensated
Employee or a Nonhighly Compensated Employee. The ESOP Committee also may elect
to aggregate plans which the Employer does not treat as a unit for coverage or
nondiscrimination purposes. For Plan Years beginning after December 31, 1989, an
aggregation of plans under this paragraph does not apply to plans which have
different plan years and, for Plan Years beginning after December 31, 1988, the
ESOP Committee may not aggregate an ESOP (or the ESOP portion of a
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plan) with a non-ESOP plan (or non-ESOP portion of a plan).
(D) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. The ESOP Committee
will determine excess aggregate contributions under the Plan. If the ESOP
Committee determines the Plan fails to satisfy the ACP test for a Plan Year, it
must distribute the excess aggregate contributions, as adjusted for allocable
income, during the next Plan Year. However, the Employer will incur an excise
tax equal to ten percent (10%) of the amount of excess aggregate contributions
for a Plan Year not distributed to the appropriate Highly Compensated Employees
during the first 22 months of that next Plan Year. The excess aggregate
contributions are the amount of the aggregate contributions allocated on behalf
of the Highly Compensated Employees which causes the Plan to fail to satisfy the
ACP test. The ESOP Committee will distribute to each Highly Compensated Employee
his respective share of the excess aggregate contributions. The ESOP Committee
will determine the respective shares of excess aggregate contributions by
starting with the Highly Compensated Employee(s) who has the greatest dollar
amount of elective deferrals, reducing his contribution percentage to the next
highest contribution percentage, then, if necessary, reducing the contribution
percentage of the Highly Compensated Employee(s) at the next highest dollar
amount of elective deferrals (including the contribution percentage of the
Highly Compensated Employee(s) whose contribution percentage the ESOP Committee
already has reduced), and continuing in this manner until the ACP for the Highly
Compensated Group satisfies the ACP test. A distribution of excess aggregate
contributions (and income) may be made under this Subsection "(D)" without
regard to any notice or consent otherwise required under Code Sections
411(a)(11) and 417.
(E) ALLOCABLE INCOME. To determine the amount of the corrective
distribution required under this Section 3.09 of the Plan, the ESOP Committee
must calculate the allocable income for the Plan Year in which the excess
aggregate contributions arose and for the "gap period" measured from the
beginning of the next Plan Year to the date of the distribution. "Allocable
income" means net income or net loss. The Committee will determine allocable
income in the same manner for excess contributions, except the numerator of the
allocation fraction will be the Highly Compensated Employee's excess aggregate
contributions for the Plan Year and the denominator of the allocation fraction
will be the sum of: (a) the total account balance of the Employee attributable
to the Employee and matching contributions, and amounts treated as matching
contributions as of the beginning of the Plan Year; and (b) the Employee and
matching contributions, and amounts treated as matching contributions for the
Plan Year.
(F) CHARACTERIZATION OF EXCESS AGGREGATE CONTRIBUTIONS. The ESOP
Committee will treat a Highly Compensated Employee's allocable share of excess
aggregate contributions in the following priority: (1) on a pro rata basis to
matching contributions which the ESOP Committee has included in the ACP test;
and (2) then to qualified nonelective contributions used in the ACP test. To the
extent the Highly Compensated Employee's excess aggregate contributions are
attributable to matching contributions, and he is not one hundred percent (100%)
vested in his Accrued Benefit attributable to matching contributions, the ESOP
Committee will distribute only the vested portion and forfeit the nonvested
portion. The vested portion of the Highly Compensated Employee's excess
aggregate contributions attributable to Employer matching contributions is the
total amount of such excess aggregate contributions (as adjusted for allocable
income) multiplied by his vested percentage (determined as of the last day of
the Plan Year for which the Employer made the matching contribution). The Plan
will allocate forfeited excess aggregate contributions as Employer discretionary
matching
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contributions for the Plan Year in which the forfeiture occurs, except the ESOP
Committee will not allocate these forfeitures to the Highly Compensated
Employees who incurred the forfeitures.
SEC. 3.10. DEFINITIONS. For purposes of Section 3.09, the following
definitions shall apply:
(a) "Highly Compensated Employee" means an Eligible Employee who
satisfies the definition in Section 1.07 hereof.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is
not a Highly Compensated Employee.
(c) For purposes of the ACP test described in Section 3.09 hereof, an
"Eligible Employee" means a Participant who is eligible to receive an allocation
of Employer matching contributions (or would be eligible if he made the type of
contributions necessary to receive an allocation of matching contributions) and
a Participant who is eligible to make Employee contributions, regardless of
whether he actually makes Employee contributions. An Employee continues to be an
Eligible Employee during a period the Plan suspends the Employee's right to make
elective deferrals or nondeductible contributions following a hardship
distribution.
(d) "Highly Compensated Group" means the group of Eligible Employees
who are Highly Compensated Employees for the Plan Year.
(e) "Non-highly Compensated Group" means the group of Eligible
Employees who are Non-highly Compensated Employees for the Plan Year.
(f) "Compensation" means, except as specifically provided under this
Article III, Compensation as defined for nondiscrimination purposes in Section
1.10(B) hereof. Compensation includes Compensation received only for the portion
of the Plan Year in which the Employee was an Eligible Employee and only for the
portion of the Plan Year in which the Plan or the Code Section 401(k)
arrangement was in effect.
(g) "Deferral contributions" means the sum of the deferral
contributions the Employer contributes on behalf of an Eligible Employee.
(h) "Elective deferrals" are the deferral contributions the Employer
contributes at the election of an Eligible Employee. If the Code Section 401(k)
arrangement includes a cash or deferred feature, any portion of a cash or
deferred contribution contributed because of the Employee's failure to make a
cash election is an elective deferral, but any portion of a cash or deferred
contribution over which the Employee does not have a cash election is not an
elective deferral. Elective deferrals do not include amounts which have become
currently available to the Employee prior to the election nor amounts designated
as nondeductible employee contributions at the time of deferral or contribution.
(i) "Matching contributions" or "Regular Matching contributions" are
contributions made by the Employer on account of elective deferrals under a Code
Section 401(k) arrangement or on account of employee contributions. Matching
contributions also
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include Participant forfeitures allocated on account of such elective deferrals
or employee contributions.
(j) "Nonelective contributions" are contributions made by the Employer
which are not subject to a deferral election by an Employee and which are not
matching contributions.
(k) "Qualified matching contributions" are matching contributions
which are one hundred percent (100%) Nonforfeitable at all times and which are
subject to the distribution restrictions described in Paragraph "(m)" of this
Section 3.10 of the Plan. Matching contributions are not one hundred percent
(100%) Nonforfeitable at all times if the Employee does not have a one hundred
percent (100%) Nonforfeitable interest because of his Years of Service taken
into account under the vesting schedule of the Plan.
(l) "Qualified nonelective contributions" are nonelective
contributions which are one hundred percent (100%) Nonforfeitable at all times
and which are subject to the distribution restrictions described in Paragraph
"(m)" of this Section 3.10 of the Plan. Nonelective contributions are not one
hundred percent (100%) Nonforfeitable at all times if the Employee does not have
a one hundred percent (100%) Nonforfeitable interest because of his Years of
Service taken into account under the vesting schedule of the Plan.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (1) the Participant's death, disability,
termination of employment, attainment of age 592, (2) financial hardship
satisfying the requirements of Code Section 401(k) and the applicable Treasury
regulations, (3) plan termination, without establishment of a successor defined
contribution plan (other than an employee stock ownership plan ("ESOP") or a
simplified employee pension), (4) a sale of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used in a trade or business, but
only to an employee who continues employment with the corporation acquiring
those assets, or (5) a sale by a corporation of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)), but only to an employee who
continues employment with the subsidiary. A distribution on account of financial
hardship, as described in clause (2), may not include earnings on elective
deferrals credited as of a date later than December 31, 1988, and may not
include any earnings on qualified matching contributions and qualified
nonelective contributions, regardless of when credited. A distribution described
in clauses (3), (4) or (5), must be a lump sum distribution, as required under
Code Section 401(k)(10).
(n) "Employee contributions" are contributions made by a Participant
on an after-tax basis, whether voluntary or mandatory, and designated, at the
time of contribution, as an employee (or nondeductible) contribution. Elective
deferrals and deferral contributions are not employee contributions.
END OF ARTICLE III
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ARTICLE IV
PARTICIPANT CONTRIBUTIONS
SEC. 4.01. PARTICIPANT VOLUNTARY CONTRIBUTIONS. The Plan does not permit
(or require) Participant voluntary contributions.
SEC. 4.02. PARTICIPANT VOLUNTARY CONTRIBUTIONS - SPECIAL DISCRIMINATION
TEST. The ESOP Committee, in accordance with Section 4.01 above, is not required
to satisfy a special discrimination test under Code Section 401(m).
SEC. 4.03. PARTICIPANT ROLLOVER CONTRIBUTIONS. If the SHOWCO/VARI-LITE
401(k) SAVINGS PLAN (or a successor plan) permits Participant rollover
contributions, this Section 4.03 does not apply. If the SHOWCO/VARI-LITE 401(k)
SAVINGS PLAN (or a successor plan) does not exist or does not permit Participant
rollover contributions, this Plan will permit Participant rollover contributions
provided the following provisions are satisfied:
(A) ROLLOVER CONTRIBUTIONS. Any Participant, with the Company's and
the ESOP Committee's written consent and after filing with the ESOP Committee
the form prescribed by the ESOP Committee, may contribute cash or other property
to the Trust other than as a voluntary contribution, if the contribution is a
"Rollover Contribution" which the Code permits an employee to transfer either
directly or indirectly from one qualified plan to another qualified plan. A
Rollover Contribution is not an Annual Addition under Part 2 of Article III
hereof.
(B) ROLLOVER ACCOUNT. A "Rollover Contribution" accepted by the ESOP
Committee shall be credited to a separate Rollover Account, and (i) shall be
held pursuant to the provisions of this Plan; (ii) shall be fully vested at all
times and not be subject to forfeiture for any reason; and (iii) may not be
withdrawn by the Employee, in whole or in part, for any reason, except as
provided in Section 6.02 hereof.
(C) DEFINITIONS. For purposes of this Section 4.03, the term "Rollover
Contribution" shall include:
(1) Amounts transferred to this Plan directly from another
qualified corporate plan which does not provide a life annuity
form of payment, provided that the trust from which such funds
are transferred permits the transfer to be made;
(2) Amounts which are properly characterized as an Eligible
Rollover Distribution (including a lump sum distribution),
received by a person who is not an Employee, from another
qualified corporate plan with respect to such person's service
for such corporate employer, which amounts are eligible for
tax free rollover treatment and which are transferred by the
Employee to the Trustee of this Plan within sixty (60) days
following receipt thereof;
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(3) Amounts transferred to this Plan from an individual retirement
account, provided that the individual retirement account
contains no assets: (A) other than assets which were
previously distributed to a person who is now an Employee by
another qualified corporate plan as an Eligible Rollover
Distribution (including a lump sum distribution) with respect
to such person's service for such corporate employer, which
amounts were eligible for tax-free rollover treatment, and
which amounts were deposited in such individual retirement
account within sixty (60) days of receipt thereof; and (B)
other than earnings on said assets; and
(4) Amounts distributed to a person (who is now an Employee) from
an individual retirement account meeting the requirements of
paragraph (3) above, and transferred by the Employee to this
Plan within sixty (60) days of receipt thereof from such
individual retirement account.
(D) TRANSFERS. Prior to accepting the transfers to which this Section
4.03 applies, the Company and ESOP Committee may require the following: (1) the
Employee to furnish satisfactory evidence that the proposed transfer is in fact
a "Rollover Contribution" which the Code permits an Employee to make to a
qualified plan; (2) the Employee to establish that the amounts to be transferred
to this Plan meet the requirements of this Section 4.03; (3) the Employee to
furnish an opinion of counsel or other documentation satisfactory that the
amounts to be transferred meet the requirements of this Section 4.03 and will
not jeopardize the tax exempt status of this Plan for any reason (including, but
not limited to, the failure of the amount to be excluded from the definition of
Annual Addition in Section 415(c)(2) of the Code, and thereby causing the Annual
Addition to the account to exceed the permissible limits of Section 415 of the
Code, or create adverse tax consequences to the Employer); and (4) the Employee
to furnish to the ESOP Committee and Company a written opinion from legal
counsel (legal counsel must be approved by the ESOP Committee) which provides
that such Rollover Contribution does not violate any provisions under the
federal and state securities laws and that the Company is not required to
register any Employer Securities held by the Plan under the federal and state
securities laws as a result of such Rollover Contribution.
(E) INVESTMENT. The Rollover Account shall be invested in a
diversified manner in accordance with the provisions of this Plan and in
investments other than Employer Securities. Effective October 21, 1997, the
Trustee is authorized to invest the Rollover Account in Employer Securities.
(F) WRITTEN CONSENT OF ESOP COMMITTEE AND COMPANY. Notwithstanding any
provision to the contrary herein, no Participant Rollover Contributions will be
accepted unless the ESOP Committee and Company consent to such Rollover
Contribution in writing.
END OF ARTICLE IV
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 46
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<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
SEC. 5.01. NORMAL RETIREMENT AGE. A Participant's Normal Retirement Age is
sixty-five (65) years of age. Under Section 6.07 hereof, a Participant who
remains in the employ of the Employer after attaining Normal Retirement Age
shall continue to participate in the Plan until his Late Retirement Date. A
Participant's Accrued Benefit derived from Employer contributions is one hundred
percent (100%) Nonforfeitable upon and after his attaining Normal Retirement Age
(if employed by the Employer on or after that date).
SEC. 5.02. PARTICIPANT DISABILITY OR DEATH. If a Participant's employment
with the Employer terminates as a result of death or Disability, the
Participant's Accrued Benefit derived from Employer contributions will be one
hundred percent (100%) Nonforfeitable.
SEC. 5.03. VESTING SCHEDULE.
(A) QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT AND ROLLOVER ACCOUNT.
A Participant has a one hundred percent (100%) nonforfeitable interest at all
times in his Qualified Nonelective Contributions Account and Rollover Account.
(B) VESTING SCHEDULE. Except as provided in Sections 5.01, 5.02,
5.03(A), and 9.14 hereof, for each Year of Service a Participant's
Nonforfeitable Percentage of his Accrued Benefit derived from Matching
Contributions, Qualifying Matching Contributions Account, and Discretionary
Nonelective Contributions equals the percentage in the following vesting
schedule:
<TABLE>
<CAPTION>
PERCENT OF
YEARS OF SERVICE NONFORFEITABLE
WITH THE EMPLOYER ACCRUED BENEFIT
----------------- ---------------
<S> <C>
Less than 3 years None
3 years, but less than 4 30%
4 years, but less than 5 40%
5 years, but less than 6 60%
6 years, but less than 7 80%
7 years or more 100%
</TABLE>
Effective the first Plan Year for which the Plan is a top heavy Plan and until
such time as the Plan is no longer deemed to be top heavy, the ESOP Committee
will calculate a Participant's Nonforfeitable Percentage of his Accrued Benefit
under the following vesting schedule:
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<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
YEARS OF SERVICE NONFORFEITABLE
WITH THE EMPLOYER ACCRUED BENEFIT
------------------ ---------------
<S> <C>
Less than 2 years None
2 years, but less than 3 30%
3 years, but less than 4 40%
4 years, but less than 5 60%
5 years, but less than 6 80%
6 years or more 100%
</TABLE>
The ESOP Committee will apply the top heavy vesting schedule to Participants who
are credited with at least one (1) Hour of Service after the top heavy vesting
schedule becomes effective. A shift between vesting schedules under this Section
5.03 is an amendment to the vesting schedule and the ESOP Committee must apply
the rules of Section 7.04 hereof accordingly. A shift to a new vesting schedule
under this Section 5.03 is effective on the first day of the Plan Year for which
the top heavy status of the Plan changes.
(C) SPECIAL VESTING FORMULA. If a distribution (other than a cash-out
distribution described in Section 5.04 hereof) is made to a partially-vested
Participant, and the Participant has not incurred a Forfeiture Break in Service
(as defined in Section 5.08(B) hereof) at the relevant time, the ESOP Committee
will establish a separate Account for the Participant's Accrued Benefit. At any
relevant time following the distribution, the ESOP Committee will determine the
Participant's Nonforfeitable Accrued Benefit derived from Employer contributions
in accordance with the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current vesting
percentage at the relevant time, "AB" is the Participant's Employer-derived
Accrued Benefit at the relevant time, "R" is the ratio of "AB" to the
Participant's Employer-derived Accrued Benefit immediately following the earlier
distribution and "D" is the amount of the earlier distribution. If, under a
restated Plan, the Plan has made distribution to a partially-vested Participant
prior to its restated Effective Date and is unable to apply the cash-out
provisions of Section 5.04 hereof to that prior distribution, this special
vesting formula also applies to that Participant's remaining Account.
SEC. 5.04. CASH-OUT DISTRIBUTIONS. If, pursuant to Article VI hereof, a
partially-vested Participant receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Section 5.08(B) hereof), the cash-out
distribution will result in an immediate Forfeiture of the non-vested portion of
the Participant's Accrued Benefit derived from Employer contributions. A
partially-vested Participant is a Participant whose Nonforfeitable percentage
determined under Section 5.03 hereof is less than one hundred percent (100%). A
cash-out distribution is a distribution of the entire present value of the
Participant's Nonforfeitable Accrued Benefit.
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially-vested
Participant who is re-employed by the Employer after receiving a cash-out
distribution of the Nonforfeitable percentage of his Accrued Benefit may repay
the amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to
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<PAGE>
restoration by reason of the conditions of this Section 5.04(A). If a
partially-vested Participant makes the cash-out distribution repayment, the ESOP
Committee, subject to the conditions of this Section 5.04(A), must restore his
Accrued Benefit attributable to Employer contributions to the same dollar amount
as the dollar amount of his Accrued Benefit on the Accounting Date, or other
Valuation Date, immediately preceding the date of the cash-out distribution,
unadjusted for any gains or losses occurring subsequent to that Accounting Date,
or other Valuation Date. Restoration of the Participant's Accrued Benefit
includes restoration of all Code Section 411(d)(6) protected benefits with
respect to that restored Accrued Benefit, in accordance with applicable Treasury
regulations. The ESOP Committee will not restore a re-employed Participant's
Accrued Benefit under this paragraph if:
(1) Five (5) years have elapsed since the Participant's first
re-employment date with the Employer following the cash-out
distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as
defined in Section 5.08(B) hereof). This condition also
applies if the Participant makes repayment within the Plan
Year in which he incurs the Forfeiture Break in Service and
that Forfeiture Break in Service would result in a complete
forfeiture of the amount the ESOP Committee otherwise would
restore.
(B) TIME AND METHOD OF RESTORATION. If neither of the two conditions
preventing restoration of the Participant's Accrued Benefit applies, the ESOP
Committee will restore the Participant's Accrued Benefit as of the Plan year
Accounting Date coincident with or immediately following the repayment. To
restore the participant's Accrued Benefit, the ESOP Committee, to the extent
necessary, will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant Forfeitures the ESOP
Committee would otherwise allocate under Section 3.04 hereof;
(2) Second, the amount, if any, of the Trust Fund net income or
gain for the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the
extent made under a discretionary formula.
To the extent the amounts described in clauses (1), (2) and (3)
above are insufficient to enable the ESOP Committee to make the required
restoration, the Employer must contribute, without regard to any requirement
or condition of Section 3.01 hereof, the additional amount necessary to
enable the ESOP Committee to make the required restoration. If, for a
particular Plan Year, the ESOP Committee must restore the Accrued Benefit of
more than one re-employed Participant, then the ESOP Committee will make the
restoration allocation(s) to each such Participant's Account in the same
proportion that a Participant's restored amount for the Plan Year bears to
the restored amount for the Plan Year of all re-employed Participants. The
ESOP Committee will not take into account the allocation under this Section
5.04 in applying the limitation on allocations under Part 2 of Article III
hereof.
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(C) ZERO PERCENT VESTED PARTICIPANT. The deemed cash-out rule applies
to a zero percent (0%) vested Participant. A zero percent (0%) vested
Participant is a Participant whose Accrued Benefit derived from Employer
contributions is entirely forfeitable at the time of his Separation from
Service. If the Participant's Account is not entitled to an allocation of
Employer Contributions or Participant Forfeitures for the Plan Year in which he
has a Separation from Service, the ESOP Committee will apply the deemed cash-out
rule as if the zero percent vested Participant received a cash-out distribution
on the date of the Participant's Separation from Service. If the Participant's
Account is entitled to an allocation of Employer Contributions or Participant
Forfeitures for the Plan Year in which he has a Separation from Service, the
ESOP Committee will apply the deemed cash-out rule as if the zero percent (0%)
vested Participant received a cash-out distribution on the first day of the
first Plan Year beginning after his Separation from Service. For purposes of
applying the restoration provisions of this Section 5.04, the ESOP Committee
will treat the zero percent (0%) vested Participant as repaying his cash-out
"distribution" on the first date of his re-employment with the Employer.
SEC. 5.05. SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the ESOP Committee
restores the Participant's Accrued Benefit, as described in Section 5.04, the
cash-out amount the Participant has repaid will be held in a Segregated Account
maintained solely for that Participant. The amount in the Participant's
Segregated Account must be invested in federally insured interest bearing
savings account(s) or time deposit(s) (or a combination of both), or in other
fixed income investments. Until commingled with the balance of the Trust Fund on
the date the ESOP Committee restores the Participant's Accrued Benefit, the
Participant's Segregated Account remains a part of the Plan, but it alone shares
in any income it earns and it alone bears any expense or loss it incurs. Unless
the repayment qualifies as a Rollover Contribution, the Participant will be
repaid as soon as is administratively practicable the full amount of the
Participant's Segregated Account if the ESOP Committee determines either of the
conditions of Section 5.04(A) prevents restoration as of the applicable
Accounting Date, notwithstanding the Participant's repayment. The Participant's
Segregated Account will be commingled with the balance of the Trust Fund as of
the second Accounting Date immediately following the date of the Participant's
repayment.
SEC. 5.06. YEAR OF SERVICE - VESTING. For purposes of vesting under Section
5.03 hereof, Year of Service means any Plan Year during which an Employee
completes not less than one thousand (1,000) Hours of Service with the Employer.
SEC. 5.07. BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than five hundred (500) Hours of Service with the Employer, unless
he does not complete more than five hundred (500) Hours of Service because: (a)
he is transferred; (b) he is on an approved leave of absence which does not
exceed eighteen (18) months and he returns to employment with the Employer
immediately following the leave of absence; (c) he is temporarily laid off, and
he returns to employment with the Employer immediately following the temporary
layoff; or (d) he is in the service of the armed forces of the United States,
and he returns to employment with the Employer within ninety (90) days after
termination of military service without being employed somewhere else. Solely
for the purpose of determining whether an Employee has incurred a Break in
Service, if the Employee is absent from Service because of her pregnancy, the
birth of her child, his or her receipt of a child through adoption, or his or
her caring for the child immediately after birth or adoption, he or she shall be
entitled to the Hours of Service that he or
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<PAGE>
she would have received but for that absence for one (1) year after the absence
began. Eight (8) Hours of Service shall be credited for each day of such
absence. However, no more than a total of five hundred one (501) hours can be
credited. The five hundred one (501) hours shall be credited to the Plan Year in
which the absence first begins if such hours shall prevent a Break in Service in
that period; otherwise, the five hundred one (501) hours shall be credited to
the next Plan Year.
SEC. 5.08. INCLUDED YEARS OF SERVICE - VESTING.
(A) INCLUDED YEARS OF SERVICE. For purposes of determining "Years of
Service" under Section 5.06 hereof, the Plan takes into account all Years of
Service an Employee completes with the Employer, except any:
Year of Service before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds the greater of five (5) or the
aggregate number of Years of Service prior to the Break. This exception
applies only if the Participant is not vested in his Accrued Benefit
derived from Employer contributions at the time he has a Break in Service.
The aggregate number of Years of Service before a Break in Service does not
include any Years of Service not required to be taken into account under
this exception by reason of any prior Break in Service.
(B) FORFEITURE BREAK IN SERVICE. For the sole purpose of determining a
Participant's Nonforfeitable percentage of his Accrued Benefit derived from
Employer contributions which accrued for his benefit prior to a Forfeiture Break
in Service, the Plan disregards any Year of Service after the Participant first
incurs a Forfeiture Break in Service. The Participant incurs a Forfeiture Break
in Service when he incurs five (5) consecutive Breaks in Service.
SEC. 5.09. FORFEITURE OCCURS. A Participant's Forfeiture, if any, of his
Accrued Benefit derived from Employer contributions occurs under the Plan as of
the last day of the Plan Year in which the Participant first incurs a Forfeiture
Break in Service; or the date the Participant receives a cash-out distribution.
The ESOP Committee determines the percentage of a Participant's Accrued Benefit
Forfeiture, if any, under this Section 5.09 solely by reference to the vesting
schedule of Section 5.03 hereof. A Participant will not forfeit any portion of
his Accrued Benefit for any other reason or cause except as expressly provided
by this Section 5.09 or as provided under Section 9.14 hereof.
END OF ARTICLE V
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 51
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<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
For Plan Years beginning prior to January 1, 1998, the figure "$5,000" is
replaced with the figure "$3,500" for Article VI.
SEC. 6.01. TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Sections
6.03 hereof, the Participant or the Beneficiary elects in writing to a different
time or method of payment, the ESOP Committee will direct the Trustee to
commence distribution of a Participant's Nonforfeitable Accrued Benefit in
accordance with this Section 6.01. A Participant must consent, in writing, to
any distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds or at the time of any prior distribution exceeded Five
Thousand Dollars ($5,000) and the Participant has not attained Normal Retirement
Age. A distribution date under this Article VI, unless otherwise specified
within the Plan, is March 1 of each Plan Year or as soon as administratively
practicable following a distribution date. For purposes of the consent
requirements under this Article VI, if the present value of the Participant's
Nonforfeitable Accrued Benefit, at the time of any distribution exceeds, or at
the time of any prior distribution exceeded, Five Thousand Dollars ($5,000), the
ESOP Committee must treat that present value as exceeding Five Thousand Dollars
($5,000) for purposes of all subsequent Plan distributions to the Participant.
For purposes of applying this Section 6.01, a Participant's Account shall not
include any Leveraged Employer Securities until the close of the Plan Year in
which the loan is repaid in full except as permitted under Section 6.03(D) of
the Plan. Notwithstanding anything herein to the contrary, the Participant's
consent is not required to distribute dividends described in Section 3.05(d)
hereof and Code Section 404(k).
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH.
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING
$5,000. If the Participant's Separation from Service is for
any reason other than death or Disability, the ESOP Committee
will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum as soon as
administratively practicable following the close of the Plan
Year in which the Participant's Separation from Service
occurs, but in no event later than the sixtieth (60th) day
following the close of the Plan Year in which the Participant
attains Normal Retirement Age. If the Participant has attained
Normal Retirement Age when he Separates from Service, the
distribution under this paragraph will occur no later than the
sixtieth (60th) day following the close of the Plan Year in
which the Participant's Separation from Service occurs.
Notwithstanding anything to the contrary in this Paragraph,
the Participant may elect to have his Nonforfeitable Accrued
Benefit distributed, in whole or in part, directly to an
Eligible Retirement Plan specified by the Participant in a
Direct Rollover and at the time and in the manner prescribed
by the Plan Administrator;
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provided, however, the Direct Rollover portion of the
distribution qualifies as an Eligible Rollover Distribution.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $5,000.
If the Participant's Separation from Service is for any reason
other than death or Disability, the ESOP Committee will direct
the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit in a form and at the time elected by the
Participant, pursuant to Section 6.03 hereof. In the absence
of an election by the Participant, the ESOP Committee will
direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit in a lump sum as
soon as administratively practicable following the close of
the Plan Year in which the latest of the following events
occurs: (a) the Participant attains Normal Retirement Age; or
(b) the Participant's Separation from Service.
(3) DISABILITY. If the Participant's Separation from Service is
because of Disability, the ESOP Committee will direct the
Trustee to distribute the Participant's Nonforfeitable Accrued
Benefit in a form and at the time elected by the Participant,
pursuant to Section 6.03 hereof. In the absence of an election
by the Participant, the ESOP Committee will direct the Trustee
to commence distribution of the Participant's Nonforfeitable
Accrued Benefit in a lump sum on the sixtieth (60) day
following the close of the Plan Year in which the
Participant's Separation from Service occurs, subject to the
notice and consent requirements of this Article VI and to the
applicable mandatory commencement dates described in Paragraph
(1) or in Paragraph (2) of this Section 6.01(A).
(B) REQUIRED BEGINNING DATE. If any distribution commencement date
described under Paragraph (A) of this Section 6.01, either by Plan provision or
by Participant election (or nonelection), is later than the Participant's
Required Beginning Date, the ESOP Committee instead must direct the Trustee to
make distribution on the Participant's Required Beginning Date. The Required
Beginning Date of a Participant (other than a five percent (5%) owner) is the
April 1 of the calendar year following the later of: (i) the year in which the
Participant attains age seventy and one-half (70 1/2) or (ii) the calendar year
in which occurs the retirement of the Participant. In the case of a five percent
(5%) owner, a Participant's Required Beginning Date is the April 1 following the
close of the calendar year in which the Participant attains age seventy and
one-half (70 1/2). For purposes of this Paragraph, the term "five percent (5%)
owner" shall have the meaning as defined in Code Section 416(i). A mandatory
distribution at the Participant's Required Beginning Date will be in lump sum
unless the Participant, pursuant to the provisions of this Article VI, makes a
valid election to receive an alternative form of payment.
(C) DEATH OF THE PARTICIPANT. The ESOP Committee will direct the
Trustee, in accordance with this Section 6.01(C), to distribute to the
Participant's Beneficiary the Participant's Nonforfeitable Accrued Benefit
remaining in the Trust at the time of the Participant's death. The ESOP
Committee will determine the death benefit by reducing the
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Participant's Nonforfeitable Accrued Benefit by any security interest the Plan
has against that Nonforfeitable Accrued Benefit by reason of an outstanding
Participant loan.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES NOT
EXCEED $5,000. The ESOP Committee must direct the Trustee to
distribute the deceased Participant's Nonforfeitable Accrued
Benefit in a lump sum as soon as administratively practicable
following the Participant's death or, if later, the date on
which the ESOP Committee receives notification of or otherwise
confirms the Participant's death. Notwithstanding anything to
the contrary in this Paragraph, the Participant's Beneficiary
(if such Beneficiary is the Participant's surviving spouse)
may elect to have his Nonforfeitable Accrued Benefit
distributed, in whole or in part, directly to an Eligible
Retirement Plan specified by the Participant's Beneficiary in
a Direct Rollover and at the time and in the manner prescribed
by the ESOP Committee; provided, however, the Direct Rollover
portion of the distribution qualifies as an Eligible Rollover
Distribution.
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS
$5,000. The ESOP Committee will direct the Trustee to
distribute the deceased Participant's Nonforfeitable Accrued
Benefit at the time and in the form elected by the Participant
or, if applicable, by the Beneficiary, as permitted under this
Article VI. In the absence of an election, the ESOP Committee
will direct the Trustee to distribute the Participant's
undistributed Nonforfeitable Accrued Benefit in a lump sum as
soon as administratively practicable following the close of
the Plan Year in which the Participant's death occurs or, if
later, the first distribution date (as defined in Section 6.01
hereof) following the date the ESOP Committee receives
notification of or otherwise confirms the Participant's death.
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form this
Article VI would permit for a Participant.
SEC. 6.02. METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to any restrictions
prescribed by Section 6.03 hereof and subject to Section 6.05 hereof, a
Participant or Beneficiary may elect distribution under one, or any combination,
of the following methods:
(a) METHOD 1 - LUMP SUM. The Participant's Account shall be
distributed in a single lump sum payment no later than the end
of the Plan Year following the Plan Year in which occurs the
Participant's death, Retirement, Disability, or Separation
from Service.
(b) METHOD 2 - INSTALLMENT OPTION. The Participant's Account shall
be distributed in installments over a period of time not to
exceed the life
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expectancy of the Participant or joint and last survivor
expectancy of the Participant and designated Beneficiary, as
selected by the Participant.
If a Participant elects installment payments in accordance
with this Section 6.02(b), payment shall be made in monthly,
quarterly, or other regular installments over a fixed period
of time, not exceeding in the case of benefits payable upon
Retirement or Disability, the longer of the life expectancy of
the Participant or the joint life expectancy of the
Participant and his designated Beneficiary. Initial payments
under any installment schedule shall be set in such amounts as
would complete the payment of total benefit in substantially
equal payments over the period of time fixed for such
payments; but the amounts of each installment may be adjusted
by the Trustee following each valuation of the Trust Fund to
reflect the effect of net earnings, gains, or losses credited
to the Participant's Account in accordance with this Plan.
Payments under any installment method shall not be subject to
any mortality risk or determination, but shall be continued in
all events to the Participant, his Spouse, or his designated
Beneficiaries or, if none, as provided in Section 8.02 hereof
until the full amount of his Account shall have been
distributed; however, this sentence does not constitute any
guaranty by the Plan of the sufficiency of the Account to meet
all payments initially scheduled or any guaranty against the
diminution in value of assets retained in the Account to meet
installment obligations, whether such diminution shall occur
by losses in market values, operating expenses of the Plan, or
any other charges properly made to such Account while any part
of its assets are retained in the Trust Fund.
For purposes of determining the value of a Participant's
Account under this Section 6.02(b), a Participant's Account
balance is determined as of the end of the Plan Year in which
occurs the Participant's death, Retirement, or Disability or
Separation from Service and without regard to the value of the
Participant's Rollover Account. During the period such
installment payments are being made from the funds in the
Participant's Account, the Participant's Account shall
continue to participate in the annual adjustments for "net
increase" or "net decrease" of the Trust.
(c) METHOD 3 - INSTALLMENT OPTION. The Participant's Account
shall be distributed in substantially equal installments (not
less frequently than annually) over a period of five (5)
years, plus one (1) year for each One Hundred Thousand Dollars
($100,000) or fraction thereof by which the value of the
Participant's Account exceeds Five Hundred Thousand Dollars
($500,000), with distributions commencing no later than one
(1) year after (A) the end of the Plan Year in which occurs
the Participant's Retirement, death or Disability; or (B) the
end of the fifth (5th) Plan Year following the Plan Year in
which occurs the Participant's Severance Date (assuming the
Participant has not been reemployed). The dollar amounts in
this Paragraph (c) shall be subject to cost-of-living
adjustments under Section 415(d) of the Code. During the
period such installment payments
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are being made from the funds in the Participant's Account,
the Participant's Account shall continue to participate in the
annual adjustments for "net increase" or "net decrease" of the
Trust.
(d) METHOD 4 - DIRECT ROLLOVER. At the time the Participant is
entitled to receive a distribution under Subsection (a), (b)
or (c) of Section 6.02 hereof, the Participant's Account, in
whole or in part, shall be distributed directly to an Eligible
Retirement Plan specified by the Participant in a Direct
Rollover and at the time and in the manner prescribed by the
ESOP Committee; provided, however, the Direct Rollover portion
of the distribution qualifies as an Eligible Rollover
Distribution.
If a Participant elects distribution option (d), the
Participant's Account, in whole or in part, shall be
distributed directly to the Eligible Retirement Plan specified
by the Participant in a Direct Rollover and at the time and in
the manner prescribed by the ESOP Committee; provided,
however, the Direct Rollover portion of the distribution
qualifies as an Eligible Rollover Distribution.
To facilitate installment payments under this Article VI, the ESOP
Committee may direct the Trustee to segregate all or any part of the
Participant's Accrued Benefit in a Segregated Account. A Segregated Account
remains a part of the Trust, but it alone shares in any income it earns, and it
alone bears any expense or loss it incurs. Notwithstanding any other provision
herein, the Participant may elect to commence distribution on any later
distribution date as provided under Treasury regulation Section 1.411(d)-4.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS. The ESOP
Committee may not direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit, nor may the Participant elect to have the
Trustee distribute his Nonforfeitable Accrued Benefit, under a method of payment
which, as of the Required Beginning Date, does not satisfy the minimum
distribution requirements under Code Section 401(a)(9) and the applicable
Treasury Regulations. The minimum distribution for a calendar year equals the
Participant's Nonforfeitable Accrued Benefit as of the latest Valuation Date
preceding the beginning of the calendar year divided by the Participant's life
expectancy (as determined under Article VIII hereof, subject to the requirements
of the Treasury Regulations under Code Section 401(a)(9) regulations). The ESOP
Committee will increase the Participant's Nonforfeitable Accrued Benefit, as
determined on the relevant Valuation Date, for Employer contributions or
Participant Forfeitures allocated after the Valuation Date and by December 31 of
the valuation calendar year, and will decrease the valuation by distributions
made after the Valuation Date and by December 31 of the valuation calendar year.
For purposes of this valuation, the ESOP Committee will treat any portion of the
minimum distribution for the first distribution calendar year made after the
close of that year as a distribution occurring in that first distribution
calendar year. In computing a minimum distribution, the ESOP Committee must use
the unisex life expectancy multiples under Treasury Regulation Section 1.72-9.
The ESOP Committee, only upon the Participant's written request, will compute
the minimum distribution for a calendar year subsequent to the first calendar
year for which the Plan requires a minimum distribution by redetermining the
applicable life expectancy. The ESOP Committee may not redetermine the joint
life and last survivor expectancy of the Participant and a nonspouse designated
Beneficiary
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in a manner which takes into account any adjustment to a life expectancy other
than he Participant's life expectancy.
If the Participant's spouse is not his designated Beneficiary, a
method of payment to the Participant (whether by Participant election or by ESOP
Committee direction) may not provide more than incidental benefits to the
Beneficiary. The Plan must satisfy the minimum distribution incidental benefit
("MDIB") requirement in the Treasury regulations issued under Code Section
401(a)(9) for distributions made on or after the Participant's Required
Beginning Date and before the Participant's death. To satisfy the MDIB
requirement, the ESOP Committee will compute the minimum distribution required
by this Section 6.02(A) by substituting the applicable MDIB divisor for the
applicable life expectancy factor, if the MDIB divisor is a lesser number.
Following the Participant's death, the ESOP Committee will compute the minimum
distribution required by this Section 6.02(A) solely on the basis of the
applicable life expectancy factor and will disregard the MDIB factor. The ESOP
Committee must determine whether benefits to the Beneficiary are incidental as
of the date the Trustee is to commence payment of the retirement benefits to the
Participant, or as of any date the Trustee redetermines the payment period to
the Participant.
The minimum distribution for the first distribution calendar year is
due by the Participant's Required Beginning Date. The minimum distribution for
each subsequent distribution calendar year, including the calendar year in which
the Participant's Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES. The method of
distribution to the Participant's Beneficiary must satisfy Code Section
401(a)(9) and the applicable Treasury Regulations. If the Participant's death
occurs after his Required Beginning Date, the method of payment to the
Beneficiary must provide for completion of payment over a period which does not
exceed the payment period which had commenced for the Participant. If the
Participant's death occurs prior to his Required Beginning Date, the method of
payment to the Beneficiary must provide for completion of payment to the
Beneficiary over a period not exceeding: (i) five (5) years after the date of
the Participant's death; or (ii) if the Beneficiary is a designated Beneficiary,
the designated Beneficiary's life expectancy. The ESOP Committee may not direct
payment of the Participant's Nonforfeitable Accrued Benefit over a period
described in clause (ii) unless payment to the designated Beneficiary will
commence no later than the December 31 following the close of the calendar year
in which the Participant's death occurred or, if later, and the designated
Beneficiary is the Participant's surviving spouse, December 31 of the calendar
year in which the Participant would have attained age seventy and one-half (70
1/2). If a distribution will be made in accordance with clause (ii), the minimum
distribution for a calendar year equals the Participant's Nonforfeitable Accrued
Benefit as of the latest Valuation Date preceding the beginning of the calendar
year divided by the designated Beneficiary's life expectancy. The ESOP Committee
must use the unisex life expectancy multiples under Treasury Regulation Section
1.72-9 for purposes of applying this paragraph. The ESOP Committee, only upon
the written request of the Participant or of the Participant's surviving spouse,
will recalculate the life expectancy of the Participant's surviving spouse not
more frequently than annually, but may not recalculate the life expectancy of a
nonspouse designated Beneficiary
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payment to the designated Beneficiary begins. The ESOP Committee will apply this
paragraph by treating any amount paid to the Participant's child, which becomes
payable to the Participant's surviving spouse upon the child's attaining the age
of majority, as paid to the Participant's surviving spouse. Upon the
Beneficiary's written request, the ESOP Committee must direct the Trustee to
accelerate payment of all, or any portion, of the Participant's unpaid Accrued
Benefit, as soon as administratively practicable following the effective date of
that request.
SEC. 6.03. BENEFIT PAYMENT ELECTIONS. Not earlier than ninety (90) days, but
not later than thirty (30) days, before the Participant's Annuity Starting Date,
the ESOP Committee must provide a benefit notice to a Participant who is
eligible to make an election under this Section 6.03. The benefit notice must
explain the optional forms of benefit in the Plan, including the material
features and relative values of those options, and the Participant's right to
defer distribution until he attains Normal Retirement Age.
If a Participant or Beneficiary makes an election prescribed by this Section
6.03, the ESOP Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that election. Any election
under this Section 6.03 is subject to the requirements of Section 6.02 hereof.
The Participant or Beneficiary must make an election under this Section 6.03 by
filing his election form with the ESOP Committee at any time before the Trustee
otherwise would commence to pay a Participant's Accrued Benefit in accordance
with the requirements of Article VI hereof.
(A) PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. If the
present value of a Participant's Nonforfeitable Accrued Benefit exceeds Five
Thousand Dollars ($5,000), he may elect to have the Trustee commence
distribution as of any distribution date, but not earlier than March 1 following
the close of Plan Year in which the Participant's Separation from Service
occurs. The Participant may reconsider an election at any time prior to the
Annuity Starting Date and elect to commence distribution as of any other
distribution date, but not earlier than the date described in the first sentence
of this Paragraph (A). Following his attainment of Normal Retirement Age, a
Participant who has Separated from Service may elect distribution as of any
distribution date, regardless of the restrictions otherwise applicable under
this Section 6.03(A). If the Participant is partially-vested in his Accrued
Benefit, an election under this Paragraph (A) to distribute prior to the
Participant's incurring a Forfeiture Break in Service (as defined in Section
5.08 hereof), must be in the form of a cash-out distribution (as defined in
Article V hereof). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer.
(B) PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE. After a
Participant attains Normal Retirement Age, the Participant, until he retires,
has a continuing election to receive all or any portion of his Accrued Benefit.
A Participant must make an election under this Section 6.03(B) on a form
prescribed by the ESOP Committee at any time during the Plan Year for which his
election is to be effective. In his written election, the Participant must
specify the percentage or dollar amount he wishes distributed to him. The
Participant's election relates solely to the percentage or dollar amount
specified in his election form and his right to elect to receive an amount, if
any, for a particular Plan Year greater than the dollar amount or percentage
specified in his election form terminates on the Accounting Date. A distribution
to a Participant must be made in accordance with his election under this Section
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6.03(B) within the ninety (90) day period (or as soon as administratively
practicable) after the Participant files his written election with the Trustee.
The balance of the Participant's Accrued Benefit not distributed pursuant to his
election(s) will be distributed in accordance with the other distribution
provisions of this Plan.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds Five Thousand Dollars
($5,000), the Participant's Beneficiary may elect to have the Participant's
Nonforfeitable Accrued Benefit distributed in a form and within a period
permitted under Section 6.02 hereof. The Beneficiary's election is subject to
any restrictions designated in writing by the Participant and not revoked as of
his
date of death.
(D) EMPLOYER SECURITIES ACQUIRED BY AN EXEMPT LOAN. Notwithstanding
anything to the contrary herein, for any Leveraged Employer Securities,
distribution under this Section shall not be required until the first
distribution date following the close of the Plan Year in which such loan has
been fully repaid unless the Trustee makes distributions (i) to a Participant to
comply with the minimum distribution requirements of Section 401(a)(9) of the
Code, (ii) to a Beneficiary as a result of a Participant's death, (iii) to a
Participant who becomes disabled, (iv) to a Participant who has reached Normal
Retirement Age, or (v) to a Participant who has separated from service for
reasons other than death, disability or normal retirement as permitted by the
ESOP Committee.
(E) ELECTION TO POSTPONE DISTRIBUTION OF BENEFITS. If the present
value of a Participant's Nonforfeitable Accrued Benefit exceeds Five Thousand
Dollars ($5,000), he may elect to postpone the distribution of the
Nonforfeitable Accrued Benefit under the Plan as provided in Sections 6.02 and
6.03(A) hereof. Upon request, the ESOP Committee will direct the Trustee to
provide the Participant electing to postpone his distribution of his
Nonforfeitable Accrued Benefit with the necessary election forms.
(F) DIRECT ROLLOVER ELECTION. Notwithstanding anything to the contrary
herein, at the time the Participant is entitled to receive a distribution, any
Participant who is considered a "Distributee" and who receives an Eligible
Rollover Distribution may elect to have all or any portion of the distribution
transferred directly to an Eligible Retirement Plan. Upon request, the ESOP
Committee will direct the Trustee to provide the Distributee with the necessary
forms.
SEC. 6.04. ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
joint and survivor annuity requirements of the Code do not apply to this Plan.
The Plan does not provide any annuity distributions to Participants. A transfer
agreement may not permit a plan which is subject to the provisions of Code
Section 417 to transfer assets to this Plan.
SEC. 6.05. DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a
loan made pursuant to a loan policy adopted by the ESOP Committee, the Plan
treats the default as a distributable event only if the Participant has incurred
a Separation from Service or has attained Normal Retirement Age. If either
condition applies, then, at the time of the default, or, if later, at the time
either condition first occurs, the Participant's Nonforfeitable Accrued Benefit
will be reduced by the lesser of the amount in default (plus accrued interest)
or the Plan's security interest in that Nonforfeitable Accrued Benefit.
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SEC. 6.06. DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained
in this Plan prevents the ESOP Committee, from complying with the provisions of
a qualified domestic relations order (as defined in Code Section 414(p)). This
Plan specifically permits distribution to an Alternate Payee under a qualified
domestic relations order at any time regardless of whether the Participant has
attained his earliest retirement age (as defined under Code Section 414(p))
under the Plan. A distribution to an Alternate Payee prior to the time the
Participant reaches his earliest retirement age is available only if the order
specifies distribution at that time or permits an agreement between the Plan and
the Alternate Payee to authorize an earlier distribution. Nothing in this
Section 6.06 gives a Participant a right to receive distribution at a time
otherwise not permitted under the Plan nor does it permit the Alternate Payee to
receive a form of payment not otherwise permitted under the Plan. Furthermore,
for any Leveraged Employer Securities, distribution under this Section 6.06
shall not be required until such Exempt Loan is repaid in full unless required
by the Code.
The ESOP Committee must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the ESOP Committee promptly will notify the Participant and any
Alternate Payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
ESOP Committee must determine the qualified status of the order and must notify
the Participant and each Alternate Payee, in writing, of its determination. The
ESOP Committee must provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the ESOP Committee is making its determination of the
qualified status of the domestic relations order, the ESOP Committee must make a
separate accounting of the amounts payable. If the ESOP Committee determines the
order is a qualified domestic relations order within eighteen (18) months of the
date amounts first are payable following receipt of the order, the ESOP
Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the ESOP Committee determines that the order is
not a qualified domestic relations order or does not make its determination of
the qualified status of the order within the eighteen (18) month determination
period, the ESOP Committee will direct the Trustee to distribute the payable
amounts in the manner the Plan would distribute if the order did not exist and
will apply the order prospectively if the ESOP Committee later determines the
order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the ESOP Committee may direct the Trustee to invest
any partitioned amount in a segregated subaccount or separate account and to
invest the account in federally insured, interest-bearing savings account(s) or
time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount alone shares in any income it earns, and it
alone bears any expense or loss it incurs. Any payments or distributions
required under this Section 6.06 will be made by separate benefit checks or
other separate distribution to the Alternate Payee(s).
SEC. 6.07. LATE RETIREMENT. A Participant may remain in the service of the
Employer after his Normal Retirement Date. In such case, he shall remain a
Participant until his
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Late Retirement Date. At such time, his interest in his Account shall be
distributed to him in accordance with this Article VI. Such Participant is
subject to the minimum distribution requirement of Section 401(a)(9) of the
Code.
SEC. 6.08. LIMITATIONS ON BENEFITS. All of the provisions of this Article VI
are subject to withholding for payment of taxes, and are subject to the rights
of any Alternate Payee.
SEC. 6.09. SPECIAL DISTRIBUTION AND PAYMENT REQUIREMENTS.
(A) DISTRIBUTION OF EMPLOYER SECURITIES. Unless the Participant elects to
have other distribution provisions of the Plan apply, or unless other
distribution provisions of the Plan require earlier distribution of the
Participant's Account, the portion of the Participant's Account attributable to
Employer Securities (the "Eligible Portion") must be distributed no later than
the time prescribed by this Section 6.09(A), regardless of any other provision
of the Plan. The distribution provisions of this Section 6.09(A) are subject to
the consent and form of distribution requirements of Articles V and VI hereof.
(1) If the Participant Separates from Service by reason of the
attainment of Normal Retirement Age, death or Disability, the
ESOP Committee will direct the Trustee to commence
distribution of the Eligible Portion not later than one (1)
year after the close of the Plan Year in which that event
occurs.
(2) If the Participant Separates from Service for any reason other
than by reason of the attainment of Normal Retirement Age,
death or Disability, the ESOP Committee will direct the
Trustee to commence distribution of the Eligible Portion not
later than one (1) year after the close of the fifth (5th)
Plan Year following the Plan Year in which the Participant
Separated from Service. If the Participant resumes employment
with the Employer on or before the last day of the fifth (5th)
Plan Year following the Plan Year of his or her Separation
from Service, the distribution provisions of this Paragraph
(2) do not apply.
For purposes of this Section 6.09(A), Employer Securities do not
include any Leveraged Employer Securities until the close of the Plan Year in
which the borrower repays the Exempt Loan in full.
(B) THIRTY (30) DAY WAIVER. A distribution may commence less than thirty
(30) days after the notice required under Treasury Regulation Section
1.411(a)-11(c) is given, provided that:
(1) The ESOP Committee clearly informs the Participant that the
Participant has a right to a period of at least thirty (30)
days after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
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(2) The Participant, after receiving the notice, affirmatively
elects a distribution.
End of Article VI
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ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
SEC. 7.01. INFORMATION TO ESOP COMMITTEE. The Employer must supply current
information to the ESOP Committee as to the name, date of birth, date of
employment, annual Compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, a Participant under the Plan, together with any other information which
the ESOP Committee considers necessary. The Employer's records as to the current
information the Employer furnishes to the ESOP Committee are conclusive as to
all persons.
SEC. 7.02. NO LIABILITY. The Employer assumes no obligation or
responsibility to any of its Employees, Participants, Former Participants or
Beneficiaries for any act of, or failure to act, on the part of its ESOP
Committee (unless the Employer is the ESOP Committee), or the Plan Administrator
(unless the Employer is the Plan Administrator).
SEC. 7.03. INDEMNITY OF CERTAIN FIDUCIARIES. The Company indemnifies and
saves harmless the Plan Administrator, Trustee, ESOP Committee, and the members
of the ESOP Committee, and each of them, from and against any and all loss
resulting from liability to which the Plan Administrator, Trustee, the ESOP
Committee, or the members of the ESOP Committee, may be subjected by reason of
any act or conduct (except willful misconduct or gross negligence) in their
official capacities in the administration of this Plan, including all court
costs and other expenses reasonably incurred in their defense, in case the
Company fails to provide such defense. The indemnification provisions of this
Section 7.03 do not relieve the Plan Administrator or any ESOP Committee member
from any liability he may have under ERISA, including any liability for breach
of a fiduciary duty. In the case of any ESOP Committee member, the
indemnification provisions of this Section 7.03 do not relieve it from any
liability, to the extent that a court of competent jurisdiction from which no
appeal can be taken, enters a final judgment that the ESOP Committee member's
actions or omissions were the result of gross negligence or willful misconduct.
The Plan Administrator, Trustee, the ESOP Committee members, and the Company may
execute a letter agreement further delineating the indemnification provisions of
this Section 7.03, provided the letter agreement is consistent with and does not
violate ERISA, the Code, and Texas law. The indemnification provisions of this
Section 7.03 extend to any other fiduciary solely to the extent provided by a
letter agreement executed by such person and the Company.
SEC. 7.04. AMENDMENT TO VESTING SCHEDULE. Though the Company reserves the
right to amend the vesting schedule at any time, the amended vesting schedule
will not be applied to reduce the Nonforfeitable percentage of any Participant's
Accrued Benefit derived from Employer contributions (determined as of the later
of the date the Employer adopts the amendment, or the date the amendment becomes
effective) to a percentage less than the Nonforfeitable percentage computed
under the Plan without regard to the amendment. An amended vesting schedule will
apply to a Participant only if the Participant receives credit for at least one
(1) Hour of Service after the new schedule becomes effective.
If the Company makes a permissible amendment to the vesting schedule,
each Participant having at least three (3) Years of Service with the Employer
may elect to have the percentage of
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his Nonforfeitable Accrued Benefit computed under the Plan without regard to the
amendment. The Participant must file his election with the ESOP Committee within
sixty (60) days of the latest of (a) the Company's adoption of the amendment;
(b) the effective date of the amendment; or (c) his receipt of a copy of the
amendment. The ESOP Committee as soon as practicable, must forward a true copy
of any amendment to the vesting schedule to each affected Participant, together
with an explanation of the effect of the amendment, the appropriate form upon
which the Participant may make an election to remain under the vesting schedule
provided under the Plan prior to the amendment and notice of the time within
which the Participant must make an election to remain under the prior vesting
schedule. The election described in this Section 7.04 does not apply to a
Participant if the amended vesting schedule provides for vesting at least as
rapid at all times as the vesting schedule in effect prior to the amendment. For
purposes of this Section 7.04, an amendment to the vesting schedule includes any
Plan amendment which directly or indirectly affects the computation of the
Nonforfeitable percentage of a Participant's rights to his Accrued Benefit,
derived from Employer contributions and Participant forfeitures.
End of Article VII
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ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
SEC. 8.01. BENEFICIARY DESIGNATION. Any Participant from time to time may
designate, in writing, any person or persons contingently or successively to
whom the Plan will pay his Nonforfeitable Accrued Benefit (including any life
insurance proceeds payable to the Participant's Account) in the event of his or
her death, and the Participant may designate the form and method. The ESOP
Committee will prescribe the form for the written designation of Beneficiary and
upon the Participant's filing the form with the ESOP Committee, the form
effectively revokes all designations filed prior to that date by the same
Participant.
The Beneficiary designation of a married Participant is not valid unless the
Participant's spouse consents to the Beneficiary designation. The Participant's
spouse shall automatically be the named Beneficiary and shall be paid the
Participant's death benefit unless (1) the Participant's spouse affirmatively
consents to the Beneficiary designation in the manner prescribed in Code Section
417(a)(2); or (2) the following sentence applies. The spousal consent
requirements in this paragraph do not apply if the Participant and his spouse
are not married throughout the one year period ending on the date of the
Participant's death or if the Participant's spouse is the Participant's sole
primary Beneficiary.
SEC. 8.02. NO BENEFICIARY DESIGNATION. If a Participant fails to name a
Beneficiary in accordance with Section 8.01 hereof, or if the Beneficiary named
by a Participant predeceases him, or if the Beneficiary designation is invalid
or void, the Participant's Nonforfeitable Accrued Benefit will be paid in
accordance with Section 6.02 hereof in the following order of priority to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children,
in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
remaining Nonforfeitable Accrued Benefit will be paid to the Beneficiary's
estate unless the Participant's Beneficiary designation provides otherwise.
SEC. 8.03. PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary
of a deceased Participant must furnish to the ESOP Committee such evidence, data
or information as the ESOP Committee considers necessary or desirable for the
purpose of administering the Plan. The provisions of this Plan are effective for
the benefit of each Participant upon the condition precedent that each
Participant will promptly furnish full, true, and complete evidence, data, and
information when requested by the ESOP Committee, provided the ESOP Committee
advises each Participant of the effect of his failure to comply with its
request. Any adjustment required by reason of lack of proof or the misstatement
of the age of persons entitled to benefits
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hereunder, by the Participant or otherwise, shall be in such manner as the ESOP
Committee deems equitable.
Any notice or information which according to the terms of the Plan or the
rules of the ESOP Committee must be filed with the ESOP Committee, shall be
deemed so filed if addressed and either delivered in person or mailed, postage
fully prepaid, to the ESOP Committee. If mailed, any such notice or information
shall be addressed to the ESOP Committee Chairman c/o VARI-LITE INTERNATIONAL,
INC. and mailed to its corporate headquarters address.
Whenever a provision herein requires that a Participant (or the
Participant's Beneficiary) give notice to the ESOP Committee within a specified
number of days or by a certain date, and the last day of such period, or such
date falls on a Saturday, Sunday, or Company holiday, the Participant (or the
Participant's Beneficiary) will be deemed in compliance with such provision if
notice is delivered in person to the ESOP Committee or is mailed, properly
addressed, postage prepaid, and postmarked on or before the business day next
following such Saturday, Sunday or Company holiday. The ESOP Committee may, in
its sole discretion, modify or waive any specified requirement notice; provided,
however, that such modification or waiver must be administratively feasible,
must be in the best interest of the Participant, and must be made on the basis
of rules of the ESOP Committee which are applied uniformly to all Participants.
SEC. 8.04. ADDRESS FOR NOTIFICATION. Each Participant, each Beneficiary of a
deceased Participant, and other person entitled to benefits hereunder must file
with the ESOP Committee from time to time, in writing, his mailing address and
any change of mailing address. Any communication, statement or notice addressed
to a Participant, Former Participant, or Beneficiary, at his last mailing
address filed with the ESOP Committee, or as shown on the records of the
Employer, binds the Participant, Former Participant, or Beneficiary, for all
purposes of this Plan. Any check representing payment hereunder and any
communication addressed to a Participant, Former Participant, an Employee, a
former Employee, or Beneficiary, at such person's last mailing address filed
with the ESOP Committee, or if no such mailing address has been filed, then at
such person's last address as indicated on the records of the Employer, shall be
deemed to have been delivered to such person on the date on which such check or
communication is deposited, postage prepaid, in the United States mail.
If the ESOP Committee, for any reason, is in doubt as to whether payments
are being received by the person entitled thereto, it shall, by registered mail
addressed to the person concerned, at his mailing address last known to the ESOP
Committee, notify such person that all unmailed and future payments shall be
henceforth withheld until he provides the ESOP Committee with evidence of his
existence and his proper mailing address.
SEC. 8.05. ASSIGNMENT OR ALIENATION. Unless Section 6.06 hereof applies,
which relates to qualified domestic relations orders, neither a Participant nor
a Beneficiary may anticipate, assign or alienate (either at law or in equity)
any benefit provided under the Plan. A benefit under the Plan is not subject to
attachment, garnishment, levy, execution or other legal or equitable process.
SEC. 8.06. NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the
time prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of
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discontinuance of the Plan and all other information required by ERISA to be
furnished without charge.
SEC. 8.07. LITIGATION AGAINST THE TRUST. A court of competent jurisdiction
may authorize any appropriate equitable relief to redress violations of ERISA or
to enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
SEC. 8.08. INFORMATION AVAILABLE. Any Participant in the Plan or any
Beneficiary may examine copies of the Plan description, latest annual report,
any bargaining agreement, or this Plan, contract or any other instrument under
which the Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office, or in such
other place or places as he may designate from time to time in order to comply
with the regulations issued under ERISA, for examination during reasonable
business hours. Upon the written request of a Participant or Beneficiary, the
Plan Administrator will furnish him with a copy of any item listed in this
Section 8.08. The Plan Administrator may make a reasonable charge to the
requesting person for the copy so furnished.
SEC. 8.09. APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant, Former
Participant, or a Beneficiary ("Claimant") may file with the ESOP Committee a
written claim for benefits, if the Participant, Former Participant, or
Beneficiary determines the distribution procedures of the Plan have not provided
him his proper Nonforfeitable Accrued Benefit. The ESOP Committee must render a
decision on the claim within sixty (60) days of the Claimant's written claim for
benefits. The Plan Administrator must provide adequate notice in writing to the
Claimant whose claim for benefits under the Plan the ESOP Committee has denied.
The Plan Administrator's notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the ESOP
Committee based its denial;
(c) A description of any additional material and information needed
for the Claimant to perfect his claim and an explanation of why the material or
information is needed; and
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the ESOP Committee within seventy-five (75)
days after receipt of the Plan Administrator's notice of denial of benefits. The
Plan Administrator's notice must further advise the Claimant that his failure to
appeal the action to the ESOP Committee in writing within the seventy-five (75)
day period will render the ESOP Committee's determination final, binding and
conclusive.
If the Claimant should appeal to the ESOP Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. At the appeals
conference (or prior thereto upon five (5) business days written notice to the
ESOP Committee), the Claimant, or his duly authorized representative, may review
Plan documents in the possession of the Plan Administrator which
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are pertinent to the claim. Either the Claimant, ESOP Committee, Trustee, or
Plan Administrator may cause a court reporter to attend the appeals conference
and record the proceedings. In such event, a complete written transcript of the
proceeding shall be furnished to all parties by the court reporter. The full
expense of any court reporter and such transcripts shall be borne by the party
causing the court reporter to attend the appeals conference. The ESOP Committee
will re-examine all facts related to the appeal and make a final determination
as to whether the denial of benefits is justified under the circumstances. The
ESOP Committee must advise the Claimant of its decision within sixty (60) days
of the Claimant's written request for review, unless special circumstances (such
as a hearing) would make the rendering of a decision within the sixty (60) day
limit unfeasible, but in no event may the ESOP Committee render a decision
respecting a denial for a claim for benefits later than one hundred-twenty (120)
days after its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the name
of each member of the ESOP Committee and the name and address of the ESOP
Committee member to whom the Claimant may forward his appeal.
SEC. 8.10. DIVERSIFICATION OF PARTICIPANT'S ACCOUNT. Except as provided in
this Section 8.10, a Participant does not have the right to direct the Trustee
with respect to the investment or re-investment of the assets comprising the
Participant's individual Account. Each "Qualified Participant," however, may
direct the investment of twenty-five percent (25%) of the total number of
Employer Securities acquired by or contributed to the Plan that have ever been
allocated to the Participant's Account on or before the most recent Plan
allocation date less the number of Employer Securities previously diversified
under this Section 8.10 ("Eligible Accrued Benefit") within ninety (90) days
after the Accounting Date of each Plan Year (to the extent a direction amount
exceeds the amount to which a prior direction under this Section 8.10 applies)
during the Participant's Qualified Election Period. For the last Plan Year in
the Participant's Qualified Election Period, fifty percent (50%) will be
substituted for twenty-five percent (25%) in the immediately preceding sentence.
The Qualified Participant must make his direction in writing, the direction may
be effective no later than ninety (90) days after the close of the Plan Year to
which the direction applies, and the direction must specify which, if any, of
the investment options the Participant selects.
A Qualified Participant may choose one of the following investment options:
(a) The distribution of the portion of his Eligible Accrued
Benefit covered by the election. The distribution will be made
within ninety (90) days after the last day of the Plan Year
during which the Qualified Participant may make the election.
The provisions of this Plan applicable to a distribution of
Employer Securities apply to this investment option.
(b) The direct transfer of the portion of his Eligible Accrued
Benefit covered by the election to the SHOWCO/VARI-LITE 401(k)
Savings Plan or another qualified plan of the Employer which
accepts such transfers, but only if the transferee plan
permits employee-directed investment and does not invest in
Employer Securities to a substantial degree. The direct
transfer will be made no later than ninety (90) days after the
last day of the period during which the Qualified Participant
may make the election.
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SEC. 8.11. PARTICIPANT VOTING RIGHTS - EMPLOYER SECURITIES
(A) TENDER OFFER.
(1) Notwithstanding any provision contained in the Plan to the
contrary, regarding Tender Offers or exchanges of stock, the
provisions of this subsection shall apply in the event any
"Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the 1934 Federal Securities Exchange Act),
either alone or in conjunction with others, makes a tender
offer, or exchange offer, or otherwise offers to purchase, or
solicits an offer to sell to such Person, one percent (1%) or
more of the outstanding Employer Securities (hereinafter
referred to as a "Tender Offer").
(2) Upon commencement of a Tender Offer, the Company shall notify
each Participant (or Beneficiary) for whom an Account is
maintained of such Tender Offer and use its best efforts to
distribute or cause to be distributed to each Participant (or
Beneficiary) information, documents and other materials
relating to the Tender Offer. If the Trustee deems it
appropriate, the Trustee shall have the authority to obtain an
opinion as to the adequacy of, and fairness opinion of the
overall transaction from a financial point of view, of selling
or exchanging the Employer Securities allocated to the
participant accounts in accordance with such Tender Offer.
Each Participant (or Beneficiary) shall be entitled to direct
the Trustee to vote for or against the sale, offer to sell,
exchange or other proposal to dispose of the Employer
Securities allocated to such Participant's Employer Securities
Account in accordance with the provisions, conditions and
terms of such Tender Offer and the provisions of this Section.
Such a Participant (or Beneficiary) shall, as a named
fiduciary described in Section 403(a)(1) of ERISA, direct the
Trustee with respect to the tender of such Employer Securities
which are allocated to the Employer Securities Account of the
Participant. Reasonable means shall be employed to provide
information to the Participant (or Beneficiary) and
confidentiality with respect to the tendering directions by
each Participant (or Beneficiary). Such directions shall be
held in confidence, it being the intent of this provision to
ensure that the Company (and its directors, officers,
employees and agents) cannot determine the tendering
directions given by any Participant (or Beneficiary). Such
instructions shall be in such form and shall be filed in such
manner and at such time as the ESOP Committee may prescribe.
(3) A Participant (or Beneficiary) who has directed the Trustee to
tender or exchange Employer Securities may, at any time prior
to the tender or exchange offer withdrawal date, or such
earlier date
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as established by the ESOP Committee, instruct the Trustee to
withdraw such Employer Securities from the tender or exchange
offer prior to the withdrawal deadline. Reasonable limits on
the number of instructions to tender or exchange or withdraw
which a Participant (or Beneficiary) may give may be imposed
by the ESOP Committee.
(4) The proceeds of a disposition directed by a Participant (or
Beneficiary) shall be allocated to such Participant's Account
in proportion to the number of Employer Securities from such
Account which the Participant (or Beneficiary) instructed the
Trustee to sell, exchange or otherwise dispose of.
(5) To the extent to which Participants (or Beneficiaries) do not
instruct the Trustee, or do not issue valid directions to the
Trustee, to sell, offer to sell, exchange or otherwise dispose
of the Employer Securities allocated to their Employer
Securities Accounts (herein referred to as "Uninstructed
Shares"), the ESOP Committee shall direct the Trustee to
properly vote such Uninstructed Shares for or against any
sale, offer to sell, exchange or other proposal to dispose of
Employer Securities.
(6) With respect to shares of Employer Securities held in the
Unallocated Employer Securities Account, the ESOP Committee
shall direct the Trustee to properly vote such Employer
Securities which are held in the Unallocated Employer
Securities Account for or against any sale, offer to sell,
exchange or other proposal to dispose of Employer Securities.
(7) Following the completion of a Tender Offer, the ESOP Committee
shall direct the substitution of new Employer Securities (as
such term is defined in Section 409(1) of the Code) for
Employer Securities or for the proceeds of Employer Securities
to the extent provided in the Plan; provided, however, that
the Trust Fund be invested primarily in Employer Securities.
In lieu of the substitution of new Employer Securities, the
ESOP Committee may direct that the Trust Fund be invested in
other securities, properties or investment vehicles on a
temporary basis.
(8) Notwithstanding any provision contained in this Subsection A
of Section 8.11, Participant (or Beneficiary) directions and
ESOP Committee directions which are or would result in a
violation of ERISA or would not be in the best interest of the
Participant (or Beneficiary) shall not be complied with.
If the ESOP Committee does not direct the Trustee to vote on a
matter, or the Participant (or Beneficiary) directions or ESOP
Committee directions are or would result in a violation of
ERISA
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or would not be in the best interest of the Plan, the Trustee,
in its discretion, shall properly vote the Employer Securities
in a manner which is in the best interest of the Participants
(or Beneficiaries).
(9) If any provision contained in or action required by this
Subsection (A) of Section 8.11 violates any provision under
ERISA, the provisions under ERISA shall be complied with.
(B) OTHER CORPORATE MATTERS. Notwithstanding any provision contained
in the Plan to the contrary, unless Subsection (A) of Section 8.11 applies:
(1) With respect to Employer Securities held in the Employer
Securities Account which are not part of a registration-type
class of securities (as defined in Code Section 409(e)(4)), a
Participant has the right to direct the Trustee regarding the
voting of such Employer Securities allocated to his Employer
Securities Account with respect to any corporate matter which
involves the approval or disapproval of any corporate merger
or consolidation, recapitalization, reclassification,
liquidation, dissolution, sale of substantially all assets of
a trade or business, or such similar transaction as the
Department of Treasury may prescribe in regulations. On other
corporate matters requiring a vote of the shareholders, the
ESOP Committee shall direct the Trustee to properly vote such
Employer Securities which are held in the Employer Securities
Account of the Participants. As to any Employer Securities
allocated to the Participant's Employer Securities Account
which are part of a registration-type class of securities, the
voting rights provided in this Subsection 8.11(B) extend to
all corporate matters requiring a vote of stockholders. The
ESOP Committee shall direct the Trustee to vote allocated
Employer Securities held in the Participant Employer
Securities Account for which it has not received direction or
for which it has not received a valid direction from a
Participant (or Beneficiary) as part of the Plan Assets.
Each Participant (or Beneficiary) who timely provides
instructions to the Trustee shall be entitled to direct the
Trustee how to vote Employer Securities allocated to such
Participant's Employer Securities Account in accordance with
this Subsection. In order to implement these voting
directions, the Company shall provide each Participant (or
Beneficiary) with proxy solicitation materials or other
notices or information statements which are distributed to
Company shareholders, together with a form requesting
confidential instructions as to the manner in which Employer
Securities allocated to the Participant's Employer Securities
Account are to be voted. Each Participant (or Beneficiary)
shall, as a named fiduciary described in Section 403(a)(1) of
ERISA, direct the Trustee with respect to the vote of such
Employer
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Securities which are allocated to the Employer Securities
Account of the Participant (or Beneficiary). Reasonable means
shall be employed to provide confidentiality with respect to
the voting by such Participant (or Beneficiary), it being the
intent of this provision of this Subsection to ensure that the
Company (and its directors, officers, employees and agents)
cannot determine the direction given by any Participant (or
Beneficiary). Such instructions shall be in such form and
shall be filed in such manner and at such time as the ESOP
Committee may prescribe.
(2) With respect to Employer Securities held in the Unallocated
Employer Securities Account which are part of a
registration-type class of securities, and which are not part
of a registration-type class of securities, the ESOP Committee
shall direct the Trustee to properly vote such Employer
Securities which are held in the Unallocated Employer
Securities Account for or against any proposal. If all
Employer Securities are held in the Unallocated Employer
Securities Account on the record date when a matter is
submitted to a vote of the Company's shareholders, the
Trustee, as directed by the ESOP Committee, shall properly
vote such Employer Securities for or against any proposal.
(3) Notwithstanding any provision contained in this Subsection (B)
of Section 8.11, Participant (or Beneficiary) directions and
ESOP Committee directions which are or would result in a
violation of ERISA or would not be in the best interest of the
Participant (or Beneficiary) shall not be complied with.
If the ESOP Committee does not direct the Trustee to vote on a
matter, or the Participant (or Beneficiary) directions or ESOP
Committee directions are or would result in a violation of
ERISA or would not be in the best interest of the Plan, the
Trustee, in its discretion, shall properly vote the Employer
Securities in a manner which is in the best interest of the
Participants (or Beneficiaries).
(4) If any provision contained in or action required by this
Subsection (B) of Section 8.11 violates any provision under
ERISA, the provisions under ERISA shall be complied with.
SEC. 8.12. FEES AND EXPENSES. The ESOP Committee may direct the Trustee to
pay from the Trust all fees and expenses reasonably incurred by the Plan, to the
extent such fees and expenses are for the ordinary and necessary administration
and operation of the Plan, unless the Employer pays the fees and expenses. If
the Trustee cannot pay expenses reasonably incurred based upon the advise of
legal counsel, the Employer shall pay such expenses. Any fee or expense paid,
directly or indirectly, by the Employer is not an Employer contribution to the
Plan, provided the fee or expense relates to the ordinary and necessary
administration of the Plan.
END OF ARTICLE VIII
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ARTICLE IX
ESOP COMMITTEE
DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
SEC. 9.01. MEMBERS' COMPENSATION, EXPENSES. The Company may appoint an ESOP
Committee to administer the Plan, the members of which may or may not be
Participants in the Plan, or which may be the Plan Administrator acting alone.
In the absence of an ESOP Committee appointment, the Board of Directors assumes
the powers, duties and responsibilities of the ESOP Committee. The members of
the ESOP Committee will serve without compensation for services as such, but the
Employer will pay all expenses of the ESOP Committee, except to the extent the
Trust properly pays for such expenses, pursuant to Article X hereof.
SEC. 9.02. TERM. Each member of the ESOP Committee serves until the
appointment of his successor.
SEC. 9.03. POWERS. The ESOP Committee is empowered to assist the Trustee to
satisfy and operate the Plan in accordance with the terms of the Plan, the
Trust, the Code, and ERISA. In case of a vacancy in the membership of the ESOP
Committee, the remaining members of the ESOP Committee may exercise any and all
of the powers, authority, duties and discretion conferred upon the ESOP
Committee pending the filling of the vacancy.
SEC. 9.04. GENERAL. The ESOP Committee has full discretion and authority to
perform the following powers and duties:
(a) To select a Secretary, who need not be a member of the ESOP
Committee;
(b) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Accrued Benefit and the
Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations and guidelines
necessary for the proper and efficient administration of the Plan provided the
rules are not inconsistent with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To assist the Trustee in crediting and distributing the Trust
Assets;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(G) To furnish the Employer with information which the Employer may
require for tax or other purposes;
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(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as
defined in ERISA Section 3(38)), each of whom will have full power and authority
to manage, acquire or dispose (or direct the Trustee with respect to acquisition
or disposition) of any Plan Asset under its control;
(j) To establish a nondiscriminatory policy with regard to making
distributions and loans, if any, to Participants and Beneficiaries;
(k) To construe and interpret the Plan and the rules and regulations
adopted and to answer all questions arising in the administration,
interpretation and application of the Plan document and documents related to the
Plan's operation; and
(l) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in accordance
with the provisions of the Code.
Notwithstanding any other provision herein to the contrary, the ESOP
Committee shall not interfere or cause the Trustee to violate the terms of the
Plan, the Trust, the Code, and ERISA. The ESOP Committee must exercise all of
its powers, duties and discretion under the Plan in a uniform and
nondiscriminatory manner. All decisions, determinations, directions,
interpretations, and applications of the Plan by the ESOP Committee shall be
final and binding upon all persons, including (but not limited to) the Company,
Employer, Trustee, and all Participants, Former Participants, Beneficiaries, and
Alternate Payees unless in violation of the Plan, the Trust, ERISA, the Code, or
any federal or state laws.
If the ESOP Committee adopts a loan policy, pursuant to paragraph (j) of
this Section 9.04, the loan policy must be a written document and must include:
(1) the identity of the person or persons authorized to administer the
participant loan program; (2) a procedure for applying for the loan; (3) the
criteria for approving or denying a loan; (4) the limitations, if any, on the
types and amounts of loans available; (5) the procedure for determining a
reasonable rate of interest; (6) the types of collateral which may secure the
loan; and (7) the events constituting default and the steps the Plan will take
to preserve Plan assets in the event of default. This Section 9.04 specifically
incorporates a written loan policy as part of the Employer's Plan.
SEC. 9.05. FUNDING POLICY. This Plan is designed to invest primarily in
Employer Securities, which is a Qualifying Employer Security with respect to the
Employer within the meaning of Sections 409(l) and 4975(e)(8) of the Code. The
ESOP Committee, however, may invest, or may direct the Trustee, however to
invest, in assets other than Employer Securities to provide for expenses and
distributions and to the extent as the Trustee and ESOP Committee deem
appropriate.
SEC. 9.06. MANNER OF ACTION. The decision of a majority of the members of
the ESOP Committee appointed and qualified controls.
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SEC. 9.07. AUTHORIZED REPRESENTATIVE. The ESOP Committee may authorize any
one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The ESOP Committee must evidence this authority by an
instrument signed by all members.
SEC. 9.08. INTERESTED MEMBER. No member of the ESOP Committee may decide or
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the ESOP Committee.
SEC. 9.09. INDIVIDUAL ACCOUNTS. The ESOP Committee will maintain, or direct
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the Plan
set forth below. If a Participant re-enters the Plan subsequent to his having a
Forfeiture Break in Service (as defined in Section 5.08 hereof), a separate
Account for the Participant's pre-Forfeiture Break in Service Accrued Benefit
and a separate Account for his post-Forfeiture Break in Service Accrued Benefit
shall be maintained unless the Participant's entire Accrued Benefit under the
Plan is one hundred percent (100%) Nonforfeitable.
The ESOP Committee will make its allocations, or request the Trustee to make
its allocations, to the Accounts of the Participants in accordance with the
provisions of Section 9.11 hereof. The ESOP Committee may direct the Trustee to
maintain a temporary Segregated Investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11
hereof.
The ESOP Committee shall create and maintain adequate records to reflect all
transactions of the Plan and to disclose the interest in the Plan of each
Participant, Former Participant, Beneficiary, or Alternate Payee who has an
undistributed interest in the Plan, as follows:
(a) INDIVIDUAL ACCOUNTS. The ESOP Committee may establish and
maintain, or direct the Trustee to establish and maintain, for each such
individual a Participant Employer Securities Account, Participant Matching
Contributions Account, Participant Qualifying Matching Contributions Account,
Participant Nonelective Contributions Account, Participant Discretionary
Account, and other Account, which Accounts are collectively referred to herein
as an Account. The ESOP Committee may also establish a Participant General
Investments Account.
(b) GENERAL ACCOUNTS. The ESOP Committee may establish and maintain,
or direct the Trustee to establish and maintain, for the Plan suspense accounts
to be known as an "Unallocated Employer Securities Account" and an "Unallocated
General Investments Account."
(c) ACCOUNTS FOR TRANSFERRED PARTICIPANTS. In the event a Participant
transferred from one (1) Employer to another Employer during a Plan Year, the
ESOP Committee shall continue to maintain on its books such Participant's
Account without differentiation between Employers.
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(d) RIGHTS IN TRUST FUND. The maintenance of individual Accounts is
only for accounting purposes, and a segregation of the assets of the Plan or
each Account shall not be required. Distributions and withdrawals made from an
Account shall be charged to the Account as of the date paid.
SEC. 9.10. VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Trust Fund which the net credit balance in his Account
bears to the total net credit balance in the Accounts of all Participants. For
purposes of a distribution under the Plan, the value of a Participant's Accrued
Benefit is its value as of the Valuation Date immediately preceding the date of
the distribution.
SEC. 9.11. ALLOCATIONS TO PARTICIPANTS' ACCOUNTS. A "Valuation Date" under
this Plan is each Accounting Date and each interim valuation date determined
under Section 12.20 hereof. As of each Valuation Date, the ESOP Committee must
adjust Participant Employer Securities Accounts, Qualified Matching
Contributions Account, and other accounts and to reflect net income, gain or
loss since the last Valuation Date. The valuation period is the period beginning
the day after the last Valuation Date and ending on the current Valuation Date.
The ESOP Committee will allocate Employer contributions, Participant
Forfeitures, net income, gain or loss, if any, in accordance with Article III
hereof.
SEC. 9.12. INDIVIDUAL STATEMENT. As soon as practicable after the Accounting
Date of each Plan Year, but within the time prescribed by ERISA, and the
regulations under ERISA, the Plan Administrator, ESOP Committee, or Trustee will
deliver to each Participant (and to each Beneficiary) a statement reflecting the
condition of his Accrued Benefit as of that date and such other information that
ERISA requires be furnished the Participant or Beneficiary. No Participant,
except a member of the ESOP Committee, shall have the right to inspect the
records reflecting the Account of any other Participant.
SEC. 9.13. ACCOUNT CHARGED. The ESOP Committee shall charge all
distributions made to a Participant or to his Beneficiary from his Account,
against the Account of the Participant when made.
SEC. 9.14. UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require the ESOP
Committee, the Plan Administrator, the Employer, or the Company to search for,
or to ascertain the whereabouts of, any Participant or Beneficiary. The ESOP
Committee, by certified or registered mail addressed to his last known address
of record with the ESOP Committee or the Employer, shall notify any Participant,
or Beneficiary, that he is entitled to a distribution under this Plan, and the
notice shall quote the provisions of this Section 9.14. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the ESOP Committee within six (6) months from the date of mailing
of the notice, the ESOP Committee may treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and shall reallocate and use the
amount of the unclaimed payable Accrued Benefit to reduce the Employer's
contribution for the Plan Year in which the Forfeiture occurs.
If a Participant or Beneficiary who has incurred a forfeiture of his Accrued
Benefit under the provisions of the first paragraph of this Section 9.14 makes a
claim, at any time, for his forfeited Accrued Benefit, the ESOP Committee shall
restore the Participant's or Beneficiary's
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forfeited Accrued Benefit to the same dollar amount as the dollar amount of the
Accrued Benefit forfeited, unadjusted for any gains or losses occurring
subsequent to the date of the forfeiture to the extent permitted by ERISA and
the Code. The ESOP Committee will make the restoration during the Plan Year in
which the Participant or Beneficiary makes the claim, first from the amount, if
any, of Participant Forfeitures the ESOP Committee otherwise would allocate for
the Plan Year, then from the amount, if any, of the Trust Fund net income or
gain for the Plan Year and then from the amount, or additional amount, the
Employer contributes to enable the ESOP Committee (or the Trustee) to make the
required restoration. The ESOP Committee must direct the Trustee to distribute
the Participant's or Beneficiary's restored Accrued Benefit to him not later
than sixty (60) days after the close of the Plan Year in which the ESOP
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions and Participant Forfeitures.
End of Article IX
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ARTICLE X
REPURCHASE OF EMPLOYER SECURITIES
Notwithstanding any other provision herein, Article X does not apply to the
Plan if the Employer Securities held by the Plan are Publicly Traded unless
required by the Code and Treasury Regulations thereunder.
SEC. 10.01. PUT OPTION. The Company will issue a "put option" to each
Participant receiving a distribution of Employer Securities from his Employer
Securities Account if (i) such Employer Securities are not Publicly Traded when
distributed or are subject to a trading limitation (within the meaning of
Section 54.4975-7(b)(10) of the Regulations) and (ii) such Employer Securities
were acquired with the proceeds of an Exempt Loan. The put option will permit
the Participant, the Participant's donees, or a person (including an estate or
its distributee) to whom the Employer Securities pass by reason of a
Participant's death, to sell the Employer Securities to the Company, at any time
during two (2) option periods, at the current fair market value. The first put
option period runs for a period of at least sixty (60) days commencing on the
date of distribution of Employer Securities to the Participant. The second put
option period runs for a period of at least sixty (60) days commencing on the
first day of the subsequent Plan Year. If a Participant (or Beneficiary)
exercises his put option, the Company must purchase the Employer Securities at
fair market value upon the terms provided under Section 10.04 hereof. The
Company may grant the Trust an option to assume the Company's rights and
obligations at the time a Participant exercises an option under this Section
10.01.
SEC. 10.02. RESTRICTION ON EMPLOYER SECURITIES. Except upon the prior
written consent of the Company, no Participant (or Beneficiary) may sell,
assign, give, pledge, encumber, transfer or otherwise dispose of any Employer
Securities which are not Publicly Traded and which are now owned or subsequently
acquired by him without complying with the terms of this Article X. If a
Participant (or Beneficiary) pledges or encumbers any Employer Securities with
the required prior written consent, any security holder's rights with respect to
such Employer Securities are subordinate and subject to the rights of the
Company.
If the Employer Securities are not Publicly Traded, then any certificates
for Employer Securities distributed to Participants, Inactive Participants,
Former Participants, or Beneficiaries thereof, shall contain the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE TRANSFERABLE ONLY UPON
COMPLIANCE WITH THE TERMS OF THE VARI-LITE INTERNATIONAL, INC. EMPLOYEES'
STOCK OWNERSHIP PLAN AND THE VARI-LITE INTERNATIONAL, INC. EMPLOYEES'
STOCK OWNERSHIP TRUST (COLLECTIVELY REFERRED TO AS THE "PLAN"), WHICH
GRANTED VARI-LITE INTERNATIONAL, INC. (THE "COMPANY") A RIGHT OF FIRST
REFUSAL. THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS OR REGISTERED OFFICE A COPY OF THE PLAN.
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
LAWS OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE IN
WHICH THEY HAVE BEEN SOLD. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
On the front of each such certificate, there may be placed the following
notation in capital letters:
RESTRICTIONS ON TRANSFER STATED ON REVERSE SIDE
SEC. 10.03. LIFETIME TRANSFER AND RIGHT OF FIRST REFUSAL. If any Participant
(or Beneficiary) who receives Employer Securities under this Plan which are not
Publicly Traded, desires to dispose of any of his Employer Securities for any
reason during his lifetime (whether by sale, assignment, gift or any other
method of transfer), he first must offer the Employer Securities for sale to the
Company. The ESOP Committee may require a Participant (or Beneficiary) entitled
to a distribution of Employer Securities to execute an appropriate stock
transfer agreement (evidencing the right of first refusal) prior to receiving a
certificate of Employer Securities.
In the case of an offer by a third party, the offer to the Company is
subject to all the terms and conditions set forth in Section 10.04 hereof based
on the price equal to the fair market value per share and payable in accordance
with the terms of Section 10.04 hereof unless the selling price and terms
offered to the Participant by the third party are more favorable to the
Participant than the selling price and terms of Section 10.04 hereof, in which
case the selling price and terms of the offer of the third party apply. The
Company must give written notice to the offering Participant of its acceptance
of the Participant's offer within fourteen (14) days after the Participant has
given written notice to the Company or the Company's rights under this Section
10.03 will lapse. The Company may grant the Trust the option to assume the
Company's rights and obligations with respect to all or any part of the Employer
Securities offered to the Company under this Section 10.03.
Notwithstanding any provision to the contrary herein, the Trustee is
prohibited from exercising this first right of refusal if the fair market value
at the time of exercise is higher than the last Valuation Date unless the ESOP
Committee and the Trustee determine such action shall not have an effect on the
qualification of this Plan.
SEC. 10.04. PAYMENT OF PURCHASE PRICE. If the Company (or the Trustee, at
the direction of the ESOP Committee) exercises an option to purchase a
Participant's Employer Securities pursuant to an offer given under Section 10.03
hereof, the purchaser(s) must make payment in lump sum or, if the distribution
to the Participant (or to his Beneficiary) constitutes a Total Distribution, in
substantially equal installments over a period not exceeding five (5) years. A
"Total Distribution" to a Participant (or to a Beneficiary) is the distribution,
within one taxable year of the recipient, of the entire balance to the
Participant's credit under the Plan. In the case of a distribution which is not
a Total Distribution or which is a Total Distribution with respect to
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which the purchaser(s) will make payment in lump sum, the purchaser(s) must pay
the Participant (or Beneficiary) the fair market value of the Employer
Securities repurchased no later than thirty (30) days after the date the
Participant (or Beneficiary) exercises the option. In the case of a distribution
which is not a Total Distribution or which is a Total Distribution with respect
to which the purchaser(s) will make payment in lump sum, the purchaser(s) must
pay the Participant (or Beneficiary) the fair market value of the Employer
Securities repurchased no later than thirty (30) days after the date the
Participant or (Beneficiary) exercises the option. In the case of a Total
Distribution with respect to which the purchaser(s) will make installment
payments, the purchaser(s) must make the first installment payment no later than
thirty (30) days after the Participant (or Beneficiary) exercises the put
option. For installment amounts not paid within thirty (30) days of the exercise
of the put option, the purchaser(s) must evidence the balance of the purchase
price by executing a promissory note, delivered to the selling Participant at
the Closing. The note delivered at Closing (as defined in Section 10.06 hereof)
must bear a reasonable rate of interest, determined as of the Closing Date (as
dfined in Section 10.06 hereof), and the purchaser(s) must provide adequate
security (which satisfies the requirement of Section 409 of the Code and ERISA).
The note must provide for equal annual installments with interest payable with
each installment, the first installment being due and payable one year after the
Closing Date. The note further must provide for acceleration in the event of
thirty (30) days' default of the payment on interest or principal and must grant
to the maker of the note the right to prepay the note in whole or in part at any
time or times without penalty; provided, however, the purchaser(s) may not have
the right to make any prepayment during the calendar year or fiscal year of the
Participant (or Beneficiary) in which the Closing Date occurs.
SEC. 10.05. NOTICE. A person has given Notice permitted or required under
this Article X when the person deposits the Notice in the United States mail,
first class, postage prepaid, addressed to the person entitled to the Notice at
the address currently listed for him in the records of the ESOP Committee. Any
person affected by this Article X has the obligation of notifying the ESOP
Committee of any change of address.
SEC. 10.06. TERMS AND DEFINITIONS. For purposes of this Article X:
(a) "Fair market value" means the value of the Employer Securities (i)
determined as of the date of the exercise of an option if the exercise is by a
Disqualified Person, or (ii) in all other cases, determined as of the most
recent Accounting Date. The ESOP Committee must determine fair market value of
Employer Securities, for all purposes of the Plan by engaging the services of an
independent appraiser or independent financial advisor ("INDEPENDENT PARTY").
The ESOP Committee shall rely upon a determination of valuation of Employer
Securities made by the independent party selected by the Trustee. The ESOP
Committee shall rely upon the independent party selected by the Trustee to be
(i) independent as required by law, and (ii) qualified and experienced in
preparing valuations of closely-held corporations for ESOP purposes.
(b) "Notice" means any offer, acceptance of an offer, payment or any
other communications.
(c) "Beneficiary" includes the legal representative of a deceased
Participant.
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(d) "Closing" means the place, date, and time ("Closing Date") to
which the selling Participant (or his Beneficiary) and purchaser may agree for
purposes of a sale and purchase under this Article X, provided Closing must take
place not later than thirty (30) days after the exercise of an offer under
Section 10.03 hereof.
SEC. 10.07. CERTAIN RIGHTS WITH RESPECT TO EMPLOYER SECURITIES. Any Employer
Securities, if they are not Publicly Traded when distributed, or are subject to
a trading limitation when distributed, must be subject to a put option as set
forth in Section 10.01 hereof. The put option is to be exercisable only by the
Participant, the Participant's Beneficiary, and Alternate Payee, or by a person
"including an estate or its distributee" to whom the Employer Securities pass by
reason of a Participant's death. The put option must permit the Participant to
put the Employer Securities to the Company. Additionally, except as otherwise
provided in Sections 10.01 and 10.03 hereof, or as otherwise required by
applicable law, no Leveraged Employer Securities may be subject to a put, call,
or other option, or a buy-sell or similar arrangement, while held by and when
distributed from the Plan.
SEC. 10.08. TRUSTEE'S PUT OPTION. To the extent permitted by Regulation
Section 54.4975-7(b)(4) (with respect to Leveraged Employer Securities) the
Trustee shall have the right to put the shares of Employer Securities held by
the Trust, to the Company to be purchased by the Company at the then fair market
value in the event that a distribution from a Participant's Employer Securities
Account is to be made in cash, or a distribution pursuant to Section 12.25
hereof or the Trustee expects to incur Plan expenses which will not be paid
directly by the Employer and the Trustee determines that the Trust has
insufficient cash to make the anticipated distributions or pay Plan expenses.
SEC. 10.09. PROVISIONS NON-TERMINABLE. The provisions described in this
Article X are non-terminable even if the Exempt Loan is repaid or the Plan
ceases to be an employee stock ownership plan.
END OF ARTICLE X
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP PLAN - Page 81
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<PAGE>
ARTICLE XI
PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
SEC. 11.01. INSURANCE BENEFIT. The Company may elect to provide incidental
life insurance benefits for Insurable Participants who consent to life insurance
benefits by signing the appropriate insurance company application form. No
incidental life insurance benefit for any Participant will be purchased prior to
an allocation to the Participant's Account. If the Policy is on the joint lives
of the Participant and another person, that Policy may not be maintained if that
other person predeceases the Participant.
The Company will direct the Trustee as to the insurance company and
insurance agent through which the Trustee is to purchase the insurance
Contracts, the amount of the coverage and the applicable dividend plan. Each
application for a Policy, and the Policies themselves, must designate the
Trustee as sole owner, with the right reserved to the Trustee to exercise any
right or option contained in the Policies, subject to the terms and provisions
of this Plan. The Trustee must be the named beneficiary for the Account of the
insured Participant. Proceeds of insurance contracts paid to the Participant's
Account under this Article XI are subject to the distribution requirements of
Article V and of Article VI hereof.
The premiums on any incidental benefit insurance Contract covering the life
of a Participant will be charged against the Account of that Participant. All
incidental benefit insurance Contracts issued under the Plan will be held as
assets of the Plan.
The aggregate of life insurance premiums paid for the benefit of a
Participant, at all times, may not exceed the following percentages of the
aggregate of the Employer's contributions allocated to any Participant's
Account: (i) forty-nine percent (49%) in the case of the purchase of ordinary
life insurance Contracts; or (ii) twenty-five percent (25%) in the case of the
purchase of term life insurance or universal life insurance Contracts. If a
combination of ordinary life insurance Contract(s) and term life insurance or
universal life insurance Contract(s) are purchased, then the sum of one-half (2)
of the premiums paid for the ordinary life insurance Contract(s) and the
premiums paid for the term life insurance or universal life insurance
Contract(s) may not exceed twenty-five percent (25%) of the Employer
contributions allocated to any Participant's Account.
SEC. 11.02. LIMITATION ON LIFE INSURANCE PROTECTION. No life insurance
protection for any Participant will be continued beyond his Annuity Starting
Date. If the Plan holds any incidental benefit insurance Contract(s) on the life
of a Participant when he terminates his employment (other than by reason of
death), the following provisions shall apply:
(a) If the entire cash value of the Contract(s) is vested in the
terminating Participant, or if the Contract(s) will have no cash value at the
end of the policy year in which termination of employment occurs, the
Contract(s) to the Participant will be transferred so as to vest in the
transferee all right, title and interest to the Contract(s), free and clear of
the Plan; subject however, to restrictions as to surrender or payment of
benefits as the Issuing Insurance Company may permit and as the ESOP Committee
directs;
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(b) If only part of the cash value of the Contract(s) is vested in the
terminating Participant, then to the extent the Participant's interest in the
cash value of the Contract(s) is not vested, the Participant's interest in the
value of his Account attributable to Trust Assets other than incidental benefit
insurance contracts may be adjusted and proceed as in Section 11.02(a) above, or
a loan from the Issuing Insurance Company on the sole security of the
Contract(s) for an amount equal to the difference between the cash value of the
Contract(s) at the end of the policy year in which termination of employment
occurs and the amount of the cash value that is vested in the terminating
Participant, and the Contract(s) endorsed must be transferred so as to vest in
the transferee all right, title and interest to the Contract(s), free and clear
of the Plan; subject however, to the restrictions as to surrender or payment of
benefits as the Issuing Insurance Company may permit and the ESOP Committee
directs;
(c) If no part of the cash value of the Contract(s) is vested in the
terminating Participant, the Contract(s) must be surrendered for cash proceeds
as may be available.
In accordance with the written direction of the ESOP Committee, any transfer
of Contract(s) under this Section 11.02 will be made on the Participant's
Annuity Starting Date (or as soon as administratively practicable after that
date). No Contract may be transferred under this Section 11.02 which contains a
method of payment not specifically authorized by Article VI hereof. In this
regard, such a Contract must be converted to cash and the cash distributed
instead of the Contract, or before making the transfer, require the Issuing
Insurance Company to delete the unauthorized method of payment option from the
Contract.
SEC. 11.03. DEFINITIONS. For purposes of this Article XI:
(a) "Policy" means an ordinary life insurance contract or a term life
insurance Contract issued by an insurer on the life of a Participant.
(b) "Issuing Insurance Company" is any life insurance company which
has issued a Policy upon application by the Trustee or ESOP Committee under the
terms of this Plan.
(c) "Contract" or "Contracts" means a Policy of insurance. In the
event of any conflict between the provisions of this Plan and the terms of any
Contract or Policy of insurance issued in accordance with this Article XI, the
provisions of the Plan control.
(d) "Insurable Participant" means a Participant to whom an insurance
company, upon an application being submitted in accordance with the Plan, will
issue insurance coverage, either as a standard risk or as a risk in an extra
mortality classification.
SEC. 11.04. DIVIDEND PLAN. The dividend plan is premium reduction unless the
Company directs the Trustee to the contrary. All dividends from a Contract must
be used to purchase insurance benefits or additional insurance benefits for the
Participant on whose life the Issuing Insurance Company has issued the Contract.
All Policies issued on the lives of Participants under the Plan must be
arranged, if possible, to have the same premium due date and all ordinary life
insurance Contracts to contain guaranteed cash values with as uniform basic
options as are possible to obtain. The term "dividends" includes Policy
dividends, refunds of premiums and other credits.
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SEC. 11.05. INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance
company, solely in its capacity as an Issuing Insurance Company, is a party to
this Plan nor is the insurance company responsible for its validity.
SEC. 11.06. INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS. No
insurance company, solely in its capacity as an Issuing Insurance Company, need
examine the terms of this Plan nor is responsible for any action taken by the
Trustee or the ESOP Committee.
SEC. 11.07. INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For the
purpose of making application to an insurance company and in the exercise of any
right or option contained in any Policy, the insurance company may rely upon the
signature of the Trustee and is saved harmless and completely discharged in
acting at the direction and authorization of the Trustee.
SEC. 11.08. ACQUITTANCE. An insurance company is discharged from all
liability for any amount paid to the Plan, and is not obligated to see to the
distribution or further application of any moneys it so pays.
SEC. 11.09. DUTIES OF INSURANCE COMPANY. Each insurance company must keep
such records, make such identification of Contracts, funds and accounts within
funds, and supply such information as may be necessary for the proper
administration of the Plan under which it is carrying insurance benefits.
END OF ARTICLE XI
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ARTICLE XII
MISCELLANEOUS
SEC. 12.01. EVIDENCE. Anyone required to give evidence under the terms of
the Plan may do so by certificate, affidavit, document or other information
which the person to act in reliance may consider pertinent, reliable and
genuine, and to have been signed, made or presented by the proper party or
parties. The ESOP Committee is fully protected in acting and relying upon any
evidence described under the immediately preceding sentence.
SEC. 12.02. NO RESPONSIBILITY FOR PLAN ACTION. The ESOP Committee does not
have any obligation or responsibility with respect to any action required by the
Plan or Trust to be taken by the Trustee, Employer, the Company, the Plan
Administrator, any Participant or Eligible Employee, or for the failure of any
of the above persons to act or make any payment or contribution, or to otherwise
provide any benefit contemplated under this Plan. The Plan does not require the
ESOP Committee to determine if a loan obtained by the Trustee is an Exempt Loan
(as defined in Section 12.21 hereof, the Trustee is purchasing Qualifying
Employer Securities (as defined at Section 1.62 hereof), the Trustee is
purchasing Qualifying Employer Securities for no more than adequate
consideration (as defined in ERISA), or to collect any contribution required
under the Plan, or to determine the correctness of the amount of any Employer
contribution. The ESOP Committee need not inquire into or be responsible for any
action or failure to act on the part of the others, or on the part of any other
person who has any responsibility regarding the management, administration or
operation of the Plan, whether by the express terms of the Plan, the Trust, or
by a separate agreement authorized by the Plan or by the applicable provisions
of ERISA.
SEC. 12.03. FIDUCIARIES NOT INSURERS. The ESOP Committee, the Plan
Administrator, the Trustee, the Company, and the Employer in no way guarantee
the Trust Fund from loss or depreciation. The Employer and the Company do not
guarantee the payment of any money which may be or becomes due to any person
from the Trust Fund.
SEC. 12.04. WAIVER OF NOTICE. Any person entitled to notice under the Plan
may waive the notice, unless the Code or Treasury regulations prescribe the
notice or ERISA specifically or impliedly prohibits such a waiver.
SEC. 12.05. SUCCESSORS. The Plan is binding upon all persons entitled to
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, its successors and assigns, and upon the Trustee, the ESOP
Committee, the Plan Administrator and their successors.
SEC. 12.06. WORD USAGE. Words used in the masculine also apply to the
feminine and neuter where applicable, and wherever the context of the Plan
dictates, the plural includes the singular and the singular includes the plural.
Whenever a noun, or pronoun in lieu thereof, is used in this Plan in plural form
and there may be only one person within the scope of the word so used, or in
singular form and there be more than one (1) person within the scope of the word
so used, such word, or pronoun used in lieu thereof, shall have a singular or
plural meaning, as the case may be. The words "herein," "hereof," and
"hereunder" and other similar compounds of the
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word "here" shall mean and refer to the entire Plan, not to any particular
provision or Section. Reference to Plan or Trust (or both) means this Plan.
Article and Section headings are included for convenience of reference and are
not intended to add to, or subtract from, the terms of the Plan.
SEC. 12.07. STATE LAW. Texas law will determine all questions arising with
respect to the provisions of this Agreement, such as (but not limited to) the
execution, construction, administration and enforcement of the Plan, except to
the extent superseded by federal law.
SEC. 12.08. EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or
with respect to the establishment of the Trust, or any modification or amendment
to the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Participant, Former Participant, or any Beneficiary
any right to continue employment, any legal or equitable right against the
Employer, the Company, or the Employee of the Employer, or its agents or
employees, the ESOP Committee, or against the Plan Administrator, except as
expressly provided by the Plan, the Trust, ERISA or by a separate agreement.
SEC. 12.09. SEVERABILITY. Notwithstanding any provision contained in the
Plan to the contrary, the provisions of this Plan shall be deemed severable and
the validity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions thereof.
SEC. 12.10. CONTRARY PROVISIONS. The provisions of this Article XII shall
govern notwithstanding anything contained in the Plan to the contrary.
SEC. 12.11. NOTICE TO EMPLOYEES. Notice of the Plan and of any amendments
thereto, of eligibility of each Employee, and notice of such other matters as
may be required by law or this instrument, shall be given by the Employer to the
Employees in such form as the ESOP Committee may deem appropriate and reasonable
and in conformity to lawful requirements.
SEC. 12.12. AGREEMENT OF PARTICIPANTS. Each Participant, by becoming such,
for himself or herself, and such Participant's heirs, executors, administrators,
legal representatives and Beneficiaries, ipso facto, approves and agrees to be
bound by the provisions of this Plan.
SEC. 12.13. ACTION BY EMPLOYERS. Any written action herein permitted or
required to be taken by an Employer shall be by resolution of its board of
directors or by written instrument executed by a person or group of persons who
has been authorized by resolution of its board of directors as having authority
to take such action.
SEC. 12.14. ADOPTION OF THE PLAN BY A CONTROLLED GROUP MEMBER. Any business
enterprise which on or after the Effective Date is or becomes a member of a
group of corporations described in Code Section 409(1) that includes the Company
shall be authorized to adopt the Plan for the benefit of its eligible employees
if approval of its board of directors is obtained.
(A) METHOD OF ADOPTING THE PLAN BY AN AFFILIATE. In order to adopt the
Plan, the board of directors of the adopting Employer must approve a resolution
expressly adopting the Plan for the benefit of its Employees and the
requirements set forth in Section 1.43 of the Plan
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must be satisfied. The Company may require the Employer to authorize the
appropriate officer of such adopting Employer to contribute from time to time,
for purposes of the Plan, such sum as may be determined by the board, to be such
adopting Employer's contribution for the benefit of Participants who are
employed by such adopting Employer.
(b) TRANSMITTAL OF RESOLUTION. Upon the Company's request, a certified
copy of the adopting Employer's resolution shall be transmitted to the Company
and approval of the Board of Directors shall be deemed to constitute the
adoption of the Plan by the adopting Employer as of the date specified in such
adopting Employer's resolution or other agreement.
SEC. 12.15. DISASSOCIATION OF ANY EMPLOYER FROM PLAN. Any Employer may
withdraw from the provisions of this Plan at any time upon the expiration of
thirty (30) days after delivery of written notice of its intent to do so to the
ESOP Committee and the Board, and shall thereupon cease to be a party to this
Plan. In such event, liability for further contributions for such Employer shall
cease, and the money attributable to its then Participants and Former
Participants shall either be distributed to the Participants or Former
Participants, if it elects to terminate the Plan as to it, in the same manner as
provided in the case of termination of the whole Plan, or shall be transferred
to an independent successor plan and trust that it may establish for the benefit
of its own employees, which shall be deemed a continuation of this Plan.
Withdrawal from the Plan by an Employer shall not affect the continued operation
of the Plan with respect to the Company and other Employers.
SEC. 12.16. AUDIT.
(a) If an audit of the Plan's records shall be required by ERISA and
the regulations thereunder for any Plan Year, the ESOP Committee shall direct
the Trustee to engage on behalf of all Participants any independent, qualified
certified public accountant for that purpose. Such accountant shall, after an
audit of the books and records of the Plan in accordance with generally accepted
auditing standards within a reasonable period after the close of the Plan Year,
furnish to the ESOP Committee and the Company a report of his, her, or its audit
setting forth his, her, or its opinion that each of the following statements,
schedules or lists, or any other statements that are required by ERISA or the
Secretary of Labor to be filed with the Plan's annual report, are presented
fairly in conformity with generally accepted accounting principles applied
consistently:
(1) Statement of the assets and liabilities of the Trust;
(2) Statement of changes in net assets available to the
Trust;
(3) Statement of receipts and disbursements of all assets
held for investment purposes;
(4) A schedule of all loans of fixed income obligations and
defaults at the close of the Plan Year;
(5) A list of all leases in default or uncollectible during
the Plan Year;
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(6) The most recent annual statement of assets and
liabilities of any bank common or collective trust fund
in which the Plan Assets are invested or such
information regarding separate accounts or trusts with a
bank or insurance company as ESOP Committee deems
necessary;
(7) A schedule of each transaction or series of transactions
involving an amount in excess of three percent (3%) of
Plan Assets; and
(8) Other schedules and statements necessary to render an
opinion.
All auditing and accounting fees may be paid by the Employer, and if
not, shall be an expense of the Plan and may, at the election of the ESOP
Committee, be paid from the Trust.
(b) If some or all of the information necessary to enable the ESOP
Committee to comply with ERISA is maintained by a bank, insurance company, or
similar institution regulated, supervised, and subject to periodic examination
by state or federal agencies, it shall transmit and certify the accuracy of that
information to the ESOP Committee as provided by ERISA within one hundred twenty
(120) days after the end of the Plan Year or such other date as may be
prescribed under regulations of the Secretary of Labor.
SEC. 12.17. BONDING. Every Fiduciary, for the faithful performance of its
duties under the Plan to the extent required by ERISA, shall be bonded in the
amount required under ERISA; provided, however, that the minimum bond shall be
One Thousand and No/100 Dollars ($1,000). The amount of funds handled shall be
determined at the beginning of each Plan Year by the amount of the funds handled
by such person, group, or class to be covered and their predecessors, if any,
during the preceding Plan Year or if there is no preceding Plan Year, then the
amount of the funds to be handled during the then current year. The bond shall
provide protection to the Plan against any and all loss by reason of acts of
fraud or dishonesty by the Fiduciary, alone or in connivance with others. The
security shall be a corporate security as the term is used in Section 412(a)(2)
of ERISA, and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bond
shall be an expense of, and may at the election of the ESOP Committee be paid
from, the Trust or by the Employer.
SEC. 12.18. NAMED FIDUCIARY. The "Named Fiduciaries" of this Plan are (1)
the Trustee, (2) the Plan Administrator, and (3) any Investment Manager
appointed hereunder. The Named Fiduciaries shall have only those specified
powers, duties, responsibilities, and obligations as are specifically given them
under this Plan. In general, the Employer shall have the sole responsibility for
making the contributions provided for under the Plan. The Company shall have the
sole authority to appoint and remove the Trustee and the Plan Administrator. The
Plan Administrator shall have the sole responsibility for the administration of
the Plan. The Trustee shall have the sole responsibility to determine
if a loan secured by the Trustee on behalf of the Plan is an Exempt Loan (as
defined in Section 12.21 hereof), to determine
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that the Employer Securities purchased by the Trust are Qualifying Employer
Securities, to determine that the purchase price paid to purchase Qualifying
Employer Securities does not violate the prohibited transaction rules, and for
management of the assets held under the Trust except those assets, management of
which have been delegated to an Investment Manager who shall be solely
responsible for the management of the assets delegated to it or as specifically
provided under this Plan. Each Named Fiduciary warrants that any directions
given, information furnished, or action taken by it shall be taken in accordance
with the provisions of this Plan, authorizing or providing for such direction,
information, or action. Each Named Fiduciary may rely upon any such direction,
information, or action of another Named Fiduciary as being proper under this
Plan and is not required under this Plan to inquire into priority of any such
direction, information, or action. It is intended under this Plan that the Named
Fiduciary shall be responsible for the proper exercise of its own powers,
duties, responsibilities or obligations under this Plan. No Named Fiduciary
shall guarantee the Plan in any manner against investment lost or depreciation
inasset value.
SEC. 12.19. SECURITIES AND EXCHANGE COMMISSION APPROVAL. The Company may
request an interpretative letter from the Securities and Exchange Commission
stating that the transfers of Employer Securities contemplated thereunder do not
involve transactions requiring a registration of such Employer Securities under
the Securities Exchange Act of 1933. In the event a favorable interpretative
letter is not obtained, the Company reserves the right to amend the Plan, to
amend the Plan retroactively for an effective date to obtain a favorable
interpretative letter, or to terminate the Plan.
SEC. 12.20. VALUATION OF TRUST. The Trust Fund must be valued as of each
Accounting Date, and in addition, as of transaction date with any Disqualified
Person, to determine the fair market value of each Participant's Accrued Benefit
in the Plan. The Trust Fund must also be valued on such other dates, as directed
by the ESOP Committee. If a Valuation Date would otherwise occur on a Saturday,
Sunday, or Company holiday, then the Valuation Date shall mean the preceding
business day. For the purposes of each such valuation, the assets of the Trust
Fund shall be valued at their respective current fair market value, and the
amount of any obligations for which the Trust Fund may be liable shall be
deducted from the total value of the assets. With respect to activities carried
on by the Plan, an independent appraiser meeting requirements similar to those
prescribed by Treasury Regulations under Code Section 170(a)(1) must perform all
valuations of Employer Securities which are not Publicly Traded. Notwithstanding
any provision to the contrary, the value of any Employer Securities which are
Publicly Traded as of any date shall mean: (i) for statement purposes the
closing price of such securities; (ii) for purchases and sales on the open
market purposes the price at which the securities may be purchased or sold:
(iii) for purposes of the initial valuation of the Company common stock received
from the Company in exchange for securities not listed on a national securities
exchange the average high and low prices of such securities, for the Valuation
Date on the NASDAQ (or such national exchange as shall be designated by the
Committee.)
SEC. 12.21. EXEMPT LOAN. This Section 12.21 is effective as of October 21,
1997 and specifically authorizes the Trustee to enter into an Exempt Loan
transaction. The Board may empower the Company to authorize the guarantee or
making by the Employer of any such loan. The following terms and conditions will
apply to any Exempt Loan:
(A) The proceeds of the loan will be used within a reasonable time
after receipt only for any or all of the following purposes: (i) to acquire
Employer Securities, (ii) to
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repay such loan, or (iii) to repay a prior Exempt Loan. Except as provided under
Article X hereof, no Employer Securities acquired with the proceeds of an Exempt
Loan may be subject to a put, call or other option, or buy-sell or similar
arrangement while held by and when distributed from this Plan, whether or not
this Plan is then an employee stock ownership plan.
(B) The interest rate of the loan may not be more than a reasonable
rate of interest.
(C) Any collateral pledged to the creditor must consist only of the
assets purchased by the borrowed funds and those assets used as collateral on
the prior Exempt Loan repaid with the proceeds of the current Exempt Loan.
(D) The creditor may have no recourse against the Plan under the loan
except with respect to such collateral given for the loan, contributions (other
than contributions of Employer Securities) that the Employer makes to the Plan
to meet its obligations under the loan, and earnings attributable to such
collateral and the investment of such contributions. The payment made with
respect to an Exempt Loan by the Plan during a Plan Year must not exceed an
amount equal to the sum of such contributions and earnings received during or
prior to the year less such payments in prior years.
(E) In the event of default upon the loan, the value of Plan Assets
transferred in satisfaction of the loan must not exceed the amount of the
default, and if the lender is a Disqualified Person, the loan must provide for
transfer of Plan Assets upon default only upon and to the extent of the failure
of the Plan to meet the payment schedule of the loan.
(F) All assets acquired with the proceeds of an Exempt Loan must be
added to and maintained in a Suspense Account. In withdrawing assets from the
Suspense Account, the provisions of Treasury Regulation Sections 54.4975-7(b)(8)
and (15) will be applied as if all securities in the Suspense Account were
encumbered. Notwithstanding any other provision herein, upon the payment of any
portion of the loan, assets in the Suspense Account shall be released from
encumbrances. For each Plan Year during the duration of the loan, the number of
Employer Securities released must equal the number of encumbered Employer
Securities held immediately before release for the current Plan Year multiplied
by a fraction of (i) the numerator of which is the amount of principal paid
under the purchase contract or the loan agreement for the current Plan Year;
(ii) the denominator of which is the total of all principal to be paid for the
current and all future Plan Years during the term of the note (determined
without reference to any possible extensions or renewals thereof); provided the
terms of the Exempt Loan satisfy all the requirements under Treasury Regulation
Section 54.4975-7(b)(8)(ii). At the option of the Company, or if the Exempt Loan
does not contain the following characteristics: (1) the annual payments of
principal and interest (at a cumulative rate) are at least as rapid as level
annual payments of such amounts over ten years, (2) the portion of each loan
payment treated as interest does not exceed the amount of payment that would be
treated as interest under standard loan amortization tables, and (3) the loan
term (including extensions and renewals) does not exceed ten years, then
interest paid and to be paid in the future on the Exempt Loan shall be included
in the numerator and denominator of the fraction. The number of future Plan
Years under the loan must be definitely ascertainable and must be determined
without taking into account any possible extension or renewal periods. If the
interest rate under the loan is variable, the interest to be paid in future Plan
Years must be computed by using the interest rate applicable as of the end of
the
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Plan Year. If the collateral includes more than one class of Employer
Securities, the number of Employer Securities of each class to be released for a
Plan Year must be determined by applying the same fraction to each such class.
The ESOP Committee will allocate assets withdrawn from the Suspense Account to
the Accounts of Participants who otherwise share in the allocation of the
Employer's contribution for the Plan Year for which the portion of the loan
resulting in the release of the assets has been paid in accordance with the
provisions of subparagraph (d)(iii) of paragraph (1) subsection (A) of Section
3.04. The ESOP Committee consistently will make this allocation as of each
Accounting Date, and of any special Valuation Date if directed by the ESOP
Committee, on the basis of non-monetary units, taking into account the relative
Compensation of all such Participants for such Plan Year.
(G) A loan may be obtained provided the loan is primarily for the
benefit of the Plan Participants and Beneficiaries of the Plan.
(H) In the event a portion of a Participant's Employer Securities
Account is forfeited, if more than one class of Qualifying Employer Securities
subject to the Exempt Loan provisions have been allocated to a Participant's
Employer Securities Account, the same proposition of each class of Qualifying
Employer Securities shall be forfeited. Such forfeiture shall occur only with
other assets held in the Participant's Accounts have been forfeited.
SEC. 12.22. RECORDS AND STATEMENTS. The records pertaining to the Plan shall
be open to the inspection of the Plan Administrator, ESOP Committee and the
Employer at all reasonable times and may be audited from time to time by any
person or persons as the Company or ESOP Committee may specify in writing. The
ESOP Committee may direct the Trustee to furnish the ESOP Committee or Plan
Administrator with whatever information relating to the Trust Fund the Plan
Administrator or ESOP Committee considers necessary.
SEC. 12.23. PARTIES TO LITIGATION. Except as otherwise provided by ERISA, no
Participant or Beneficiary is a necessary party or is required to receive notice
of process in any court proceeding involving the Plan or any fiduciary of the
Plan. Any final judgment entered in any proceeding will be conclusive upon the
Employer, the Plan Administrator, the ESOP Committee, the Trustee, Participants
and Beneficiaries.
SEC. 12.24. PROFESSIONAL AGENTS. The ESOP Committee may employ and direct
the Trustee to pay from the Trust Fund reasonable compensation to agents,
financial advisors, appraisers, attorneys, accountants, investment managers, and
other persons to advise the Trustee as in its opinion may be necessary. The ESOP
Committee may delegate to any agent, financial advisor, appraiser, attorney
(which may be counsel of the Employer), accountant, investment manager, or other
person selected by it any non-Trustee power or duty vested in it by the Plan.
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SEC. 12.25. DISTRIBUTION OF TRUST FUND.
(A) UNRESTRICTED EMPLOYER SECURITIES. If Employer Securities held in a
Participant Employer Securities Account are not restricted, as described in Code
Section 409(h)(2) or are freely tradeable as described in Section 1.411(d)-4 of
the Regulations, all distributions under the Plan will be made in Employer
Securities. If the Participant (or his Beneficiary), elects in writing to have
his Accounts distributed in cash, the ESOP Committee, in its discretion, shall
determine whether to make such distribution in cash, Employer Securities, or any
combination. At the discretion of the ESOP Committee, the Trustee may pay in
cash any fractional security share and any funds in the Participant General
Investments Account to which a Participant or his Beneficiary is entitled. At
the discretion of the ESOP Committee, the Trustee may apply any balance in a
Participant General Investments Account to provide whole shares of Employer
Securities for distribution.
(B) RESTRICTED EMPLOYER SECURITIES. If Employer Securities held in a
Participant Employer Securities Account are restricted as described in Code
Section 409(h)(2) or are not freely tradeable as described in Section 1.411(d)-4
of the Regulations, all distributions under the Plan will be made only as
directed by the ESOP Committee valued at the time of distribution. Distribution
of a Participant's Account(s) will be made in whole shares of Employer
Securities, cash or a combination thereof, as determined by the ESOP Committee;
provided, however, that the ESOP Committee shall notify the Participant of his
right to demand and receive a distribution of his Account(s) entirely in whole
shares of Employer Securities. At the discretion of the ESOP Committee, the
Trustee may pay in cash any fractional security share to which a Participant or
his Beneficiary is entitled. In the event the Trustee is to make a distribution
in shares of Employer Securities, any balance in a Participant General
Investments Account may be applied to provide whole shares of Employer
Securities for distribution at the then value.
(C) DIVIDENDS. Notwithstanding the preceding provisions of this
Section 12.25, the Trustee, if directed in writing by the ESOP Committee, shall
pay to the Participant, in cash, any cash dividends on Employer Securities
allocated, or allocable to Participant Employer Securities Accounts pursuant to
Section 3.05(d) of the Plan. The ESOP Committee's direction must state whether
the Trustee is to pay the cash dividend distributions currently, or within the
ninety (90) day period following the close of the Plan Year in which the
Employer pays the dividends to the Trust. The ESOP Committee may request the
Employer to pay dividends on Employer Securities directly to Participants.
SEC. 12.26. DISTRIBUTION DIRECTIONS. If no one claims a payment or
distribution made from the Plan, disposition of the payment will be made in
accordance with the direction of the ESOP Committee.
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SEC. 12.27. WITHHOLDING FOR ANY PAYMENT OF TAXES. If any assets of the Plan,
or any benefits payable under the Plan, shall become liable for the payment of
any estate, inheritance, income, or other tax, charge or assessment, which in
the Company's opinion the Trustee shall or may be required to pay, the ESOP
Committee may direct the Trustee to pay or withhold such tax, charge or
assessment out of any monies or other property in Trustee's hands for the
account of the person whose interest hereunder are liable for such tax. The ESOP
Committee may require such releases or other documents from any lawful taxing
authority and may require such indemnity from such Beneficiary the ESOP
Committee shall deem necessary. The Plan may provide any notices required by
Section 3405 of the Code with respect to federal income tax withholding from
distributions hereunder, and shall withhold and pay any federal income tax
required under Section 3405 of the Code.
SEC. 12.28. USERRA COMPLIANCE. Notwithstanding any provision of this Plan to
be contrary, contributions benefits and service credit with respect to qualified
military service will be provided in accordance with Section 414(u) of the Code.
SEC. 12.29 SECURITY HOLDER. Notwithstanding any provision herein, the
Trustee shall not otherwise obligate itself to acquire Employer Securities from
a particular shareholder at an indefinite time determined upon the happening of
an event such as, but not limited to, the death of a shareholder.
END OF ARTICLE XII
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ARTICLE XIII
EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
SEC. 13.01. EXCLUSIVE BENEFIT. Except as provided under Article III hereof,
the Employer has no beneficial interest in any asset of the Trust and no part of
any asset in the Trust may ever revert to or be repaid to an Employer, either
directly or indirectly; nor, prior to the satisfaction of all liabilities with
respect to the Participants and their Beneficiaries under the Plan, may any part
of the corpus or income of the Trust Fund, or any asset of the Trust, be (at any
time) used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. In the event the Commissioner of the
Internal Revenue Service, upon the Employer's request for initial approval of
this Plan, determines the Plan is not a qualified plan under the Code, any
contribution made incident to that initial qualification by the Employer must be
returned to the Employer within one (1) year after the date the initial
qualification is denied, but only if the application for qualification is made
by the time prescribed by law for filing the Employer's return to the taxable
year in which the Plan was adopted or such later date as the Secretary of the
Treasury may prescribe. The Plan and Trust will terminate upon the return of the
Employer's contributions.
SEC. 13.02. AMENDMENT BY COMPANY. The Company has the right at any time and
from time to time:
(a) To amend this Plan in any manner it deems necessary or
advisable in order to qualify (or maintain qualification
of) this Plan under the appropriate provisions of Code
Sections 401(a) and 4975(e)(7); and
(b) To amend distribution options in a nondiscriminatory
manner as permitted under Code Section 411(d)(b)(c)(ii);
and
(c) To amend this Plan in any other manner.
No amendment may authorize or permit any of the Trust Fund (other than the
part which is required to pay taxes and administration expenses) to be used for
or diverted to purposes other than for the exclusive benefit of the Participants
or their Beneficiaries or estates. No amendment may cause or permit any portion
of the Trust Fund to revert to or become a property of the Company or Employer.
The Company also may not make any amendment which affects the rights, duties or
responsibilities of the Trustee, the Plan Administrator or the ESOP Committee
without the written consent of the affected Trustee, the Plan Administrator or
the affected member of the ESOP Committee. The Company must make all amendments
in writing. Each amendment must state the date to which it is either
retroactively or prospectively effective.
(A) CODE SECTION 411(d)(6) PROTECTED BENEFITS. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code Section
412(c)(8), and may not reduce or eliminate Code Section 411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
Section 411(d)(6) protected benefits if the amendment has the effect of either
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(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy (as defined in Treasury regulations), or (2) except as provided by
Treasury regulations, eliminating an optional form of benefit. The ESOP
Committee must disregard an amendment to the extent application of the amendment
would fail to satisfy this paragraph. If the ESOP Committee must disregard an
amendment because the amendment would violate clause (1) or clause (2), the ESOP
Committee must maintain a schedule of the early retirement option or other
optional forms of benefit the Plan must continue for the affected Participants.
(B) EFFECTIVE DATE OF AMENDMENT. Any such amendment shall become effective
as provided therein upon its execution except the amendments which are required
to be made by provisions of ERISA or the Code, which if not made would
disqualify the qualified status of the Plan and the amendment, shall be deemed
to be made prior to the end of any retroactive amendment period provided for in
ERISA or the Code.
SEC. 13.03. DISCONTINUANCE. Any Employer has the right, at any time, to
suspend or discontinue its contributions under the Plan. The Company has the
right to terminate this Plan at any time. The Plan will terminate upon the first
to occur of the following:
(a) The date terminated by action of the Company; and
(b) The dissolution or merger of the Company, unless the successor
entity makes provision to continue the Plan, in which event the successor must
substitute itself as the Company under this Plan. Any termination of the Plan
resulting from this paragraph (b) is not effective until compliance with any
applicable notice requirements under ERISA.
SEC. 13.04. FULL VESTING ON TERMINATION. Upon either full or partial
termination of the Plan, or, if applicable, upon complete discontinuance of Plan
contributions to the Plan, an affected Participant's right to his Accrued
Benefit is one hundred percent (100%) Nonforfeitable, regardless of the
Nonforfeitable percentage which otherwise would apply under Article V hereof. A
partial termination of the Plan or discontinuance of Plan contributions to the
Plan will in no way accelerate the time of distribution of benefits to any
Participant.
SEC. 13.05. MERGER AND DIRECT TRANSFER. The Company may not consent to, or
be a party to, any merger or consolidation with another plan, or to a transfer
of assets or liabilities to another plan, unless immediately after the merger,
consolidation or transfer, the surviving plan provides each Participant a
benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer.
The Plan may accept a direct transfer of plan assets on behalf of an
Employee prior to the date the Employee satisfies the Plan's eligibility
conditions. If the Plan accepts a direct transfer of plan assets, the ESOP
Committee must treat the Employee as a Participant for all purposes of the Plan
except the Employee is not a Participant for purposes of sharing in Employer
contributions or Participant Forfeitures under the Plan until he actually
becomes a Participant in the Plan.
(A) ELECTIVE TRANSFERS. Unless a transfer of assets to this Plan is an
elective transfer, the Plan will preserve all Code Section 411(d)(6) protected
benefits with respect to
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those transferred assets, in the manner described in Section 13.02 hereof. A
transfer is an elective transfer if: (1) the transfer satisfies the first
paragraph of this Section 13.05 hereof; (2) the transfer is voluntary, under a
fully informed election by the Participant; (3) the Participant has an
alternative that retains his Code Section 411(d)(6) protected benefits
(including an option to leave his benefit in the transferor plan, if that plan
is not terminating); (4) the transfer satisfies the applicable spousal consent
requirements of the Code; (5) the transferor plan satisfies the joint and
survivor notice requirements of the Code, if the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a right to
immediate distribution from the transferor plan, in lieu of the elective
transfer; (7) the transferred benefit is at least the greater of the single sum
distribution provided by the transferor plan for which the Participant is
eligible or the present value of the Participant's accrued benefit under the
transferor plan payable at that plan's normal retirement age; (8) the
Participant has a one hundred percent (100%) Nonforfeitable interest in the
transferred benefit; and (9) the transfer otherwise satisfies applicable
Treasury regulations. An elective transfer may occur between qualified plans of
any type.
(B) DISTRIBUTION RESTRICTIONS UNDER CODE SECTION 401(K). If the Plan
receives a direct transfer (by merger or otherwise) of Elective Contributions
(or amounts treated as Elective Contributions) under a Plan with a Code Section
401(k) arrangement, the distribution restrictions of Code Sections 401(k)(2) and
(10) continue to apply to those transferred Elective Contributions.
SEC. 13.06. COMPLETE TERMINATION. Upon termination of the Plan, the
distribution provisions of Article VI hereof remain operative, with the
following exceptions:
(1) If the present value of the Participant's Nonforfeitable Accrued
Benefit does not exceed Five Thousand Dollars ($5,000), the ESOP Committee will
direct the Trustee to distribute the Participant's Nonforfeitable Accrued
Benefit to him in lump sum as soon as administratively practicable after the
Plan terminates; and
(2) If the present value of the Participant's Nonforfeitable Accrued
Benefit exceeds Five Thousand Dollars ($5,000), the Participant or the
Beneficiary, in addition to the distribution events permitted under Article VI
hereof, may elect to have the Trustee commence distribution of his
Nonforfeitable Accrued Benefit as soon as administratively practicable after the
Plan terminates.
To liquidate the Trust, the ESOP Committee will purchase a deferred annuity
contract for each Participant which protects the Participant's distribution
rights under the Plan, if the Participant's Nonforfeitable Accrued Benefit
exceeds Five Thousand Dollars ($5,000) and the Participant does not elect an
immediate distribution pursuant to Paragraph (2) of this Section 13.06. The
Trust will continue until the Trustee in accordance with the direction of the
ESOP Committee has distributed all of the benefits under the Plan.
On each Valuation Date, the ESOP Committee will credit any part of a
Participant's Accrued Benefit retained in the Trust with its proportionate share
of the Trust's income, expenses, gains and losses, both realized and unrealized.
Upon termination of the Plan, the amount, if any, in a suspense account under
Article III hereof will revert to the Employer, subject to the conditions of the
Treasury regulations permitting such a reversion. A resolution or
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<PAGE>
amendment to freeze all future benefit accrual, but otherwise to continue
maintenance of this Plan, is not a termination for purposes of this Section
13.06.
For Plan Years beginning prior to January 1, 1998, the figure "$5,000" is
replaced with the figure "$3,500" for Section 13.06.
SEC. 13.07. PARTIAL TERMINATION. Upon a partial termination of the Plan, the
ESOP Committee shall notify each affected Participant. The rights of each
Participant and Beneficiary affected by such partial termination to the amounts
credited to his Account shall be fully vested and nonforfeitable as of the date
of such partial termination as set forth in Section 13.04 hereof. Such amounts
shall either be distributed to such affected Participants and Beneficiaries, as
in the case of a complete termination of the Plan, or held, as in the case of a
discontinuance of contributions, as directed by the ESOP Committee. However, a
partial termination of the Plan will in no way accelerate the time of
distribution of benefits to any Participant.
END OF ARTICLE XIII
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<PAGE>
IN WITNESS WHEREOF, the Company has executed this Plan in multiple copies in
Dallas, Dallas County, Texas, on the _____ day of November, 1998, to be
effective the 1st day of January, 1998 unless otherwise set forth herein or
required by applicable law.
"EMPLOYER" AND "COMPANY"
VARI-LITE INTERNATIONAL, INC.
By:
--------------------------------------
H.R. Brutsche III, President
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<PAGE>
Exhibit 10.41
VARI-LITE INTERNATIONAL, INC.
EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
ESOT Cover Sheet
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Table of Contents..............................................................i
Index.........................................................................ii
Vari-Lite International, Inc. Employees' Stock Ownership Trust ................1
Article I: Name and Acceptance.............................................2
Article II: Management and Control of Trust Fund............................2
Article III: Provisions Related to Investment of Trust Fund..................9
Article IV: Valuation of Trust Fund........................................10
Article V: No Reversion to Employer.......................................10
Article VI: Change of Trustee..............................................11
Article VII: Additional Employers...........................................12
Article VIII: Amendment and Termination......................................12
Article IX: Indemnification, Appointment of Investment Manager, and
Appointment of Ancillary Trustee...............................13
Article X: Miscellaneous..................................................15
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998) - PAGE i
<PAGE>
INDEX
<TABLE>
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ARTICLE I - NAME AND ACCEPTANCE................................................2
Sec. 1.01 Name.............................................................2
Sec. 1.02 Acceptance.......................................................2
Sec. 1.02 Tax Identification Number........................................2
ARTICLE II - MANAGEMENT AND CONTROL OF TRUST FUND..............................2
Sec. 2.01 Trust Fund.......................................................2
Sec. 2.02 Plan Administration..............................................3
Sec. 2.03 Exercise of Trustee's Duties.....................................3
Sec. 2.04 General Powers...................................................3
Sec. 2.05 Responsibility of Trustee........................................8
Sec. 2.06 Compensation and Expenses........................................8
Sec. 2.07 Continuation of Powers Upon Trust Termination....................8
Sec. 2.08 Bond.............................................................8
Sec. 2.09 Trustee Directions...............................................8
Sec. 2.10 Insurance Proceeds...............................................8
ARTICLE III - PROVISIONS RELATED TO INVESTMENT
OF TRUST FUND .......................................................9
Sec. 3.01 Investment of Trust Fund.........................................9
Sec. 3.02 Stock Splits and Other Capital Reorganization, Dividends.........9
Sec. 3.03 Voting of Shares and Tender or Exchange Offers..................10
Sec. 3.04 Distribution of Trust Fund......................................10
Sec. 3.05 Put Option......................................................10
ARTICLE IV - VALUATION OF TRUST FUND..........................................10
ARTICLE V - NO REVERSION TO EMPLOYER..........................................10
ARTICLE VI - CHANGE OF TRUSTEE................................................11
Sec. 6.01 Resignation of the Trustee......................................11
Sec. 6.02 Removal of the Trustee..........................................11
Sec. 6.03 Duties of Resigning or Removed Trustee and of Successor
Trustee.........................................................11
Sec. 6.04 Filling Trustee Vacancy.........................................12
ARTICLE VII - ADDITIONAL EMPLOYERS............................................12
ARTICLE VIII - AMENDMENT AND TERMINATION......................................12
Sec. 8.01 Amendment.......................................................12
Sec. 8.02 Termination.....................................................12
</TABLE>
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<TABLE>
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ARTICLE IX - INDEMNIFICATION, APPOINTMENT OF INVESTMENT
MANAGER, AND APPOINTMENT OF ANCILLARY TRUSTEE.......................13
Sec. 9.01 Indemnification.................................................13
Sec. 9.02. Limitation on Liability - If Investment Manager,
Ancillary Trustee or Independent Fiduciary Appointed............13
Sec. 9.03 Appointment of Investment Manager or Ancillary Trustee..........14
Sec. 9.04 Parties to Litigation...........................................15
ARTICLE X - MISCELLANEOUS.....................................................15
Sec. 10.01 Disagreement as to Acts.........................................15
Sec. 10.02 Persons Dealing with Trustee....................................15
Sec. 10.03 Third Party and Multiple Trustees...............................15
Sec. 10.04 Benefits May Not Be Assigned or Alienated.......................15
Sec. 10.05 Evidence........................................................15
Sec. 10.06 Waiver of Notice................................................15
Sec. 10.07 Counterparts....................................................16
Sec. 10.08 Governing Laws and Severability.................................16
Sec. 10.09 Successors......................................................16
Sec. 10.10 Action..........................................................16
Sec. 10.11 Conformance with Plan...........................................16
Sec. 10.12 Headings........................................................16
</TABLE>
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
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VARI-LITE INTERNATIONAL, INC.
EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998)
THIS TRUST AGREEMENT is amended in restatement form as of the date
hereof,by and between VARI-LITE INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and the FROST NATIONAL BANK (formerly known as OVERTON BANK AND
TRUST, N.A. prior to May 31, 1998), and its successors and assigns in the trust
hereby evidenced, as trustee (referred to as the "Trustee").
WITNESSETH THAT:
WHEREAS, the Company established a stock bonus plan on September 27, 1995,
to be effective as of January 1, 1995, which was known as the VARI-LITE
HOLDINGS, INC. EMPLOYEES' STOCK OWNERSHIP PLAN; and
WHEREAS, VARI-LITE HOLDINGS, INC. changed its name to VARI-LITE
INTERNATIONAL, INC., effective as of December 27, 1995; and
WHEREAS, the Company has amended and restated the VARI-LITE HOLDINGS, INC.
EMPLOYEES' STOCK OWNERSHIP PLAN to be effective as of January 1, 1998 unless
otherwise set forth therein or as required by applicable law. The amended and
restated Plan is known as the VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK
OWNERSHIP PLAN (As Amended and Restated, Effective January 1, 1998) (the "Plan")
and is intended to qualify as an employee stock ownership plan and satisfy the
requirements of Sections 401(a) and 4975(e)(7) of the Internal Revenue Code of
1986, as it may be amended from time to time (the "Code"), and Section 407(d)(6)
of the Employee Retirement Income Security Act of 1974, as it may be amended
from time to time ("ERISA"); and
WHEREAS, the Company established the VARI-LITE HOLDINGS, INC. EMPLOYEES'
STOCK OWNERSHIP TRUST on September 27, 1995, to be effective as of January 1,
1995 or as otherwise set forth herein or required by applicable law; and
WHEREAS, the Company, pursuant to Section VIII-1 of the VARI-LITE HOLDINGS,
INC. EMPLOYEES' STOCK OWNERSHIP TRUST hereby amends the VARI-LITE HOLDINGS, INC.
EMPLOYEES' STOCK OWNERSHIP TRUST, in restated form, effective as of January 1,
1998 or as otherwise set forth herein or required by applicable law, to be known
as the VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST (As
Amended and Restated, Effective January 1, 1998) (the "Trust"); and
WHEREAS, the Plan was established for the exclusive benefit of Eligible
Employees of the Company and those of any Related Employer (as defined in
Section 1.27 of the Plan) which adopts the Plan and becomes a party to this
Trust as provided in Article VII herein (the Company and the
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Related Employersare sometimes referred to below collectively as the
"Employers" and individually as an "Employer"); and
WHEREAS, the Trustee accepts this Trust which is and becomes a part of the
Plan and agrees to perform the obligations set forth in this Trust Agreement;
and
WHEREAS, the Trust shall be interpreted, wherever possible, to comply with
the terms of the Code, ERISA, and all formal regulations and rulings; and
NOW, THEREFORE, pursuant to the authority delegated to the undersigned
officers of the Company by resolution of its Board of Directors (the "Board");
IT IS AGREED, by and between the parties hereto, that the trust provisions
contained herein shall constitute the agreement between the Company and the
Trustee in connection with the Plan and the Trust; and
IT IS FURTHER AGREED, that the Trustee hereby agrees to continue to serve
under this Trust Agreement; and
IT IS FURTHER AGREED, by and between the parties hereto as follows:
ARTICLE I
NAME AND ACCEPTANCE
SEC. 1.01. NAME. This Trust Agreement and Trust, as amended and restated
herein, shall be known as the "VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK
OWNERSHIP TRUST (As Amended and Restated, Effective January 1, 1998)." Prior to
January 1, 1998, the Trust was known as the "Vari-Lite Holdings, Inc. Employees'
Stock Ownership Trust.
SEC. 1.02. ACCEPTANCE. The Trustee continues to accept the Trust, as
amended and restated herein, which is and becomes part of the Plan and agrees to
perform the obligations imposed under this Trust Agreement.
SEC. 1.03. TAX IDENTIFICATION NUMBER. The tax identification number of the
Trust is as follows: 75-2612238.
ARTICLE II
MANAGEMENT AND CONTROL OF TRUST FUND
SEC. 2.01. TRUST FUND. The "Trust Fund" as of any date means all property
of every kind held or acquired by the Trustee pursuant to this Trust. "Trust
Fund" is also referred to as "Trust Assets." The Trustee may manage, administer
and invest all contributions made to the Trust by the Employer or Employers
under the Plan as one Trust Fund. If, for any reason, it becomes necessary to
determine the portion of the Trust Fund allocable to Employees and former
Employees of any Employer as of any date, the ESOP Committee (as defined in
Section 2.02 herein) shall specify such
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date as an Accounting Date, and afterall adjustments required under the
Plan as of that Accounting Date have been made, the portion of the Trust Fund
attributable to such Employees and former Employees shall be determined and
shall consist of an amount equal to the aggregate of the Account balances of
Employees and former Employees of that Employer plus an amount equal to any
allocable contributions made by that Employer since the close of the immediately
preceding Plan Year.
SEC. 2.02. PLAN ADMINISTRATION. The Plan shall be administered by an ESOP
Committee. Except as provided in the Plan, Section 2.04 herein, and under ERISA,
the Trustee shall have no authority to act unless directed by the ESOP
Committee. In the absence of an ESOP Committee, the Company assumes the powers,
duties and responsibilities of the ESOP Committee. The ESOP Committee may
authorize one or more individuals to sign all communications between the ESOP
Committee and Trustee. The Company shall at all times keep the Trustee advised
of the names of the members of the ESOP Committee and individuals authorized to
sign on behalf of the ESOP Committee, and provide specimen signatures thereof.
With the Trustee's prior written consent, the ESOP Committee may authorize the
Trustee to act, without specific directions or other directions or instructions
from the ESOP Committee, on any matter or class of matters with respect to which
directions or instructions from the ESOP Committee are called for hereunder. The
Trustee shall be fully protected in relying on any communication sent by any
authorized person and shall not be required to verify the accuracy or validity
of any signature unless the Trustee has reasonable grounds to doubt the
authenticity of any signature. If the Trustee requests any directions hereunder
and does not receive them, the Trustee shall act or refrain from acting, as it
may determine, with no liability for such action or inaction. Notwithstanding
the provisions herein, the Trustee must act in accordance with ERISA and the
Plan.
SEC. 2.03. EXERCISE OF TRUSTEE'S DUTIES. The Trustee shall discharge its
duties hereunder solely in the interest of Plan Participants and other persons
entitled to benefits under the Plan, and:
(a) for the exclusive purpose of:
(i) providing benefits to Participants and other persons
entitled to benefits under the Plan; and
(ii) defraying reasonable expenses of administering the
Plan;
(b) with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims; and
(c) in accordance with the documents and instruments governing
the Plan unless, in the good faith judgment of the Trustee, the
documents and instruments are not consistent with the provisions of
the Code and ERISA.
SEC. 2.04. GENERAL POWERS. The Trustee has full discretion and authority
with regard to the investment of the Trust Fund, except with respect to a Trust
Asset under the control
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or direction of a properly appointed Investment Manageror with respect to a
Trust Asset properly subject to Employer, Participant or ESOP Committee
direction of investment. Subject to the provisions of Sections 2.02, 2.03 and
2.09 and Article III herein, with respect to the Trust Fund, the Trustee shall
have the following, but not limited to, powers, rights and duties in addition to
those provided elsewhere in this Trust, the Plan or by law:
(a) To invest the Trust Fund primarily in Employer Securities and
to invest the Trust Fund in any common or preferred stocks, open-end
or closed-end mutual funds, put and call options traded on a national
exchange, United States retirement plan bonds, corporate bonds,
debentures, convertible debentures, commercial paper, U.S. Treasury
bills, U.S. Treasury notes and other direct or indirect obligations of
the United States Government or its agencies, improved or unimproved
real estate situated in the United States, limited partnerships,
limited liability companies, insurance contracts of any type,
mortgages, notes or other property of any kind, real or personal, and
to buy or sell options on common stock on a nationally recognized
exchange with or without holding the underlying common stock, to buy
and sell commodities, commodity options and contracts for the future
delivery of commodities, and to make any other investments the Trustee
deems appropriate, as a prudent man would do under like circumstances
with due regard for the purposes of the Plan. Any investment made or
retained by the Trustee in good faith is proper but must be of a kind
(with the exception of Employer Securities) constituting a
diversification considered by law suitable for trust investments;
(b) To retain in cash (pending investment, reinvestment or the
distribution of dividends) such reasonable amount as may be required
to satisfy liquidity needs of the Trust and for the proper
administration of the Trust and to invest such cash as provided in
Section 3.01 herein, provided, however, that pending receipt of
directions from the ESOP Committee, the Trustee may retain reasonable
amounts of cash, in its discretion, without any liability for
interest;
(c) To invest at a reasonable rate of interest or in a common
trust fund, as described in Code Section 584, or in a collective
investment fund, the provisions of which govern the investment of such
assets and which the Plan incorporates by this reference and which
conforms to the rules of the Comptroller of the Currency;
(d) To lease for oil, gas and other mineral purposes and to
create mineral severance's by grant or reservation; to pool or unitize
interests in oil, gas and other minerals; and to enter into operating
agreements and to execute division and transfer orders;
(e) To hold any securities or other property in the name of the
Trustee or its nominee, with depositories or agent depositories or in
another form as it may deem best, with or without disclosing the trust
relationship;
(f) To file all tax returns for the Trust and Plan required of
the Trustee;
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(g) To receive and to hold all contributions paid to it under the
Plan; provided, however, that the Trustee shall have no duty to
require any contributions to be made to it, to determine that the
contributions received by it comply with the provisions of the Plan or
with any resolution of the Board providing therefor;
(h) To credit and make distributions from the Trust Fund to such
persons or trusts, in such manner, at such times and in such forms
(Employer Securities, cash or a combination thereof) as directed by
the ESOP Committee without inquiring as to whether a payee or
distributee is entitled to the payment, or as to whether a payment is
proper, and without liability for a payment made in good faith without
actual notice or knowledge of the changed condition or status of the
payee or distributee. Unless required by ERISA, the Trustee is
accountable only to the ESOP Committee for any payment or distribution
made by it in good faith on the order or direction of the ESOP
Committee. If any payment of benefits to be made from the Trust Fund
by the Trustee is not claimed, the Trustee shall notify the ESOP
Committee of that fact promptly. The ESOP Committee shall direct the
Trustee or the Trustee will make a diligent effort to ascertain the
whereabouts of the payee or distributee of benefits returned
unclaimed. The Trustee shall dispose of such payments as the ESOP
Committee shall direct pursuant to Section 12.26 of the Plan and in
accordance with ERISA. The Trustee shall have no obligation to search
for or ascertain the whereabouts of any payee or distributee of
benefits from the Trust Fund unless required by the Plan, Code or
ERISA;
(i) To vote Employer Securities (as defined in Section 1.31 of
the Plan) as provided in Section 8.11 of the Plan, and any other
stocks, bonds or other securities held in the Trust, or otherwise
consent to or request any action on the part of the issuer in person,
by proxy or power of attorney;
(j) To contract or otherwise enter into transactions between
itself, as Trustee, and the Company or any Employer, or any Company
shareholder or other individual, for the purpose of acquiring or
selling Employer Securities and, subject to the provisions of Section
2.03 herein and the Plan, to retain such Employer Securities;
(k) To compromise, contest, arbitrate, settle or abandon claims
and demands by or against the Trust and Trust Fund;
(l) To begin, maintain or defend any litigation necessary in
connection with the investment, reinvestment and administration of the
Trust, and, to the extent not paid from the Trust Fund and subject to
Section 9.01 herein, the Employers shall indemnify the Trustee against
all expenses and liabilities reasonably sustained or anticipated by it
by reason thereof (including reasonable attorneys' fees);
(m) To retain any funds or property subject to any dispute
without liability for the payment of interest, or to decline to make
payment or delivery thereof until final adjudication is made by a
court of competent jurisdiction;
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(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998) - PAGE 5
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(n) To report to the Company as of the last day of each Plan
Year, as of any Accounting Date (or as soon thereafter as
practicable), or at such other times as may be required under the
Plan, the then "Net Worth" of the Trust Fund, which is, the fair
market value of all property held in the Trust Fund, reduced by any
liabilities other than liabilities to Participants (and their
Beneficiaries) in the Plan, as determined by the Trustee;
(o) To furnish to the Company, Employer, the Plan Administrator
and the ESOP Committee an annual statement of account and accounts for
such other periods as may be required under the Plan, showing the
condition of the Trust Fund and the Net Worth of the Trust Fund at the
end of the Plan Year, all investments, receipts, disbursements and
other transactions made by the Trustee during the Plan Year, covered
by the statement, and such other information as the Trustee may
possess which the Company requires in order to comply with Section 103
of ERISA. The Trustee shall keep accurate accounts of all investments,
earnings thereon, and all accounts, books and records related to such
investments shall be open to inspection by any person designated by
the Company, Employer or the ESOP Committee at reasonable times and
may be audited from time to time by any person or persons as the
Company, Employer or ESOP Committee may specify in writing. All
accounts of the Trustee shall be kept on an accrual basis. The ESOP
Committee may direct the Trustee to furnish the ESOP Committee, Plan
Administrator, Company or Employer with whatever information relating
to the Trust Fund. If, during the term of this Trust, the Department
of Labor issues Regulations under ERISA regarding the valuation of
Employer Securities or other assets for purposes of the reports
required by ERISA, the Trustee shall use such valuation methods for
purposes of the accounts described by this subparagraph. If the
Trustee determines that there is not a generally recognized market (as
contemplated by Section 3(18)(A) of ERISA) for shares of Employer
Securities, all valuations of such securities shall be made by an
"Independent Appraiser" (as described in Section 401(a)(28)(C) of the
Code) retained by the Trustee, and reviewed and finalized by the
Trustee, in accordance with Section 3(18)(B) of ERISA. The Company or
the ESOP Committee may approve such accounting by written notice of
approval delivered to the Trustee or by failure to express objection
to such accounting in writing delivered to the Trustee within sixty
(60) days from the date upon which the annual return for the Plan on
Form 5500 is due (including all applicable extensions of such date).
Nothing herein shall require the Company or the ESOP Committee to
approve or otherwise determine the correctness of the Trustee's
valuation of Employer Securities. Upon the receipt of a written
approval of the accounting, or upon the passage of the period of time
within which objection may be filed without written objections having
been delivered to the Trustee, such accounting shall be deemed to be
approved, and the Trustee shall be released and discharged as to all
items, matters and things set forth in such account, as fully as if
such accounting had been settled and allowed by decree of a court of
competent jurisdiction in an action or proceeding in which the
Trustee, the ESOP Committee, the Company and all persons having or
claiming to have any interest in the Trust Fund or under the Plan were
parties;
(p) To pay any estate, inheritance, income or other tax, charge
or assessment attributable to any benefit which, it shall or may be
required to pay or withhold taxes; and to require before making any
payment such release or other document from any taxing
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
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authority and such indemnity from the intended payee or distributee as
the Trustee shall deem necessary for its protection;
(q) To employ and to reasonably rely upon information and advice
furnished by agents, attorneys, independent appraisers, independent
financial advisors, accountants or other persons of its choice for
such purposes as the Trustee considers desirable;
(r) To assume, until advised to the contrary, that the Trust
evidenced by this Agreement is qualified under Section 401(a) of the
Code and is entitled to tax exemption under Section 501(a) of the
Code;
(s) To have the authority to invest and reinvest the assets of
the Trust Fund, in personal property of any kind, including, but not
limited to Employer Securities, bonds, notes, debentures, mortgages,
equipment trust certificates, investment trust certificates, life
insurance, guaranteed investment contracts, preferred or common stock,
and registered investment companies; provided, however, that all
investments in Employer Securities shall be undertaken pursuant to the
provisions of Section 3.01 herein;
(t) To exercise any options, subscription rights and other
privileges with respect to the Trust Fund, subject to the provisions
of Article III herein, to manage, sell, contract to sell, grant
options to purchase, convey, exchange, transfer, abandon, improve,
repair, insure, lease for any term even though commencing in the
future or extending beyond the term of the Trust, and otherwise deal
with all property, real or personal, in such manner, for such
considerations and on such terms and conditions as the Trustee
decides;
(u) To register ownership of any securities or other property
held by it in its own name or in the name of a nominee, with or
without the addition of words indicating that such securities are held
in a fiduciary capacity, and may hold any securities in bearer form,
but the books and records of the Trustee shall at all times reflect
that all such investments are part of the Trust;
(v) To borrow such sum or sums of money, to assume indebtedness,
to extend mortgages, to obtain an Exempt Loan (as defined in Section
12.21 of the Plan) from time to time as the Trustee considers
necessary or desirable and in the best interest of the Plan, Trust
Fund and Plan Participants, and for that purpose to mortgage or
encumber or pledge any part of the Trust Fund (subject to the
provisions of Code Section 4975(c) and the Regulations issued
thereunder);
(w) To enter into an Exempt Loan transaction pursuant to Section
12.21 of the Plan;
(x) To participate in and use the Federal Book-Entry Account
System, a service provided by the Federal Reserve Bank for its member
banks for deposit of Treasury securities;
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998) - PAGE 7
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(y) To perform any and all other acts which are necessary or
appropriate for the proper management, investment and distribution of
the Trust Fund;
(z) To construe and interpret the Plan subject to the
constructions and interpretations of the ESOP Committee and the Plan
Administrator, direction(s) from the ESOP Committee, and the rules and
regulations adopted and to answer all questions arising in the
administration, interpretation, and application of the Plan document
and documents related to the Plan's operation; and
(aa) To purchase Qualifying Employer Securities as an investment
of the Trust, provided the Trustee does not pay in excess of adequate
consideration as defined in ERISA.
SEC. 2.05. RESPONSIBILITY OF TRUSTEE. The Trustee shall not be responsible
in any way for the adequacy of the Trust Fund to meet and discharge any or all
liabilities under the Plan or for the proper application of distributions made
or other actions taken upon the direction of the ESOP Committee. The powers,
duties and responsibilities of the Trustee shall be limited to those set forth
in this Trust and the Plan, or as later agreed upon by the Trustee, Company, and
ESOP Committee in writing.
SEC. 2.06. COMPENSATION AND EXPENSES. The Trustee shall be entitled to
reasonable compensation for its services, as agreed to between the Company and
the Trustee from time to time in writing and to reimbursement of all reasonable
expenses incurred by the Trustee in the administration of the Trust and Plan.
The Trustee is authorized to pay from the Trust Fund all expenses reasonably
incurred by the Trustee, to the extent such fees and expenses are for the
ordinary and necessary administration and operation of the Trust, including its
compensation, compensation to any agents employed by the Trustee and any
accounting and legal expenses, to the extent they are not paid directly by the
Company or Employers. If the Trustee cannot pay from the Trust Fund expenses
reasonably incurred based upon the advise of legal counsel, the Employer shall
pay such expenses. Any fee or expense paid directly or indirectly, by the
Employer is not an Employer contribution to the Trust, provided the fee or
expense relates to the ordinary and necessary administration of the Trust.
SEC. 2.07. CONTINUATION OF POWERS UPON THE TRUST TERMINATION.
Notwithstanding anything to the contrary in this Agreement, upon termination of
the Trust, the powers, rights and duties of the Trustee hereunder shall continue
until all Trust Assets have been liquidated and distributed out of the Trust.
SEC. 2.08. BOND. The Trustee shall be required to provide bond pursuant to
Section 12.17 of the Plan for the faithful performance of its duties under the
Trust and Plan, unless otherwise permitted by ERISA. ----
SEC. 2.09. TRUSTEE DIRECTIONS. All decisions, determinations, directions,
interpretations, and applications (collectively referred to as "determination")
of the Plan and Trust by the Trustee shall be final and binding upon all
persons, including (but not limited to) the Company, ESOP Committee, and all
Participants and Beneficiaries unless such determination is in violation of
ERISA
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998) - PAGE 8
<PAGE>
or any federal or state laws or the ESOP Committee has the authority to
make such determination and directs or overrides the Trustee's decision provided
the ESOP Committee's determination does not cause the Trustee to violate ERISA
or any federal or state laws.
SEC. 2.10. INSURANCE PROCEEDS. The Trustee will allocate any insurance
proceeds received from the purchase of insurance contracts to Participants'
Accounts in the same manner as the allocation under Section 3.04 of the Plan of
the Employer contribution for the Plan Year in which the death of the insured
Participant occurs.
ARTICLE III
PROVISIONS RELATED TO INVESTMENT OF TRUST FUND
SEC. 3.01. INVESTMENT OF TRUST FUND. Any cash received by the Trustee as
Employer contributions or as Income of the Trust Fund attributable to the
Unallocated Employer Securities Account or Unallocated General Investment
Account which is not applied to pay the Current Obligations of the Trust, if
any, shall be either held in the Unallocated General Investments Account, or be
invested at the direction of the ESOP Committee, or shall be applied to the
payment of Non-current Obligations or General Obligations of the Trust. All cash
received by the Trustee as income attributable to Participant Employer
Securities Accounts and Participant General Investments Accounts shall be
invested as soon as practicable after receipt by the Trustee. In making payments
in respect of Current Obligations, Non-current Obligations, or General
Obligations of the Trust, the Trustee shall utilize income and Employer
contributions as is specified in Article III of the Plan, namely, that income
shall be first used to pay interest payments. The Trustee is authorized to
purchase Employer Securities with the Trust Assets held in the Participant's
General Investments Accounts and the Unallocated General Investments Account.
The Trustee is further authorized to purchase Employer Securities in the public
market place, directly from the Company or any shareholder and the Employer
Securities may be outstanding, newly issued or treasury stock. Whenever
investment in Employer Securities of amounts held in the Trust Fund is required
or permitted hereunder, such investment may be accomplished, at the discretion
of the Trustee, by a sale within the Trust. Specifically, the Employer
Securities Accounts of Participants, Former Participants, Alternate Payees, and
Beneficiaries who have become entitled to cash distributions hereunder may be
liquidated by an exchange for assets held in other Accounts of the Plan. All
purchases or exchanges of Employer Securities shall be for no more than
"adequate consideration," as defined in Section 3(18) of ERISA. If there is no
generally recognized market for Employer Securities, "adequate consideration"
shall mean the fair market value of such Employer Securities, determined in good
faith by the Trustee. Pending such investment or application of cash, the
Trustee may invest the cash in accordance with Article II hereof or may retain
cash uninvested without liability for interest if it is prudent to act in such a
manner.
At the discretion of the ESOP Committee, the Trustee shall convert a
Participant's Employer Securities Account (in whole or in part) into cash in the
Plan Year following the close of the Plan Year in which the Participant
separates from service for any reason; provided at such time the Trustee has
cash in the Plan to convert (in whole or in part) the Participant's Employer
Securities Account. For purposes of the conversion described in this paragraph,
the Trustee shall determine
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
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the value of the Participant's Employer Securities Account either as of the
end of the Plan Year in which the Participant separates from service or as of a
more recent valuation, if any. The Trustee shall invest such amounts converted
into cash in a diversified manner as required herein.
SEC. 3.02. STOCK SPLITS AND OTHER CAPITAL REORGANIZATION DIVIDENDS. Any
Employer Securities received by the Trustee as a stock split or as a result of a
reorganization or other recapitalization of the Company (collectively referred
to as "stock split") shall be allocated in accordance with the terms of the Plan
as of each Accounting Date under the Plan. If the Plan does not address the
allocation of a stock split, the Trustee shall allocate the stock split in
proportion to the Employer Securities to which they are attributable. Cash or
stock in kind dividends received by the Trustee shall be reinvested in
accordance with the terms of the Plan.
SEC. 3.03. VOTING OF SHARES AND TENDER OR EXCHANGE OFFERS. Employer
Securities held in the Trust Fund shall be voted, tendered and exchanged by the
Trustee in the manner set forth in Section 8.11 of the Plan and consistent with
its duties described in Section 2.03 herein.
SEC. 3.04. DISTRIBUTION OF TRUST FUND. The Trustee shall make all
distributions in accordance with Article VI of the Plan and Section 12.25 of the
Plan.
SEC. 3.05. PUT OPTION. If the Employer Securities held within the Trust are
not Publicly Traded, as such term is defined in Section 1.63 of the Plan and if
the distribution of a Participant's Employer Securities Account is to be made in
cash, or a distribution pursuant to Section 12.25 of the Plan or the Trustee
expects to incur substantial Trust expenses which will not be paid directly by
the Employer, and the Trustee determines that the Trust Fund has insufficient
cash to make anticipated distributions or pay Trust expenses, the Trustee shall
have a "put option" on Employer Securities it holds to the Company to the extent
the Trustee receives written direction from the ESOP Committee pursuant to
Section 10.08 of the Plan for the purpose of making such anticipated
distributions and paying such expenses. The Company will use its best efforts to
ensure that the Company will purchase the Employer Securities for an amount that
is not less than "adequate consideration" as that term is defined in ERISA
Section 3(18), and the overall transaction is fair to the Plan from a financial
point of view.
ARTICLE IV
VALUATION OF TRUST FUND
The Trustee shall value the Trust Fund in accordance with Section 12.20 of
the Plan.
ARTICLE V
NO REVERSION TO EMPLOYER
No part of the corpus or income of the Trust Fund shall revert to any
Employer or be used for, or diverted to, purposes other than for the exclusive
benefit of Participants and other persons entitled to benefits under the Plan,
provided, however, that:
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(a) Each Employer's contribution under the Plan is conditioned on the
initial qualification of the Plan as applied to that Employer under
Sections 401(a) and 4975(e)(7) of the Code and if the Plan does not so
initially qualify, the Trustee shall, upon written direction of the ESOP
Committee, return to that Employer the amount of such contribution and any
increment thereon within one calendar year after the date that
qualification of the Plan, as applied to that Employer, is denied, but only
if the application for qualification is submitted within the time
prescribed by law.
(b) If, upon termination of the Plan with respect to any Employer, any
amounts are held in a Code Section 415 Suspense Account which are
attributable to the contributions of such Employer and such amounts may not
be credited to the Accounts of Participants, such amounts, upon the written
direction of the ESOP Committee, will be returned to that Employer as soon
as practicable after the termination of the Plan with respect to that
Employer to the extent permitted by the Code and ERISA.
(c) Employer contributions under the Plan are conditioned upon the
deductibility thereof under Section 404 of the Code, and, to the extent any
such deduction of an Employer is disallowed, the Trustee shall, upon the
written direction of the ESOP Committee, return the amount of the
contribution (to the extent disallowed), reduced by the amount of any
losses thereon, to the Employer within one year after the date the
deduction is disallowed.
(d) If a contribution or any portion thereof is made by an Employer by
a mistake of fact, the Trustee shall, upon written direction of the ESOP
Committee, return the amount of the contribution or such portion, reduced
by the amount of any losses thereon, to the Employer within one year after
the date of payment to the Trustee.
Notwithstanding the foregoing, the Trustee has no responsibility as to the
sufficiency of the Trust Fund to provide any distribution to an Employer under
this Article V.
ARTICLE VI
CHANGE OF TRUSTEE
SEC. 6.01. RESIGNATION OF THE TRUSTEE. The Trustee may resign its
position at any time by giving thirty (30) days' advance written notice to
the Company and the ESOP Committee. If the Company fails to appoint a
successor trustee within ninety (90) days of its receipt of the Trustee's
written notice of resignation, the Trustee will treat the Board of
Directors of the Company as having been appointed as Trustee and as having
their acceptance of the appointment as Trustee with the
former Trustee.
SEC. 6.02. REMOVAL OF THE TRUSTEE. The Company may remove the Trustee
by hand delivering or by mailing by registered or certified mail, addressed
to such Trustee at his or her or its last known address, at least thirty
(30) days' advance written notice of removal, subject to providing the
removed Trustee with satisfactory written evidence of the appointment of a
successor Trustee and of the successor Trustee's acceptance of the
trusteeship. If two or more persons hold the position of Trustee, in the
event of the removal of one such person, during any period the selection
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of a replacement is pending, or during any period such person is
unable to serve for any reason, the remaining person or persons will act as
the Trustee.
SEC. 6.03. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR
TRUSTEE. If the Trustee resigns or is removed, it shall promptly transfer
and deliver the assets of the Trust Fund to the successor Trustee, and may
reserve such amount to provide for the payment of all fees and expenses, or
taxes then or thereafter chargeable against the Trust Fund, to the extent
not previously paid by the Employers. The Employers shall be obligated to
reimburse the Trust for any amount reserved by the Trustee. Within one
hundred twenty (120) days, the resigned or removed Trustee shall furnish to
the Company and the successor Trustee an account of its administration of
the Trust from the date of its last account. Each successor Trustee shall
succeed to the title to the Trust Fund vested in the predecessor Trustee
without the signing or filing of any further instrument, but any resigning
or removed Trustee shall execute all documents and do all acts necessary to
vest such title or record in any successor Trustee. Each successor Trustee
shall have all the powers, rights and duties conferred by this Trust as if
originally named Trustee. No successor Trustee shall be personally liable
for any act or failure to act of a predecessor Trustee, except as required
by ERISA. With the approval of the Company and ESOP Committee, a successor
Trustee may accept the account rendered and the property delivered to it by
its predecessor Trustee as a full and complete discharge to the predecessor
Trustee without incurring any liability or responsibility for so doing.
SEC. 6.04. FILLING TRUSTEE VACANCY. The Company shall fill a vacancy
in the office of Trustee as soon as practicable by a writing filed with the
person or entity appointed to fill the vacancy. -----------------------
ARTICLE VII
ADDITIONAL EMPLOYERS
In addition to the requirements of Sections 1.43 and 12.14 of the Plan,
any Related Employer (as defined in Section 1.27 of the Plan) may become a party
to this Trust Agreement by:
(a) filing with the Company and the Trustee a copy of a resolution of
its board of directors to that effect; and
(b) filing with the Trustee a copy of a resolution of the Board of
Directors of the Company consenting to such action.
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<PAGE>
ARTICLE VIII
AMENDMENT AND TERMINATION
SEC. 8.01. AMENDMENT. While the Company expects and intends to
continue the Trust, the Company reserves the right to amend the Trust at
any time pursuant to an action of the Board of Directors of the Company,
except that no amendment shall change the rights, duties and liabilities of
the Trustee under the Trust without its prior written agreement, nor reduce
a Participant's benefits to less than the amount such Participant would be
entitled to receive if such Participant had resigned from the employ of the
Employer on the date of the amendment unless otherwise required or
permitted by the Code or ERISA. Amendments to the Trust shall be in writing
and shall be effective upon execution of such amendments by both the
Company and the Trustee unless otherwise agreed.
SEC. 8.02. TERMINATION. The Trust may be terminated as to all
Employees on any date specified by the Company. The Trust will terminate as
to any Employer on the first to occur of the following: -----------
(a) the date it is terminated by that Employer;
(b) the date such Employer's contributions, or contributions
on its behalf to the Trust, are completely discontinued;
(c) the date such Employer is judicially declared bankrupt
under Chapter 7 of the U.S. Bankruptcy Code; or
(d) the dissolution, merger, consolidation, or
reorganization of that Employer, or the sale by that Employer of
all or substantially all of its assets, except that, with the
consent of the Company, such arrangements may be made whereby the
Trust will be continued by any successor to that Employer or any
purchaser of all or substantially all of that Employer's assets,
in which case the successor or purchaser will be substituted for
that Employer under the Trust.
The Trustee's powers upon termination as described above will continue until
liquidation of the Trust Fund, or the portion thereof attributable to an
Employer, as the case may be. Upon termination of this Trust the Trustee shall
first reserve such reasonable amounts as it may deem necessary to provide for
the payment of any expenses or fees then or thereafter chargeable to the Trust
Fund. Subject to such reserve, the balance of the Trust Fund shall be liquidated
and distributed by the Trustee to or for the benefit of the Participants or
their Beneficiaries, as directed by the ESOP Committee after compliance with
Section 13.06 of the Plan and applicable requirements of ERISA, as amended from
time to time, or other applicable law, accompanied by a certification that the
disposition is in accordance with the terms of the Plan and the Trustee need not
question the propriety of such certification. The Company shall have full
responsibility to see that such distribution is proper and within the terms of
the Plan and this Trust. Any Employer Securities remaining subject to pledge
will be used to repay the Exempt Loan but only to the extent permitted under
ERISA and the Code.
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<PAGE>
ARTICLE IX
INDEMNIFICATION, APPOINTMENT OF INVESTMENT MANAGER,
AND APPOINTMENT OF ANCILLARY TRUSTEE
SEC. 9.01. INDEMNIFICATION. The Company shall indemnify and save harmless
the Trustee from and against any and all loss resulting from liability to which
the Trustee may be subjected by reason of any act or conduct (except willful
misconduct or gross negligence) in its official capacity in the administration
of the Trust and Plan, including all court costs and other expenses reasonably
incurred in the Trustee's defense, in case the Company fails to provide such
defense. The indemnification provisions of this Section 9.01 do not relieve the
Trustee from any liability he or she or it may have under ERISA for breach of a
fiduciary duty. The indemnification provisions of this Section 9.01 do not
relieve the Trustee from any liability, to the extent that a court of competent
jurisdiction from which no appeal can be taken, enters a final judgment that the
actions or omissions were the result of gross negligence or willful misconduct
unless done with the knowledge and consent or at the direction of Board of
Directors. The Trustee and the Company may execute a letter agreement further
delineating the indemnification agreement of this Section 9.01, provided the
letter agreement is consistent with and does not violate ERISA and Texas law.
SEC. 9.02. LIMITATION ON LIABILITY - IF INVESTMENT MANAGER, ANCILLARY
TRUSTEE OR INDEPENDENT FIDUCIARY APPOINTED. The Trustee is neither liable for
the acts nor omissions of any Investment Manager appointed by the ESOP
Committee, nor is the Trustee under any obligation to invest or otherwise manage
any asset of the Trust Fund which is subject to the management of a properly
appointed Investment Manager. The ESOP Committee, the Trustee, the Company and
any properly appointed Investment Manager may execute a letter agreement as a
part of this Trust delineating the duties, responsibilities and liabilities of
the Investment Manager with respect to any part of the Trust Fund under the
control of the Investment Manager.
The limitation on liability described in this Section 9.02 also applies to
the acts or omissions of an ancillary trustee or independent fiduciary properly
appointed under Section 9.03 hereof. However, if a Trustee, pursuant to the
delegation described in Section 9.03 of the Trust, appoints an ancillary
trustee, the Trustee is responsible for the periodic review of the ancillary
trustee's actions and must exercise its delegated authority in accordance with
the terms of the Trust and in a manner consistent with ERISA. The Company, the
Trustee and an ancillary trustee may execute a letter agreement as a part of
this Trust delineating any indemnification agreement between the parties.
SEC. 9.03. APPOINTMENT OF INVESTMENT MANAGER OR ANCILLARY TRUSTEE. The
Company, in writing, may appoint any person or trust company in any State to act
as an Investment Manager or ancillary trustee with respect to a designated
portion of the Trust Fund. An Investment Manager or ancillary trustee must
acknowledge in writing its acceptance of the terms and conditions of its
appointment as Investment Manager or ancillary trustee and its fiduciary status
under ERISA. The Investment Manager or ancillary trustee has the rights, powers,
duties, and discretion as the Company may delegate, subject to any limitations
or directions specified in the instrument evidencing appointment of the
Investment Manager or ancillary trustee and to the terms of the Trust or of
ERISA. The investment powers delegated to the Investment Manager or ancillary
trustee may include any investment powers available under Section 2.04 of the
Trust including the right to invest
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any portion of the assets of the Trust Fund in Employer Securities and to
invest any portion of the assets of the Trust Fund in a common trust fund, as
described in Code Section 584, or in any collective investment fund, the
provisions of which govern the investment of such assets and which the Trust
incorporates by this reference, but only if the ancillary trustee is a bank or
similar financial institution supervised by the United States or by a State and
the ancillary trustee (or its affiliate, as defined in Code Section 1504)
maintains the common trust fund or collective investment fund exclusively for
the collective investment of money contributed by the ancillary trustee (or its
affiliate) in a trustee capacity and which conforms to the rules of the
Comptroller of the Currency.
The Investment Manager or ancillary trustee may resign its position at any
time by providing at least thirty (30) days' advance written notice to the
Company, unless the Company waives this notice requirement. The Company, in
writing, may remove an Investment Manager or ancillary trustee at any time. In
the event of resignation or removal, the Company may appoint another Investment
Manager or ancillary trustee, return the assets to the control and management of
the Trustee, or receive such assets in the capacity of Investment Manager or
ancillary trustee. The Company may delegate its responsibilities under this
Section 9.03 to the Trustee.
If the U.S. Department of Labor ("the Department") requires engagement of
an independent fiduciary to have control or management of all or a portion of
the Trust Fund, the Company will appoint such independent fiduciary, as directed
by the Department. The independent fiduciary will have the duties,
responsibilities, and powers prescribed by the Department and will exercise
those duties, responsibilities, and powers in accordance with the terms,
restrictions, and conditions established by the Department and, to the extent
not inconsistent with ERISA, the terms of the Plan. The independent fiduciary
must accept its appointment in writing and must acknowledge its status as a
fiduciary of the Plan.
SEC. 9.04. PARTIES TO LITIGATION. Except as otherwise provided by ERISA, no
Participant or Beneficiary is a necessary party or is required to receive notice
of process in any court proceeding involving the Plan, the Trust, the Trust Fund
or any fiduciary of the Plan. Any final judgment entered in any proceeding will
be conclusive upon the Company, the Employer, the Plan Administrator, the ESOP
Committee, the Trustee, Participants and Beneficiaries.
ARTICLE X
MISCELLANEOUS
SEC. 10.01. DISAGREEMENT AS TO ACTS. If there is a disagreement between the
Trustee and anyone as to any act or transaction reported in any accounting, the
Trustee shall have the right to have its own account settled by a court of
competent jurisdiction.
SEC. 10.02. PERSONS DEALING WITH TRUSTEE. No person dealing with the
Trustee shall be required to see to the application of any money paid or
property delivered to the Trustee, or to determine whether or not the Trustee is
acting pursuant to any authority granted to it under the Trust or the Plan.
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<PAGE>
SEC. 10.03. THIRD PARTY AND MULTIPLE TRUSTEES. No person dealing with the
Trustee is obligated to see to the proper application of any money paid or
property delivered to the Trustee, or to inquire whether the Trustee has acted
pursuant to any of the terms of the Trust and Plan. Each person dealing with the
Trustee may act upon any notice, request or representation in writing by the
Trustee, or by the Trustee's duly authorized agent, and is not liable to any
person in so acting. The certificate of the Trustee that it is acting in
accordance with the Trust and Plan will be conclusive in favor of any person
relying on the certificate. If more than two persons act as Trustee, a decision
of the majority of such persons controls with respect to any decision regarding
the administration or investment of the Trust Fund, or any portion of the Trust
Fund with respect to which such persons act as Trustee. However, the signature
of only one Trustee is necessary to effect any transaction on behalf of the
Trust.
SEC. 10.04. BENEFITS MAY NOT BE ASSIGNED OR ALIENATED. The interests of
Participants, Beneficiaries and other persons entitled to benefits under the
Trust and Plan are not subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated or encumbered, except to the
extent that the ESOP Committee, pursuant to Section 6.06 of the Plan, directs
the Trustee that any such interests are subject to a qualified domestic
relations order, as defined in Section 414(p) of the Code.
SEC. 10.05. EVIDENCE. Evidence required of anyone under the Trust may be by
certificate, affidavit, document or other instrument which the person acting in
reliance thereon considers pertinent and reliable, and signed, made or presented
by the proper party.
SEC. 10.06. WAIVER OF NOTICE. Any notice required under the Trust or Plan
may be waived in writing by the person entitled thereto.
SEC. 10.07. COUNTERPARTS. The Trust may be executed in any number of
counterparts, each of which shall be deemed an original and no other
counterparts need be produced.
SEC. 10.08. GOVERNING LAWS AND SEVERABILITY. The Trust shall be construed
and administered according to the laws of the State of Texas to the extent that
such laws are not preempted by the laws of the United States of America. If any
provision of the Trust or Plan is held illegal or invalid, the illegality or
invalidity shall not affect the remaining provisions of the Trust and Plan, but
shall be severable, and the Trust and Plan shall be construed and enforced as if
the illegal or invalid provision had never been inserted herein.
SEC. 10.09. SUCCESSORS. The Trust shall be binding on the Company, Employer
and any successor thereto by virtue of any merger, sale, dissolution,
consolidation or reorganization, on the Trustee and its successor and on all
persons entitled to benefits under the Plan and their respective heirs and legal
representatives.
SEC. 10.10. ACTION. Any action required or permitted to be taken by the
Company under the Trust shall be by resolution of its Board of Directors or by a
person or persons authorized by resolution of its Board of Directors. The
Trustee shall not recognize or take notice of any appointment of any
representative of the Company or ESOP Committee unless and until the
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<PAGE>
Company or the ESOP Committee shall have notified the Trustee in writing of such
appointment and the extent of such representative's authority. The Trustee may
assume that such appointment and authority continue in effect until it receives
written notice to the contrary from the Company or ESOP Committee. Any action
taken or omitted to be taken by the Trustee by authority of any representative
of the Company or ESOP Committee within the scope of his or her authority shall
be as effective for all purposes hereof as if such action or nonaction had been
authorized by the Company or ESOP Committee.
SEC. 10.11. CONFORMANCE WITH PLAN. Unless otherwise indicated in the Trust,
all capitalized terms herein shall have the meaning as stated in the Plan. To
the extent provisions of the Plan and the Trust conflict, the provisions of the
Plan shall govern; provided, however, that the Trustee's duties and obligations
shall be determined solely under the Trust.
SEC. 10.12. HEADINGS. The headings and sections of this Agreement are for
convenience or reference only and shall have no substantive effect on the
provisions of this Agreement.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, and
Trustee have caused this Trust Agreement to be signed on the _____ day of
November, 1998, to be effective the 1st day of January, 1998, or otherwise set
forth herein or required under applicable law.
"COMPANY"
VARI-LITE INTERNATIONAL, INC.
By:
----------------------------------------
H.R. Brutsche, III, President
"TRUSTEE"
FROST NATIONAL BANK
By:
----------------------------------------
Carol Lampier, Sr. Vice President and
Trust Officer
VARI-LITE INTERNATIONAL, INC. EMPLOYEES' STOCK OWNERSHIP TRUST
(AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1998) - PAGE 17
<PAGE>
AMENDMENT NO. 4 TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT (this "AMENDMENT")
effective as of April 1, 1999, by and among VARI-LITE INTERNATIONAL, INC., a
Delaware corporation (the "BORROWER"), SUNTRUST BANK, ATLANTA, BROWN BROTHERS
HARRIMAN & CO., CHASE BANK OF TEXAS, N.A. (formerly known as Texas Commerce
Bank National Association), COMERICA BANK-TEXAS and THE FIRST NATIONAL BANK
OF CHICAGO (collectively, the "Lenders"), SUNTRUST BANK, ATLANTA, as agent
and collateral agent for the Lenders (in such capacities, the "AGENT" and
"COLLATERAL AGENT", respectively), and BROWN BROTHERS HARRIMAN & CO, as
co-agent for the Lenders (in such capacity, the "CO-AGENT").
WITNESSETH
WHEREAS, Borrower, the Lenders, the Agent, the Collateral Agent,
and the Co-Agent are parties to a certain Multicurrency Credit Agreement
dated as of December 19, 1997, as amended by a certain Amendment No. 1 to
Credit Agreement dated as of April 21, 1998, by a certain Amendment No. 2 to
Credit Agreement dated as of July 31, 1998, and by a certain Amendment No. 3
to Credit Agreement dated as of September 30, 1998 (as so amended, the
"CREDIT AGREEMENT"; defined terms used herein without definition shall have
the meanings ascribed to such terms in the Credit Agreement);
WHEREAS, Borrower and the Lenders have agreed to amend the Credit
Agreement as more specifically set forth below;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intended to
be legally bound, agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Subject to the
satisfaction of the conditions precedent set forth in Section 2 hereof, and
effective as of the Effective Date (as hereinafter defined), the Credit
Agreement is hereby amended as follows:
1.1 SECTION 1.01 of the Credit Agreement is hereby amended by
deleting in its entirety the defined term "Applicable Margin" and its
accompanying definition, and substituting in lieu thereof the following
defined term and accompanying definition:
<PAGE>
"APPLICABLE MARGIN" shall mean (x) with respect to all outstanding
Advances through April 1, 1999, the percentage determined pursuant to the
definition of "Applicable Margin" as defined in the Agreement immediately
prior to the effectiveness of Amendment No. 4, and (y) on and after April 1,
1999, with respect to all outstanding Advances for any day, the applicable
percentage determined from the chart set forth below based on Borrower's
Adjusted Funded Debt/EBITDA Ratio calculated as of the relevant determination
date:
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE
ADJUSTED FUNDED MARGIN FOR MARGIN FOR
DEBT/EBITDA RATIO EURO ADVANCES BASE RATE ADVANCES
- ----------------- ------------- ------------------
<S> <C> <C>
Greater than or equal to
3.00:1.00 3.50% 1.00%
Less than 3.00:1.00, but
greater than or equal to
2.50:1.00 3.00% 0.50%
Less than 2.50:1.00, but
greater than or equal to
2.00:1.00 2.50% 0%
Less than 2.00:1.00, but
greater than or equal to
1.50:1.00 2.00% 0%
Less than 1.50:1.00, but
greater than or equal to
1.00:1.00 1.50% 0%
Less than 1.00:1.00 1.00% 0%
</TABLE>
The Adjusted Funded Debt/EBITDA Ratio and the resulting Applicable Margin
shall be determined quarterly, based upon the financial statements delivered
to the Lenders pursuant to Section 6.07(a) or Section 6.07(b) hereof, as the
case may be, in accordance with Section 6.08(b), with such Applicable Margin
to be effective with respect to calculations based upon the financial
statements delivered pursuant to Section 6.07 as of the first day of the
second fiscal quarter immediately following the fiscal quarter for which such
financial statements are delivered (for example, the Applicable Margin
effective with respect to all outstanding Advances as of the first day of the
third fiscal quarter shall be calculated based upon the financial statements
delivered for the first fiscal quarter of Borrower). Notwithstanding the
foregoing, at any time during which Borrower has failed to deliver the
financial statements
2
<PAGE>
and certificates when required by Section 6.07(a), (b), and (c), as
applicable (and the cure period set forth in Section 8.02 hereof shall have
expired), the Applicable Margin with respect to the Advances then outstanding
shall be 3.50% for Euro Advances and 1.00% for Base Rate Advances.
1.2 SECTION 1.01 of the Credit Agreement is hereby amended by
adding the following defined term and accompanying definition in proper
alphabetical order:
"AMENDMENT NO. 4" shall mean that certain Amendment No. 4 to Credit
Agreement effective as of April 1, 1999, by and among Borrower, the
Agent and Collateral Agent, the Co-Agent, and the Lenders, as the same
may be amended, restated and supplemented from time to time.
1.3 SECTION 3.03 of the Credit Agreement is hereby amended by
deleting in their entirety clause (i) of subsection (a) of SECTION 3.03, and
clause (iii) of subsection (c) of SECTION 3.03, and substituting in lieu
thereof the following clause (i) in subsection (a) and the following clause
(iii) in subsection (c) thereof:
(i) For a Base Rate Advance--The Base Rate in effect from time
to time plus the Applicable Margin;
. . . .
(iii) in the case of overdue principal and interest with respect
to all other Loans outstanding as Base Rate Advances and Transaction Rate
Advances (to the extent not outstanding as Fixed Rate Advances), and all
other Obligations hereunder (other than Loans), at a rate equal to the
applicable Base Rate PLUS (x) the Applicable Margin, and (y) an additional
two percent (2%) per annum;
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective as of the date first above written (the "EFFECTIVE DATE")
on the first day when this Amendment shall have been executed and delivered
by Borrower, the Lenders, the Agent and the Co-Agent.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower,
without limiting the representations and warranties provided in the Credit
Agreement, represents and warrants to the Lenders and the Agents as follows:
3.1 The execution, delivery and performance by Borrower of this
Amendment, and by Borrower and the Domestic Subsidiaries of the Credit
Documents being delivered pursuant to this Amendment, are within Borrower's
and such Subsidiaries' corporate powers, have been duly authorized by all
necessary corporate action (including any necessary shareholder action) and
do not and will not (a) violate any provision of any law, rule or regulation,
any judgment, order or ruling of any court or governmental agency, the
articles or certificate of incorporation or by-laws of
3
<PAGE>
Borrower or any such Subsidiary or any indenture, agreement or other
instrument to which Borrower or any such Subsidiary is a party or by which
Borrower or any such Subsidiary or any of its properties is bound or (b) be
in conflict with, result in a breach of, or constitute with notice or lapse
of time or both a default under any such indenture, agreement or other
instrument.
3.2 This Amendment and the Credit Documents being delivered
pursuant to this Amendment constitute the legal, valid and binding
obligations of Borrower and its Domestic Subsidiaries, enforceable against
Borrower and its Domestic Subsidiaries in accordance with their terms.
3.3 After giving to this Amendment, no Default or Event of
Default has occurred and is continuing as of the Effective Date.
SECTION 4. SURVIVAL. Each of the foregoing representations and
warranties shall be made at and as of the Effective Date. Each of the
foregoing representations and warranties shall constitute a representation
and warranty of Borrower under the Credit Agreement, and it shall be an Event
of Default if any such representation and warranty shall prove to have been
incorrect or false in any material respect at the time when made. Each of
the foregoing representations and warranties shall survive and not be waived
by the execution and delivery of this Amendment or any investigation by the
Lenders or the Agent or the Collateral Agent.
SECTION 5. RATIFICATION OF CREDIT AGREEMENT. Except as expressly
amended herein, all terms, covenants and conditions of the Credit Agreement
and the other Loan Documents shall remain in full force and effect, and the
parties hereto do expressly ratify and confirm the Credit Agreement as
amended herein. All future references to the Credit Agreement shall be
deemed to refer to the Credit Agreement as amended hereby.
SECTION 6. BINDING NATURE. This Amendment shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs,
successors, successors-in-titles, and assigns.
SECTION 7. COSTS, EXPENSES AND TAXES. Notwithstanding anything to
the contrary contained herein or in the Credit Agreement or any other Loan
Document, Borrower shall not be responsible for the costs and expenses of the
Agent and the Collateral Agent in connection with the preparation, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder, including, without limitation, the fees and
out-of-pocket expenses of counsel for the Agent and the Collateral Agent with
respect thereto and with respect to advising the Agent and the Collateral
Agent as to its rights and responsibilities hereunder and thereunder.
SECTION 8. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Georgia.
4
<PAGE>
SECTION 9. ENTIRE UNDERSTANDING. This Amendment sets forth the
entire understanding of the parties with respect to the matters set forth
herein, and shall supersede any prior negotiations or agreements, whether
written or oral, with respect thereto.
SECTION 10. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts and may be delivered by telecopier. Each counterpart so
executed and delivered shall be deemed an original and all of which taken
together shall constitute but one and the same instrument.
[Signatures Set Forth on Next Page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
through their authorized officers as of the date first above written.
VARI-LITE INTERNATIONAL, INC.
By:------------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA,
individually and as Agent and Collateral
Agent
By:------------------------------------
Name:
Title:
By:------------------------------------
Name:
Title:
BROWN BROTHERS HARRIMAN & CO.,
individually and as Co-Agent
By:------------------------------------
Name:
Title:
CHASE BANK OF TEXAS, N.A.
(Formerly Texas Commerce Bank National
Association)
By:------------------------------------
Name:
Title:
6
<PAGE>
COMERICA BANK-TEXAS
By:------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:------------------------------------
Name:
Title:
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 AND THE CONSOLIDATED
STATEMENTS OF INCOME FOR THREE-MONTH AND SIX-MONTH PERIODS ENDED MARCH 31, 1999
OF VARI-LITE INTERNATIONAL, INC. AS SET FORTH IN THIS FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 SEP-30-1998
<PERIOD-END> MAR-31-1999 MAR-31-1999
<CASH> 3,175 3,175
<SECURITIES> 0 0
<RECEIVABLES> 15,487 15,487
<ALLOWANCES> (890) (890)
<INVENTORY> 5,791 5,791
<CURRENT-ASSETS> 26,005 26,005
<PP&E> 154,563 154,563
<DEPRECIATION> (76,956) (76,956)
<TOTAL-ASSETS> 112,025 112,025
<CURRENT-LIABILITIES> 16,583 16,583
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 44,334 44,334
<TOTAL-LIABILITY-AND-EQUITY> 112,025 112,025
<SALES> 2,289 4,903
<TOTAL-REVENUES> 23,170 48,418
<CGS> 1,769 3,651
<TOTAL-COSTS> 12,772 25,617
<OTHER-EXPENSES> 10,096 21,045
<LOSS-PROVISION> 17 32
<INTEREST-EXPENSE> 991 2,032
<INCOME-PRETAX> (689) (276)
<INCOME-TAX> (280) (109)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (409) (167)
<EPS-PRIMARY> (0.05) (0.02)
<EPS-DILUTED> (0.05) (0.02)
</TABLE>
