Split Dollar Life Insurance Agreement - Enron Corp. and the Kenneth L. Lay (KLL) & Linda Phillips Lay (LPL) Family Partnership Ltd.
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT is made as of the 22nd day of
April, 1994, between Enron Corp. ("Enron"), a Delaware
corporation having its headquarters at 1400 Smith Street,
Houston, Texas 77002, and the KLL & LPL Family Partnership,
Ltd., a Texas limited partnership.
WHEREAS, Kenneth L. Lay (the "Participant"), Chairman
and Chief Executive Officer of Enron, has contributed
substantially to the success of Enron, and is employed by
Enron pursuant to an employment agreement first entered into
between Enron and the Participant as of September 1, 1989
(the "Employment Agreement").
WHEREAS, contemporaneously with the execution of this
Agreement, the Participant and Enron entered into and
executed the Sixth Amendment To Employment Agreement
pursuant which (as amended, the "Employment Agreement") the
Participant and Enron agreed to enter into this Agreement to
establish a program for split dollar life insurance.
WHEREAS, the owner of life insurance policy number
92474662 (the "Insurance Contract") issued by TransAmerica
Occidental (the "Insurance Company") on the joint lives of
the Participant and his wife, Linda Phillips Lay (the
"Participant's Spouse") shall be the KLL & LPL Family
Partnership, Ltd., a Texas limited partnership (the
"Owner"); and
WHEREAS, Enron is willing to assist in the payment of
premiums under the Insurance Contract as provided in this
Agreement; and
WHEREAS, the Owner contemporaneous herewith is
assigning an interest in the Insurance Contract to Enron as
collateral security for such premium payments (the
"Collateral Agreement");
NOW, THEREFORE, in consideration of the mutual
covenants and agreements described herein, Enron and the
Owner hereby agree as follows:
1. Payment of Premiums.
(a) By Enron: Enron shall pay to the Insurance
Company an amount equal to Two Hundred Eighty
Thousand Two Hundred Sixty-Five Dollars
($280,265), which shall hereinafter sometimes
be referred to as the "Agreed Premium
Amount," as its share of the initial premium
for the Insurance Contract and shall continue
to pay to the Insurance Company the same
Agreed Premium Amount as its share of the
annual premium for the Insurance Contract
during the eight (8) successive years
following the initial premium payment
(meaning a total of nine (9) payments of the
Agreed Premium Amount shall be paid by Enron
to the Insurance Company), unless this
Agreement terminates earlier as provided
below, in which event Enron shall only be
obligated to continue to pay to the Insurance
Company the Agreed Premium Amount on an
annual basis until the date on which this
Agreement terminates. Provided that this
Agreement shall not have terminated earlier,
Enron shall have no further obligation to pay
any amounts to the Insurance Company after
Enron has made the nine (9) payments to the
Insurance Company of the Agreed Premium
Amount in the manner described herein. A
portion of each such payment of the Agreed
Premium Amount by Enron to the Insurance
Company may be reported as imputed income
includable as compensation in the
Participant's gross income in accordance with
federal, state, or local income tax laws.
(b) By the Owner. The Owner may, but shall not
be required, to pay the portion of the annual
premium (if any) on the Insurance Contract
that is in excess of the Agreed Premium
Amount to be paid by Enron.
2. Insurance Contract Beneficiary Designation. The
right to designate and change the beneficiary of
the Insurance Contract and to elect an optional
mode of settlement is reserved to the Owner. Such
Owner shall have the right to designate and change
the beneficiaries and contingent beneficiaries and
to elect an optional mode of settlement subject to
the interest of Enron as Assignee under the
Collateral Agreement, and Enron will make the
Insurance Contract available to the Owner, if
required for endorsement or a change of
beneficiary.
3. Payment of Insurance Contract Proceeds in Event of
Death Prior to Termination of this Agreement by
Any Other Event. If the Participant and the
Participant's Spouse die while the Insurance
Contract and this Agreement are in force, then the
proceeds of the Insurance Contract will be payable
as follows:
(a) Enron shall be entitled to the amount of the
death benefit proceeds equal to the sum of
the Agreed Premium Amounts paid by Enron
pursuant to this Agreement.
(b) The beneficiary designated by the Owner shall
be entitled to the amount of the death
benefit proceeds, if any, in excess of the
amount payable to Enron.
Enron shall not be responsible for payments by the
Insurance Company to the Owner of the Insurance
Contract or for the benefits payable under the
Insurance Contract to the beneficiaries thereof.
Neither Participant nor the Owner (including any
person or entity claiming through the Participant
or the Owner) shall have any claim against Enron
for any benefits to be provided under the
Insurance Contract.
4. Payment of Insurance Contract Proceeds In Event of
Death After Termination of this Agreement. If the
Participant and the Participant's Spouse die while
the Insurance Contract is in force and after this
Agreement has previously terminated (other than
due to deaths of the Participant and the
Participant's Spouse), then the proceeds of the
Insurance Contract will be payable as follows:
(a) Enron shall not be entitled to receive any
amount of the death benefit proceeds of the
Insurance Contract.
(b) The beneficiary designated by the Owner shall
be entitled to all of the death benefit
proceeds of the Insurance Contract.
Enron shall not be responsible for payments by the
Insurance Company to the Owner of the Insurance
Contract or for benefits payable under the
Insurance Contract to the beneficiaries thereof.
Neither the Participant nor the Owner (including
any person or entity claiming through the
Participant or the Owner) shall have any claim
against Enron for any benefits to be provided
under the Insurance Contract.
5. Company's Exercise of Rights as Assignee. While
this Agreement is in force, Enron shall have no
incidents of ownership with regard to the
Insurance Contract. The power to surrender,
terminate or cancel the Insurance Contract and the
right to borrow or withdraw against the Insurance
Contract, subject to the provisions of Paragraph 6
below, shall remain in Owner. The Insurance
Contract shall be held by Enron until the
termination of this Agreement.
6. Limitation on Rights of Owner. The Owner agrees
not to withdraw, surrender, borrow against, or
pledge as security for a loan any portion of the
Insurance Contract cash value while this Agreement
is in effect. Should this Agreement be terminated
for any reason, prior to the expiration of nine
(9) years and thirty (30) days following the issue
date of the Insurance Contract, or should the
Owner surrender the Insurance Contract to the
Insurance Company, prior to the expiration of nine
(9) years and thirty (30) days following the issue
date of the Insurance Contract, the Owner agrees
that the Insurance Company shall reimburse Enron
for all Agreed Premium Amounts paid to Enron prior
to any portion of the cash surrender value being
paid to the Owner. The Owner agrees that, in the
situation described in the preceding sentence,
should the Owner receive from the Insurance
Company any portion of the cash surrender value
representing the Agreed Premium Amounts paid by
Enron, then the Owner shall be constructive
trustee for Enron and shall pay such sums to Enron
upon receipt.
7. Termination of Agreement. This Agreement shall
terminate upon the occurrence of one of the
following:
(a) the date of payment to Enron by the Owner (or
some other source) of the aggregate of the
Agreed Premium Amounts paid by Enron to the
Insurance Company pursuant to this Agreement;
(b) the date of surrender of the Insurance
Contract;
(c) the date of death of the second to die of the
Participant and the Participant's Spouse;
(d) thirty (30) days following the ninth (9th)
anniversary of the issue date of the
Insurance Contract (meaning the month and day
in the year 2003 on which the Insurance
Contract was issued) or in January after
Participant retires from Enron, whichever is
later.
In the event of termination of this Agreement
pursuant to (a), (b) or (c) above, the aggregate
of the Agreed Premium Amounts paid by Enron
pursuant to this Agreement shall become due and
payable to Enron. Upon payment of such amount to
Enron from the Insurance Contract, the Owner, or
whatever other source, Enron shall execute a
release of the Collateral Agreement and deliver
such release and the Insurance Contract to the
Owner. In the event of termination of this
Agreement pursuant to (d) above, Enron shall no
longer be entitled to receive from the Insurance
Contract, the Owner, or any other source any of
the Agreed Premium Amounts paid by Enron pursuant
to this Agreement, and Enron shall execute a
release of the Collateral Agreement and shall
deliver such release and the Insurance Contract to
the Owner.
8. Amendment and Assignment of Agreement.
(a) This Agreement shall not be modified or
amended except in writing signed by Enron and
the Owner.
(b) This Agreement is binding upon Enron, the
Participant (and the Participant's
successors, executors, administrators, and
transferees), the Owner (and the Owner's
successors and transferees) and any Insurance
Contract beneficiary.
9. Taxes. Enron makes no guarantees and assumes no
obligation or responsibility with respect to the
Participant's or the Owner's federal, state, or
local income, estate, inheritance and gift tax
obligations, if any, under this Agreement, or the
Collateral Agreement, or the Insurance Contract.
10. State Law. This Agreement shall be subject to and
construed in accordance with the laws of the State
of Texas.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
ENRON CORP.
By: JOHN H. DUNCAN
Name: John H. Duncan
Title: Chairman, Executive Committee of
Board of Directors
By: CHARLES A. LeMAISTRE
Name: Charles A. LeMaistre
Title: Chairman, Compensation Committee
of Board of Directors
KLL & LPL Family Partnership, Ltd.
By: KENNETH L. LAY
Name: Kenneth L. Lay, General Partner
Agreed to and ratified by:
KENNETH L. LAY
Kenneth L. Lay
<PAGE>
COLLATERAL AGREEMENT
THIS AGREEMENT is made and entered into by the
undersigned as owner (the "Owner") of Insurance Contract
Number 92474662 ("Insurance Contract") issued by
TransAmerica Occidental (the "Insurance Company") on the
joint lives of Kenneth L. Lay (the "Participant") and his
wife Linda Phillips Lay (the "Participant's Spouse"), which
Insurance Contract shall herein be assigned to Enron Corp.
("Enron"), as collateral security for those liabilities
which may arise under the terms of the Split Dollar
Agreement between the Owner and Enron dated as of April 22,
1994 (the "Split Dollar Agreement"), subject to the terms
and conditions in the Insurance Contract.
WHEREAS, in consideration of Enron's agreement to make
certain premium payments (the "Agreed Premium Amounts")
under the Insurance Contract, the Owner agrees to grant
Enron a security interest in the Insurance Contract as
collateral security for the repayment of the aggregate
Agreed Premium Amounts paid under the Split Dollar Agreement
by Enron for the Insurance Contract, until the Split Dollar
Agreement terminates in accordance with its provisions.
NOW, THEREFORE, the undersigned Owner hereby assigns,
transfers and sets over to Enron the following specific
rights in the Insurance Contract subject to the following
terms and conditions:
1. This Agreement is made, and the Insurance Contract
is to be held as collateral security, for all liabilities of
the Owner to Enron, either now existing or that may
hereafter arise, pursuant to the terms of the Split Dollar
Agreement.
2. Enron's interest in the Insurance Contract, while
the Split Dollar Agreement is in force, shall be strictly
limited to the right to collect from the Insurance Company
when the Insurance Contract becomes a claim by death or
surrender an amount equal to the aggregate of the Agreed
Premium Amounts paid by Enron pursuant to the Split Dollar
Agreement.
3. Subject to the terms and conditions of the Split
Dollar Agreement, the Owner shall retain all incidents of
ownership in the Insurance Contract, including, but not
limited to, the sole and exclusive right to:
(a) designate and change the beneficiary of the
Insurance Contract; and
(b) exercise settlement options.
4. If, at any time, Enron has possession of the
original of the Insurance Contract, Enron shall make the
Insurance Contract available to the Owner, at any time and
from time to time, to enable the Owner to exercise any right
reserved by the Owner.
5. Enron covenants and agrees with the Owner that any
amounts, which may be paid to Enron by the Insurance Company
pursuant to the terms of the Insurance Contract and this
Agreement and which are in excess of the then existing
liabilities of the Owner under the Split Dollar Agreement,
shall be paid by Enron to the persons who would have been
entitled thereto under the Insurance Contract had this
Agreement not been executed.
6. Upon the full payment of all liabilities, which
are then due and owing to Enron under the Split Dollar
Agreement, Enron shall execute an appropriate instrument of
release of this Agreement. However, notwithstanding
anything to the contrary contained above, if the Split
Dollar Agreement shall terminate in accordance with its
provisions on the 30 days following the ninth (9th)
anniversary of the issue date of the Insurance Contract, or
the January following the retirement of Owner from Enron,
whichever is later, then in such situation, Enron shall have
no further right to receive any payment under the Split
Dollar Agreement, and Enron shall execute an appropriate
instrument of release of this Agreement.
7. The Insurance Company shall be fully protected and
discharged from further obligation by paying in reliance
upon the terms of the Insurance Contract and/or the terms of
this Agreement.
IN WITNESS WHEREOF, the Owner and Enron have executed
this Agreement effective this 22nd day of April, 1994.
KLL & LPL Family Partnership, Ltd.
By: KENNETH L. LAY
Kenneth L. Lay, General Partner
ENRON CORP.
By: JOHN H. DUNCAN
Name: John H. Duncan
Title: Chairman, Executive Committee of Board of
Directors
By: CHARLES A. LEMAISTRE
Name: Charles A. LeMaistre
Title: Chairman, Compensation Committee of Board of
Directors