GRANCARE, INC.
EXECUTIVE LIFE INSURANCE PLAN
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TABLE OF CONTENTS
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Page
---- A. PURPOSE.................................................................. 1
B. DEFINITIONS.............................................................. 1
C. PARTICIPATION............................................................ 2
1. Approval............................................................. 2
2. Insurability......................................................... 2
3. Election not to Participate.......................................... 3
D. ASSIGNMENT............................................................... 3
E. PREMIUMS................................................................. 3
F. INVESTMENT EARNINGS...................................................... 3
G. OWNERSHIP................................................................ 3
H. COLLATERAL ASSIGNMENT OF SECURITY INTEREST............................... 3
I. INSURANCE BENEFITS PRIOR TO TERMINATION OF EMPLOYMENT.................... 4
J. INSURANCE BENEFITS AFTER TERMINATION OF EMPLOYMENT....................... 4
1. Qualifying Termination............................................... 4
2. Non-Qualifying Termination........................................... 4
K. TAX LIABILITY AND WITHHOLDING............................................ 4
L. ADMINISTRATION OF THE PLAN............................................... 5
1. Administration and Interpretation.................................... 5
2. Plan Supervisor...................................................... 5
3. Elections and Notices................................................ 5
M. AMENDMENT OR TERMINATION OF THE PLAN..................................... 6
N. BENEFICIARY DESIGNATION.................................................. 6
O. ERISA PLAN............................................................... 6
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P. CLAIMS PROCEDURE............................................. 6
1. Claims.................................................. 6
2. Appeal.................................................. 7
3. Limitation Period....................................... 7
Q. MISCELLANEOUS................................................ 7
1. Employment Not Guaranteed............................... 7
2. Protective Provisions................................... 7
3. Gender, Singular & Plural............................... 8
4. Captions................................................ 8
5. Validity................................................ 8
6. Applicable Law.......................................... 8
7. Notice to Insurer....................................... 8
8. Notice Under Agreement.................................. 9
9. Binding Agreement....................................... 9
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GRANCARE, INC.
EXECUTIVE LIFE INSURANCE PLAN
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A. PURPOSE
This Plan provides life insurance coverage for certain employees of
GranCare, Inc. ("GranCare").
B. DEFINITIONS
For the purposes of the Plan, the following terms shall have the
meanings indicated:
1. "Beneficiary" means the person or persons designated as such in
accordance with Section N.
2. "Committee" means the Board of Directors of GranCare or its
delegate, if any.
3. "Annual Salary" means with respect to an Employee, such
Employee's annual base salary before any salary deferrals or
salary reduction elections.
4. "Employee" means, except as provided in Section D, an officer or
other employee of GranCare designated by GranCare as a Plan
participant.
5. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
6. "GranCare" means GranCare, Inc., a Delaware corporation, its
subsidiaries and successors.
7. "Initial Annual Premium Contribution" means the first premium
installment paid by GranCare to the Insurer under the Split
Dollar Policy.
8. "Insurer" means the insurance company chosen to issue a Policy
on the life of the Employee.
9. "Old GranCare" means GranCare, Inc., a California corporation.
10. "Old Plan" means the GranCare, Inc. Executive Life Insurance
Plan, as maintained by Old GranCare.
11. "Plan" means the GranCare, Inc. Executive Life Insurance Plan.
12. "Plan Supervisor" means GranCare's Vice President, Director of
Human Resources.
13. "Plan Year" means the calendar year.
14. "Policy" means the life insurance policy which GranCare will cause to
be issued by the Insurer on the life of an Employee pursuant to the
Plan. In the event that an Employee was a participant in the Old Plan
and agreed to the assignment of the collateral assignment entered into
by the Employee in favor of Old GranCare with respect to the policy
issued on the life of the Employee under the Old Plan, such policy
shall be the Policy hereunder.
15. "Qualifying Termination" means the termination of employment which
constitutes a Qualifying Termination under the Split Dollar Life
Insurance Agreement.
16. "Retirement" means the termination of employment following attainment
of at least age 65.
17. "Split Dollar Life Insurance Agreement" means the agreement entered
into between GranCare and an Employee which defines GranCare's
contingent rights in the Split Dollar Policy.
18. "Split Dollar Policy" means the Policy controlled by the applicable
Split Dollar Life Insurance Agreement.
C. PARTICIPATION
1. Approval
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An Employee shall become a participant of the Plan as of the date the
Employee is notified in writing by the Committee that participation is
approved. Notwithstanding the foregoing, if an Employee was a
participant in the Old Plan and agreed to the assignment of the
collateral assignment entered into by the Employee in favor of Old
GranCare with respect to the policy issued on the life of the Employee
under the Old Plan, such Employee shall be a Participant in the Plan
as of the date of the assignment of such collateral assignment to
GranCare.
2. Insurability
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An Employee is not automatically entitled to the insurance benefits
provided under the Plan. The Employee must satisfy the requirements
for obtaining insurance before the Employee becomes covered under the
Plan. In the event Employee is uninsurable, the Committee may, but
need not, elect to obtain insurance on the life of Employee's spouse
in order to enable Employee to participate in the Plan.
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3. Election not to Participate
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An Employee may elect not to participate in the Plan at any time. Such
election shall be in writing, and shall become effective upon its
receipt by the Plan Supervisor. No compensation or benefits in lieu of
participation in the Plan shall be paid to an Employee who elects not
to participate in the Plan.
D. ASSIGNMENT
An Employee may not assign (other than through a Collateral Assignment in
favor of GranCare in accordance with the Split Dollar Life Insurance
Agreement and Section H of the Plan) to any individual or trustee all or
any part of the Employee's right, title, claim, interest, benefit and all
other incidents of ownership which the Employee may have in any life
insurance under the Plan.
E. PREMIUMS
All premiums due on an Employee's Policy while the Employee is employed by
GranCare shall be paid by GranCare directly to the Insurer. GranCare may
satisfy its obligation to pay premiums with funds borrowed against the
Split Dollar Policy, on a nonrecourse basis. GranCare will cease making
premium payments due after the date on which Employee's employment with
GranCare terminates for any reason.
F. INVESTMENT EARNINGS
All investment earnings on an Employee's Policy while such Employee is a
participant in this Plan will be reinvested in the Policy and will not be
distributed to the Employee.
G. OWNERSHIP
The Employee shall be the owner of the Policy and shall hold the right to
exercise all ownership rights granted by the terms of the Policy, including
the right to change the Beneficiary of that portion of the proceeds of the
Policy to which the Employee is entitled under Section I or J of the Plan,
and the right to exercise settlement options, except to the extent such
rights are specifically limited by the terms of the Plan. While an Employee
is a participant in the Plan, the Employee will have no right to borrow
against the Split Dollar Policy or obtain any part of the cash surrender
value of the Split Dollar Policy.
H. COLLATERAL ASSIGNMENT OF SECURITY INTEREST
An Employee will be required to assign certain rights of the Employee in
the Split Dollar Policy to GranCare to secure GranCare's right to recover
the premiums it pays with respect to the Split Dollar Policy. This
assignment will be made by the Employee's
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execution of a Split Dollar Life Insurance Agreement in substantially
the form attached hereto as Exhibit "A" at the time the Employee
becomes a participant of the Plan, GranCare will not assign its
security interest in the Split Dollar Policy to anyone other than the
Employee. In the event that the Employee was a participant in the Old
Plan and agreed to the assignment of the collateral assignment entered
into by the Employee in favor of Old GranCare with respect to the
policy issued on the life of the Employee under the Old Plan, the
Split Dollar Life Insurance Agreement will also secure GranCare's
right to recover the premiums paid by Old GranCare with respect to the
Split Dollar Policy.
I. INSURANCE BENEFITS PRIOR TO TERMINATION OF EMPLOYMENT
If the Employee dies prior to the termination of employment, the
Employee's Beneficiary will be entitled to receive as a death benefit
under the Split Dollar Policy, an amount equal to three times the
Employee's most recent Annual Salary. To the extent the death benefit
under the Split Dollar Policy exceeds this amount, the balance of the
death benefit will be paid to GranCare. Upon the death of the
Employee, GranCare shall promptly take all action necessary to obtain
the death benefit provided under the Split Dollar Policy.
J. INSURANCE BENEFITS AFTER TERMINATION OF EMPLOYMENT
1. Qualifying Termination. Upon a Qualifying Termination, GranCare
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shall release its assignment of the cash surrender value in the
Split Dollar Policy and the Employee shall receive cash surrender
value of the policy as of the date of termination of employment.
The Employee may maintain the Split Dollar Policy by making the
premium payments after the date of termination of employment.
2. Non-Qualifying Termination. Upon a termination of employment
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which does not constitute a Qualifying Termination, Employee
shall forfeit the cash surrender value of the Split Dollar
Policy. Immediately upon such termination of employment, GranCare
shall withdraw from or borrow against the Split Dollar Policy, an
amount equal to the maximum amount which may be withdrawn or
borrowed, as the case may be, under the Split Dollar Policy. The
Employee may maintain the Split Dollar Policy by making the
premium payments after the date of termination of employment.
K. TAX LIABILITY AND WITHHOLDING
The rights of an Employee in the Split Dollar Policy may cause the
Employee to be treated as having gross income for federal, state or
local income tax purposes. These circumstances may also impose upon
GranCare an obligation to deduct and collect federal, state or local
withholding taxes. Unless the Employee otherwise provides GranCare the
amounts it is required to withhold, GranCare may satisfy its
withholding
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obligations by borrowing, on a nonrecourse basis, against the Split Dollar
Policy, an amount equal to its withholding tax liability.
L. ADMINISTRATION OF THE PLAN
1. Administration and Interpretation
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The Plan shall be administered and interpreted by the Committee. The
Committee shall have the power and authority in its sole, absolute and
uncontrolled discretion to control and manage the operation and
administration of the Plan and shall have all powers necessary to
accomplish these purposes. The responsibility and authority of the
Committee shall include but shall not be limited to the following:
a. determining all questions relating to the eligibility of an
Employee to participate;
b. determining the amount and kind of benefits payable to any Employee
or Beneficiary;
c. establishing and reducing to writing and distributing to any
Employee or Beneficiary a claims procedure; ...
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