EXHIBIT J GROUP HEALTH PLAN, INC. CEO SPLIT DOLLAR PLAN. Article 1. the Plan.

Transcription

1 EXHIBIT J GROUP HEALTH PLAN, INC. CEO SPLIT DOLLAR PLAN Article 1 The Plan 1.1 Name/Effective Date. GROUP HEALTH PLAN, INe. (the "Company") adopts this CEO Split. Dollar Plan (the "Plan") for the Company's Chief Executive Officer. GEORGE C. HALVORSON (the "Participant"). The Plan is adopted effective as of November 1, Purpose. The Company desires to retain the Participant. To do so, the Company has agreed to deposit premiums into a split dollar life insurance policy for the Participant to provide current life insurance protection and, subject to the Participant remaining employed with the Company for an extended period of time, to create cash value with which to continue the policy post-termination. Article 2 Definitions Whenever used in the Plan, the following words and phrases shall have the meanings set forth below unless the context plainly requires a different meaning. When the defined meaning is intended, the term is capitalized: 2.1 "AccumulJtion Premium" means the deposits to the Policy made under Section 4.2 of the Plan. 2.2 "Comoetition" me:lns the Participant violating the noncompetition restrictions In Exhibit A. 2.3 "Disabilitv" mc:lns. if the Participant is covered by an individual or group long-term disability policy paid for by the Company, total and permanent disability as defined in such policy without regard to any w:1iting period. If the Participant is covered by both an individual and a group policy, Disability occurs under this Plan when total and permanent disability occurs 12/4/98; F:\PLANS\F-L\HealthPanners\CEO (11 98)\C'EO Splil Dollar Plan. doc P001624

2 under either the individual or the group policy, also without regard to any \vaiting period. Iflhe Participant is not coyered by such a policy, Disability means the Participant suffering a sickness, accident or injury which, in the judgment of a physician satisfactory to the Company, prevents the Participant from performing substantially all of his normal duties for the Company. As a condition to any benefits, the Company may require the Participant to submit to such physical or mental evaluations and tests as the Company deems appropriate. 2.4 "Distribution Date" means the date described in Section "Insurer" means the insurance company listed on Exhibit B. 2.6 "Living Needs Benefit" means the provisions of the Policy, if any, giving the Owner the right to elect distribution of the Policy's death benefit during the Participant's lifetime due to the Participant becoming terminally ill 2.7 "Minimum Premium" means a premium which is calculated by the Company and which, when levelized over the Participant's projected years of participation in the Plan, is expected to be sufficient to pay the Policy's charges for administrative fees, Death Benefit Guarantee charge, and the cost of insurance, all calculated assuming an 8.24% gross investment return for the Policy's cash accumulation value. 2.8 "Owner" means the Owner identified by the Participant. If not the Participant, the Owner is a person or trust named in writing by the Participant for estate planning purposes to hold and. exercise Policy ownership rights described in this Plan. 2.9 "Plan Year" means the l2-month period ending each October 3 I "Policy" means the life insurance policy issued by the Insurer on the life of the Participant, as listed on Exhibit B, together with any supplementary contracts to the Policy issued by the Insurer "Reasonable Cause" means any of the following, with respect to the Participant's position of employment with the Company: 2 P001625

3 Gross negligence, fraud or willful violation of any law or significant Company policy, committed in connection with the position and resulting in a material adverse effect on the Company; or Failure to perform (for reasons other than Disability) the duties reasonably assigned or appropriate to the position, in a manner reasonably consistent with prior practice; provided, however, that the term "Reasonable Cause" shall not include ordinary negligence or failure to act, whether due to an error in judgment or otherwise, if the Participant has exercised substantial efforts in good faith to perform the duties reasonably assigned or appropriate to the position. Article 3 Policy Ownership 3.1 Owner's Interest. Except for the Company's rights and the limitations provided in Sections 3.2 and 3.3, the Owner shall be the s6le and exclusive owner of the Policy. The Owner's rights include all the rights of an "owner" under the terms of the Policy including, but not limited to, the right to designate beneficiaries and select settlement and investment options. Except as provided in Section 3.3, all Policy rights not held by the Company may be exercised by the Owner \vithout the Company's consent. 3.2 Company's Interest. In exchange for the Company's payment of premiums, the Company shall have the right to receive a portion of the Policy's death proceeds as provided under Article 5, or a portion of the Policy's cash value as provided in Article Limitations Except for cash withdrawals expressly pemlitted under Article 6, neither the Company nor the Owner shall have the right to borrow against the cash value of the Policy, to withdraw cash from the Policy, or to partially or completely surrender the Policy prior to the Participant's termination of p:micip::ltion in this Pbn. 3.4 Payment from Insurer. Benefits under the Policy may be paid by the Insurer either by separate checks as agreed to between the parties entitled thereto, or by.a j-oint check. In the latter instance, the Owner and the Company (and, if applicable, their respective beneficiaries) shall divide the benefits as provided herein. However, in the event of a withdrawal by the Company 3 P001626

4 of the entire cash surrender value under Section following the Participant's forfeiture 01 interests in the Policy, or of taxes under Section 6.3 at any time, the Insurer shall issue a single check for such amounts payable solely to the Company upon the sole direction of the Company. By participating in this Plan, the Participant, individually and for the Participant's successors, assigns and beneficiaries, releases the Insurer from any and all claims that may arise from the Insurer following the Company's written statement that it is entitled to a distribution under this Section 3.4. Article 4 Premiums 4.1 Minimum Premium Pavrnents. To provide current insurance coverage, the Company shall pay a Minimum Premium of $13,980 each Plan Year that the Participant continues as an employee of the Company. If the noncompete restrictions under Section 6.2 apply following the Participant's termination of employment, the Company shall continue to pay the Minimum premium during the noncompete period so long as the Participant does not enter into Competition with the Company. 4.2 Accumulation Premium Pavrnents. To provide Policy values with which to continue the insurance coverage following termination, the Company shall also pay at the beginning of each Plan Year an Accumulation Premium of $139,368. The Company shall pay such annual Accumulation Premiums until the earlier of (i) the Participant's termination of employment, or (ii) the date on which 11 such Premiums have been paid Return of Unearned Premiums. The Company's premium payments under Sections 4.1 and 4.2 are in recognition of the Participant's services to be rendered during the applicable Plan Year. Therefore, immediately upon the Participant's termination of employment for reasons other than death, the Company shall withdraw from the Policy's cash surrender value the unearned portion of the Accumulation Premium for such Plan Year. If the noncompete provisions of Section 6.2 do not apply, the Company shall also withdraw the same pro rata portion of the Minimum Prcmium for such Plan Year. If the noncompete provisions apply such that the Company continucs to pay the Minimum Premiums post-termination, the Company shall withdraw the unearned rvlinimum Premium when the Participant satisfies or violates the noncompete restnctlons. Premium recoveries under this Section shall not be adjusted to reflect cash value earnings or losses. 4 P001627

5 4.4 Imputed Income. The Company shall annually report as imputed income to the Participant an amount equal to the current term rate for the Participant's age multiplied by the aggregate death benefit that would be payable to the beneficiaries designated by the Owner upon' the Participant's death. The "current term rate" shall mean the minimum amount required to be imputed to the Participant for federal income tax putposes. Death Article 5 Proceeds Upon the death of the Participant prior to his termination of participation in this Plan (as described in Article 6), the death proceeds of the Policy shall be allocated as follows. in the priority listed: Policy. 5.] Companv's Interest. To the Company, an amount equal to the face amount of the 5.2 Owner's Beneficiary, To the beneficiary designated by the Owner, the balance of the death proceeds. if any. Article 6 Policy Distribution 6.1 Generallv, The Distribution Date shall be the date of the earliest of the following events: (i) the Participant attaining age 62 while employed by the Company, (ii) the Participant terminating employment with the Company for Disability, or (iii) the Company terminating the Participant's employment involuntarily and without Reasonable Cause. Upon the Distribution Date, the Company shall as of such date withdraw from the Policy's cash surrender value any amounts it is required to withhold under Section 6.3, and any unearned premiums as described in Section 4.3, and release all interests in the Policy to the Owner, and the Participant's participation in the PIan shall terminate. 6.2 Terminations Requinng Risks of Forfeiture. If the Participant, prior to the Distribution Date either (:1) voluntarily terminates employment, or (b) is involuntarily terminated for Reasonable Cause, the Participant shall continue to participate in this Plan (but without payment of Accumulation Premiums) until the earlier of (i) 24 months following termination of 5 P00'1628

6 employment, or (ii) entering into Competition with the Company, with the followint consequences: No Competition. If the Participant does not enter into Competition with the Company during the 24-month period following termination of employment, the Company shall withdraw fro~ the cash surrender value any amounts it is required to withhold for tax purposes as provided in Section 6.3, and any unearned premiums as described in Section 4.3, and then release all interests in the Policy and its cash value to the Owner. The Participant's participation in the Plan shall then terminate Competition. If the Participant enters into Competition during the 24-month period, the Owner shall forfeit all interests in the Policy and its cash value. The Owner shall either (i) repay the Company an amo~nt equal to the Policy's cash value as of such date, after which the Company shall assign all of its interests in the Policy to the Owner, or (ii) transfer all interests in the Policy to the Company without further remuneration. Absent the Company's receipt of payment under option (i), above, within 30 days atler the forfeiture, the Company shall have the unilateral authority to have the Policy ownership changed to the Company and/or to withdraw the Policy's entire cash surrender value, even if such withdrawal causes the Policy to lapse. The Participant's participation in the Plan shall then terminate. 6.3 Tax Withholding. Prior to any release of the Policy to the Owner, the Company shall withdraw from the Policy an amount equal to any applicable state and federal employment taxes and income tax withholding that apply, and pay such amounts to the appropriate government offices as required by law. In lieu of the Company's withdrawal of cash from the policy under this Section 6.3, the Owner may elect to pay to the Company an amount equal to such withholding. 6.4 Accelerated Death Benefits. If the Participant qualifies for the Living Needs Benefit, the Owner shall have the right to exercise such option to the extent of the Owner's interest in the death benefit, as described in Section 5.2. The Policy shall then remain in full force and effect, and any such acceleration shall not otherwise affect the rights of the parties to the Policy and its values as otherwise provided in this Plan. 6 P001629

7 Article 7 Insurer The Insurer shall be bound only by the provisions of (and endorsements on) the Policy, and any payments made or actions taken by it in accordance therewith shall fully discharge it from all claims, suits and demands of all persons. The Insurer shall in no way be bound by or be deemed to have notice of the provisions of this Plan. Article 8 Claims Procedure 8.1 Claims Procedure. The Company shall notify the Owner or the Owner's beneficiary ("Claimant") in writing, within 90 days after his or her written application for benefits, of his or her eligibility or noneligibility for benefits under this Plan. If the Company determines that a Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Plan on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of the Plan's claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90-day period. B.2 Review Procedure. If a Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within 60 days after receipt by the Company of the petition, the Comp:my 1Tl3Y,in its discretion, afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company orally or in writing, and the Claimant (or counsel) shall h3ve the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Plan on which the decision is based. If, because of the need for a hearing, the 7 P001630

8 60-day period is not sufficient, the decision may be deferred for up to another 60-day period at the election of the Company, but notice of this deferral shall be given to the Claimant. Administration Article 9 and Finances 9.1 Administration. The Company's Board of Directors shall be the named fiduciary and shall act for the Company under this Plan. 9.2 Powers of the Company. The Company shall have all powers necessary to administer the Plan, including, without limitation, powers: to interpret the provisions of the Plan; to establish and revise the method of accounting for the Plan; and to establish rules for the administration of the Plan and to prescribe any forms required to administer the Plan. 9.3 Actions of the Companv. All determinations, interpretations, rules, and decisions of the Company shall be conclusive and binding upon all persons having or claiming to have any interest or right under the Plan. 9.4 Finances. The costs of the Plan shall be borne by the Company, except as otherwise provided herein. Article] 0 1\1iscellaneous instrument 10.1 Termination/Amendment. This Plan may be temlinated or amended only by a written signed by the Company and the Owner Transfer.ahilit\ The Owner shall have the right to assign for estate planning purposes, without remuncrat ion. any part or all of his, her, or its interests in the Policy and in this Plan to any person, entity or trust by execution of a written assignment delivered to the Insurer. 8 P001631

9 10.3 Binding Effect. Except as otherwise expressly stated herein, this Plan shall bind the Owner and the Participant, their heirs, executors, administrators and transferees, and th( Company and any Policy beneficiary No Emplovment A~eement. The adoption and maintenance of the Plan shall not be deemed to be. a contract of employment between the Company and the Participant Collateral Assignment. The Company's interest and rights in the Policy as provided in this Plan shall be evidenced and secured by filing with the Insurer an assignment, executed by the Owner, in the form provided by the Company Governing Law. This Plan, and the rights of the parties hereunder, shall be governed by and construed pursuant to the laws of Minnesota, except to the extent such laws are preempted by the laws of the United States of America..GROUP HEALTH PLAN, INC. By _ Title _ 9 P001632

10 EXHIBIT A COMPETING ACTIVITIES The Participant shall be in Competition with the Company ifhe, directly or indirectly, whether as partner, officer, director, employee, manager, consultant, or otherwise, within the seven-county Minneapolis/St. Paul Metropolitan Area: 1. Performs services for any organization, any purpose or activity of which is substantially similar to that of the Company or an affiliate ("Similar Organization"); 2. For any Similar Organization, performs, assists in the performance, or consults with respect to the performance of services substantially similar to the services now, or at any time, performed by the Participant for the Company or an affiliate, or similar to services performed by any person over whom the Participant, at any time, had supervision of, or responsibility for, while employed by the Company or an affiliate; 3. Operates, assists in operating or consults with respect to the operation of any entity or any part of any entity, the purpose of which and/or the activities of which are similar in any way to the operation of any part of the Company or an affiliate over which the Participant had direct or indirect responsibility while employed by the Company or an affiliate; or 4. Performs services for any health maintenance organization or preferred provider organization. 10 P001633

11 EXHIBITB CEO SPLIT DOLLAR PLAN SCHEDULE OF LIFE INSURANCE As of PolicvNo. Insurer II P001634

12 ADDENDUM TO EXHIBIT B CEO SPLIT DOLLAR PLAN SCHEDULE OF LIFE INSURANCE Asof _ Additions: PolicvNo. Insurer Deletions: Policy No. Insurer 12 P001635