AMENDED AND RESTATED MID ATLANTIC MEDICAL SERVICES, INC.
STOCK COMPENSATION TRUST AGREEMENT
THIS AMENDED AND RESTATED STOCK COMPENSATION TRUST AGREEMENT
made and entered into as of the 20th day of December, 1996, effective as
of August 26, 1996, by and between Mid Atlantic Medical Services, Inc.,
a corporation organized under the laws of the State of Delaware
(hereinafter referred to as the "Company") and THE BANK OF NEW YORK, a
New York banking corporation (hereinafter referred to as the "Trustee").
WHEREAS, the Company (as defined below) desires to establish a
trust (the "Trust") in accordance with the laws of the State of New York
and for the purposes stated in this Agreement;
WHEREAS, the Trustee desires to act as trustee of the Trust,
and to hold legal title to the assets of the Trusts, in trust, for the
purposes hereinafter stated and in accordance with the terms hereof;
WHEREAS, the Company or its subsidiaries have previously
adopted the Plans (as defined below);
WHEREAS, the Company desires to provide assurance of the
availability of the shares of its common stock necessary to satisfy
certain of its obligations or those of its subsidiaries under the Plans
(as defined below);
WHEREAS, the Trustee has accepted such appointment as of August
26, 1996;
WHEREAS, the Company intends, that the assets of the Trust Fund
shall be and remain subject to the claims of the Company's creditors as
herein provided and that the Plans not be deemed funded by virtue of the
existence of this Trust; and
WHEREAS, the Trust is intended to be a "grantor trust" with the
result that the corpus and income of the Trust are treated as assets and
income of the Company pursuant to Sections 671 through 679 of the Code;
and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Trustee declare and agree as follows:
1. DEFINITIONS; ESTABLISHMENT OF TRUST
1.1. DEFINITIONS. Whenever used in this Trust Agreement,
unless otherwise provided or the context otherwise requires:
AUTHORIZED OFFICER. "Authorized Officer" means the
Chairman, President, any Vice President, the Secretary or the Treasurer
of the Company or any other person or persons as may be designated by
the Company.
BOARD OF DIRECTORS. "Board of Directors" means the
board of directors of the Company.
CHANGE OF CONTROL. "Change of Control" means any of
the following events:
(a) an acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the combined voting power of the
then outstanding voting securities of the Company; provided, however,
that the following acquisitions shall not constitute a Change of
Control: (i) an acquisition by or directly from the Company, (ii) an
acquisition by any employee benefit plan or trust sponsored or
maintained by the Company; and (iii) any acquisition described in
subclauses (A) or (B) of subsection (b) below; or
(b) approval by the stockholders of the Company of (i)
a complete dissolution or liquidation of the Company, (ii) a sale or
other disposition of all or substantially all of the Company's assets or
(iii) a reorganization, merger, or consolidation ("Business
Combination") unless either (A) all or substantially all of the
stockholders of the Company immediately prior to the Business
Combination own more than 50% of the voting securities of the entity
surviving the Business Combination, or the entity which directly or
indirectly controls such surviving entity, in substantially the same
proportion as they owned the voting securities of the Company
immediately prior thereto, or (B) the consideration (other than cash
paid in lieu of fractional shares or payment upon perfection of
appraisal rights) issued to stockholders of the Company in the Business
Combination is solely common stock which is publicly traded on an
established securities exchange in the United States.
CODE. "Code" means the Internal Revenue Code of 1986,
as amended.
COMMITTEE. "Committee" means a committee of officers
selected by the Board of Directors, except as provided in Section 9.2,
or by an individual or individuals authorized by the Board of Directors
to make such selection which is charged with administration of the
Trust.
COMPANY. "Company" means Mid Atlantic Medical
Services, Inc., a Delaware corporation, or any successor thereto.
References to the Company shall include its subsidiaries where
appropriate.
COMPANY STOCK. "Company Stock" means shares of common
stock, par value $0.01 per share, issued by the Company or any successor
securities.
EXTRAORDINARY DIVIDEND. "Extraordinary Dividend" means
any dividend or other distribution of cash or other property (other than
Company Stock) made with respect to Company Stock, which the Board of
Directors declares generally to be other than an ordinary dividend.
FAIR MARKET VALUE. "Fair Market Value" means as of any
date the closing price quotation, or, if none, the average of the bid
and asked prices, as reported with respect to the Company Stock on the
most recently available date, on any national exchange on which the
Company Stock is then listed, or if not so listed, on the NASDAQ
National Market, or other consolidated reporting system reporting trades
of the Company Stock. If the Company Stock is not so listed, "Fair
Market Value" shall mean the average of the bid and asked prices as
quoted by all market makers in the Company Stock. In the event that a
market for the Company Stock does not exist, the Committee may
determine, in any case or cases, that "Fair Market Value" shall be
determined on the basis of the opinion of one or more independent and
reputable appraisers qualified to value companies in the Company's line
of business.
INSOLVENCY. "Insolvency" means (i) the inability of
the Company to pay its debts as they become due, or (ii) the Company
being subject to a pending proceeding as a debtor under the provisions
of Title 11 of the United States Code (Bankruptcy Code).
LOAN. "Loan" means the loan and extension of credit to
the Trust evidenced by a promissory note dated as of the Closing (as
defined in the Amended and Restated Common Stock Purchase Agreement
dated December 20, 1996, effective as of August 26, 1996, between the
Trust and the Company (the Common Stock Purchase Agreement )) and,
following cancellation of such promissory note, by the replacement
promissory note dated as of the Rescission Closing (as defined in the
Common Stock Purchase Agreement), with which the Trustee will purchase
Company Stock.
OPTION GRANT. "Option Grant" means an option granted
under one of the Plans to a Plan Participant to acquire shares of
Company Stock.
PLAN COMMITTEE CERTIFICATION. "Plan Committee
Certifications" means a certification to be provided to the Trustee by
the Committee from time to time which (i) sets forth the number of
shares of Company Stock transferred to a Plan Participant, and (ii)
certifies that the determination of such number is in accordance with
the terms of each Plan.
PLANS. "Plans" means the employee plans listed on
Schedule A hereto and any other employee benefit plan of the Company
designated as such by the Board of Directors.
PLAN PARTICIPANT. "Plan Participant" means an
individual who has an Option Grant under any of the Plans.
RELIABLE SOURCE. "Reliable Source" means (i) a report
filed with the Securities and Exchange Commission, (ii) a public
statement issued by the Company, or a periodical of general circulation,
including, but not limited to, The NEW YORK TIMES or THE WALL STREET
JOURNAL, or (iii) a certificate of the Company signed by the Chief
Executive Officer or by the Chairman of the Board of Directors.
SUSPENSE ACCOUNT. "Suspense Account" means the account
in which shares of Company Stock acquired with the Loan are held until
they are released pursuant to Section 3.1.
TRUST. "Trust" means the trust established pursuant to
this Trust Agreement.
TRUSTEE. "Trustee" means Bank of New York or any
successor trustee.
TRUST YEAR. "Trust Year" means the period beginning on
the date of the Closing (the "Closing Date") and ending on the next
following December 31st and on each December 31st thereafter.
1.2. ESTABLISHMENT OF TRUST.
TRUST. This Agreement and the Trust shall be known as
the Mid Atlantic Medical Services, Inc. Stock Compensation Trust. The
parties intend that the Trust will be an independent legal entity with
title to and power to convey all of its assets. The parties hereto
further intend that the Trust not be subject to the Employee Retirement
Income Security Act of 1974, as amended. The Trust is not a part of any
of the Plans and does not provide retirement or other benefits to any
Plan Participant. The assets of the Trust will be held, invested and
disposed of by the Trustee, in accordance with the terms of the Trust.
The Company covenants and agrees to at all times make available
sufficient shares of Company Stock for purposes of the Plans to the
extent that there are not sufficient shares in the Trust to meet the
requirements of the Plans; provided, however, that the Trustee shall not
be responsible for enforcing such obligation of the Company.
TRUSTEE. The trustee named above, and its successor or
successors, is hereby designated as the trustee hereunder, to receive,
hold, invest, administer and distribute the Trust Fund in accordance
with this Agreement, the provisions of which shall govern the power,
duties and responsibilities of the Trustee.
TRUST FUND. The assets held at any time and from time
to time under the Trust collectively are herein referred to as the
"Trust Fund" and shall consist of contributions received by the Trustee,
proceeds of any loans, investments and reinvestment thereof, the
earnings and income thereon, less disbursements therefrom. Except as
herein otherwise provided, title to the assets of the Trust Fund shall
at all times be vested in the Trustee and securities that are part of
the Trust Fund shall be held in such manner that the Trustee's name and
the fiduciary capacity in which the securities are held are fully
disclosed, subject to the right of the Trustee to hold title in bearer
form or in the name of a nominee, and the interests of others in the
Trust Fund shall be only the right to have such assets received, held,
invested, administered and distributed in accordance with the provisions
of the Trust.
IRREVOCABILITY. The Trust Fund shall be used for the
exclusive purpose of aiding the Company in delivering the benefits
provided by the Plans and defraying the expenses of the Trust in
accordance with this Trust Agreement. The Trustee, however, is under no
obligation to enforce the requirements set forth in the foregoing
sentence. No part of the income or corpus of the Trust Fund shall be
recoverable by the Company except as provided in Sections 2.1, 2.2 and
7.2 and except as provided in Article II of the Common Stock Purchase
Agreement, with respect to the Rescission (as defined in such
Agreement).
TRUST FUND SUBJECT TO CLAIMS. Notwithstanding any
provision of this Agreement to the contrary, the Trust Fund shall at all
times remain subject to the claims of the Company's general creditors
under federal and state law as set forth herein.
2. CONTRIBUTIONS AND DIVIDENDS
2.1. CONTRIBUTIONS. For each Trust Year the Company shall
contribute to the Trust in cash such amount, which together with
dividends, as provided in Section 2.2, and any other earnings of the
Trust Fund, shall enable the Trustee to make all scheduled payments of
principal and interest due under the Loan on a timely basis. Unless
otherwise expressly provided herein, the Trustee shall apply all such
contributions, dividends and earnings to the payment of principal and
interest due under the Loan. The Company may from time to time, in its
sole discretion, make additional contributions to the Trust for the
purpose of enabling the Trust to make prepayments of principal with
respect to the Loan (a "Prepayment Contribution"). The Trustee shall
immediately use any Prepayment Contribution to make a prepayment of
principal with respect to the Loan. All contributions made under the
Trust shall be delivered to the Trustee. The Trustee shall be
accountable for all contributions received by it, but shall have no duty
to require any contributions to be made to it.
2.2. DIVIDENDS. Except as otherwise provided herein,
dividends paid in cash on Company Stock held by the Trust, including
Company Stock held in the Suspense Account, shall be applied to pay
interest and repay scheduled principal due under the Loan. In the event
that cash dividends paid on Company Stock held in the Trust, other than
Extraordinary Dividends, exceed the amount of scheduled principal and
interest due in any Trust Year, such excess shall be used to purchase
additional shares of Company Stock and/or shall be distributed to a
broad cross-section of individuals employed by the Company, as
determined in good faith by the Committee. Dividends which are not in
cash or in Company Stock (including Extraordinary Dividends, or portions
thereof) shall be reduced to cash by the Trustee and reinvested in
Company Stock as soon as practicable. For purposes of this Agreement,
Company Stock purchased with the proceeds of an Extraordinary Dividend,
any excess dividend or with the proceeds of a non-cash dividend and any
dividend paid in the form of Company Stock shall, for purposes of this
Agreement (including without limitation Section 3.1 hereof), be deemed
to have been acquired with the proceeds of the Loan. In the Trustee's
discretion, investments in Company Stock may be made through open-market
purchases, private transactions or (with the Company's consent)
purchases from the Company. In carrying out the duties as set forth in
this Section, the Trustee shall act solely pursuant to the directions of
the Committee.
3. RELEASE AND ALLOCATION OF COMPANY STOCK
3.1. RELEASE OF SHARES. Upon any payment (including a
prepayment) or forgiveness in any Trust Year of any principal on the
Loan (a "Principal Payment"), the following number of shares of Company
Stock acquired with the proceeds of the Loan shall be available for
allocation ("Available Shares") as provided in this Article 3: the
number of shares so acquired and held in the Suspense Account
immediately before such payment or forgiveness, multiplied by a fraction
the numerator of which is the amount of the Principal Payment and the
denominator of which is the sum of such Principal Payment and the
remaining principal of the Loan outstanding after such Principal
Payment.
3.2. PAYMENT OF BENEFITS. Available Shares shall be
distributed, as directed by the Committee, to the Plan Participants at
such times as may be required to provide shares in accordance with the
Plans. Any payments required by the Plan Participants shall be made in
accordance with the Plans.
4. TAX WITHHOLDING
4.1. WITHOLDING OF TAXES. The Trustee shall, as directed by
the Committee, withhold, require withholding, or otherwise satisfy any
withholding obligation, on any distribution which it is directed to
make, such amount as the Committee shall reasonably estimate to be
necessary to comply with applicable federal, state and local withholding
requirements. Upon settlement of such tax liability, the Trustee shall
distribute the balance of such amount. Prior to making any distribution
hereunder, the Trustee may require such release of documents from any
taxing authority, or may require such indemnity, as the Trustee shall
reasonably deem necessary for its protection.
5. ADMINISTRATION OF TRUST FUND
5.1. MANAGEMENT AND CONTROL OF TRUST FUND. Subject to the
terms of this Agreement, the Trustee shall have exclusive authority and
responsibility to manage and control the assets of the Trust Fund;
provided, however, that the Trustee shall have no authority or
responsibility to manage and control shares of Company Stock returned to
the Company in connection with the Rescission from and after the date of
the Rescission Closing (as such terms are defined in the Amended and
Restated Common Stock Purchase Agreement, dated as of December 20, 1996,
by and between the Company and the Trust).
5.2. INVESTMENT OF FUNDS. Except as otherwise provided in
Section 2.2 and in this Section 5.2, the Trustee shall invest and
reinvest the Trust Fund exclusively in Company Stock, including any
accretions thereto resulting from the proceeds of a tender offer,
recapitalization or similar transaction which, if not in Company Stock,
shall be reduced to cash as soon as practicable. The Trustee may invest
any portion of the Trust Fund temporarily pending investment in Company
Stock, distribution or payment of expenses in (i) investments in United
States Government obligations with maturities of less than one year,
(ii) interest-bearing accounts including but not limited to certificates
of deposit, time deposits, saving accounts and money market accounts
with maturities of less than one year in any bank, including the
Trustee's, with aggregate capital in excess of $1,000,000,000 and a
▇▇▇▇▇'▇ Investor Services rating of at least P1, or an equivalent rating
from a nationally recognized ratings agency, which accounts are insured
by the Federal Deposit Insurance Corporation or other similar federal
agency, (iii) obligations issued or guaranteed by any agency or
instrumentality of the United States of America with maturities of less
than one year or (iv) short-term discount obligations of the Federal
National Mortgage Association.
5.3. TRUSTEE'S ADMINISTRATIVE POWERS. Except as otherwise
provided herein, and subject to the Trustee's duties hereunder, the
Trustee shall have the following powers and rights, in addition to those
provided elsewhere in this Agreement or by law:
(a) to retain any asset of the Trust Fund;
(b) subject to Section 5.4 and Article 3, to sell,
transfer, mortgage, pledge, lease or otherwise dispose of, or grant
options with respect to, any Trust Fund assets at public or private
sale;
(c) upon direction from the Committee and with the
Trustee's consent, to borrow from any lender (including the Company
pursuant to the Loan), to acquire Company Stock as authorized by this
Agreement, to enter into lending agreements upon such terms (including
reasonable interest and security for the loan and rights to renegotiate
and prepay such loan) as may be determined by the Committee; provided,
however, that any collateral given by the Trustee for the Loan shall be
limited to cash and property contributed by the Company to the Trust and
dividends paid on Company Stock held in the Trust and shall not include
Company Stock acquired with the proceeds of Loan;
(d) with the consent of the Committee, to settle,
submit to arbitration, compromise, contest, prosecute or abandon claims
and demands in favor of or against the Trust Fund initiated by a party
other than the Trustee;
(e) to vote or to give any consent with respect to
any securities, including any Company Stock, held by the Trust either in
person or by proxy for any purpose, provided that the Trustee shall
vote, tender or exchange all shares of Company Stock as provided in
Section 5.4;
(f) to exercise any of the powers and rights of an
individual owner with respect to any asset of the Trust Fund and to
perform any and all other acts that in its judgment are necessary or
appropriate for the proper administration of the Trust Fund, even though
such powers, rights and acts are not specifically enumerated in this
Agreement;
(g) to employ such accountants, actuaries,
investment bankers, appraisers, other advisors and agents as may be
reasonably necessary in collecting, managing, administering, investing,
valuing, distributing and protecting the Trust Fund or the assets
thereof or any borrowings of the Trustee made in accordance with Section
5.3(c); and to pay their reasonable fees and out-of-pocket expenses,
which shall be deemed to be expenses of the Trust and for which the
Trustee shall be reimbursed in accordance with Section 4.1;
(h) to cause any asset of the Trust Fund to be
issued, held or registered in the Trustee's name or in the name of its
nominee, or in such form that title will pass by delivery, provided that
the records of the Trustee shall indicate the true ownership of such
asset;
(i) to utilize another entity as custodian to hold,
but not invest or otherwise manage or control, some or all of the assets
of the Trust Fund; and
(j) to consult with legal counsel (who may also be
counsel for the Trustee generally) with respect to any of its duties or
obligations hereunder; and to pay the reasonable fees and out-of-pocket
expenses of such counsel, which shall be deemed to be expenses of the
Trust and for which the Trustee shall be reimbursed in accordance with
Section 4.1.
Notwithstanding the foregoing, neither the Trust nor the Trustee shall
have any power to, and shall not, engage in any trade or business. Any
loan obtained by the Trustee pursuant to Section 5.3(c) shall be in its
capacity as Trustee and not in its individual corporate capacity.
5.4. VOTING AND TENDERING OF COMPANY STOCK.
(a) Voting of Company Stock. The Trustee shall follow the
directions of each Plan Participant, as to the manner in which shares of
Company Stock held by the Trust are to be voted on each matter brought
before an annual or special stockholders' meeting of the Company or the
manner in which any consent is to be executed, in each case as provided
below. Before each such meeting of stockholders, the Trustee shall
cause to be furnished to each Plan Participant, a copy of the proxy
solicitation material received by the Trustee, together with a form
requesting confidential instructions as to how to vote the shares of
Company Stock held by the Trustee. Upon timely receipt of directions
from the Plan Participants, the Trustee shall on each such matter vote
the number of shares (including fractional shares) of Company Stock held
by the Trust as follows:
The Company Stock shall be voted by the Trustee with
each Plan Participant directing a number of shares of Company Stock (the
"Participant Directed Amount") equal to the quotient of (x) the total
number of shares of Company Stock held by the Trust and (y) the number
of Plan Participants on the relevant date. Any Participant Shares for
which the Trustee does not receive a signed voting-direction instrument
shall be voted for, against or to abstain in the same proportions as
those shares of Company Stock for which the Trustee did receive
instructions.
Similar provisions shall apply in the case of any
action by shareholder consent without a meeting.
(b) TENDER OR EXCHANGE OF COMPANY STOCK. The
Trustee shall use its best efforts timely to distribute or cause to be
distributed to each Plan Participant any written materials distributed
to stockholders of the Company generally in connection with any tender
offer or exchange offer, together with a form requesting confidential
instructions as to whether or not to tender or exchange shares of
Company Stock held in the Trust. Upon timely receipt of instructions
from a Plan Participant, the Trustee shall tender such Participant's
Participant Directed Amount if such Plan Participant has directed the
Trustee to tender.
(c) The Company shall maintain appropriate
procedures to ensure that all instructions by Participants in the Plans
are collected, tabulated, and transmitted to the Trustee without being
divulged or released to any person affiliated with the Company or its
affiliates. All actions taken by Plan Participants shall be held
confidential by the Trustee and shall not be divulged or released to any
person, other than (i) agents of the Trustee who are not affiliated with
the Company or its affiliates or (ii) by virtue of the execution by the
Trustee of any proxy, consent or letter of transmittal for the shares of
Company Stock held in the Trust.
6. CONCERNING THE TRUSTEE
6.1. Notices to the Trustee.
The Trustee may rely on the authenticity, truth and ac-
curacy of, and will be fully protected in acting upon:
(a) any notice, direction, certification, approval or
other writing of the Company, if evidenced by an instrument signed in
the name of the Company by an Authorized Officer; and
(b) any copy of a resolution of the Board of Directors
of the Company, if certified by the Secretary or an Assistant Secretary
of the Company under its corporate seal; or
(c) any notice, direction, certification, approval or
other writing, oral or other transmitted form of instruction received by
the Trustee and believed by it to be genuine and to be sent by or on
behalf of the Committee.
6.2. EXPENSES OF THE TRUST FUND.
The Trustee is authorized to pay out of the Trust Fund:
(a) all brokerage fees and transfer tax expenses and other expenses
incurred in connection with the sale or purchase of investments; (b) all
real and personal property taxes, income taxes and other taxes of any
kind at any time levied or assessed under any present or future law
upon, or with respect to, the Trust Fund or any property included in the
Trust Fund; (c) the Trustee's compensation and expenses as provided in
Section 6.3 hereof; and (d) all other expenses of administering the
Trust, including, without limitation, the expenses incurred by the
Trustee pursuant to Section 6.11 of this Agreement, if any, unless
promptly paid to the Trustee by the Company.
6.3. COMPENSATION OF THE TRUSTEE.
The Company will pay to the Trustee such compensation
for its services as set forth on Exhibit A as from time to time amended
by the Company and the Trustee and will reimburse the Trustee for all
expenses (including reasonable attorney's fees) incurred by the Trustee
in the administration of the Trust. If not promptly paid on request,
the Trustee may charge such fees and expenses to and pay the same from
the Trust Fund. The compensation and expenses of the Trustee shall
constitute a lien on the Trust Fund.
6.4. PROTECTION OF THE TRUSTEE.
The Company shall pay and shall protect, indemnify and
save harmless the Trustee and its officers, employees and agents from
and against any and all losses, liabilities (including liabilities for
penalties), actions, suits, judgments, demands, damages, costs and
expenses (including, without limitation, attorneys' fees and expenses)
of any nature arising from or relating to any action or any failure to
act by the Trustee, its officers, employees and agents or the
transactions contemplated by this Trust Agreement, including, but not
limited to, any claim with respect to the Rescission (as such term is
defined in the Common Stock Purchase Agreement), any claim by a
shareholder of the Company of any kind or nature, any claim made by a
Plan Participant or his or her beneficiary with respect to payments made
or to be made by the Trustee and any claim made by the Company or its
successor, whether pursuant to a sale of assets, merger, consolidation,
liquidation or otherwise, that this Trust Agreement is invalid or ultra
▇▇▇▇▇, except to the extent that any such loss, liability, action, suit,
judgment, demand, damage, cost or expense has been determined by a final
judgment of a court of competent jurisdiction to be solely the result of
the gross negligence or
willful misconduct of the Trustee, its officers, employees or agents.
To the extent that the Company has not fulfilled its obligations under
the foregoing provisions of this Section, the Trustee shall be
reimbursed out of the assets of the Trust Fund or may set up reasonable
reserves for the payment of such obligations. The Trustee assumes no
obligation or responsibility with respect to any action required by this
Trust Agreement on the part of the Company or the Committee. With
respect to all action or inaction taken or not taken by the Trustee
prior to the Rescission Closing, the rights of the Trustee shall
be determined in accordance with the terms and provisions of the Common
Stock Purchase Agreement.
6.5. DUTIES OF THE TRUSTEE.
The Trustee will be under no duties whatsoever, except
such duties as are specifically set forth as such in this Trust
Agreement, and no implied covenant or obligation will be read into this
Trust Agreement against the Trustee. The Trustee will not be liable for
any action or failure to act except if such action or failure to act
constitutes gross negligence or willful misconduct. The Trustee will
not be compelled to take any action toward the execution or enforcement
of the Trust or to prosecute or defend any suit in respect thereof,
unless indemnified to its satisfaction against loss, cost, liability and
expense; and the Trustee will be under no liability or
obligation to anyone with respect to any failure on the part of the
Company, the Committee or a Plan Participant. Nothing in this Trust
Agreement shall be construed as requiring the Trustee to make any
payment in excess of the amounts held in the Trust Fund at the time of
such payment or otherwise to risk its own funds. The Trustee has no
duty to maintain records with respect to Option Grants or with respect
to the shares in the Suspense Account.
6.6. SETTLEMENT OF ACCOUNTS OF THE TRUSTEE.
The Trustee shall keep or cause to be kept accurate and
detailed accounts of all investments, receipts, disbursements and other
transactions hereunder. Such accounts shall be open to inspection and
audit at all reasonable times during normal business hours by any person
designated by the Company or the Committee. At least annually after the
end of each Plan Year, the Trustee shall file with the Company and the
Committee a written account, listing the investments of the Trust Fund
and any uninvested cash balance thereof, and setting forth all receipts,
disbursements, payments, and other transactions respecting the Trust
Fund not included in any such previous account. Any account, when
approved by the Company and the Committee, will be binding and
conclusive on the Company, the Committee and all Plan Participants, and
the Trustee will thereby be released and discharged from any liability
or accountability to the Company, the Committee and all Plan
Participants with respect to all matters set forth therein. Omission by
the Company or the Committee to object in writing to any specific items
in any such account within sixty (60) days after its delivery will
constitute approval of the account by the Company and the Committee. No
other accounts or reports shall be required to be given to the Company,
the Committee or a Plan Participant except as stated herein or except as
otherwise agreed to in
writing by the Trustee. The Trustee shall not be required to file, and
no Plan Participant or beneficiary shall have right to compel, an
accounting, judicial or otherwise, by the Trustee.
6.7. RIGHT TO JUDICIAL SETTLEMENT.
Nothing contained in this Trust Agreement shall be
construed as depriving the Trustee of the right to have a judicial
settlement of its accounts, and upon any proceeding for a judicial
settlement of the Trustee's accounts or for instructions the only
necessary parties thereto in addition to the Trustee shall be the
Company and the Committee.
6.8. RESIGNATION OR REMOVAL OF THE TRUSTEE.
The Trustee may at any time resign and may at any time
be removed by the Company upon thirty (30) days' notice in writing.
6.9. APPOINTMENT OF SUCCESSOR TRUSTEE.
In the event of the resignation or removal of the
Trustee, or in any other event in which the Trustee ceases to act, a
successor trustee may be appointed by the Company by instrument in
writing delivered to and accepted by the successor trustee. Notice of
such appointment and approval, if applicable, will be given by the
Company to the retiring trustee, and the successor trustee will deliver
to the retiring trustee an instrument in writing accepting such
appointment. Notwithstanding the foregoing, if no appointment and
approval, if applicable, of a successor trustee is made by the
Company within a reasonable time after such a resignation, removal or
other event, any court of competent jurisdiction may appoint a successor
trustee after such notice, if any, solely to the Company and the
retiring trustee, as such court may deem suitable and proper.
In the event of such resignation, removal or other event, the
retiring trustee or its successors and assigns shall file with the
Company a final account to which the provisions of Section 6.6 hereof
relating to annual accounts shall apply.
In the event of the appointment of a successor trustee, such
successor trustee will succeed to all the right, title and estate of,
and will be, the Trustee; and the retiring trustee will after the
settlement of its final account and the receipt of any compensation or
expenses due it, deliver the Trust Fund to the successor trustee
together with all such instruments of transfer, conveyance, assignment
and further assurance as the successor trustee may reasonably require.
The retiring trustee will retain a lien upon the Trust Fund to secure
all amounts due the retiring trustee pursuant to the provisions of this
Trust Agreement.
6.10. MERGER OR CONSOLIDATION OF THE TRUSTEE.
Any corporation continuing as the result of any merger
or resulting from any consolidation to which merger or consolidation the
Trustee is a party, or any corporation to which substantially all the
business and assets of the Trustee may be transferred, will be deemed
automatically to be continuing as the Trustee.
6.11. DECLARATORY JUDGMENT. Effective on and after December
20, 1996, the Trustee may, prior to taking any action pursuant to this
Agreement with respect to which the Trustee determines in good faith
that the legality or permissibility of such action under this Agreement
or otherwise is questionable, seek a declaratory judgment from a court
of competent jurisdiction as to such legality or permissibility.
7. ENFORCEMENT; INSOLVENCY OF THE COMPANY
7.1. ENFORCEMENT OF TRUST AGREEMENT AND LEGAL PROCEEDINGS.
The Company shall have the right to enforce any provi-
sion of this Trust Agreement. In any action or proceeding affecting the
Trust, the only necessary parties shall be the Company, the Trustee and
the Committee and, except as otherwise required by applicable law, no
other person shall be entitled to any notice or service of process. Any
judgment entered in such an action or proceeding shall, to the maximum
extent permitted by applicable law, be binding and conclusive on all
persons having or claiming to have any interest in the Trust.
7.2. INSOLVENCY OF THE COMPANY.
(a) If at any time (i) the Company or a person claiming
to be a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, (ii) the Trustee is served with any
order, process or paper from which it appears that an allegation to the
effect that the Company is Insolvent has been made in a judicial
proceeding or (iii) the Trustee has actual knowledge of a current report
or statement from a nationally recognized credit reporting agency or
from a Reliable Source to the effect that the
Company is Insolvent, the Trustee shall discontinue allocations under
Section 3 under this Trust Agreement, shall hold the Trust Fund for the
benefit of the Company's creditors, and shall resume allocations under
Section 3 under this Trust Agreement, only upon receipt of an order of a
court of competent jurisdiction requiring such payment or if the Trustee
has actual knowledge of a current report or statement from a nationally
recognized credit reporting agency or other Reliable Source (other than
a Reliable Source described in clause (iii) of the definition thereof)
to the effect that the Company is not Insolvent; provided, however, that
in the event that allocations under Section
3 were discontinued by reason of a court order or injunction, the
Trustee shall resume allocations only upon receipt of an order of a
court of competent jurisdiction requiring such allocation. The Company
and its Chief Executive Officer shall be obligated to give the Trustee
prompt written notice in the event that the Company becomes Insolvent.
The Trustee shall not be liable to anyone in the event benefit payments
are discontinued pursuant to this Section 7.2. For purposes of this
Section 7.2, the term Company shall include any and all of the Company's
subsidiaries. The Company hereby specifically represents
and warrants to the Trustee that, as of December 20, 1996, neither the
Company nor any subsidiary of the Company with one or more employees
benefiting under the Plans is Insolvent.
8. AMENDMENT, REVOCATION AND TERMINATION
8.1. AMENDMENTS. Except as otherwise provided herein,
the company may amend the Trust at any time and from time to time in any
manner which it deems desirable, provided that no amendment which would
adversely affect the rights, duties, interests, fees or obligations of
the Trustee shall be made without the Trustee's written consent, which
consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the Company shall retain the power under all circumstances to
amend the Trust to correct any errors or clarify any ambiguities or
similar issues of interpretation in this Agreement.
8.2. TERMINATION. Subject to the terms of this
Section 8.2, the Trust shall terminate on the later of (i) the date all
Available Shares are distributed and (ii) the date on which the Loan is
paid in full (the "Termination Date"). The Company may terminate the
Trust at any time prior to the Termination Date. The Trust shall also
terminate automatically upon the Company giving the Trustee written
notice of a Change of Control (The Trustee shall have no duty to
authenticate the occurrence of a Change of Control).
Immediately upon a termination of the Trust, the Company shall be deemed
to have forgiven all amounts then outstanding under the Loan. As soon
as practicable after receiving notice from the Company of a Change of
Control or upon any other termination of the Trust, the Trustee shall
sell all of the Company Stock and other non-cash assets (if any) then
held in the Trust Fund as directed by the Committee in good faith taking
into account the interests of a broad cross-section of individuals em-
ployed by the Company. The proceeds of such sale shall first be
returned to the Company up to an amount equal to
the principal amount, plus any accrued interest, of the Loan that was
forgiven upon such termination. Any funds remaining in the Trust after
such payment to the Company (the "Excess Funds") shall be allocated and
distributed with reasonable promptness to Plan Participants among a
broad cross-section of the Company's employees as determined by the
Committee.
8.3. FORM OF AMENDMENT OR TERMINATION. Any amendment
or termination of the Trust shall be evidenced by an instrument in
writing signed by an Authorized Officer of the Company, certifying that
said amendment or termination has been authorized and directed by the
Company or the Board of Directors, as applicable, and, in the case of
any amendment, shall be consented to by signature of an authorized
officer of the Trustee, if required by Section 8.1.
9. MISCELLANEOUS PROVISIONS
9.1. SUCCESSORS.
This Trust Agreement shall be binding upon and inure to
the benefit of the Company and the Trustee and their respective
successors and assigns.
9.2. COMMITTEE ACTION.
Any action required or permitted to be taken by the
Committee may be taken on behalf of the Committee by any individual so
authorized. The Company (or the Committee after a Change of Control)
shall furnish to the Trustee the name and specimen signature of each
member of the Committee upon whose statement of a decision or direction
the Trustee is authorized to rely. Until notified of a change in the
identity of such person or persons, the Trustee shall act upon the
assumption that there has been no change. After the Company has given
the Trustee notice that a Change of Control has occurred, the Board of
Directors shall no longer have the authority to remove or appoint
members of the Committee and the members of the Committee in place
immediately preceding such a Change of Control shall continue as such
members and shall appoint new members to replace any members who resign
or otherwise cease to be members after the Change of Control.
9.3. NONALIENATION.
Except insofar as applicable law may otherwise require,
(a) no amount payable to or in respect of any Plan Participant at any
time under the Trust shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind, and any attempt to so
alienate, sell, transfer, assign, pledge, attach, charge or otherwise
encumber any such amount, whether presently or thereafter payable, shall
be void; and (b) the Trust Fund shall in no manner
be liable for or subject to the debts or liabilities of any Plan
Participant.
9.4. COMMUNICATIONS.
(a) Communications to the Company shall be addressed
to the Company at ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, provided, however, that upon the Company's written request,
such communications shall be sent to such other address as the Company
may specify.
(b) Communications to the Trustee shall be addressed
to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: Division
Head, Master Trust/Custody Division; provided, however, that upon the
Trustee's written request, such communications shall be sent to such
other address as the Trustee may specify.
(c) No communication shall be binding on the Trustee
until it is received by officer the Trustee having primary responsi-
bility for this Trust, and no communication shall be binding on the
Company until it is received by the Company.
9.5. HEADINGS.
Titles to the Sections of this Trust Agreement are
included for convenience only and shall not control the meaning or
interpretation of any provision of this Trust Agreement.
9.6. THIRD PARTIES.
A third party dealing with the Trustee shall not be
required to make inquiry as to the authority of the Trustee to take any
action nor be under any obligation to follow the proper application by
the Trustee of the proceeds of sale of any property sold by the Trustee
or to inquire into the validity or propriety of any act of the Trustee.
9.7. GOVERNING LAW.
This Trust Agreement and the Trust established
hereunder shall be governed by and construed, enforced, and administered
in accordance with the internal laws of the State of New York without
regard to principles of conflicts of laws and the Trustee shall be
liable to account only in the courts of that state.
9.8. COUNTERPARTS.
This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original although
the others shall not be produced.
IN WITNESS WHEREOF, this Trust Agreement has been duly executed
by the parties hereto as of the day and year first above written.
MID ATLANTIC MEDICAL SERVICES, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------
Attest
/S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
THE BANK OF NEW YORK, as
TRUSTEE
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
Attest
/S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇
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SCHEDULE A
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MAMSI 1990 Non-Qualified Stock Option Plan
MAMSI 1991 Non-Qualified Stock Option Plan
MAMSI 1992 Non-Qualified Stock Option Plan
MAMSI 1993 Non-Qualified Stock Option Plan
MAMSI 1994 Non-Qualified Stock Option Plan
MAMSI 1995 Non-Qualified Stock Option Plan
MAMSI 1996 Non-Qualified Stock Option Plan
The Bank of New York
Schedule of Fees
for
Grantor Trust Services
for
MID ATLANTIC MEDICAL SERVICES, INC.
The following schedule of fees would apply to the subject trust. Fees
are rendered quarterly.
Administration Fees: $15,000 annually
Special Asset Fee:
$10,000 per annum for the first company stock account held as an asset
per issuer.
$3,000 per annum for each additional account.
Transaction Fees:
Security Transaction $15.00 per security
transaction
Lump Sum/Expense Payments $12.50 per check plus postage
Periodic Payments $2.00 per check plus postage
Wire Transfers (outgoing) $15.00 per transfer
Special Transaction Fees
Change of Control $10,000 per event
Insolvency $10,000 per event
Termination of the Trust $3,000 per event
Tax Form Preparation $150 per hour as incurred
Convert to Pay Status $100 per participant
Proxy Services $150/hour
Corporate Action Administrative Services $150/hour
Legal Fees/Out-of-Pocket Expenses As Incurred
Special Reporting Fees - Sub Plan Accounting
$1,500 annually per investment pool
$250 per plan within each pool
Fees as quoted above do not include any direct out-of-pocket or legal
expenses which would become payable in accordance with the grantor trust
agreement. There are no initial set-up fees, except legal fees,
incurred with the establishment/conversion of the trust to The Bank of
New York.
Exhibit A