MID ATLANTIC MEDICAL SERVICES, INC.
STOCK COMPENSATION TRUST AGREEMENT
TRUST AGREEMENT made and entered into as of the 26th day of August,
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 the date
set forth first above;
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 he 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 date of the Closing
(as defined in the Stock Purchase Agreement dated August 26, 1996
between the Trust and the Company), 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.
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.
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. WITHHOLDING 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.
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 accuracy 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, 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 made by a Plan Participant or his or her
beneficiary with respect to payments made or to be made by the Trustee,
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 wilful 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.
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 wilful 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.
7. ENFORCEMENT; INSOLVENCY OF THE COMPANY
7.1. ENFORCEMENT OF TRUST AGREEMENT AND LEGAL PROCEEDINGS.
The Company shall have the right to enforce any provision 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.
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 employed 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 responsibility 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
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
THE BANK OF NEW YORK, as TRUSTEE
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Attest
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇
---------------------------
STATE OF Maryland )
ss.:
COUNTY OF ▇▇▇▇▇▇▇▇▇▇)
On this 31st day of October, 1996, before me personally came ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, to me known, who, being by me duly sworn, said that he
resides at ▇▇▇▇▇▇▇▇▇▇ County; that he is a Executive Vice President of
Mid Atlantic Medical Services, Inc., the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Notary Public
Commission Expires: 3/1/99
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK)
On this 26th day of August, 1996, before me personally came
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, to me known, who, being by me duly sworn, said that he
resides at Hammouth County, NY; that he is a Vice President of THE BANK
OF NEW YORK, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was
so affixed by order of the Board of Directors of said corporation; and
that he signed his name thereto by like order.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Notary Public
Commission Expires: 7/31/98
SCHEDULE A
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
