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Sample Business Contracts

Stock Compensation Trust Agreement - Mid Atlantic Medical Services Inc. and The Bank of New York

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            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 4th day of August,  2000,  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 Stock  Compensation  Trust  Agreement  dated  December 20, 1996,
effective  as of August 26,  1996,  between  the  Company and the Trustee and as
previously  amended  and  restated as of January 11, 1999 and August 20, 1999 is
hereby further amended and restated in its entirety as follows:


<PAGE>


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 (the "Original  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  "1996  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 1996  Common  Stock  Purchase
Agreement),  with which the Trustee  purchased  Company Stock,  as amended by an
Allonge  dated as of January 11, 1999 (as defined in the Common  Stock  Purchase
Agreement  dated of even date therewith  between the Trust and the Company),  as
further  amended by an Allonge  dated as of August 20,  1999 (as  defined in the
Common Stock Purchase Agreement of even date therewith between the Trust and the
Company),  with which the Trustee will purchase Company Stock.  Effective August
4, 2000,  the term "Loan"  means any loan and  extension  of credit to the Trust
evidenced by a promissory note (or an Allonge to the Original  Promissory Note),
the proceeds of which are to be used by the Trustee to 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 The 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. 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;  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 Moody's
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 the 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,  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 vires,  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 1996  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  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.  The Company hereby specifically represents and warrants
to the  Trustee  that,  as of the  date  hereof,  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
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 4 Taft Court,  Rockville,  MD 20850 Attn:  Sharon  Pavlos,  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
One Wall  Street,  New  York,  New  York  10286,  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.

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<PAGE>


         IN WITNESS WHEREOF,  this Trust Agreement has been duly executed by the
parties hereto as of the day and year first above written.

Attest                                   MID ATLANTIC MEDICAL SERVICES, INC.
                                          /S/ Robert E. Foss
____________________________           By:___________________________________
                                              Sr. EVP & CFO
                                       Title:__________________________________

Attest                                  THE BANK OF NEW YORK, as TRUSTEE
/S/Paulette S. Bagil, AT                      /S/ Richard J. Barry
____________________________           By:___________________________________
                                              Vice President
                                       Title:__________________________________