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