<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q/A
AMENDMENT NUMBER 1 TO FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1996, or
[ ] Transition report pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------------------
COMMISSION FILE NUMBER 1-13340
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MID ATLANTIC MEDICAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
52-1481661
(IRS Employer Identification Number)
4 TAFT COURT, ROCKVILLE, MARYLAND
(Address of principal executive offices)
20850
(Zip code)
(301) 294-5140
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the issuer's classes of
common stock was 54,677,862 shares of common stock, par value $.01,
outstanding as of September 30, 1996.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MID ATLANTIC MEDICAL SERVICES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (Note 1)
(in thousands except share amounts)
<TABLE>
<CAPTION>
(Unaudited) (Note)
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,523 $ 10,874
Short-term investments 161,588 204,734
Accounts receivable, net of allowance of $4,564 and $3,638 77,330 61,263
Prepaid expenses, advances and other 27,129 8,974
Deferred income taxes 3,894 4,379
----------- -----------
Total current assets 272,464 290,224
Property and equipment, net of accumulated
depreciation of $19,901 and $15,091 44,592 38,704
Statutory deposits 9,129 10,543
Other assets 11,385 11,373
Deferred income taxes 2,494 3,338
---------- -----------
Total assets $ 340,064 $ 354,182
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 60 $ 210
Short-term borrowings 1,752 1,651
Accounts payable 20,332 15,075
Medical claims payable 123,314 108,490
Deferred premium revenue 6,159 10,125
Deferred income taxes 114 1,005
----------- -----------
Total current liabilities 151,731 136,556
Notes payable 149 194
Deferred income taxes 216 216
----------- -----------
Total liabilities 152,096 136,966
----------- -----------
Stockholders' equity (Notes 2, 3 and 4)
Common stock, $.01 par, 100,000,000 shares authorized; 56,772,502 issued
and 54,677,862 outstanding at September 30, 1996; 46,631,327 issued and
46,585,387 outstanding at December 31, 1995 568 466
Additional paid-in capital 168,018 40,374
Stock compensation trust (common stock held in trust) (115,863)
Treasury stock, 2,094,640 shares at September 30, 1996; 45,940 shares at
December 31, 1995 (41,211) (33)
Unrealized gains on investments, net of tax of $628 and $1,004 961 1,535
Retained earnings 175,495 174,874
----------- -----------
Total stockholders' equity 187,968 217,216
----------- -----------
Total liabilities and stockholders' equity $ 340,064 $ 354,182
=========== ===========<PAGE>
</TABLE>
Note: The balance sheet at December 31, 1995 has been extracted from the
audited financial statements at that date.
See accompanying notes to these financial statements.<PAGE>
<PAGE> 3
MID ATLANTIC MEDICAL SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Revenue
Health premium $ 275,147 $ 231,006
Fee and other 4,159 3,916
Life and disability premium 1,217 619
Home health services 5,539 4,162
Investment 2,167 3,577
----------- -----------
Total revenue 288,229 243,280
----------- -----------
Expense
Medical 259,811 191,317
Life and disability claims 810 351
Home health patient services 4,940 2,671
Administrative (including interest expense of $167 and $368) 29,878 25,749
----------- -----------
Total expense 295,439 220,088
----------- -----------
Income (loss) before income taxes (7,210) 23,192
Benefit (provision) for income taxes 2,499 (8,793)
----------- -----------
Net income (loss) $ (4,711) $ 14,399
=========== ===========
Income (loss) per common and common equivalent share:
Net income (loss) $ (.10) $ .30
=========== ===========
Weighted average common and common equivalent shares outstanding 46,394,158 47,955,851
=========== ===========
/TABLE
<PAGE>
See accompanying notes to these financial statements.<PAGE>
<PAGE> 4
MID ATLANTIC MEDICAL SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Revenue
Health premium $ 801,427 $ 665,963
Fee and other 12,285 11,616
Life and disability premium 2,870 863
Home health services 15,546 13,628
Investment 9,612 7,714
----------- -----------
Total revenue 841,740 699,784
----------- -----------
Expense
Medical 736,814 543,804
Life and disability claims 1,681 453
Home health patient services 11,901 9,447
Administrative (including interest expense of $592 and $910) 90,273 73,584
----------- -----------
Total expense 840,669 627,288
----------- -----------
Income before income taxes 1,071 72,496
Provision for income taxes (450) (27,354)
----------- -----------
Net income $ 621 $ 45,142
=========== ===========
Income per common and common equivalent share:
Net income $ .01 $ .95
=========== ===========
Weighted average common and common equivalent shares outstanding 47,176,616 47,731,721
=========== ===========
/TABLE
<PAGE>
See accompanying notes to these financial statements.<PAGE>
<PAGE> 5
MID ATLANTIC MEDICAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ending
September 30, 1996
------------
<S> <C> <C>
Cash flows used in operating activities:
Net income $ 621
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization $ 5,630
Provision for bad debts 926
Provision for deferred income taxes 27
Loss on sale and disposal of assets 8
Increase in accounts receivable (16,993)
Increase in prepaid expenses, advances, and other (18,155)
Increase in accounts payable 5,257
Increase in medical claims payable 14,824
Decrease in deferred premium revenue (3,966)
-----------
Total adjustments (12,442)
-----------
Net cash used in operating activities (11,821)
Cash flows provided by investing activities:
Purchases of short-term investments (291,978)
Sales of short-term investments 336,175
Purchases of property and equipment (10,836)
Purchases of statutory deposits (2,407)
Maturities of statutory deposits 1,820
Purchases of other assets (234)
Proceeds from sale of assets 319
-----------
Net cash provided by investing activities 32,859
Cash flows used in financing activities:
Principal payments on notes payable (195)
Increase in short-term borrowings 101
Exercise of stock options 5,866
Stock option tax benefit 6,017
Purchase of treasury stock (41,178)
-----------
Net cash used in financing activities (29,389)
-----------
Net decrease in cash and cash equivalents (8,351)
Cash and cash equivalents at beginning of period 10,874
-----------
Cash and cash equivalents at end of period $ 2,523
===========
/TABLE
<PAGE>
See accompanying notes to these financial statements.<PAGE>
<PAGE> 6
MID ATLANTIC MEDICAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ending
September 30, 1995
------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income $ 45,142
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization $ 4,326
Provision for bad debts 16
Provision for deferred income taxes 3,081
Loss on sale and disposal of assets 78
Increase in accounts receivable (19,086)
Increase in prepaid expenses, advances, and other (1,581)
Decrease in accounts payable (206)
Increase in medical claims payable 13,157
Decrease in deferred premium revenue (3,778)
Increase in income taxes payable 2,115
-----------
Total adjustments (1,878)
-----------
Net cash provided by operating activities 43,264
Cash flows used in investing activities:
Purchases of short-term investments (313,267)
Sales of short-term investments 269,655
Purchases of property and equipment (7,078)
Purchases of statutory deposits (807)
Maturities of statutory deposits 135
Purchases of other assets (690)
Proceeds from sale of assets 682
-----------
Net cash used in investing activities (51,370)
Cash flows provided by financing activities:
Proceeds from notes payable 300
Principal payments on notes payable (5,786)
Increase in short-term borrowings 169
Exercise of stock options 4,065
Stock option tax benefit 5,683
-----------
Net cash provided by financing activities 4,431
-----------
Net decrease in cash and cash equivalents (3,675)
Cash and cash equivalents at beginning of period 17,054
-----------
Cash and cash equivalents at end of period $ 13,379
===========
/TABLE
<PAGE>
See accompanying notes to these financial statements.<PAGE>
<PAGE> 7
MID ATLANTIC MEDICAL SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
INTRODUCTION
Mid Atlantic Medical Services, Inc. ("MAMSI") is a holding company whose
subsidiaries are active in managed health care and other life and health
insurance related activities. MAMSI's principal markets currently
include all or parts of the states of Maryland, Virginia, Delaware, West
Virginia, North Carolina, Pennsylvania and the District of Columbia.
MAMSI and its subsidiaries (collectively referred to as the "Company")
have developed a broad range of managed health care, health insurance
and related ancillary products and deliver these services through health
maintenance organizations ("HMOs"), preferred provider organizations
("PPOs"), a life and health insurance company, home health care
companies and an outpatient surgery center.
MAMSI delivers managed health care services principally through HMOs.
In general, the HMOs, MD-Individual Practice Association, Inc. ("M.D.
IPA"), Optimum Choice, Inc. ("OCI"), Optimum Choice of the Carolinas,
Inc. ("OCCI") and Optimum Choice, Inc. of Pennsylvania ("OCIPA") arrange
for health care services to be provided to a voluntarily enrolled
population for a predetermined, prepaid fee, regardless of the extent or
nature of services provided to the enrollees. The HMOs offer a full
complement of health benefits, including physician, hospital and
prescription drug services.
Other MAMSI subsidiaries include Alliance PPO, Inc., which provides a
PPO delivery network to employers and insurance companies, and Mid
Atlantic Psychiatric Services, Inc., which provides specialized non-risk
mental health services. MAMSI Life and Health Insurance Company
develops and markets indemnity health products in addition to life and
short-term disability insurance. HomeCall, Inc., FirstCall, Inc., and
HomeCall Pharmaceutical Services, Inc. provide in-home medical care
including skilled nursing, infusion and therapy, and mail order pharmacy
services to both MAMSI's HMO and indemnity members and other payors.
NOTE 1 - FINANCIAL STATEMENTS
The consolidated balance sheet of the Company as of September 30, 1996,
the consolidated statements of operations for the three and nine months
ended September 30, 1996 and 1995, and the consolidated statements of
cash flows for the nine months ended September 30, 1996 and 1995 have
been prepared by MAMSI without audit. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1995 audited consolidated
financial statements. The results of operations for the three and nine
month periods ended September 30 are not necessarily indicative of the
operating results for the full year.
Certain balances in the 1995 financial statements have been reclassified
to conform to the 1996 presentation.<PAGE>
NOTE 2 - STOCK OPTION PLANS
In 1996, the stockholders of MAMSI ratified the 1996 Non-Qualified Stock
Option Plan whereby options for the purchase of up to 3,000,000 shares
may be granted to officers, employees and non-employee directors of the
Company. Options under this plan are exercisable at 100% of the fair
market value per share on the date the options are granted.<PAGE>
<PAGE> 8
NOTE 3 - COMMON STOCK
The Company has implemented a stock repurchase program under which the
Company may expend up to $60.0 million (including brokerage commissions)
to repurchase shares of its common stock over a twelve month period. As
of September 30, 1996, the Company has repurchased approximately 2.1
million shares for an aggregate purchase price of approximately $41.2
million.
NOTE 4 - STOCK COMPENSATION TRUST
Effective August 26, 1996, the Company established the MAMSI Stock
Compensation Trust ("SCT") to fund its obligations arising from its
various stock compensation plans. MAMSI funded the SCT with 9,130,000
shares of newly issued MAMSI stock. In exchange, the SCT has delivered
a promissory note to MAMSI for approximately $129.9 million which
represents the purchase price of the shares. Amounts owed by the SCT to
MAMSI will be repaid by cash received by the SCT or will be forgiven by
MAMSI, which will result in the SCT releasing shares to satisfy MAMSI
obligations for stock compensation.
For financial reporting purposes, the SCT is consolidated with MAMSI.
The fair market value of the shares held by the SCT is shown as a
reduction to stockholders' equity in the Company's consolidated balance
sheet. All transactions between the SCT and MAMSI are eliminated. The
difference between the cost and fair value of common stock held in the
SCT is included in consolidated additional paid-in capital. At
September 30, 1996, the SCT held 9,087,300 shares of common stock at a
fair market value of approximately $115.9 million.
Shares held by the SCT are excluded from weighted average shares
outstanding used in the computation of income or loss per common and
common equivalent share.
NOTE 5 - SHORT-TERM BORROWINGS
During the third quarter of 1996, the Company renegotiated its revolving
credit facilities to provide total revolving credit of $24.0 million. At
September 30, 1996, approximately $1.8 million was drawn against these
facilities.<PAGE>
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
undersigned thereto duly authorized.
MID ATLANTIC MEDICAL SERVICES, INC.
--------------------------------------------
(Registrant)
Date: January 27, 1997 Robert E. Foss
-------------------------------------------
-
Robert E. Foss
Executive Vice President and
Chief Financial Officer<PAGE>
<PAGE> 10
6(a) List of Exhibits.
EXHIBIT INDEX
Location of Exhibit
Exhibit in Sequential
Number Description of Document Numbering System
------- ----------------------- -------------------
10 Amended and Restated Stock
Compensation Trust Agreement
dated December 20, 1996. . . . . . . . . . . . .
10.1 Amended and Restated Common Stock
Purchase Agreement dated
December 20, 1996. . . . . . . . . . . . . . . .
10.2 Replacement Promissory Note dated
December 20, 1996. . . . .
27 Financial Data Schedule for the Nine
Months Ended September 30, 1996. . . . . . . .<PAGE>
<PAGE>
AMENDED AND RESTATED MID ATLANTIC MEDICAL SERVICES, INC.
STOCK COMPENSATION TRUST AGREEMENT
THIS AMENDED AND RESTATED STOCK COMPENSATION TRUST AGREEMENT
made and entered into as of the 20th day of December, 1996, effective as
of August 26, 1996, by and between Mid Atlantic Medical Services, Inc.,
a corporation organized under the laws of the State of Delaware
(hereinafter referred to as the "Company") and THE BANK OF NEW YORK, a
New York banking corporation (hereinafter referred to as the "Trustee").
WHEREAS, the Company (as defined below) desires to establish a
trust (the "Trust") in accordance with the laws of the State of New York
and for the purposes stated in this Agreement;
WHEREAS, the Trustee desires to act as trustee of the Trust,
and to hold legal title to the assets of the Trusts, in trust, for the
purposes hereinafter stated and in accordance with the terms hereof;
WHEREAS, the Company or its subsidiaries have previously
adopted the Plans (as defined below);
WHEREAS, the Company desires to provide assurance of the
availability of the shares of its common stock necessary to satisfy
certain of its obligations or those of its subsidiaries under the Plans
(as defined below);
WHEREAS, the Trustee has accepted such appointment as of August
26, 1996;
WHEREAS, the Company intends, that the assets of the Trust Fund
shall be and remain subject to the claims of the Company's creditors as
herein provided and that the Plans not be deemed funded by virtue of the
existence of this Trust; and
WHEREAS, the Trust is intended to be a "grantor trust" with the
result that the corpus and income of the Trust are treated as assets and
income of the Company pursuant to Sections 671 through 679 of the Code;
and
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and the Trustee declare and agree as follows:
1. DEFINITIONS; ESTABLISHMENT OF TRUST
1.1. DEFINITIONS. Whenever used in this Trust Agreement,
unless otherwise provided or the context otherwise requires:
AUTHORIZED OFFICER. "Authorized Officer" means the
Chairman, President, any Vice President, the Secretary or the Treasurer
of the Company or any other person or persons as may be designated by
the Company.
BOARD OF DIRECTORS. "Board of Directors" means the
board of directors of the Company.
CHANGE OF CONTROL. "Change of Control" means any of
the following events:
(a) an acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the<PAGE>
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<PAGE>
(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<PAGE>
the Trust evidenced by a promissory note dated as of the Closing (as
defined in the Amended and Restated Common Stock Purchase Agreement
dated December 20, 1996, effective as of August 26, 1996, between the
Trust and the Company (the Common Stock Purchase Agreement )) and,
following cancellation of such promissory note, by the replacement
promissory note dated as of the Rescission Closing (as defined in the
Common Stock Purchase Agreement), with which the Trustee will purchase
Company Stock.
OPTION GRANT. "Option Grant" means an option granted
under one of the Plans to a Plan Participant to acquire shares of
Company Stock.<PAGE>
PLAN COMMITTEE CERTIFICATION. "Plan Committee
Certifications" means a certification to be provided to the Trustee by
the Committee from time to time which (i) sets forth the number of
shares of Company Stock transferred to a Plan Participant, and (ii)
certifies that the determination of such number is in accordance with
the terms of each Plan.
PLANS. "Plans" means the employee plans listed on
Schedule A hereto and any other employee benefit plan of the Company
designated as such by the Board of Directors.
PLAN PARTICIPANT. "Plan Participant" means an
individual who has an Option Grant under any of the Plans.
RELIABLE SOURCE. "Reliable Source" means (i) a report
filed with the Securities and Exchange Commission, (ii) a public
statement issued by the Company, or a periodical of general circulation,
including, but not limited to, The NEW YORK TIMES or THE WALL STREET
JOURNAL, or (iii) a certificate of the Company signed by the Chief
Executive Officer or by the Chairman of the Board of Directors.
SUSPENSE ACCOUNT. "Suspense Account" means the account
in which shares of Company Stock acquired with the Loan are held until
they are released pursuant to Section 3.1.
TRUST. "Trust" means the trust established pursuant to
this Trust Agreement.
TRUSTEE. "Trustee" means Bank of New York or any
successor trustee.
TRUST YEAR. "Trust Year" means the period beginning on
the date of the Closing (the "Closing Date") and ending on the next
following December 31st and on each December 31st thereafter.
1.2. ESTABLISHMENT OF TRUST.
TRUST. This Agreement and the Trust shall be known as
the Mid Atlantic Medical Services, Inc. Stock Compensation Trust. The
parties intend that the Trust will be an independent legal entity with
title to and power to convey all of its assets. The parties hereto
further intend that the Trust not be subject to the Employee Retirement
Income Security Act of 1974, as amended. The Trust is not a part of any
of the Plans and does not provide retirement or other benefits to any
Plan Participant. The assets of the Trust will be held, invested and
disposed of by the Trustee, in accordance with the terms of the Trust.
The Company covenants and agrees to at all times make available
sufficient shares of Company Stock for purposes of the Plans to the
extent that there are not sufficient shares in the Trust to meet the
requirements of the Plans; provided, however, that the Trustee shall not
be responsible for enforcing such obligation of the Company.
TRUSTEE. The trustee named above, and its successor or
successors, is hereby designated as the trustee hereunder, to receive,
hold, invest, administer and distribute the Trust Fund in accordance
with this Agreement, the provisions of which shall govern the power,
duties and responsibilities of the Trustee.
TRUST FUND. The assets held at any time and from time<PAGE>
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.<PAGE>
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.<PAGE>
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.<PAGE>
4. TAX WITHHOLDING
4.1. WITHOLDING OF TAXES. The Trustee shall, as directed by
the Committee, withhold, require withholding, or otherwise satisfy any
withholding obligation, on any distribution which it is directed to
make, such amount as the Committee shall reasonably estimate to be
necessary to comply with applicable federal, state and local withholding
requirements. Upon settlement of such tax liability, the Trustee shall
distribute the balance of such amount. Prior to making any distribution
hereunder, the Trustee may require such release of documents from any
taxing authority, or may require such indemnity, as the Trustee shall
reasonably deem necessary for its protection.
5. ADMINISTRATION OF TRUST FUND
5.1. MANAGEMENT AND CONTROL OF TRUST FUND. Subject to the
terms of this Agreement, the Trustee shall have exclusive authority and
responsibility to manage and control the assets of the Trust Fund;
provided, however, that the Trustee shall have no authority or
responsibility to manage and control shares of Company Stock returned to
the Company in connection with the Rescission from and after the date of
the Rescission Closing (as such terms are defined in the Amended and
Restated Common Stock Purchase Agreement, dated as of December 20, 1996,
by and between the Company and the Trust).
5.2. INVESTMENT OF FUNDS. Except as otherwise provided in
Section 2.2 and in this Section 5.2, the Trustee shall invest and
reinvest the Trust Fund exclusively in Company Stock, including any
accretions thereto resulting from the proceeds of a tender offer,
recapitalization or similar transaction which, if not in Company Stock,
shall be reduced to cash as soon as practicable. The Trustee may invest
any portion of the Trust Fund temporarily pending investment in Company
Stock, distribution or payment of expenses in (i) investments in United
States Government obligations with maturities of less than one year,
(ii) interest-bearing accounts including but not limited to certificates
of deposit, time deposits, saving accounts and money market accounts
with maturities of less than one year in any bank, including the
Trustee's, with aggregate capital in excess of $1,000,000,000 and a
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<PAGE>
pursuant to the Loan), to acquire Company Stock as authorized by this
Agreement, to enter into lending agreements upon such terms (including
reasonable interest and security for the loan and rights to renegotiate
and prepay such loan) as may be determined by the Committee; provided,
however, that any collateral given by the Trustee for the Loan shall be
limited to cash and property contributed by the Company to the Trust and
dividends paid on Company Stock held in the Trust and shall not include
Company Stock acquired with the proceeds of Loan;
(d) with the consent of the Committee, to settle,
submit to arbitration, compromise, contest, prosecute or abandon claims
and demands in favor of or against the Trust Fund initiated by a party
other than the Trustee;
(e) to vote or to give any consent with respect to
any securities, including any Company Stock, held by the Trust either in
person or by proxy for any purpose, provided that the Trustee shall
vote, tender or exchange all shares of Company Stock as provided in
Section 5.4;<PAGE>
(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<PAGE>
which the Trustee does not receive a signed voting-direction instrument
shall be voted for, against or to abstain in the same proportions as
those shares of Company Stock for which the Trustee did receive
instructions.
Similar provisions shall apply in the case of any
action by shareholder consent without a meeting.
(b) TENDER OR EXCHANGE OF COMPANY STOCK. The
Trustee shall use its best efforts timely to distribute or cause to be
distributed to each Plan Participant any written materials distributed
to stockholders of the Company generally in connection with any tender
offer or exchange offer, together with a form requesting confidential
instructions as to whether or not to tender or exchange shares of
Company Stock held in the Trust. Upon timely receipt of instructions
from a Plan Participant, the Trustee shall tender such Participant's
Participant Directed Amount if such Plan Participant has directed the
Trustee to tender.
(c) The Company shall maintain appropriate
procedures to ensure that all instructions by Participants in the Plans
are collected, tabulated, and transmitted to the Trustee without being
divulged or released to any person affiliated with the Company or its
affiliates. All actions taken by Plan Participants shall be held
confidential by the Trustee and shall not be divulged or released to any
person, other than (i) agents of the Trustee who are not affiliated with
the Company or its affiliates or (ii) by virtue of the execution by the
Trustee of any proxy, consent or letter of transmittal for the shares of
Company Stock held in the Trust.
6. CONCERNING THE TRUSTEE
6.1. Notices to the Trustee.
The Trustee may rely on the authenticity, truth and ac-
curacy of, and will be fully protected in acting upon:
(a) any notice, direction, certification, approval or
other writing of the Company, if evidenced by an instrument signed in
the name of the Company by an Authorized Officer; and
(b) any copy of a resolution of the Board of Directors
of the Company, if certified by the Secretary or an Assistant Secretary
of the Company under its corporate seal; or
(c) any notice, direction, certification, approval or
other writing, oral or other transmitted form of instruction received by
the Trustee and believed by it to be genuine and to be sent by or on
behalf of the Committee.
6.2. EXPENSES OF THE TRUST FUND.
The Trustee is authorized to pay out of the Trust Fund:
(a) all brokerage fees and transfer tax expenses and other expenses
incurred in connection with the sale or purchase of investments; (b) all
real and personal property taxes, income taxes and other taxes of any
kind at any time levied or assessed under any present or future law<PAGE>
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 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<PAGE>
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<PAGE>
to the retiring trustee an instrument in writing accepting such
appointment. Notwithstanding the foregoing, if no appointment and
approval, if applicable, of a successor trustee is made by the
Company within a reasonable time after such a resignation, removal or
other event, any court of competent jurisdiction may appoint a successor
trustee after such notice, if any, solely to the Company and the
retiring trustee, as such court may deem suitable and proper.
In the event of such resignation, removal or other event, the
retiring trustee or its successors and assigns shall file with the
Company a final account to which the provisions of Section 6.6 hereof
relating to annual accounts shall apply.
In the event of the appointment of a successor trustee, such
successor trustee will succeed to all the right, title and estate of,
and will be, the Trustee; and the retiring trustee will after the
settlement of its final account and the receipt of any compensation or
expenses due it, deliver the Trust Fund to the successor trustee
together with all such instruments of transfer, conveyance, assignment
and further assurance as the successor trustee may reasonably require.
The retiring trustee will retain a lien upon the Trust Fund to secure
all amounts due the retiring trustee pursuant to the provisions of this
Trust Agreement.
6.10. MERGER OR CONSOLIDATION OF THE TRUSTEE.
Any corporation continuing as the result of any merger
or resulting from any consolidation to which merger or consolidation the
Trustee is a party, or any corporation to which substantially all the
business and assets of the Trustee may be transferred, will be deemed
automatically to be continuing as the Trustee.
6.11. DECLARATORY JUDGMENT. Effective on and after December
20, 1996, the Trustee may, prior to taking any action pursuant to this
Agreement with respect to which the Trustee determines in good faith
that the legality or permissibility of such action under this Agreement
or otherwise is questionable, seek a declaratory judgment from a court
of competent jurisdiction as to such legality or permissibility.
7. ENFORCEMENT; INSOLVENCY OF THE COMPANY
7.1. ENFORCEMENT OF TRUST AGREEMENT AND LEGAL PROCEEDINGS.
The Company shall have the right to enforce any provi-
sion of this Trust Agreement. In any action or proceeding affecting the
Trust, the only necessary parties shall be the Company, the Trustee and
the Committee and, except as otherwise required by applicable law, no
other person shall be entitled to any notice or service of process. Any
judgment entered in such an action or proceeding shall, to the maximum
extent permitted by applicable law, be binding and conclusive on all
persons having or claiming to have any interest in the Trust.
7.2. INSOLVENCY OF THE COMPANY.
(a) If at any time (i) the Company or a person claiming
to be a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, (ii) the Trustee is served with any
order, process or paper from which it appears that an allegation to the
effect that the Company is Insolvent has been made in a judicial
proceeding or (iii) the Trustee has actual knowledge of a current report<PAGE>
or statement from a nationally recognized credit reporting agency or
from a Reliable Source to the effect that the
Company is Insolvent, the Trustee shall discontinue allocations under
Section 3 under this Trust Agreement, shall hold the Trust Fund for the
benefit of the Company's creditors, and shall resume allocations under
Section 3 under this Trust Agreement, only upon receipt of an order of a
court of competent jurisdiction requiring such payment or if the Trustee
has actual knowledge of a current report or statement from a nationally
recognized credit reporting agency or other Reliable Source (other than
a Reliable Source described in clause (iii) of the definition thereof)
to the effect that the Company is not Insolvent; provided, however, that
in the event that allocations under Section
3 were discontinued by reason of a court order or injunction, the
Trustee shall resume allocations only upon receipt of an order of a
court of competent jurisdiction requiring such allocation. The Company
and its Chief Executive Officer shall be obligated to give the Trustee
prompt written notice in the event that the Company becomes Insolvent.
The Trustee shall not be liable to anyone in the event benefit payments
are discontinued pursuant to this Section 7.2. For purposes of this
Section 7.2, the term Company shall include any and all of the Company's
subsidiaries. The Company hereby specifically represents
and warrants to the Trustee that, as of December 20, 1996, neither the
Company nor any subsidiary of the Company with one or more employees
benefiting under the Plans is Insolvent.
8. AMENDMENT, REVOCATION AND TERMINATION
8.1. AMENDMENTS. Except as otherwise provided herein,
the company may amend the Trust at any time and from time to time in any
manner which it deems desirable, provided that no amendment which would
adversely affect the rights, duties, interests, fees or obligations of
the Trustee shall be made without the Trustee's written consent, which
consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the Company shall retain the power under all circumstances to
amend the Trust to correct any errors or clarify any ambiguities or
similar issues of interpretation in this Agreement.
8.2. TERMINATION. Subject to the terms of this
Section 8.2, the Trust shall terminate on the later of (i) the date all
Available Shares are distributed and (ii) the date on which the Loan is
paid in full (the "Termination Date"). The Company may terminate the
Trust at any time prior to the Termination Date. The Trust shall also
terminate automatically upon the Company giving the Trustee written
notice of a Change of Control (The Trustee shall have no duty to
authenticate the occurrence of a Change of Control).
Immediately upon a termination of the Trust, the Company shall be deemed
to have forgiven all amounts then outstanding under the Loan. As soon
as practicable after receiving notice from the Company of a Change of
Control or upon any other termination of the Trust, the Trustee shall
sell all of the Company Stock and other non-cash assets (if any) then
held in the Trust Fund as directed by the Committee in good faith taking
into account the interests of a broad cross-section of individuals em-
ployed by the Company. The proceeds of such sale shall first be
returned to the Company up to an amount equal to
the principal amount, plus any accrued interest, of the Loan that was
forgiven upon such termination. Any funds remaining in the Trust after
such payment to the Company (the "Excess Funds") shall be allocated and
distributed with reasonable promptness to Plan Participants among a
broad cross-section of the Company's employees as determined by the<PAGE>
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: Joseph L.
Guarriello, 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<PAGE>
Trustee's written request, such communications shall be sent to such
other address as the Trustee may specify.
(c) No communication shall be binding on the Trustee
until it is received by officer the Trustee having primary responsi-
bility for this Trust, and no communication shall be binding on the
Company until it is received by the Company.
9.5. HEADINGS.
Titles to the Sections of this Trust Agreement are
included for convenience only and shall not control the meaning or
interpretation of any provision of this Trust Agreement.
9.6. THIRD PARTIES.
A third party dealing with the Trustee shall not be
required to make inquiry as to the authority of the Trustee to take any
action nor be under any obligation to follow the proper application by
the Trustee of the proceeds of sale of any property sold by the Trustee
or to inquire into the validity or propriety of any act of the Trustee.
9.7. GOVERNING LAW.
This Trust Agreement and the Trust established
hereunder shall be governed by and construed, enforced, and administered
in accordance with the internal laws of the State of New York without
regard to principles of conflicts of laws and the Trustee shall be
liable to account only in the courts of that state.
9.8. COUNTERPARTS.
This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be the original although
the others shall not be produced.<PAGE>
IN WITNESS WHEREOF, this Trust Agreement has been duly executed
by the parties hereto as of the day and year first above written.
MID ATLANTIC MEDICAL SERVICES, INC.
By: /S/ JOSEPH L. GUARRIELLO
--------------------------
Attest
/S/ ALISA CHESTLER
--------------------
THE BANK OF NEW YORK, as
TRUSTEE
By: /S/ EUGENE J. FORAN
----------------------
Attest
/S/ KATARINA ANTENS-MILLER
---------------------------<PAGE>
SCHEDULE A
----------
MAMSI 1990 Non-Qualified Stock Option Plan
MAMSI 1991 Non-Qualified Stock Option Plan
MAMSI 1992 Non-Qualified Stock Option Plan
MAMSI 1993 Non-Qualified Stock Option Plan
MAMSI 1994 Non-Qualified Stock Option Plan
MAMSI 1995 Non-Qualified Stock Option Plan
MAMSI 1996 Non-Qualified Stock Option Plan<PAGE>
The Bank of New York
Schedule of Fees
for
Grantor Trust Services
for
MID ATLANTIC MEDICAL SERVICES, INC.
The following schedule of fees would apply to the subject trust. Fees
are rendered quarterly.
Administration Fees: $15,000 annually
Special Asset Fee:
$10,000 per annum for the first company stock account held as an asset
per issuer.
$3,000 per annum for each additional account.
Transaction Fees:
Security Transaction $15.00 per security
transaction
Lump Sum/Expense Payments $12.50 per check plus postage
Periodic Payments $2.00 per check plus postage
Wire Transfers (outgoing) $15.00 per transfer
Special Transaction Fees
Change of Control $10,000 per event
Insolvency $10,000 per event
Termination of the Trust $3,000 per event
Tax Form Preparation $150 per hour as incurred
Convert to Pay Status $100 per participant
Proxy Services $150/hour
Corporate Action Administrative Services $150/hour
Legal Fees/Out-of-Pocket Expenses As Incurred
Special Reporting Fees - Sub Plan Accounting
$1,500 annually per investment pool
$250 per plan within each pool
Fees as quoted above do not include any direct out-of-pocket or legal
expenses which would become payable in accordance with the grantor trust
agreement. There are no initial set-up fees, except legal fees,
incurred with the establishment/conversion of the trust to The Bank of
New York.
Exhibit A<PAGE>
<PAGE>
AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED COMMON STOCK PURCHASE AGREEMENT
(this "Agreement"), made this 20th day of December, 1996, effective as
of August 26, 1996, between Mid Atlantic Medical Services, Inc., a
Delaware corporation (the "Seller") and The Bank of New York, not in its
individual or corporate capacity, but solely in its capacity as trustee
(the "Trustee") of the Stock Compensation Trust (the "Trust") (the Trust
is hereinafter sometimes referred to as the "Purchaser") under an
amended and restated trust agreement between the Seller and the Trustee
dated December 20, 1996 effective as of August 26, 1996 (the "Trust
Agreement").
W I T N E S S E T H:
WHEREAS, this Agreement was originally effective as of
August 26, 1996; and
WHEREAS, pursuant to this Agreement, as contemplated by
the Trust Agreement, the Purchaser purchased from the Seller, and the
Seller sold to the Purchaser, 20,000,000 shares of the Seller s common
stock, $0.01 par value (the Common Stock ) on August 26, 1996, all as
more specifically described herein (the Original Transaction ); and
WHEREAS, as payment for such Common Stock, the Purchaser
paid to the Seller $200,000 and issued a promissory note, in favor of
the Seller, in the principal amount of $284,800,000; and
WHEREAS, following the consummation of such transaction,
it was determined that, pursuant to the listing rules of the New York
Stock Exchange (the NYSE Listing Rules ), the number of shares of
Common Stock sold by the Seller to the Purchaser exceeded the maximum
number of shares that may be issued without the approval of the
shareholders of the Seller; and
WHEREAS, in order in order to comply with such NYSE
Listing Rules, the Seller and the Purchaser have agreed to amend and
restate this Agreement to provide that (i) the Purchaser will return to
the Seller 10,870,000 shares of Common Stock, (ii) the promissory note
issued by the Purchaser in favor of the Seller in connection with the
Original Transaction will be canceled, and (iii) a replacement
promissory note will be issued by the Purchaser in favor of the Seller,
in the principal amount of $129,902,500.
NOW, THEREFORE, in consideration of the mutual covenants
and undertakings contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:<PAGE>
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE. Subject to the terms and conditions
set forth herein, the Seller will sell to the Purchaser, and the
Purchaser will purchase from the Seller, at the Closing (as hereinafter
defined), twenty million (20,000,000) shares of Common Stock at $14.25
per share which is the Fair Market Value (as defined in the Trust) of
the Common Stock on the last full trading day prior to the Closing. The
shares of Common Stock to be purchased by the Purchaser and sold by the
Seller at the Closing are referred to in this Agreement as the "Common
Shares." In consideration for the Common Shares, the Purchaser will
deliver to the Seller cash in the amount of $200,000, representing the
par value of the Common Stock and a note in the form of Schedule 1.1 to
this Agreement in the principal amount of $284,800,000 (the "Original
Note").
1.2 CLOSING. The closing of the sale and purchase of the
Common Shares hereunder (the "Closing"), will be held at the offices of
the Seller on August 26, 1996 or at such other time, date and place as
agreed to by the parties.
1.3 DELIVERY AND PAYMENT. At the Closing, the Seller
will deliver to the Purchaser a certificate representing the Common
Shares, which certificate shall be registered in the name of the
Trustee, or the name of its nominee, against payment by the Purchaser to
the Seller of the aggregate purchase price therefor. Notwithstanding
the foregoing, the Seller may accomplish the transfer of shares to the
Trustee by book entry, in which event a cross receipt shall be executed
by the parties. The Seller will pay all stamp and other transfer taxes,
if any, which may be payable in respect of the sale and delivery of the
Common Shares.
ARTICLE II
RETURN OF SHARES
2.1 RETURN OF SHARES. Subject to terms and
conditions set forth herein, the Purchaser shall deliver to the Seller,
at the Rescission Closing (as hereinafter defined) 10,870,000 shares of
Common Stock (the Returned Common Shares ). In order to accomplish
such delivery, the Seller shall reflect the transfer of 10,870,000
shares of Common Stock from the Purchaser to the Seller by book entry
and the Seller and the Purchaser shall execute a cross-receipt in the
form of Schedule 2.1 to this Agreement. The Seller will pay all stamp
and other transfer taxes, if any, which may be payable in respect of the
transfer of the Returned Common Shares. The actions described in this
Section 2.1 are referred to in this Agreement, collectively, as the
Rescission.
2.2 CANCELLATION OF NOTE; ISSUANCE OF REPLACEMENT NOTE.
At the Rescission Closing, the Seller shall deliver the Note to the
Purchaser, and the Note shall be marked canceled. Simultaneous
therewith, the Purchaser shall deliver to the Seller a replacement note
in the form of Schedule 2.2 to this Agreement in the principal amount
of $129,902,500 (the Replacement Note ).
2.3 RESCISSION CLOSING. The closing of the
Rescission hereunder (the Rescission Closing ) will be held at the<PAGE>
offices of the Seller on December 20, 1996 or at such other time, date
and place as agreed to by the parties.
2.4 REPRESENTATIONS. The Seller hereby represents
and warrants to the Purchaser that (i) the Committee (as such term is
defined in the Trust Agreement) has approved the Rescission, (ii) the
Rescission has no federal income or other tax consequences to the
Seller, the Trustee or otherwise, and (iii) the Purchaser has properly
performed all of its duties under this Agreement with respect to the
Returned Shares from the Closing Date through the date of the Rescission
Closing.
2.5 RETIREMENT OF SHARES. As of the date of the
Rescission Closing, the Seller shall cause the Returned Shares to be
retired so that the total number of issued and outstanding shares of the
Seller is reduced by the number of Returned Shares.<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as
follows:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Seller
(i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) has all requisite
corporate power to execute, deliver and perform this Agreement; and
(iii) has taken all necessary corporation action to authorize the
execution, delivery and performance of this Agreement.
3.2 NO CONFLICT. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with or constitute a default
under (i) the Seller's certificate of incorporation or by-laws, (ii) any
agreement, indenture or other instrument to which the Seller is a party
or by which the Seller or its assets may be bound or (iii) any law,
regulation, order, arbitration, award, judgment or decree applicable to
the Seller.
3.3 VALIDITY. This Agreement has been duly
executed and delivered by the Seller and is a valid and binding
agreement of the Seller enforceable against the Seller in accordance
with its terms, except as the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws affecting the enforcement of
creditors' rights generally, and by general principles of equity.
3.4 THE COMMON SHARES. The Common Shares have been
duly authorized and are (or when issued as contemplated hereby will be)
validly issued and constitute fully-paid and non-assessable shares of
Common Stock, $0.01 par value, of the Seller. No stockholder of the
Seller has any preemptive or other subscription right to acquire any
shares of Common Stock. The Seller will convey to the Purchaser, on the
date of Closing, good and valid title to the Common Shares free and
clear of any liens, claims, security interests and encumbrances.
3.5 LITIGATION. There are no actions, suits,
proceedings or arbitrations or investigations pending, or to the
Seller's best knowledge, threatened in any court or before any
governmental agency or instrumentality or arbitration panel or otherwise
against or by the Seller which seek to or could restrain, prohibit,
rescind or declare unlawful, or result in substantial damages in respect
of this Agreement or the performance hereof by the Seller (including,
without limitation, the delivery of the Common Shares).
3.6 RESCISSION. Neither the Rescission nor any
transaction related to the Rescission, including the holding of
9,130,000 shares of Common Stock by the Purchaser immediately following
such Rescission, violates any federal or state law or any rule of the
New York Stock Exchange. After giving effect to the Rescission, the
purchase and sale of the Common Shares will not violate any rule of the
New York Stock Exchange applicable to companies whose stock is listed
thereon.<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the
Seller as follows:
4.1 AUTHORITY; VALIDITY. The Purchaser has full
power and authority to execute and deliver this Agreement and the
Replacement Note as Trustee and to consummate the transactions
contemplated hereby. The Replacement Note has been duly executed by the
Trustee on behalf of the Trust and, upon the execution and delivery by
the Trustee on behalf of the Trust, the Replacement Note will be a valid
and binding agreement of the Purchaser enforceable in accordance with
its terms, except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws affecting the enforcement of
creditors' rights generally, and by general principles of equity.
ARTICLE V
RESTRICTIONS ON DISPOSITION OF THE COMMON SHARES
5.1 RESTRICTED SECURITIES. The Purchaser
acknowledges that the Purchaser is acquiring the Common Shares pursuant
to a transaction exempt from registration under the 1933 Act. The
Purchaser represents, warrants and agrees that all Common Shares
acquired by the Purchaser pursuant to this Agreement are being acquired
for investment without any intention of making a distribution thereof,
or of making any sale or other disposition thereof which would be in
violation of the 1933 Act or any applicable state securities law, and
that the Purchaser will not dispose of any of the Common Shares (other
than in the Rescission) except that the Trustee will, from time to time,
convey a portion of the Common Shares to the participants in the Plans
(as such term is defined in the Trust Agreement) to satisfy the
obligations of the Seller thereunder, and except upon termination of the
Trust to the extent that the Trust then holds any Common Shares.
5.2 LEGEND. Until such time as the Common Shares
are registered pursuant to the provisions of the 1933 Act, any
certificate or certificates representing the Common Shares delivered
pursuant to Section 1.3 or 2.1, will bear a legend in substantially the
following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and may not be sold, transferred or otherwise disposed of
unless they have first been registered under such Act or
unless an exemption from registration is available."
The Seller may place stop transfer orders against the registration or
transfer of any shares evidenced by such a certificate or certificates
until such time as the requirements of the foregoing are satisfied.
ARTICLE VI<PAGE>
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Common Shares is subject to
the satisfaction of the following conditions on the date of Closing:
(a) The representations and warranties of
the Seller set forth in Article III hereof shall be true
and correct; and if the Closing shall occur on a date
other than the date of this Agreement, the Purchaser
shall have been furnished with a certificate, dated the
date of Closing, to such effect, signed by an authorized
officer of the Seller; and<PAGE>
(b) All permits, approvals, authorizations
and consents of third parties necessary for the
consummation of the transactions herein shall have been
obtained, and no order of any court or administrative
agency shall be in effect which restrains or prohibits
the transactions contemplated by this Agreement, and no
suit, action or other proceeding by any governmental
body or other person shall have been instituted which
questions the validity or legality of the transactions
contemplated by this Agreement.
6.2 Conditions to Obligations of the Seller. The
obligation of the Seller to issue, sell and deliver the Common Shares to
the Purchaser is subject to the satisfaction of the following conditions
on the date of Closing:
(a) The representations and warranties of
the Purchaser set forth in Article IV hereof shall be
true and correct; and if the Closing shall occur on a
date other than the date of this Agreement, the Seller
shall have been furnished with a certificate dated the
date of Closing, to such effect, signed by an authorized
office of the Trustee; and
(b) No order of any court or
administrative agency shall be in effect which restrains
or prohibits the transactions contemplated by this
Agreement, and no suit, action or other proceeding by
any governmental body or other person shall have been
instituted which questions the validity or legality of
the transactions contemplated by this Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES. The Seller shall pay all of
its expenses, and it shall pay the Purchaser's expenses, in connection
with the authorization, preparation, execution and performance of this
Agreement, including without limitation the reasonable fees and expenses
of the Trustee, its agents, representatives, counsel, financial advisors
and consultants.
7.2 SURVIVAL OF SELLER'S REPRESENTATIONS
AND WARRANTIES. All representations and warranties made by the Seller
to the Purchaser in this Agreement shall survive the Closing and the
Rescission Closing.
7.3 NOTICES. All notices, requests or
other communications required or permitted to be delivered hereunder
shall be in writing, delivered by registered or certified mail, return
receipt requested, as follows:
(a) To the Seller:
Joseph L. Guarriello, Executive Vice
President and General Counsel<PAGE>
Mid Atlantic Medical Services, Inc.
4 Taft Court
Rockville, MD 20850
(b) To the Purchaser:
Katarina Antens-Miller, AVP
Relationship Manager
The Bank of New York
One Wall Street
New York, NY 10286
Any party hereto may from time to time, by written notice given as
aforesaid, designate any other address to which notices, requests or
other communications addressed to it shall be sent.<PAGE>
7.4 SPECIFIC PERFORMANCE. The parties
hereto acknowledge that damages would be an inadequate remedy for any
breach of the provisions of this Agreement and agree that the
obligations of the parties hereunder shall be specifically enforceable,
and neither party will take any action to impede the other from seeking
to enforce such rights of specific performance.
7.5 SUCCESSORS AND ASSIGNS; INTEGRATION;
ASSIGNABILITY. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto, and their
respective legal representatives, successors and assigns. This
Agreement (a) constitutes, together with the Note, the Trust Agreement,
and any other written agreements between the Purchaser and the Seller
executed and delivered on the date hereof, the entire agreement between
the parties hereto and supersedes all other prior agreements and
understandings, both written and oral, among the parties, with respect
to the subject matter hereof; (b) shall not confer upon any person other
than the parties hereto any rights or remedies hereunder; and (c) shall
not be assignable by operation of law or otherwise, except that the
Trustee may assign all its rights hereunder to any corporation or other
institution exercising trust powers in connection with any such
institution assuming the duties of a trustee under the Trust.
7.6 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the state of
New York.
7.7 FURTHER ASSURANCES. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement.
7.8 AMENDMENT AND WAIVER. No amendment or waiver
of any provision of this Agreement or consent to departure therefrom
shall be effective unless in writing and signed by the Purchaser and the
Seller.
7.9 COUNTERPARTS. This Agreement may be executed
in any number of counterparts with the same effect as if the signatures
thereto were upon one instrument.
7.10 CERTAIN LIMITATIONS. The execution and
delivery of this Agreement and the performance by the Trustee of this
Agreement and under the terms of the Trust have been or will be,
effected by the Trustee in its capacity as Trustee. Nothing in this
Agreement shall be interpreted to increase, decrease or modify in any
manner any liability of the Trustee to the Seller or to any trustee,
representative or other claimant by right of the Seller resulting from
the Trustee's performance of its duties under the constituent
instruments of the Trust, and no personal liability shall be asserted or
enforceable against the Trustee by reason of any of the covenants,
statements or representations contained in this Agreement. 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 this amended and restated
Agreement.<PAGE>
7.11 INCORPORATION. The terms and conditions of
the Trust Agreement relating to the nature of the responsibilities of
the Trustee and the indemnification of the Trustee by the Seller are
incorporated herein by reference and made applicable to this Agreement.<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed
this Agreement on the date and year first above written.
Mid Atlantic Medical Services, Inc.
By: /s/ Joseph L. Guarriello
-------------------------------
Title: Executive VP, General
---------------------------
Counsel & Secretary
Attest: /s/ Alisa Chestler
---------------------------
Title: Asst. Secretary
----------------------------
The Bank of New York in its capacity
as trustee of the Mid Atlantic
Medical Services, Inc. Stock
Compensation Trust
By: /s/ Eugene J. Foran
--------------------------------
Title: Vice President
----------------------------
Attest: By: Katarina Antens-Miller
-----------------------------
Title: Asst. Vice President
-----------------------------<PAGE>
<PAGE>
REPLACEMENT PROMISSORY NOTE
---------------------------
$129,902,500 December 20, 1996
FOR VALUE RECEIVED, the undersigned, The Bank of New York, not in its
individual or corporate capacity but solely in its capacity as Trustee
of the Mid Atlantic Medical Services, Inc. Stock Compensation Trust (the
"Trust") hereby promises on behalf of the Trust to pay to the order of
Mid Atlantic Medical Services, Inc., a Delaware corporation (the
"Company"), at the principal offices of the Company, the aggregate
principal amount of $129,902,500 as shown on Schedule A attached hereto
as such may be amended from time to time, with interest in arrears
thereon, as hereinafter provided.
Principal shall be paid in installments in the amounts and on the dates
set forth on the Maturity Schedule attached hereto as Schedule A, the
last such installment due on August 26, 2011 (the fifteenth anniversary
of the Closing); PROVIDED, HOWEVER, that this Note may be prepaid in
whole or in part at any time without penalty; and PROVIDED FURTHER that
the principal amount of this note shall be forgiven in the event that
the Trust shall have been terminated in accordance with Section 8.2
thereof and the Trustee shall have complied with the requirements of
such Section. Interest on the unpaid principal balance, at an annual
interest rate (the "Interest Rate") equal to 8%, shall be paid
quarterly, in arrears, on each January 15th, April 15th, July 15th and
October 15th commencing October 15, 1996 and shall be calculated on the
basis of a 360-day year of 30-day months, as set forth on Schedule B.
Whenever any payment falls due on a Saturday, Sunday or public holiday,
such payment shall be made on the next succeeding business day. Certain
provisions of the Trust Agreement made effective as of August 26, 1996
between the Company and the Trustee as amended and restated on December
20, 1996 relating to the Trust affect the Company's obligations to make
payments of principal and interest on the Note.
This Note shall be construed under the laws of the State of New York.
The undersigned represents and warrants that the indebtedness
represented by this Note was incurred for the purpose of purchasing
shares of Common Stock of the Company.
This Note may not be assigned by the Company, other than by operation of
law, without the prior express written consent of the undersigned.
The Company shall have no recourse whatsoever to any assets of the
Trustee for repayment. The Trustee is entering into this Agreement not
in its individual or corporate capacity but solely as Trustee, and no
personal or corporate liability or personal or corporate
responsibilities are assumed by, or shall at any time be asserted or
enforceable against, the Trustee in its individual or corporate capacity
under, or with respect to, this Agreement.<PAGE>
The Bank of New York not in
its individual or corporate
capacity but solely in its
capacity as Trustee of the
Mid Atlantic Medical
Services, Inc. Stock
Compensation Trust
By:/s/ Eugene J. Foran
-------------------------
Title: Vice President
-------------------------
ATTEST: /s/ Katarina Antens-Miller
----------------------------------
Title: Asst. Vice President
---------------------------
<PAGE>
SCHEDULE A
----------
Trust Year Principal Payment
---------- -----------------
1997 $ 4,330,084
1998 $ 8,660,167
1999 $ 8,660,167
2000 $ 8,660,167
2001 $ 8,660,167
2002 $ 8,660,167
2003 $ 8,660,167
2004 $ 8,660,167
2005 $ 8,660,167
2006 $ 8,660,167
2007 $ 8,660,167
2008 $ 8,660,167
2009 $ 8,660,167
2010 $ 8,660,167
2011 $12,990,245<PAGE>
SCHEDULE B
Payment Date Interest Payment
------------ ----------------
10/15/96 $1,423,589.04
01/15/97 $2,619,403.84
04/15/97 $2,562,460.27
07/15/97 $2,590,932.05
10/15/97 $2,571,950.86
01/15/98 $2,532,090.36
04/15/98 $2,477,044.92
07/15/98 $2,504,567.64
10/15/98 $2,437,184.42
01/15/99 $2,357,463.43
04/15/99 $2,306,214.23
07/15/99 $2,331,838.83
10/15/99 $2,262,557.49
01/15/2000 $2,182,836.50
04/15/2000 $2,159,110.02
07/15/2000 $2,159,110.02
10/15/2000 $2,087,930.56
01/15/2001 $2,008,209.57
04/15/2001 $1,964,552.84
07/15/2001 $1,986,381.21
10/15/2001 $1,913,303.63
01/15/2002 $1,833,582.64
04/15/2002 $1,793,722.15
07/15/2002 $1,813,652.40
10/15/2002 $1,738,676.70
01/15/2003 $1,658,955.72
04/15/2003 $1,622,891.46
07/15/2003 $1,640,923.59
10/15/2003 $1,564,049.78
01/15/2004 $1,484,328.79
04/15/2004 $1,468,194.78
07/15/2004 $1,468,194.78
10/15/2004 $1,389,422.85
01/15/2005 $1,309,701.86
04/15/2005 $1,281,230.08
07/15/2005 $1,295,465.97
10/15/2005 $1,214,795.92
01/15/2006 $1,135,074.93
04/15/2006 $1,110,399.39
07/15/2006 $1,122,737.16
10/15/2006 $1,040,168.99
01/15/2007 $ 960,448.00
04/15/2007 $ 939,568.69
07/15/2007 $ 950,008.35
10/15/2007 $ 865,542.06
01/15/2008 $ 785,821.07
04/15/2008 $ 777,279.54
07/15/2008 $ 777,279.54
10/15/2008 $ 690,915.13
01/15/2009 $ 611,194.14
04/15/2009 $ 597,907.31
07/15/2009 $ 604,550.73<PAGE>
10/15/2009 $ 516,288,20
01/15/2010 $ 436,567.21
04/15/2010 $ 427,076.62
07/15/2010 $ 431,821.92
10/15/2010 $ 341,661.27
01/15/2011 $ 261,940.28
04/15/2011 $ 256,245.93
07/15/2011 $ 259,093.11<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> $2,523
<SECURITIES> 161,588
<RECEIVABLES> 77,330
<ALLOWANCES> 4,564
<INVENTORY> 0
<CURRENT-ASSETS> 272,464
<PP&E> 44,592
<DEPRECIATION> 19,901
<TOTAL-ASSETS> $340,064
<CURRENT-LIABILITIES> $151,731
<BONDS> 149
0
0
<COMMON> 568
<OTHER-SE> 187,400
<TOTAL-LIABILITY-AND-EQUITY> $340,064
<SALES> $0
<TOTAL-REVENUES> 841,740
<CGS> 0
<TOTAL-COSTS> 750,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 926
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> 1,071
<INCOME-TAX> 450
<INCOME-CONTINUING> 621
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $621
<EPS-PRIMARY> $.01
<EPS-DILUTED> $.01
</TABLE>
