<PAGE>   1
                                                                  EXHIBIT 10.16


                      SPLIT-DOLLAR LIFE INSURANCE AGREEMENT



         THIS AGREEMENT is entered into as of July 1, 1998, by and between
MATRIA HEALTHCARE, INC., a Delaware corporation (the "Company"), and ROBERTA L.
MCCAW (the "Employee"), in reference to the following facts:

         1. The Employee is a valued employee of the Company.

         2. The Company has simultaneously with the execution of this Agreement
            caused Aetna Life Insurance and Annuity Company (the "Insurance
            Company") to issue and deliver to the Employee Policy Number
            I0003335 (the "Policy") on the life of the Employee. The first
            annual premium has been paid by the Company as of the date of this
            Agreement.

         NOW, THEREFORE, in consideration of the facts set forth above and the
various promises and covenants set forth below, the parties to this Agreement
agree as follows:

 1.      Ownership of the Policy.

                  The Company acknowledges that the Employee is the owner of the
         Policy and that Employee is entitled to exercise all of his or her
         rights granted by the terms of the Policy, except to the extent that
         the power of the Employee to exercise those rights is specifically
         limited by this Agreement and the Collateral Security Assignment
         Agreement of even date in the form attached hereto as Exhibit A (the
         "Collateral Assignment") executed by the Employee with respect to the
         Policy. Except as so limited, it is the expressed intention of the
         parties to reserve to the Employee all rights in and to the Policy
         granted to its owner by the terms thereof, including, but not limited
         to, the right to change the beneficiary of that portion of the proceeds
         to which the Employee is entitled under Section 3(d) of this Agreement
         and the right to exercise settlement options.

 2.      Premium Payments.

                  In addition to the first annual premium on the Policy, which
         has been paid by the Company as of the date of this Agreement, unless
         and until the Employee's employment with the Company is terminated for
         reasons other than Employee's Disability (as defined in this Section 2)
         prior to the Employee's completion of ten (10) Years of Service (as
         defined in this Section 2) if such termination occurs prior to a Change
         in Control (as defined in Section 6 below) or due to the Employee's
         Disability prior to the Employee's completion of five (5) Years of
         Service, the Company agrees to make an annual premium payment on each
         of the first six (6) anniversary dates of the Policy in the amount of
         $99,240. The Company shall transmit all premium payments required
         hereunder directly to the 



<PAGE>   2

         Insurance Company. During the period of time that this Agreement is in
         effect, the Employee irrevocably agrees that all dividends paid on the
         Policy shall be applied to purchase from the Insurance Company
         additional paid-up life insurance on the life of the Employee. For
         purposes of this Agreement, "Disability" shall mean disability under
         the Company's long-term disability plan then in effect (or if no plan
         is then in effect, on the date hereof) and a "Year of Service" shall
         mean each twelve (12) month period during the Employee's employment
         with the Company in which the Employee completes at least one thousand
         (1,000) hours of employment with the Company plus, in the event of a
         Change in Control of the Company, three (3) years. Employment with any
         entity in which the Company, directly or indirectly, owns in excess of
         fifty percent (50%) of the voting interests therein shall, for all
         purposes of this Agreement, constitute employment with the Company.

3.       Repayment Obligation.

         (a)(i)   Subject to the last sentence of Sections 3(b) and 3(d)
                  below, upon the first to occur of (w) the twenty-third (23rd)
                  anniversary date of the Policy, (x) the Employee's death, (y)
                  termination of the Employee's employment with the Company
                  (other than by reason of the Employee's death or Disability)
                  prior to completion of ten (10) Years of Service if such
                  termination occurs prior to a Change in Control or (z)
                  termination of the Employee's employment with the Company by
                  reason of the Employee's Disability prior to completion of
                  five (5) Years of Service, the Company shall have the right to
                  be paid the amount of its Premium Advances (as hereinafter
                  defined), plus, except in the case of the death of the
                  Employee while employed by the Company, the amount by which
                  the Net Policy Value (as hereinafter defined) exceeds the
                  Employee's Vested Life Insurance Plan Benefit (as hereinafter
                  defined).

             (ii) For purposes of this section, the term "Premium Advances"
                  shall mean the total amount of premiums paid by the Company
                  hereunder (including any premiums paid on the Policy by the
                  Trustee under a trust established pursuant to Section 6(a)
                  below) and the term "Net Policy Value" shall mean the amount
                  by which the then cash surrender value of the Policy or, in
                  the event the payment obligation arises pursuant to Section
                  3(a)(i)(x) above, the death benefit payable under the Policy,
                  exceeds the amount of the Premium Advances. In the case of a
                  termination of the Employee's employment described in Section
                  3(a)(i)(y) or Section 3(a)(i)(z) above, the Employee's Vested
                  Life Insurance Plan Benefit shall be zero (0). In all other
                  cases, the Employee's Vested Life Insurance Plan Benefit shall
                  be the lesser of (x) the Net Policy Value and (y) the amount
                  calculated by multiplying the greater of (i) $1,844,207 and
                  (ii) the Net Policy Value by a percentage based on the
                  Employee's age at termination of employment, Years of Service
                  and other factors as set forth below:


                                       2
<PAGE>   3

<TABLE>
<CAPTION>
                                               PERCENTAGE 
                  ------------------------------------------------------------------------
                  Termination of Employment prior to          Termination of Employment
                  a Change in Control for reasons other       due to Disability or after a
                  than Disability                             Change in Control  
                  -----------------------------------------   ----------------------------
Years of         Age at Termination      Age at Termination
 Service               < 55                 55 or more          
--------         ------------------------------------------
<S>              <C>                     <C>                  <C> 
   < 5                  - 0 -                - 0 -                     - 0 -
     5                  - 0 -                - 0 -                      33%
     6                  - 0 -                - 0 -                      40%
     7                  - 0 -                - 0 -                      47%
     8                  - 0 -                - 0 -                      53%
     9                  - 0 -                - 0 -                      60%
    10                   30%                  50%                       67%
    11                   36%                  60%                       73%
    12                   42%                  70%                       80%
    13                   48%                  80%                       87%
    14                   54%                  90%                       93%
    15 or more           60%*                 100%                     100%

</TABLE>


* 100% in the event the Employee's employment is terminated without cause after
attaining 15 Years of Service and 52 years of age. "Cause" shall mean the
Company's termination of the Employee's employment on the basis of criminal or
civil fraud on the part of the Employee involving a material amount of funds of
the Company. Notwithstanding the foregoing, the Employee shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Employee a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Company's
Board of Directors at a meeting of the Board called and held for such purpose
(after reasonable notice to the Employee and an opportunity for the Employee,
together with the Employee's counsel, to be heard before the Board) finding that
in the good faith opinion of the Board, the Employee was guilty of conduct set
forth in the second sentence of this footnote and specifying the particulars
thereof in detail. For purposes of this Agreement only, the preparation and
filing of fictitious, false or misleading claims in connection with any federal,
state or other third-party medical reimbursement program, or any other violation
of any rule or regulation in respect of any federal, state or other third-party
medical reimbursement program by the Company or any subsidiary of the Company
shall not be deemed to constitute "criminal fraud" or "civil fraud."

                  The amount that the Company is entitled to be paid under this
                  Section 3 is hereinafter referred to as the "Repayment
                  Obligation."

         (b)      In the case of a termination of the Employee's employment
                  described in Section 3(a)(i)(y) or Section 3(a)(i)(z) above,
                  the Employee shall cause, either by withdrawing from or
                  borrowing against the Policy, on a non-recourse basis, to be
                  transferred to the Company, an amount equal to the maximum
                  amount that may then be obtained under the Policy. In no event
                  shall the amount payable to the Company under this Section
                  3(b) exceed the amount described in the preceding sentence.

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<PAGE>   4

         (c)      If the Employee survives until the twenty-third (23rd)
                  anniversary date of the Policy, then, on such date, the
                  Employee, either by withdrawing from or borrowing against the
                  Policy, on a non-recourse basis, shall cause to be transferred
                  to the Company an amount equal to the Repayment Obligation.
                  The Employee agrees to execute any notice prepared by the
                  Company requesting a withdrawal or non-recourse loan as
                  provided in the preceding sentence.

         (d)      Unless the Repayment Obligation has been previously satisfied
                  pursuant to Section 3(b) or Section 3(c) above, upon the death
                  of the Employee, the Company shall have the right to receive a
                  portion of the death benefit payable under the Policy equal to
                  the Repayment Obligation. The balance of the death benefit
                  provided under the Policy, if any, shall be paid directly to
                  the beneficiary or beneficiaries designated by the Employee,
                  in the manner and in the amount or amounts provided in the
                  beneficiary designation provision of he Policy. No amount
                  shall be paid from such death benefit to the beneficiary or
                  beneficiaries designated by the Employee until the full amount
                  due the Company hereunder has been paid. The parties hereto
                  agree that the beneficiary designation provision of the Policy
                  shall conform to the provisions hereof. In no event shall the
                  amount payable to the Company under this Section 3(d) exceed
                  the Policy proceeds payable at the death of the Employee.

         (e)      The Employee agrees that, during the period of this Agreement,
                  the Employee will obtain and provide to the Company and/or the
                  Insurance Company the written consent of the spouse of the
                  Employee, in the form attached hereto as Exhibit B, to any
                  designation by the Employee of anyone other than the
                  Employee's spouse as the beneficiary to receive the benefits
                  under Section 3(d).

         (f)      Upon payment to the Company of the Repayment Obligation as
                  hereinabove provided, this Agreement shall thereupon
                  terminate. Such termination shall have no effect upon the
                  Employee's ownership rights in and to the Policy.

         (g)      Any payments under the Policy to the Company in connection
                  with the rights granted to the Company in the Collateral
                  Assignment shall be made from Policy cash value attributable
                  to the paid-up additional life insurance purchased by Policy
                  dividends. The Employee shall have no interest in the paid-up
                  additional life insurance protection except to the extent the
                  death benefit or cash value thereof exceeds the amount of the
                  Repayment Obligation.


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<PAGE>   5

 4.      The Company's Security Interest.

                  To secure the payment of the Repayment Obligation, the
         Employee has, contemporaneously herewith, assigned the Policy to the
         Company as collateral pursuant to the Collateral Assignment. The
         Collateral Assignment shall not be terminated, altered or amended by
         the Employee without the express written consent of the Company. The
         Company's security interest in the Policy is conditioned upon its
         satisfactorily performing all of the covenants under this Agreement.
         The Company shall not have nor exercise any right in and to the Policy
         which could, in any way, endanger, defeat, or impair any of the rights
         of the Employee in the Policy, including, by way of illustration, any
         right to collect the proceeds of the Policy in excess of the amount due
         the Company, as provided in this Agreement and in the Policy. The only
         rights in and to the Policy granted to the Company in this Agreement
         shall be limited to the Company's security interest in the Policy to
         secure the repayment of the Repayment Obligation (the "Security
         Interest"). The Company shall not assign its Security Interest in the
         Policy.

 5.      Limitation on the Employee's Rights.

                  In order to protect the Company's Security Interest and
         notwithstanding any other provisions of this Agreement, the Employee
         agrees that, except through borrowing or withdrawals permitted under
         this section, the Employee will not modify the death benefit under the
         Policy or direct the investment of the cash surrender value of the
         Policy. The Employee agrees that, prior to attaining age fifty-five
         (55) and completion of fifteen (15) Years of Service, he or she shall
         not borrow against the Policy or withdraw any portion of the cash value
         of the Policy. The Employee further agrees that, after attaining age
         fifty-five (55) and completion of fifteen (15) Years of Service, he or
         she shall not withdraw any portion of the cash value of the Policy or
         borrow against the Policy if, after such borrowing, the cash value of
         the Policy would be reduced to an amount less than the amount of the
         Repayment Obligation. Notwithstanding the preceding sentences, the
         Employee may borrow or withdraw from the Policy, so long as the
         borrowing or withdrawal request is submitted to the Insurance Company
         along with a directive that the borrowed or withdrawn amount be
         transferred directly to the Company in accordance with Section 3(c).
         Prior to the release of the Company's Security Interest in the Policy,
         the Employee and the Company agree that the Company shall from time to
         time appoint one (1) or more individuals (the "Designee"), who may be
         officers of the Company, who shall be entitled to direct the
         investments under the Policy; provided, however, that the Designee may
         only direct the investments under the Policy in funds offered by the
         Insurance Company under the Policy.


                                       5
<PAGE>   6

6.      Change in Control.

        (a)       If a "Change in Control" of the Company shall occur, the
                  Employee, in his discretion, at any time thereafter may
                  require the Company to place in a grantor trust of the type
                  and with the terms and conditions of the Trust attached as
                  Exhibit C hereto an amount of money which is equal to the
                  premiums payable under Section 2 hereof. A delay by the
                  Employee in the making of a request for a trust shall in no
                  way compromise or invalidate the Employee's rights with
                  respect thereto and the Company shall promptly honor such
                  request when made.

        (b)       For purposes of this Agreement, "Change in Control" shall mean
                  changes in the ownership of a corporation, changes in the
                  effective control of a corporation, changes in ownership of a
                  substantial portion of a corporation's assets and the
                  disposition of a substantial portion of the corporation's
                  assets all as defined below:

                  (i)      A change in the ownership of a corporation occurs on
                           the date that any one person, or more than one person
                           acting as a group, acquires ownership of stock of
                           that corporation which, together with stock held by
                           such person or group, represents more than fifty
                           percent (50%) of the total fair market value or total
                           voting power of the stock of such corporation. An
                           increase in the percentage of stock owned by any one
                           person, or persons acting as a group, as a result of
                           a transaction in which the corporation acquires its
                           stock in exchange for property will be treated as an
                           acquisition of stock.

                  (ii)     A change in the effective control of a corporation
                           occurs on the date that either: any one person, or
                           more than one person acting as a group becomes the
                           beneficial owner of stock of the corporation and
                           possessing twenty percent (20%) or more of the total
                           voting power of the stock of such corporation; or a
                           majority of members of the corporation's board of
                           directors is replaced during any twenty-four (24)
                           month period by directors whose appointment or
                           election is not endorsed by at least two-thirds (2/3)
                           of the members of the corporation's board of
                           directors who were directors prior to the date of the
                           appointment or election of the first of such new
                           directors.

                  (iii)    A change in the ownership of a substantial portion of
                           a corporation's assets occurs on the date that any
                           one person, or more than one person acting as a
                           group, acquires (or has acquired during the twelve
                           (12) month period ending on the date of the most
                           recent acquisition by such person or persons) assets
                           from the corporation that have a total fair market
                           value equal to or more than one-half (1/2) of the
                           total fair market value of all of the assets 


                                       6
<PAGE>   7

                           of the corporation immediately prior to such
                           acquisition or acquisitions. The transfer of assets
                           by a corporation is not treated as a change in the
                           ownership of such assets if the assets are
                           transferred: to a shareholder of the corporation
                           (immediately before the asset transfer) in exchange
                           for such shareholder's capital stock of the
                           corporation having a fair market value approximately
                           equal to the fair market value of such assets; or to
                           an entity, fifty percent (50%) or more of the total
                           value or voting power of which is owned, directly or
                           indirectly, by the corporation.

                  (iv)     A disposition of a substantial portion of a
                           corporation's assets occurs on the date that the
                           corporation transfers assets by sale, distribution to
                           shareholders, assignment to creditors, foreclosure or
                           otherwise, in a transaction or transactions not in
                           the ordinary course of the corporation's business (or
                           has made such transfers during the twelve (12) month
                           period ending on the date of the most recent transfer
                           of assets) that have a total fair market value equal
                           to or more than one-half (1/2) of the total fair
                           market value of all of the assets of the corporation
                           as of the date immediately prior to the first such
                           transfer or transfers. The transfer of assets by a
                           corporation is not treated as a disposition of a
                           substantial portion of the corporation's assets if
                           the assets are transferred to an entity, fifty
                           percent (50%) or more of the total value or voting
                           power of which is owned, directly or indirectly, by
                           the corporation.

         For purposes of the provisions of this Agreement defining "Change in
Control," (i) references to the Company in this Agreement include the Delaware
corporation known as Matria Healthcare, Inc. as of the date of execution of this
Agreement, and any corporation which is the legal successor to such corporation
by virtue of merger or share exchange; and (ii) the terms "person," "acting as a
group" and "ownership" shall have the meanings prescribed in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3
promulgated thereunder; provided, however, that in any merger, consolidation or
share exchange in which less than fifty percent (50%) of the outstanding voting
securities of the Company or its successor corporation are held by the former
shareholders of the Company, the shareholders of the other parties to the
transaction shall be deemed to have acted as a group that acquired ownership of
more than fifty percent (50%) of the outstanding voting securities of the
Company, resulting in a change in ownership under (i) above.

 7.      Disputes.

         (a)      A committee, the members of which shall be the Chief Executive
                  Officer, the Chief Financial Officer, and the General Counsel
                  of the Company (collectively, the "Administrator"), shall
                  administer this Agreement. The Administrator (either directly
                  or through its designees) will have power and authority to
                  interpret, construe, and administer this Agreement (for the


                                       7
<PAGE>   8

                  purpose of this section, the Agreement shall include the
                  Collateral Assignment), provided that the Administrator's
                  authority to interpret this Agreement shall not cause the
                  Administrator's decisions in this regard to be entitled to a
                  deferential standard of review in the event that the Employee
                  or his or her beneficiary seeks review of the Administrator's
                  decision, as described below.

         (b)      Neither the Administrator, its designee, nor its advisors
                  shall be liable to any person for any action taken or omitted
                  in good faith in connection with the interpretation and
                  administration of this Agreement.

         (c)

                  (i)      A person who believes that he or she is being denied
                           a benefit to which he or she is entitled under this
                           Agreement (hereinafter referred to as a "Claimant")
                           may file a written request for such benefit with the
                           Administrator, setting forth his or her claim. The
                           request must be addressed to the Administrator, in
                           care of the Company at its then principal place of
                           business.

                  (ii)     Upon receipt of a claim, the Administrator shall
                           advise the Claimant that a reply will be forthcoming
                           within ninety (90) days and shall deliver such reply
                           within such period.

                  (iii)    If the claim is denied in whole or in part, the
                           Administrator shall adopt a written opinion, using
                           language calculated to be understood by the Claimant,
                           setting forth: (a) the specific reason or reasons for
                           such denial; (b) the specific reference to pertinent
                           provisions of this Agreement on which such denial is
                           based; (c) a description of any additional material
                           or information necessary for the Claimant to perfect
                           his or her claim and an explanation why such material
                           or such information is necessary; (d) appropriate
                           information as to the steps to be taken if the
                           Claimant wishes to submit the claim for review; and
                           (e) the time limits for requesting a review of the
                           claim.

                  (iv)     Within sixty (60) days after the Claimant's receipt
                           of the written opinion described above, the Claimant
                           may request in writing a review of the denial. Such
                           request must be addressed to the Administrator, in
                           care of the Company at its then principal place of
                           business. The Claimant or his or her duly authorized
                           representative may, but need not, review the
                           pertinent documents and submit issues and comments in
                           writing for consideration by the Administrator.


                                       8
<PAGE>   9

                  (v)      Within sixty (60) days after the Administrator's
                           receipt of a request for review, the Administrator
                           will review its determination. After considering all
                           materials presented by the Claimant, the
                           Administrator will render a written opinion, using
                           language calculated to be understood by the Claimant,
                           setting forth the specific reasons for the decision
                           and containing specific references to the pertinent
                           provisions of this Agreement on which the decision is
                           based.

         (d)

                  (i)      Because it is agreed that time will be of the essence
                           in determining whether any payments are due a
                           Claimant under this Agreement, following receipt of
                           the Administrator's denial of a claim (in whole or in
                           part) pursuant to Section 7(c)(ii) above, the
                           Claimant may, if he or she desires, submit any claim
                           for payment under this Agreement or dispute regarding
                           the interpretation of this Agreement to arbitration.
                           This right to select arbitration shall be solely that
                           of the Claimant, and the Claimant may decide whether
                           or not to arbitrate in his or her discretion. The
                           "right to select arbitration" is not mandatory on the
                           Claimant, and the Claimant may choose in lieu thereof
                           to bring an action in an appropriate civil court.
                           Once an arbitration is commenced, however, it may not
                           be discontinued without the mutual consent of both
                           parties to the arbitration. During the lifetime of
                           the Employee, only he or she can use the arbitration
                           procedure set forth in this section.

                  (ii)     Any claim for arbitration may be submitted as
                           follows: If the Claimant disagrees with the
                           Administrator regarding the interpretation of this
                           Agreement and the claim is finally denied by the
                           Administrator in whole or in part, such claim may be
                           filed in writing with an arbitrator of the Claimant's
                           choice, who is selected by the method described in
                           the next four (4) sentences. The first step of the
                           selection shall consist of the Claimant submitting a
                           list of three (3) potential arbitrators to the
                           Administrator. Each of the three (3) arbitrators must
                           be either (1) a member of the National Academy of
                           Arbitrators located in the State of Georgia, or (2) a
                           retired Georgia Superior Court, Court of Appeals, or
                           Supreme Court judge. Within two (2) weeks after
                           receipt of the list, the Administrator shall select
                           one (1) of the three (3) arbitrators as the
                           arbitrator for the dispute in question. If the
                           Administrator fails to select an arbitrator in a
                           timely manner, the Claimant shall then designate one
                           (1) of the three (3) arbitrators as the arbitrator
                           for the dispute in question.


                                       9
<PAGE>   10

                  (iii)    The arbitration hearing shall be held within seven
                           (7) days (or as soon thereafter as possible) after
                           the picking of the arbitrator. No continuance of said
                           hearing shall be allowed without the mutual consent
                           of the Claimant and the Administrator. Absence from
                           or non-participation at the hearing by either party
                           shall not prevent the issuance of an award. Hearing
                           procedures which will expedite the hearing may be
                           ordered at the arbitrator's discretion, and the
                           arbitrator may close the hearing in his or her sole
                           discretion when he or she decides he or she has heard
                           sufficient evidence to satisfy issuance of an award.

                  (iv)     The arbitrator's award shall be rendered as
                           expeditiously as possible and in no event later than
                           one (1) week after the close of the hearing. In the
                           event the arbitrator finds that the Company has
                           breached this Agreement, he or she shall order the
                           Company to immediately take the necessary steps to
                           remedy the breach. The award of the arbitrator shall
                           be final and binding upon the parties. The award may
                           be enforced in any appropriate court as soon as
                           possible after its rendition. If an action is brought
                           to confirm the award, both the Company and the
                           Employee (on his or her own behalf and on behalf of
                           all other Claimants) agree that no appeal shall be
                           taken by either party from any decision rendered in
                           such action.

                  (v)      Solely for purposes of determining the allocation of
                           the costs described in this subsection, the
                           Administrator will be considered the prevailing party
                           in a dispute if the arbitrator determines that (1)
                           the Company has not breached this Agreement, and (2)
                           the claim by the Claimant was not made in good faith.
                           Otherwise, the Claimant will be considered the
                           prevailing party. In the event that the Company is
                           the prevailing party, the fee of the arbitrator and
                           all necessary expenses of the hearing (excluding any
                           attorney's fees incurred by the Company), including
                           the fees of a stenographic reporter, if employed,
                           shall be paid by the Claimant. In the event that the
                           Claimant is the prevailing party, the fee of the
                           arbitrator and all necessary expenses of the hearing
                           (including any attorney's fees incurred by the
                           Claimant in pursuing his claim), including the fees
                           of a stenographic reporter, if employed, shall be
                           paid by the Company.

8.       The Employee's Beneficiary Rights and Security Interest.

         (a)      The Company and the Employee intend that in no event shall the
                  Company have any power or interest related to the Policy or
                  its proceeds, except as provided herein and in the Collateral
                  Assignment. In the event that the Company ever receives or may
                  be deemed to have received any 


                                       10
<PAGE>   11


                  right or interest in the Policy or its proceeds beyond the
                  limited rights described herein and in the Collateral
                  Assignment, such right or interest shall be held in trust for
                  the benefit of the Employee and shall be held separate from
                  the property of the Company. The Company hereby agrees to act
                  as trustee for the benefit of the Employee and his beneficiary
                  concerning any right to the Policy or its proceeds, except to
                  the extent expressly provided otherwise in this Agreement.

         (b)      In order to further protect the rights of the Employee, the
                  Company agrees that its rights to the Policy and proceeds
                  thereof shall serve as security for the Company's obligations
                  as provided in this Agreement to the Employee. The Company
                  grants to the Employee a security interest in and collaterally
                  assigns to the Employee any and all rights the Company has in
                  the Policy and products and proceeds thereof, whether now
                  existing or hereafter arising pursuant to the provisions of
                  the Policy, this Agreement, the Collateral Assignment, or
                  otherwise, to secure any and all obligations owed by the
                  Company to the Employee under this Agreement. In no event
                  shall this provision be interpreted to reduce the Employee's
                  rights to the Policy or expand in any way the rights or
                  benefits of the Company under this Agreement, the Policy, or
                  the Collateral Assignment.

9.       Amendment of Agreement.

                  Except as provided in a written instrument signed by the
         Company and the Employee, this Agreement may not be canceled, amended,
         altered, or modified.

 10.     Notice under Agreement.

                  Any notice, consent, or demand required or permitted to be
         given under the provisions of this Agreement by one party to another
         shall be in writing, signed by the party giving or making it, and may
         be given either by delivering it to such other party personally or by
         mailing it, by United States Certified Mail, postage prepaid, to such
         party, addressed to its last known address, as shown on the records of
         the Company. The date of such mailing shall be deemed the date of such
         mailed notice, consent, or demand. In the case of notice to the
         Company, notice shall be addressed to the attention of the General
         Counsel.

11.      Binding Agreement.

                  This Agreement shall bind the parties hereto and their
         respective successors, heirs, executor, administrators, and
         transferees, and any Policy beneficiary.


                                       11
<PAGE>   12

12.      Controlling Law and Characterization of Agreement.

         (a)      To the extent not governed by federal law, this Agreement and
                  the rights of the parties hereunder shall be controlled by the
                  laws of the State of Georgia.

         (b)      If this Agreement is considered a "plan" under the Employee
                  Retirement Income Security Act of 1974 ("ERISA"), both the
                  Company and the Employee acknowledge and agree that, for all
                  purposes, the Agreement shall be treated as a "welfare plan"
                  within the meaning of Section 3(1) of ERISA, so that only
                  those provisions of ERISA applicable to welfare plans shall
                  apply to the Agreement, and that any rights that might arise
                  under ERISA if this Agreement were treated as a "pension plan"
                  within the meaning of Section 3(2) of ERISA are hereby
                  expressly waived. Consistent with the preceding sentence, the
                  Employee further acknowledges that his or her rights to the
                  Policy and the release of the Company's Security Interest are
                  strictly limited to those rights set forth in this Agreement.
                  In furtherance of this acknowledgement and in consideration of
                  the Company's payment of the initial premiums for this Policy,
                  the Employee voluntarily and irrevocably relinquishes and
                  waives any additional rights in the Policy or any different
                  restrictions on the release of the Company's Security Interest
                  that he or she might otherwise argue to exist under either
                  federal, state, or local law. The Employee further agrees that
                  he or she will not argue that any such additional rights or
                  different restrictions exist in any judicial or arbitration
                  proceeding. Similarly, the Company acknowledges that its
                  Security Interest is strictly limited as set forth in this
                  Agreement and voluntarily and irrevocably relinquishes and
                  waives any additional interests or different interests or
                  advantages that the Company would have or enjoy if the
                  Agreement were not treated as a "welfare plan" within the
                  meaning of Section 3(1) of ERISA. The Company is hereby
                  designated as the named fiduciary under this Agreement.

 13.     Execution of Documents.

                  The Company and the Employee agree to execute any and all
         documents necessary to effectuate the terms of this Agreement.



                                       12
<PAGE>   13


         IN WITNESS WHEREOF, the Employee and the Company have executed this
Agreement as of the day and year first above written.


                                            MATRIA HEALTHCARE, INC.



                                            By:   /s/ Donald R. Millard       
                                                  ----------------------------
                                            Its:  President                   
                                                  ----------------------------

                                            EMPLOYEE



                                            /s/ Roberta L. McCaw               
                                            ----------------------------------
                                            ROBERTA L. McCAW


                                       13
<PAGE>   14

                                    EXHIBIT A

                    COLLATERAL SECURITY ASSIGNMENT AGREEMENT


         THIS COLLATERAL SECURITY ASSIGNMENT is made and entered into effective
as of July 1, 1998, by the undersigned as the owner (the "Owner") of Life
Insurance Policy Number I0003335 (the "Policy") issued by Aetna Life Insurance
and Annuity Company (the "Insurer") upon the life of Owner and by Matria
Healthcare, Inc., a Delaware corporation (the "Assignee").

         WHEREAS, the Owner is a valued employee of or consultant to Assignee
and the Assignee wishes to retain him or her in that capacity; and

         WHEREAS, as an inducement to the Owner's continued participation with
the Assignee, the Assignee wishes to pay premiums on the Policy, as more
specifically provided for in that certain Split-Dollar Life Insurance Agreement
dated as of July 1, 1998, and entered into between the Owner and the Assignee,
as such Agreement may be hereafter amended or modified (the "Agreement") (unless
otherwise indicated, the terms herein shall have the definitions ascribed
thereto in the Agreement); and

         WHEREAS, in consideration of the Assignee agreeing to make the premium
payments, the Owner agrees to grant the Assignee a security interest in the
Policy as collateral security; and

         WHEREAS, the Owner and the Assignee intend that the Assignee have no
greater interest in the Policy than that prescribed herein and in the Agreement;

         NOW, THEREFORE, the Owner hereby assigns, transfers and sets over to
the Assignee for security the following specific rights in the Policy, subject
to the following terms, agreements and conditions:

1.       This Collateral Security Assignment is made, and the Policy is to be
         held, as collateral security for all liabilities of the Owner to the
         Assignee, pursuant to the terms of the Agreement, whether now existing
         or hereafter arising (the "Secured Obligations").

2.       The Owner hereby grants to the Assignee a security interest in and
         collaterally assigns to the Assignee the Policy to secure the Secured
         Obligations. However, the Assignee's interest in the Policy shall be
         strictly limited to the right to receive an amount equal to the Secured
         Obligations (which right may be realized by the Assignee's receiving a
         portion of the death benefit under the Policy or by the Owner's causing
         such amount to be transferred to the Assignee (through withdrawing from
         or borrowing against the Policy) in accordance with the terms of the
         Agreement).


                                       14

<PAGE>   15

3.       (a) The Owner shall retain all incidents of ownership in the Policy,
         and may exercise such incidents of ownership except as otherwise
         limited by the Agreement and hereunder. The Insurer is only authorized
         to recognize (and is fully protected in recognizing) the exercise of
         any ownership rights by the Owner if the Insurer determines that the
         Assignee has been given notice of the Owner's purported exercise of
         ownership rights in compliance with the provisions of Section 3(b)
         hereof and as of the date thirty (30) days after such notice is given,
         the Insurer has not received written notification from the Assignee of
         the Assignee's objection to such exercise; provided that the
         designation of the beneficiary to receive the death benefits not
         otherwise payable to the Assignee pursuant to Section 3 of the
         Agreement may be changed by the Owner without prior notification of the
         Assignee. The Insurer shall not be responsible to ensure that the
         actions of the Owner conform to the Agreement.

         (b) The Assignee hereby acknowledges that for purposes of this
         Collateral Security Assignment, the Assignee shall be conclusively
         deemed to have been properly notified of the Owner's purported exercise
         of his or her ownership rights as of the third (3rd) business day
         following either of the following events: (1) the Owner mails written
         notice of such exercise to the Assignee by United States Certified
         Mail, postage paid, at the address below and provides the Insurer with
         a copy of such notice and a copy of the certified mail receipt, or (2)
         the Insurer mails written notice of such exercise to the Assignee by
         regular United States Mail, postage paid, at the address set forth
         below:

                                    Matria Healthcare, Inc.
                                    1850 Parkway Place, 12th Floor
                                    Marietta, Georgia  30067
                                    Attention:  General Counsel

         The foregoing address shall be the appropriate address for such notices
         to be sent, unless and until the receipt by both the Owner and the
         Insurer of a written notice from the Assignee of a change in such
         address.

         (c) Notwithstanding the foregoing, the Owner and the Assignee hereby
         agree that until the Assignee's security interest in the Policy is
         released, the Assignee shall from time to time designate one (1) or
         more individuals (the "Designee"), who may be officers of the Assignee,
         to direct the investments under the Policy; provided, however, that the
         Designee may only direct the investments under the Policy in funds
         offered by the Insurer under the Policy. The Assignee shall notify the
         Insurer in writing of the identity of the Designee and any changes in
         the identity of the Designee. Until the Assignee's security interest in
         the Policy is released, no other party may direct the investments under
         the Policy without the consent of the Assignee and the Owner.


                                       15
<PAGE>   16

4.       If the Policy is in the possession of the Assignee, the Assignee
         shall, upon request, forward the Policy to the Insurer without
         unreasonable delay for endorsement of any designation or change of
         beneficiary or the exercise of any other right reserved by the Owner.

5.       (a) The Assignee shall be entitled to exercise its rights under the
         Agreement by delivering a written notice to Insurer, executed by the
         Assignee and the Owner or the Owner's beneficiary, requesting either
         (1) a withdrawal or non-recourse policy loan equal to the amount to
         which the Assignee is entitled under Section 3(b) or 3(c) of the
         Agreement and transfer of such withdrawn or borrowed amount to the
         Assignee, or (2) the payment to the Assignee of that portion of the
         death benefit under the Policy to which the Assignee is entitled under
         Section 3(d) of the Agreement. So long as the notice is also signed by
         the Owner or his beneficiary, the Insurer shall pay or loan the
         specified amounts to the Assignee without the need for any additional
         documentation.

         (b) Upon receipt of a properly executed notice complying with the
         requirements of subsection (a) above, the Insurer is hereby authorized
         to recognize the Assignee's claims to rights hereunder without the need
         for any additional documentation and without investigating (1) the
         reason for such action taken by the Assignee; (2) the validity or the
         amount of any of the liabilities of the Owner to the Assignee under the
         Agreement; (3) the existence of any default therein; (4) the giving of
         any notice required herein; or (5) the application to be made by the
         Assignee of any amounts to be paid to the Assignee. The receipt of the
         Assignee for any sums received by it shall be a full discharge and
         release therefor to the Insurer.

6.       Upon the full payment of the Secured Obligations, the Assignee shall
         execute an appropriate release of this Collateral Security Assignment.

7.       The Assignee shall have the right to request of the Insurer and/or the
         Owner notice of any action taken with respect to the Policy by the
         Owner.

8.       (a) The Assignee and the Owner intend that in no event shall the
         Assignee have any power or interest related to the Policy or its
         proceeds, except as provided herein and in the Agreement,
         notwithstanding the provisions of any other documents, including the
         Policy. In the event that the Assignee ever receives or may be deemed
         to have received any right or interest beyond the limited rights
         described herein and in the Agreement, such right or interest shall be
         held in trust for the benefit of the Owner and be held separate from
         the property of the Assignee. The Assignee hereby agrees to act as
         trustee for the benefit of the Owner concerning any right to the Policy
         or its proceeds, except to the extent expressly provided otherwise in
         the Agreement and this Collateral Security Assignment Agreement.


                                       16
<PAGE>   17

         (b) In order to further protect the rights of the Owner, the Assignee
         agrees that its rights to the Policy and proceeds thereof shall serve
         as security for the Assignee's obligations to the Owner, as provided in
         the Agreement. The Assignee hereby grants to the Owner a security
         interest in and collaterally assigns to the Owner any and all rights it
         has in the Policy and products and proceeds thereof, whether now
         existing or hereafter arising pursuant to the provisions of the Policy,
         the Agreement, this Collateral Security Assignment or otherwise, to
         secure the Assignee's obligations ("Assignee Obligations") to the Owner
         under the Agreement, whether now existing or hereafter arising. The
         Assignee Obligations include all obligations owed by the Assignee to
         the Owner under the Agreement, including, without limitation: (i) to
         make the premium payments required under Section 2 of the Agreement,
         and (ii) the obligation to do nothing which may, in any way, endanger,
         defeat or impair any of the rights of the Owner in the Policy as
         provided in the Agreement. In no event shall this provision be
         interpreted to reduce the Owner's rights in the Policy or expand in any
         way the rights or benefits of the Assignee under the Agreement.

9.       The Assignee and the Owner agree to execute any documents necessary to
         effectuate this Collateral Security Assignment pursuant to the
         provisions of the Agreement. All disputes shall be settled as provided
         in Section 7 of the Agreement. Th rights under this Collateral Security
         Agreement may be enforced pursuant to the terms of the Agreement.


         IN WITNESS WHEREOF, the Owner and the Assignee have executed this
Collateral Security Assignment effective the day and year first above written.


                                            OWNER



                                            /s/ Roberta L. McCaw               
                                            -----------------------------
                                            ROBERTA L. McCAW


                                            MATRIA HEALTHCARE, INC.



                                            By:    /s/ Donald R. Millard       
                                                   -----------------------------
                                            Title: President                    
                                                   -----------------------------



                                       17
<PAGE>   18

                                    EXHIBIT B

                         SPOUSAL CONSENT TO DESIGNATION
                           OF NON-SPOUSAL BENEFICIARY



         My spouse is __________________. I hereby consent to the designation
made by my spouse of __________________ as the beneficiary (subject to any
rights collaterally assigned to Matria Healthcare, Inc.) under Life Insurance
Policy No. ________________, which Matria Healthcare, Inc. has purchased from
__________________ and transferred to him or her. I understand that this Consent
is valid only with respect to the naming of the beneficiary indicated above and
that the designation of any other beneficiary will not be valid unless I consent
in writing to such designation.

         This Consent is being voluntarily given, and no undue influence or
coercion has been exercised in connection with my consent to the designation
made by my spouse of the beneficiary named above rather than myself as the
beneficiary under the Split-Dollar Life Insurance Policy.




                                            ------------------------------------
                                            Spouse's Signature


                                            ------------------------------------
                                            Print Spouse's Name


                                            ------------------------------------
                                            Date


                                       18
<PAGE>   19

                                    EXHIBIT C

                       TRUST UNDER MATRIA HEALTHCARE, INC.
                     SPLIT-DOLLAR LIFE INSURANCE AGREEMENTS


         THIS AGREEMENT made this ____ day of ____________, 19___, by and
between MATRIA HEALTHCARE, INC., a Delaware corporation (the "Company"), and
______________________________ (the "Trustee"), a commercial bank or trust
company acceptable to a majority of the Insureds (as hereinafter defined);

         WHEREAS, the Company is a party to the Split-Dollar Insurance
Agreements (the "Agreements") listed in Appendix A for the benefit of the
insureds named therein (hereinafter referred to, individually, as an "Insured"
and collectively, as the "Insureds"); and

         WHEREAS, the Company has incurred or expects to incur liability to pay
premiums under the terms of the Agreements (such liability being referred to
herein as "Premium Obligations"); and

         WHEREAS, the Company wishes to establish a trust (hereinafter called
the "Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's creditors in the event of the Company's
Insolvency (as hereinafter defined) until used to meet the Company's Premium
Obligations; and

         WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Agreements as unfunded welfare plans; and

         WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its Premium Obligations;

         NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:

         SECTION 1.        ESTABLISHMENT OF TRUST.

         (a)      The Company hereby deposits with the Trustee in trust
                  $__________, which shall become the principal of the Trust to
                  be held, administered and disposed of by the Trustee as
                  provided in this Trust Agreement.

         (b)      The Trust hereby established shall be irrevocable.


                                       19
<PAGE>   20

         (c)      The Trust is intended to be a grantor trust, of which the
                  Company is the grantor, within the meaning of subpart E, part
                  I, subchapter J, chapter 1, subtitle A of the Internal Revenue
                  Code of 1986, as amended, and shall be construed accordingly.

         (d)      The principal of the Trust, and any earnings thereon, shall be
                  held separate and apart from other funds of the Company and
                  shall be used exclusively for the uses and purposes of meeting
                  the Company's Premium Obligations and of the Company's general
                  creditors, as herein set forth. The Insureds and their
                  beneficiaries shall have no preferred claim on, or any
                  beneficial ownership interest in, any assets of the Trust. Any
                  rights created under the Agreements and this Trust Agreement
                  shall be mere unsecured contractual rights of the Insureds and
                  their beneficiaries against the Company. Any assets held by
                  the Trust will be subject to the claims of the Company's
                  general creditors under federal and state law in the event of
                  Insolvency, as defined in Section 3(a) hereof.

         (e)      The Company, in its sole discretion, may at any time, or from
                  time to time, make additional deposits of cash or other
                  property in trust with the Trustee to augment the principal to
                  be held, administered and disposed of by the Trustee, as
                  provided in this Trust Agreement. Neither the Trustee nor any
                  Insured or beneficiary shall have any right to compel such
                  additional deposits.

         (f)      The Company shall, as soon as possible, but in no event later
                  than ninety (90) days following the establishment of this
                  Trust, make an irrevocable contribution to the Trust in an
                  amount equal to the Premium Obligations.

         SECTION 2.        PAYMENTS OF PREMIUM OBLIGATIONS.

         (a)      Attached hereto as Appendix B is a schedule (the "Payment
                  Schedule") that indicates the Premium Obligations payable in
                  respect of each Insured and the time of payment of such
                  amounts. Except as otherwise provided herein or in the
                  Agreements, the Trustee shall pay the Premium Obligations in
                  accordance with such Payment Schedule. In the event of the
                  death of an Insured, the Company shall notify the Trustee of
                  any resultant revisions in the Payment Schedule.

         (b)      The Company may make payment of Premium Obligations directly
                  to the applicable insurance company as they become due under
                  the Agreements. The Company shall notify the Trustee of its
                  decision to make payment of Premium Obligations directly prior
                  to the time amounts are payable under the Payment Schedule. In
                  addition, if the principal of the Trust and any earnings
                  thereon are not sufficient to make payments of Premium
                  Obligations in accordance with the terms of the Agreements,
                  the Company 


                                       20
<PAGE>   21

                  shall make the balance of each such payment as it
                  falls due. The Trustee shall notify the Company if the
                  principal and earnings are not sufficient.

         SECTION 3.        TRUSTEE RESPONSIBILITY REGARDING PAYMENT OF PREMIUM
                           OBLIGATIONS WHEN THE COMPANY IS INSOLVENT.

         (a)      The Trustee shall cease payment of Premium Obligations if the
                  Company is Insolvent. The Company shall be considered
                  "Insolvent" for purposes of this Trust Agreement if (i) the
                  Company is unable to pay its debts as they become due, or (ii)
                  the Company is subject to a pending proceeding as a debtor
                  under the United States Bankruptcy Code.

         (b)      At all times during the continuance of this Trust, as provided
                  in Section 1(d) hereof, the principal and income of the Trust
                  shall be subject to claims of general creditors of the Company
                  under federal and state law, as set forth below.

                  (1)      The Board of Directors and the Chief Executive
                           Officer of the Company shall have the duty to inform
                           the Trustee in writing of the Company's Insolvency.
                           If a person claiming to be a creditor of the Company
                           alleges in writing to the Trustee that the Company
                           has become Insolvent, the Trustee shall determine
                           whether the Company is Insolvent and, pending such
                           determination, the Trustee shall discontinue payment
                           of Premium Obligations.

                  (2)      Unless the Trustee has actual knowledge of the
                           Company's Insolvency, or has received notice from the
                           Company or a person claiming to be a creditor
                           alleging that the Company is Insolvent, the Trustee
                           shall have no duty to inquire whether the Company is
                           Insolvent. The Trustee may in all events rely on such
                           evidence concerning the Company's solvency as may be
                           furnished to the Trustee and that provides the
                           Trustee with a reasonable basis for making a
                           determination concerning the Company's solvency.

                   (3)     If at any time the Trustee has determined that the
                           Company is Insolvent, the Trustee shall discontinue
                           payments of Premium Obligations and shall hold the
                           assets of the Trust for the benefit of the Company's
                           general creditors. Nothing in this Trust Agreement
                           shall in any way diminish any rights of the Insureds
                           or their beneficiaries to pursue their rights as
                           general creditors of the Company with respect to the
                           Company's obligations under the Agreements or
                           otherwise.


                                       21
<PAGE>   22


                  (4)      The Trustee shall resume the payment of Premium
                           Obligations in accordance with Section 2 of this
                           Trust Agreement only after the Trustee has determined
                           that the Company is not Insolvent (or is no longer
                           Insolvent).

         (c)      Provided that there are sufficient assets, if the Trustee
                  discontinues the payment of benefits from the Trust pursuant
                  to Section 3(b) hereof and subsequently resumes such payments,
                  the first payment following such discontinuance shall include
                  the aggregate amount of all payments due under the Payment
                  Schedule for the period of such discontinuance, less the
                  aggregate amount of any premium payments made by the Company
                  in lieu of the payments provided for hereunder during any such
                  period of discontinuance.

         SECTION 4.        PAYMENTS TO THE COMPANY.

         Except as provided in Section 3 hereof, the Company shall have no right
or power to direct the Trustee to return to the Company or to divert to others
any of the Trust assets before all payment of Premium Obligations have been
satisfied pursuant to the terms of the Agreements.

         SECTION 5.        INVESTMENT AUTHORITY.

         (a)      In no event may the Trustee invest in securities (including
                  stock or rights to acquire stock) or obligations issued by the
                  Company, other than a de minimis amount held in common
                  investment vehicles in which the Trustee invests. All rights
                  associated with assets of the Trust shall be exercised by the
                  Trustee or the person designated by the Trustee, and shall in
                  no event be exercisable by or rest with Insureds.

         (b)      The Trustee and the Company shall agree to such other
                  investment powers of the Trustee as are necessary for the
                  establishment and proper administration of the Trust;
                  provided, however, that such investment powers are standard
                  among the industry and do not conflict with the terms of the
                  Trust, as set forth herein.

         SECTION 6.        DISPOSITION OF INCOME.

         During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.


                                       22
<PAGE>   23

         SECTION 7.        ACCOUNTING BY THE TRUSTEE.

         The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within one hundred twenty (120) days following the
close of each calendar year and within thirty (30) days after the removal or
resignation of the Trustee, the Trustee shall deliver to the Company a written
account of its administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.

         SECTION 8.        RESPONSIBILITY OF THE TRUSTEE.

         (a)      The Trustee shall act with the care, skill, prudence and
                  diligence under the circumstances then prevailing that a
                  prudent person acting in like capacity and familiar with such
                  matters would use in the conduct of an enterprise of a like
                  character and with like aims; provided, however, that the
                  Trustee shall incur no liability to any person for any action
                  taken pursuant to a direction, request or approval given by
                  the Company which is contemplated by, and in conformity with,
                  the terms of the Agreements or this Trust and is given in
                  writing by the Company. In the event of a dispute between the
                  Company and a party, the Trustee may apply to a court of
                  competent jurisdiction to resolve the dispute.

         (b)      If the Trustee undertakes or defends any litigation arising in
                  connection with this Trust, the Company agrees to indemnify
                  the Trustee against the Trustee's costs, expenses and
                  liabilities (including, without limitation, attorney's fees
                  and expenses) relating thereto and to be primarily liable for
                  such payments. If the Company does not pay such costs,
                  expenses and liabilities in a reasonably timely manner, the
                  Trustee may obtain payment from the Trust.

         (c)      The Trustee may consult with legal counsel (who may also be
                  counsel for the Company generally) with respect to any of its
                  duties or obligations hereunder.

         (d)      The Trustee may hire agents, accountants, actuaries,
                  investment advisors, financial consultants or other
                  professionals to assist it in performing any of its duties or
                  obligations hereunder.


                                       23
<PAGE>   24

         (e)      The Trustee shall have, without exclusion, all powers
                  conferred on trustees by applicable law, unless expressly
                  provided otherwise herein; provided, however, that if an
                  insurance policy is held as an asset of the Trust, the Trustee
                  shall have no power to name a beneficiary of the policy other
                  than the Trust, to assign the policy (as distinct from
                  conversion of the policy to a different form) other than to a
                  successor Trustee, or to loan to any person the proceeds of
                  any borrowing against such policy.

         (f)      Notwithstanding any powers granted to the Trustee pursuant to
                  this Trust Agreement or to applicable law, the Trustee shall
                  not have any power that could give this Trust the objective of
                  carrying on a business and dividing the gains therefrom,
                  within the meaning of Section 301.7701-2 of the Procedure and
                  Administrative Regulations promulgated pursuant to the
                  Internal Revenue Code of 1986, as amended.

         SECTION 9.        COMPENSATION AND EXPENSES OF THE TRUSTEE.

         The Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from the Trust.

         SECTION 10.       RESIGNATION AND REMOVAL OF THE TRUSTEE.

         (a)      The Trustee may resign at any time by written notice to the
                  Company, which shall be effective forty-five (45) days after
                  receipt of such notice, unless the Company and the Trustee
                  agree otherwise.

         (b)      The Trustee may be removed by the Company on forty-five (45)
                  days' notice or upon shorter notice accepted by the Trustee.

         (c)      If the Trustee resigns or is removed within five (5) years
                  after this Trust is established, the Company shall apply to a
                  court of competent jurisdiction for the appointment of a
                  Successor Trustee or for instructions.

         (d)      Upon resignation or removal of the Trustee and appointment of
                  a successor Trustee, all assets shall subsequently be
                  transferred to the successor Trustee. The transfer shall be
                  completed within forty-five (45) days after receipt of notice
                  of resignation, removal or transfer, unless the Company
                  extends the time limit.

         (e)      If the Trustee resigns or is removed, a successor shall be
                  appointed, in accordance with Section 11 hereof, by the
                  effective date of resignation or removal under paragraphs (a)
                  or (b) of this section. If no such appointment has been made,
                  the Trustee may apply to a court of competent jurisdiction for
                  appointment of a successor or for instructions. All expenses
                  of the Trustee in connection with the proceeding shall be
                  allowed as administrative expenses of the Trust.


                                       24
<PAGE>   25

         SECTION 11.       APPOINTMENT OF SUCCESSOR.

         If the Trustee resigns or is removed in accordance with Section 10(a)
or (b) hereof, the Company may appoint any unaffiliated third party, such as a
bank trust department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee upon resignation
or removal. The Company must obtain the prior written approval of a majority of
the then living Insureds for the appointment of the successor Trustee, unless
such appointment has been made by a court of competent jurisdiction. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee (including
ownership rights in the Trust assets). The former Trustee shall execute any
instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.

         SECTION 12.       AMENDMENT OR TERMINATION.

         (a)      This Trust Agreement may be amended by a written instrument
                  executed by the Trustee and the Company with the prior written
                  approval of all of the Insureds. Notwithstanding the
                  foregoing, no such amendment shall conflict with the terms of
                  the Agreements, shall infringe on the rights of the Insureds
                  under the Agreements, reduce or restrict the assets that are
                  the subject of the Trust, other than as required by Section 3
                  hereof, or shall make the Trust revocable.

         (b)      The Trust shall not terminate until the date on which all
                  Premium Obligations have been paid in full. Upon termination
                  of the Trust, any assets remaining in the Trust shall be
                  returned to the Company.

         (c)      Upon prior written approval of all then living Insureds, the
                  Company may terminate this Trust prior to the time all Premium
                  Obligations have been satisfied. All assets in the Trust at
                  termination shall be returned to the Company.

         SECTION 13.       MISCELLANEOUS.

         (a)      Any provision of this Trust Agreement prohibited by law shall
                  be ineffective to the extent of any such prohibition, without
                  invalidating the remaining provisions hereof.

         (b)      The rights of Insureds and their beneficiaries under this
                  Trust Agreement may not be anticipated, assigned (either at
                  law or in equity), alienated, pledged, encumbered or subjected
                  to attachment, garnishment, levy, execution or other legal or
                  equitable process.

                                       25
<PAGE>   26


         (c)      This Trust Agreement shall be governed by and construed in
                  accordance with the laws of the State of __________ [TO BE
                  DETERMINED BY THE TRUSTEE].

         SECTION 14.       EFFECTIVE DATE.

         The effective date of this Trust Agreement shall be ____________,
19___.



                                       26
<PAGE>   27


                                   APPENDIX A



         The Company is a party to a Split Dollar Insurance Agreement dated as
of July 1, 1998 with each of the following individuals: Yvonne Scoggins; Roberta
L. McCaw; Thornton A. Kuntz, Jr; James P. Reichmann, III; and Martin L. Olson.

                                       27