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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) 5/20/96
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WellPoint Health Networks Inc.
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(Exact Name of Registrant as Specified in Charter)
California 1-14340 95-3760980
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
21555 Oxnard Street, Woodland Hills, California 91367
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (818) 703-4000
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Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 20, 1996, the Company concluded a series of transactions
(collectively, the "Recapitalization") to recapitalize its publicly traded,
majority-owned subsidiary, WellPoint Health Networks Inc., a Delaware
corporation ("Old WellPoint"), pursuant to the Amended and Restated
Recapitalization Agreement dated as of March 31, 1995 (the "Amended
Recapitalization Agreement"), by and among Old WellPoint, the Company (formerly
known as Blue Cross of California), Western Health Partnerships (the "Health
Foundation") and Western Foundation for Health Improvement (the "Western
Foundation"). In connection with the Recapitalization, (a) Old WellPoint
distributed an aggregate of $995.0 million by means of a special dividend of
$10.00 per share to the record holders of its Class A and Class B Common Stock
as of May 15, 1996, (b) the Company, the sole shareholder of Old WellPoint's
Class B Common Stock, donated its portion of such dividend ($800.0 million) to
the Western Foundation, (c) the Company donated its assets, other than the
shares of the Old WellPoint Class B Common Stock held by the Company and the
Company's commercial operations (the "BCC Commercial Operations"), to the Health
Foundation, (d) the Company changed its status from a California nonprofit
public benefit corporation to a California for-profit business corporation, in
conformity with the terms and orders of the California Department of
Corporations, by means of filing amended and restated articles of incorporation
with the California Secretary of State, immediately following which the Company
issued to the Health Foundation 53,360,000 shares of its common stock and (e)
Old WellPoint merged with and into the Company (the "Merger"), with the
resulting entity changing its name to WellPoint Health Networks Inc. In
connection with the Merger, (i) each outstanding share of Old WellPoint's Class
A Common Stock was converted into 0.667 shares of the Company's Common Stock and
(ii) the outstanding shares of the Company's common stock issued to the Health
Foundation prior to the Merger were converted into 53,360,000 shares of the
post-merger Company's Common Stock and a cash payment of $235,000,000 to reflect
the value of the BCC Commercial Operations. The BCC Commercial Operations
consisted of, among other things, the health care lines of business conducted by
Blue Cross of California, substantially all agreements with health care
providers that provided services to enrollees of Blue Cross of California and
certain of the Company's subsidiaries and all of the cash and securities of Blue
Cross of California on hand at the time of closing of the Recapitalization. The
Company intends to continue the BCC Commercial Operations in substantially the
same manner as they were conducted by Blue Cross of California prior to the
Recapitalization. By virtue of the Merger and the exchange of shares of Old
WellPoint for those of the Company, as of May 20, 1996 (the effective time of
the Merger), there were a total of 66,366,500 shares of the Company's Common
Stock outstanding, of which 53,360,000 shares (or approximately 80.4%) were held
beneficially by the Health Foundation.
In connection with the Recapitalization, the Company relinquished its
rights under the Blue Cross License Agreement dated January 1, 1991, between
Blue Cross of California and the Blue Cross and Blue Shield Association (the
"BCBSA"). The BCBSA and the Company entered into a new license agreement (the
"New License Agreement"), pursuant to which the Company has become the exclusive
licensee for the right to use the Blue Cross name and related service marks in
California and has become a member of the BCBSA. The New License Agreement
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contains a number of requirements, including, among others, that (i) the Amended
and Restated Articles of Incorporation of the Company (the "Articles") prohibit
any person (other than the Health Foundation) from owning five percent or
greater of the outstanding voting securities of the Company, (ii) the Board of
Directors have three substantially equal classes with each director serving a
three-year term, (iii) there be a prohibition on cumulative voting by
shareholders and (iv) the affirmative vote of 75% or more of the outstanding
shares represented and voting at any shareholders' meeting be required to amend
certain provisions of the Articles. In addition, the majority of directors of
the Company must be independent directors (as defined in the License Agreement
Addendum by and between the Company and the BCBSA). A copy of the New License
Agreement is being filed as an exhibit to this Current Report on Form 8-K and
the description of the terms thereof contained herein is qualified by reference
to such exhibit.
In connection with the execution of the New License Agreement, the
BCBSA also required that the Health Foundation enter into a voting trust
agreement (the "Voting Trust Agreement"), pursuant to which the Health
Foundation has deposited into a voting trust the number of shares of the
Company's Common Stock sufficient to reduce the Health Foundation's holdings
outside such voting trust to a level equal to 49.9% of the outstanding shares of
the Company's Common Stock. In addition, the Health Foundation will be required,
through sales (which may involve the exercise of its registration rights
discussed below) or additional deposits into the voting trust, to reduce its
holdings outside the voting trust to 20% and 5% of the outstanding Company
Common Stock on and after the third and fifth anniversaries, respectively, of
the Recapitalization. The shares held by the trustee under the Voting Trust
Agreement generally will be voted (i) with respect to elections and removal of
directors, calling of shareholder meetings and amendment of the Company's
Articles and Bylaws, where such actions are opposed by the Board of Directors,
to support the position of the Board of Directors, and (ii) with respect to
matters enumerated in clause (i) that have the support of the Board of Directors
and with respect to other matters generally, to support the vote of the other
shareholders. With respect to those shares held by the Health Foundation in
excess of 5% of the outstanding shares of the Company that are not subject to
the Voting Trust Agreement, the Health Foundation has also entered into a voting
agreement (the "Voting Agreement"). The Voting Agreement provides among other
things, that the Health Foundation, during the period that it continues to own
in excess of 5% of the outstanding shares of the Company, will vote all shares
of the Company's Common Stock owned by it in excess of 5% of the outstanding
shares (except those shares held pursuant to the Voting Trust Agreement) in
favor of each nominee to the Board of Directors of the Company who has been
nominated by the Nominating Committee of the Board of Directors, or under
certain circumstances, other subsets of the Board of Directors, all as set forth
in the the Company's Bylaws (a copy of which is being filed as an exhibit to
this Current Report on Form 8-K). The Voting Trust Agreement and the Voting
Agreement are being filed as exhibits to this Current Report on Form 8-K and the
description of the terms thereof contained herein is qualified by reference to
such exhibits.
In connection with the Recapitalization, the Company and the Health
Foundation entered into a Registration Rights Agreement dated as of May 20,
1996, with respect to the shares of the Company received by the Health
Foundation in connection with the Merger. The Registration Rights Agreement
grants the Health Foundation (and subsequent holders of the shares covered by
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the Registration Rights Agreement) certain annual demand and piggyback
registration rights. The undertakings made by Old WellPoint in order to secure
the California Department of Corporations' approval of the Recapitalization
require the Health Foundation to make annual distributions of approximately 5%
of the value of its investment assets beginning in 1997. In order to fund such
required distributions, the Health Foundation may sell shares of the Company's
Common Stock pursuant to the exercise of its rights under the Registration
Rights Agreement. The Health Foundation and the Company have also entered into
an Indemnification Agreement dated as of May 17, 1996, pursuant to which the
Health Foundation has agreed to indemnify the Company under the terms set forth
therein against any tax liability that results from the revocation or
modification of certain Internal Revenue Service rulings received by Old
WellPoint in connection with the Recapitalization. The Registration Rights
Agreement and the Indemnification Agreement are being filed as exhibits to this
Current Report on Form 8-K and the description of the terms thereof contained
herein is qualified by reference to such exhibits.
A portion of the funds used to pay the dividend to Old WellPoint's
shareholders was provided by a borrowing of $775 million under a newly executed
Credit Agreement dated as of May 15, 1996 (the "Credit Agreement"), by and among
Old WellPoint, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, N.A. as Syndication Agent, Chemical
Bank, as Documentation Agent, and the other financial institutions named
therein. The obligations under the Credit Agreement have been assumed by the
Company. The Credit Agreement provides for an unsecured facility in the
aggregate amount of $1.25 billion, and borrowings under the Credit Agreement
will bear interest at rates determined by reference to the Bank of America base
rate, or to the London Interbank Offered Rate ("LIBOR") plus a margin determined
by reference to the Company's leverage ratio or the then-current rating of the
Company's unsecured long-term debt by specified rating agencies. The Credit
Agreement will expire as of May 15, 2001, although in certain circumstances it
may be extended for two additional one-year periods. The Credit Agreement
requires that the Company comply with certain minimum net worth, leverage ratio
and fixed charge coverage ratio requirements and contains certain other
customary covenants and restrictions, including restrictions on the incurrence
of additional indebtedness and the granting of certain liens, limitations on
acquisitions and investments and limitations on changes in control. A copy of
the Credit Agreement is being filed as an exhibit to this Current Report on Form
8-K and the description of the terms of such Credit Agreement contained herein
is qualified by reference to the Credit Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Historical financial information as of and for the
period ended December 31, 1995 was previously reported in Old
WellPoint's Annual Report on Form 10-K (SEC File No. 1-11628)
for the fiscal year ended December 31, 1995, at pages F-2 to
F-24, and is incorporated herein by this reference. It is
impracticable to provide the historical financial information
as of and for the period ended March 31, 1996 at the time of
filing of this Current Report on Form 8-K. Such historical
financial information will be filed as soon as it is
available, but in no event later than 60 days after this
Current Report on Form 8-K was due to be filed.
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(b) PRO FORMA FINANCIAL INFORMATION
Pro forma financial information as of and for the
period ended December 31, 1995 was previously reported in Old
WellPoint Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, at pages 32 to 38, and is
incorporated herein by this reference. It is impracticable to
provide the pro forma financial information as of and for the
period ended March 31, 1996 at the time of filing of this
Current Report on Form 8-K. Such pro forma financial
information will be filed as soon as it is available, but in
no event later than 60 days after this Current Report on Form
8-K was due to be filed.
(c) EXHIBITS
Exhibit No. Exhibit
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3.1 Amended and Restated Articles of
Incorporation of WellPoint Health Networks
Inc., a California corporation (the
"Company").
3.2 Bylaws of the Company.
3.3 Agreement of Merger dated as of May 20, 1996
by and among the Company, WellPoint Health
Networks Inc., a Delaware corporation,
Western Health Partnerships and Western
Foundation for Health Improvement
99.1 Amended and Restated Recapitalization
Agreement dated as of March 31, 1995, by and
among WellPoint Health Networks Inc., a
Delaware corporation, the Company, Western
Health Partnerships and Western Foundation
for Health Improvement (Filed as Exhibit
99.1 to Old WellPoint's Current Report on
Form 8-K (File No. 1-11628) dated February
20, 1996 and incorporated herein by this
reference).
99.2 Voting Trust Agreement dated as of May 20,
1996 by and between the Company, Western
Health Partnerships and Wilmington Trust
Company.
99.3 Voting Agreement dated as of May 8, 1996 by
and among the Company and Western Health
Partnerships.
99.4 Share Escrow Agent Agreement dated as of May
20, 1996 by and between the Company and U.S.
Trust Company of California, N.A.
99.5 Registration Rights Agreement dated as of
May 20, 1996 by and between the Company and
Western Health Partnerships.
99.6 Blue Cross License Agreement effective as of
May 20, 1996 by and among the Blue Cross and
Blue Shield Association and the Company.
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99.7 California Blue Cross License Addendum
effective as of May 20, 1996 by and between
the Blue Cross and Blue Shield Association
and the Company.
99.8 Blue Cross Affiliated License Agreement
effective as of May 20, 1996 by and between
the Blue Cross and Blue Shield Association
and CaliforniaCare Health Plans.
99.9 Indemnification Agreement dated as of May
17, 1996 by and among the Company, WellPoint
Health Networks Inc., a Delaware
corporation, and Western Health
Partnerships.
99.10 Credit Agreement dated as of May 15, 1996 by
and among the Company, Bank of America
National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas,
N.A., as Syndication Agent, Chemical Bank,
as Documentation Agent, and the other
financial institutions named therein.
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SIGNATURE
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 the
undersigned hereunto duly authorized.
Dated: May 31, 1996
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Howard G. Phanstiel
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Name: Howard G. Phanstiel
Title: Executive Vice President, Finance
and Information Services
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EXHIBIT INDEX
Exhibit No. Description
3.1 Amended and Restated Articles of
Incorporation of WellPoint Health Networks
Inc., a California corporation (the
"Company").
3.2 Bylaws of the Company.
3.3 Agreement of Merger dated as of May 20, 1996
by and among the Company, WellPoint Health
Networks Inc., a Delaware corporation,
Western Health Partnerships and Western
Foundation for Health Improvement
99.1 Amended and Restated Recapitalization
Agreement dated as of March 31, 1995, by and
among WellPoint Health Networks Inc., a
Delaware corporation, the Company, Western
Health Partnerships and Western Foundation
for Health Improvement (Filed as Exhibit
99.1 to Old WellPoint's Current Report on
Form 8-K (File No. 1-11628) dated February
20, 1996 and incorporated herein by this
reference).
99.2 Voting Trust Agreement dated as of May 20,
1996 by and between the Company, Western
Health Partnerships and Wilmington Trust
Company.
99.3 Voting Agreement dated as of May 8, 1996 by
and among the Company and Western Health
Partnerships.
99.4 Share Escrow Agent Agreement dated as of May
20, 1996 by and between the Company and U.S.
Trust Company of California, N.A.
99.5 Registration Rights Agreement dated as of
May 20, 1996 by and between the Company and
Western Health Partnerships.
99.6 Blue Cross License Agreement effective as of
May 20, 1996 by and among the Blue Cross and
Blue Shield Association and the Company.
99.7 California Blue Cross License Addendum
effective as of May 20, 1996 by and between
the Blue Cross and Blue Shield Association
and the Company.
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99.8 Blue Cross Affiliated License Agreement
effective as of May 20, 1996 by and between
the Blue Cross and Blue Shield Association
and CaliforniaCare Health Plans.
99.9 Indemnification Agreement dated as of May
17, 1996 by and among the Company, WellPoint
Health Networks Inc., a Delaware
corporation, and Western Health
Partnerships.
99.10 Credit Agreement dated as of May 15, 1996 by
and among the Company, Bank of America
National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas,
N.A., as Syndication Agent, Chemical Bank,
as Documentation Agent, and the other
financial institutions named therein.
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Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BLUE CROSS OF CALIFORNIA
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ARTICLE I
NAME
The name of the corporation (hereinafter called the "Corporation") is
Blue Cross of California.
ARTICLE II
PURPOSE
SECTION 1. The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust company
business or the practice of a profession permitted to be incorporated by the
California Corporations Code (the "CCC").
SECTION 2. Upon the effectiveness of these Amended and Restated
Articles of Incorporation, all existing memberships are cancelled without
consideration.
ARTICLE III
AUTHORIZED CAPITAL STOCK
SECTION 1. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is three hundred and fifty million
(350,000,000) shares as follows: (a) three hundred million (300,000,000) shares
of Common Stock, $.01 par value per share ("Common Stock"), and (b) fifty
million (50,000,000) shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
SECTION 2. The rights, preferences, privileges and restrictions of the
classes of stock of the Corporation and the express grant of authority to the
Board of Directors to fix by resolution the rights, preferences, privileges and
restrictions relating to the classes of stock of the Corporation which are not
fixed by these Articles of Incorporation, are as follows:
COMMON STOCK
A. DIVIDENDS.
Subject to any other provisions of these Articles of Incorporation, as
amended from time to time, holders of Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon from time to time by the Board of
Directors of the Corporation (the "Board of Directors") out of assets or funds
of the Corporation legally available therefor.
B. VOTING.
(i) At every meeting of the shareholders, every holder of Common Stock
shall be entitled to one (1) vote in person or by proxy for each share of Common
Stock standing in his or her name on the transfer books of the Corporation.
(ii) The provisions of this Article III of these Articles of
Incorporation shall not be modified, revised, altered or amended, repealed or
rescinded, in whole or in part, without the affirmative vote of the holders of a
majority of the shares of Common Stock.
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PREFERRED STOCK
The Board of Directors is authorized to provide, by resolution, for the
issuance of one or more series of Preferred Stock out of the unissued shares of
Preferred Stock and the Board of Directors is authorized to determine the
designation and to fix the number of shares of each series. Except as may be
required by law, the shares in any series of Preferred Stock need not be
identical to any other series of Preferred Stock or any other class.
The Board of Directors of the Corporation is further authorized to
determine or alter the rights, preferences, privileges, and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock, and to
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any such series of Preferred Stock
subsequent to the issue of shares of that series.
ARTICLE IV
BOARD OF DIRECTORS
AND SHAREHOLDER MEETINGS
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders:
SECTION 1. The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less than
nine nor more than seventeen directors, the exact number of directors to be
determined in accordance with the Bylaws of the Corporation. The directors shall
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. At each annual
meeting of shareholders beginning in 1997, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term. If the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible, but in no case shall a decrease in the number
of directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. The
provisions of this Section 1 relating to the division of the Board of Directors
into three classes shall become effective only when the Corporation becomes a
listed corporation within the meaning of Section 301.5 of the California
Corporations Code (the "CCC").
SECTION 2. In the case of any vacancy on the Board of Directors,
including any vacancy created by the removal of a director, or in the case of
any newly created directorship, a director elected to fill the vacancy or the
newly created directorship for the unexpired portion of the term being filled
shall be elected pursuant to the procedures set forth in the Bylaws of the
Corporation. The director elected to fill a vacancy shall hold office for the
unexpired term in respect of which the vacancy occurred and until his successor
shall be elected and shall qualify or until his or her earlier death,
resignation or removal.
SECTION 3. Any director or the entire Board of Directors may be removed
with or without cause in accordance with Sections 302 and 303, respectively, of
the CCC.
SECTION 4. Whenever the holders of any series of Preferred Stock issued
by the Corporation or of any other securities of the Corporation shall have the
right, voting separately by series, to elect directors at an annual or special
meeting of shareholders, the election, term of
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office, filling of vacancies and other features of such directorships shall be
governed by the terms of these Articles of Incorporation applicable thereto.
SECTION 5. Election of Directors need not be by ballot unless a
shareholder demands election by ballot at the meeting and before the voting
begins or unless the Bylaws so require.
SECTION 6. The Board of Directors shall have the concurrent power with
the shareholders to make, alter, amend, change, add to or repeal (collectively,
"Change") the Bylaws of the Corporation.
SECTION 7. No action required or permitted to be taken at any annual or
special meeting of shareholders of the Corporation may be taken by written
consent without a meeting of such shareholders. The provisions of this Section 7
shall become effective only when the Corporation becomes a listed corporation
within the meaning of Section 301.5 of the CCC.
SECTION 8. Special meetings of the shareholders of the Corporation for
any purpose or purposes may be called at any time by the Chairman of the Board,
the President, a majority of the members of the Board of Directors or the
holders of shares entitled to cast not less than 10% of the votes at the
meeting. Such special meeting may not be called by any other person or persons
or in any other manner.
SECTION 9. The approval of the greater of at least two-thirds or seven
of the directors of the Corporation then in office shall be required for the
Board of Directors to approve and authorize any of the following:
(a) any amendment to these Articles of Incorporation of the
Corporation; and
(b) the amendment of Sections 8 and 10 of Article II, Sections 2, 3 and
14 of Article III, Sections 1 and 2 of Article IV, and Sections 6 and 7 of
Article V of the Bylaws of the Corporation.
ARTICLE V
INDEMNIFICATION
SECTION 1. Other than in the case of an action by, or in the right of,
the Corporation, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or an
officer of the Corporation or of a Predecessor Corporation, against expenses
(including, but not limited to, attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding to the fullest extent and in the manner set
forth in and permitted by the CCC and any other applicable law, as from time to
time in effect. To the maximum extent permitted by the CCC, the Corporation
shall advance expenses (including attorneys' fees) incurred by any person
indemnified hereunder in defending any civil, criminal, administrative or
investigative action, suit or proceeding upon an undertaking by or on behalf of
such person to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation. Such rights of
indemnification and advancement of expenses shall not be deemed to be exclusive
of any other rights to which such director or officer may be entitled apart from
the foregoing provisions. The foregoing provisions of this Section 1 shall be
deemed to be a contract between the Corporation (or any Predecessor Corporation)
and each director and officer who serves in such capacity at any time while this
Section 1 and the relevant provisions of the CCC and other applicable law, if
any, are in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing, with respect to any state of facts then or
theretofore existing,
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or any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts. For purposes
hereof "Predecessor Corporation" shall mean WellPoint Health Networks Inc., a
Delaware corporation ("WellPoint"), and its subsidiaries, as such corporations
existed prior to the effective time of the merger of WellPoint into the
Corporation (the "WellPoint Merger Effective Time").
SECTION 2. The Corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was an employee or
agent of the Corporation (or a Predecessor Corporation), or is or was serving at
the request of the Corporation (or a Predecessor Corporation), as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including, but not limited to,
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding to
the extent and in the manner set forth in and permitted by the CCC and any other
applicable law as from time to time in effect. Such right of indemnification
shall not be deemed to be exclusive of any other rights to which any such person
may be entitled apart from the foregoing provisions.
ARTICLE VI
LIABILITY FOR BREACH OF FIDUCIARY DUTY
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
ARTICLE VII
RESTRICTION ON TRANSFER
SECTION 1. No Person (as defined in Section 14 below) shall
Beneficially Own (as defined in Section 14 below) shares of Capital Stock (as
defined in Section 14 below) in excess of the Ownership Limit (as defined in
Section 14 below). Any Transfer (as defined in Section 14 below) that, if
effective, would result in any Person Beneficially Owning Capital Stock in
excess of the Ownership Limit shall result in such intended transferee acquiring
no rights in such shares of Capital Stock (other than those rights expressly
granted in this Article VII) and such number of shares of Capital Stock shall be
deemed transferred to the Share Escrow Agent (as defined in Section 14 below) as
set forth in this Article VII.
SECTION 2. If, notwithstanding any other provisions of this Article
VII, there is a purported Transfer or other change in the capital structure of
the Corporation such that any Person would Beneficially Own shares of Capital
Stock in excess of the Ownership Limit (a "Purported Owner"), then, upon such
Transfer or change in capital structure, such shares of Capital Stock in excess
of the Ownership Limit shall be Excess Shares for purposes of this Article VII;
provided, however, that in the event that any Person becomes a Purported Owner
as a result of Beneficial Ownership of Capital Stock of one Person being
aggregated with another Person, then the number of Excess Shares subject to this
Article VII shall be allocated pro rata among each Purported Owner in proportion
to each Person's total Beneficial Ownership (without regard to any aggregation
with another Person pursuant to Section 14(b)(4) or (5) of this Article VII).
Upon the occurrence of any event that would cause any Person to exceed the
Ownership Limit (including without limitation the expiration of a voting trust,
without being renewed on substantially similar terms, that entitled such Person
to an exemption from the Ownership Limit), all shares of Capital Stock
Beneficially Owned by such Person in excess of the Ownership Limit shall also be
Excess Shares for purposes of this Article VII, such Person shall be deemed the
Purported Owner of such Excess Shares and such Person's rights in such Excess
Shares shall be
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as prescribed in this Article VII. Excess Shares shall not constitute a separate
class of Capital Stock.
SECTION 3. If the Corporation at any time determines that a Transfer
has taken place in violation of Section 1 of this Article VII or that a
Purported Owner intends to acquire or has attempted to acquire Beneficial
Ownership of any shares of Capital Stock in violation of Section 1 of this
Article VII, the Corporation shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer, including, without
limitation, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin or rescind such Transfer;
provided, however, that any purported Transfers in violation of Section 1 of
this Article VII shall automatically result in all shares of Capital Stock in
excess of the Ownership Limit being deemed Excess Shares. Notwithstanding the
foregoing, nothing contained in this Article VII shall limit the authority of
the Corporation to take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its shareholders.
SECTION 4. Any Purported Owner who acquires or attempts to acquire
shares of Capital Stock in violation of Section 1 of this Article VII, or any
Purported Owner who is a transferee such that any shares of Capital Stock are
deemed Excess Shares under Section 2 of this Article VII, shall immediately give
written notice to the Corporation of such event and shall provide to the
Corporation such other information as the Corporation may request.
SECTION 5. Each certificate for Capital Stock issued at or after the
WellPoint Merger Effective Time shall bear the following legend:
The shares of stock represented by this certificate are
subject to restrictions on ownership and transfer. No Person shall
Beneficially Own shares of Capital Stock in excess of the Ownership
Limit (as defined in Article VII, Section 14 of the Amended and
Restated Articles of Incorporation of the Corporation). Subject to
certain limited specific exemptions, Beneficial Ownership of 5% or more
of the outstanding shares of any class of Capital Stock will exceed the
Ownership Limit. These provisions have been designed to ensure that the
Corporation will not violate the terms of the License Agreement between
the Corporation and the Blue Cross and Blue Shield Association (the
"BCBSA"). The Corporation maintains at its principal executive office a
copy of the applicable requirements of the BCBSA relating to such
restrictions on ownership and transfer, as such requirements may be
amended from time to time, which are open to inspection by the
shareholders at all reasonable times during office hours. Any Person
who attempts to beneficially own shares in violation of this limitation
must immediately notify the Corporation. All capitalized terms in this
legend have the meanings ascribed to them in the Corporation's Amended
and Restated Articles of Incorporation, as the same may be amended from
time to time, a copy of which, including the restrictions on ownership
and transfer, will be sent without charge to each shareholder who so
requests. Upon the occurrence of any event that would cause any Person
to exceed the Ownership Limit (including without limitation the
expiration of a voting trust that entitled such Person to an exemption
from the Ownership Limit), all shares of Capital Stock Beneficially
Owned by such Person in excess of the Ownership Limit will
automatically be deemed Excess Shares and be transferred immediately to
the Share Escrow Agent and be subject to the provisions of the
Corporation's Amended and Restated Articles of Incorporation and the
Excess Share Escrow Agreement, a copy of which the Corporation
maintains at its principal executive office. The foregoing summary of
the restrictions on ownership and transfer are qualified in its
entirety by reference to the Corporation's Amended and Restated
Articles of Incorporation.
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SECTION 6. Upon the occurrence of a Transfer or an event that results
in Excess Shares pursuant to Section 2 of this Article VII, such Excess Shares
shall automatically be transferred immediately to the Share Escrow Agent, which
Excess Shares, subject to the provisions of this Article VII, shall be held by
the Share Escrow Agent until such time as the Excess Shares are transferred to a
Person whose acquisition thereof will not violate the Ownership Limit (a
"Permitted Transferee") and the Share Escrow Agent shall be authorized to
execute any and all documents sufficient to transfer title to any Permitted
Transferee, even in the absence of receipt of certificate(s) representing Excess
Shares. The Corporation shall take such actions as it deems necessary to give
effect to such transfer to the Share Escrow Agent, including by issuing a stop
transfer order to the Corporation's transfer agent with respect to any attempted
transfer by the Purported Owner or its nominee of any Excess Shares and by
giving effect, or by instructing the Corporation's transfer agent to give
effect, to such transfer to a Permitted Transferee on the books of the
Corporation. Excess Shares so held shall be issued and outstanding shares of
Capital Stock. The Purported Owner shall have no rights in such Excess Shares
except as provided in Sections 7, 8, and 11 of this Article VII and the
administration of the Excess Shares escrow shall be governed by the terms of an
Excess Share Escrow Agreement
SECTION 7. The Share Escrow Agent, as record holder of Excess Shares,
shall be entitled to receive all dividends and distributions as may be declared
by the Board of Directors with respect to Excess Shares (the "Excess Share
Dividends") and shall hold the Excess Share Dividends until disbursed in
accordance with the provisions of Section 11 following. The Purported Owner,
with respect to Excess Shares purported to be Beneficially Owned by such
Purported Owner prior to such time that the Corporation determines that such
shares are Excess Shares, shall repay to the Share Escrow Agent the amount of
any Excess Share Dividends received by it that (i) are attributable to any
Excess Shares and (ii) the record date of which is on or after the date that
such shares become Excess Shares. The Corporation shall take all measures that
it determines reasonably necessary to recover the amount of any Excess Share
Dividends paid to a Purported Owner, including, if necessary, withholding any
portion of future dividends or distributions payable on shares of Capital Stock
Beneficially Owned by any Purported Owner (including on shares which fall below
the Ownership Limit as well as on Excess Shares), and, as soon as practicable
following the Corporation's receipt or withholding thereof, shall pay over to
the Share Escrow Agent the dividends so received or withheld, as the case may
be.
SECTION 8. In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of, or any distribution of the assets of, the
Corporation, the Share Escrow Agent shall be entitled to receive, ratably with
each other holder of Capital Stock of the same class or series, that portion of
the assets of the Corporation that is available for distribution to the holders
of such class or series of Capital Stock. The Share Escrow Agent shall
distribute to the Purported Owner the amounts received upon such liquidation,
dissolution or winding up or distribution in accordance with the provisions of
Section 11 of this Article VII.
SECTION 9. The Share Escrow Agent shall be entitled to vote all Excess
Shares. The Share Escrow Agent shall be instructed by the Corporation to vote,
consent or assent the Excess Shares as follows: (i) if the matter concerned is
the election of directors, the Share Escrow Agent shall vote, consent or assent
the whole number of Excess Shares held by the Share Escrow Agent for each
director by multiplying the number of votes held in escrow by a fraction, the
numerator of which is the number of Nonaffiliated Votes cast for the director
and the denominator of which is the number of Nonaffiliated Votes that could
have been cast in the election of the director and are present in person or by
proxy at the meeting; (ii) where the matter under the CCC or these Articles of
Incorporation or the Bylaws of the Corporation requires at least an absolute
majority of all outstanding shares of Common Stock in order to be effected, then
the Share Escrow Agent shall vote, assent or consent all of such Excess Shares
in favor of or in opposition to such matter as the majority of all Nonaffiliated
Votes are cast; and (iii) on all other matters, the Share Escrow Agent shall at
all times vote, assent or consent all of such shares in the identical proportion
in
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favor of or in opposition to such matter as Nonaffiliated Votes are cast. If
any calculation of votes under the preceding sentence would require a fractional
vote, the Share Escrow Agent shall vote the next lower number of whole Excess
Shares. The Share Escrow Agent shall use all reasonable commercial efforts to
ensure, with respect to Excess Shares, that such Excess Shares are counted as
being present for the purposes of any quorum required for shareholder action of
the Corporation and to vote as set forth above. For purposes of these Articles
of Incorporation, Nonaffiliated Votes shall mean the votes cast by shareholders
other than any Share Escrow Agent with respect to Excess Shares.
SECTION 10.
(a) In an orderly fashion so as not to materially adversely affect the
price of Common Stock on the New York Stock Exchange or, if Common Stock is not
listed on the New York Stock Exchange, on the exchange or other principal market
on which Common Stock is traded, the Share Escrow Agent shall sell or cause the
sale of Excess Shares at such time or times as the Share Escrow Agent determines
to be appropriate. The Share Escrow Agent shall have the right to take such
actions as the Share Escrow Agent deems appropriate to seek to restrict sale of
the shares to Permitted Transferees.
(b) The Share Escrow Agent shall have the power to convey to the
purchaser of any Excess Shares sold by the Share Escrow Agent ownership of the
Excess Shares free of any interest of the Purported Owner of those Excess Shares
and free of any other adverse interest arising through the Purported Owner.
(c) Upon acquisition by any Permitted Transferee of any Excess Shares
sold by the Share Escrow Agent or the Purported Owner, such shares shall upon
such sale cease to be Excess Shares and shall become regular shares of Capital
Stock in the class to which the Excess Shares belong, and the purchaser of such
shares shall acquire such shares free of any claims of the Share Escrow Agent or
the Purported Owner.
(d) To the extent permitted by law, none of the Corporation, the Share
Escrow Agent or anyone else shall have any liability to the Purported Owner or
anyone else by reason of any action or inaction the Corporation or the Share
Escrow Agent shall take which either shall in good faith believe to be within
the scope of its authority under this Article VII or by reason of any decision
as to when or how to sell any Excess Shares or by reason of any other action or
inaction in connection with activities under this Article VII which does not
constitute gross negligence or willful misconduct. Without limiting by
implication the scope of the preceding sentence, to the extent permitted by law,
(a) neither the Share Escrow Agent nor the Corporation shall have any liability
on grounds that either failed to take actions which would have produced higher
proceeds for any of the Excess Shares or by reason of the manner or timing for
any disposition of any Excess Shares and (b) the Share Escrow Agent shall not be
deemed to be a fiduciary or Agent of any Purported Owner.
SECTION 11. The proceeds from the sale of the Excess Shares to a
Permitted Transferee and any Excess Share Dividends shall be distributed as
follows: (i) first, to the Share Escrow Agent for any costs and expenses
incurred in respect of its administration of the Excess Shares that have not
theretofore been reimbursed by the Corporation; (ii) second, to the Corporation
for all costs and expenses incurred by the Corporation in connection with the
appointment of the Share Escrow Agent, the payment of fees to the Share Escrow
Agent with respect to the services provided by the Share Escrow Agent in respect
of the escrow and all funds expended by the Corporation to reimburse the Share
Escrow Agent for costs and expenses incurred by the Share Escrow Agent in
respect of its administration of the Excess Shares and for all fees,
disbursements and expenses incurred by the Share Escrow Agent in connection with
the sale of the Excess Shares; and (iii) third, the remainder thereof (as the
case may be) to the
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Purported Owner or the Person who was the holder of record before the shares
were transferred to the Share Escrow Agent (depending on who shall at such time
be entitled to any economic interest in the Excess Shares); provided, however,
if the Share Escrow Agent shall have any questions as to whether any security
interest or other interest adverse to the Purported Owner shall have existed
with respect to any Excess Shares, the Share Escrow Agent shall not be obligated
to disburse proceeds for those shares until the Share Escrow Agent is provided
with such evidence as the Share Escrow Agent shall deem necessary to determine
the parties who shall be entitled to such proceeds.
SECTION 12. Subject to Section 13 of this Article VII, nothing
contained in this Article VII or in any other provision of these Articles of
Incorporation shall limit the authority of the Corporation to take such other
action as it deems necessary or advisable to protect the Corporation and the
interests of its shareholders.
SECTION 13. Nothing in these Articles of Incorporation shall preclude
the settlement of any transactions entered into through the facilities of the
New York Stock Exchange or any other exchange or through the means of any
automated quotation system now or hereafter in effect.
SECTION 14. The following definitions shall apply with respect to this
Article VII:
(a) "affiliate" and "associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended or supplemented (the "Exchange
Act") at the time as of which the term shall be applied and any other federal
law which BCBSA shall reasonably judge to have replaced or supplemented the
coverage of the Exchange Act as in effect at the WellPoint Merger Effective
Time.
(b) Except as is provided in (c) of this Section 14, a Person shall be
deemed to "Beneficially Own", be the "Beneficial Owner" of or have "Beneficial
Ownership" of any Capital Stock:
(1) in which such Person shall then have a direct or indirect
beneficial ownership interest;
(2) in which such Person shall have the right to acquire any
direct or indirect beneficial ownership interest pursuant to any option or other
agreement (either immediately or after the passage of time or the occurrence of
any contingency);
(3) which such Person shall have the right to vote;
(4) in which such Person shall hold any other interest which
would count in determining whether such Person would be required to file a
Schedule 13D; or
(5) which shall be Beneficially Owned (under the concepts
provided in the preceding clauses) by any affiliate or associate of the
particular Person or by any other Person with whom the particular Person or any
such affiliate or associate has any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities and other than
pursuant to that certain Registration Rights Agreement between the Corporation
and Western Health Partnerships to be entered into at the consummation of the
merger of WellPoint Health Networks Inc. into the Corporation) relating to the
acquisition, holding, voting or disposing of any securities of the Corporation.
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(c) The following provisions are included to clarify (b) above:
(1) A Person shall not be deemed to Beneficially Own, be the
Beneficial Owner of, or have Beneficial Ownership of Capital Stock by reason of
possessing the right to vote if (i) such right arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act, and (ii) such Person is not the
Purported Owner of any Excess Shares, is not named as holding a beneficial
ownership interest in any Capital Stock in any filing on Schedule 13D and is not
an affiliate or associate of any such Purported Owner or named Person.
(2) A member of a national securities exchange or a registered
depositary shall not be deemed to Beneficially Own, be the Beneficial Owner of
or have Beneficial Ownership of Capital Stock held directly or indirectly by it
on behalf of another Person (and not for its own account) solely because such
member or depositary is the record holder of such Capital Stock, and (in the
case of such member), pursuant to the rules of such exchange, such member may
direct the vote of such Capital Stock without instruction on matters which are
uncontested and do not affect substantially the rights or privileges of the
holders of the Capital Stock to be voted, but is otherwise precluded by the
rules of such exchange from voting such Capital Stock without instruction on
either contested matters or matters that may affect substantially the rights or
the privileges of the holders of such Capital Stock to be voted.
(3) A Person who in the ordinary course of business is a
pledgee of Capital Stock under a written pledge agreement shall not be deemed to
Beneficially Own, be the Beneficial Owner of or have Beneficial Ownership of
such pledged Capital Stock solely by reason of such pledge until the pledgee has
taken all formal steps which are necessary to declare a default or has otherwise
acquired the power to vote or to direct to vote such pledged Capital Stock,
provided that:
(i) The pledge agreement is bona fide and was not
entered into with the purpose nor with the effect of changing or influencing the
control of the Corporation, nor in connection with any transaction having such
purpose or effect, including any transaction subject to Rule 13d-3(b)
promulgated under the Exchange Act; and
(ii) The pledge agreement does not grant to the
pledgee the right to vote or to direct the vote of the pledged securities prior
to the time the pledgee has taken all formal steps which are necessary to
declare a default.
(4) A Person engaged in business as an underwriter or a
placement agent for securities who enters into an agreement to acquire or
acquires Capital Stock solely by reason of its participation in good faith and
in the ordinary course of its business in the capacity of underwriter or
placement agent in any underwriting or agent representation registered under the
Securities Act of 1933, as amended and in effect at the WellPoint Merger
Effective Time (the "Securities Act"), a bona fide private placement, a resale
under Rule 144A promulgated under the Securities Act or in any foreign or other
offering exempt from the registration requirements under the Securities Act
shall not be deemed to Beneficially Own, be the Beneficial Owner of or have
Beneficial Ownership of such securities until the expiration of forty (40) days
after the date of such acquisition so long as (i) such Person does not vote such
Capital Stock during such period and (ii) such participation is not with the
purpose or with the effect of changing or influencing control of the
Corporation, nor in connection with or facilitating any transaction having such
purpose or effect, including any transaction subject to Rule 13d-3(b)
promulgated under the Exchange Act.
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(5) If the Corporation shall sell shares in a transaction not
involving any public offering, then each purchaser in such offering shall be
deemed to obtain Beneficial Ownership in such offering of the shares purchased
by such purchaser, but no particular purchaser shall be deemed to Beneficially
Own or have acquired Beneficial Ownership or be the Beneficial Owner in such
offering of shares purchased by any other purchaser solely by reason of the fact
that all such purchasers are parties to customary agreements relating to the
purchase of equity securities directly from the Corporation in a transaction not
involving a public offering, provided that:
(i) All the purchasers are persons specified in Rule
13d-1(b)(1)(ii) promulgated under the Exchange
Act;
(ii) The purchase is in the ordinary course of each
purchaser's business and not with the purpose nor with the effect of changing or
influencing control of the Corporation, nor in connection with or as a
participant in any transaction having such purpose or effect, including any
transaction subject to Rule 13d-3(b) promulgated under the Exchange Act;
(iii) There is no agreement among or between any
purchasers to act together with respect to the Corporation or its securities
except for the purpose of facilitating the specific purchase involved; and
(iv) The only actions among or between any purchasers
with respect to the Corporation or its securities subsequent to the closing date
of the nonpublic offering are those which are necessary to conclude ministerial
matters directly related to the completion of the offer or sale of the
securities sold in such offering.
(6) The Share Escrow Agent shall not be deemed to be the
Beneficial Owner of any Excess Share held by such Share Escrow Agent pursuant to
an Excess Share Escrow Agreement, nor shall any such Excess Shares be aggregated
with any other share of Capital Stock held by affiliates or associates of such
Share Escrow Agent.
(d) "Capital Stock" shall mean shares (or any other basic unit) of any
class or series of any voting security which the Corporation may at any time
issue or be authorized to issue, that entitles the holder thereof to vote on any
election, but not necessarily all elections, of directors. To the extent that
classes or series of Capital Stock vote together in the election of directors
with equal votes per share, they shall be treated as a single class of Capital
Stock for the purpose of computing the relevant Ownership Limit or the right to
amend these Articles of Incorporation.
(e) "License Agreement" shall mean the license agreement between the
Corporation and the BCBSA, including any and all addenda thereto, now in effect
and, as it may be amended, modified, superseded and/or replaced from time to
time, with respect to, among other things, the "Blue Cross" name and mark.
(f) "Ownership Limit" shall mean the following:
(1) Except as otherwise expressly provided in this Subsection
(f) and subject to Section 15(a), the Ownership Limit shall be that number of
shares of Capital Stock one share lower than the number of shares of Capital
Stock which would represent 5% of the Voting Power.
(2) In the event the Corporation and BCBSA shall agree in
writing, through an amendment of the License Agreement or otherwise, that an
Ownership Limit of a higher percentage than that prescribed in clause (1) shall
apply, then the Ownership Limit shall be as specified in such written agreement.
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(3) In the event any particular Person shall Beneficially Own
shares of Capital Stock in excess of the Ownership Limit which would apply were
it not for this clause (3) (the "Regular Limit"), such ownership shall not be
deemed to exceed the Ownership Limit provided that (i) such Person shall not at
any time Beneficially Own shares of Capital Stock in excess of the Regular Limit
plus 1% and (ii) within thirty (30) days of the time when the particular Person
becomes aware of the fact that the Regular Limit has been exceeded, the
particular Person reduces such Person's Beneficial Ownership below the Regular
Limit.
(g) "Person" shall mean any individual, firm, partnership, corporation,
trust, association, joint venture or other entity, and shall include any
successor (by merger or otherwise) or of any such entity.
(h) "Schedule 13D" means a report on Schedule 13D under Regulation 13D
under the Exchange Act as in effect at the WellPoint Merger Effective Time and
any report which may be required in the future under any requirements which
BCBSA shall reasonably judge to have any of the purposes served by Schedule 13D
as in effect at the WellPoint Merger Effective Time.
(i) "Share Escrow Agent" shall mean the Person appointed by the
Corporation to act as escrow agent with respect to some or all of the Excess
Shares.
(j) "Transfer" shall mean any sale, transfer, gift, hypothecation,
pledge, assignment, devise or other disposition of Capital Stock (including (i)
the granting of any option or entering into any agreement for the sale, transfer
or other disposition of Capital Stock or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or exchangeable
for Capital Stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
(k) "Voting Power." The percentage of the voting power attributable to
the shares of Capital Stock Beneficially Owned by any particular Person shall be
equal to the percentage of all votes which could be cast in any election of any
director which could be accounted for by the shares of Capital Stock
Beneficially Owned by that particular Person. If in connection with an election
for any particular position on the Board, shares in different classes or series
are entitled to be voted together for purposes of such election, then in
determining the number of "all votes which could be cast" in the election for
that particular position for purposes of the preceding sentence, the number
shall be equal to the number of votes which could be cast in the election for
that particular position if all shares entitled to be voted in such election
(regardless of series or class) were in fact voted in such election. If the
Corporation shall issue any series or class of shares for which positions on the
Board are reserved or shall otherwise issue shares which have voting rights
which can arise or vary based upon terms governing that class or series, then
the percentage of the voting power represented by the shares of Capital Stock
Beneficially Owned by any particular Person shall be the highest percentage of
the total votes which could be accounted for by those shares in any election of
any director.
SECTION 15. (a) This Article VII shall become effective only when the
Corporation becomes a listed corporation within the meaning of Section 301.5 of
the CCC as of the WellPoint Merger Effective Time, and even then shall not be
applicable with respect to any outstanding shares of Capital Stock of the
Corporation which were issued by the Corporation prior to the merger of
WellPoint into the Corporation, or which were issued by the Corporation in the
merger of WellPoint into the Corporation in exchange for shares issued by the
Corporation prior to the merger of WellPoint into the Corporation, or any shares
acquired by any holder thereof with respect to such shares after such time as a
result of a stock dividend, stock split, conversion, recapitalization, exchange
of shares or the like, so long as such shares shall be Beneficially Owned by the
same Person who Beneficially Owned such shares prior to the WellPoint Merger
Effective Time (the "Original Owner") or an affiliate of the Original Owner or
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by a trustee for the account of the Original Owner or affiliate of the Original
Owner. All shares of Capital Stock issued prior to the effectiveness of this
Article VII and such other shares of Capital Stock received by the Original
Owner or affiliate or trustee thereof as a result of a stock dividend, stock
split, conversion, recapitalization, exchange of shares or the like shall be
aggregated with any other shares of Capital Stock for which the Original Owner
or affiliate or trustee of the Original Owner becomes a Beneficial Owner after
the effectiveness of this Article VII ("After Acquired Shares") in determining
if such After Acquired Shares are Excess Shares. Upon the transfer of any
Beneficial Ownership interest in any Capital Stock from the Original Owner or
affiliate or trustee thereof to any unaffiliated transferee after the WellPoint
Merger Effective Time that Capital Stock shall become fully subject to this
Article VII from and at all times after such transfer.
Any shares originally issued to the Original Owner prior to the
WellPoint Merger Effective Time or issued to the Original Owner in the merger of
WellPoint into this Corporation in exchange for such previously issued shares or
issued with respect to such shares as a result of a stock dividend, stock split,
conversion, recapitalization, exchange of shares or the like shall automatically
become subject to this Article VII upon transfer to any affiliate or trustee of
the Original Owner, unless such affiliate or trustee is subject to a binding
obligation to vote such shares as prescribed by the terms of the Voting
Agreement or Voting Trust Agreement, whichever is applicable, entered into by
the Original Owner at or prior to the WellPoint Merger Effective Time with
respect to shares subject to such Agreement. For purposes of this Section 15(a),
neither the Western Foundation for Health Improvement nor any of its successors
in interest or affiliates shall be deemed to be an affiliate of the Original
Owner.
(b) This Article VII shall become ineffective and of no
further force and effect in the event that the Corporation ceases to be subject
to any License Agreement.
(c) Subject to (a) and (b) above, the Board of Directors of
the Corporation has the power to interpret this Article VII and, in the absence
of manifest error, any interpretation by the Board of Directors of the
Corporation shall be binding; provided, however, that in making any such
interpretation, the Board of Directors of the Corporation shall consider the
Corporation's obligations to the BCBSA, wherever relevant.
ARTICLE VIII
NO PREFERENTIAL RIGHTS
No shareholder of the Corporation shall, by reason of his, her or its
holding shares of any class, have any preemptive or preferential rights to
purchase or subscribe to any shares of the Corporation now or hereafter to be
authorized, or any notes, debentures, bonds or other securities convertible into
or carrying options or warrants to purchase shares of any class now or hereafter
to be authorized (whether or not the issuance of any such shares or such notes,
debentures, bonds or other securities would adversely affect the dividend or
voting rights of such shareholder) other than such rights, if any, as the Board
of Directors in its discretion from time to time may grant and at such price as
the Board of Directors may fix; and the Board of Directors may issue shares of
the Corporation or any notes, debentures, bonds or other securities, convertible
into or carrying options or warrants to purchase shares without offering any
such shares, either in whole or in part, to the existing shareholders.
ARTICLE IX
NO CUMULATIVE VOTING
Shareholders are not entitled to cumulate votes at any election of
directors. This Article IX shall become effective only when the Corporation
becomes a listed corporation within the meaning of Section 301.5 of the CCC.
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ARTICLE X
BOOKS AND RECORDS
The books and records of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of California at such
place or places as may be designated from time to time by the Board of Directors
or in the Bylaws of the Corporation.
ARTICLE XI
RIGHT TO AMEND ARTICLES OF INCORPORATION
The Corporation reserves the right to Change any provision contained in
these Articles of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon shareholders herein are granted subject
to this reservation; provided, however, that subject to the powers and rights
provided for herein with respect to Preferred Stock issued by the Corporation,
if any, but not withstanding anything else contained in these Articles of
Incorporation to the contrary, (a) the affirmative vote of the holders of at
least seventy-five percent (75%) of each class of the shares of Capital Stock,
represented and voting at a duly held meeting of shareholders of the Corporation
at which a quorum is present, voting by class, shall be required to Change
Sections 1, 2, 6, 7 and 9 of Article IV, Article VII, Article IX or this Article
XI; (b) no amendment of these Articles of Incorporation as described in the
preceding clause (a) shall be effective unless approved by the affirmative vote
of a majority of the outstanding shares of Capital Stock entitled to vote, (c)
the provisions of clause (a) above shall not apply to any amendment to Article
VII to conform Article VII to a change to the terms of the License Agreement or
to any amendment to Article VII required or permitted by the BCBSA (whether or
not constituting a change to the terms of the License Agreement) and (d) the
provisions of clauses (a), (b) and (c) above shall become ineffective and of no
further force and effect in the event that the Corporation ceases to be subject
to any License Agreement.
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Exhibit 3.2
BYLAWS
OF
BLUE CROSS OF CALIFORNIA
1
<PAGE> 2
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE
The Board of Directors shall fix the location of the principal
executive office of the Corporation at any place within or outside the State of
California. If the principal executive office is located outside this state, and
the Corporation has one or more business offices in this state, the Board of
Directors shall fix and designate a principal business office in the State of
California.
SECTION 2. OTHER OFFICES
The Board of Directors may at any time establish branch or subordinate
offices at any place or places within or outside the State of California as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the Board of Directors. In the absence of
any such designation by the Board of Directors, shareholders' meetings shall be
held at the principal executive office of the Corporation.
SECTION 2. ANNUAL MEETINGS
The annual meeting of the shareholders for the election of directors
and for the transaction of such other business as may properly come before such
meeting shall be held on the second Tuesday of May each year at 10:00 A.M., if
not a legal holiday under the laws of the place where such meeting is to be
held, and if a legal holiday, then on the next succeeding day not a legal
holiday under the laws of that place, or on such other date and at such hour as
may be fixed from time to time by the Board of Directors.
SECTION 3. SPECIAL MEETINGS
Subject to the rights of holders of any class or series of stock having
a preference over the Corporation's common stock (the "Common Stock"), a special
meeting of the shareholders may be called at any time by a majority of the
entire Board of Directors, the Chairman of the Board, the President or the
holders of shares entitled to cast not less than 10% of the votes at the
meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the Chairman of the Board or the President, the request
shall be in writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile transmission to the
Chairman of the Board, the President, any Vice President, or the Secretary of
the Corporation. The officer receiving the request shall cause notice to be
given promptly to the shareholders entitled to vote, in accordance with the
provisions of Section 4 and 5 of this Article II, that a meeting will be held at
the time and date requested by the person or persons calling the meeting, which
date shall be not less than 35 nor more than 60 days after receipt of the
request. If the notice is not given within 20 days after receipt of the request,
the person or
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persons requesting the meeting may give the notice so long as the notice given
complies with the other provisions of this section. Nothing contained in this
paragraph of this Section 3 shall be construed as limiting, fixing or affecting
the time when a meeting of shareholders called by action of the Board of
Directors may be held.
SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 5 of this Article II not less than 10 (or, if
sent by third-class mail, 30) nor more than 60 days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted, and no other business may be transacted or (ii) in the case of the
annual meeting, those matters which the Board of Directors, at the time of
giving the notice, intends to present for action by the shareholders. The notice
of any meeting at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by the Board of
Directors for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the California Corporations Code (the
"CCC"), (ii) an amendment of the Articles of Incorporation, pursuant to Section
902 of the CCC, (iii) a reorganization of the Corporation, pursuant to Section
1201 of the CCC, (iv) a voluntary dissolution of the Corporation, pursuant to
Section 1900 of the CCC, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the CCC, the notice shall also state the general nature of that
proposal.
SECTION 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Notice of any meeting of shareholders shall be given either personally
or by first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the shareholder at the address of that shareholder
appearing on the books of the Corporation or given by the shareholder to the
Corporation for the purpose of notice. If no such address appears on the
Corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by first-class mail or telegraphic or other written
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county in which that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if such notices or reports shall be available to
the shareholder on written demand of the shareholder at the principal executive
office of the Corporation for a period of one year from the date of the giving
of such notice or report to other shareholders.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the Secretary, Assistant Secretary,
or any transfer agent of the Corporation giving the notice, and shall be filed
and maintained in the minute book of the Corporation.
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SECTION 6. QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting of shareholders shall constitute a quorum
(unless reduced by an amendment to the Articles of Incorporation of the
Corporation, but in any case no fewer than one-third of the shares entitled to
vote) for the transaction of business. The shareholders present at a duly called
or held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
SECTION 7. ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy, but in the
absence of a quorum, no other business may be transacted at that meeting, except
as provided in Section 6 of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set for
the original meeting, in which case the Board of Directors shall set a new
record date. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 4 and 5 of this Article II. At any adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting.
SECTION 8. VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 11 of this Article
II, subject to the provisions of Sections 702 to 704, inclusive, of the CCC
(relating to voting shares held by a fiduciary, in the name of a corporation, or
in joint ownership). The shareholders' vote may be by voice vote (unless
required by law or determined by a majority of the Board of Directors to be
unadvisable) or by ballot; provided, however, that any election for directors
must be by ballot if demanded by any shareholder before the voting has begun.
Any shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares which such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares that such shareholder is entitled
to vote. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter (other than
the election of directors) shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required under applicable law or by
the Articles of Incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes.
At any meeting of shareholders at which shares of Common Stock are
voted that are held of record by the trustee pursuant to the Voting Trust
Agreement (the "Foundation Voting Trust") effective as of the Effective Time (as
hereinafter defined) by and between Western Health Partnerships and Wilmington
Trust Company, as trustee (the "Foundation Trust Shares") or held by the Share
Escrow Agent pursuant to Article VII of the Corporation's Articles of
Incorporation
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("Excess Shares"), the polls at such meeting shall be conditionally closed
following such time as shareholders have cast their votes either by proxy or by
ballot. Thereafter, following a preliminary tabulation of the votes cast at such
meeting, the polls shall be reopened solely for the purpose of permitting the
Foundation Trust Shares, and any Excess Shares pursuant to Article VII of the
Corporation's Articles of Incorporation, if any, to be voted in accordance with
the Foundation Voting Trust, or Article VII of the Corporation's Articles of
Incorporation, as the case may be.
SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS
The transactions of any meeting of the shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote thereat, not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
need not specify either the business to be transacted or the purpose of any
annual or special meeting of shareholders, except that if action is taken or
proposed to be taken for approval of any of those matters specified in Section
601(f) of the CCC, the waiver of notice or consent shall state the general
nature of the proposal approved. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Notwithstanding anything contained in these Bylaws to the contrary, no
action required or permitted to be taken at any meeting of shareholders of the
Corporation may be taken by written consent without a meeting of shareholders.
The provisions of this Section 10 shall become effective only when the
Corporation becomes a listed corporation within the meaning of Section 301.5 of
the CCC.
SECTION 11. RECORD DATE FOR SHAREHOLDER NOTICE AND VOTING
For purposes of determining the shareholders entitled to notice of any
meeting or to vote, the Board of Directors may fix, in advance, a record date,
which shall not be more than 60 days nor less than 10 days before the date of
any such meeting, and in this event only shareholders of record on the date so
fixed are entitled to notice and to vote, notwithstanding any transfer of any
shares on the books of the Corporation after the record date, except as
otherwise provided in the CCC.
If the Board of Directors does not so fix a record date, the record
date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
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SECTION 12. PROXIES
Every person entitled to vote for directors or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the shareholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by a writing delivered to the
Corporation stating that the proxy is revoked, or by a subsequent proxy executed
by, or attendance at the meeting and voting in person by, the person executing
the proxy; or (ii) written notice of the death or incapacity of the maker of
that proxy is received by the Corporation before the vote pursuant to that proxy
is counted; provided, however, that no proxy shall be valid after the expiration
of 11 months from the date of the proxy, unless otherwise provided in the proxy.
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Sections 705(e) and 705(f) of the CCC.
SECTION 13. INSPECTORS OF ELECTION
Before any meeting of shareholders, the Board of Directors may appoint
any person other than nominees for office, directors or shareholders to act as
inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any shareholder or a shareholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one or three.
If inspectors are appointed at a meeting on the request of one or more
shareholders or proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one or three inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies;
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
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ARTICLE III
DIRECTORS
SECTION 1. POWERS
Subject to the provisions of the CCC and any limitations in the
Corporation's Articles of Incorporation relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:
(a) Select and remove all officers, agents, and employees of the
Corporation; prescribe any powers and duties for them that are consistent with
law, with the Articles of Incorporation, and with these Bylaws; fix their
compensation; and require from them security for faithful service.
(b) Change the principal executive office or the principal business
office in the State of California from one location to another; cause the
Corporation to be qualified to do business in any other state, territory,
dependency, or country and conduct business within or outside the State of
California; and designate any place within or outside the State of California
for the holding of any shareholders' meeting, or meetings, including annual
meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates.
(d) Authorize the issuance of shares of stock of the Corporation on any
lawful terms, in consideration of money paid, labor done, services actually
rendered, debts or securities cancelled, or tangible or intangible property
actually received.
(e) Borrow money and incur indebtedness on behalf of the Corporation,
and cause to be executed and delivered for the Corporation's purposes, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations, and other evidences of debt and securities.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS
Until the expiration of the Initial Period, the Board of Directors
shall consist of 9 members. For purposes hereof, "Initial Period" shall mean the
period commencing as of the effective time (the "Effective Time") of the merger
of WellPoint Health Networks Inc. ("WellPoint"), a Delaware corporation, with
and into the Corporation and ending upon the date on which Western Health
Partnerships and its affiliates, when taken together, cease to Beneficially Own
Capital Stock (as defined in Section 14(d) of Article VII of the Corporation's
Articles of Incorporation) in excess of the Ownership Limit (as defined in
Section 14(f) of Article VII of the Corporation's Articles of Incorporation, but
without disregarding outstanding shares of the Corporation issued prior to the
Corporation becoming a listed corporation within the meaning of Section 301.5 of
the CCC).
Each of the directors of the Corporation shall hold office for the term
for which he or she is elected and until (i) his or her successor has been
elected and qualified or (ii) his or her earlier death, resignation or removal.
Effective upon the Corporation becoming a listed corporation within the meaning
of Section 301.5 of the CCC, the directors of the Corporation shall be
classified, with respect to the time for which they hold office, into three
classes as nearly equal
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in number as possible: Class I, consisting of Ms. Sanders and Messrs. Birk and
Knight, whose term expires at the annual meeting of stockholders held in 1997,
and Class II, consisting of Messrs. Banks and Davenport, whose term expires at
the annual meeting of stockholders held in 1998 and Class III, consisting of Ms.
Hill and Messrs. Besson and Schaeffer, whose term expires at the annual meeting
of stockholders held in 1999, with each class to hold office until its
successors are elected and qualified. If the number of directors is changed by
the Board of Directors, then any newly created directorships or any decrease in
directorships shall be so apportioned among the classes as to make all classes
as nearly equal as possible; provided, that no decrease in the number of
directors shall shorten the term of any incumbent director. At each annual
meeting of the stockholders, subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election.
Directors need not be shareholders. In any election of directors, the
persons receiving a plurality of the votes cast, up to the number of directors
to be elected in such election, shall be deemed to be elected.
SECTION 3. VACANCIES
In the case of any vacancy on the Board of Directors or in the case of
any newly created directorship, a director elected to fill the vacancy or the
newly created directorship for the unexpired portion of the term being filled,
shall be elected by a vote of not less than a majority of the directors of the
Corporation then in office, from a list of one or more persons proposed in
accordance with the nominating process specified in Article IV, Section 2 of
these Bylaws, or, in the absence of such list being arrived at in accordance
with the nominating process specified in Article IV, Section 2 of these Bylaws,
then by the vote of a majority of the Board of Directors, provided however,
during the Initial Period, in the case of replacing or filling a vacancy of a
BCC Designee, the vote shall be of not less than a majority of the remaining BCC
Designees and, in the case of replacing or filling a vacancy of a WellPoint
Designee, the vote shall be of not less than a majority of the remaining
WellPoint Designees. Each director so elected shall hold office until the next
annual meeting of the shareholders and until a successor has been elected and
qualified. A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
Any director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
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SECTION 4. REMOVAL OF DIRECTORS
Any or all of the directors may be removed with or without cause in
accordance with Sections 302 and 303, respectively, of the CCC.
SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE
Regular meetings of the Board of Directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the Board of Directors. In the absence of such a
designation, regular meetings shall be held at the principal executive office of
the Corporation. Special meetings of the Board of Directors shall be held at any
place within or outside the State of California that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no notice,
at the principal executive office of the Corporation. Any meeting, regular or
special, may be held by conference telephone, electronic video screen
communication or other communications equipment, if (1) each member
participating in the meeting can communicate with all of the other members
concurrently, (2) each member is provided the means of participating in all
matters before the Board of Directors, including the capacity to propose, or to
interpose an objection, to a specific action to be taken by the Corporation, and
(3) the Corporation adopts and implements some means of verifying that (a) a
member communicating by telephone, electronic video screen, or other
communications equipment is a director entitled to participate in the meeting,
and (b) all statements, questions, actions, or votes were made by that director
and not by another person not permitted to participate as a director.
Participation in a meeting as permitted by this Section 5 constitutes presence
in person at such meeting.
SECTION 6. REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held without call
at such time as shall from time to time be fixed by the Board of Directors. Such
regular meetings may be held without notice.
SECTION 7. SPECIAL MEETINGS
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the Chairman of the Board, the President or by a
majority of directors.
Notice of the time and place of special meetings (but the purpose need
not be stated) shall be delivered personally or by telephone, facsimile, or
electronic mail message to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
residence or usual place of business. In case the notice is mailed, it shall be
deposited in the United States mail at least two (2) calendar days before the
time of the holding of the meeting. In case the notice is delivered personally,
or by telephone, facsimile, electronic mail message, or telegram, it shall be
delivered personally or by telephone, facsimile, electronic mail message, or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. As used herein, notice by telephone shall be deemed to
include a voice messaging system or other system or technology designed to
record and communicate messages, or wireless, to the recipient, including the
recipient's designated voice mailbox or address on such a system.
SECTION 8. QUORUM
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A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except as so provided in Section 14 of
this Article and as provided in Article IV. Every act done or decision made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, subject to the
provisions of Section 310 of the CCC (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the CCC (as to appointment of committees), and Section
317 of the CCC (as to indemnification of directors). A meeting at which a quorum
is initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for that meeting.
SECTION 9. WAIVER OF NOTICE
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any director who attends the meeting
without protesting before or at its commencement the lack of notice to that
director.
SECTION 10. ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
SECTION 11. NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given, unless the meeting is adjourned for more than 24 hours, in which case
notice of the time and place shall be given prior to the time of the adjourned
meeting, in the manner specified in Section 7 of this Article III, to the
directors who were not present at the time of the adjournment.
SECTION 12. ACTION WITHOUT MEETING
Any action required or permitted to be taken by the Board of Directors
may be taken without a meeting, if all members of the Board shall individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the Board of
Directors. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board.
SECTION 13. FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement of expenses, as may be fixed or
determined by resolution of the Board of Directors. This Section 13 shall not be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation for those services.
SECTION 14. RULES AND REGULATIONS
The Board of Directors may adopt such rules and regulations not
inconsistent with the provisions of the Articles of Incorporation, these Bylaws
or applicable law for the conduct of its
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meetings and management of the affairs of the Corporation as the Board of
Directors may deem to be proper.
SECTION 15. LOANS BY THE CORPORATION TO OFFICERS.
The Board of Directors, acting alone (by a vote sufficient without
counting the vote of any interested director or directors), and without any
approval of the shareholders of the Corporation, shall be authorized to approve
the making of any loan of money or property by the Corporation to, or the
guarantee by the Corporation of the obligation of, any officer (whether or not a
director) of the Corporation, or an employee benefit plan authorizing such a
loan or guaranty to an officer (whether or not a director), if the Board of
Directors determines that such a loan or guaranty or plan may reasonably be
expected to benefit the Corporation.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES
The Board may, by resolution adopted by a majority of the authorized
number of directors, designate one or more committees, each consisting of two or
more directors, to serve at the pleasure of the Board, provided, however, that
any executive committee established pursuant to this provision shall, during the
Initial Period, have at least one member who shall be a BCC Designee (as
hereinafter defined) and a majority of members who shall be non-BCC Designees..
Subject to Section 2 of this Article IV, the Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. Any committee, to the
extent allowed by law and provided in these Bylaws or the resolution
establishing the committee, shall have all the authority of the Board in the
management and of the business and affairs of the Corporation. Each committee
shall keep regular minutes and report to the Board when required.
SECTION 2. NOMINATING COMMITTEE
There shall be a Nominating Committee of the Board which shall consist
of three directors, at least one of whom shall be a BCC Designee and a majority
of members who shall be non-BCC Designees, and all of whom shall be independent,
but none of whom shall consist of the Chairman of the Board so long as the
Chairman of the Board is also an executive officer of the Corporation. The
Nominating Committee shall continue in existence, with the power and authority
specified in this Section 2, at least until the expiration of the Initial
Period. So long as it shall remain in existence, the Nominating Committee shall
have the power, acting by majority vote, to nominate persons to serve as
directors of the Corporation, subject (i) to any rights of shareholders under
law to nominate persons to serve as directors, (ii) in the case of a person
nominated to be a replacement for any BCC Designee on the Board, the BCC
Designee member(s) of the Nominating Committee shall have a veto vote, (iii) in
the case of a person nominated to be a replacement for any WellPoint Designee on
the Board, the Nominating Committee shall not nominate such a person if a
majority of the WellPoint Designee members of the Nominating Committee oppose
such a nomination, (iv) to any contractual obligations of the Corporation, and
(v) to the next paragraph hereof.
So long as the Nominating Committee shall remain in existence, if the
Nominating Committee is unable to nominate a candidate for the Corporation's
Board of Directors as set forth above on a timely basis, nominations shall be
made by vote of a majority of the Board of Directors, provided, however, in the
case of replacing a BCC Designee, by vote of a majority of the remaining BCC
Designees or, in the case of replacing a WellPoint Designee, by vote of a
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majority of the remaining WellPoint Designees and with respect to any other
position on the Board, by a vote of a majority of the Board of Directors.
As used in these Bylaws, "BCC Designee" means each of W. Toliver
Besson, Stephen L. Davenport and Robert T. Knight, or a direct or indirect
replacement thereof; "WellPoint Designees" shall mean Leonard D. Schaeffer,
David R. Banks, Roger E. Birk, Julie A. Hill and Elizabeth E. Sanders (once her
appointment to the Board of Directors has become effective), or a direct or
indirect replacement thereof.
SECTION 3. POWERS OF COMMITTEES
Any committee, to the extent allowed by law and provided in these
Bylaws or the resolution of the Board of Directors establishing the committee,
shall have all the authority of the Board of Directors, except with respect to:
(a) the approval of any action which, under the CCC, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
Board of Directors or on any committee;
(d) the amendment or repeal of Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the Board of
Directors;
(f) a distribution to the shareholders of the Corporation, except at a
rate or in a periodic amount or within a price range set forth in the
Corporation's Articles of Incorporation or determined by the Board of Directors;
or
(g) the appointment of any other committees of the Board of Directors
or the members of these committees.
SECTION 4. MEETINGS AND ACTION OF COMMITTEES
Meetings and action of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these Bylaws, Section
5 (place of meetings), Section 6 (regular meetings), Section 7 (special meetings
and notice), Section 8 (quorum), Section 9 (waiver of notice), Section 10
(adjournment), Section 11 (notice of adjournment), and Section 12 (action
without meeting), with such changes in the context of those Bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members, except that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee; special meetings of committees may also be called by resolution
of the Board of Directors; and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
Bylaws.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS
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The officers of the Corporation shall be a Chairman of the Board, a
President, a Secretary, and a Chief Financial Officer. The Treasurer is the
Chief Financial Officer of the Corporation unless the Board of Directors has by
resolution determined a Vice President or other officer to be the Chief
Financial Officer. The Corporation may also have, at the discretion of the Board
of Directors, one or more vice presidents, one or more assistant secretaries,
one or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
offices may be held by the same person.
SECTION 2. ELECTION OF OFFICERS
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article V, shall be chosen by the Board of Directors, and each shall serve at
the pleasure of the Board, subject to the rights, if any, of any officer under
an express written contract of employment.
SECTION 3. SUBORDINATE OFFICERS
The Board of Directors may appoint, and may empower the President to
appoint, such other officers as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the Bylaws or as the Board of Directors or the
President may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS
Except as otherwise provided in these Bylaws and subject to the rights,
if any, of any officer under an express written contract of employment, any
officer may be removed, either with or without cause, by the Board of Directors,
at any regular or special meeting of the Board of Directors, or except in the
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
SECTION 5. VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
SECTION 6. CHAIRMAN OF THE BOARD
The Chairman of the Board shall, when present, preside at meetings of
the Board of Directors and, when present, preside at the meetings of the
shareholders. The Chairman of the Board shall perform such duties and possess
such powers as are usually vested in the office of the Chairman of the Board or
as may be vested in the Chairman of the Board by the Board of Directors, subject
to the terms of his or her employment agreement.
SECTION 7. PRESIDENT
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The President shall be the chief operating officer of the Corporation.
He shall also be the chief executive officer of the Corporation, unless such
title is assigned to the Chairman of the Board. The President shall perform such
duties and possess such powers as are usually vested in the office of the
President or as may be vested in the President by the Board of Directors,
subject to the terms of his or her employment agreement.
SECTION 8. VICE PRESIDENT
In the absence or disability of the President, the vice presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors or the Bylaws,
and the President, or the Chairman of the Board.
SECTION 9. SECRETARY
The Secretary shall keep or cause to be kept, at the principal
executive office or such other place as the Board of Directors may direct, a
book of minutes of all meetings and actions of directors, committees of
directors, and shareholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice given, the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings.
The Secretary shall keep or cause to be kept, at the principal
executive office or at such other place as designated by the Board of Directors,
a share register, or a duplicate share register, showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep the seal of the Corporation if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or by the Bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS AND FIDUCIARIES
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SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall be required, to the maximum extent permitted by
the CCC, to indemnify each of its directors and officers against expenses,
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact that
any such person is or was a director, officer, employee, or other agent of the
Corporation or a Predecessor Corporation or is or was serving at the request of
the Corporation or a Predecessor Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise. For purposes hereof, "Predecessor Corporation" shall mean WellPoint
and its subsidiaries as such corporations existed prior to the Effective Time.
SECTION 2. INDEMNIFICATION OF OTHER AGENTS
The Corporation may, in its absolute discretion, up to the maximum
extent permitted by the CCC, indemnify each of its agents who are not required
to be indemnified under Section 1 of this Article VI against expenses,
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact that
any such person is or was an agent of the Corporation or a Predecessor
Corporation. For purposes of this Section 2, an "agent" of the Corporation
includes any person who is or was an employee or other agent of the Corporation
or a Predecessor Corporation, or is or was serving at the request of the
Corporation or a Predecessor Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise.
SECTION 3. INDEMNIFICATION OF FIDUCIARIES
The Corporation shall indemnify any director, officer, employee, or
other agent of the Corporation against expenses, judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
proceeding arising by reason of the fact that any such person is or was a
trustee, investment manager, or other fiduciary under any employee benefit plan
of the Corporation (or a Predecessor Corporation). The provisions of this
Section 3 shall be deemed to constitute a contract between the Corporation (or
any Predecessor Corporation) and any such indemnified person, or for the benefit
of any such indemnified person, as provided in the provisions of Section 317 of
the CCC.
SECTION 4. ADVANCES OF EXPENSES
Expenses incurred in defending any proceeding in the cases described in
Sections 1 and 3 of this Article VI shall, and in the case described in Section
2 of this Article VI may, be advanced by the Corporation prior to the final
disposition of such proceeding upon receipt of any undertaking by or on behalf
of the agent to repay such amount, if it shall be determined ultimately that the
agent is not entitled to be indemnified as authorized in this section.
ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER
The Corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed and as
determined by resolution of the Board of Directors, a record of its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
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A shareholder or shareholders of the Corporation holding at least 5% in
the aggregate of the outstanding voting shares of the Corporation may (i)
inspect and copy the records of shareholders' names and addresses and
shareholdings during usual business hours upon five days' prior written demand
on the Corporation, or (ii) obtain from the transfer agent of the Corporation,
upon written demand and upon the tender of such transfer agent's usual charges
for such list, a list of the shareholders' names and addresses entitled to vote
for the election of directors, and their shareholdings, as of the most recent
record date for which that list has been compiled or as of a date specified by
the shareholder subsequent to the date of demand. This list shall be made
available to any such shareholder by the transfer agent on or before the later
of five days after the demand is received or the date specified in the demand as
the date as of which the list is to be compiled. The record of shareholders
shall also be open to inspection on the written demand of any shareholder or
holder of a voting trust certificate, at any time during usual business hours,
for a purpose reasonably related to the holder's interests as a shareholder or
as the holder of a voting trust certificate. Any inspection and copying under
this Section 1 may be made in person or by an agent or attorney of the
shareholder or holder of a voting trust certificate making the demand.
SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS
The Corporation shall keep at its principal executive office, or if its
principal executive office is not in the State of California, at its principal
business office in this state, the original or a copy of the Bylaws as amended
to date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the Corporation
is outside the State of California and the Corporation has no principal business
office in this state, the Secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the Bylaws as amended to
date.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
Board of Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal executive
office of the Corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to the
shareholder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and to make extracts. These rights of
inspection shall extend to the records of each subsidiary corporation of the
Corporation which is subject to the CCC with respect to such a right of
inspection.
SECTION 4. INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind and the physical
properties of the Corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
SECTION 5. FINANCIAL STATEMENTS
A copy of any annual financial statement and any income statement of
the Corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the
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Corporation as of the end of each such period, that has been prepared by the
Corporation shall be kept on file in the principal executive office of the
Corporation for 12 months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of any such
statement or a copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least 5% of the outstanding
shares of any class of stock of the Corporation makes a written request to the
Corporation for an income statement of the Corporation for the three-month,
six-month or nine-month period of the then current fiscal year ended more than
30 days before the date of the request, and a balance sheet of the Corporation
as of the end of that period, the Chief Financial Officer shall cause that
statement to be prepared, if not already prepared, and shall deliver personally
or mail that statement or statements to the person making the request within 30
days after the receipt of the request. If the Corporation has not sent to the
shareholders its annual report for the last fiscal year, this report shall
likewise be delivered or mailed to the shareholder or shareholders within 30
days after the request.
The Corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
Section shall be accompanied by the report, if any, of any independent
accountants engaged by the Corporation or the certificate of an authorized
officer of the Corporation that the financial statements were prepared without
audit from the books and records of the Corporation.
SECTION 6. ANNUAL STATEMENT OF GENERAL INFORMATION
The Corporation shall, during the applicable filing period each year,
file with the Secretary of State of the State of California, on the prescribed
form, a statement setting forth the authorized number of directors, the names
and complete business or residence addresses of all incumbent directors, the
names and complete business or residence addresses of the Chief Executive
Officer, Secretary, and Chief Financial Officer, the street address of its
principal executive office or principal business office in this state, and the
general type of business constituting the principal business activity of the
Corporation, together with a designation of the agent of the Corporation for the
purpose of service of process, all in compliance with Section 1502 of the CCC.
Notwithstanding the above, if there has been no change in the information
contained in the corporation's last annual statement on file in the Secretary of
State's office, the corporation may, in lieu of filing the annual statement,
advise the Secretary of State, on the appropriate form, that no changes in the
required information have occurred during the applicable period.
ARTICLE VIII
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before any such action, and in that case only shareholders
of record on the date so fixed are entitled to receive the dividend,
distribution, or allotment of rights or to exercise the rights, as the case may
be, notwithstanding any transfer of any shares on the books of the Corporation
after the record date so fixed, except as otherwise provided in the CCC.
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If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the date on which the Board of Directors adopts the applicable
resolution or the sixtieth day before the date of that action, whichever is
later.
SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS
All checks, drafts, or other orders for payment of money, notes, or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the Board of
Directors.
SECTION 3. EXECUTING CORPORATE CONTRACTS AND INSTRUMENTS
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation, and this authority may be general or confined to specific
instances; and, unless so authorized or ratified by the Board of Directors or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the Corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
SECTION 4. CERTIFICATES FOR SHARES
A certificate or certificates for shares of the capital stock of the
Corporation shall be issued to each shareholder when any of these shares are
fully paid, and the Board of Directors may authorize the issuance of
certificates or shares as partly paid provided that these certificates shall
state thereon the amount of the consideration to be paid for them and the amount
paid. All certificates shall be signed in the name of the Corporation by the
Chairman of the Board or the President or Vice President and by the Chief
Financial Officer or an Assistant Treasurer or the Secretary or any Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed on a certificate shall have ceased to
be that officer, transfer agent, or registrar before that certificate is issued,
it may be issued by the Corporation with the same effect as if that person were
an officer, transfer agent, or registrar at the date of issue.
SECTION 5. LOST CERTIFICATES
Except as provided in this Section 5, no new certificates for shares
shall be issued to replace an old certificate unless the latter is surrendered
to the Corporation and cancelled at the same time. The Board of Directors may,
in case any share certificate or certificate for any other security is lost,
stolen, or destroyed, authorize the issuance of a replacement certificate on
such terms and conditions as the Board of Directors may require, including
provision for indemnification of the Corporation secured by a bond or other
adequate security sufficient to protect the Corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, the President, or any Vice President, or any
other person authorized by resolution of the Board of Directors or by any of the
foregoing designated officers,
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is authorized to vote on behalf of the Corporation any and all shares of any
other corporation or corporations, foreign or domestic, standing in the name of
the Corporation. The authority granted to these officers to vote or represent on
behalf of the Corporation any and all shares held by the Corporation in any
other corporation or corporations may be exercised by any of these officers in
person or by any person authorized to do so by a proxy duly executed by these
officers.
SECTION 7. CONSTRUCTION AND DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the CCC shall govern the construction of these
Bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENT BY SHAREHOLDERS
New Bylaws may be adopted or these Bylaws may be amended or repealed by
the vote of holders of a majority of the outstanding shares entitled to vote,
except as otherwise provided by law or in the Articles of Incorporation.
SECTION 2. AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 1 of
this Article IX, to adopt, amend, or repeal Bylaws, and subject to the
provisions of the Articles of Incorporation, Bylaws may be adopted, amended, or
repealed by the Board of Directors; provided, however, that the Board of
Directors may adopt a Bylaw or amendment of a Bylaw changing the authorized
number of directors only for the purpose of fixing the exact number of directors
within the limits specified in the Articles of Incorporation.
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Exhibit 3.3
AGREEMENT OF MERGER
This Agreement of Merger, dated as of May 20, 1996 ("Merger
Agreement"), is made and entered into by WellPoint Health Networks Inc., a
Delaware corporation ("WellPoint"), and Blue Cross of California, a California
corporation ("BCC") (WellPoint and BCC being collectively referred to as the
"Constituent Corporations"), Western Health Partnerships, a California nonprofit
public benefit corporation (the "Health Foundation") and Western Foundation for
Health Improvement, a California nonprofit public benefit corporation (the
"Western Foundation" and together with the Health Foundation, the
"Foundations").
WITNESSETH:
WHEREAS, the Constituent Corporations previously have entered
into an Amended and Restated Recapitalization Agreement providing for certain
representations, warranties and agreements in connection with the transactions
contemplated; and
WHEREAS, the Boards of Directors of the Constituent
Corporations deem it advisable and in the best interests of the Constituent
Corporations and in the best interests of the shareholders of the Constituent
Corporations that BCC and WellPoint be combined through a merger (the "Merger")
of WellPoint into BCC.
NOW, THEREFORE, the Constituent Corporations and the
Foundations hereby agree as follows:
ARTICLE I.
The Constituent Corporations
1.01 (a) BCC was incorporated under the laws of the
State of California on June 8, 1982.
(b) BCC is authorized to issue an aggregate of
300,000,000 Common Shares (the "BCC Common Stock") and 50,000,000 Preferred
Shares (the "BCC Preferred Stock").
(c) As of the date and time immediately prior to
the consummation of the Merger, there will be an aggregate of 53,360,000 shares
of BCC Common Stock (all of which will be owned by the Health Foundation) and no
shares of BCC Preferred Stock will be outstanding.
1.02 (a) WellPoint was incorporated under the laws of
the State of Delaware on July 24, 1992.
1.
<PAGE> 2
(b) WellPoint is authorized to issue an
aggregate of 350,000,000 shares of capital stock, of which 200,000,000 are Class
A Common Stock (the "WellPoint Class A Common Stock"), 100,000,000 are Class B
Common Stock (the "WellPoint Class B Common Stock") and 50,000,000 are Preferred
Stock (the "WellPoint Preferred Stock").
(c) As of the date and time immediately prior to
the consummation of the Merger, an aggregate of 19,500,000 shares of WellPoint
Class A Common Stock, 80,000,000 shares of WellPoint Class B Common Stock and no
shares of WellPoint Preferred Stock will be outstanding.
ARTICLE II.
The Merger
2.01 (a) This Merger Agreement shall be submitted to
the shareholders of BCC and WellPoint. If adopted and approved by the written
consent of the shareholders of BCC and by the vote of the stockholders of
WellPoint, and if all of the conditions precedent to the consummation of the
Merger specified in the Amended and Restated Recapitalization Agreement shall
have been satisfied or duly waived by the party entitled to satisfaction
thereof, then, unless terminated as provided in the Amended and Restated
Recapitalization Agreement, this Merger Agreement, along with certificates
meeting the requirements of the California General Corporation Law, shall be
filed with the Secretary of State of California, and certificates meeting the
requirements of the Delaware General Corporation Law shall be filed with the
Secretary of State of Delaware. Upon such California filing, the Merger shall
become effective ("Effective Time of the Merger").
(b) At the Effective Time of the Merger,
WellPoint shall be merged into BCC and the separate corporate existence of
WellPoint shall thereupon cease. BCC shall be the surviving corporation in the
Merger and the separate corporate existence of BCC, with all of its purposes,
objects, rights, privileges, powers, immunities and franchises, shall continue
unaffected and unimpaired by the Merger ("Surviving Corporation").
2.02 (a) The Surviving Corporation shall succeed to
all of the rights, privileges, powers, immunities and franchises of WellPoint,
all of the properties and assets of WellPoint and all of the debts, choses in
action and other interests due or belonging to WellPoint and shall be subject
to, and responsible for, all of the debts, liabilities and obligations of
WellPoint with the effect set forth in the California General Corporation Law.
(b) If, at any time after the Effective Time of
the Merger, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or
2.
<PAGE> 3
interest in, to or under any of the rights, properties or assets of WellPoint
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or to otherwise carry out this Merger Agreement, the
officers and directors of the Surviving Corporation shall and will be authorized
to execute and deliver, in the name and on behalf of WellPoint or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of WellPoint or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or to otherwise carry out this Merger Agreement.
ARTICLE III.
Articles of Incorporation
3.01 The Articles of Incorporation of BCC in effect
immediately prior to the Effective Time of the Merger shall be the Articles of
Incorporation of the Surviving Corporation except that Article I thereof shall
be amended in its entirety to read as follows:
"The name of this corporation (hereinafter called the
"Corporation") is WellPoint Health Networks Inc."
ARTICLE IV.
Manner And Basis Of Converting Shares
Of The Constituent Corporations
4.01 At the Effective Time of the Merger:
(a) Each share of WellPoint Class A Common Stock
which is outstanding immediately prior to the Effective Time of the Merger shall
be converted at the Effective Time of the Merger into .667 of a share of BCC
Common Stock.
(b) Each share of WellPoint Class B Common Stock
which is outstanding immediately prior to the Effective Time of the Merger shall
be cancelled at the Effective Time of the Merger.
(c) The shares of BCC Common Stock outstanding
immediately prior to the Effective Time shall be converted in the aggregate into
53,360,000 shares of BCC Common Stock and the right to receive cash in the
aggregate amount of $235,000,000.
4.02 BCC shall not be required to issue or deliver any
fractional shares of BCC Common Stock or any BCC certificates representing
fractional shares of BCC Common Stock in connection with any exchange of
WellPoint certificates for BCC certificates; however, BCC shall pay to each
person who would otherwise be entitled to
3.
<PAGE> 4
receive a BCC certificate representing a fractional share of BCC Common Stock an
amount in cash equal to such fraction multiplied by the average closing price
per share of BCC Common Stock on the New York Stock Exchange or on such exchange
as the BCC Common Stock shall be listed during the five trading days immediately
following the Effective Time.
4.03 At the Effective Time of the Merger, BCC shall
distribute to the holder of BCC Common Stock, upon surrender of the
certificate(s) representing the shares of BCC Common Stock outstanding
immediately prior to the Effective Time, such certificates registered in the
name of such holder or its designee as such holder shall request, and payment
shall be made by wire transfer to such holder of the aggregate cash amount
referred to in Section 4.01(c). Immediately after the Effective Time of the
Merger and after surrender to BCC or such other party designated by BCC (the
"Exchange Agent") of any certificate which prior to the Effective Time of the
Merger shall have represented any WellPoint shares, BCC shall cause to be
distributed to the person in whose name such certificate shall have been issued
a certificate registered in the name of such person representing the whole
shares of BCC Common Stock into which any shares previously represented by the
surrendered certificate shall have been converted at the Effective Time of the
Merger, along with the check representing the value of any fractional share as
determined in Section 4.02 above. Until surrendered each certificate which
immediately prior to the Effective Time of the Merger shall have represented any
BCC share or WellPoint share shall be deemed at and after the Effective Time of
the Merger to represent only the right to receive upon surrender the certificate
and payments contemplated above in Sections 4.01 and 4.02. Upon such surrender,
there shall be paid to the person in whose name the certificate(s) representing
such shares of BCC Common Stock shall be issued and without interest any
dividends which shall have become payable with respect to such shares of BCC
Common Stock between the Effective Time of the Merger and the time of such
surrender.
4.04 If any certificate for shares of BCC Common Stock is
to be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Exchange Agent any transfer or other
taxes payable by reason of the issuance of such new certificate in any name
other than that of the registered holder of the certificate surrendered or
establish to the satisfaction of BCC that such tax has been paid or is not
payable.
4.
<PAGE> 5
ARTICLE V.
General
5.01 This Merger Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.02 Notwithstanding approval of this Merger Agreement by
the shareholders of either of the Constituent Corporations, this Merger
Agreement shall terminate forthwith in the event that the Amended and Restated
Recapitalization Agreement shall be terminated as therein provided.
5.03 This Merger Agreement may be amended by the parties
hereto at any time before or after approval hereof by the shareholders of either
of the Constituent Corporations, but, after any such approval, no amendment
shall be made which would have a material adverse effect on the shareholders of
either of the Constituent Corporations, or change any of the principal terms of
the Merger Agreement, without the further approval of such shareholders. This
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Without limiting the foregoing, the
parties hereto acknowledge and agree that (a) any modification of the manner or
basis of exchanging shares of WellPoint common stock into BCC Common Stock shall
require further approval of the Board of Directors (or appropriate committee
thereof empowered to so act) of WellPoint and the stockholders of WellPoint, and
(b) any modification of the manner or basis of exchanging BCC Common Stock (as
described above) shall require further approval of the Board of Directors (or
appropriate committee thereof empowered to so act) of BCC and the shareholder of
BCC.
IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement as of the date first written above.
BLUE CROSS OF CALIFORNIA
By: /s/ Leonard D. Schaeffer
------------------------------
Leonard D. Schaeffer
Chairman of the Board and
Chief Executive Officer
By: /s/ Brian J. Donnelly
------------------------------
Brian J. Donnelly
Secretary
5.
<PAGE> 6
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Leonard D. Schaeffer
------------------------------
Leonard D. Schaeffer
Chairman of the Board and
Chief Executive Officer
By: /s/ Thomas C. Geiser
------------------------------
Thomas C. Geiser
Secretary
WESTERN HEALTH PARTNERSHIPS
By: /s/ Jonathan Van Scoyk
------------------------------
Name: Jonathan Van Scoyk
Title: Vice President, CFO
By: /s/ Gail C. Watts
------------------------------
Name: Gail C. Watts
Title: Vice President, Secretary
WESTERN FOUNDATION FOR HEALTH
IMPROVEMENT
By: /s/ Jonathan Van Scoyk
------------------------------
Name: Jonathan Van Scoyk
Title: Vice President, CFO
By:
/s/ Gail C. Watts
------------------------------
Name: Gail C. Watts
Title: Vice President, Secretary
6.
<PAGE> 7
OFFICERS' CERTIFICATE
FOR
WELLPOINT HEALTH NETWORKS INC.
A Delaware Corporation
The undersigned, Howard G. Phanstiel and Thomas C. Geiser, certify
that:
1. They are the Executive Vice President and the Secretary,
respectively, of WellPoint Health Networks Inc., a Delaware corporation (the
"Corporation").
2. The Agreement of Merger in the form attached was duly approved by
the Board of Directors and the stockholders of the Corporation.
3. The total number of outstanding shares of each class entitled to
vote on the merger was 19,500,000 shares of Class A Common Stock and 80,000,000
shares of Class B Common Stock (together the "Common Stock"). The principal
terms of the Agreement of Merger in the form attached were approved by the
Corporation by the vote of a number of shares of each class which equaled or
exceeded the vote required, only the Common Stock of the Corporation being
entitled to vote on the merger and such required vote being a majority of the
outstanding shares of Class A Common and Class B Common Stock voting together as
a single class and a majority of the shares of Class A Common Stock present at
the special meeting of stockholders called to vote on the Agreement of Merger,
voting separately as a class.
The undersigned certify under penalty of perjury that they have read
the foregoing certificate and know the contents thereof, and that the statements
therein are true.
Executed at Los Angeles, California on May 20, 1996.
/s/ Howard G. Phanstiel
------------------------
Howard G. Phanstiel
Executive Vice President
/s/ Thomas C. Geiser
------------------------
Thomas C. Geiser
Secretary
<PAGE> 8
OFFICERS' CERTIFICATE
FOR
BLUE CROSS OF CALIFORNIA
A California Corporation
The undersigned, Leonard D. Schaeffer and Brian J. Donnelly, certify that:
1. They are the Chairman of the Board/Chief Executive Officer and the
Secretary, respectively, of Blue Cross of California, a California corporation
(the "Corporation").
2. The Agreement of Merger in the form attached was duly approved by
the Board of Directors and the shareholders of the Corporation.
3. The total number of outstanding shares of each class entitled to
vote on the merger was 53,360,000 shares of Common Stock. The principal terms of
the Agreement of Merger in the form attached were approved by the Corporation by
the vote of a number of shares of each class which equaled or exceeded the vote
required with such required vote being a majority of the outstanding shares of
Common Stock.
The undersigned certify under penalty of perjury that they have read
the foregoing certificate and know the contents thereof, and that the statements
therein are true.
Executed at Los Angeles, California on May 20, 1996.
/s/ Leonard D. Schaeffer
---------------------------------------------
Chairman of the Board/Chief Executive Officer
/s/ Brian J. Donnelly
---------------------------------------------
Secretary
<PAGE> 1
Exhibit 99.2
VOTING TRUST AGREEMENT
This Voting Trust Agreement ("Agreement") is made and entered into as
of the 20th day of May, 1996, by and between Western Health Partnerships (the
"Beneficiary") and Wilmington Trust Company, a Delaware corporation, as trustee
(hereinafter, with any successor trustee, referred to as "Trustee"). This
Agreement shall take effect only at the WellPoint Merger Effective Time (as
defined in that certain Amended and Restated Recapitalization Agreement dated as
of March 31, 1995 between Blue Cross of California, WellPoint Health Networks
Inc., the Beneficiary and Western Foundation for Health Improvement).
WITNESSETH:
WHEREAS, the Beneficiary owns approximately 80.4% of the outstanding
equity securities of the recapitalized entity to be known as WellPoint Health
Networks Inc. (the "Company"), representing approximately 80.4% of the voting
power of the outstanding stock of the Company;
WHEREAS, the Beneficiary wishes for its investment in the Company to be
as valuable as possible so long as such investment is maintained and believes
that the Company's license to use the "Blue Cross" name and related rights (the
"Blue Cross marks") contributes substantially to the Company's value and its
future prospects;
WHEREAS, the Blue Cross and Blue Shield Association ("BCBSA") has
conditioned the Company's license to continue to use the Blue Cross marks upon
the Company maintaining certain Basic Protections (as defined in the License
Addendum between the Company and BCBSA) which are intended by the BCBSA to
enable the Company to remain independent of the Beneficiary and any other
shareholder who may in the future acquire Capital Stock (as defined below) in
the Company in excess of the Ownership Limit (as defined below); and
WHEREAS, the Beneficiary has agreed to be bound by:
(i) a requirement that the Beneficiary make an
initial deposit into the voting trust established by this
Agreement (the "Voting Trust") sufficient to reduce the number
of the Beneficiary's shares of Capital Stock of the Company
held by the Beneficiary outside the Voting Trust on the date
hereof to a level which does not exceed 50% of the voting
power of the Company's outstanding Capital Stock and a
requirement that the Beneficiary make any additional deposits
into this Voting Trust necessary to maintain the shares of
Capital Stock Beneficially Owned (as defined below) by the
Beneficiary outside the Voting Trust at a level which does not
exceed 50% of the voting power of the Company's outstanding
Capital Stock at all times from the date hereof to but not
including the third anniversary of the date hereof;
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<PAGE> 2
(ii) a requirement that the Beneficiary make such
additional deposits into the Voting Trust as may be necessary
to maintain the number of shares of Capital Stock Beneficially
Owned by the Beneficiary outside the Voting Trust at a level
which does not exceed 20% of the voting power of the Company's
outstanding Capital Stock from time to time from and including
such third anniversary to but not including the fifth
anniversary of the date hereof; and
(iii) a requirement that the Beneficiary make such
additional deposits into the Voting Trust as may be necessary
to prevent the Beneficiary from having Beneficial Ownership
outside the Voting Trust of any shares of Capital Stock in
excess of the Ownership Limit at any time on or after the
fifth anniversary of the date hereof.
The requirements for contributions into this Voting Trust described in
(i), (ii) and (iii) above of the preceding recital are herein called the
"Contributions Timetable".
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEPOSIT OF STOCK AND ISSUANCE OF VOTING TRUST CERTIFICATES.
1.1 DELIVERY OF STOCK CERTIFICATES. Upon execution of this Agreement,
the Beneficiary shall deliver to the Trustee certificates representing
20,182,254 shares of common stock ("common stock") issued by the Company, and
the Beneficiary confirms that it is the Beneficiary's understanding that such
deposit will reduce the number of VA Shares (as defined below) Beneficially
Owned by the Beneficiary to the number permitted by the Contributions Timetable.
The Beneficiary shall make such additional contributions of VA shares which the
Beneficiary may Beneficially Own such that the number of shares Beneficially
Owned by the Beneficiary shall never exceed the number permitted by the
Contributions Timetable. Every certificate delivered by the Beneficiary to the
Trustee shall be duly endorsed for transfer or accompanied by duly executed
instruments of transfer sufficient to convey to the Trustee record ownership of
such shares and the power to vote such shares specified in this Agreement. The
Beneficiary shall pay any taxes and costs imposed upon such transfers to the
Trustee. Immediately upon each receipt of certificates pursuant to this
paragraph, the Trustee shall cause the certificates to be surrendered to the
Company's transfer agent and canceled and new certificates therefor to be issued
to the Trustee.
1.2 DELIVERY OF VOTING TRUST CERTIFICATES. The Trustee shall issue and
deliver one or more Voting Trust Certificates, in the form attached as Exhibit
"A" hereto (a "Certificate"), to the Beneficiary in respect of the shares
deposited with and held by the Trustee for the benefit of the Beneficiary under
this Agreement. The Trustee shall sign these certificate(s).
1.3 CERTIFICATE BOOK AND INSPECTION OF AGREEMENT. The Trustee shall
keep at 1100 North Market Street, Wilmington, Delaware 19890-001 correct books
of account of all the
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<PAGE> 3
Trustee's business and transactions relating to the Voting Trust, and a book
(the "Certificate Book") setting forth the number of shares represented by the
Certificate(s) held by the Beneficiary, and the date of issuance of such
Certificate(s). A duplicate of this Agreement and any extension thereof shall be
filed with the secretary of the Company and shall be open to inspection by a
shareholder, a holder of a Certificate or the agent of either, upon the same
terms as the record of shareholders of the Company is open to inspection.
1.4 LOST CERTIFICATE. If a Certificate shall be lost, stolen, mutilated
or destroyed, the Trustee, in its discretion, may issue a duplicate of such
Certificate upon receipt of evidence of such fact satisfactory to the Trustee,
indemnity satisfactory to it, and the existing Certificate, if mutilated.
1.5 WITHDRAWAL OF SHARES FROM TRUST. The Beneficiary shall be entitled
at any time to withdraw shares from the Voting Trust: (i) to the extent that
after giving effect to such withdrawal, the Beneficiary would not Beneficially
Own shares outside the Voting Trust in excess of the number required for the
Beneficiary to be in compliance with the Contributions Timetable or (ii) to
enable the Beneficiary to sell, assign, transfer its entire Beneficial Ownership
interest in each of the shares withdrawn promptly after such withdrawal. Any
share withdrawn in accordance with (i) or (ii) above shall cease upon withdrawal
to be subject to the terms and conditions hereof.
1.6 PLEDGE, ENCUMBER OR GRANT OPTIONS. The Beneficiary shall be
entitled at any time to pledge, encumber or grant any option in any shares
subject to the Voting Trust hereunder, provided that such shares remain subject
to the provisions of this Agreement, so long as the Beneficiary or any affiliate
of the Beneficiary shall retain any interest therein.
2. TRUSTEE'S POWERS AND DUTIES.
2.1 LIMITS ON TRUSTEE'S POWERS. The Trustee shall have only the powers
set forth in this Agreement. It is expressly understood and agreed by the
parties hereto that under no circumstances shall the Trustee be personally
liable for the payment of any indebtedness or expenses of this Agreement, except
as set forth in Section 5.2 of this Agreement, or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Trustee under this Agreement or the other related agreement or
document, except as set forth in Section 5.6 of this Agreement.
2.2 EXECUTION BY TRUSTEE. The Trustee shall execute all documents as
follows:
By: Wilmington Trust Company, not in its individual capacity, but solely
as Trustee
By: ____________________________
2.3 VOTING. With respect to all shares held in the Voting Trust, the
Beneficiary shall retain the entire economic and beneficial ownership rights
therein, including without limitation the right to receive dividends and
distributions on the shares and the right to direct the Trustee in any order
whatsoever to sell, assign, transfer, encumber or grant any option therein to or
in favor
3
<PAGE> 4
of any person other than the Beneficiary or an affiliate of the Beneficiary or
agree to do any such thing, except that the Trustee shall have the exclusive and
absolute right in respect of such shares to vote, assent or consent such shares
at all times during the term of this Agreement, including without limitation the
right to vote at any election of directors and in favor of or in opposition to
any resolution, any dissolution, liquidation, merger or consolidation of the
Company, any sale of all or substantially all of the Company's assets, any
issuance or authorization of securities, or any action of any character
whatsoever which may be presented at any meeting or require the consent of
shareholders of the Company. In exercising the Trustee's powers and duties
hereunder, the Trustee shall at all times vote, assent or consent in respect of
any action as follows, subject to the following paragraph: (i) if the matter
concerned is the election of directors, then the Trustee shall vote, assent or
consent the whole number of shares held by the Voting Trust in favor of each
nominee to the Board of Directors of the Company who has been nominated by the
Nominating Committee, the remaining BCC Designees, or the remaining WellPoint
Designees pursuant to Article IV, Section 2 of the bylaws of the Company in
effect as of the WellPoint Merger Effective Time (the "Bylaws") or any successor
provision thereto, and, with respect to every Board position for which no
nominee is presented in accordance with the preceding provisions in this clause
(i), shall vote for the nominee selected by a majority of the incumbent members
of the Board of Directors of the Company and vote against any candidate for the
Board of Directors of the Company for whom no competing candidate has been
nominated in one of the methods prescribed in this clause (i); (ii) where the
matter under state law or the Articles of Incorporation or the Bylaws requires
at least an absolute majority of all outstanding shares of common stock of the
Company in order to be effected, then the Trustee shall vote, assent or consent
all of such shares in favor of or in opposition to such matter as the majority
of all Nontrust Votes (as defined below) are cast; and (iii) if after January 1,
1997 the Board of Directors of the Company, in their sole determination,
determine that a reincorporation of the Company in Delaware solely for such
purpose is in the best interests of the Company, and a vote to approve such
reincorporation is sought of the shareholders of the Company, the Trustee shall
vote, assent or consent all of such shares in the identical proportions in favor
of or in opposition to such reincorporation as Nontrust Votes are cast, and (iv)
on all other matters, the Trustee shall at all times vote, assent or consent all
of such shares in the identical proportions in favor of or in opposition to such
matters as Nontrust Votes are cast (other than a proposal to reincorporate in
Delaware made before January 1, 1997, on which proposal the Trustee shall vote,
assent or consent the whole number of shares held by the Voting Trust in
opposition thereto). If any calculation of votes under the preceding sentence
would require a fractional vote, the Trustee shall vote the next lower number of
whole shares.
With respect to (i), (ii), (iii) and (iv), the Trustee, unless such
action is initiated by or with the consent of the Board of Directors of the
Company, shall (a) vote against removal of any director of the Company, except
in the case of fraudulent or dishonest acts or gross abuse of authority or
discretion with reference to the Company (which acts or gross abuse shall have
been determined by a majority of those holders of Nontrust Votes entitled to
vote at a duly held meeting of the shareholders of the Company at which a quorum
is present), (b) vote against adoption of new bylaws or articles of
incorporation of the Company or any alteration, amendment, change or addition to
or repeal of the Bylaws or Articles of Incorporation, (c) not nominate any
candidate to fill any vacancy on the Board of Directors of the Company, (d) not
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<PAGE> 5
call any special meeting of the shareholders of the Company, and (e) not take
any action by voting shares held by the Voting Trust that would be inconsistent
with or would have the effect, directly or indirectly, of defeating or
subverting the board nomination procedures identified in clause (i) above.
Before voting, assenting or consenting, the Trustee shall at all times be
entitled to (x) receive any proxy or other written materials identifying any
action on which the Trustee's vote, assent or consent is requested and whether
or not any action is initiated by or with the consent of the Board of Directors
of the Company and (y) a certificate of the Secretary or other authorized
officer of the Company tabulating any votes cast at a meeting before the Trustee
shall have voted and identifying the number and percentage of votes cast by
Nontrust Votes. The Trustee shall use all reasonable commercial efforts to
ensure, with respect to the shares held in the Voting Trust hereunder, that such
shares are counted as being present for the purposes of any quorum required for
shareholder action of the Company and to vote, assent or consent as set forth
above so long as the Trustee has reasonable notice of the time to vote, assent
or consent. For purposes of this Agreement, Nontrust Votes shall mean the votes
cast by shareholders other than the Trust.
2.4 SALES. The Trustee shall have no authority to sell or otherwise
dispose of or to pledge, encumber or hypothecate, any of the stock deposited
pursuant to the provisions of this Agreement, unless directed to do so by the
Beneficiary. The Beneficiary shall have the right to direct the Trustee to sell
or otherwise dispose of or to pledge, encumber or hypothecate all or any part of
the shares held by the Voting Trust.
3. DIVIDENDS AND DISTRIBUTIONS.
3.1 CASH. The Beneficiary shall be entitled to receive payments equal
to the amount of cash dividends, if any, collected or received by the Trustee or
its successor upon the number of shares in respect of which any Certificate was
issued, subject to deduction in respect of expenses, charges or fees pursuant to
Section 5.2 or 5.3 below. The Trustee shall arrange with the Company for the
direct payment by the Company of such cash dividends to the Beneficiary.
3.2 STOCK. In case the Trustee shall receive, as a dividend or other
distribution upon any shares of stock held by the Trustee under this Agreement,
any shares of stock of the Company, the Trustee shall hold the same and said
shares shall be subject to all of the terms and conditions of this Agreement to
the same extent as if originally deposited hereunder. The Trustee shall issue
Certificate(s) in respect of such additional shares to the Beneficiary.
3.3 OTHER DISTRIBUTIONS. If at any time during the continuation of this
Agreement the Trustee shall receive or collect any monies through a distribution
by the Company to its shareholders, other than in payment of cash dividends, or
shall receive any property (other than shares of stock or securities convertible
into voting stock of the Company) through a distribution by the Company to its
shareholders, the Trustee shall distribute the same to the Beneficiary, subject
to deduction in respect of expenses, charges or fees pursuant to Section 5.2 or
5.3 below.
4. RIGHTS TO SUBSCRIBE.
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<PAGE> 6
In case any securities of the Company shall be offered for subscription
to the holders of stock held by the Trustee under this Agreement, the Trustee,
promptly upon receipt of notice of such offer, shall mail a copy thereof to the
Beneficiary. Upon receipt by the Trustee, two (2) days (or any shorter time if
this is feasible) prior to the last date fixed by the Company for subscription,
of a request from the Beneficiary of any Certificate to subscribe in its behalf,
accompanied by the sum of money (in immediately available funds) required to be
paid for such securities, the Trustee shall make such subscription and payment
on behalf of the Beneficiary, and upon receiving from the Company the
certificates for the securities so subscribed for, the Trustee shall deliver the
same to the Beneficiary, unless such securities be voting stock or securities
convertible into voting stock, in which case the Trustee shall issue to the
Beneficiary a Certificate in respect thereof, and such securities shall be held
by the Trustee for the benefit of the Beneficiary subject to the terms of this
Agreement.
5. THE TRUSTEE.
5.1 USE OF PROXIES. The Trustee may vote, assent or consent with
respect to all shares held in the Voting Trust in person or by such person or
persons as it may from time to time select as its proxy provided that the
Trustee shall at all times do so in conformity with the provisions of Section
2.3 hereof.
5.2 EXPENSES. The Trustee is expressly authorized to incur and pay such
reasonable expenses and charges, to employ and pay such agents, attorneys and
counsel, and to incur and pay such other charges and expenses as the Trustee may
deem reasonably necessary and proper for administering this Agreement. The
Beneficiary agrees to reimburse the Trustee for any such expense and charges,
and any such expenses or charges may be deducted from the cash dividends or
other monies received by the Trustee on the shares deposited hereunder, to the
extent unreimbursed.
5.3 COMPENSATION. The Trustee shall be entitled to $10,000 per calendar
year by way of compensation for its services as Trustee hereunder as provided in
a separate fee agreement between the parties hereto and any such fees may be
deducted from the cash dividends or monies received by Trustee on the shares
deposited hereunder, to the extent otherwise unpaid by the Beneficiary.
5.4 SUCCESSOR TRUSTEE. The Trustee may resign after giving thirty (30)
days' advance written notice of its resignation to the Beneficiary. The
Beneficiary may in addition terminate the Trustee after giving thirty (30) days'
advance written notice thereof to the Trustee provided that such termination of
the Trustee shall not become effective until a Successor Trustee (as defined
below) becomes bound by this Agreement. If the Trustee shall resign or be so
terminated by the Beneficiary, the Trustee shall be replaced by a reasonably
competent alternate (who is an institution duly authorized to act as such a
trustee in the State of Delaware) (the "Successor Trustee"). The Successor
Trustee shall be designated by the Trustee and approved by the Beneficiary. The
Beneficiary shall not unreasonably withhold its approval of any qualified
Successor Trustee. The Successor Trustee shall enjoy all the rights, powers,
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<PAGE> 7
interests and immunities of the Trustee originally designated and shall agree in
writing to be bound by this Agreement.
5.5 INTERESTS OF TRUSTEE. The Trustee and any firm, corporation, trust
or association of which it may be a member, trustee, shareholder, agent or
affiliate may contract with the Company or any affiliate and may be or become
pecuniarily interested in any matter to which the Company or any affiliate may
be a party or in which it may be concerned, as fully and freely as though the
Trustee were not the Trustee hereunder. Directors and officers of the Trustee
may act as directors and/or officers of the Company or any affiliate.
5.6 TRUSTEE'S LIABILITY. The Trustee shall not be liable for any act or
omission undertaken in connection with its powers and duties under this
Agreement, except for any willful misconduct or gross negligence by Trustee. No
Successor Trustee shall be liable for actions or omissions of the Trustee or any
other Successor Trustee. The Trustee shall not be liable in acting on any
notice, request, consent, certificate, instruction, or other paper or document
or signature reasonably believed to be genuine and to have been signed by the
proper party. The Trustee may consult with legal counsel (reasonably competent
for the purpose) and any act or omission undertaken by it in good faith in
accordance with the opinion of such legal counsel shall not result in any
liability of the Trustee. The Beneficiary covenants and agrees to indemnify and
hold harmless the Trustee and its affiliates, directors, officers, employees,
agents and advisors (each an "Indemnified Party"), without duplication, from and
against any and all claims, damages, losses, liability, obligations, actions,
suits, costs, disbursements and expenses (including without limitation
reasonable fees and expenses of counsel) incurred by any Indemnified Party, in
any way relating to or arising out of or in connection with or by reason of the
preparation for a defense of any investigation, litigation or proceeding arising
out of this Agreement or the shares of the Beneficiary held pursuant to this
Agreement, the administration of this Agreement or the action or inaction of the
Trustee hereunder; except to the extent such claim, damage, loss, liability,
obligation, action, suit, cost, disbursement or expense results from such
Indemnified Parties' gross negligence or willful misconduct. The indemnity set
forth in this Section 5.6 shall be in addition to any other obligation or
liabilities of the Beneficiary hereunder or at common law or otherwise and shall
survive the termination of this Agreement.
Notwithstanding anything contained herein to the contrary, the Trustee
shall not be required to take any action in any jurisdiction other than in the
State of Delaware if the taking of such action will (i) require the consent or
approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any action in respect of, any state or other
governmental authority or agency of any jurisdiction other than the State of
Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of any jurisdiction or any political subdivisions thereof in existence on
the date hereof other than the State of Delaware becoming payable by the
Trustee; or (iii) subject the Trustee to personal jurisdiction in any
jurisdiction other than the State of Delaware for causes of action arising from
acts unrelated to the consummation of the transactions by the Trustee
contemplated hereby.
6. TERMINATION.
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<PAGE> 8
6.1 TERM. This Agreement shall terminate upon written notice by the
Beneficiary to the Trustee of such termination (a) if the Company no longer
licenses the Blue Cross marks from BCBSA, (b) if and to the extent that all of
the shares held in the Voting Trust have been sold, assigned, transferred or
withdrawn pursuant to Section 2.4 or Section 1.5, or (c) if the Beneficiary and
its affiliates cease to Beneficially Own Capital Stock in excess of the
Ownership Limit. If not terminated earlier pursuant to the preceding provisions
of this Agreement, this Agreement shall terminate ten years after the date
hereof, (unless (i) at any time within two years prior to the tenth anniversary
of the date hereof, the Beneficiary by written agreement, and with the written
consent of the Trustee, extends the duration of this Agreement for an additional
period of up to a further ten years or (ii) the Company reincorporates in
Delaware, and, in that case this Agreement shall terminate at that time but
shall automatically be replaced with another agreement in substantially similar
form except for this sentence). Except as otherwise provided herein, the trust
created by this Agreement is hereby expressly declared to be and shall be
irrevocable.
6.2 DELIVERY OF SHARE CERTIFICATE(S). As soon as practicable after the
termination of this Agreement, the Trustee shall deliver to the Beneficiary,
certificate(s) representing the number of shares beneficially owned by the
Beneficiary at the date of termination, upon the surrender of such
Certificate(s) properly endorsed and upon payment by the Beneficiary of any and
all taxes and other expenses relating to the transfer or delivery of such
certificates.
7. MISCELLANEOUS.
7.1 MERGER. If the Company shall merge into or consolidate with another
corporation or corporations, or if all or substantially all of the assets of the
Company are transferred to another corporation, the shares of which are issued
to shareholders of the Company in connection with such transfer, then the terms
"WellPoint Health Networks Inc." or the "Company" shall be construed, so long as
the "Blue Cross" name and mark continues to be licensed by such entity from
BCBSA, to include such successor corporation and the Trustee shall receive and
hold under this Agreement any shares of such successor corporation received by
it on account of its ownership as Trustee of shares held by it hereunder prior
to such merger, consolidation or transfer. Certificates issued and outstanding
at the time of such merger, consolidation or transfer may remain outstanding,
but the Trustee may, in its discretion, substitute new Certificates in
appropriate form.
7.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the Trustee and each and all of its respective heirs, executors, administrators,
successors and assigns. Notwithstanding any provision of this Agreement, the
provisions of this Agreement shall not be binding on any transferee or purchaser
from the Beneficiary (other than such a person who is an affiliate of the
Beneficiary and except that any and all shares sold in violation of paragraph 12
of that certain Registration Rights Agreement as of even date herewith between
the Company and the Beneficiary shall remain subject to this Agreement). In case
at any time the Trustee shall resign and no successor Trustee shall have been
appointed within thirty days after notice of such resignation has been filed and
mailed as required by Section 7.3, the resigning Trustee may forthwith apply to
a court of competent jurisdiction for the appointment of a successor Trustee.
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Such court may thereupon, after such notice, if any, as it may deem proper and
appropriate, appoint a successor Trustee.
7.3 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address which shall be effective upon
receipt) or sent by electronic transmission, with confirmation received, to the
telecopy number specified below:
(a) If to the Beneficiary:
Western Health Partnerships
21550 Oxnard Street, Suite 600
Woodland Hills, CA 91367
Telecopier No.: (818) 703-4193
Attention: Vice President and Secretary
With a copy to:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Telecopier No.: (213) 892-5454
Attention: Michael J. Connell, Esq.
Rena L. O'Malley, Esq.
Marron, Reid & Sheehy LLP
601 California Street
Suite 1200
San Francisco, CA 94108-2896
Telecopier No.: (415) 986-1374
Attention: E. Lewis Reid, Esq.
(b) If to the Trustee:
Wilmington Trust Company
1100 North Market Street
Wilmington, DE 19890-0001
Telecopier No.: (302) 651-8882
Attention: Corporate Trust Administration
With a copy to:
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<PAGE> 10
Richards, Layton & Finger P.A.
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
Telecopier No.: (302) 658-6548
Attention: Glenn C. Kenton, Esq.
7.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
conflicts of laws principles.
7.5 ATTORNEYS' FEES. In the event of any suit or other proceeding
between the parties hereto with respect to any of the transactions contemplated
hereby or the subject matter hereof, the prevailing party shall, in addition to
such other relief as the court may award, be entitled to recover reasonable
attorneys' fees, expenses and costs of investigation, all as actually incurred,
including, without limitation, attorneys' fees, costs and expenses of
investigation incurred in appellate proceedings or in any action or
participation in, or in connection with, any case or proceeding under Chapters
7, 11 and 13 of the Bankruptcy Code or any successor thereto.
7.6 FAIR CONSTRUCTION. This Agreement is the product of negotiation and
shall be deemed to have been drafted by all of the parties. It shall be
construed in accordance with the fair meaning of its terms and its language
shall not be strictly construed against, nor shall ambiguities be resolved
against, any particular party.
7.7 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto regarding the subject matter hereof, and may not be
amended, altered or modified except by a writing signed by the parties hereto
and consented to by the Company. This Agreement supersedes all prior agreements,
representations, warranties, statements, promises, information, arrangements and
understandings, whether oral or written, express or implied, with respect to the
subject matter hereof, all of which are specifically integrated into this
Agreement. No party hereto shall be bound by or charged with any oral or written
agreements, representations, warranties, statements, promises, information,
arrangements or understandings, express or implied, not specifically set forth
herein; and the parties hereto further acknowledge and agree that in entering
into this Agreement they have not in any way relied and will not rely in any way
on any of the foregoing not specifically set forth herein.
7.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.9 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "Beneficially Own" has the meaning set forth in Section 14
of Article VII of the Company's Articles of Incorporation.
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<PAGE> 11
(b) "Capital Stock" has the meaning set forth in Section 14 of
Article VII of the Company's Articles of Incorporation.
(c) "Ownership Limit" has the meaning set forth in Section 14
of Article VII of the Company's Articles of Incorporation, but without
disregarding any shares Beneficially Owned by the Beneficiary.
(d) "VA Shares" means all of the shares of the Company's
Capital Stock Beneficially Owned by the Health Foundation at any particular
time, except that (i) shares of Capital Stock which are held in the Voting Trust
and are voted as required by the terms of this Agreement shall not be deemed VA
Shares so long as they are so held in the Voting Trust and voted and (ii) the
Health Foundation shall be entitled to Beneficially Own at any particular time
shares of Capital Stock of the Company representing up to the Ownership Limit
free of and without being subject in any way to either this Agreement or the
Voting Agreement and none of the shares of Capital Stock Beneficially Owned by
the Health Foundation at or below the Ownership Limit shall be deemed VA Shares.
Without limiting by implication the generality of the preceding sentence, any
share of Capital Stock which shall be Beneficially Owned by the Health
Foundation at any particular time in excess of the Ownership Limit shall be
deemed a VA Share, unless at that particular time it is on deposit in the Voting
Trust and is required to be voted in accordance with the terms of this
Agreement.
IN WITNESS WHEREOF, the Trustee and the Beneficiary have executed this
Agreement on the day and year first above written.
Trustee Beneficiary
By: /s/ Authorized Signatory By: /s/ Gail C. Watts
----------------------------------- ------------------------------
Its: Senior Financial Services Officer Its: Vice President and Secretary
---------------------------------- -----------------------------
11
<PAGE> 12
EXHIBIT A
[COMPANY NAME]
VOTING TRUST CERTIFICATE
CERTIFICATE NO. SHARES
-------------- --------------
This certifies that the undersigned trustee (the "Trustee")
holds _____ shares of common stock ("Shares") of [the recapitalized entity to be
known as WellPoint Health Networks Inc.] (the "Company") beneficially owned by
Western Health Partnerships (the "Beneficiary") subject to the terms and
conditions of a Voting Trust Agreement ("Agreement") dated as of
_________________, 1996 between the Beneficiary and Trustee. This certificate is
Exhibit A to the Agreement, a copy of which is on file with the secretary of the
Company in Woodland Hills, California.
1. During the term of the Agreement, Trustee has the exclusive
and absolute right to vote the Shares as provided in the Agreement.
2. During the term of the Agreement, the Beneficiary shall be
subject to the terms and conditions of the Agreement and entitled to the
benefits of the Beneficiary under the Agreement.
3. As soon as practicable after the termination of the
Agreement and subject to its terms and conditions, the Trustee shall deliver to
the Beneficiary share certificates representing the number of shares of stock of
the Company beneficially owned by the Beneficiary at the date of termination of
the Agreement, upon the surrender of this certificate properly endorsed and upon
payment by the Beneficiary of any and all taxes and other expenses relating to
the transfer or delivery of share certificates to the Beneficiary pursuant to
the termination of the Agreement.
Dated as of , 199 .
---------- --
Wilmington Trust Company, not in its individual
capacity, but solely as Trustee
By:
--------------------------------------------
Its:
-------------------------------------------
<PAGE> 1
Exhibit 99.3
VOTING AGREEMENT
THIS AGREEMENT is made and entered into this 8th day of May
1996, by and between Blue Cross of California, a California corporation (the
"Company"), and Western Health Partnerships, a California nonprofit public
benefit corporation (the "Health Foundation"). This Agreement shall take effect
only at the WellPoint Merger Effective Time (as hereinafter defined).
WHEREAS, the Company, WellPoint Health Networks Inc., a
Delaware corporation ("WellPoint"), the Health Foundation and Western Foundation
for Health Improvement, a California nonprofit public benefit corporation, have
entered into an Amended and Restated Recapitalization Agreement, dated as of
March 31, 1995 (the "Recapitalization Agreement"), pursuant to which, among
other things, the equity interests of the Company and WellPoint would be
adjusted and the name of the Company would be changed to WellPoint Health
Networks Inc.;
WHEREAS, as of the effective time of the WellPoint Merger, as
defined in the Recapitalization Agreement, (the "WellPoint Merger Effective
Time"), the Health Foundation would beneficially own an aggregate of 53,360,000
shares of the Company's Common Stock;
WHEREAS, the Health Foundation wishes for its investment in
the Company to be as valuable as possible so long a such investment is
maintained and believes that the Company's license to use the "Blue Cross" name
and related rights (the "Blue Cross marks") contributes substantially to the
Company's value and its future prospects;
WHEREAS, the Blue Cross and Blue Shield Association ("BCBSA")
has conditioned the Company's license to continue to use the Blue Cross marks
upon the Company maintaining certain Basic Protections (as defined in the
License Addendum between the Company and BCBSA) which are intended by the BCBSA
to enable the Company to remain independent of the Health Foundation and any
other shareholder who may in the future acquire Capital Stock (as defined below)
in the Company in excess of the Ownership Limit (as defined below); and
WHEREAS, the conditions imposed by the License Addendum
include a requirement that the Health Foundation vote all VA Shares (as defined
below) as provided herein and certain other matters with respect to the
Company's Common Stock.
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and agreements contained herein and in
the Recapitalization Agreement, and intending to be legally bound, the parties
hereto agree as follows:
1. VOTING AGREEMENT. During the Initial Period, the Health
Foundation agrees, with respect to all VA Shares,: (A) to vote in favor of each
nominee to the Board of Directors of the Company who has been nominated by the
Nominating Committee, the remaining BCC Designees, or the remaining WellPoint
Designees pursuant to Article IV,
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<PAGE> 2
Section 2 of the bylaws of the Company in effect as of the WellPoint Merger
Effective Time (the "Bylaws") or any successor provision thereto, and, with
respect to every Board position for which no nominee is presented in accordance
with the preceding provisions in this clause (A), to vote for the nominee
selected by a majority of the incumbent members of the Board of Directors of the
Company and vote against any candidate for the Board of Directors of the Company
for whom no competing candidate has been nominated in one of the methods
prescribed in this clause (A); (B) if after January 1, 1997 the Board of
Directors of the Company, in their sole determination, determine that a
reincorporation of the Company in Delaware solely for such purpose is in the
best interests of the Company, and a vote to approve such reincorporation is
sought of the shareholders of the Company, to vote, assent or consent all VA
Shares in the identical proportions in favor of or in opposition to such
reincorporation as all shareholders other than the Health Foundation cast their
vote; (C) unless such action is initiated by or with the consent of the Board of
Directors of the Company, (i) to vote against removal of any director of the
Company, except in the case of fraudulent or dishonest acts or gross abuse of
authority or discretion with reference to the Company as determined by the
Health Foundation, (ii) to vote against adoption of new bylaws or articles of
incorporation of the Company or any alteration, amendment, change or addition to
or repeal of the Bylaws or Articles of Incorporation, (iii) not to nominate any
candidate to fill any vacancy on the Board of Directors of the Company, (iv) not
to call any special meeting of the shareholders of the Company, and (v) to take
no action by voting its VA Shares that would be inconsistent with or would have
the effect, directly or indirectly, of defeating or subverting the board
nomination procedures identified in clause (A) above. For purposes of this
Agreement, "Initial Period" shall mean the period commencing as of the WellPoint
Merger Effective Time and ending upon the date on which the Health Foundation
and its affiliates, when taken together, cease to Beneficially Own Capital Stock
in excess of the Ownership Limit. For purposes of this Agreement, "affiliates"
of the Health Foundation shall be deemed not to include the Company and its
subsidiaries.
2. STANDSTILL. During the Initial Period, the Health
Foundation will not, directly or indirectly, (i) individually, or as part of a
group, acquire, offer or propose to acquire, or agree to acquire, by purchase or
otherwise, any shares of the Company's Capital Stock, or direct or indirect
rights or options to acquire (through purchase, exchange, conversion or
otherwise), beneficial ownership of any shares of the Company's Capital Stock or
(ii) enter into any agreement, arrangement or understanding with any person,
other than the Company, that would have the effect of increasing such person's
or the Health Foundation's voting power in the Company. Notwithstanding the
foregoing, it is expressly agreed that any shares of the Company's Capital Stock
acquired by the Health Foundation (i) by reason of stock dividends, stock
splits, spin-offs, mergers, recapitalizations, combinations, conversions,
exchanges of shares or the like or (ii) at any time after the ownership of the
Company's Capital Stock by the Health Foundation shall have fallen to the
Ownership Limit or less, any action that would have the effect of increasing the
ownership of the Company's Capital Stock by the Health Foundation within or up
to but not beyond the Ownership Limit shall not be deemed to violate or conflict
with the provisions of this Section 2.
3. (a) NOMINATING BCC DESIGNEE TO BOARD. During the Initial
Period, so long as the Nominating Committee to the Board of Directors of the
Company shall remain in
2
<PAGE> 3
existence pursuant to the Bylaws, in the case of a person nominated to be a
replacement for any BCC Designee, the Company undertakes to ensure that any such
nomination shall only be made after reasonable and adequate consultation thereon
with the Health Foundation.
(b) DELAWARE REINCORPORATION. The Company
agrees and undertakes not to call any meeting of shareholders of the Company to
consider any proposal to reincorporate the Company in Delaware at any time prior
to January 1, 1997.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HEALTH
FOUNDATION. The Health Foundation represents, warrants and covenants to the
Company that (i) it is the record or beneficial owner of 29,860,923 VA Shares,
at the effective date of this Agreement, (ii) for so long as the Health
Foundation owns of record or beneficially VA Shares, those VA Shares owned by
the Health Foundation are and at all times prior to the expiration of the
Initial Period will be free and clear of any liens, claims, options, charges or
other encumbrances; (iii) it does not own of record or beneficially any shares
of Capital Stock of the Company in excess of the Ownership Limit, other than the
VA Shares and the Voting Trust Shares; and (iv) it has full power and authority
to make, enter into and carry out the terms of this Agreement. Notwithstanding
the foregoing, (a) the Health Foundation may pledge any of its VA Shares as
collateral provided that such pledge complies with Section 14(c)(3) of Article
VII of the Company's Articles of Incorporation, and (b) the Health Foundation
shall be free to dispose of any of its VA Shares in accordance with and subject
to any other agreements or restrictions which may be applicable, and any
non-affiliated transferee shall acquire the VA Shares free and clear of any
provisions of this Agreement, except that any and all VA Shares sold in
violation of Section 12 of that certain Registration Rights Agreement as of even
date herewith between the Company and the Health Foundation shall remain subject
to this Agreement. In addition, the Health Foundation agrees that, during the
Initial Period, it will be present, in person or represented by proxy, at all
meetings of the shareholders of the Company for which it has VA Shares, so that
all VA Shares then beneficially owned by the Health Foundation may be counted
for the purpose of determining the presence of a quorum at such meetings.
5. ADDITIONAL DOCUMENTS. The Health Foundation hereby
covenants and agrees to execute and deliver any additional documents necessary
or desirable, in the reasonable opinion of the Company to carry out the purpose
and intent of this Agreement.
6. MISCELLANEOUS.
a) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impair or invalidated. If any term,
provision, covenant or restriction in Section 1 hereof is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then such provision
shall be construed so as to require the VA Shares to be voted in the identical
proportions in favor of or in opposition to such matters as votes of
shareholders other than the Health Foundation are cast.
3
<PAGE> 4
b) BINDING EFFECT AND ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor any
of the rights, interests or obligations of the parties hereto may be assigned by
either of the parties without the prior written consent of the other.
Notwithstanding the foregoing, the provisions of this Agreement shall not be
binding on any transferee who is not affiliated with the Health Foundation
except that any and all VA Shares sold in violation of Section 12 of that
certain Registration Rights Agreement effective on or before the effective date
hereof between the Company and the Health Foundation shall remain subject to
this Agreement.
c) AMENDMENTS AND MODIFICATION. This Agreement may not be
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
d) SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties
acknowledge that there will be irreparable harm and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements set
forth herein. Therefore, it is agreed that, in addition to any other remedies
that may be available to any party upon any such violation, the non-defaulting
party shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to such party at
law or in equity.
e) NOTICES. All notices and other communications pursuant to
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company, then addressed to the Company at:
21555 Oxnard Street
Woodland Hills, CA 91367
Attn: General Counsel
Telecopy No.: (818) 703-4406
With a copy to:
Brobeck Phleger & Harrison LLP
Spear Street Tower
One Market Street
San Francisco, CA 94105
Attention: William L. Hudson, Esq.
Telecopy No.: (415) 442-1010
If to the Health Foundation:
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<PAGE> 5
Western Health Partnerships
21555 Oxnard Street
Woodland Hills, CA 91367
Attn: General Counsel
Telecopy No.: (818) 703-2344
With a copy to:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Michael J. Connell, Esq.
Rena L. O'Malley, Esq.
Telecopy No.: (213) 892-5454
Marron, Reid & Sheehy LLP
601 California Street, Suite 1200
San Francisco, CA 94108-28
Attn: E. Lewis Reid, Esq.
Telecopy No.: (415) 986-1374
f) GOVERNING LAW. This Agreement shall be
governed and enforced in accordance with the internal laws of the State of
California without regard to its principles of conflicts of laws.
g) ENTIRE AGREEMENT. This Agreement contains the
entire understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
h) COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
i) EFFECT OF HEADINGS. The section headings
herein are for convenience only and shall not affect the construction or
interpretation of this Agreement.
j) AUTOMATIC TERMINATION. This Agreement shall
become ineffective and of no further force and effect in the event that (i) the
Company ceases to be subject to any License Agreement (as defined in Section
14(e) of Article VII of the Company's Articles of Incorporation); and/or (ii)
the Health Foundation and its affiliates cease to Beneficially Own Capital Stock
in excess of the Ownership Limit.
k) LEGENDING OF CERTIFICATES. Each certificate
representing (i) VA Shares, and (ii) any other securities issued in respect of
the VA Shares by reason of stock dividends, stock splits, spin-offs, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
shall bear a legend to the effect that: "The securities represented
5
<PAGE> 6
by this certificate are subject to a Voting Agreement (the "Voting Agreement")
dated May 8, 1996 by and between the Company and Western Health Partnerships,
a copy of which may be obtained from the Secretary of the Company. The
provisions of the Voting Agreement are not binding on any transferee who is not
affiliated with Western Health Partnerships except that any and all shares
subject to the Voting Agreement sold in violation of Section 12 of that certain
Registration Rights Agreement dated as of even date with the Voting Agreement
between the Company and Western Health Partnerships shall remain subject to the
Voting Agreement." No VA Shares may be held by the Health Foundation or any of
its affiliates in any street or nominee name. All VA Shares shall be represented
at all times by stock certificates which do not represent any shares other than
VA Shares and which are registered in the name of the Health Foundation or its
affiliates or are registered in a way in which they can be readily identified by
the Company and its transfer agents as VA Shares. The Health Foundation shall
provide such information and assistance as the Company may reasonably request at
any time to identify the VA Shares.
l) CERTAIN DEFINITIONS. For purposes of this Agreement,
the term:
a) "Beneficially Own" has the meaning set forth in
Section 14 of Article VII of the Company's
Articles of Incorporation;
b) "Capital Stock" has the meaning set forth in
Section 14 of Article VII of the Company's
Articles of Incorporation;
c) "Ownership Limit" has the meaning set forth in
Section 14 of Article VII of the Company's
Articles of Incorporation, but without
disregarding any shares Beneficially Owned by the
Health Foundation;
d) "Trustee" means Wilmington Trust Company or any
successor thereto as trustee pursuant to the
Voting Trust Agreement;
e) "VA Shares" means all shares of the Company's
Capital Stock Beneficially Owned by the Health
Foundation at any particular time, except that
(i) Voting Trust Shares which are voted as
required by the terms of the Voting Trust
Agreement shall not be deemed VA Shares so long
as they are so held in the voting trust created
by the Voting Trust Agreement and voted, and (ii)
the Health Foundation shall be entitled to
Beneficially Own at any particular time Capital
Stock of the Company representing up to the
Ownership Limit free of and without being subject
in any way to either the Voting Trust Agreement
or this Agreement and none of the Capital Stock
Beneficially Owned by the Health Foundation at or
below the
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<PAGE> 7
Ownership Limit shall be deemed VA Shares.
Without limiting by implication the generality of
the preceding sentence, any share of Capital
Stock which shall be Beneficially Owned by the
Health Foundation at any particular time in
excess of the Ownership Limit shall be deemed a
VA Share unless at that particular time it is on
deposit in the voting trust created by the Voting
Trust Agreement and is required to be voted in
accordance with the terms of the Voting Trust
Agreement.
f) "Voting Trust Agreement" means that certain
Voting Trust Agreement dated May 20, 1996
between the Health Foundation and the Trustee;
and
g) "Voting Trust Shares" means those shares of
Capital Stock held of record by the Trustee
pursuant to the Voting Trust Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
BLUE CROSS OF CALIFORNIA
By: /s/ Brian J. Donnelly
-------------------------------------
Name: Brian J. Donnelly
-----------------------------------
Title: Sr. Vice President
----------------------------------
WESTERN HEALTH PARTNERSHIPS
By: /s/ Gail Watts
-------------------------------------
Name: Gail Watts
-----------------------------------
Title: Vice President & Secretary
----------------------------------
7
<PAGE> 1
Exhibit 99.4
SHARE ESCROW AGENT AGREEMENT
THIS SHARE ESCROW AGENT AGREEMENT (this "Agreement") is made
and entered into, as of May 20, 1996 by and between Blue Cross of California, a
California corporation (the "Corporation"), and U.S. Trust Company of
California, N.A., a national association, as share escrow agent (the "Share
Escrow Agent").
WHEREAS, the Amended and Restated Articles of Incorporation
(the "Articles") of the Corporation restrict the ability of any Person to
Beneficially Own shares of Capital Stock in excess of the Ownership Limit (all
capitalized terms used but not defined herein have their respective meanings as
set forth in the Articles);
WHEREAS, any Transfer that, if effective, would result in a
violation of the Ownership Limit will also result in the creation of Excess
Shares pursuant to the Articles;
WHEREAS, the Corporation desires to provide for the escrow of
Excess Shares in accordance with the Articles; and
WHEREAS, the Share Escrow Agent has agreed to act as share
escrow agent for the Corporation in connection with the Excess Shares;
NOW, THEREFORE, the parties hereto agree as follows:
1. Excess Shares Escrow. If the Corporation at any time
determines that a Transfer has taken place such that a Person Beneficially Owns
shares of Capital Stock in excess of the Ownership Limit, or that a Purported
Owner intends to acquire or has attempted to acquire Beneficial Ownership of any
shares of Capital Stock in excess of the Ownership Limit, the Corporation shall
take such action as it deems advisable to refuse to give effect to or prevent
such Transfer, including, without limitation, by causing such Excess Shares to
be transferred immediately to the Share Escrow Agent, which Excess Shares shall
be held by the Share Escrow Agent until such time as the Excess Shares are
transferred to a Person whose acquisition thereof will not violate the Ownership
Limit (a "Permitted Transferee"). The Share Escrow Agent is hereby authorized
and directed by the Corporation to execute any and all documents sufficient to
transfer title to any Permitted Transferee, even in the absence of receipt of
certificate(s) representing Excess Shares.
2. Excess Dividends Escrow. The Share Escrow Agent, as
record holder of all Excess Shares, is entitled to receive all Excess Share
Dividends as may be declared by the Board of Directors of the Corporation and
shall hold all Excess Share Dividends until disbursed in accordance with the
provisions of Section 6. The Share
<PAGE> 2
Escrow Agent also agrees to hold in escrow, subject to the provisions of this
Agreement, any amounts it receives from the Corporation or any Purported Owner
of Excess Shares in respect of Excess Shares Dividends.
3. Liquidation of Corporation. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation, the Share Escrow Agent shall be
entitled to receive, ratably with each other holder of Capital Stock of the same
class or series, that portion of the assets of the Corporation that is available
for distribution to the holders of such class or series of Capital Stock. The
Share Escrow Agent shall distribute to the Purported Owner the amounts received
upon such liquidation, dissolution or winding up or distribution in accordance
with the provisions of Section 6.
4. Voting of Excess Shares. The Share Escrow Agent shall
be entitled to vote all Excess Shares. The Share Escrow Agent shall vote,
consent or assent the Excess Shares as follows at each shareholders' meeting:
(a) if the matter concerned is the election of directors, the Share Escrow Agent
shall vote, consent or assent the whole number of Excess Shares held by the
Share Escrow Agent for each director by multiplying the number of votes held in
escrow by a fraction, the numerator of which is the number of Nonaffiliated
Votes cast for the director and the denominator of which is the number of
Nonaffiliated Votes that could have been cast in the election of the director
and are present in person or by proxy at the meeting; (b) where the matter under
the applicable law of the Corporation's state of incorporation or the Articles
or the Bylaws of the Corporation requires at least an absolute majority of all
outstanding shares of Common Stock in order to be effected, then the Share
Escrow Agent shall vote, assent or consent all of such Excess Shares in favor of
or in opposition to such matter as the majority of all Nonaffiliated Votes are
cast; and (c) on all other matters, the Share Escrow Agent shall at all times
vote, assent or consent all of such shares in the identical proportion in favor
of or in opposition to such matter as Nonaffiliated Votes are cast. If any
calculation of votes under the preceding sentence would require a fractional
vote, the Share Escrow Agent shall vote the next lower number of whole Excess
Shares. At such shareholders' meeting the Corporation shall inform the Share
Escrow Agent of how the Nonaffiliated Votes were cast for purposes of
determining how the Share Escrow Agent shall vote the Excess Shares. The Share
Escrow Agent shall use all reasonable commercial efforts to ensure, with respect
to Excess Shares, that such Excess Shares are counted as being present for the
purposes of any quorum required for shareholder action of the Corporation and to
vote as set forth above, provided, that it receives reasonable prior written
notice from the Corporation of any such opportunities to vote the Excess Shares.
For purposes hereof, written notice given to the Share Escrow Agent with respect
to voting of Excess Shares in accordance with applicable state and federal laws,
as well as the Articles and Bylaws of the Corporation, shall be deemed
reasonable. For purposes hereof "Nonaffiliated Votes" shall mean the votes cast
by shareholders other than the Share Escrow Agent with respect to Excess Shares.
2.
<PAGE> 3
5. Sales of Excess Shares. In an orderly fashion so as
not to materially adversely affect the price of Common Stock on the New York
Stock Exchange or, if Common Stock is not listed on the New York Stock Exchange,
on the exchange or other principal market on which Common Stock is traded, the
Share Escrow Agent shall sell or cause the sale of Excess Shares at such time or
times as the Share Escrow Agent determines to be appropriate. The Share Escrow
Agent shall have the power to convey to the purchaser of any Excess Shares sold
by the Share Escrow Agent ownership of the Excess Shares free of any interest of
the Purported Owner of those Excess Shares and free of any other adverse
interest arising through the Purported Owner. The Share Escrow Agent shall also
have the right to take actions as the Share Escrow Agent deems appropriate to
seek to restrict sale of the shares to Permitted Transferees. In furtherance of
its obligations under this Section 5, the Share Escrow Agent shall have the
right to request the Corporation to make a determination as to whether a
proposed sale of Excess Shares will materially adversely affect the price of the
Common Stock on the New York Stock Exchange (or, if the Common Stock is not
listed on the New York Stock Exchange, on the exchange or other principal market
on which Common Stock is traded) and shall have no liability for any action it
takes pursuant to such determination. Upon acquisition by any Permitted
Transferee of any Excess Shares sold by the Share Escrow Agent or the Purported
Owner, such shares shall upon such sales cease to be Excess Shares and shall
become regular shares of Capital Stock in the class to which the Excess Shares
belong, and the purchaser of such shares shall acquire such shares free of any
claims of the Share Escrow Agent or the Purported Owner.
6. Distributions From Excess Shares Sold. The proceeds
from the sale of the Excess Shares to a Permitted Transferee, any Excess Share
Dividends and all interest therein pursuant to Section 10 shall be distributed
by the Share Escrow Agent as follows: (a) first, to the Share Escrow Agent for
any costs and expenses incurred in respect of its administration of the Excess
Shares that have not theretofore been reimbursed by the Corporation; (b) second,
to the Corporation for all costs and expenses incurred by the Corporation in
connection with the appointment of the Share Escrow Agent, the payment of fees
to the Share Escrow Agent with respect to the services provided by the Share
Escrow Agent and all funds expended by the Corporation to reimburse the Share
Escrow Agent for costs and expenses incurred by the Share Escrow Agent in
respect of its administration of the Excess Shares and for all fees,
disbursements and expenses incurred by the Share Escrow Agent in connection with
the sale of the Excess Shares; and (c) third, the remainder thereof (as the case
may be) to the Purported Owner or the Person who was the holder of record before
the shares were transferred to the Share Escrow Agent (depending on who shall at
such time be entitled to any economic interest in the Excess Shares); provided,
however, if the Share Escrow Agent shall have any questions as to whether any
security interest or other interest adverse to the Purported Owner shall have
existed with respect to any Excess Shares, the Share Escrow Agent shall not be
obligated to disburse proceeds for those shares until the Share Escrow Agent is
provided with such evidence as the Share Escrow Agent shall deem necessary to
determine the parties who shall be entitled to such proceeds.
3.
<PAGE> 4
7. Escrow Account: The Share Escrow Agent shall maintain
an escrow account designated as Blue Cross of California-Share Escrow Account
(the "Escrow Account"). The Share Escrow Agent shall deposit all checks and
other payments received from the Corporation, Purported Holders or other Persons
pursuant to this Agreement into the Escrow Account.
8. Deposit of Funds.
(a) The Corporation will direct each Purported
Holder to make payment by (i) delivery to the Share Escrow Agent of a personal,
certified or official bank check, and made payable to "U.S. Trust Company of
California, N.A. for Blue Cross of California-Share Escrow Account" or (ii) a
bank wire transfer to the Escrow Account pursuant to instructions to be agreed
to by the parties.
(b) The Share Escrow Agent will promptly notify
the Corporation of the deposit of any funds into the Escrow Account.
9. Termination Date. Subject to the rights of the Share
Escrow Agent under Sections 12 and 20, which shall continue beyond the
termination of this Agreement, this Agreement shall terminate upon the
Corporation's delivery of a written notice to the Escrow Agent to such effect.
10. Investment of Escrow Property. The Share Escrow Agent
shall promptly invest any escrowed proceeds in any federally insured money
market deposit account that is acceptable to the Corporation. The Share Escrow
Agent and its affiliates may act as agent, principal sponsor, or depositary,
with respect to any such investment. The Share Escrow Agent shall in no event be
liable for any loss resulting from the performance of any funds invested
pursuant to this Section 10. Interest on proceeds invested pursuant to this
Section 10 shall accrue from the date of investment of such proceeds until the
termination of such investment pursuant to the terms hereof and shall be paid as
set forth in Section 6.
11. Collections. The Share Escrow Agent shall be under no
duty or responsibility to enforce collection of any checks or other instruments
delivered to the Share Escrow Agent hereunder. The Share Escrow Agent shall
promptly notify the Corporation if any check or instrument received from any
Purported Holder shall be dishonored, not accepted or paid, or otherwise
uncollectible. The Share Escrow Agent may recover any costs or expenses incurred
in connection with such transaction from the applicable Purported Holder or the
Corporation.
12. Fees. The Share Escrow Agent shall provide all
administrative and reporting services contemplated by this Agreement. The Share
Escrow Agent's fees and expenses shall be in the amounts as set forth in
Schedule A to that certain Fee Letter Agreement (the "Fee Letter"), from the
Share Escrow Agent to the Corporation, or as
4.
<PAGE> 5
otherwise provided herein or therein. The Corporation shall pay such fees and
expenses upon execution of this Agreement, or as otherwise provided in the Fee
Letter. The Share Escrow Agent shall send the Corporation a final invoice after
closing of the escrow covering all out-of-pocket expenses or any other
extraordinary services rendered.
13. Consultation with Counsel. The Share Escrow Agent may
consult with legal counsel, at the expense of the Corporation (which expenses
shall be reasonable), in the event of any dispute or question as to the
consideration of the foregoing instructions or the Share Escrow Agent's duties
hereunder, and the Share Escrow Agent shall incur no liability and shall be
fully protected in acting in good faith in accordance with the opinion or advice
of such counsel.
14. Notices. All notices, communications and instructions
required or desired to be given hereunder shall be in writing (including
facsimile) and shall be given to such party, addressed to it, at its address and
facsimile number set forth below or to such other address or facsimile number as
such party may have furnished to the other parties in the manner for giving
notices hereunder. Each such notice, communication or instruction shall be
effective (i) if given by mail, five days after such communication is deposited
in the mails with first-class postage prepaid addressed as aforesaid, (ii) if
sent by facsimile to the facsimile number set forth below, when such facsimile
is transmitted and its receipt is acknowledged, or (iii) if given by any other
means, when delivered at the address specified below,
If to the Corporation, to: Blue Cross of California
21555 Oxnard Street
Woodland Hills, CA 91367
Attn: Thomas C. Geiser
Telephone No.: (818) 703-4000
Facsimile No.: (818) 703-3551
If to the Share Escrow
Agent, to: U.S. Trust Company of California, N.A.
515 South Flower Street, Suite 2700
Los Angeles, CA 90071-2291
Attn: Corporate Trust Department
Telephone No.: (213) 861-5000
Facsimile No.: (213) 488-1370
15. Limited Duties.
(a) The duties and responsibilities of the Share
Escrow Agent shall be limited to those expressly set forth in this Agreement;
provided, however, that this Agreement may be amended at any time or times by an
instrument in writing signed by all the then parties in interest.
5.
<PAGE> 6
(b) The Share Escrow Agent is authorized, in its
sole discretion, to disregard any and all notices or instructions given by any
Person except only such notices or instructions provided by the Corporation or
as otherwise hereinabove provided or an order or process of any court entered or
issued with or without jurisdiction. If any property subject hereto is at any
time attached, garnished or levied upon under any court order or in case any
order, judgment or decree which the Share Escrow Agent is advised by legal
counsel of its own choosing is binding upon it, and further, if the Share Escrow
Agent complies with any such order, writ, judgment or decree it shall not be
liable to the Corporation or to any other Person by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
(c) The Share Escrow Agent shall not be
responsible for the sufficiency or accuracy of the form, execution, validity or
genuineness of documents, or securities now or hereafter deposited hereunder, or
of an endorsement thereon, or for any lack of endorsement thereon, for any
description therein, nor shall the Share Escrow Agent be responsible or liable
in any respect on account of the authority or rights of the Persons executing or
delivering or purporting to execute or deliver any such document, security or
endorsement.
(d) The Share Escrow Agent shall not be
responsible in any manner whatsoever for the recitals made herein. It is the
intention of the parties hereto that the Share Escrow Agent shall not be
required to use or advance its own funds or otherwise incur personal financial
liability in the performance of any of its duties or the exercise of any rights
and powers hereunder.
(e) The Share Escrow Agent is not a party to,
nor is it bound by nor need it give consideration to the terms or provisions of,
any other agreement or undertaking between the Corporation and other Persons,
and the Share Escrow Agent is to give consideration only to the terms and
provisions of this Agreement and, to the extent referred to herein, the
Articles. The Share Escrow Agent's only duties hereunder are to safeguard the
Excess Shares and any monies held in escrow, to vote such shares as provided
herein and to dispose of and deliver the same in accordance with this Agreement
and, to the extent referred to herein, the Articles. If the Share Escrow Agent
is called upon by the terms of this Agreement to determine the occurrence of any
event or contingency, the Share Escrow Agent shall be obligated in making such
determination, only to exercise reasonable care and diligence, and, in the event
of error in making such determination, the Share Escrow Agent shall be liable
only for its own intentional misconduct or grossly negligent conduct, and it
shall, accordingly, not incur any such liability with respect to any action
taken or omitted in good faith upon advice of its counsel given in respect to
any questions relating to the duties and responsibilities of the Share Escrow
Agent under this Agreement. In determining the occurrence of any such event or
contingency, the Share Escrow Agent may request from the Corporation or any
other Person such additional evidence as the Share Escrow Agent in its sole
discretion
6.
<PAGE> 7
may deem necessary to determine any fact relating to the occurrence of such
event or contingency and, in this connection, may inquire and consult with its
counsel and, among others, with the Corporation at any time, and the Share
Escrow Agent shall not be liable for any damages resulting from its reasonable
delay in acting hereunder pending its examination of the additional evidence
requested by it.
(f) In the event of any disagreement between the
parties to this Agreement, or between any of them and any other Person,
resulting in adverse claims or demands being made in connection with the matters
covered by this Agreement, or in the event that the Share Escrow Agent, in good
faith, be in doubt as to what action it should take hereunder, the Share Escrow
Agent may at its option, refuse to comply with any claims or demands on it, or
refuse to take any other action hereunder, so long as such disagreement
continues or such doubt exists, and in any such event, the Share Escrow Agent
shall not be or become liable in any to any Person for its failure or refusal to
act, and the Share Escrow Agent shall be entitled to continue to refrain from
acting until: (i) the rights of all interested parties shall have been fully and
finally adjudicated by a court of competent jurisdiction; or (ii) all
differences shall have been adjudged and all doubt resolved by agreement among
all of the interested Persons, and the Share Escrow Agent shall have been
notified thereof in writing signed by all such Persons. Notwithstanding the
preceding sentence, the Share Escrow Agent may in its discretion obey the order,
judgment, decree or levy of any court, whether with or without jurisdiction, or
of any agency of the United States or any political subdivision thereof, and the
Share Escrow Agent is hereby authorized to obey such orders, judgments, decrees
or levies. The rights of the Share Escrow Agent under this subsection are
cumulative of all other rights which it has by law or otherwise.
(g) Should any controversy arise between the
parties hereto with respect to this Agreement or with respect to the right of
the Corporation to receive the Excess Shares or any monies held in escrow, the
Share Escrow Agent shall have the right to institute a bill of interpleader in
any court of competent jurisdiction to determine the rights of the parties.
Should a bill of interpleader be instituted, or should the Share Escrow Agent
become involved in litigation in any manner whatsoever on account of this
Agreement for the deposits made hereunder, the Corporation hereby binds and
obligates itself, its successors and assigns, to pay the Share Escrow Agent, in
addition to any charges made hereunder for acting as Share Escrow Agent,
reasonable attorneys' fees incurred by the Share Escrow Agent, and any other
reasonable disbursements, expenses, losses, costs and damages in connection with
and resulting from such litigation, except in the case where losses or damages
result from the Share Escrow Agent's intentional misconduct or gross negligence.
(h) Without in any way limiting any other
provision of this Agreement, it is understood and agreed that the Share Escrow
Agent shall be under no duty or obligation to give any notice, except as
expressly provided herein.
7.
<PAGE> 8
(i) The Share Escrow Agent shall not be liable
for any error in judgment or any act or steps taken or permitted to be taken in
good faith, or for anything it may do or refrain from doing In connection
herewith, except for its own intentional misconduct or grossly negligent
conduct.
(j) In no event shall the Share Escrow Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Share Escrow
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action, except for consequential loss or damage arising out of
the Share Escrow Agent's own intentional misconduct or grossly negligent
conduct.
16. Records. The Share Escrow Agent shall maintain
accurate records of all transactions hereunder. Promptly after the termination
of the Escrow Account, or as may reasonably be requested by the Corporation from
time to time before such termination, the Share Escrow Agent shall provide the
Corporation with a complete copy of such records, certified by the Share Escrow
Agent to be a complete and accurate account of all such transactions. The
authorized representatives of the Corporation shall also have access to such
books and records at all reasonable times during normal business hours upon
reasonable notice to the Share Escrow Agent.
17. Governing Law; Binding. This Agreement is being made
in, is governed by and is intended to be construed according to the laws of the
State of California. It shall inure to and be binding upon the parties hereto,
their successors and assigns.
18. Severability. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
19. Time. Whenever under the terms of this Agreement the
performance date of any provision hereof shall fall on a day which is not a
legal banking day, and upon which the Share Escrow Agent is not open for
business, the performance thereof on the next succeeding business day of the
Share Escrow Agent shall be deemed to be in full compliance.
20. Indemnification. The Share Escrow Agent shall be
indemnified and held harmless by the Corporation, from and against any expenses,
including reasonable counsel fees and disbursements, or loss suffered by the
Share Escrow Agent in connection with any claim or demand, which, in any way,
directly or indirectly, arises out of or relates to this Agreement or the
services of the Share Escrow Agent hereunder except in the case of gross
negligence or intentional misconduct under this Agreement by
8.
<PAGE> 9
the Share Escrow Agent. Promptly after the receipt by the Share Escrow Agent of
notice of any demand or claim or the commencement of any action, suit or
proceeding, the Share Escrow Agent shall notify the Corporation in writing.
21. Successors. The Share Escrow Agent may be merged or
consolidated with or into any entity or transfer all or substantially all of its
assets to any entity, in which case, any entity resulting from any merger or
consolidation or any entity succeeding to the business of the Share Escrow
Agent, shall be successor of the Share Escrow Agent hereunder without the
execution or filing of any paper or further act by any of the parties hereto. In
case at any time the Share Escrow Agent or its legal successor or successors
should become unable, through operation of law or otherwise, to act as Share
Escrow Agent, or if its properties and affairs shall be taken under the control
of any court or administrative body because of insolvency or bankruptcy or for
any other reason, a vacancy shall forthwith and ipso facto exist in the office
of the Share Escrow Agent, a successor Share Escrow Agent shall be appointed by
the Corporation. The Corporation may be merged or consolidated with or into any
entity or transfer all or substantially all of its assets to any entity, in
which case, any entity resulting from any merger or consolidation or any entity
succeeding to the business of the Corporation, shall be successor of the
Corporation hereunder without the execution or filing of any paper or further
act by any of the parties hereto.
22. Resignation. The Share Escrow Agent may resign at any
time upon thirty (30) days' prior written notice to the Corporation, whereupon
the Corporation shall appoint a substitute Share Escrow Agent and the Share
Escrow Agent shall deliver the Excess Shares and monies held in escrow to any
designated substitute Share Escrow Agent selected by the Corporation. If the
Corporation does not designate a substitute Share Escrow Agent within ten (10)
days, the Share Escrow Agent may, in its sole discretion, institute a bill of
interpleader as contemplated herein or otherwise submit appropriate pleadings.
Notwithstanding the immediately preceding sentence, until a substitute Share
Escrow Agent has been named and accepts its appointment or until another
disposition of the Excess Shares and monies held in the Escrow Account has been
agreed upon by all the parties hereto, the Share Escrow Agent shall be
discharged of all of its duties and obligations hereunder except to hold such
Excess Shares and monies in escrow.
23. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which shall constitute but one and the same instrument.
24. No Fiduciary Duty to Purported Holders. The Share
Escrow Agent shall not be deemed to be a fiduciary or agent of any Purported
Holder or other Person other than the Corporation.
9.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers, as of the
date first above written at Los Angeles, California.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By: /s/ Sandra H. Leeso
---------------------------------
Its: Authorized Officer
BLUE CROSS OF CALIFORNIA
a California Corporation
By: /s/ Brian J. Donnelly
---------------------------------
Its: Secretary
10.
<PAGE> 1
Exhibit 99.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
May 20, 1996, by and among WESTERN HEALTH PARTNERSHIPS, a California nonprofit
public benefit corporation ("WHP"), and BLUE CROSS OF CALIFORNIA, a California
corporation (the "Company").
WHEREAS, the Company, WHP and Western Foundation for Health
Improvement and WellPoint Health Networks Inc., a Delaware corporation
("WellPoint"), have entered into an Amended and Restated Recapitalization
Agreement dated as of March 31, 1995 (the "Recapitalization Agreement") pursuant
to which the Company would convert from a nonprofit public benefit corporation
to for-profit status and WHP would become its sole shareholder, and thereafter
WellPoint would merge into the Company (with the name of the Company being
changed to WellPoint Health Networks Inc.) and following that merger WHP would
become an 80.4% shareholder in the Company with other former shareholders of
WellPoint holding the remaining 19.6% of the outstanding shares of Common Stock
of the Company.
WHEREAS, the execution of this Agreement is required under the
Recapitalization Agreement.
WHEREAS, following the completion of the transactions
contemplated by the Recapitalization Agreement, WHP would become the owner of
53,360,000 shares of the Company's issued and outstanding Common Stock, par
value $.01 per share ("Common Stock").
WHEREAS, the parties hereto desire to enter into this
Agreement which sets forth the terms of certain registration rights applicable
to the Registrable Securities (as defined below).
NOW, THEREFORE, upon the premises and the mutual promises
herein contained, and for good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the
following initially capitalized terms shall have the following meanings:
(a) "Affiliate" means, with respect to any person,
any other person who, directly or indirectly, is in control of, is controlled by
or is under common control with the former person.
(b) "Holders" means WHP or any Affiliate of WHP or
any trustee for the account of WHP and any "transferee" (as such term is defined
in Section 11 hereof) which is the record holder of Registrable Securities.
1
<PAGE> 2
(c) "Registrable Securities" means the shares of
Common Stock held by the WHP as of the date hereof, any stock or other
securities into which or for which such shares of Common Stock may hereafter be
changed, converted or exchanged, and any other securities issued to the Holders
of such shares of Common Stock (or such shares into which or for which such
shares are so changed, converted or exchanged) upon any reclassification, share
combination, share subdivision, share dividend, merger, consolidation or similar
transactions or events, provided that any such securities shall cease to be
Registrable Securities if (i) a registration statement with respect to the sale
of such securities shall have become effective under the Securities Act (as
defined below) and such securities shall have been disposed of in accordance
with the plan of distribution set forth in such registration statement, (ii)
such securities shall have been transferred pursuant to Rule 144, (iii) such
securities are held by a Holder other than WHP, unless such Holder shall furnish
the Company an opinion of counsel, which opinion shall be reasonably
satisfactory to the Company, to the effect that all of such securities are not
permitted to be distributed by such Holder in one transaction pursuant to Rule
144, or (iv) such securities are held by a Holder whose aggregate holdings of
Registrable Securities, computed in accordance with the requirements of
Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder, constitute less than 4.9% of the total
outstanding common equity of the Company.
(d) "Registration Expenses" means all reasonable
expenses in connection with any registration of securities pursuant to this
Agreement including, without limitation, the following: (i) SEC filing fees;
(ii) the fees, disbursements and expenses of the Company's counsel(s) and
accountants in connection with the registration of the Registrable Securities to
be disposed of under the Securities Act; (iii) all expenses in connection with
the preparation, printing and filing of the registration statement, any
preliminary prospectus or final prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to any Holders,
underwriters and dealers and all expenses incidental to delivery of the
Registrable Securities; (iv) the cost of producing blue sky or legal investment
memoranda; (v) all expenses in connection with the qualification of the
Registrable Securities to be disposed of for offering and sale under state
securities laws, including the fees and disbursements of counsel for the
underwriters or Holders in connection with such qualification and in connection
with any blue sky and legal investments surveys; (vi) the filing fees incident
to securing any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Registrable Securities to be
disposed of, (vii) transfer agents', depositories' and registrars' fees and the
fees of any other agent appointed in connection with such offering; (viii) all
security engraving and security printing expenses; (ix) all fees and expenses
payable in connection with the listing of the Registrable Securities on each
securities exchange or inter-dealer quotation system on which a class of common
equity securities of the Company is then listed; (x) all reasonable
out-of-pocket expenses of the Company incurred in connection with road show
presentations, including the salaries (based on a per diem allocation) and
expenses (to the extent not reimbursed by the underwriters) of officers making
road show presentations and holding meetings with potential investors to
facilitate the distribution and sale of Registrable Securities and other
out-of-pocket expenses of the Company related thereto, but salaries shall be
deemed a
2
<PAGE> 3
Registrable Expense if and only to the extent such road show presentations and
meetings are made or held on more than five business days in the aggregate with
respect to any one registration (and then only if earned or incurred in respect
of such days in excess of five business days); (xi) the pro rated salaries and
expenses of in-house attorneys performing legal services to the extent such
services would otherwise be performed by outside counsel; (xii) courier,
overnight delivery, word processing, duplication, telephone and facsimile
expenses; and (xiii) any one-time payment for directors and officers insurance
directly related to such offering, provided the insurer provides a separate
statement for such payment.
(e) "Rule 144" means Rule 144 promulgated under the
Securities Act, or any successor rule to similar effect.
(f) "SEC" means the United States Securities and
Exchange Commission.
(g) "Securities Act" means the Securities Act of
1933, as amended, or any successor statute.
2. Demand Registration.
(a) At any time, upon written notice from a Holder in
the manner set forth in Section 13(h) hereof requesting that the Company effect
the registration under the Securities Act of any or all of the Registrable
Securities held by such Holder, which notice shall specify the intended method
or methods of disposition of such Registrable Securities, the Company shall have
the right, exercisable within 15 days by written notice, to purchase all or a
portion of the Registrable Securities requested to be registered by such Holder
at a cash price per share equal to the arithmetic mean of each of the closing
sales prices per share of Common Stock on the New York Stock Exchange for each
of the 15 consecutive trading days ending on the fifth trading day immediately
preceding the date of the written notice from the Holder under this
Section 2(a). The closing of such purchase shall take place no later than 45
days after the date of the written notice from the Company under this
Section 2(a).
(b) If the Company does not exercise its right to
purchase under Section 2(a) above, the Company shall use its best efforts to
effect, in the manner set forth in Section 5, the registration under the
Securities Act of such Registrable Securities for disposition in accordance with
the intended method or methods of disposition stated in such request, provided
that:
(i) if prior to receipt of a registration
request pursuant to this Section 2(b), the Company had commenced a
financing plan through a formal "all hands" meeting with outside
advisors, including an underwriter if such financing plan is an
underwritten offering, and, in the good faith business judgment of the
Company's underwriter, a registration at the time and on the terms
requested could materially and adversely affect or interfere with such
financing plan of the Company or its subsidiaries
3
<PAGE> 4
(a "Transaction Blackout"), the Company shall not be required to effect
a registration pursuant to this Section 2(b) until the earliest of (A)
the abandonment of such offering, (B) 90 days after the termination of
such offering, (C) the termination of any "hold back" period obtained
by the underwriter(s) of such offering from any person in connection
therewith or (D) 110 days after receipt by the Holder requesting
registration of the written notice from the Company referred to above
in this subsection (i);
(ii) if, while a registration request is
pending pursuant to this Section 2(b), the Company has determined in
good faith that (A) the filing of a registration statement could
jeopardize or delay any contemplated material transaction other than a
financing plan involving the Company or would require the disclosure of
material information that the Company had a bona fide business purpose
for preserving as confidential; or (B) the Company then is unable to
comply with SEC requirements applicable to the requested registration
(notwithstanding its best efforts to so comply), the Company shall not
be required to effect a registration pursuant to this Section 2(b)
until the earlier of (1) the date upon which such contemplated
transaction is completed or abandoned or such material information is
otherwise disclosed to the public or ceases to be material or the
Company is able to so comply with applicable SEC requirements, as the
case may be, and (2) 45 days after the Company makes such good-faith
determination, provided that the Company shall not be permitted to
delay a requested registration in reliance on this clause (ii) more
than once in any 12-month period; and
(iii) the Company shall not be obligated to
file a registration statement relating to a registration request
pursuant to this Section 2: (A) more than once in any calendar year;
(B) within a period of six months after the effective date of any other
registration statement of the Company demanded pursuant to this
Section 2(b); or (C) if such registration request is for a number of
Registrable Securities which have an aggregate market value less than
$75 million.
(c) Notwithstanding any other provision of this
Agreement to the contrary:
(i) a registration requested by a Holder
pursuant to this Section 2 shall not be deemed to have been effected
(and, therefore, not requested for purposes of Section 2(b)), (A) if it
is withdrawn based upon material adverse information relating to the
Company that is different from the information (x) known to the Holder
requesting registration at the time of their request for registration,
or (y) promptly disclosed by the Company to the Holder at the time of
their request for registration; (B) if after it has become effective
such registration is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or
court for any reason other then a misrepresentation or an omission by
such Holder and, as a result thereof, less than 90% of the Registrable
Securities requested to be registered can be completely distributed in
accordance with the plan of distribution set forth in the related
registration statement; or (C) if the conditions to closing specified
in the purchase
4
<PAGE> 5
agreement or underwriting agreement entered into in connection with
such registration are not satisfied (other than by reason of some act
or omission by such Holder) or waived by the underwriters;
(ii) a registration requested by a Holder
pursuant to this Section 2 and later withdrawn at the request of such
Holder shall be deemed to have been effected (and, therefore, requested
for purpose of Section 2(b)), whether withdrawn by the Holder prior to
or after the effectiveness of such requested registration, provided,
that if the Holder bears the Registration Expenses for any registration
begun pursuant to Section 2(b) and subsequently withdrawn, such
registration shall not count as a requested registration pursuant to
Section 2(b).
(d) In the event that any registration pursuant to
this Section 2 shall involve, in whole or in part, an underwritten offering, the
Company, on the one hand, and the Holder initiating the demand pursuant to
Section 2(a), on the other hand, shall each have the right to designate an
underwriter as the sole lead managing underwriters of such underwritten offering
(with such co-lead managing underwriters sharing lead managing underwriter
compensation equally). The Company and such Holder shall together select which
of the co-lead managing underwriters shall serve as "books-running" underwriter;
provided that if the Company and such Holder cannot, within 10 days following
the notice from such Holder referred to in Section 2(a), reach a mutual
agreement on such selection, then (i) the Company shall have the right in the
case of the first such underwritten offering (subject to the consent of WHP,
which consent may not be unreasonably withheld) to select the "books-running"
underwriter for such first offering; (ii) such Holder shall have the right (in
the case of the next such underwritten offering as to which no agreement can be
reached as provided) to select the "books-running" underwriter for such next
offering; and (iii) the selection right shall thereafter alternate for each
subsequent offering as to which no agreement can be reached as provided.
(e) Holders other than the Holder initiating the
demand pursuant to Section 2(b) shall have the right to include their shares of
Registrable Securities in any registration pursuant to Section 2(b); provided
that WHP may exclude participation by other Holders in connection with
registrations pursuant to two demands (no two of which can be in consecutive
years). In connection with those registrations in which multiple Holders
participate, in the event such registration involves an underwritten offering
and the lead managing underwriter advises that marketing factors require a
limitation on the number of shares to be underwritten, the number of shares to
be included in the underwriting and registration shall be allocated at least 50%
to WHP until such time as WHP shall have received $250,000,000 from the sale of
its Registrable Securities pursuant to Sections 2 or 3 of this Agreement and
thereafter pro rata among the Holders on the basis of the shares of Registrable
Securities held by each such Holder.
(f) The Company shall have the right to cause the
registration of additional securities for sale for the account of any person
(including the Company) in any registration of Registrable Securities requested
by a Holder pursuant to Section 2(b); provided
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<PAGE> 6
that the Company shall not have the right to cause the registration of such
additional securities if such Holder is advised in writing (with a copy to the
Company) by the lead managing underwriter designated by the Holder pursuant to
Section 2(d) that, in such firm's good-faith opinion, registration of such
additional securities would materially and adversely affect the offering and
sale of the Registrable Securities then contemplated by such Holder.
3. Piggyback Registration. At any time if the Company proposes
to register any of its Common Stock or any other of its common equity securities
(collectively, "Other Securities") under the Securities Act (other than a
registration on Form S-4 or S-8 or any successor form thereto), whether or not
for sale for its own account, in a manner which would permit registration of
Registrable Securities for sale for cash to the public under the Securities Act,
it will each such time give prompt written notice to each Holder of its
intention to do so at least 10 business days prior to the anticipated filing
date of the registration statement relating to such registration. Such notice
shall offer each such Holder the opportunity to include in such registration
statement such number of Registrable Securities as each such Holder may request.
Upon the written request of any such Holder made within five business days after
the receipt of the Company's notice (which request shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
disposition thereof), the Company shall effect, in the manner set forth in
Section 5, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register, to the extent required to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so requested to be registered, provided that:
(a) if at any time after giving written notice of its
intention to register any securities and prior to the effective date of such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to the Holder and, thereupon, (A) in the
case of a determination not to register, the Company shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration and (B) in the case of a determination to delay such registration,
the Company shall be permitted to delay registration of any Registrable
Securities requested to be included in such registration for the same period as
the delay in registering such other securities;
(b) (i) if the registration referred to in the first
sentence of this Section 3 is to be an underwritten primary registration on
behalf of the Company, and the managing underwriter advises the Company in
writing that, in such firm's opinion, such offering would be materially and
adversely affected by the inclusion therein of the Registrable Securities
requested to be included therein, the Company shall include in such
registration: (1) first, all securities the Company proposes to sell for its own
account ("Company Securities") and (2) second, up to the full number of
Registrable Securities in excess of the number or dollar amount of Company
Securities, which, in the good-faith opinion of such managing underwriter, can
be so sold without materially and adversely affecting such offering (and, if
less than the full number of such Registrable Securities, allocated pro rata
among the Holders of such Registrable
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<PAGE> 7
Securities on the basis of the number of securities requested to be included
therein by each such Holder) and (ii) if the registration referred to in the
first sentence of this Section 3 is to be an underwritten secondary registration
on behalf of holders of securities (other than Registrable Securities) of the
Company (the "Other Holders"), and the managing underwriter advises the Company
in writing that in their good-faith opinion such offering would be materially
and adversely affected by the inclusion therein of the Registrable Securities
requested to be included therein, the Company shall include in such registration
the amount of securities (including Registrable Securities) that such managing
underwriter advises allocated as follows: (1) first, that number of Registrable
Securities requested to be included therein as shall result in the Holder making
such request owning less than 20% of the total outstanding common equity of the
Company and (2) second, pro rata among the Other Holders and the Holders on the
basis of the number of remaining securities (including Registrable Securities)
requested to be included therein by each Other Holder and each Holder;
(c) the Company shall not be required to effect any
registration of Registrable Securities under this Section 3 incidental to the
registration of any of its securities in connection with mergers, acquisitions,
dividend reinvestment plans or stock option or other executive or employee
benefit or compensation plans; and
(d) no registration of Registrable Securities
effected under this Section 3 shall relieve the Company of its obligation to
effect a registration of Registrable Securities pursuant to Section 2 hereof.
(e) for a period of 90 days following the closing of
the transactions contemplated by the Recapitalization Agreement, the Company may
not propose to register or register any Common Stock or Other Securities,
whether or not for sale for its own account, without the consent of WHP, which
consent may not be unreasonably withheld. It is hereby expressly agreed that
(among other reasons for withholding WHP's consent) it shall be deemed a
reasonable basis for WHP to withhold its consent under the preceding sentence if
in the sole determination of WHP the registration of such Common Stock or Other
Securities by the Company may adversely affect the ability of WHP, if and when
WHP so chooses, to subsequently register and sell any of its Registrable
Securities. After the first 90 days following the closing of the transactions
contemplated by the Recapitalization Agreement, and until such time as WHP shall
have received $250,000,000 from the sale of its Registrable Securities pursuant
to either Section 2 or 3 of this Agreement, the Company may not propose to
register or register any Common Stock or Other Securities, whether or not for
sale for its own account, unless WHP is entitled to include for sale, if it so
chooses, shares of its Registrable Securities which make it entitled to receive
no less than 50% of the proceeds of the offering pursuant to such registration
and the lead managing underwriter for such registration is selected by mutual
agreement of the Company and WHP, or in the absence of mutual agreement, then
such selection may be made by the Company, with the consent of WHP, which
consent may not be unreasonably withheld.
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<PAGE> 8
4. Expenses. Unless otherwise elected to be borne by a Holder
pursuant to Section 2(c)(ii), the Company agrees to pay all Registration
Expenses with respect to an offering pursuant to Section 2 and Section 3 hereof.
5. Registration and Qualification. If and whenever the Company
is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2 or 3
hereof, the Company, shall:
(a) prepare and file a registration statement under
the Securities Act relating to the Registrable Securities to be offered as soon
as practicable, but in no event later than 30 days (60 days if the applicable
registration form is other than Form S-3) after the date notice is given, and
use its best efforts to cause the same to become effective as promptly as
practicable;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
70 days (or, in the case of an underwritten offering, such shorter time period
as the underwriters may require);
(c) furnish to the Holders and to any underwriter of
such Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities Act,
and such other documents, as the Holders or such underwriter may reasonably
request in order to facilitate the public sale of the Registrable Securities,
and a copy of any and all transmittal letters or other correspondence to, or
received from, the SEC or any other governmental agency or self-regulatory body
or other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering;
(d) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Holders or any
underwriter of such Registrable Securities shall request, and use its best
efforts to obtain all appropriate registrations, permits and consents required
in connection therewith, and do any and all other acts and things which may be
necessary or advisable to enable the Holders or any such underwriter to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such registration statement; provided that the Company shall not for
any such purpose be required to register or qualify generally to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified, or to
subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) (i) use its best efforts to furnish an opinion of
counsel for the Company addressed to the underwriters and each Holder of
Registrable Securities included in
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<PAGE> 9
such registration (each a "Selling Holder") and dated the date of the closing
under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement), and (ii)
use its best efforts to furnish a "cold comfort" letter addressed to each
Selling Holder, if permissible under applicable accounting practices, and signed
by the independent public accountants who have audited the Company's financial
statements included in such registration statement, in each such case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and such other matters as the
Selling Holders may reasonably request and, in the case of such accountants'
letter, with respect to events subsequent to the date of such financial
statements;
(f) immediately notify the Selling Holders in writing
(i) at any time when a prospectus relating to a registration pursuant to
Section 2 or 3 hereof is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) of any request by the SEC or any
other regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to such
offering, and in either such case (i) or (ii) at the request of the Selling
Holders, subject to Section 4 hereof, prepare and furnish to the Selling Holders
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(g) use its best efforts to list all such Registrable
Securities covered by such registration on each securities exchange and
inter-dealer quotation system on which a class of common equity securities of
the Company is then listed, with expenses in connection therewith to be paid in
accordance with Section 4 hereof; and
(h) furnish unlegended certificates representing
ownership of the Registrable Securities being sold in such denominations as
shall be requested by the Selling Holders or the underwriters with expenses
therewith to be paid in accordance with Section 4 hereof.
6. Conversion of Other Securities, etc. If a Holder offers any
options, rights, warrants or others securities issued by it or any other person
that are offered with, convertible into or exercisable or exchangeable for any
Registrable Securities, the Registrable Securities underlying such options,
rights, warrants or other securities shall be eligible for registration pursuant
to Section 2 and Section 3 of this Agreement.
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<PAGE> 10
7. Underwriting, Due Diligence.
(a) If requested by the underwriters for any
underwritten offering of Registrable Securities pursuant to a registration
requested under this Agreement, the Company shall enter into an underwriting
agreement with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution substantially to the effect and to the extent provided in Section 8
hereof and the provision of opinions of counsel and accountants' letters to the
effect and to the extent provided in Section 5(e) hereof. The Selling Holders on
whose behalf the Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters, shall also be made to and
for the benefit of such Selling Holders. Such underwriting agreement shall also
contain such representations and warranties by the Selling Holders on whose
behalf the Registrable Securities are to be distributed as are customarily
contained in underwriting agreements with respect to secondary distributions.
Selling Holders may require that any additional securities included in an
offering proposed by a Holder be included on the same terms and conditions as
the Registrable Securities that are included therein.
(b) In the event that any registration pursuant to
Section 3 shall involve, in whole or in part, an underwritten offering, the
Company may require the Registrable Securities requested to be registered
pursuant to Section 3 to be included in such underwriting on the same terms and
conditions as shall be applicable to the other securities being sold through
underwriters under such registration. If requested by the underwriters for such
underwritten offering, the Selling Holders on whose behalf the Registrable
Securities are to be distributed shall enter into an underwriting agreement with
such underwriters, such agreement to contain such representations and warranties
by the Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
including, without limitation, indemnities and contribution substantially to the
effect and to the extent provided in Section 8 hereof. Such underwriting
agreement shall also contain such representations and warranties by the Company
and such other person or entity for whose account securities are being sold in
such offering as are customarily contained in underwriting agreements with
respect to secondary distributions.
(c) In connection with the preparation and filing of
each registration statement registering Registrable Securities under the
Securities Act, the Company shall give the Holders of such Registrable
Securities and the underwriters, if any, and their respective counsel and
accountants, such reasonable and customary access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified the Company's financial
statements as shall be necessary, in the opinion of such Holder and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
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8. Indemnification and Contribution.
(a) In the case of each offering of Registerable
Securities made pursuant to this Agreement, the Company agrees to indemnify and
hold harmless each Holder, its officers and directors, each underwriter of
Registrable Securities so offered and each person, if any, who controls any of
the foregoing persons within the meaning of the Securities Act, from and against
any and all claims, liabilities, losses, damages, expenses and judgments, joint
or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement of any
litigation commenced or threatened, and shall promptly reimburse them, as and
when incurred, for any reasonable legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, liabilities or actions shall arise out of, or
shall be based upon, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement (or in any preliminary or
final prospectus included therein) or any amendment thereof or supplement
thereto, or in any document incorporated by reference therein, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company shall not be liable to a particular Holder in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement, or
any omission, if such statement or omission shall have been made in reliance
upon and in conformity with information relating to such Holder furnished to the
Company in writing by or on behalf of such Holder specifically for use in the
preparation of the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Holder and shall survive the transfer of
such securities. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to each Holder, its officers and
directors, underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, further, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent or given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.
(b) In the case of each offering made pursuant to
this Agreement, each Holder of Registrable Securities included in such offering,
by exercising its registration rights hereunder, agrees to indemnify and hold
harmless the Company, its officers and directors and each person, if any, who
controls any of the foregoing within the meaning of the Securities Act (and if
requested by the underwriters, each underwriter who participates in the offering
and each person, if any, who controls any such underwriter within the meaning of
the Securities Act), from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or otherwise,
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<PAGE> 12
including any amount paid in settlement of any litigation commenced or
threatened, and shall promptly reimburse them, as and when incurred, for any
legal or other expenses incurred by them in connection with investigating any
claims and defending any actions, insofar as any such losses, claims, damages,
liabilities or actions shall arise out of, or shall be based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement (or in any preliminary or final prospectus included
therein) or any amendment thereof or supplement thereto, or any omission or
alleged omission to state therein a material fact relating to the Holder
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue statement of a
material fact contained in, or such material fact relating to the Holder is
omitted from, information relating to such Holder furnished in writing to the
Company by or on behalf of such Holder specifically for use in the preparation
of such registration statement (or in any preliminary or final prospectus
included therein). The foregoing indemnity is in addition to any liability which
such Holder may otherwise have to the Company, or any of its directors, officers
or controlling persons; provided, however, that, as to any underwriter or any
person controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent to given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.
(c) Procedure for Indemnification. Each party
indemnified under paragraph (a) or (b) of this Section 8 shall, promptly after
receipt of notice of any claim or the commencement of any action against such
indemnified party in respect of which indemnity may be sought, notify the
indemnifying party in writing of the claim or the commencement thereof; provided
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party on account of the indemnity
agreement contained in paragraph (a) or (b) of this Section 8, except to the
extent the indemnifying party was prejudiced by such failure, and in no event
shall relieve the indemnifying party from any other liability which it may have
to such indemnified party. If any such claim or action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonable satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonably
costs of investigation; provided that each indemnified party, its officers and
directors, if any, and each person, if any, who controls such indemnified party
within the meaning of the Securities Act, shall have the right to employ
separate counsel reasonably approved by the indemnifying party to represent them
if the named parties to any action (including any impleaded parties) include
both such indemnified party and an indemnifying party
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<PAGE> 13
or an affiliate of an indemnifying party, and such indemnified party shall have
been advised by counsel either (i) that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to such indemnifying party or such affiliate or (ii) a conflict
may exist between such indemnified party and such indemnifying party or such
affiliate, and in that event the fees and expenses of one such separate counsel
for all such indemnified parties shall be paid by the indemnifying party. An
indemnified party will not enter into any settlement agreement which is not
approved by the indemnifying party, such approval not to be unreasonably
withheld. The indemnifying party may not agree to any settlement of any such
claim or action which provides for any remedy or relief other than monetary
damages for which the indemnifying party shall be responsible hereunder, without
the prior written consent of the indemnified party, which consent shall not be
unreasonably withheld. In any action hereunder as to which the indemnifying
party has assumed the defense thereof with counsel reasonably satisfactory to
the indemnified party, the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the indemnifying party shall not be obligated hereunder to
reimburse the indemnified party for the costs thereof. In all instances, the
indemnified party shall cooperate fully with the indemnifying party or its
counsel in the defense of each claim or action.
If the indemnification provided for in this Section 8 shall
for any reason be unavailable to an indemnified party in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
herein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, in such proportion as shall be appropriate to reflect the relative
fault of the indemnifying party on the one hand and the indemnified party on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party on the one hand or the indemnified party on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission,
but not by reference to any indemnified party's stock ownership in the Company.
In no event, however, shall a Holder be required to contribute in excess of the
amount of the net proceeds received by such Holder in connection with the sale
of Registrable Securities in the offering which is the subject of such loss,
claim, damage or liability. The amount paid or payable by an indemnified party
as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph shall be deemed to include, for
purposes of this paragraph, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11 (f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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9. Rule 144. The Company shall take such measures and file
such information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144.
10. Holdback.
(a) Each Holder agrees if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of
any securities of the Company, during the 30 days prior to and the 90 days after
any underwritten registration pursuant to Section 2 or 3 hereof has become
effective (or such shorter period as may be required by the underwriter), except
as part of such underwritten registration. The Company may legend and may impose
stop transfer instructions on any certificate evidencing Registrable Securities
relating to the restrictions provided for in this Section 10.
(b) The Company agrees, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of (other than pursuant to employee benefit plans),
effect any public sale or distribution of or otherwise dispose of its equity
securities or securities convertible into or exchangeable or exercisable for any
such securities during the 30 days prior to and the 90 days after any
underwritten registration pursuant to Section 2 or 3 hereof has become
effective, except as part of such underwritten registration and except pursuant
to registrations on Form S-4, S-8 or any successor or similar forms thereto.
11. Transfer of Registration Rights.
(a) A Holder may transfer all or any portion of its
rights under this Agreement to any transferee of Registrable Securities
representing at least 4.9% of the total outstanding common equity of the Company
(each, a "transferee"). The Holder making such transfer shall promptly notify
the Company in writing stating the name and address of any transferee and
identifying the amount of Registrable Securities with respect to which the
rights under this Agreement are being transferred and the nature of the rights
so transferred. In connection with any such transfer, the term "Holder" as used
in this Agreement shall, where appropriate to assign the rights and obligations
of a Holder hereunder to such direct transferee, be deemed to refer to the
transferee holder of such Registrable Securities.
(b) After any such transfer, the Holder making such
transfer shall retain its rights under this Agreement with respect to all other
Registrable Securities still owned by such Holder.
(c) Upon the request of the Holder making such
transfer, the Company shall execute a Registration Rights Agreement with such
transferee or a proposed transferee substantially similar to this Agreement.
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<PAGE> 15
12. Restriction on Transfer.
A Holder shall not transfer any shares of Registrable
Securities whether in a private placement or pursuant to a registration under
this Agreement if such transfer shall, to such Holder's knowledge, result in
Registrable Securities in excess of the Ownership Limit which become Excess
Shares within the meaning of Article VII, Section 2 of the Company's Articles of
Incorporation. This Section 12 shall expire and be of no further force or effect
in the event the Company ceases to be subject to any License Agreement, as
defined in Section 14 of Article VII of the Company's Articles of Incorporation.
13. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. Therefore, each party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, such remedy being in addition to any other remedy to which such
party may be entitled at law or in equity.
(b) Severability. If any term or provision of this
Agreement shall be held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms and provisions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and each of the parties shall use its best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term or provision.
(c) Further Assurances. Subject to the specific terms
of this Agreement, each of the parties hereto shall make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as may be reasonably required in order to effectuate the purposes of
this Agreement and to consummate the transactions contemplated hereby.
(d) Waivers, etc. No failure or delay on the part of
either party (or the intended third-party beneficiaries referred to herein) in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power preclude
any other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor consent
to any departure therefrom shall in any event be effective unless the same shall
be in writing and signed by an authorized officer of each of the parties, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.
15
<PAGE> 16
(e) Entire Agreement. This Agreement contains the
entire understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties, whether written or oral, with respect to the subject matter hereof. The
paragraph headings contained in this Agreement are for reference purposes only,
and shall not affect in any manner the meaning or interpretation of this
Agreement.
(f) Counterparts. For the convenience of the parties,
this Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original but all of which together shall be one and the
same instrument.
(g) Amendment. This Agreement may be amended only by
a written instrument duly executed by an authorized officer of each of the
parties.
(h) Notices. Unless expressly provided herein, all
notices, claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be duly given (i) when
personally delivered or (ii) if mailed registered or certified mail, postage
prepaid, return receipt requested, on the date the return receipt is executed or
the letter refused by the addressee or its agent or (iii) if sent by overnight
courier which delivers only upon the signed receipt of the addressee, on the
date the receipt acknowledgment is executed or refused by the addressee or its
agent:
(i) if to WHP:
Western Health Partnerships
21550 Oxnard Street, Suite 600
Woodland Hills, CA 91367
Attn.: Vice President and Secretary
Telecopy No.: (818) 703-4193
With copy to:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn.: Michael J. Connell, Esq.
Rena L. O'Malley, Esq.
Telecopy No.: (213) 892-5454
Marron, Reid & Sheehy LLP
601 California Street, Suite 1200
San Francisco, CA 94108
Attn.: E. Lewis Reid, Esq.
Telecopy No.: (415) 986-1374
16
<PAGE> 17
(ii) if to the Company, then addressed to the Company at:
21555 Oxnard Street
Woodland Hills, CA 91367
Attn.: General Counsel
Telecopy No.: (818) 703-4406
With copy to:
Brobeck Phleger & Harrison LLP
Spear Street Tower
One Market Street
San Francisco, CA 94105
Attn: William L. Hudson, Esq.
Telecopy No.: (415) 442-1010
(i) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE.
(j) Term. This Agreement shall remain in full force
and effect until there are no Registrable Securities outstanding or until
terminated by the mutual agreement of the Company and WHP.
(k) Assignment. Except as provided herein, the
parties may not assign their rights under this Agreement. The Company may not
delegate its obligations under this Agreement.
(l) Priority of Rights. The rights granted to the
Holders under this Agreement shall be senior to and take priority over any other
registration rights granted by the Company. The Company agrees that it shall not
grant any registration rights to any third party unless such rights are
expressly made subject to the rights of the Holders in a manner consistent with
this Agreement. The Company also agrees that it shall not grant any Holder any
registration rights which are senior or take priority over the registration
rights granted to all Holders under this Agreement.
(m) Ownership Limit. For purposes of this Agreement,
Ownership Limit has the meaning set forth in Section 14 of Article VII of the
Company's Articles of Incorporation.
17
<PAGE> 18
IN WITNESS WHEREOF, WHP and the Company have caused this
Agreement to be duly executed by their authorized representative as of the date
first above written.
WESTERN HEALTH PARTNERSHIPS
By: /s/ Gail C. Watts
----------------------------------------
Name: Gail C. Watts
--------------------------------------
Title: Vice President and Secretary
-------------------------------------
BLUE CROSS OF CALIFORNIA
By: /s/ Brian J. Donnelly
----------------------------------------
Name: Brian J. Donnelly
--------------------------------------
Title: Secretary
-------------------------------------
18
<PAGE> 1
Exhibit 99.6
BLUE CROSS LICENSE AGREEMENT
This agreement by and between Blue Cross and Blue Shield Association
("BCBSA") and The Blue Cross Plan, known as WellPoint Health Networks Inc. (the
"Plan").
PREAMBLE
WHEREAS, the Plan and/or its predecessor(s) in interest (collectively
the "Plan") had the right to use the BLUE CROSS and BLUE CROSS Design service
marks (collectively the "Licensed Marks") for health care plans in its service
area, which was essentially local in nature;
WHEREAS, the Plan was desirous of assuring nationwide protection of the
Licensed Marks, maintaining uniform quality controls among Plans, facilitating
the provision of cost effective health care services to the public and otherwise
benefiting the public;
WHEREAS, to better attain such ends, the Plan and the predecessor of
BCBSA in 1972 simultaneously executed the BCA License Agreement (s) and the
Ownership Agreement; and
WHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) to
reflect their current practices and to assure the continued integrity of the
Licensed Marks and of the BLUE CROSS system;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
<PAGE> 2
AGREEMENT
1. BCBSA hereby grants to the Plan, upon the terms and conditions of
this License Agreement, the right to use BLUE CROSS in its trade and/or
corporate name (the "Licensed Name"), and the right to use the Licensed Marks,
in the sale, marketing and administration of health care plans and related
services in the Service Area set forth and defined in paragraph 5 below. As used
herein, health care plans and related services shall include acting as a
nonprofit health care plan, a for-profit health care plan, or mutual health
insurer operating on a not-for-profit or for-profit basis, under state law;
financing access to health care services; providing health care management and
administration; administering, but not underwriting, non-health portions of
Worker's Compensation insurance; and delivering health care services.
2. The Plan may use the Licensed Marks and Name in connection with the
offering of: a) health care plans and related services in the Service Area
through Controlled Affiliates, provided that each such affiliate is separately
licensed to use the Licensed Marks and Name under the terms and conditions
contained in the Agreement attached as Exhibit 1 hereto (the "Controlled
Affiliate License Agreement"); and: b) insurance coverages offered by life
insurers under the applicable law in the Service Area, other than those which
the Plan may offer in its own name, provided through Controlled Affiliates,
provided that each such affiliate is separately licensed to use the Licensed
Marks and Name under the terms and conditions contained in the Agreement
attached as Exhibit 1A hereto (the "Controlled Affiliate License Agreement
Applicable to Life Insurance Companies") and further provided that the offering
of such services does not and will not dilute or tarnish the unique value of the
Licensed Marks and Name; and c) administration and underwriting of Workers'
Compensation Insurance Controlled Affiliates, provided that each such Affiliate
is separately licensed to use the Licensed Marks and Name under the terms and
conditions contained in the Agreement attached as Exhibit 1 hereto (the
"Controlled Affiliate License.") With respect to any HMO previously sublicensed
as provided in a License Addendum between BCBSA and the Plan, the Plan shall
have one (1) year from the date hereof to obtain execution of the direct license
required herein. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean:
A. The legal authority, directly or indirectly through
wholly-owned subsidiaries: (a) to select members of the
Controlled Affiliate's governing body having not less than 51%
voting control thereof; (b) to exercise operational control
with respect to the governance thereof; and (c) to prevent any
change in its articles of incorporation, bylaws or other
governing documents deemed inappropriate. In addition, a Plan
or Plans shall own at least 51% of any for-profit Controlled
Affiliate; or
B. The legal authority directly or indirectly through
wholly-owned subsidiaries (a) to select members of the
Affiliate's governing body having not less than 50% voting
control; (b) the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or
governing documents of the Affiliate with which it does not
concur; (c) at least equal control over the operations of the
Affiliate; and (d) to concur before the Affiliate can:
AMENDED AS OF NOVEMBER 16, 1995
-2-
<PAGE> 3
1. Change its legal and/or trade name;
2. Change the geographic area in which it operates;
3. Change the types of businesses in which it engages;
4. Take any action that Plan or BCBSA reasonably believes will adversely
affect the Licensed Marks or Names.
AMENDED AS OF NOVEMBER 7,1994
-2a-
(The next page is page 3)
<PAGE> 4
3. The Plan may engage in activities not required by BCBSA to be
directly licensed through Controlled Affiliates and may indicate its
relationship thereto by use of the Licensed Name as a tag line, provided that
the engaging in such activities does not and will not dilute or tarnish the
unique value of the Licensed Marks and Name and further provided that such tag
line use is not in a manner likely to cause confusion or mistake. Consistent
with the avoidance of confusion or mistake, each tag line use of the Plan's
Licensed Name: (a) shall be in the style and manner specified by BCBSA from
time-to-time; (b) shall not include the design service marks; (c) shall not be
in a manner to import more than the Plan's mere ownership of the affiliate; and
(d) shall be restricted to the Service Area. No rights are hereby created in any
Controlled Affiliate to use the Licensed Name in its own name or otherwise. At
least annually, the Plan shall provide BCBSA with representative samples of each
such use of its Licensed Name pursuant to the foregoing conditions.
4. The Plan agrees (a) to maintain in good standing its membership in
BCBSA; (b) promptly to pay its dues to BCBSA, said dues to represent the
royalties for this License Agreement; (c) materially to comply with all
applicable laws; (d) to comply with the Membership Standards of BCBSA, a current
copy of which is attached as Exhibit 2 hereto; and (e) reasonably to permit
BCBSA, upon a written, good faith request and during reasonable business hours,
to inspect the Plan's books and records necessary to ascertain compliance
herewith. As to other Plans and third parties, BCBSA shall maintain the
confidentiality of all documents and information furnished by the Plan pursuant
hereto, or pursuant to the Membership Standards, and clearly designated by the
Plan as containing proprietary information of the Plan.
5. The rights hereby granted are exclusive to the Plan within the
geographical area(s) served by the Plan on June 30, 1972, and/or as to which the
Plan has been granted a subsequent license, which is hereby defined as the
"Service Area," except that BCBSA reserves the right to use the Licensed Marks
in said Service Area, and except to the extent that said Service Area may
overlap areas served by one or more other licensed Blue Shield Plans as of said
date or subsequent license, as to which overlapping areas the rights hereby
granted are nonexclusive as to such other Plan or Plans only.
-3-
<PAGE> 5
6. Except as expressly provided by BCBSA with respect to National
Accounts, Government Programs and certain other necessary and collateral uses,
the current rules and regulations governing which are attached as Exhibit 3 and
Exhibit 4 hereto, or as expressly provided herein, the Plan may not use the
Licensed Marks and Name outside the Service Area or in connection with other
goods and services, nor may the Plan use the Licensed Marks or Name in a manner
which is intended to transfer in the Service Area the goodwill associated
therewith to another mark or name. Nothing herein shall be construed to prevent
the Plan from engaging in lawful activity anywhere under other marks and names
not confusingly similar to the Licensed Marks and Name, provided that engaging
in such activity does and will not dilute or tarnish the unique value of the
Licensed Marks and Name.
7. The Plan agrees that it will display the Licensed Marks and Name
only in such form, style and manner as shall be specifically prescribed by BCBSA
from time-to-time in regulations of general application in order to prevent
impairment of the distinctiveness of the Licensed Marks and Name and the
goodwill pertaining thereto. The Plan shall cause to appear on all materials on
or in connection with which the Licensed Marks or Name are used such legends,
markings and notices as BCBSA may reasonably request in order to give
appropriate notice of service mark or other proprietary rights therein or
pertaining thereto.
8. BCBSA agrees that: (a) it will not grant any other license effective
during the term of this License Agreement for the use of the Licensed Marks or
Name which is inconsistent with the rights granted to the Plan hereunder; and
(b) it will not itself use the Licensed Marks in derogation of the rights of the
Plan or in a manner to deprive the Plan of the full benefits of this License
Agreement. The Plan agrees that it will not attack the title of BCBSA in and to
the Licensed Marks or Name or attack the validity of the Licensed Marks or of
this License Agreement. The Plan further agrees that all use by it of the
Licensed Marks and Name or any similar mark or name shall inure to the benefit
of BCBSA, and the Plan shall cooperate with BCBSA in effectuating the assignment
to BCBSA of any service mark or trademark registrations of the Licensed Marks or
any similar mark or name held by the Plan or a Controlled Affiliate of the Plan,
all or any portion of which registration consists of the Licensed Marks.
-4-
<PAGE> 6
9. (a). Should the Plan fail to comply with the provisions of
paragraphs 2-4, 6, 7 and/or 12, and not cure such failure within thirty (30)
days of receiving written notice thereof (or commence curing such failure within
such thirty day period and continue diligent efforts to complete the curing of
such failure if such curing cannot reasonably be completed within such thirty
day period), BCBSA shall have the right to issue a notice that the Plan is in a
state of noncompliance. Except as to the termination of a Plan's License
Agreement or the merger of two or more Plans, disputes as to noncompliance, and
all other disputes between or among BCBSA, the Plan, other Plans and/or
Controlled Affiliates, shall be submitted promptly to mediation and mandatory
dispute resolution pursuant to the rules and regulations of BCBSA, a current
copy of which is attached as Exhibit 5 hereto, and shall be timely presented and
resolved. The mandatory dispute resolution panel shall have authority to issue
orders for specific performance and assess monetary penalties. If a state of
noncompliance as aforesaid is undisputed by the Plan or is found to exist by a
mandatory dispute resolution panel and is uncured as provided above, BCBSA shall
have the right to seek judicial enforcement of the License Agreement and/or to
issue a notice of termination thereof. Except, however, as provided in paragraph
15(a)(i)-(viii) below, no Plan's license to use the Licensed Marks and Name may
be finally terminated for any reason without the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted
vote of all the Plans.
(b). Notwithstandng any other provision of this License
Agreement, a Plan's license to use the Licensed Marks and Name may be forthwith
terminated by the affirmative vote of three-fourths of the Plans and
three-fourths of the total then current weighted vote of all the Plans at a
special meeting expressly called by BCBSA for the purpose on ten (10) days
written notice for: (i) failure to comply with any minimum capital or liquidity
requirement under the Membership Standard on Financial Responsibility; or (ii)
impending financial insolvency; or (iii) such other reason as is determined in
good faith immediately and irreparably to threaten the integrity and reputation
of BCBSA, the Plans and/or the Licensed Marks.
(c). To the extent not otherwise provided therein, neither:
(i) the Membership Standards; nor (ii) the rules and regulations governing
National Accounts, Government Programs and certain other uses; nor (iii) the
rules and regulations governing mediation and mandatory dispute resolution, may
be amended unless and until each such amendment is first adopted by the
affirmative vote of three-fourths of the Plans and of three-fourths of the total
then current weighted vote of all the Plans.
AMENDED AS OF NOVEMBER 17, 1994
-5-
<PAGE> 7
9. (d). The Plan may operate as a for-profit company on the
following conditions:
(i) The Plan shall discharge all responsibilities which it has to the
Association and to other Plans by virtue of this Agreement and the Plan's
membership in BCBSA.
(ii) The Plan shall not use the licensed Marks and Name, or any
derivative thereof, as part of its legal name or any symbol used to identify the
Plan in any securities market. The Plan shall use the licensed Marks and Name as
part of its trade name within its service area for the sale, marketing and
administration of health care and related services in the service area.
(iii) The Plan's license to use the Licensed Marks and Name shall
automatically terminate effective ten business days after: (a) any Person,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 20% or more of the voting power of
the Plan, unless such Person shall cease to be such a Beneficial Owner prior to
such automatic termination becoming effective; (b) individuals who at the time
the Plan went public constituted the Board of Directors of the Plan (together
with any new directors whose election to the Board was approved by a vote of 2/3
of the directors then still in office who were directors at the time the Plan
went public or whose election or nomination was previously so approved) (the
"Continuing Directors") cease for any reason to constitute a majority of the
Board of Directors; or (c) the Plan consolidates with or merges with or into any
person or conveys, assigns, transfers or sells all or substantially all of its
assets to any person other than a merger in which the Plan is the surviving
entity and immediately after which merger, no person or group beneficially owns
securities representing 20% or more of the voting power of the Plan: provided
that, if requested by the affected Plan prior to such automatic termination
becoming effective, the provisions of this paragraph 9(d)(iii) may be waived or
made conditional, in whole or in part, upon the affirmative vote of a majority
of the disinterested Plans and a majority of the total then current weighted
vote of the disinterested Plans.
In the event that the Plan's license to use the Licensed Marks and Name is
terminated pursuant to this Paragraph 9(d)(iii), the license may be reinstated
by BCBSA if, within 30 days of the date of such termination, the Plan
demonstrates that the Person referred to in the preceding sentence is no longer
the Beneficial Owner of securities representing 20% or more of the voting power
of the Plan.
AMENDED AS OF SEPTEMBER 29, 1994
-5a-
<PAGE> 8
The Plan's license to use the Licensed Marks and Name may be terminated if any
Person, together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 5% or more of the voting power of
the Plan and such Person's Beneficial Ownership is deemed in BCBSA's absolute
discretion, detrimental to the best interest of the Name and Marks; provided,
however that such termination shall become effective only upon the affirmative
vote of three-fourths of the disinterested Plans and three-fourths of the total
then current weighted vote of the disinterested Plans.
(iv) For purposes of paragraph 9(d)(iii), the following definitions
shall apply:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended and in effect on November 17, 1993 (the "Exchange
Act").
(b) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise; or (B) the right to vote
pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the
Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding
(other than customary agreements with and between
AMENDED AS OF SEPTEMBER 29, 1994
-5b-
<PAGE> 9
underwriters and selling group members with respect to a bona
fide public offering of securities) relating to the
acquisition, holding, voting (except to the extent
contemplated by the proviso to (b)(ii)(B) above) or disposing
of any securities of the Plan.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when
used with reference to a Person's Beneficial Ownership of
securities of the Plan, shall mean the number of such
securities then issued and outstanding together with the
number of such securities not then actually issued and
outstanding which such Person would be deemed to own
beneficially hereunder.
(c) "Person" shall mean any individual, firm, partnership,
corporation, trust, association, joint venture or other
entity, and shall include any successor (by merger or
otherwise) or such entity.
AMENDED AS OF SEPTEMBER 29, 1994
-5c-
(The next page is page 6)
<PAGE> 10
10. This License Agreement shall remain in effect: (a) until terminated
as provided herein; or (b) until this and all such other License Agreements are
terminated by the affirmative vote of three-fourths of the Plans and
three-fourths of the total then current weighted vote of all the Plans; or (c)
until termination of the aforesaid Ownership Agreement; or (d) until terminated
by the Plan upon six (6) months written notice to BCBSA.
11. Except as otherwise provided in paragraph 15 below or by the
affirmative vote of three-fourths of the Plans and three-fourths of the total
then current weighted vote of all the Plans, or unless this and all such other
License Agreements are simultaneously terminated by force of law, the
termination of this License Agreement for any reason whatsoever shall cause the
reversion to BCBSA of all rights in and to the Licensed Marks and Name, and the
Plan agrees that it will promptly discontinue all use of the Licensed Marks and
Name, will not use them thereafter, and will promptly, upon written notice from
BCBSA, change its corporate name so as to eliminate the Licensed Name therefrom.
12. The license hereby granted to Plan to use the Licensed Marks and
Name is and shall be personal to the Plan so licensed and shall not be
assignable by any act of the Plan, directly or indirectly, without the written
consent of BCBSA. Said license shall not be assignable by operation of law, nor
shall Plan mortgage or part with possession or control of this license or any
right hereunder, and the Plan shall have no right to grant any sublicense to use
the Licensed Marks and Name.
13. BCBSA shall maintain appropriate service mark registrations of the
Licensed Marks and BCBSA shall take such lawful steps and proceedings as may be
necessary or proper to prevent use of the Licensed Marks by any person who is
not authorized to use the same. Any actions or proceedings undertaken by BCBSA
under the provisions of this paragraph shall be at BCBSA's sole cost and
expense. BCBSA shall have the sole right to determine whether or not any legal
action shall be taken on account of unauthorized use of the Licensed Marks, such
right not to be unreasonably exercised. The Plan shall report any unlawful usage
of the Licensed Marks to BCBSA in writing and agrees, free of charge, to
cooperate fully with BCBSA's program of enforcing and protecting the service
mark rights, trade name rights and other rights in the Licensed Marks.
-6-
<PAGE> 11
14. The Plan hereby agrees to save, defend, indemnify and hold BCBSA
and any other Plan(s) harmless from and against all claims, damages, liabilities
and costs of every kind, nature and description which may arise exclusively and
directly as a result of the activities of the Plan. BCBSA hereby agrees to save,
defend, indemnify and hold the Plan and any other Plan(s) harmless from and
against all claims, damages, liabilities and costs of every kind, nature and
description which may arise exclusively and directly as a result of the
activities of BCBSA.
15. (a). This Agreement shall automatically terminate upon the
occurrence of any of the following events: (i) a voluntary petition shall be
filed by the Plan or by BCBSA seeking bankruptcy, reorganization, arrangement
with creditors or other relief under the bankruptcy laws of the United States or
any other law governing insolvency or debtor relief, or (ii) an involuntary
petition or proceeding shall be filed against the Plan or BCBSA seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other laws governing insolvency or
debtor relief and such petition or proceeding is consented to or acquiesced in
by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which it was filed, or (iii) an order for relief is entered against the Plan or
BCBSA in any case under the bankruptcy laws of the United States, or the Plan or
BCBSA is adjudged bankrupt or insolvent (as that term is defined in the Uniform
Commercial Code as enacted in the state of Illinois) by any court of competent
jurisdiction, or (iv) the Plan or BCBSA makes a general assignment of its assets
for the benefit of creditors, or (v) the Department of Insurance or other
regulatory agency assumes control of the Plan or delinquency proceedings
(voluntary or involuntary) are instituted, or (vi) an action is brought by the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
the appointment of a trustee, interim trustee, receiver or other custodian for
any of its property or business, or (vii) an action is instituted against the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
the appointment of a trustee, interim trustee, receiver or other custodian for
any of its property or business and such action is consented to or acquiesced in
by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which it was instituted, or (viii) a trustee, interim trustee, receiver or other
custodian for any of the Plan's or BCBSA's property or business is appointed, or
(ix) the Plan shall fail to pay its dues and shall not cure such failure within
thirty (30) days of receiving written notice thereof.
-7-
<PAGE> 12
(b). BCBSA, or the Plans (as provided and in addition to the rights
conferred in Paragraph 10(b) above), may terminate this Agreement immediately
upon written notice upon the occurrence of either of the following events: (a)
the Plan or BCBSA becomes insolvent (as that term is defined in the Uniform
Commercial Code enacted in the state of Illinois), or (b) any final judgment
against the Plan or BCBSA remains unsatisfied or unbonded of record for a period
of sixty (60) days or longer.
(c). If this License Agreement is terminated as to BCBSA for any reason
stated in subparagraphs 15(a) and (b) above, the ownership of the Licensed Marks
shall revert to each of the Plans as provided in the Ownership Agreement.
(d). Upon termination of this License Agreement or any Controlled
Affiliate License Agreement, the Plan shall immediately notify all customers of
the terminated entity that the entity is no longer a licensee of the Blue Cross
and Blue Shield Association and, if directed by the Association's Board of
Directors, shall provide instruction on how the customer can contact the Blue
Cross and Blue Shield Association or its designated licensee to obtain further
information on securing coverage. The written notification required by this
paragraph shall be in writing and in a form approved by the Association. The
Association shall have the right to audit the terminated entity's books and
records to verify compliance with this paragraph.
16. This Agreement supersedes any and all other agreements between the
parties with respect to the subject matter herein, and contains all of the
covenants and agreements of the parties as to the licensing of the Licensed
Marks and Name. This Agreement may be amended only by a signed writing, the form
of which shall have been approved by the affirmative vote of three-fourths of
the Plans and three-fourths of the total then current weighted vote of all the
Plans.
17. If any provision or any part of any provision of this Agreement is
judicially declared unlawful, each and every other provision, or any part of any
provision, shall continue in full force and effect notwithstanding such judicial
declaration.
18. No waiver by BCBSA or the Plan of any breach or default in
performance on the part of BCBSA or the Plan or any other licensee of any of the
terms, covenants or conditions of this Agreement shall constitute a waiver of
any subsequent breach or default in performance of said terms, covenants or
conditions.
19. All notices provided for hereunder shall be in writing and shall be
sent in duplicate by regular mail to BCBSA or the Plan at the address currently
published for each by BCBSA and shall be marked respectively to the attention of
the President and, if any, the General Counsel, of BCBSA or the Plan.
AMENDED AS OF JUNE 22, 1995
-8-
<PAGE> 13
20. Nothing herein contained shall be construed to constitute the
parties hereto as partners or joint venturers, or either as the agent of the
other, and Plan shall have no right to bind or obligate BCBSA in any way, nor
shall it represent that it has any right to do so. BCBSA shall have no liability
to third parties with respect to any aspect of the business, activities,
operations, products, or services of the Plan.
21. This Agreement shall be governed, construed and interpreted in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By /s/
-----------------------------------
Title President and CEO
-----------------------------------
Date 5/17/96
-----------------------------------
WELLPOINT HEALTH NETWORKS INC.
By /s/ Leonard D. Schaeffer
-----------------------------------
Title Chairman & CEO
-----------------------------------
Date 5/15/96
-----------------------------------
-9-
<PAGE> 14
EXHIBIT 1
BLUE CROSS
AFFILIATE LICENSE AGREEMENT
This Agreement by and among Blue Cross and Blue Shield Association
("BCBSA") and __________________ ("Affiliate"), an affiliate of the Blue Cross
Plan(s), known as _______________________ ("Plan"), which is also a Party
signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design
service marks;
WHEREAS, Plan and Affiliate desire that the latter be entitled to use
the BLUE CROSS and BLUE CROSS Design service marks (collectively the "Licensed
Marks") as service marks and be entitled to use the term BLUE CROSS in a trade
name ("Licensed Name");
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby
grants to Affiliate the right to use the Licensed Marks and Name in connection
with, and only in connection with: (i) health care plans and related services
and administering the non-health portion of workers' compensation insurance, and
(ii) underwriting the indemnity portion of workers' compensation insurance,
provided that Affiliate's total premium revenue comprises less than 15 percent
of the sponsoring Plan's net subscription revenue.
This grant of rights is non-exclusive and is limited to the Service Area served
by the Plan. Affiliate may not use the Licensed Marks and Name in its legal name
and may use the Licensed Marks and Name in its Trade Name only with the prior
consent of BCBSA.
2. QUALITY CONTROL
A. Affiliate agrees to use the Licensed Marks and Name only in
connection with the licensed services and further agrees to be bound by the
conditions regarding quality control shown in attached Exhibit A as they may be
amended by BCBSA from time-to-time.
<PAGE> 15
B. Affiliate agrees to comply with all applicable federal, state and
local laws.
C. Affiliate agrees that it will provide on an annual basis (or more
often if reasonably required by Plan or by BCBSA) a report or reports to Plan
and BCBSA demonstrating Affiliate's compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this
paragraph and the attached Exhibit A.
D. Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon
reasonable notice, review and inspect the manner and method of Affiliate's
rendering of service and use of the Licensed Marks and Name.
E. As used herein, an Affiliate is defined as an entity organized and
operated in such a manner, that it meets the following requirements:
(1) If the Plan has 50 percent of the voting control of the Affiliate:
(a) the Plan must have the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
(b) the Plan must have at least equal control over the operations of
the Affiliate;
(c) the Plan must concur in writing before the Affiliate can:
(i) change its legal and/or trade names;
(ii) change the geographic area in which it operates;
(iii) change the fundamental type(s) of business in which
it engages;
(iv) take any action that Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and
Name.
(2) If the Plan has more than 50 percent voting control of the
Affiliate:
(a) the Plan must have the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
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<PAGE> 16
(b) the Plan must have control over the policy and operations of
the Affiliate.
3. SERVICE MARK USE
A. Affiliate shall at all times make proper service mark use of the
Licensed Marks and Name, including but not limited to use of such symbols or
words as BCBSA shall specify to protect the Licensed Marks and Name and shall
comply with such rules (generally applicable to Affiliates licensed to use the
Licensed Marks and Name) relative to service mark use, as are issued from
time-to-time by BCBSA. Affiliate recognizes and agrees that all use of the
Licensed Marks and Name by Affiliate shall inure to the benefit of BCBSA.
B. Affiliate may not directly or indirectly use the Licensed Marks and
Name in a manner that transfers or is intended to transfer in the Service Area
the goodwill associated therewith to another mark or name, nor may Affiliate
engage in activity that may dilute or tarnish the unique value of the Licensed
Marks and Name.
C. If Affiliate meets the standards of 2E(1) but not 2E(2) above and
any of Affiliate's advertising or promotional material is reasonably determined
by BCBSA and/or the Plan to be in contravention of rules and regulations
governing the use of the Licensed Marks and Name, Affiliate shall for ninety
(90) days thereafter obtain prior approval from BCBSA of advertising and
promotional efforts using the Licensed Marks and Name, approval or disapproval
thereof to be forthcoming within five (5) business days of receipt of same by
BCBSA or its designee. In all advertising and promotional efforts, Affiliate
shall observe the Service Area limitations applicable to Plan.
D. Affiliate shall use its best efforts in the Service Area to promote
and build the value of the Licensed Marks and Name.
4. SUBLICENSING AND ASSIGNMENT
Affiliate shall not sublicense, transfer, hypothecate, sell, encumber
or mortgage, by operation of law or otherwise, the rights granted hereunder and
any such act shall be voidable at the sole option of Plan or BCBSA. This
Agreement and all rights and duties hereunder are personal to Affiliate.
5. INFRINGEMENT
Affiliate shall promptly notify Plan and Plan shall promptly notify
BCBSA of any suspected acts of infringement, unfair competition or passing off
that may occur in relation to the Licensed Marks and Name. Affiliate shall not
be entitled
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<PAGE> 17
to require Plan or BCBSA to take any actions or institute any proceedings to
prevent infringement, unfair competition or passing off by third parties.
Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable
assistance in connection with any matter pertaining to the protection of the
Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Affiliate and Plan hereby agree to save, defend, indemnify and hold
BCBSA harmless from and against all claims, damages, liabilities and costs of
every kind, nature and description (except those arising solely as a result of
BCBSA's negligence) that may arise as a result of or related to Affiliate's
rendering of services under the Licensed Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this
Agreement shall remain in effect for a period of one (1) year and shall be
automatically extended for additional one (1) year periods upon evidence
satisfactory to the Plan and BCBSA that Affiliate meets the then applicable
quality control standards.
B. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that Plan ceases to be authorized to use the Licensed Marks and Name.
C. Notwithstanding any other provision of this Agreement, this license
to use the Licensed Marks and Name may be forthwith terminated by the Plan or
the affirmative vote of the majority of the Board of Directors of BCBSA present
and voting at a special meeting expressly called by BCBSA for the purpose on ten
(10) days written notice for: (1) failure to comply with any applicable minimum
capital or liquidity requirement under the quality control standards of this
Agreement; or (2) failure to comply with the "Organization and Governance"
quality control standard of this Agreement; or (3) impending financial
insolvency; or (4) for a Smaller Affiliate (as defined in Exhibit A), failure to
comply with any of the applicable requirements of Standards 2, 3, 4, 5 or 7 of
attached Exhibit A; or (5) such other reason as is determined in good faith
immediately and irreparably to threaten the integrity and reputation of BCBSA,
the Plans, any other licensee including Affiliate and/or the Licensed Marks and
Name.
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<PAGE> 18
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E)
herein, should Affiliate fail to comply with the provisions of this Agreement
and not cure such failure within thirty (30) days of receiving written notice
thereof (or commence a cure within such thirty day period and continue diligent
efforts to complete the cure if such curing cannot reasonably be completed
within such thirty day period) BCBSA or the Plan shall have the right to issue a
notice that the Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Affiliate or is found to exist
by a mandatory dispute resolution panel and is uncured as provided above, BCBSA
shall have the right to seek judicial enforcement of the Agreement or to issue a
notice of termination thereof. Notwithstanding any other provisions of this
Agreement, any disputes as to the termination of this License pursuant to
Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between BCBSA,
the Plan and/or Affiliate shall be submitted promptly to mediation and mandatory
dispute resolution. The mandatory dispute resolution panel shall have authority
to issue orders for specific performance and assess monetary penalties. Except,
however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license
to use the Licensed Marks and Name may not be finally terminated for any reason
without the affirmative vote of a majority of the present and voting members of
the Board of Directors of BCBSA.
E. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that:
(1) Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Affiliate
pursuant to paragraph 9 hereof, which are the royalties for this License
Agreement, are more than sixty (60) days in arrears to BCBSA; or
(3) Any of the following events occur: (i) a voluntary petition shall
be filed by Affiliate seeking bankruptcy, reorganization, arrangement with
creditors or other relief under the bankruptcy laws of the United States or any
other law governing insolvency or debtor relief, or (ii) an involuntary petition
or proceeding shall be filed against Affiliate seeking bankruptcy,
reorganization, arrangement with creditors or other relief under the bankruptcy
laws of the United States of any other law governing insolvency or debtor relief
and such petition or proceeding is consented to or acquiesced in by Affiliate or
is not dismissed within sixty (60) days of the date upon which it was filed, or
(iii) an order for relief is entered against Affiliate in any case under the
bankruptcy laws of the United States, or Affiliate is adjudged bankrupt or
insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of Illinois
5
<PAGE> 19
by any court of competent jurisdiction, or (iv) Affiliate makes a general
assignment of its assets for the benefit of creditors, or (v) the Department of
Insurance or other regulatory agency assumes control of Affiliate or delinquency
proceedings (voluntary or involuntary) are instituted, or (vi) an action is
brought by Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business, or (vii) an action is instituted
against Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business and such action is consented to or
acquiesced in by Affiliate or is not dismissed within sixty (60) days of the
date upon which it was instituted, or (viii) a trustee, interim trustee,
receiver or other custodian for any of Affiliate's property or business is
appointed.
F. Upon termination of this Agreement for cause or otherwise, Affiliate
agrees that it shall immediately discontinue all use of the Licensed Marks and
Name, including any use in its trade name.
G. Upon termination of this Agreement, Affiliate shall immediately
notify all of its customers that it is no longer a licensee of BCBSA and, if
directed by the Association's Board of Directors, shall provide instruction on
how the customer can contact BCBSA or a designated licensee to obtain further
information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the
right to audit the terminated entity's books and records to verify compliance
with this paragraph.
H. In the event that the Plan has more than 50 percent voting control
of the Affiliate under Paragraph 2(E)(2) above and is a Larger Affiliate (as
defined in Exhibit A), then the vote called for in Paragraphs 7(C) and 7(D)
above shall require the affirmative vote of three-fourths of the Blue Cross
Plans which are Regular Members of BCBSA and three-fourths of the total then
current weighted vote of all the Blue Cross Plans which are Regular Member Plans
of BCBSA.
8. DISPUTE RESOLUTION
The parties agree that any disputes between them or between or among
either of them and one or more Plans or Affiliates of Plans that use in any
manner the Blue Cross and Blue Shield Marks and Name are subject to the
Mediation and Mandatory Dispute Resolution process attached to and made a part
of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibits 5,
5A and 5B as amended from time-to-time, which documents are incorporated herein
by reference as though fully set forth herein.
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<PAGE> 20
9. LICENSE FEE
Affiliate will pay to BCBSA a fee for this License determined pursuant
to the formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in the Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Affiliate or between either and BCBSA.
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in
relation to the subject matter hereof. This Agreement may only be amended by a
writing executed by all parties hereto or by the vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the
Plans.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such findings shall in no way affect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part
of Affiliate or any other licensee of any of the terms, covenants or conditions
of this Agreement shall constitute a waiver of any subsequent breach or default
in performance of said terms, covenants or conditions.
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<PAGE> 21
THIS PAGE IS INTENTIONALLY BLANK.
8
<PAGE> 22
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and
shall have no bearing on the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this License Agreement to
be executed and effective as of the date of last signature written below.
AFFILIATE
--------------------------------
By:
--------------------------------
Date:
--------------------------------
PLAN
--------------------------------
By:
--------------------------------
Date:
--------------------------------
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:
--------------------------------
Date:
--------------------------------
9
<PAGE> 23
EXHIBIT A
AFFILIATE LICENSE STANDARDS
November 1995
The standards for licensing affiliates are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote. Each licensed Plan
is required to use a standard affiliate license form provided by BCBSA and to
cooperate fully in assuring that the licensed affiliate maintains compliance
with the license standards.
The Affiliate License provides a flexible vehicle to accommodate the potential
range of health and workers' compensation related products and services Plan
affiliates provide. The Affiliate License collapses former health affiliate
licenses (HCC, HMO, PPO, TPA, and IDS) into a single license using the following
business-based criteria to provide a framework for license standards:
- - Percent of affiliate controlled by parent: Greater than 50 percent or
50 percent?
- - Risk assumption: yes or no?
- - Medical care delivery: yes or no?
- - Importance of the affiliate to the parent: If the affiliate has health
or workers' compensation administration business, does such business
constitute 15 percent or more (referred to as a "larger" affiliate) of
the parent's and other licensed health subsidiaries' contract
enrollment?
<PAGE> 24
EXHIBIT A (CONTINUED)
For purposes of definition:
- - A "smaller affiliate:" (1) comprises less than fifteen percent (15%) of
Plan's and its licensed affiliates' total contract enrollment (as
reported on the BCBSA Quarterly Enrollment Report, excluding rider and
freestanding coverage, and treating an entity seeking licensure as
licensed);* or (2) underwrites the indemnity portion of workers'
compensation insurance and has total premium revenue less than 15
percent of the sponsoring Plan's net subscription revenue.
- - A "larger affiliate" comprises fifteen percent (15%) or more of Plan's
and its licensed affiliates' total contract enrollment (as reported on
the BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed.)*
Conversion to the new license shall be:
- - For smaller affiliates:
- immediately for new applicants, and
- January 1, 1996 for existing HMO, PPO, TPA and IDS licensees
under fifteen percent (15%).
- - For larger affiliates:
- immediately for new applicants,
- July 1, 1995 for existing health coverage carrier licensees, and
- June 1996, for all other currently licensed affiliates presently
at or over fifteen percent(15%).
Changes in affiliate status:
If ANY affiliate's status changes regarding: its Plan ownership level, its risk
acceptance or direct delivery of medical care, the affiliate shall notify BCBSA
within thirty (30) days of such occurrence in writing and come into compliance
with the applicable standards within six (6) months.
If a smaller affiliate's health and workers' compensation administration
business surpasses fifteen percent (15%) of the total contract enrollment of the
Plan and licensed affiliates, the affiliate shall:
<PAGE> 25
EXHIBIT A (CONTINUED)
1. Within thirty (30) days, notify BCBSA of this fact in writing, including
evidence that the affiliate meets the minimum liquidity and capital (BCBSA
Capital Benchmark and state-established minimum reserve) requirements of
the larger affiliate Financial Responsibility standard; and
2. Within six (6) months after surpassing the fifteen percent (15%) threshold,
demonstrate compliance with all license requirements for a larger
affiliate.
If an affiliate that underwrites the indemnity portion of workers' compensation
insurance receives a change in rating or proposed change in rating, the
affiliate shall notify BCBSA within 30 days of notification by the external
rating agency.
- -----------
*For purposes of this calculation,
The numerator equals:
Applicant affiliate's contract enrollment, as defined in BCBSA's Quarterly
Enrollment Report (excluding rider and freestanding coverage).
The denominator equals:
Numerator PLUS Plan and all other licensed affiliates' contract enrollment, as
reported in BCBSA's Quarterly Enrollment Report (excluding rider and
freestanding coverage).
<PAGE> 26
EXHIBIT A (CONTINUED)
STANDARDS FOR LICENSED AFFILIATES
Each affiliate seeking licensure must answer all four questions. Depending on
the affiliate's answers, certain standards apply:
1. What percent of the affiliate is controlled by the parent Plan?
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
More than 50% 50%
<S> <C>
Standard 1A, 4 Standard 1B, 4
- --------------------------------------------------------------------------------
</TABLE>
IN ADDITION,
2. Is risk being assumed?
<TABLE>
<CAPTION>
Yes No
<S> <C> <C> <C> <C>
Affiliate is Affiliate comprises Affiliate comprises Affiliate Affiliate comprises
underwriting the less than 15% of total greater than or equal comprises greater than or equal
indemnity portion of contract enrollment to 15% of total less than 15% to 15% of total
workers' of Plan and its contract enrollment of of total contract contract enrollment
compensation licensed affiliates and Plan and its enrollment of of Plan and its
insurance does not underwrite licensed affiliates Plan and its licensed affiliates
workers' compensation and does not license
indemnity underwrite workers' affiliates
compensation
indemnity
Standards 7(A), 7(F) Standard 2 Standard 6H Standard 2 Standard 6H
(Guidelines 2.1, 2.2) (Guidelines 2.1, 2.3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
IN ADDITION,
3. Is medical care being directly provided?
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Yes No
<S> <C>
Standard 3A Standard 3B
- --------------------------------------------------------------------------------
IN ADDITION,
4. If the affiliate has health or workers' compensation administration business,
does such business comprise 15% or more of the total contract enrollment of
Plan and its licensed affiliates.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Yes No
<S> <C>
Standards 6A-6I Standards 5, 8
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 27
EXHIBIT A (CONTINUED)
STANDARD 1 - ORGANIZATION AND GOVERNANCE
1A.) The Standard for more than 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that it is
controlled by a licensed Plan or Plans which have, directly or indirectly: 1)
more than 50% of the voting control of the affiliate; and 2) the legal ability
to prevent any change in the articles of incorporation, bylaws or other
establishing or governing documents of the affiliate with which it does not
concur; and 3) operational control of the affiliate.
1B.) The Standard for 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that a licensed
Plan or Plans have directly or indirectly:
1) not less than 50% of the voting control of the affiliate; and
2) the legal ability to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents of
the affiliate with which it does not concur; and
3) at least equal direct or indirect control over the operations of the
affiliate; and
4) sufficient authority so that changes in the following require the
approval of the Licensed Plan or Plans:
- geographic operating area of the affiliate
- the legal and trade names of the affiliate
- the types of activity in which the affiliate engages
- any action which would cause the affiliate to be in violation
of the Standards applicable to Licensure by BCBSA.
<PAGE> 28
EXHIBIT A (CONTINUED)
STANDARD 2 - FINANCIAL RESPONSIBILITY
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers. If a risk-assuming affiliate ceases operations for any reason, Blue
Cross and/or Blue Shield Plan coverage will be offered to all affiliate
subscribers without exclusions, limitations or conditions based on health
status. If a nonrisk-assuming affiliate ceases operations for any reason,
sponsoring Plan(s) will provide for services to its (their) customers.
STANDARD 3 - STATE LICENSURE/CERTIFICATION
3A.) The Standard for an affiliate that employs, owns or contracts on a
substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification for its
medical care providers to operate under applicable state laws.
3B.) The Standard for an affiliate that does not employ, own or contract on
a substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification to operate
under applicable state laws.
STANDARD 4 - CERTAIN DISCLOSURES
An affiliate shall make adequate disclosure in contracting with third parties
and in disseminating public statements of 1) the structure of the Blue Cross and
Blue Shield System; and 2) the independent nature of every licensee; and 3) the
affiliate's financial condition.
STANDARD 5 - REPORTS AND RECORDS FOR CERTAIN SMALLER AFFILIATES
For a smaller affiliate that does not underwrite the indemnity portion of
workers' compensation insurance, the Standard is:
An affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate
basis, reports and records relating to these Standards and the License
Agreements between BCBSA and affiliate.
<PAGE> 29
EXHIBIT A (CONTINUED)
STANDARD 6 - OTHER STANDARDS FOR LARGER AFFILIATES
Standards 6(A) - (I) that follow apply to larger affiliates.
Standard 6(A): Board of Directors
An affiliate Governing Board shall act in the interest of its Corporation in
providing cost-effective health care services to its customers. An affiliate
shall maintain a governing Board, which shall control the affiliate, composed of
a majority of persons other than providers of health care services, who shall be
known as public members. A public member shall not be an employee of or have a
financial interest in a health care provider, nor be a member of a profession
which provides health care services.
Standard 6(B): Responsiveness to Customers
An affiliate shall be operated in a manner responsive to customer needs and
requirements.
Standard 6(C): Participation in National Programs
An affiliate shall effectively and efficiently participate in each national
program as from time to time may be adopted by the Member Plans for the purposes
of providing portability of membership between the licensees and ease of claims
processing for customers receiving benefits outside of the affiliate's Service
Area.
Such programs are applicable to licensees, and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. BlueCard Program;
<PAGE> 30
EXHIBIT A (CONTINUED)
D. Inter-Plan Teleprocessing System (ITS); and
E. Inter-Plan Data Reporting (IPDR) Program.
Standard 6(D): Financial Performance Requirements
In addition to requirements under the national programs listed in
Standard 6C: Participation in National Programs, an affiliate shall take such
action as required to ensure its financial performance in programs and contracts
of an inter-licensee nature or where BCBSA is a party.
Standard 6(E): Cooperation with Plan Performance Response Process
An affiliate shall cooperate with BCBSA's Board of Directors and its Plan
Performance and Financial Standards Committee in the administration of the Plan
Performance Response Process and in addressing affiliate performance problems
identified thereunder.
Standard 6(F): Independent Financial Rating
An affiliate shall obtain a rating of its financial strength from an independent
rating agency approved by BCBSA's Board of Directors for such purpose.
Standard 6(G): Best Efforts
During each year, an affiliate shall use its best efforts in the designated
Service Area to promote and build the value of the Blue Cross Mark.
Standard 6(H): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
<PAGE> 31
EXHIBIT A (CONTINUED)
Standard 6(I): Reports and Records
An affiliate shall furnish to BCBSA on a timely and accurate basis reports and
records relating to compliance with these Standards and the License Agreements
between BCBSA and affiliate. Such reports and records are the following:
A) Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service mark usage material;
B) Changes in the ownership and governance of the affiliate, including
changes in its charter, articles of incorporation, or bylaws, changes
in an affiliate's Board composition, or changes in the identity of the
affiliate's Principal Officers, and changes in risk acceptance,
contract growth, or direct delivery of medical care; and
C) Quarterly Financial Report including the Capital Benchmark Worksheet,
Annual Financial Forecast, Annual Certified Audit Report, Insurance
Department Examination Report, Annual Statement filed with State
Insurance Department (with all attachments); and
D) Quarterly Utilization Report, Quarterly Enrollment Report, Cost
Containment Report, NMIS Quarterly Report.
STANDARD 7 - OTHER STANDARDS FOR RISK-ASSUMING WORKERS' COMPENSATION AFFILIATES
Standards 7(A) - (E) that follow apply to affiliates that underwrite the
indemnity portion of workers' compensation insurance.
Standard 7 (A): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
<PAGE> 32
EXHIBIT A (CONTINUED)
Standard 7(B): Reports and Records
An affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between
BCBSA and the affiliate. Such reports and records are the following:
A. Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service mark usage materials; and
B. Annual Certified Audit Report, Annual Statement as filed with the State
Insurance Department (with all attachments), Annual NAIC's Risk-Based
Capital Worksheets for Property and Casualty Insurers, and Annual
Financial Forecast; and
C. Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for
Property and Casualty Insurers, Insurance Department Examination
Report, and Quarterly NMIS Report (for licensed health business only);
and
D. Notification of all changes and proposed changes to independent ratings
within 30 days of receipt and submission of a copy of all rating
reports; and
E. Changes in the ownership and governance of the affiliate including
changes in its charter, articles of incorporation, or bylaws, changes
in an affiliate's Board composition, Plan control, state license
status, operating area, the affiliate's Principal Officers or direct
delivery of medical care.
Standard 7(C): Loss Prevention
An affiliate shall apply loss prevention protocol to both new and existing
business.
<PAGE> 33
EXHIBIT A (CONTINUED)
Standard 7(D): Claims Administration
An affiliate shall maintain an effective claims administration process that
includes all the necessary functions to assure prompt and proper resolution of
medical and indemnity claims.
Standard 7(E): Disability and Provider Management
An affiliate shall arrange for the provision of appropriate and necessary
medical and rehabilitative services to facilitate early intervention by medical
professionals and timely and appropriate return to work.
STANDARD 8 - COOPERATION WITH AFFILIATE LICENSE PERFORMANCE RESPONSE PROCESS
PROTOCOL
An affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA's Board of
Directors and its Plan Performance and Financial Standards Committee in the
administration of the Affiliate License Performance Response Process Protocol
(ALPRPP) and in addressing affiliate compliance problems identified thereunder.
<PAGE> 34
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
AFFILIATE LICENSE AGREEMENT
Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
FOR RISK PRODUCTS:
For affiliates not underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to its pro rata share of each sponsoring Plan's dues payable to
BCBSA computed with the addition of the affiliate's subscription revenue and
contracts arising from products using the marks. The payment by each sponsoring
Plan of its dues to BCBSA, including that portion described in this paragraph,
will satisfy the requirement of this paragraph, and no separate payment will be
necessary.
For affiliates underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to 0.35 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus, an annual fee of $5,000 per license
for an affiliate subject to Standard 7.
FOR NONRISK PRODUCTS:
An amount equal to 0.24 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus:
1) An annual fee of $5,000 per license for an affiliate subject to
Standard 6.
2) An annual fee of $2,000 per license for all other affiliates.
The foregoing shall be reduced by one-half where both a BLUE CROSS(R) and BLUE
SHIELD(R) License are issued to the same affiliate. In the event that any
license period is greater or less than one (1) year, any amounts due shall be
prorated. Royalties under this formula will be calculated, billed and paid in
arrears.
<PAGE> 35
EXHIBIT 1A
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO LIFE INSURANCE COMPANIES
This agreement by and among Blue Cross and Blue Shield Association
("BCBSA") _______________________________("Controlled Affiliate"), a controlled
affiliate of the Blue Cross Plan(s), known as
_______________________________________("Plan").
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design
service marks;
WHEREAS, the Plan and the Controlled Affiliate desire that the latter be
entitled to use the BLUE CROSS and BLUE CROSS Design service marks (collectively
the "Licensed Marks") as service marks and be entitled to use the term BLUE
CROSS in a trade name ("Licensed Name");
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby
grants to the Controlled Affiliate the exclusive right to use the licensed Marks
and Names in connection with and only in connection with those life insurance
and related services authorized by applicable state law, other than health care
plans and related services (as defined in the Plan's License Agreements with
BCBSA) which services are not separately licensed to Controlled Affiliate by
BCBSA, in the Service Area served by the Plan, except that BCBSA reserves the
right to use the Licensed Marks and Name in said Service Area, and except to the
extent that said Service Area may overlap the area or areas served by one or
more other licensed Blue Shield Plans as of the date of this License as to which
overlapping areas the rights hereby granted are non-exclusive as to such other
Plan or Plans and their respective Licensed Controlled Affiliates only.
Controlled Affiliate cannot use the Licensed Marks or Name outside the Service
Area or, anything in any other license to Controlled Affiliate notwithstanding,
in its legal or trade name.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and Name
only in relation to the sale, marketing and rendering of authorized products and
further agrees to be bound by the conditions regarding quality control shown in
Exhibit A as it may be amended by BCBSA from time-to-time.
AMENDED AS OF NOVEMBER 17, 1994
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<PAGE> 36
B. Controlled Affiliate agrees that Plan and/or BCBSA may, from
time-to-time, upon reasonable notice, review and inspect the manner and method
of Controlled Affiliate's rendering of service and use of the Licensed Marks and
Name.
C. Controlled Affiliate agrees that it will provide on an annual basis
(or more often if reasonably required by Plan or by BCBSA) a report to Plan and
BCBSA demonstrating Controlled Affiliate's compliance with the requirements of
this Agreement including but not limited to the quality control provisions of
Exhibit A.
D. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean the legal authority, directly or
indirectly through wholly-owned subsidiaries: (a) to select members of the
Controlled Affiliate's governing body having not less than 51% voting control
thereof; (b) to exercise operational control with respect to the governance
thereof; and (c) to prevent any change in its articles of incorporation, bylaws
or other governing documents deemed inappropriate. In addition, a Plan or Plans
shall own at least 51% of any for-profit Controlled Affiliate. If the Controlled
Affiliate is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items (a) and (c) above, proxies
representing 51% of the votes at any meeting of the policyholders and shall
demonstrate that there is no reason to believe this such proxies shall be
revoked by sufficient policyholders to reduce such percentage below 51%.
3. SERVICE MARK USE
Controlled Affiliate shall at all times make proper service
mark use of the Licensed Marks, including but not limited to use of such symbols
or words as BCBSA shall specify to protect the Licensed Marks, and shall comply
with such rules (applicable to all Controlled Affiliates licensed to use the
Marks) relative to service mark use, as are issued from time-to-time by BCBSA.
If there is any public reference to the affiliation between the Plan and the
Controlled Affiliate, all of the Controlled Affiliate's licensed services in the
Service Area of the Plan shall be rendered under the Licensed Marks. Controlled
Affiliate recognizes and agrees that all use of the Licensed Marks by Controlled
Affiliate shall inure to the benefit of BCBSA.
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not sublicense, transfer,
hypothecate, sell, encumber or mortgage, by operation of law or otherwise, the
rights granted hereunder and any such act shall be
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<PAGE> 37
voidable at the option of Plan or BCBSA. This Agreement and all rights and
duties hereunder are personal to Controlled Affiliate.
5. INFRINGEMENTS
Controlled Affiliate shall promptly notify Plan and BCBSA of
any suspected acts of infringement, unfair competition or passing off which may
occur in relation to the Licensed Marks. Controlled Affiliate shall not be
entitled to require Plan or BCBSA to take any actions or institute any
proceedings to prevent infringement, unfair competition or passing off by third
parties. Controlled Affiliate agrees to render to Plan and BCBSA, free of
charge, all reasonable assistance in connection with any matter pertaining to
the protection of the Licensed Marks by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate hereby agrees to save, defend, indemnify
and hold Plan and BCBSA harmless from and against all claims, damages,
liabilities and costs of every kind, nature and description which may arise as a
result of Controlled Affiliate's rendering of health care services under the
Licensed Marks.
7. LICENSE TERM
The license granted by this Agreement shall remain in effect
for a period of one (1) year and shall be automatically extended for additional
one (1) year periods upon evidence satisfactory to the Plan and BCBSA that
Controlled Affiliate meets the then applicable quality control standards, unless
one of the parties hereto notifies the other party of the termination hereof at
least sixty (60) days prior to expiration of any license period.
This Agreement may be terminated by the Plan or by BCBSA for
cause at any time provided that Controlled Affiliate has been given a reasonable
opportunity to cure and shall not effect such a cure within thirty (30) days of
receiving written notice of the intent to terminate (or commence a cure within
such thirty day period and continue diligent efforts to complete the cure if
such curing cannot reasonably be completed within such thirty day period). By
way of example and not for purposes of limitation, Controlled Affiliate's
failure to abide by the quality control provisions of Paragraph 2, above, shall
be considered a proper ground for cancellation of this Agreement.
This Agreement and all of Controlled Affiliate's rights
hereunder shall immediately terminate without any further action by any party or
entity in the event that:
-3-
<PAGE> 38
A. Controlled Affiliate shall no longer comply with Standard No. 1
(Organization and Governance) of Exhibit A or, following an opportunity to cure,
with the remaining quality control provisions of Exhibit A, as it may be amended
from time-to-time; or
B. Plan ceases to be authorized to use the Licensed Marks; or
C. Appropriate dues for Controlled Affiliate pursuant to item 8 hereof,
which are the royalties for this License Agreement are more than sixty (60) days
in arrears to BCBSA.
Upon termination of this Agreement for cause or otherwise, Controlled
Affiliate agrees that it shall immediately discontinue all use of the Licensed
Marks including any use in its trade name.
In the event of any disagreement between Plan and BCBSA as to whether
grounds exist for termination or as to any other term or condition hereof, the
decision of BCBSA shall control, subject to provisions for mediation or
mandatory dispute resolution in effect between the parties.
Upon termination of this Agreement, Licensed Controlled Affiliate shall
immediately notify all of its customers that it is no longer a licensee of the
Blue Cross and Blue Shield Association and provide instruction on how the
customer can contact the Blue Cross and Blue Shield Association or a designated
licensee to obtain further information on securing coverage. The written
notification required by this paragraph shall be in writing and in a form
approved by the Association. The Association shall have the right to audit the
terminated entity's books and records to verify compliance with this paragraph.
8. DUES
Controlled Affiliate will pay to BCBSA a fee for this license in
accordance with the following formula:
- An annual fee of five thousand dollars ($5,000) per license, plus
- .05 percent of gross revenue per annum of Licensee arising from group
products using the Marks, plus
- .5 percent of gross revenue per annum of Licensee arising from
individual products using the Marks
The foregoing percentages shall be reduced by one-half where both a
BLUE CROSS(R) and BLUE SHIELD(R) license are issued to the same entity.
In the event that any License period is greater or less than one (1)
year, any amounts due shall be prorated. Royalties under this formula
will be calculated, billed and paid in arrears.
AMENDED AS OF SEPTEMBER 29, 1994
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<PAGE> 39
Plan will promptly and timely transmit to BCBSA all dues owed by
Controlled Affiliate as determined by the above formula and if Plan shall fail
to do so, Controlled Affiliate shall pay such dues directly.
9. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Controlled Affiliate or between either and BCBSA.
-4a-
(The next page is page 5)
<PAGE> 40
10. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
11. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in
relation to the subject matter hereof. This Agreement may only be amended by a
writing executed by all parties.
12. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such finding shall in no way effect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
13. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part
of the Controlled Affiliate or any other licensee of any of the terms, covenants
or conditions of this Agreement shall constitute a waiver of any subsequent
breach or default in performance of said terms, covenants or conditions.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:
---------------------
Date:
---------------------
- ------------------------
Controlled Affiliate
By:
---------------------
Date:
---------------------
Plan:
- ------------------------
-5-
<PAGE> 41
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 1 of 2
PREAMBLE
The standards for licensing Life Insurance Companies (Life and Health Insurance
companies, as defined by state statute) are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote of all Plans. Each
Licensed Plan is required to use a standard controlled affiliate license form
provided by BCBSA and to cooperate fully in assuring that the licensed Life
Insurance Company maintains compliance with the license standards.
An organization meeting the following standards shall be eligible for a license
to use the Licensed Marks within the service area of its sponsoring Licensed
Plan to the extent and the manner authorized under the Controlled Affiliate
License applicable to Life Insurance Companies and the principal license to the
Plan.
STANDARD 1 - ORGANIZATION AND GOVERNANCE
The LIC shall be organized and operated in such a manner that it is controlled
by a licensed Plan or Plans which have, directly or indirectly: 1) not less than
51% of the voting control of the LIC; and 2) the legal ability to prevent any
change in the articles of incorporation, bylaws or other establishing or
governing documents of the LIC with which it does not concur; and 3) operational
control of the LIC.
If the LIC is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items 1 and 2 above, proxies
representing at least 51% of the votes at any policyholder meeting and shall
demonstrate that there is no reason to believe such proxies shall be revoked by
sufficient policyholders to reduce such percentage below 51%.
STANDARD 2 - STATE LICENSURE
The LIC must maintain unimpaired licensure or certificate of authority to
operate under applicable state laws as a life and health insurance company in
each state in which the LIC does business.
STANDARD 3 - RECORDS AND EXAMINATION
The LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a
timely and accurate basis, such records and reports regarding the LIC as may be
required in order to establish compliance with the license agreement. The LIC
and its sponsoring licensed Plan(s) shall permit BCBSA to examine the affairs of
the LIC and shall agree that BCBSA's board may submit a written report to the
chief executive officer(s) and the board(s) of directors of the sponsoring
Plan(s).
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<PAGE> 42
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 2 of 2
STANDARD 4 - MEDIATION
The LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA
mediation and mandatory dispute resolution processes, in lieu of a legal action
between or among another licensed controlled affiliate, a licensed Plan or
BCBSA.
STANDARD 5 - FINANCIAL RESPONSIBILITY
The LIC shall maintain adequate financial resources to protect its customers and
meet its business obligations.
-2-
<PAGE> 43
EXHIBIT 2
MEMBERSHIP STANDARDS
Page 1 of 3
Preamble
The Membership Standards apply to all organizations seeking to become or to
continue as Regular Members of the Blue Cross and Blue Shield Association. Any
organization seeking to become a Regular Member must be found to be in
substantial compliance with all Membership Standards at the time membership is
granted and the organization must be found to be in substantial compliance with
all Membership Standards for a period of two (2) years preceding the date of its
application. If Membership is sought by an entity which controls or is
controlled by one or more Plans, such compliance shall be determined on the
basis of compliance by such Plan or Plans.
The Regular Member Plans shall have authority to interpret these Standards.
Compliance with any Membership Standard may be excused, at the Plans'
discretion, if the Plans agree that compliance with such Standard would require
the Plan to violate a law or governmental regulation governing its operation or
activities.
Standard 1: A Plan's Board shall not be controlled by any special
interest group, and shall act in the interest of its Corporation in
providing cost-effective health care services to its customers. A
Plan shall maintain a governing Board, which shall control the
Plan, composed of a majority of persons other than providers of
health care services, who shall be known as public members. A
public member shall not be an employee of or have a financial
interest in a health care provider, nor be a member of a profession
which provides health care services.
Standard 2: A Plan shall furnish to the Association on a timely
and accurate basis reports and records relating to compliance with
these Standards and the License Agreements between the Association
and the Plans. Such reports and records are the following:
A. Annual Application for Renewal of BCBSA Membership, including
trade name and service mark usage material;
B. Changes in the governance of the Plan, including changes in a
Plan's Charter, Articles of Incorporation, or Bylaws, changes
in a Plan's Board composition, or changes in the identity of
the Plan's Principal Officers;
AMENDED AS OF JUNE 24, 1994
<PAGE> 44
EXHIBIT 2
MEMBERSHIP STANDARDS
Page 2 of 3
C. Quarterly Financial Report including the Plan Capital
Benchmark Worksheet, Annual Financial Forecast, Annual
Certified Audit Report, Insurance Department Examination
Report, Annual Statement filed with State Insurance Department
(with all attachments), and Consolidating Financial Statement;
D. Quarterly Utilization Report, Quarterly Enrollment Report,
Cost Containment Report, and NMIS Quarterly Report.
Standard 3: A Plan shall be operated in a manner that
provides reasonable financial assurance that it can fulfill its
contractual obligations to its customers.
Standard 4: A Plan shall be operated in a manner responsive
to customer needs and requirements.
Standard 5: A Plan shall effectively and efficiently
participate in each national program as from time to time may be
adopted by the Member Plans for the purposes of providing
portability of membership between the Plans and ease of claims
processing for customers receiving benefits outside of the Plan's
Service Area.
Such programs are applicable to Blue Cross and Blue Shield Plans,
and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. Inter-Plan Data Reporting (IPDR) Program;
D. Inter-Plan Teleprocessing System (ITS); and
E. Out-of-Area Program.
AMENDED AS OF NOVEMBER 16, 1995
<PAGE> 45
EXHIBIT 2
MEMBERSHIP STANDARDS
Page 3 of 3
Standard 6: In addition to requirements under the national
programs listed in Standard 5: Participation in National Programs,
a Plan shall take such action as required to ensure its financial
performance in programs and contracts of an inter-Plan nature or
where the Association is a party.
Standard 7: A Plan shall make adequate disclosure in contracting with third
parties and in disseminating public statements of (i) the structure
of the Blue Cross and Blue Shield System, (ii) the independent
nature of every Plan, and (iii) the Plan's financial condition.
Standard 8: A Plan shall cooperate with the Association's Board of Directors
and its Plan Performance and Financial Standards Committee in the
administration of the Plan Performance Response Process and in
addressing Plan performance problems identified thereunder.
Standard 9: A Plan shall obtain a rating of its financial strength from an
independent rating agency approved by the Association's Board of
Directors for such purpose.
Standard 10: During each year, a Plan and its Controlled Affiliate(s) engaged in
providing licensable services (excluding Life Insurance and
Charitable Foundation Services) shall use their best efforts in the
designated Service Area to promote and build the value of the Blue
Cross and Blue Shield Marks.
AMENDED AS OF NOVEMBER 17, 1994
<PAGE> 46
EXHIBIT 3
GUIDELINES WITH RESPECT TO USE OF
LICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTS
Page 1 of 3
1. The strength of the Blue Cross/Blue Shield National Accounts mechanism, and
the continued provision of cost effective, quality health care benefits to
National Accounts, are predicated on locally managed provider networks
coordinated on a national scale in a manner consistent with effective service to
National Account customers and consistent with the preservation of the integrity
of the Blue Cross/Blue Shield system and the Licensed Marks. These guidelines
shall be interpreted in keeping with such ends.
2. A National Account is an entity with employee and/or retiree locations in
more than one Plan's Service Area. Unless otherwise agreed, a National Account
is deemed located in the Service Area in which the corporate headquarters of the
National Account is located. The Control Plan of a National Account is the Plan
in whose Service Area the National Account is located. A participating ("Par")
Plan is a Plan in whose Service Area the National Account has employee and/or
retiree locations, but in which the National Account is not located.
3. The National Account Guidelines enunciated herein below shall be applicable
only with respect to the business of new National Accounts acquired after
January 1, 1991.
4. Control Plans shall utilize National Account identification cards complying
with then currently effective BCBSA graphic standards in connection with all
National Accounts business to facilitate administration thereof, to minimize
subscriber and provider confusion, and to reflect a commitment to cooperation
among Plans.
5. Disputes among Plans and/or BCBSA as to the interpretation or implementation
of these Guidelines or as to other National Accounts issues shall be submitted
to mediation and mandatory dispute resolution as provided in the License
Agreement. For two years from the effective date of the License Agreement,
however, such disputes shall be subject to mediation only, with the results of
such mediation to be collected and reported in order to establish more
definitive operating parameters for National Accounts business and to serve as
ground rules for future binding dispute resolution.
<PAGE> 47
EXHIBIT 3
Page 2 of 3
6. At a minimum, a Participating Plan must in its Service Area collect claims
from providers and forward both provider claims and any received subscriber
claims to the Control Plan or its designated processor in the form or for the
equitable fee specified from time to time by the BCBSA Board of Directors or an
authorized committee thereof. To the extent that the Service Areas of Plans
overlap, the Control Plan may select the Participating Plan to undertake the
collection and forwarding function. Any alternative or additional requirements
must be agreed to by both the Control Plan and Participating Plan. It is
anticipated that the Control Plan and Participating Plans will establish
equitable methods for sharing in the risks of each National Account. To that
end, BCBSA will develop model protocols for risk and/or administrative cost
sharing purposes.
7. Payment to the provider may be made by the Participating Plan or the Control
Plan at the Participating Plan's option. If the Participating Plan elects to pay
the provider, it may not withhold payment of a claim verified by the Control
Plan or its designated processor, and payment must be in conformity with service
criteria established by the Board of Directors of BCBSA (or an authorized
committee thereof) to assure prompt payment, good service and minimum confusion
with providers and subscribers. The Control Plan, at the Participating Plan's
request, will also assure that measures are taken to protect the confidentiality
of the data pertaining to provider reimbursement levels and profiles.
8. Participating Plans are strongly encouraged, but not required, to pass along
to the Control Plan part or all of local provider discounts and differentials
for use by the Control Plan in negotiating financial arrangements with National
Accounts. However, since the size, basis, form and use of local differentials
can vary substantially among Plans and also by individual National Account
characteristics, the degree and form of any discount or differential passed
along to the Control Plan shall be strictly a matter of negotiated contractual
agreement between a Participating Plan and the Control Plan and may also vary
from one National Account to another. In order to facilitate the quotation of
national account pricing and the offering of a variety of National Account
delivery systems, all Plans are strongly encouraged to periodically publish to
other Plans and the BCBSA their National Account contracting policies with
respect to the handling of differentials.
The Control Plan, in its financial agreements with a National Account, is
expected to reasonably reflect the aggregate amount of differentials passed
along to the Control Plan by all Participating Plans in a National Account. The
exact form and substance of this may vary from one National Account to another
and shall be a matter of
<PAGE> 48
EXHIBIT 3
Page 3 of 3
explicit negotiation and contractual relationship between the National Account
and the Control Plan. The specifics in an agreement between the Control Plan and
the National Account may vary in form (e.g., a guaranteed offset against
retentions, or a direct pass through, or a guaranteed aggregate percentage
discount, or no pass back at all, etc.), and the Control Plan has the
responsibility and the Authority to negotiate precise arrangements. However,
irrespective of the final arrangements between the Control Plan and the National
Account, a Participating Plan's liability for passing along differentials shall
be limited to the contractual agreement the Participating Plan has with the
Control Plan on a specific National Account.
9. Other than in contracting with health care providers or soliciting such
contracts in areas contiguous to a Plan's Service Area in order to serve its
subscribers or those of its licensed Controlled Affiliate residing or working in
its Service Area, a Control Plan may not use the Licensed Marks and/or Name, as
a tag line or otherwise, to negotiate directly with providers outside its
Service Area.
<PAGE> 49
EXHIBIT 4
GOVERNMENT PROGRAMS AND CERTAIN OTHER USES
Page 1 of 2
1. A Plan and its licensed Controlled Affiliate may use the Licensed Marks and
Name in bidding on and executing a contract to serve a Government Program, and
in thereafter communicating with the Government concerning the Program. With
respect, however, to such contracts entered into after the 1st day of January,
1991, the Licensed Marks and Name will not be used in communications or
transactions with beneficiaries or providers in the Government Program located
outside a Plan's Service Area, unless the Plan can demonstrate to the
satisfaction of BCBSA's governing body that such a restriction on use of the
Licensed Marks and Name will jeopardize its ability to procure the contract for
the Government Program. As to both existing and future contracts for Government
Programs, Plans will discontinue use of the Licensed Marks and Name as to
beneficiaries and Providers outside their Service Area as expenditiously as
circumstances reasonably permit. Effective January 1, 1995, except as provided
in the first sentence above, all use by a Plan of the Licensed Marks and Name in
Government Programs outside of the Plan's Service Area shall be discontinued.
Incidental communications outside a Plan's Service Area with resident or former
resident beneficiaries of the Plan, and other categories of necessary incidental
communications approved by BCBSA, are not prohibited.
2. In connection with activity otherwise in furtherance of the License
Agreement, a Plan may use the Licensed Marks and Name outside its Service Area
in the following circumstances which are deemed legitimate and necessary and not
likely to cause consumer confusion:
a. sending letterhead, envelopes, and similar items for
administrative purposes which do not solicit the sale of
health care plans and related services;
b. distributing business cards other than in marketing and
selling;
c. contracting with health care providers or soliciting such
contracts in areas contiguous to a Plan's Service Area in
order to serve its subscribers or those of its licensed
Controlled Affiliate residing or working in its service area;
d. issuing a small sign containing the legal name or trade name
of the Plan or its licensed Controlled Affiliate for display
by a provider to identify the latter as a participating
provider of the Plan or Controlled Affiliate;
<PAGE> 50
EXHIBIT 4
Page 2 of 2
e. advertising in publications or electronic media solely to
persons for employment;
f. advertising in print, electronic or other media which serve,
as a substantial market, the Service Area of the Plan or
licensed Controlled Affiliate, provided that no Plan may
advertise outside its Service Area on the national broadcast
and cable networks and that advertisements in national print
media are limited to the smallest regional edition
encompassing the Service Area;
g. advertising by direct mail where the addressee's zip code plus
4 includes, at least in part, the Plan's Service Area or that
of a licensed Controlled Affiliate.
<PAGE> 51
EXHIBIT 5
MEDIATION AND MANDATORY DISPUTE RESOLUTION
PREAMBLE
The Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross Blue
Shield Association ("BCBSA") recognize and acknowledge that the Blue Cross and
Blue Shield system is a unique nonprofit and for-profit system offering cost
effective health care financing and services. In the best interests of
preserving the integrity of the system, the Plans and BCBSA agree that if
available administrative procedures and voluntary mediation do not resolve a
dispute between the Plans, their Controlled Affiliates who use in any manner the
Blue Cross/Blue Shield marks ("Controlled Affiliates") and/or BCBSA, the
unresolved dispute should be submitted, with three limited exceptions, to
mandatory dispute resolution in lieu of litigation.
The Plans and the Association further agree that, unless otherwise
provided, the findings, determinations, conclusions, and awards resulting from
the mandatory dispute resolution procedure should be binding on the parties
thereto. The Plans and BCBSA desire to utilize mediation and mandatory dispute
resolution to avoid expensive and time-consuming litigation that may otherwise
occur in the federal and state judicial systems. Even mediation and mandatory
dispute resolution should be viewed, however, as methods of last resort, all
other procedures for dispute resolution having failed.
1. Initiation of Proceedings
To commence a proceeding, the complaining party(ies) shall provide by
certified mail, return receipt requested, a written complaint to the BCBSA
Corporate Secretary (which shall also constitute service on BCBSA if it is a
respondent) and to any Plan(s) and/or Controlled Affiliate(s) named therein
which complaint shall contain: (a) identification of the complaining party(ies)
requesting the proceeding; (b) identification of the respondent(s); (c)
identification of any other persons or entities who are interested in a
resolution of the dispute; (d) a full statement describing the nature of the
dispute; (e) identification of all of the issues that are being submitted for
resolution; (f) the remedy sought; (g) a statement as to whether the complaining
party(ies) desire first to exhaust the mediation process; (h) any request, if
applicable, that one or more members of the Mediation Committee be disqualified
from the proceeding and the grounds for such request, and (i) any request, if
applicable, that the matter be handled on an expedited basis and the reasons
therefor. Within twenty (20)
AMENDED AS OF JUNE 24, 1994
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<PAGE> 52
days after receipt of the complaint, each respondent shall serve on BCBSA and on
the complaining party(ies); (j) a full answer to the aforesaid complaint; (k) a
statement of any compulsory counterclaims against the complaining party(ies);
providing with respect thereto the information specified in paragraph
1(c)-(f); (l) a statement as to whether the respondent desires first to
exhaust the mediation process; (m) any request, if applicable, that one or
more members of the Mediation Committee be disqualified from the proceeding
and the grounds for such request; and (n) any request, if applicable, that the
matter be handled on an expedited basis and the reasons therefor. It is
important that the complaint and answer(s) afford the Mediation Committee an
opportunity to resolve all the issues which could subsequently arise in a
mandatory dispute resolution proceeding.
If all parties reject voluntary mediation, and if the parties cannot
agree within twenty (20) days after service of the answer(s) as to the
composition of a mandatory dispute resolution panel, the complaining party(ies)
shall serve all pleadings on the then currently designated mandatory dispute
administrator ("administrator") to commence the panel selection process.
The administrator of mandatory dispute resolution procedures hereunder
shall be an independent entity such as the Center for Public Resources, Inc. or
Endispute, Inc., specializing in alternative dispute resolution. The
administrator shall be initially designated, and may be changed from time to
time, by the affirmative vote of fifty-one (51) percent of the Plans and
fifty-one (51) percent of the total then current weighted vote of all the Plans.
2. Mediation
To facilitate the mediation of disputes between or among BCBSA, the
Plans and/or their Controlled Affiliates, the BCBSA Board has established a
Mediation Committee. Mediation may be pursued in lieu of or in an effort to
obviate the mandatory dispute resolution process, and all parties are strongly
urged to exhaust the mediation procedure. The rules applicable to mediation are
set forth below. These rules, and the rules with respect to mandatory dispute
resolution set forth in paragraph 6 below, may be altered or amended from
time to time by the affirmative vote of fifty-one (51) percent of the Plans
and fifty-one (51) percent of the total then current weighted vote of all
the Plans.
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a. Determination of Jurisdiction
If the parties elect first to pursue voluntary mediation, the Corporate
Secretary will make an initial determination as to whether the dispute falls
within the jurisdiction of the Mediation Committee or should be referred to
another BCBSA Committee (e.g., the Mediation Committee's Charge appended as
Exhibit "5-A" hereto provides that "determination of equalization allowances
and/or cost allowances under FEP shall not be considered by this Committee"). If
the dispute appears to fall within the Mediation Committee's jurisdiction, the
Corporate Secretary will promptly furnish the Mediation Committee with copies of
the complaint and other documents references in paragraph 1 above, as received.
b. Disqualification
The Chairman of the Mediation Committee should expeditiously determine
whether any member of the Mediation Committee is a representative of a party.
Members of the Mediation Committee who appear to fall into such category will be
so advised by the Chairman and such members will not be permitted to serve on a
mediation panel to mediate the dispute. If a party has requested that any member
of the Mediation Committee be disqualified on any other ground, the other
members of the Committee not previously disqualified for the foregoing reasons
shall consider such grounds and a majority of such other members shall decide
whether to grant the party's request. Other grounds for disqualification
include, but are not limited to: (i) personal bias or prejudice either against
or in favor of any party to the proceeding or its counsel; and (ii) a financial
interest in the controversy or in any party to the proceeding. The Chairman
shall promptly advise the parties of any disqualifications.
c. Selection of Mediators
From the members of the Mediation Committee who have not been
disqualified, the Chairman will promptly select three members to mediate the
dispute, one of whom may be the Chairman, with due regard for availability,
expertise and such other considerations as may best promote an expeditious
resolution of the dispute. By agreeing to participate in the mediation of a
dispute, a member of the Mediation Committee represents to the parties thereto
that he or she knows of no grounds which would require his or her
disqualification.
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d. Binding Decision
Before the date of the hearing scheduled pursuant to the Mediation
Procedure described below, the Corporate Secretary will contact the parties to
determine whether they wish to be bound by any recommendation of the selected
mediators for resolution of the dispute. If all wish to be bound, the Corporate
Secretary will send appropriate documentation to them for their signatures
before the hearing begins.
e. Mediation Procedure
The Chairman shall promptly advise the parties of a scheduled mediation
hearing date. Unless a party requests an expedited procedure, the Mediation
Procedure set forth below shall be completed within 30 days of BCBSA's receipt
of the complaint, unless all parties to the proceeding agree to one or more
extensions of time. The selected mediators, unless the parties otherwise agree,
shall adhere to the following procedure:
i. Each party must be represented by its chief executive
officer or one who has been delegated full authority
to resolve the dispute. However, both parties may
send additional representatives as they see fit.
ii. Each party will be given an opportunity to submit, in
writing, and to serve on all other parties and the
selected mediators, any additional statement of the
facts as it sees them, along with a position paper
summarizing its argument. Each may submit and
likewise serve any other documentation it would like
the selected mediators to consider. Along with the
position paper, each party should supply and serve a
list of all persons who will be attending the
hearing, and indicate who will have the authority to
resolve the dispute. Upon request of the selected
mediators, BCBSA staff may also submit documentation.
All documents must be received by the date(s)
designated by the selected mediators.
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iii. Each party's presentation before the selected
mediators may be made by one or more representatives,
including outside counsel. The parties are free to
structure their presentations as they see fit, using
oral statements or direct examinations of witnesses.
However, neither cross-examination nor questioning of
opposing representatives will be permitted.
iv. Each party will be given one-half hour to present its
case, beginning with the complaining party(ies),
followed by the other party or parties. At the close
of each presentation, the selected mediators will be
given an opportunity to ask questions of the
presenters. All parties must be present throughout
the hearing. The selected mediators may extend the
time allowed for each party's presentation at the
hearing. The selected mediators may meet in executive
session, outside the presence of the parties, or may
meet with the parties separately, to discuss the
controversy.
v. After the close of the presentations, the parties
will attempt to negotiate a settlement of the
dispute. If the parties desire, the selected
mediators or any of them will sit in on the
negotiations.
vi. After the close of the presentations, the selected
mediators may meet privately to agree upon a
recommendation for resolution of the dispute which
would be submitted to the parties for their
consideration and approval. If the parties have
previously agreed to be bound by the results of this
procedure, this recommendation shall be binding upon
the parties.
vii. The purpose of the hearing is to assist the parties
to settle their grievances short of mandatory dispute
resolution. As a result, the hearing has been
designed to be as informal as possible. Rules of
evidence shall not apply. There will be no transcript
of the proceedings, and no party may make a tape
recording of the hearing.
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viii. In order to facilitate a free and open discussion,
the proceeding shall remain confidential. A
"Stipulation to Confidentiality" which prohibits
future use of settlement offers, all position papers
or other statements furnished to the selected
mediators, and decisions or recommendations in any
mediation proceeding should be executed by each
party.
f. Expedited Mediation Procedure
Any party to the mediation proceeding may direct a request for an
expedited procedure to the Chairman and to all other parties at any time. Such a
request must be supported by a statement of reasons therefor and, if not
previously submitted, a full explanation of all the arguments supporting the
position of the requesting party on the merits of the controversy. The Chairman
shall grant any request which is supported by good and sufficient reasons. If
such a request is granted, the Mediation Procedure set forth immediately above
shall be completed within 10 business days of the Chairman's receipt of the
request for expedited procedure, unless all parties to the proceeding agree to
one or more extensions of time.
g. Termination of Mediation
In the event that the mediation proceeding cannot be completed within
the prescribed or agreed time period due to the lack of cooperation of any
party, as determined by the selected mediators, or if the mediation process does
not result in a final resolution of the dispute, any party may so notify the
Corporate Secretary who shall promptly notify all parties and the selected
mediators thereof in writing, which notice shall serve to bring the mediation
process to an end and to initiate mandatory dispute resolution. If the parties
cannot agree within fifteen (15) days thereafter as to the composition of an
arbitration panel, the parties shall respectively serve the complaint and
answer(s) on the administrator to commence the panel selection process.
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3. Mandatory Dispute Resolution
If voluntary mediation does not result in a final resolution of any
dispute between or among the Plans, their Controlled Affiliates and/or the
BCBSA, or if the parties dispense with the mediation process, the parties shall
submit any unresolved dispute within the scope of Paragraph 5 below to mandatory
dispute resolution.
BCBSA, a Plan or a Controlled Affiliate shall have the right to compel
arbitration of any such unresolved dispute as provided by the Federal
Arbitration Act, 9 U.S.C. Section 1, et seq., it being the intent of the parties
that, apart from the possible need to file protective pleadings in actions
initiated by third parties, all disputes between or among them, after the
exhaustion of administrative procedures, be resolved either by mediation or
mandatory dispute resolution.
4. Mandatory Dispute Resolution Panel
The parties are encouraged to agree to the composition of the Panel
which may consist of one member. Such agreement may be particularly appropriate
with respect to disputes, the resolution of which would benefit from particular
industry expertise. Absent agreement of the parties, a mandatory dispute
resolution Panel shall consist of three members selected as follows:
As soon as feasible after the commencement of the mandatory dispute
resolution proceeding, the parties will confer with the administrator to discuss
facilitation of the panel selection process. Unless otherwise agreed, the
parties and the administrator shall thereafter proceed as follows:
With respect to a two-party arbitration proceeding, the administrator
shall first designate a panel of seven potential arbitrators. The parties shall
then be permitted to strike any potential arbitrator for cause, the
administrator to determine the sufficiency thereof in its sole discretion and to
designate a replacement for any potential arbitrator so stricken. Each party
shall then be permitted two peremptory strikes, and from the remaining potential
arbitrators, if more than three, the administrator shall select the three member
Panel. The administrator shall set all dates for exercising strikes and shall
endeavor to complete the panel selection process within twenty (20) days of its
commencement as aforesaid.
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With respect to a proceeding involving more than two parties, the same
procedures shall apply except that the number of potential arbitrators
designated shall be sufficient to give each party at least two peremptory
strikes. Absent unusual circumstances, entities whose interests are not adverse
shall be treated as a single party. For purposes of selecting the Panel, the
administrator shall determine in its sole discretion whether interests are
adverse; thereafter, the Panel shall make such determination.
The Panel shall promptly designate a Presiding Panel Member for the
purposes reflected below, but shall retain the power to review and modify any
ruling or other action of said Presiding Panel Member. Each panel member shall
be an independent arbitrator, shall be governed as such in every aspect of the
ensuing proceedings by the Code of Ethics for Arbitrators in Commercial
Disputes, appended as Exhibit "5-B" hereto, and shall at or prior to the
commencement of any hearing take an oath to that effect. Each arbitrator shall
promptly disclose in writing to the Panel and to the parties any circumstances,
whenever arising, that might cause doubt as to such arbitrator's compliance or
ability to comply with said Code of Ethics, and, absent resignation by such
arbitrator, the remaining panel members shall determine in their sole discretion
whether the circumstances so disclosed constitute grounds for disqualification,
and for replacement pursuant to paragraph 6.y. infra. With respect to such
circumstances arising or coming to the attention of a party after an
arbitrator's selection, a party may likewise request the arbitrator's
resignation or a determination as to disqualification by the remaining panel
members. With respect to a sole arbitrator, the determination as to
disqualification shall be made by the administrator.
Each arbitrator shall be compensated at his or her normal hourly rate
or, in the absence of an established rate, at a reasonable hourly rate to be
promptly fixed by the administrator for all time spent in connection with the
proceedings and shall be reimbursed for any travel and other reasonable
expenses. The administrator shall be compensated at the normal hourly rates of
its professional staff for all time spent in connection with the selection of
the panel and the provision of other services and shall be reimbursed for all
reasonable expenses.
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5. Panel's Jurisdiction and Authority
The Panel's jurisdiction and authority shall extend to any justiciable
controversy between or among the Plans, their Controlled Affiliates, and BCBSA
except a dispute as to the termination of a Plan's License Agreement with BCBSA
or the merger of two or more Plans, as to which limited issues the parties may
resort to a court of competent jurisdiction which shall consider the same de
novo.
With the exception of punitive or trebled damages, the Panel shall have
full authority to award the relief it deems appropriate to resolve the parties'
dispute, including monetary awards and injunctions, mandatory or prohibitory,
and the Panel shall have the right to allocate or assess responsibility for
punitive or treble damages assessed by another tribunal. Subject to the above
limitations, the Panel may, by way of example, but not of limitation: (a)
interpret or construe the meaning of any term, phrase or provision in any
license between BCBSA and a Plan or a Controlled Affiliate relating to the use
of the BLUE CROSS or BLUE SHIELD service marks; (b) resolve any territorial
questions or antitrust disputes which may arise between or among the parties;
(c) determine whether BCBSA, a Plan or a Controlled Affiliate has violated the
terms or conditions of any license between the Association and a Plan or a
Controlled Affiliate relating to the use of the BLUE CROSS or BLUE SHIELD
service marks; and (d) decide challenges as to its own jurisdiction.
It is understood that the Panel is expected to resolve issues based on
governing principles of law, preserving to the maximum extent legally possible
the continued integrity of the Licensed Marks and the BLUE CROSS/BLUE SHIELD
system. The Panel shall apply federal law to all issues which, if asserted in a
United States District Court, would give rise to federal question Jurisdiction,
28 U.S.C. 1331. The Panel shall apply Illinois law to all issues involving
interpretation, performance or construction of any License Agreement or
Controlled Affiliate License Agreement unless the agreement otherwise provides.
As to other issues, the Panel shall choose the applicable law based on conflicts
of law principles.
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Proceedings to confirm, modify or vacate an award shall be conducted in
conformity with and controlled by the Federal Arbitration Act. 9 U.S.C. Section
9, et seq.
6. Applicable Rules
Except to the extent varied by a written agreement between the parties,
the following rules shall govern the Mandatory Dispute Resolution Procedure. To
the extent not controlled by the following rules or the agreement of the
parties, the Panel shall look for guidance to the Federal Rules of Civil
Procedure.
a. Additional Pleadings
i. If the parties forego the mediation process, the
complaining party(ies) may file and serve, as
aforesaid, a reply to any compulsory counterclaim
asserted by the respondent(s) within ten (10) days
after receipt thereof. If no reply is filed within
the above time period, the respondent(s)'s
counterclaim will be treated as denied. Failure to
file a reply to a counterclaim shall not delay the
proceeding.
ii. Claims or compulsory counterclaims may be freely
added or amended prior to the selection of the Panel
and, thereafter, upon notice to all parties and with
the opportunity to object, with the consent of the
Presiding Panel Member.
b. Administrative Conference and Preliminary Hearing
Unless all parties otherwise agree, the Presiding Panel Member will
schedule an administrative conference as soon after issue is joined as is
feasible in an effort to expedite the proceedings. Matters to be considered at
the administrative conference may include, INTER ALIA, procedural matters such
as the timing and manner of any required discovery; the desirability of
bifurcation or other separation of the issues; the scheduling of further
conferences or hearings; the need for and the type of record of conferences and
hearings, including the need for transcripts; the need for expert witnesses and
how expert testimony should be presented; the potential appropriateness of
motions to dismiss and/or for full or partial summary judgment, and the
necessity for any on-site inspection by the Panel.
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In large or complex cases, at the request of any party or at the
discretion of the Presiding Panel Member, a preliminary hearing with the parties
and/or their representatives and the Presiding Panel Member may be scheduled to
reconsider any of the foregoing and further to specify and/or narrow the issues
to be resolved, ascertain the amount of time necessary for each party to present
its case, determine whether direct testimony of party witnesses might be more
expeditiously presented in writing in advance of the hearing, resolve objections
to documents and any other known evidentiary disputes, stipulate to uncontested
facts, and consider any other matters that will expedite the hearing.
At any point during the proceedings, the Presiding Panel Member, at the
request of any party or on his or her own initiative, may suggest that the
parties explore settlement and shall suggest that they do so at or before the
conclusion of the hearing, and the Panel shall give such assistance in
settlement negotiations as the parties may request and the Panel may deem
appropriate. Alternatively, the Presiding Panel Member may direct the parties to
endeavor to mediate their disputes as provided supra, or to explore a minitrial
proceeding, and the Panel shall enter such sanctions as it seems appropriate
with respect to any party failing to pursue such mediation or other alternate
dispute resolution methods in good faith.
c. Discovery
Within thirty (30) days after the last response is filed or permitted
to be filed, as aforesaid, the parties shall serve their respective requests for
production of documents. Within thirty (30) days after receipt of a request for
documents, a party shall produce all relevant and nonprivileged documents to the
requesting party. In his or her discretion, the Presiding Panel Member may
require the parties to provide lists in such detail as is deemed appropriate of
all documents as to which privilege is claimed and may further require in camera
inspection of the same.
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As a general rule, the parties will not be permitted to take deposition
testimony for discovery purposes. The Presiding Panel Member, in his or her sole
discretion, shall have the authority to permit a party to take such deposition
testimony upon a showing of exceptional good cause, provided that no deposition,
for discovery purposes or otherwise, shall exceed six (6) hours excluding
objections and colloquy of counsel. In connection with both document production
and discovery depositions, and to procure attendance or testimony for any
hearing, subpoenas and subpoenas duces tecum may be timely issued as provided by
the Federal Arbitration Act, 9 U.S.C. Section 7.
The good faith use of and response to Requests for Admissions, in
keeping with the Federal Rules of Civil Procedure, is encouraged, and the Panel
shall have full discretion in awarding appropriate sanctions with respect to
abuse of the procedure.
If a party intends to present the testimony of an expert witness during
the oral hearing, it shall provide all other parties with a written statement
setting forth the information required to be provided by Fed. R. Civ. P.
26(b)(4)(A)(i) prior to the expiration of the discovery period.
The Presiding Panel Member shall determine the date on which the
discovery period will end, but the discovery period shall not exceed ninety (90)
days from its commencement as aforesaid without the agreement of all parties.
The Presiding Panel Member is authorized to resolve all discovery
disputes which resolution will be binding on the parties unless modified by the
Panel. If a party refuses to comply with a decision resolving a discovery
dispute, the Panel, in keeping with Fed. R. Civ. P. 37, may refuse to allow that
party to support or oppose designated claims or defenses, prohibit that party
from introducing designated matters into evidence or, in extreme cases, decide
an issue submitted for resolution adversely to that party.
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d. Position Statements
Within thirty (30) days after the close of the discovery period, the
complaining party(ies) shall submit a written statement to all other parties and
the Panel setting forth the following information: (1) a statement of facts; (2)
a statement of the applicable law upon which it relies, including argument as to
any legal issue which it anticipates may arise during the course of the hearing;
(3) the evidence supporting each of its claims; (4) the evidence supporting its
entitlement to the relief sought, including the basis for any damages claimed;
(5) a list of all witnesses who will testify at the oral hearing on its behalf
and a summary of their testimony; and (6) a list of all documents it intends to
introduce as evidence.
Within twenty (20) days after receipt of the complaining party(ies)'s
position statement, the respondent(s) shall submit a written statement to all
other parties and the Panel setting forth the above information as to its
defenses and counterclaims.
Within ten (10) days after receipt of the respondent(s)'s position
statement, the complaining party(ies) shall submit a written statement to all
other parties and the Panel setting forth the above information relating to the
complaining party(ies)'s defenses to respondent(s)'s counterclaims, if any, and
the complaining party(ies)'s rebuttal.
The initial position statements of the parties should not exceed fifty
(50) pages. The final statement of the complaining party(ies) should not exceed
fifteen (15) pages. Any request to exceed the page limits must be made to the
Presiding Panel Member within ten (10) days after the close of discovery.
e. Hearing
A hearing will be held as soon as is feasible after the last position
statement by the parties has been filed. The parties may mutually agree on the
location of the hearing. If the parties fail to agree, the proceeding shall be
held in Chicago, Illinois or at such other location determined by the Presiding
Panel Member to be more convenient to the parties and the resolution of the
dispute. The Panel will determine the date(s) and time(s) of the hearing(s)
after consultation with all parties and shall provide reasonable notice thereof
to all parties or their representatives.
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f. Extensions of Time
The parties may modify any period of time relating to the mandatory
dispute resolution proceeding by mutual agreement, but must provide appropriate
notification to the Presiding Panel Member if they do so. Upon the request of a
party, the Presiding Panel Member may for good cause extend any period of time
established by these rules, except the time for making the award.
g. Expedited Procedures and Interim Relief
A party's request for an expedited procedure necessitating the
reduction of the above time periods for the filing of responses, counterclaims,
and replies thereto, the discovery period, the filing of position statements or
the setting of a hearing will be granted only with the approval of the Panel in
the event of extraordinary circumstances and, where appropriate, its resolution
by the Panel shall be guided by reference to the rules and legal principles
applicable to preliminary injunctions. In connection with such expedited
procedures, the Panel may issue such orders for interim relief as it deems
necessary pending final resolution of the dispute.
h. Stenographic Record
Any party or, if the parties do not object, the Panel may request that
a stenographic or other record be made of any hearing or portion thereof. The
costs of the recording and/or of preparing the transcript shall be borne by the
requesting party and by any party who receives a copy thereof. If the Panel
requests a recording and/or a transcript, the costs thereof shall be borne
equally by the parties.
i. Attendance at Hearings and the Confidentiality Thereof
The Panel and all parties shall maintain the privacy of the hearing.
Any person having a direct interest in the proceeding is entitled to attend the
hearing. The Presiding Panel Member shall otherwise have the power to require
the exclusion of any witness, other than a party or other essential person,
during the testimony of any other witness. It shall be discretionary with the
Presiding Panel Member to determine the propriety of the attendance of any other
person.
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The parties and the Panel shall treat the hearing and any discovery or
other proceedings or events related thereto, including any award resulting
therefrom, as confidential except as otherwise necessary in connection with a
judicial challenge to or enforcement of an award or unless otherwise required by
law.
After the award and the conclusion of any judicial proceedings with respect
thereto, each party and the Panel shall return or destroy any documents produced
by any other party, including all copies thereof. If a party receives a
discovery request in any other proceeding which would require it to produce any
documents produced to it by any other party in a proceeding hereunder, it shall
not produce such documents without first notifying the producing party and
giving said party reasonable time to respond, if appropriate, to the discovery
request.
j. Oaths
The Panel may require witnesses to testify under oath or affirmation
administered by any duly qualified person and, if requested by any party, shall
do so.
k. Communication with the Panel
There shall be no ex parte communications between the parties and any
member of the Panel.
l. Order of Proceedings
A hearing shall be opened by the recording of the date, time, and place
of the hearing, and the presence of the Panel, the parties, and their
representatives, if any; and by the receipt of the parties' position statements
by the Panel.
The Panel may, at the beginning of the hearing, ask for statements
clarifying the issues involved. In some cases, part or all of the above will
have been accomplished at the preliminary hearing conducted as aforesaid.
Unless otherwise agreed, the complaining party(ies) shall then present
evidence to support the claim(s). The responding party(ies) shall then present
evidence supporting the defenses and counterclaims, if any. The complaining
party(ies) shall then present evidence supporting defenses to the counterclaims,
if any, and rebuttal.
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Witnesses for each party shall submit to questions by adverse parties
and/or the Panel.
Exhibits, when offered by any party, may be received in evidence by the
Panel. The names and addresses of all witnesses and a description of the
exhibits in the order received shall be made a part of the record.
The Panel has the discretion to vary these procedures, but shall afford
a full and equal opportunity to all parties for the presentation of any material
and relevant evidence.
m. Evidence
The parties may offer such evidence as is relevant and material to the
dispute and shall produce such evidence as the Panel may deem necessary to an
understanding and resolution of the dispute. The Panel may receive and consider
the evidence of witnesses by affidavit or deposition, but shall give it only
such weight as the Panel deems it is entitled to after consideration of any
objection made to its admission. If a party fails to produce one of its
officers, employees or directors whose noncumulative testimony during the
hearing is reasonably requested by an adverse party, the Panel may refuse to
allow that party to support or oppose designated claims or defenses, prohibit
that party from introducing designated matters into evidence or, in extreme
cases, decide an issue submitted for mandatory dispute resolution adversely to
that party.
The Panel shall be the judge of the relevance and materiality of the
evidence offered, and conformity to legal rules of evidence, other than
enforcement of the attorney-client privilege and the work product protection,
shall not be necessary. The Federal Rules of Evidence shall be considered by the
Panel in conducting the hearing but those rules shall not be controlling. All
evidence shall be taken in the presence of the Panel and all of the parties,
except where any of the parties is in default or has waived the right to be
present.
Settlement offers by the parties in connection with mediation or
mandatory dispute resolution proceedings, decisions or recommendations of the
selected mediators, and an opposing party's position papers or statements
furnished to the selected mediators shall not be admissible evidence or
considered by the Panel without the consent of all parties.
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n. Defaults and Proceedings in the Absence of a Party
Whenever a party fails to comply with these Rules in a manner deemed
material by the Panel, the Panel shall fix a reasonable time for compliance and,
if the party does not comply within said period, the Panel may enter an award on
default or afford such other relief as it deems appropriate. Mandatory dispute
resolution may proceed in the event of a default or in the absence of any party
who, after due notice, fails to be present or fails to obtain an extension. An
award shall not be made solely on the default or absence of a party, but the
panel shall require the party who is present to submit such evidence as the
Panel may require for the making of findings, determinations, conclusions, and
awards.
o. Closing of Hearing
The Presiding Panel Member shall specifically inquire of all parties
whether they have any further proofs to offer or witnesses to be heard. Upon
receiving negative replies or if he or she is satisfied that the record is
complete, the Presiding Panel Member shall declare the hearing closed with an
appropriate notation made on the record. Subject to being reopened as provided
below, the time within which the Panel is required to make the award shall
commence to run, in the absence of contrary agreement by the parties, upon the
closing of the hearing.
With respect to complex disputes, the Panel may in its sole discretion
defer the closing of the hearing for a period of up to thirty days after the
presentation of proofs in order to permit the parties to submit post-hearing
briefs and argument, as the Panel deems appropriate, prior to the making of an
award.
p. Reopening of Hearing
For good cause, the hearing may be reopened for up to thirty days on
the Panel's initiative, or upon application of a party, at any time before the
award is made.
q. Waiver of Oral Hearing
The parties may provide, by written agreement, for the waiver of oral
hearings in any case and for the resolution of the dispute on the basis of such
materials as the parties specify.
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r. Time of Award
The award shall be made promptly by the Panel and, unless otherwise
agreed by the parties or specified by law, no later than thirty (30) days from
the date of closing the hearing or, if oral hearings have been waived, from the
date of the Panel's receipt of the materials specified by the parties.
s. Form of Award
The award shall be in writing and shall be signed by the Panel members.
If all parties so request, the award shall contain findings of fact and
conclusions of law. The award, and all other rulings and determinations by the
Panel, may be by a majority vote.
t. Award upon Settlement
If the parties settle their dispute during the course of the mandatory
dispute resolution proceeding, and so request, the Presiding Panel Member may
set forth the terms of the agreed settlement in an award. Such an award is
referred to as a consent award and shall be binding on the parties.
u. Delivery of Award to Parties and Finality
Parties shall accept as legal delivery of the award the placing of the
award or a true copy thereof in the mail addressed to a party or its
representative at its last known address or personal service of the award on a
party or its representative.
After the expiration of twenty days from initial delivery, the award
(with corrections, if any) shall be final and binding on the parties, and the
parties shall undertake to carry out the award without delay.
v. Waiver of Rules
Any party who proceeds with mandatory dispute resolution after
knowledge that any provision or requirement of these rules has not been complied
with and who fails to make a timely objection thereto in writing to the
Presiding Panel Member, shall be deemed to have waived the right to object.
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w. Serving of Notice
Each party shall be deemed to have consented that any papers, notices,
or process necessary or proper for the initiation or continuation of a
proceeding under these rules or for any court action in connection therewith may
be served on a party by mail addressed to the party or its representative at its
last known address or by personal service, in or outside the state where the
mandatory dispute resolution proceeding is to be held.
The Corporate Secretary and the parties may also use facsimile
transmission, telex, telegram, or other written forms of electronic
communication to give the notices required by these rules.
x. Expenses
The expenses of witnesses for either side shall be paid by the party
causing the appearance of such witnesses. All expenses of the mandatory dispute
resolution proceeding, including compensation, required travel and other
reasonable expenses of the Panel, and the cost of any proof produced at the
direct request of the Panel, shall be borne equally by the parties and shall be
paid periodically on a timely basis, unless they agree otherwise or unless the
Panel in the award assesses such expenses, or any part thereof against any
party(ies). In exceptional cases, the Panel may award reasonable attorneys' fees
as an item of expense, and the Panel shall promptly determine the amount of such
fees based on affidavits or such other proofs as the Panel deems sufficient.
y. Disqualification or Disability of a Panel Member
In the event that any panel member of a three member panel, after the
commencement of the hearing but prior to the rendition of an award, should
become disqualified, resign, die, or refuse or be unable to perform or discharge
his or her duties, and the parties are unable to agree upon a replacement, the
remaining panel members: (i) shall designate a replacement, subject to the right
of any party to challenge such replacement for cause, and (ii) shall decide the
extent to which previously held hearings shall be repeated. If the remaining
panel members consider the hearings to have progressed to a stage as to make
replacement impracticable, the parties may agree, as an alternative to the
recommencement of the mandatory dispute resolution process, to resolution of the
dispute by the remaining panel members.
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In the event that a single panel member, after the commencement of the
hearing but prior to the rendition of an award, should become disqualified,
resign, die, or refuse or be unable to perform or discharge his or her duties,
and the parties are unable to agree upon a replacement, the administrator shall
appoint a successor, subject to the right of any party to challenge such
successor for cause, and the successor shall decide the extent to which
previously held hearings shall be repeated.
A panel member disqualified or disabled prior to the commencement of
the hearing shall be replaced in the same manner he or she was initially
selected.
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EXHIBIT 5-A
MEDIATION COMMITTEE
REPORTS TO: Board of Directors
CHARGE: 1. Develop and implement processes for resolving
misunderstandings or disagreements between Plans or between
Plans and the Association under the following circumstances:
a. Matters at issue regarding relationships
between Plans or between Plans and the
Association.
b. Matters at issue regarding relationships
between Plans or between Plans and the
Association.
c. Matters at issue under the Inter-Plan Bank,
Reciprocity, and Transfer Programs.
d. Matters at issue regarding contractor
selection or performance under the Medicare
Part A Program.
2. Determination of equalization allowances and/or cost
allowances under FEP shall not be considered by this
Committee.
MEMBERSHIP: Six to Eight
STAFF: Senior Vice President and General Counsel
<PAGE> 1
Exhibit 99.7
CALIFORNIA BLUE CROSS LICENSE ADDENDUM
This License Agreement Addendum ("this Addendum") has been executed by the
Blue Cross and Blue Shield Association ("BCBSA") and WellPoint Health Networks
Inc. ("WellPoint") as of May 17, 1996 (the "date hereof"). Capitalized terms
not otherwise defined herein shall have the meanings given them in Article VII
of WellPoint's Articles of Incorporation.
Whereas: It is fundamental to the integrity of the Blue Cross and Blue
Shield names and marks that each Primary Licensee remain independent of any
control or influence by any particular economic interest or other special
interest which might impair its ability to: (1) exercise independent judgment as
to the programs which will best meet the needs of the communities in the state
or area for which it is responsible, and (2) function as an integral part of the
Blue Cross and Blue Shield national system of health benefits.
Whereas: Blue Cross of California has previously been authorized to provide
(through itself and its subsidiaries) health care plans and related services in
California under the "Blue Cross" name and under various related marks.
Whereas: Blue Cross of California has entered into an Amended and Restated
Recapitalization Agreement and various interrelated agreements (herein
collectively called the "Reorganization Agreements") which provide among other
things for (i) the conversion of Blue Cross of California from a nonprofit
public benefit corporation into a for-profit business stock corporation, (ii)
the merger into the corporation cited in clause (i) of its majority owned
subsidiary which prior to such merger had the name "WellPoint Health Networks
Inc." and (iii) the change of the name of the corporation cited in clause (i)
from "Blue Cross of California" to "WellPoint Health Networks Inc." The term
"WellPoint" as used in this Addendum refers to the corporation cited in clause
(i) of the preceding sentence and as applied as of times prior to the changes
contemplated by the preceding sentence shall refer to the nonprofit public
benefit corporation then named "Blue Cross of California" and as applied as of
times after such changes shall be deemed to refer to the for-profit business
stock corporation named "WellPoint Health Networks Inc." as constituted after
giving effect to such changes and to its successors. WellPoint has executed this
Addendum effective upon consummation of the conversion, merger, and name change
contemplated by the first sentence of this paragraph and other actions
contemplated by the Reorganization Agreements (which are collectively called the
"Reorganization").
Whereas: As part of the Reorganization, WellPoint has issued shares of its
common stock to Western Health Partnerships (which is a California nonprofit
public benefit corporation and is herein called the "Health Foundation"). Those
common shares carry voting power significantly in excess of the amount which
BCBSA's Primary License Agreement allows to be concentrated in the hands of any
single shareholder of a member organization.
<PAGE> 2
Whereas: Certain Basic Protections identified in Section 3.5 of this
Addendum have been put in place to mitigate the risks and disadvantages of the
concentration in voting power over WellPoint which result from the
Reorganization.
Whereas: WellPoint has requested that notwithstanding the concentration in
its ownership resulting from the Reorganization, BCBSA issue a Primary Blue
Cross License to WellPoint and a Controlled Affiliate License in favor of
CaliforniaCare Health Plans. The parties have executed this Addendum to identify
the conditions subject to which the Primary Blue Cross License has been granted
in response to these circumstances.
THE PARTIES AGREE AS FOLLOWS:
1. Waiver. BCBSA hereby agrees that the ownership of WellPoint shares by the
Health Foundation in excess of the number permitted by the Primary Blue Cross
License will not be deemed to provide grounds for termination of the Primary
Blue Cross License so long as the conditions specified in Part 2 of this
Addendum are satisfied. In order to obtain the waiver in the preceding sentence,
WellPoint agrees that its right to hold and utilize the Primary Blue Cross
License will at all times be subject to the conditions in Part 2 of this
Addendum and hereby covenants not to take or allow any action which could
provide grounds for termination of the Primary Blue Cross License.
2. Automatic Termination.
2.1 Except as otherwise expressly provided in this Part 2, WellPoint's
Primary Blue Cross License shall automatically terminate effective at the end of
the Applicable Interval following the occurrence of any of the following events:
(a) Any of the provisions in Article VII of WellPoint's Articles or any of
the other Basic Protections identified in Section 3.5 shall expire or
be amended (other than to extend its term), eliminated or otherwise
impaired or any person shall be permitted, by the ruling of any court
or otherwise, to take any action contrary to the terms of any of the
Basic Protections without the written consent of BCBSA.
(b) Any VA Shares (identified as prescribed in Section 3.8) shall not be
voted as prescribed by the terms of the Voting Agreement identified in
Section 3.5(b)(3).
(c) At any time before the fifth anniversary of the date hereof, the
Health Foundation's Board does not contain at least a majority of
directors who served as directors of Blue Cross of California prior to
the date hereof.
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<PAGE> 3
(d) The Health Foundation is not independent of all state governmental
authority over its affairs including any authority over the
composition and membership of its Board of Directors, other than
customary regulatory powers exercised by the State Attorney General
over similar situated entities and other than in accordance with
WellPoint's Undertakings to the California Department of Corporations
dated March 5, 1996 as provided to BCBSA prior to the date hereof.
(e) The Health Foundation Beneficially Owns WellPoint shares not on
deposit in the Voting Trust identified in Section 3.5(b)(4)
representing:
(1) 50% or more of the voting power at any time between the date
hereof and the third anniversary of the date hereof; or
(2) 20% or more of the voting power at any time from and including
the third anniversary of the date hereof to but not including the
fifth anniversary of the date hereof or
(3) 5% or more of the voting power at any time on or after the fifth
anniversary of the date hereof.
(f) Any person other than the Health Foundation shall Beneficially Own
WellPoint shares representing more than 5% of the voting power in
WellPoint except that no automatic termination shall result by reason
of any person's Beneficial Ownership exceeding that 5% limit if prior
to the end of the Applicable Interval arising from such Beneficial
Ownership (i) such person shall cease to Beneficially Own WellPoint
shares representing more than 5% of the voting power in WellPoint and
(ii) none of the WellPoint shares Beneficially Owned in excess of the
5% voting power limit shall be voted while they are so Beneficially
Owned.
(g) Any shares on deposit in the Voting Trust identified in Section
3.5(b)(4) shall not be voted in accordance with the terms of the
Voting Trust Agreement identified in Section 3.5(b)(4).
(h) Any shares known by WellPoint to be Excess Shares shall not be voted
in accordance with the terms in Section 9 of Article VII of
WellPoint's Articles as constituted immediately after the
Reorganization.
(i) Less than a majority of the positions on the WellPoint Board shall be
held by Independent Directors.
(j) WellPoint shall fail to comply with the requirements of Part 4 of this
Addendum.
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<PAGE> 4
2.2 Applicable Interval.
(a) The "Applicable Interval" with respect to any event specified in
clause (d) or (j) of Section 2.1 shall begin upon the occurrence of
that event and shall end on the 40th day after WellPoint shall first
learn of such event.
(b) The "Applicable Interval" with respect to any event specified in
clause (f) of Section 2.1 shall begin upon the occurrence of that
event and shall end on the 90th day after WellPoint shall first learn
of such event.
(c) The "Applicable Interval" with respect to any event specified in any
other clause of Section 2.1 shall begin upon the occurrence of that
event and shall end on the 10th day after WellPoint shall first learn
of such event.
2.3 Waiver. WellPoint shall have the right to request any time prior to
the expiration of the Applicable Interval that any termination which would
otherwise be caused by the occurrence of any event listed in Section 2.1 be
waived. Once such request has been made by WellPoint to BCBSA, the Primary Blue
Cross License and by any Controlled Affiliate License shall be deemed to remain
in full force and effect until a determination has been made by BCBSA. Such
determination shall be made by BCBSA's disinterested member plans and any
requested waiver shall be deemed to have been denied unless it shall be approved
at the meeting called to consider such waiver by the affirmative vote of a
majority of the disinterested BCBSA member plans and a majority of the then
current weighted vote of the disinterested BCBSA member plans. Any such waiver
may be conditioned upon such additional requirements (including but not limited
to requirements imposing new independent grounds for termination of the Primary
Blue Cross License) as shall be approved by WellPoint and by such vote by the
disinterested BCBSA member plans.
2.4 Notice. WellPoint shall notify BCBSA in writing immediately after
WellPoint learns of (i) the occurrence of any event specified in Section 2.1 or
(ii) any development or state of facts which it is reasonably possible will lead
to the occurrence of any event specified in Section 2.1.
2.5 Delaware Reincorporation. If, as and when there shall be any
reincorporation of WellPoint in Delaware in the sole discretion of WellPoint and
after any appropriate WellPoint shareholders action, any such reincorporation
shall not cause an automatic termination of the Primary Blue Cross License
provided that: (i) BCBSA shall conclude that the terms in the Certificate of
Incorporation and Bylaws of WellPoint's Delaware successor and in any agreement
which shall succeed to the Voting Trust Agreement and the Voting Agreement are
identical in all material respects to the original terms in the Basic
Protections; (ii) the Health Foundation shall affirm in a manner reasonably
satisfactory to BCBSA that any such reincorporation will not impair its
obligations with respect to any of the Basic Protections; and (iii) WellPoint
shall certify to BCBSA that
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<PAGE> 5
WellPoint has no reason to believe that such reincorporation will weaken or
impair the enforceability of any of the Basic Protections and shall supply BCBSA
with such substantiation for such conclusion as BCBSA shall reasonably require.
2.6 No Implied Exemption for Other Changes. The references in the
definitions of "WellPoint's Articles", "WellPoint's Bylaws", "Voting Agreement"
and "Voting Trust Agreement" to possible future amendments thereto or to
instruments which may supersede such original instruments in the future shall
not be deemed to exempt any amendment or replacement of any such instrument from
the operation of Section 2.1 and any such replacement shall be deemed to cause
an automatic termination at the end of the Applicable Interval if it changes or
impacts any of the terms of the Basic Protections in a manner which causes such
termination under the terms in Section 2.1.
3. Definitions. The following terms shall have the following meanings as used
herein:
3.1 Primary Blue Cross License. The term "Primary Blue Cross License"
means the license to use the Blue Cross name and all other rights granted under
or by reason of the Blue Cross License Agreement dated the date hereof between
BCBSA and WellPoint and under any amendments or supplements to, or restatements
or replacements of, that Agreement. The Primary Blue Cross License shall at all
times be subject to this Addendum and in the event of any conflict between the
Primary Blue Cross License and this Addendum, this Addendum shall control. In
the event the Primary Blue Cross License shall terminate, such termination shall
have the effect of terminating the right of any WellPoint subsidiary to use the
Blue Cross name and all other names or rights licensed from BCBSA.
3.2 Voting Power. The WellPoint shares Beneficially Owned by any
particular person shall be deemed to represent a percentage of the voting power
equal to the percentage of all votes which could be cast in any election of any
WellPoint director which could be accounted for by the shares Beneficially Owned
by that particular person. If in connection with an election for any particular
position on the WellPoint Board, shares in different classes or series are
entitled to be voted together for purposes of such election, then in determining
the number of "all votes which could be cast" in the election for that
particular position for purposes of the preceding sentence, the number shall be
equal to the number of votes which would be cast in the election for that
particular position if all shares entitled to be voted in such election
(regardless of series or class) were in fact voted in such election. If
WellPoint shall issue any series or class of shares for which positions on the
Board are reserved or shall otherwise issue shares which have voting rights
which can arise or vary based upon terms governing that class or series, then
the percentage of the voting power represented by the WellPoint shares
Beneficially Owned by any particular person shall be the highest percentage of
the total votes which could be accounted for by those shares in any election of
any director.
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<PAGE> 6
3.3 WellPoint Share. The term "WellPoint share" designates and includes a
share of common stock and a share (or other basic unit) of any class or series
of any other voting security which WellPoint may at any time issue or be
authorized to issue.
3.4 Beneficial Ownership:
(a) Except as otherwise provided in Section 3.4(b), any particular person
shall be deemed to Beneficially Own and to be the Beneficial Owner of:
(1) Any WellPoint share in which such person shall then have a direct
or indirect beneficial ownership interest;
(2) Any WellPoint share in which such person shall have the right to
acquire any direct or indirect beneficial ownership interest
pursuant to any option or other agreement (either immediately or
after the passage of time or the occurrence of any contingency);
(3) Any WellPoint share which such person shall have the right to
vote;
(4) Any WellPoint share (i) which constitutes an "Excess Share" under
Article VII of WellPoint's Charter or any successor to such
provision and (ii) of which such person is the "Purported Owner"
under such Article VII (or has an equivalent position under any
such successor provision);
(5) Any WellPoint share in which such person shall hold any other
interest which would count in determining whether such person
would be required to file a Schedule 13D; and
(6) Any WellPoint share which shall be Beneficially Owned (under the
concepts provided in the preceding clauses) by any affiliate or
associate of the particular person or by any other person with
whom the particular person or any such affiliate or associate has
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities
or other than that certain Registration Rights Agreement between
WellPoint and the Health Foundation entered into on or prior to
the consummation of the Reorganization) relating to the
acquisition, holding, voting or disposing of any WellPoint
shares. For purposes of this Addendum, the terms "affiliate" and
"associate" have the same meanings they have under Rule 12b-2
under the Exchange Act as such Rule is constituted and
interpreted on the date hereof.
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<PAGE> 7
(b) Exceptions:
(1) A person shall not be deemed to "Beneficially Own" or have
"Beneficial Ownership" of any particular WellPoint shares by
reason of possessing the right to vote if (i) such right arises
solely from a revocable proxy or consent given to such person in
response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act, and (ii) such person is not
the Purported Owner of any Excess Shares (as those terms are used
in Article VII of WellPoint's Articles), is not named as holding
a beneficial ownership interest in any WellPoint shares in any
filing on Schedule 13D, and is not an affiliate or associate of
any such Purported Owner or named person.
(2) A member of a national securities exchange or a registered
depository shall not be deemed to "Beneficially Own" or have
"Beneficial Ownership" of any particular WellPoint shares held
directly or indirectly by it on behalf of another person (and not
for its own account) solely because such member or depository is
the record holder of such WellPoint shares, and (in the case of
such member) pursuant to the rules of such exchange, such member
may direct the vote of those WellPoint shares without instruction
on matters which are uncontested and do not affect substantially
the rights or the privileges of the holders of the shares to be
voted, but is precluded by the rules of such exchange from voting
those particular WellPoint shares without instruction on either
contested matters or matters that may affect substantially the
rights or the privileges of the holders of the WellPoint shares
to be voted.
(3) A person who in the ordinary course of business is a pledgee of
WellPoint shares under a written pledge agreement shall not be
deemed to "Beneficially Own" or have "Beneficial Ownership" of
those pledged WellPoint shares solely by reason of such pledge
until the pledgee has taken all formal steps which are necessary
to declare a default or has otherwise acquired the power to vote
or to direct the vote of such pledged WellPoint shares, provided
that:
(A) The pledge agreement is bona fide and was not entered into
with the purpose nor with the effect of changing or
influencing the control of WellPoint, nor in connection with
any transaction having such purpose or effect, including any
transaction subject to Rule 13d-3(b) promulgated under the
Exchange Act as constituted on the date hereof; and
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<PAGE> 8
(B) The pledge agreement does not grant to the pledgee the right
to vote or to direct the vote of such pledged WellPoint
shares prior to the time the pledgee has taken all formal
steps which are necessary to declare a default.
(4) A person engaged in business as an underwriter or a placement
agent for securities who enters into an agreement to acquire or
acquires any particular WellPoint shares solely by reason of its
participation in good faith and in the ordinary course of its
business in the capacity of underwriter or placement agent in any
underwriting or agent representation registered under the
Securities Act of 1933, as amended and as constituted on the date
hereof (the "Securities Act"), a bona fide private placement, a
resale under Rule 144A promulgated under the Securities Act or in
any foreign or other offering exempt from the registration
requirements under the Securities Act shall not be deemed to
"Beneficially Own" or have "Beneficial Ownership" of those
particular WellPoint shares until the expiration of forty (40)
days after the date of such acquisition so long as (i) such
person does not vote such WellPoint shares during such period and
(ii) such participation is not with the purpose or with the
effect of changing or influencing control of WellPoint, nor in
connection with or facilitating any transaction having such
purpose or effect, including any transaction subject to Rule
13d-3(b) promulgated under the Exchange Act as such Rule is
constituted on the date hereof.
(5) If WellPoint shall sell shares in a transaction not involving any
public offering, then each purchaser in such offering shall be
deemed to obtain Beneficial Ownership in such offering of the
shares purchased by such purchaser but no particular purchaser
shall be deemed to have acquired Beneficial Ownership in such
offering of shares purchased by any other purchaser solely by
reason of the fact that all such purchasers are parties to
customary agreements relating to the purchase of equity
securities directly from WellPoint in a transaction not involving
a public offering, provided that:
(A) All the purchasers are persons specified in Rule
13d-1(b)(1)(ii) promulgated under the Exchange Act as such
Rule is constituted on the date hereof;
(B) The purchase is in the ordinary course of each purchaser's
business and not with the purpose nor with the effect of
changing or influencing control of WellPoint, nor in
connection with or as a participant in any transaction
having such purpose or effect, including
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any transaction subject to Rule 13d-3(b) promulgated under
the Exchange Act as such Rule is constituted on the date
hereof;
(C) There is no agreement among or between any purchasers to act
together with respect to WellPoint or any WellPoint shares
except for the purpose of facilitating the specific purchase
involved; and
(D) The only actions among or between any purchasers with
respect to WellPoint or its securities subsequent to the
closing date of the nonpublic offering are those which are
necessary to conclude ministerial matters directly related
to the completion of the offer or sale of the WellPoint
shares sold in such offering.
3.5 Basic Protections:
(a) The term "Basic Protections" designates and includes the following
provisions in WellPoint's Articles: Section 1 of Article IV; all
provisions in Article VII and Article IX; and the provision in Article
XI which requires the affirmative vote of at least 75% of each class
of WellPoint shares, represented and voting at a duly held meeting at
which a quorum is present, voting by class to amend any of the
provisions cited in this Sentence or to amend Sections 2, 6, 7 or 9 in
Article IV of WellPoint's Articles. (The term "WellPoint's Articles"
as used in this Addendum means WellPoint's Amended and Restated
Articles of Incorporation as in effect from time to time after the
Reorganization. In the event WellPoint's Articles shall be replaced by
another governing instrument as a result of a reincorporation of
WellPoint in Delaware, a merger, a reorganization or other similar
event, if any, then the term "WellPoint's Articles" shall thereafter
refer to such other governing instrument and the citations and terms
used in this agreement shall be deemed adjusted to refer to the
appropriate provisions in such subsequent instrument.)
(b) Until the Diversity Goal (identified in Section 3.6) is achieved, the
term "Basic Protections" also means:
(1) Sections 2, 6, 7, and 9 in Article IV in WellPoint's Articles.
(2) The following provisions in WellPoint's Bylaws: Sections 2 and 3
of Article III; and Section 2 of Article IV. (The term
"WellPoint's Bylaws" as used in this Addendum means WellPoint's
Bylaws as in effect from time to time after the Reorganization.
In the event WellPoint's Bylaws shall be replaced by another
governing instrument as a result of a reincorporation of
WellPoint in Delaware, a merger, a reorganization or other
similar event, if any, then the
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<PAGE> 10
term "WellPoint's Bylaws" shall thereafter refer to such other
governing instrument and the citations and terms used in this
agreement shall be deemed adjusted to refer to the appropriate
provisions in such subsequent instrument.)
(3) The Voting Agreement. (The term "Voting Agreement" whenever it is
used in this Addendum means the Voting Agreement dated the date
hereof between WellPoint and the Health Foundation as in effect
from time to time after the Reorganization. In the event the
Voting Agreement shall be replaced by another agreement as a
result of a reincorporation of WellPoint in Delaware, a merger, a
reorganization or other similar event, if any, then the term
"Voting Agreement" shall thereafter refer to that replacement
agreement and the citations and terms used in this agreement
shall be deemed adjusted to refer to the appropriate provisions
in that replacement agreement.)
(4) The Voting Trust Agreement. (The term "Voting Trust Agreement"
whenever it is used in this Addendum means the Voting Trust
Agreement dated the date hereof between WellPoint, the Health
Foundation and Wilmington Trust Company as in effect from time to
time after the Reorganization. In the event the Voting Trust
Agreement shall be replaced by another agreement as a result of a
reincorporation of WellPoint in Delaware, a merger, a
reorganization or other similar event, if any, then the term
"Voting Trust Agreement" shall thereafter refer to that
replacement agreement and the citations and terms used in this
agreement shall be deemed adjusted to refer to the appropriate
provisions in that replacement agreement. The term "Voting Trust"
whenever it is used in this Addendum means the voting trust
governed by the Voting Trust Agreement.)
(5) Section 12 of the Registration Rights Agreement between WellPoint
and the Health Foundation.
3.6 Diversity Goal. The Health Foundation's Diversity Goal shall be deemed
to be achieved when the Foundation shall Beneficially Own WellPoint shares
representing less than 5% of the voting power.
3.7 Independent Director. Any particular individual shall be deemed to be
a "Independent Director" if (but not unless) such individual
(a) either was a director of WellPoint immediately after the
Reorganization or was elected to the Board after the Reorganization
with the approval of two thirds of the directors then in office who
then constituted Independent Directors
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and
(b) does not Beneficially Own WellPoint shares which represent more than
5% of the voting power,
and
(c) was not nominated by a person who Beneficially Owns WellPoint shares
representing more than 5% of the voting power and, prior to such
individual's election, did not have any agreement, arrangement or
understanding with any such Beneficial Owner with respect to any
action to be taken by such individual as a director.
3.8 VA Shares. All WellPoint Shares which shall be Beneficially Owned by
the Health Foundation at any particular time shall be deemed to be "VA Shares"
except that (i) WellPoint Shares which are held in the voting trust created by
the Voting Trust Agreement and are voted as required by the terms of the Voting
Trust Agreement shall not be deemed VA Shares so long as they are so held and
voted and (ii) the Health Foundation shall be entitled to Beneficially Own at
any particular time WellPoint shares representing up to 5% of the voting power
free of (and without being subject in any way to) the voting requirements in
either the Voting Trust Agreement or the Voting Agreement and none of the
WellPoint shares Beneficially Owned by the Health Foundation at or below this 5%
limit shall be deemed VA Shares. Without limiting by implication the generality
of the preceding sentence, so long as the only Capital Stock outstanding is
Common Stock, any share of Common Stock which shall be Beneficially Owned by the
Health Foundation at any particular time in excess of 5% of the number of Shares
of Common Stock then outstanding shall be deemed a VA Share unless at that
particular time it is on deposit in the voting trust created by the Voting Trust
Agreement and is required to be voted in accordance with the terms of the Voting
Trust Agreement.
3.9 Exchange Act. The term "Exchange Act" means the Securities Exchange
Act of 1934 as amended or supplemented at the time as of which the term shall be
applied and any other federal law which BCBSA shall reasonably judge to have
replaced or supplemented the coverage of the Securities Exchange Act of 1934 as
in effect on the date hereof.
3.10 Schedule 13D. The term "Schedule 13D" means a report on Schedule 13D
under Regulation 13D under the Exchange Act as constituted on the date hereof
and any report which may be required in the future under any requirement which
BCBSA shall reasonably judge to have any of the purposes served by Schedule 13D
on the date hereof.
4. Commitment to Use Blue Cross Marks.
4.1 WellPoint covenants that all Relevant Businesses conducted in the
State of California by WellPoint or any of its affiliates will be conducted
after the date hereof under the name "Blue
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Cross of California" and will be conducted utilizing the Blue Cross name and
marks in identifying such business. The term "Relevant Businesses" means all
health care benefits businesses which were conducted on February 13, 1996 by
Blue Cross of California or its CaliforniaCare subsidiary ("CaliforniaCare") and
the businesses in California which may develop or evolve in the future from
those businesses. The term "Relevant Businesses" shall not include (except as
provided in Section 4.2) the business acquired by WellPoint from Massachusetts
Mutual Life Insurance Company on March 31, 1996 (the "MassMutual Businesses")
and shall not include the workers' compensation business conducted by
WellPoint's subsidiary UniCARE Insurance Company.
4.2 The MassMutual Business comprised of accounts with California
headquarters ("California Accounts") shall be transitioned to being offered by
WellPoint, CaliforniaCare or WellPoint Life Insurance Company within five years
after the date hereof and after such transition shall use the Blue Cross name
and marks to the extent required by this Part 4 for businesses operated by those
companies. No new California Accounts shall become part of the MassMutual
Business after the date hereof but rather all new accounts with California
headquarters arising after the date hereof shall be offered by WellPoint,
CaliforniaCare, or WellPoint Life Insurance Company and shall use the Blue Cross
name and marks to the extent required by this Part 4 for businesses operated by
those companies.
4.3 Within six (6) months of the date hereof and continuously thereafter,
WellPoint Life Insurance Company shall change its name to BC Life and Health
Insurance Company or another similar name acceptable to the California
Department of Insurance, shall apply to the BCBSA for a controlled affiliate
license, shall meet all qualifications for such controlled affiliate license and
shall utilize the Blue Cross of California name and Blue Cross marks in
marketing materials, shall identify its products in marketing materials as being
brought to its subscribers by "Blue Cross of California" and shall identify
itself in marketing materials as an affiliate of the Blue Cross of California.
4.4 Transfers of businesses from WellPoint or CaliforniaCare to WellPoint
Life Insurance Company after that company becomes a controlled affiliate
licensee of BCBSA (the "Transferred Businesses") shall not violate this Part 4
if, during the five years following the date hereof, the Transferred Businesses
do not comprise in excess of 50% of the Relevant Businesses, based on relative
annual premium revenues, and such Transferred Businesses are marketed under the
Blue Cross of California name and Blue Cross marks as required by Section 4.3.
4.5 The covenants in this Part 4 are in addition to and distinct from
WellPoint's obligations under the Primary Blue Cross License. For purposes of
this Part 4 only, the term "affiliate" does not include the Health Foundation.
5. No Other Waiver. Nothing herein shall constitute a waiver of BCBSA's rights
to terminate the Primary Blue Cross License for any reason allowed under the
Primary Blue Cross License other than the reason expressly waived in Part 1 of
this Addendum. All agreements, understandings or
12
<PAGE> 13
other circumstances which were made or arose prior to the date hereof granting
WellPoint or any of its subsidiaries or predecessors licenses or rights in the
Blue Cross name or other rights licensed by BCBSA are hereby terminated
effective as of the date hereof, and neither WellPoint nor any of its affiliates
shall have any rights under or by reason of such earlier agreements,
understandings or other circumstances. The rights of WellPoint and its
subsidiaries to use the Blue Cross name and other rights licensed by BCBSA shall
instead by derived from the date hereof exclusively from the Primary Blue Cross
License and related agreements granted on or after the date hereof.
6. Miscellaneous
6.1 WellPoint shall not assign its rights or obligations under this
Addendum to any other person without the prior written consent of BCBSA. BCBSA
shall have the right to assign its rights under this Addendum to any corporation
or other entity which shall assume any of its responsibility for the Blue Cross
name or other rights licensed under the Primary License Agreement. This Addendum
and the provisions hereof shall be binding upon each of the parties, and their
successors and assigns, and shall inure to the benefit of each party's
successors and permitted assignees.
6.2 Any term or provision of this Addendum may be amended, and the
observance of any term of this Addendum may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party to be bound thereby. Without limiting by implication the
generality of the preceding sentence, every time any event listed in Section 2.1
shall occur, it shall constitute a separate and self-sufficient cause for
automatic termination of the Primary Blue Cross License regardless of whether
any prior occurrence of such event or any other event shall have been waived
absolutely or conditionally. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
6.3 Each of the parties acknowledges that the other party will be
irreparably harmed and that there will be no adequate remedy at law for a
violation of any of the covenants of the other party set forth herein.
Therefore, it is agreed that, in addition to any other remedies that may be
available to either party to this Addendum in connection with any such violation
or prospective violation, such party shall have the right to enforce such
covenant by specific performance, by injunctive relief or by any other means
available to such party at law or in equity.
6.4 WellPoint warrants to BCBSA that: (i) WellPoint has provided BCBSA with
complete and accurate copies of WellPoint's Articles, WellPoint's Bylaws, the
Voting Agreement, the Voting Trust Agreement and the Registration Rights
Agreement as constituted immediately after the Reorganization; (ii) the Health
Foundation has executed the Voting Agreement, the Voting Trust Agreement, and
the Registration Rights Agreement; and (iii) the Health Foundation has deposited
a sufficient number of WellPoint shares into the voting trust created by the
Voting Trust Agreement so that the number of WellPoint shares Beneficially Owned
by the Heath Foundation outside such
13
<PAGE> 14
Voting Trust do not represent more than 50% of all WellPoint shares outstanding
immediately after the Reorganization; and (iv) no person other than the Health
Foundation Beneficially Owns WellPoint shares representing more than 5% of the
voting power.
6.5 The internal laws of the State of Illinois (irrespective of its choice
of law principles) shall govern all issues concerning the validity of this
Addendum, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties.
14
<PAGE> 15
Each of the parties has executed this Addendum to evidence its
agreement to be bound by all of its terms.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
BY: /s/
-------------------------------------
NAME:
TITLE: President and CEO
WELLPOINT HEALTH NETWORKS INC.
BY: /s/ Leonard D. Schaeffer
--------------------------------------
NAME: Leonard D. Schaeffer
TITLE: Chairman and CEO
15
<PAGE> 1
Exhibit 99.8
BLUE CROSS
AFFILIATE LICENSE AGREEMENT
This Agreement by and among Blue Cross and Blue Shield Association
("BCBSA") and CaliforniaCare Health Plans ("Affiliate"), an affiliate of the
Blue Cross Plan(s), known as WellPoint Health Networks Inc. ("Plan"), which is
also a Party signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design
service marks;
WHEREAS, Plan and Affiliate desire that the latter be entitled to use
the BLUE CROSS and BLUE CROSS Design service marks (collectively the "Licensed
Marks") as service marks and be entitled to use the term BLUE CROSS in a trade
name ("Licensed Name");
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby
grants to Affiliate the right to use the Licensed Marks and Name in connection
with, and only in connection with: (i) health care plans and related services
and administering the non-health portion of workers' compensation insurance, and
(ii) underwriting the indemnity portion of workers' compensation insurance,
provided that Affiliate's total premium revenue comprises less than 15 percent
of the sponsoring Plan's net subscription revenue.
This grant of rights is non-exclusive and is limited to the Service Area served
by the Plan. Affiliate may not use the Licensed Marks and Name in its legal name
and may use the Licensed Marks and Name in its Trade Name only with the prior
consent of BCBSA.
2. QUALITY CONTROL
A. Affiliate agrees to use the Licensed Marks and Name only in
connection with the licensed services and further agrees to be bound by the
conditions regarding quality control shown in attached Exhibit A as they may be
amended by BCBSA from time-to-time.
1
<PAGE> 2
B. Affiliate agrees to comply with all applicable federal, state and
local laws.
C. Affiliate agrees that it will provide on an annual basis (or more
often if reasonably required by Plan or by BCBSA) a report or reports to Plan
and BCBSA demonstrating Affiliate's compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this
paragraph and the attached Exhibit A.
D. Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon
reasonable notice, review and inspect the manner and method of Affiliate's
rendering of service and use of the Licensed Marks and Name.
E. As used herein, an Affiliate is defined as an entity organized and
operated in such a manner, that it meets the following requirements:
(1) If the Plan has 50 percent of the voting control of the Affiliate:
(a) the Plan must have the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
(b) the Plan must have at least equal control over the operations of
the Affiliate;
(c) the Plan must concur in writing before the Affiliate can:
(i) change its legal and/or trade names;
(ii) change the geographic area in which it operates;
(iii) change the fundamental type(s) of business in which
it engages;
(iv) take any action that Plan or BCBSA reasonably
believes will adversely affect the Licensed Marks and
Name.
(2) If the Plan has more than 50 percent voting control of the
Affiliate:
(a) the Plan must have the legal ability to prevent any change in the
articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
2
<PAGE> 3
(b) the Plan must have control over the policy and operations of the
Affiliate.
3. SERVICE MARK USE
A. Affiliate shall at all times make proper service mark use of the
Licensed Marks and Name, including but not limited to use of such symbols or
words as BCBSA shall specify to protect the Licensed Marks and Name and shall
comply with such rules (generally applicable to Affiliates licensed to use the
Licensed Marks and Name) relative to service mark use, as are issued from
time-to-time by BCBSA. Affiliate recognizes and agrees that all use of the
Licensed Marks and Name by Affiliate shall inure to the benefit of BCBSA.
B. Affiliate may not directly or indirectly use the Licensed Marks and
Name in a manner that transfers or is intended to transfer in the Service Area
the goodwill associated therewith to another mark or name, nor may Affiliate
engage in activity that may dilute or tarnish the unique value of the Licensed
Marks and Name.
C. If Affiliate meets the standards of 2E(1) but not 2E(2) above and
any of Affiliate's advertising or promotional material is reasonably determined
by BCBSA and/or the Plan to be in contravention of rules and regulations
governing the use of the Licensed Marks and Name, Affiliate shall for ninety
(90) days thereafter obtain prior approval from BCBSA of advertising and
promotional efforts using the Licensed Marks and Name, approval or disapproval
thereof to be forthcoming within five (5) business days of receipt of same by
BCBSA or its designee. In all advertising and promotional efforts, Affiliate
shall observe the Service Area limitations applicable to Plan.
D. Affiliate shall use its best efforts in the Service Area to promote
and build the value of the Licensed Marks and Name.
4. SUBLICENSING AND ASSIGNMENT
Affiliate shall not sublicense, transfer, hypothecate, sell, encumber
or mortgage, by operation of law or otherwise, the rights granted hereunder and
any such act shall be voidable at the sole option of Plan or BCBSA. This
Agreement and all rights and duties hereunder are personal to Affiliate.
5. INFRINGEMENT
Affiliate shall promptly notify Plan and Plan shall promptly notify
BCBSA of any suspected acts of infringement, unfair competition or passing off
that may occur in relation to the Licensed Marks and Name. Affiliate shall not
be entitled
3
<PAGE> 4
to require Plan or BCBSA to take any actions or institute any proceedings to
prevent infringement, unfair competition or passing off by third parties.
Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable
assistance in connection with any matter pertaining to the protection of the
Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Affiliate and Plan hereby agree to save, defend, indemnify and hold
BCBSA harmless from and against all claims, damages, liabilities and costs of
every kind, nature and description (except those arising solely as a result of
BCBSA's negligence) that may arise as a result of or related to Affiliate's
rendering of services under the Licensed Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this
Agreement shall remain in effect for a period of one (1) year and shall be
automatically extended for additional one (1) year periods upon evidence
satisfactory to the Plan and BCBSA that Affiliate meets the then applicable
quality control standards.
B. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that Plan ceases to be authorized to use the Licensed Marks and Name.
C. Notwithstanding any other provision of this Agreement, this license
to use the Licensed Marks and Name may be forthwith terminated by the Plan or
the affirmative vote of the majority of the Board of Directors of BCBSA present
and voting at a special meeting expressly called by BCBSA for the purpose on ten
(10) days written notice for: (1) failure to comply with any applicable minimum
capital or liquidity requirement under the quality control standards of this
Agreement; or (2) failure to comply with the "Organization and Governance"
quality control standard of this Agreement; or (3) impending financial
insolvency; or (4) for a Smaller Affiliate (as defined in Exhibit A), failure to
comply with any of the applicable requirements of Standards 2, 3, 4, 5 or 7 of
attached Exhibit A; or (5) such other reason as is determined in good faith
immediately and irreparably to threaten the integrity and reputation of BCBSA,
the Plans, any other licensee including Affiliate and/or the Licensed Marks and
Name.
4
<PAGE> 5
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E)
herein, should Affiliate fail to comply with the provisions of this Agreement
and not cure such failure within thirty (30) days of receiving written notice
thereof (or commence a cure within such thirty day period and continue diligent
efforts to complete the cure if such curing cannot reasonably be completed
within such thirty day period) BCBSA or the Plan shall have the right to issue a
notice that the Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Affiliate or is found to exist
by a mandatory dispute resolution panel and is uncured as provided above, BCBSA
shall have the right to seek judicial enforcement of the Agreement or to issue a
notice of termination thereof. Notwithstanding any other provisions of this
Agreement, any disputes as to the termination of this License pursuant to
Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between BCBSA,
the Plan and/or Affiliate shall be submitted promptly to mediation and mandatory
dispute resolution. The mandatory dispute resolution panel shall have authority
to issue orders for specific performance and assess monetary penalties. Except,
however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license
to use the Licensed Marks and Name may not be finally terminated for any reason
without the affirmative vote of a majority of the present and voting members of
the Board of Directors of BCBSA.
E. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that:
(1) Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Affiliate
pursuant to paragraph 9 hereof, which are the royalties for this License
Agreement, are more than sixty (60) days in arrears to BCBSA; or
(3) Any of the following events occur: (i) a voluntary petition shall
be filed by Affiliate seeking bankruptcy, reorganization, arrangement with
creditors or other relief under the bankruptcy laws of the United States or any
other law governing insolvency or debtor relief, or (ii) an involuntary petition
or proceeding shall be filed against Affiliate seeking bankruptcy,
reorganization, arrangement with creditors or other relief under the bankruptcy
laws of the United States of any other law governing insolvency or debtor relief
and such petition or proceeding is consented to or acquiesced in by Affiliate or
is not dismissed within sixty (60) days of the date upon which it was filed, or
(iii) an order for relief is entered against Affiliate in any case under the
bankruptcy laws of the United States, or Affiliate is adjudged bankrupt or
insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of Illinois
5
<PAGE> 6
by any court of competent jurisdiction, or (iv) Affiliate makes a general
assignment of its assets for the benefit of creditors, or (v) the Department of
Insurance or other regulatory agency assumes control of Affiliate or delinquency
proceedings (voluntary or involuntary) are instituted, or (vi) an action is
brought by Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business, or (vii) an action is instituted
against Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business and such action is consented to or
acquiesced in by Affiliate or is not dismissed within sixty (60) days of the
date upon which it was instituted, or (viii) a trustee, interim trustee,
receiver or other custodian for any of Affiliate's property or business is
appointed.
F. Upon termination of this Agreement for cause or otherwise, Affiliate
agrees that it shall immediately discontinue all use of the Licensed Marks and
Name, including any use in its trade name.
G. Upon termination of this Agreement, Affiliate shall immediately
notify all of its customers that it is no longer a licensee of BCBSA and, if
directed by the Association's Board of Directors, shall provide instruction on
how the customer can contact BCBSA or a designated licensee to obtain further
information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the
right to audit the terminated entity's books and records to verify compliance
with this paragraph.
H. In the event that the Plan has more than 50 percent voting control
of the Affiliate under Paragraph 2(E)(2) above and is a Larger Affiliate (as
defined in Exhibit A), then the vote called for in Paragraphs 7(C) and 7(D)
above shall require the affirmative vote of three-fourths of the Blue Cross
Plans which are Regular Members of BCBSA and three-fourths of the total then
current weighted vote of all the Blue Cross Plans which are Regular Member Plans
of BCBSA.
8. DISPUTE RESOLUTION
The parties agree that any disputes between them or between or among
either of them and one or more Plans or Affiliates of Plans that use in any
manner the Blue Cross and Blue Shield Marks and Name are subject to the
Mediation and Mandatory Dispute Resolution process attached to and made a part
of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibits 5,
5A and 5B as amended from time-to-time, which documents are incorporated herein
by reference as though fully set forth herein.
6
<PAGE> 7
9. LICENSE FEE
Affiliate will pay to BCBSA a fee for this License determined pursuant
to the formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in the Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Affiliate or between either and BCBSA.
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties in
relation to the subject matter hereof. This Agreement may only be amended by a
writing executed by all parties hereto or by the vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the
Plans.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such findings shall in no way affect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the part
of Affiliate or any other licensee of any of the terms, covenants or conditions
of this Agreement shall constitute a waiver of any subsequent breach or default
in performance of said terms, covenants or conditions.
7
<PAGE> 8
THIS PAGE IS INTENTIONALLY BLANK.
8
<PAGE> 9
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and
shall have no bearing on the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this License Agreement to
be executed and effective as of the date of last signature written below.
AFFILIATE CALIFORNIACARE HEALTH PLANS
By: /s/ Leonard D. Schaeffer
------------------------------------
Date: 5/15/96
----------------------------------
PLAN WELLPOINT HEALTH NETWORKS INC.
By: /s/ Leonard D. Schaeffer
------------------------------------
Date: 5/15/96
----------------------------------
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By: /s/
------------------------------------
Date: 5/17/96
----------------------------------
9
<PAGE> 10
EXHIBIT A
AFFILIATE LICENSE STANDARDS
November 1995
The standards for licensing affiliates are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote. Each licensed Plan
is required to use a standard affiliate license form provided by BCBSA and to
cooperate fully in assuring that the licensed affiliate maintains compliance
with the license standards.
The Affiliate License provides a flexible vehicle to accommodate the potential
range of health and workers' compensation related products and services Plan
affiliates provide. The Affiliate License collapses former health affiliate
licenses (HCC, HMO, PPO, TPA, and IDS) into a single license using the following
business-based criteria to provide a framework for license standards:
- - Percent of affiliate controlled by parent: Greater than 50 percent or
50 percent?
- - Risk assumption: yes or no?
- - Medical care delivery: yes or no?
- - Importance of the affiliate to the parent: If the affiliate has health
or workers' compensation administration business, does such business
constitute 15 percent or more (referred to as a "larger" affiliate) of
the parent's and other licensed health subsidiaries' contract
enrollment?
<PAGE> 11
EXHIBIT A (CONTINUED)
For purposes of definition:
- - A "smaller affiliate:" (1) comprises less than fifteen percent (15%) of
Plan's and its licensed affiliates' total contract enrollment (as
reported on the BCBSA Quarterly Enrollment Report, excluding rider and
freestanding coverage, and treating an entity seeking licensure as
licensed);* or (2) underwrites the indemnity portion of workers'
compensation insurance and has total premium revenue less than 15
percent of the sponsoring Plan's net subscription revenue.
- - A "larger affiliate" comprises fifteen percent (15%) or more of Plan's
and its licensed affiliates' total contract enrollment (as reported on
the BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed.)*
Conversion to the new license shall be:
- - For smaller affiliates:
- immediately for new applicants, and
- January 1, 1996 for existing HMO, PPO, TPA and IDS licensees under
fifteen percent (15%).
- - For larger affiliates:
- immediately for new applicants,
- July 1, 1995 for existing health coverage carrier licensees, and
- June 1996, for all other currently licensed affiliates presently at or
over fifteen percent(15%).
Changes in affiliate status:
If ANY affiliate's status changes regarding: its Plan ownership level, its risk
acceptance or direct delivery of medical care, the affiliate shall notify BCBSA
within thirty (30) days of such occurrence in writing and come into compliance
with the applicable standards within six (6) months.
If a smaller affiliate's health and workers' compensation administration
business surpasses fifteen percent (15%) of the total contract enrollment of the
Plan and licensed affiliates, the affiliate shall:
<PAGE> 12
EXHIBIT A (CONTINUED)
1. Within thirty (30) days, notify BCBSA of this fact in writing, including
evidence that the affiliate meets the minimum liquidity and capital (BCBSA
Capital Benchmark and state-established minimum reserve) requirements of
the larger affiliate Financial Responsibility standard; and
2. Within six (6) months after surpassing the fifteen percent (15%) threshold,
demonstrate compliance with all license requirements for a larger
affiliate.
If an affiliate that underwrites the indemnity portion of workers' compensation
insurance receives a change in rating or proposed change in rating, the
affiliate shall notify BCBSA within 30 days of notification by the external
rating agency.
- -----------
*For purposes of this calculation,
The numerator equals:
Applicant affiliate's contract enrollment, as defined in BCBSA's Quarterly
Enrollment Report (excluding rider and freestanding coverage).
The denominator equals:
Numerator PLUS Plan and all other licensed affiliates' contract enrollment, as
reported in BCBSA's Quarterly Enrollment Report (excluding rider and
freestanding coverage).
<PAGE> 13
EXHIBIT A (CONTINUED)
STANDARDS FOR LICENSED AFFILIATES
Each affiliate seeking licensure must answer all four questions. Depending on
the affiliate's answers, certain standards apply:
1. What percent of the affiliate is controlled by the parent Plan?
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
More than 50% 50%
<S> <C>
Standard 1A, 4 Standard 1B, 4
- --------------------------------------------------------------------------------
</TABLE>
IN ADDITION,
2. Is risk being assumed?
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Yes No
<S> <C> <C> <C> <C>
Affiliate is Affiliate comprises Affiliate comprises Affiliate Affiliate comprises
underwriting the less than 15% of total greater than or equal comprises greater than or equal to
indemnity portion of contract enrollment of to 15% of total contract less than 15% 15% of total contract
workers' Plan and its licensed enrollment of Plan of total contract enrollment of Plan and
compensation affiliates and does not and its licensed enrollment of its licensed affiliates
insurance underwrite workers' affiliates and does not Plan and its
compensation underwrite workers' license
indemnity compensation indemnity affiliates
Standards 7(A), 7(F) Standard 2 Standard 6H Standard 2 Standard 6H
(Guidelines 2.1, 2.2) (Guidelines
2.1, 2.3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
IN ADDITION,
3. Is medical care being directly provided?
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Yes No
<S> <C>
Standard 3A Standard 3B
- --------------------------------------------------------------------------------
</TABLE>
4. If the affiliate has health or workers' compensation adminstration business,
does such business comprise 15% or more of the total contract enrollment of
Plan and its licensed affiliates?
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Yes No
<S> <C>
Standards 6A-6I Standards 5, 8
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
EXHIBIT A (CONTINUED)
STANDARD 1 - ORGANIZATION AND GOVERNANCE
1A.) The Standard for more than 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that it is
controlled by a licensed Plan or Plans which have, directly or indirectly: 1)
more than 50% of the voting control of the affiliate; and 2) the legal ability
to prevent any change in the articles of incorporation, bylaws or other
establishing or governing documents of the affiliate with which it does not
concur; and 3) operational control of the affiliate.
1B.) The Standard for 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that a licensed
Plan or Plans have directly or indirectly:
1) not less than 50% of the voting control of the affiliate; and
2) the legal ability to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents of
the affiliate with which it does not concur; and
3) at least equal direct or indirect control over the operations of the
affiliate; and
4) sufficient authority so that changes in the following require the
approval of the Licensed Plan or Plans:
- geographic operating area of the affiliate
- the legal and trade names of the affiliate
- the types of activity in which the affiliate engages
- any action which would cause the affiliate to be in violation
of the Standards applicable to Licensure by BCBSA.
<PAGE> 15
EXHIBIT A (CONTINUED)
STANDARD 2 - FINANCIAL RESPONSIBILITY
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers. If a risk-assuming affiliate ceases operations for any reason, Blue
Cross and/or Blue Shield Plan coverage will be offered to all affiliate
subscribers without exclusions, limitations or conditions based on health
status. If a nonrisk-assuming affiliate ceases operations for any reason,
sponsoring Plan(s) will provide for services to its (their) customers.
STANDARD 3 - STATE LICENSURE/CERTIFICATION
3A.) The Standard for an affiliate that employs, owns or contracts on a
substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification for its
medical care providers to operate under applicable state laws.
3B.) The Standard for an affiliate that does not employ, own or contract on
a substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification to operate
under applicable state laws.
STANDARD 4 - CERTAIN DISCLOSURES
An affiliate shall make adequate disclosure in contracting with third parties
and in disseminating public statements of 1) the structure of the Blue Cross and
Blue Shield System; and 2) the independent nature of every licensee; and 3) the
affiliate's financial condition.
STANDARD 5 - REPORTS AND RECORDS FOR CERTAIN SMALLER AFFILIATES
For a smaller affiliate that does not underwrite the indemnity portion of
workers' compensation insurance, the Standard is:
An affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate
basis, reports and records relating to these Standards and the License
Agreements between BCBSA and affiliate.
<PAGE> 16
EXHIBIT A (CONTINUED)
STANDARD 6 - OTHER STANDARDS FOR LARGER AFFILIATES
Standards 6(A) - (I) that follow apply to larger affiliates.
Standard 6(A): Board of Directors
An affiliate Governing Board shall act in the interest of its Corporation in
providing cost-effective health care services to its customers. An affiliate
shall maintain a governing Board, which shall control the affiliate, composed of
a majority of persons other than providers of health care services, who shall be
known as public members. A public member shall not be an employee of or have a
financial interest in a health care provider, nor be a member of a profession
which provides health care services.
Standard 6(B): Responsiveness to Customers
An affiliate shall be operated in a manner responsive to customer needs and
requirements.
Standard 6(C): Participation in National Programs
An affiliate shall effectively and efficiently participate in each national
program as from time to time may be adopted by the Member Plans for the purposes
of providing portability of membership between the licensees and ease of claims
processing for customers receiving benefits outside of the affiliate's Service
Area.
Such programs are applicable to licensees, and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. BlueCard Program;
<PAGE> 17
EXHIBIT A (CONTINUED)
D. Inter-Plan Teleprocessing System (ITS); and
E. Inter-Plan Data Reporting (IPDR) Program.
Standard 6(D): Financial Performance Requirements
In addition to requirements under the national programs listed in
Standard 6C: Participation in National Programs, an affiliate shall take such
action as required to ensure its financial performance in programs and contracts
of an inter-licensee nature or where BCBSA is a party.
Standard 6(E): Cooperation with Plan Performance Response Process
An affiliate shall cooperate with BCBSA's Board of Directors and its Plan
Performance and Financial Standards Committee in the administration of the Plan
Performance Response Process and in addressing affiliate performance problems
identified thereunder.
Standard 6(F): Independent Financial Rating
An affiliate shall obtain a rating of its financial strength from an independent
rating agency approved by BCBSA's Board of Directors for such purpose.
Standard 6(G): Best Efforts
During each year, an affiliate shall use its best efforts in the designated
Service Area to promote and build the value of the Blue Cross Mark.
Standard 6(H): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
<PAGE> 18
EXHIBIT A (CONTINUED)
Standard 6(I): Reports and Records
An affiliate shall furnish to BCBSA on a timely and accurate basis reports and
records relating to compliance with these Standards and the License Agreements
between BCBSA and affiliate. Such reports and records are the following:
A) Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service mark usage material;
B) Changes in the ownership and governance of the affiliate, including
changes in its charter, articles of incorporation, or bylaws, changes
in an affiliate's Board composition, or changes in the identity of the
affiliate's Principal Officers, and changes in risk acceptance,
contract growth, or direct delivery of medical care; and
C) Quarterly Financial Report including the Capital Benchmark Worksheet,
Annual Financial Forecast, Annual Certified Audit Report, Insurance
Department Examination Report, Annual Statement filed with State
Insurance Department (with all attachments); and
D) Quarterly Utilization Report, Quarterly Enrollment Report, Cost
Containment Report, NMIS Quarterly Report.
STANDARD 7 - OTHER STANDARDS FOR RISK-ASSUMING WORKERS' COMPENSATION AFFILIATES
Standards 7(A) - (E) that follow apply to affiliates that underwrite the
indemnity portion of workers' compensation insurance.
Standard 7 (A): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
<PAGE> 19
EXHIBIT A (CONTINUED)
Standard 7(B): Reports and Records
An affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between
BCBSA and the affiliate. Such reports and records are the following:
A. Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service mark usage materials; and
B. Annual Certified Audit Report, Annual Statement as filed with the State
Insurance Department (with all attachments), Annual NAIC's Risk-Based
Capital Worksheets for Property and Casualty Insurers, and Annual
Financial Forecast; and
C. Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for
Property and Casualty Insurers, Insurance Department Examination
Report, and Quarterly NMIS Report (for licensed health business only);
and
D. Notification of all changes and proposed changes to independent ratings
within 30 days of receipt and submission of a copy of all rating
reports; and
E. Changes in the ownership and governance of the affiliate including
changes in its charter, articles of incorporation, or bylaws, changes
in an affiliate's Board composition, Plan control, state license
status, operating area, the affiliate's Principal Officers or direct
delivery of medical care.
Standard 7(C): Loss Prevention
An affiliate shall apply loss prevention protocol to both new and existing
business.
<PAGE> 20
EXHIBIT A (CONTINUED)
Standard 7(D): Claims Administration
An affiliate shall maintain an effective claims administration process that
includes all the necessary functions to assure prompt and proper resolution of
medical and indemnity claims.
Standard 7(E): Disability and Provider Management
An affiliate shall arrange for the provision of appropriate and necessary
medical and rehabilitative services to facilitate early intervention by medical
professionals and timely and appropriate return to work.
STANDARD 8 - COOPERATION WITH AFFILIATE LICENSE PERFORMANCE RESPONSE PROCESS
PROTOCOL
An affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA's Board of
Directors and its Plan Performance and Financial Standards Committee in the
administration of the Affiliate License Performance Response Process Protocol
(ALPRPP) and in addressing affiliate compliance problems identified thereunder.
<PAGE> 21
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
AFFILIATE LICENSE AGREEMENT
Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
FOR RISK PRODUCTS:
For affiliates not underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to its pro rata share of each sponsoring Plan's dues payable to
BCBSA computed with the addition of the affiliate's subscription revenue and
contracts arising from products using the marks. The payment by each sponsoring
Plan of its dues to BCBSA, including that portion described in this paragraph,
will satisfy the requirement of this paragraph, and no separate payment will be
necessary.
For affiliates underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to 0.35 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus, an annual fee of $5,000 per license
for an affiliate subject to Standard 7.
FOR NONRISK PRODUCTS:
An amount equal to 0.24 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus:
1) An annual fee of $5,000 per license for an affiliate subject to
Standard 6.
2) An annual fee of $2,000 per license for all other affiliates.
The foregoing shall be reduced by one-half where both a BLUE CROSS(R) and BLUE
SHIELD(R) License are issued to the same affiliate. In the event that any
license period is greater or less than one (1) year, any amounts due shall be
prorated. Royalties under this formula will be calculated, billed and paid in
arrears.
<PAGE> 1
Exhibit 99.9
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made and entered into this 17th day
of May, 1996, by and among Blue Cross of California, a California corporation
("BCC"), WellPoint Health Networks Inc., a Delaware corporation ("WellPoint"),
and Western Health Partnerships, a California nonprofit public benefit
corporation (the "Health Foundation").
WHEREAS, BCC, WellPoint, the Health Foundation and Western Foundation
for Health Improvement, a California nonprofit public benefit corporation (the
"Western Foundation"), have entered into an Amended and Restated
Recapitalization Agreement dated as of March 31, 1995 (the "Recapitalization
Agreement"), pursuant to which, among other things, (i) BCC would change its
status in conformity with the terms of an order of the California Department of
Corporations from a California nonprofit public benefit corporation to a
California for-profit business stock corporation and issue to the Health
Foundation 53,360,000 shares of Common Stock, par value $.01 per share ("BCC
Common Stock"), of BCC (the "BCC Conversion") in a transaction intended to
qualify as a tax free reorganization under section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and (ii) WellPoint would merge with and
into BCC (the "WellPoint Upstream Merger"); upon which the Health Foundation
would receive 53,360,000 shares of Common Stock of the recapitalized entity to
be known as WellPoint Health Networks Inc.;
WHEREAS, BCC has received an Internal Revenue Service ("IRS") private
letter ruling dated August 16, 1995 that, among other things, the BCC Conversion
qualifies as a tax free transaction and that no gain or loss will be recognized
by BCC from the BCC Conversion for Federal income tax purposes (the "IRS
Ruling");
WHEREAS, to facilitate consummation of the transactions contemplated by
the Recapitalization Agreement BCC, WellPoint, and the Health Foundation have
agreed to enter into this Agreement to provide for an indemnity by the Health
Foundation to BCC against certain Federal income tax liability to BCC resulting
from a determination that the BCC Conversion is a taxable transaction for
Federal income tax purposes, as described below.
NOW THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein and in the Recapitalization Agreement, and intending
to be legally bound, the parties hereto agree as follows:
1. INDEMNITY. The Health Foundation agrees to indemnify, defend and
save BCC harmless from and against the net amount of Federal income tax
liabilities (together with any penalties, interest, fines and additions to tax,
but not taxes, if any, resulting from the receipt of indemnity payments by BCC
pursuant to this Agreement) incurred by BCC, as a result of (i) a revocation or
modification, in whole or in part, of the IRS Ruling or (ii) a determination by
the IRS that the BCC Conversion constitutes a taxable transaction
1
<PAGE> 2
for Federal income tax purposes under Section 337(d) of the Code, in either
case, after reducing such tax liabilities by the amount of any tax benefit
arising to BCC as a consequence of the donation of cash to the Western
Foundation for Health Improvement (the "Western Foundation"), as provided in the
Recapitalization Agreement; provided, however, that the Health Foundation shall
have no liability under this Agreement if the revocation or modification, in
whole or in part of the IRS Ruling, or imposition of tax liability under Section
337(d) of the Code, is a result of (i) actions taken by WellPoint Health
Networks Inc., the surviving corporation ("Surviving Corporation"), following
the WellPoint Upstream Merger, without the consent of the Health Foundation
(including without limitation a reincorporation of the Surviving Corporation
under any state law) or (ii) the transaction not being consummated in accordance
with the terms set forth in the request for the IRS Ruling; except that this
proviso (ii) shall not apply if one of the reasons for revocation or
modification is that either the step described in paragraph (v) on page 3 of the
IRS Ruling shall not have occurred or that the dividend referred to in the step
described in paragraph (i) on page 2 of the IRS Ruling shall have been reduced.
BCC shall promptly notify the Health Foundation of any assertion by the IRS of a
tax liability for which the Health Foundation may be responsible under this
Agreement. If at the time a claim is asserted the Health Foundation has net
assets in excess of $100 million, the Health Foundation shall have the
opportunity to participate jointly with BCC in contesting any such asserted tax
liability. The settlement of any claim which would result in a payment by the
Health Foundation under this Agreement without the Health Foundation's written
consent shall constitute a waiver of the right to indemnity; provided, however,
the Health Foundation shall not unreasonably withhold its consent to any
settlement.
2. MISCELLANEOUS.
(a) NET WORTH. The Health Foundation shall maintain a net worth
(computed in accordance with generally accepted accounting practices, applied on
a consistent basis, except that the Surviving Corporation's shares shall be
valued at the end of each calendar quarter on the basis of the average closing
price on the New York Stock Exchange for the last ten trading days of the
calendar quarter) of not less than $400,000,000 for the six years following the
BCC Conversion.
(b) FURTHER AGREEMENTS. Until this Agreement terminates, the
Health Foundation agrees (i) to maintain its status as a tax-exempt organization
under section 501(c)(4) of the Code, and (ii) not to qualify as a "private
foundation" as defined under section 509(a) of the Code. No party to this
Agreement will take any position inconsistent with the IRS Ruling or the request
for the IRS Ruling.
(c) TERMINATION. This Agreement shall terminate on the expiration
of the applicable statute of limitations for the period in which the BCC
Conversion occurs. This Agreement shall also terminate automatically in the
event BCC or the Surviving Corporation is audited by the IRS, the relevant tax
year is closed and the IRS determines that no tax is due with respect to the BCC
Conversion.
2
<PAGE> 3
(d) NO SETOFF. No payment required to be made pursuant to this
Agreement shall be subject to any right of setoff, counterclaim, defense,
abatement, suspension, deferment or reduction on an unrelated claim.
(e) AMENDMENTS. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally or in writing, except that any
term of this Agreement may be amended by writing signed by each of the parties
hereto, and the observance of any such term may be waived (either generally or
in a particular instance and either retroactively or prospectively) by a writing
signed by the party against whom such waiver is to be asserted.
(f) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in accordance with the notice provisions of
the Recapitalization Agreement.
(g) SUCCESSORS AND ASSIGNS. This Agreement (or any right or
obligation hereunder) may not be assigned by any party without the prior written
consent of the other parties, except that each of BCC and WellPoint may assign
its rights and obligations in this Agreement, whether by a writing or operation
of law, to a successor to all or substantially all of its business without such
consent in which event this Agreement shall inure to the benefit of and be
binding upon the successor. This Agreement shall not be binding upon the Western
Foundation or any Permitted Transferee (defined below).
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed within the state.
(i) WAIVER; REMEDIES. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor shall any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The waiver or
consent (whether express or implied) by any party of the breach of any term or
conditions of this Agreement shall not prejudice any remedy of any other party
in respect of any continuing or other breach of the terms and conditions hereof,
and shall not be construed as a bar to any right or remedy which any party would
otherwise have on any future occasion under this Agreement.
(j) ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees and costs in addition to any other available remedy.
(k) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal
3
<PAGE> 4
or unenforceable in any respect for any reasons, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all other rights and privileges shall be enforceable to the
fullest extent permitted by law.
(l) NO LIEN. Nothing in this Agreement is intended to impose a
lien or encumbrance on any assets of the Health Foundation. Subject to Section
2(a) of this Agreement, notwithstanding anything else in this Agreement to the
contrary, nothing in this Agreement shall prevent the Health Foundation from
conducting its operations in the ordinary course or from carrying out its social
welfare purposes including specifically, without limitation, nothing in this
Agreement shall prohibit the Health Foundation from:
(i) making contributions to the Western Foundation,
including contributions in accordance with the order of the
California Department of Corporation dated March 5, 1996 and
undertakings relating thereto (the "DOC Order") and modifications
or amendments thereof;
(ii) making transfers for value;
(iii) making donations of Surviving Corporation stock in
accordance with the DOC Order;
(iv) making other distributions in accordance with the DOC
Order; or
(v) making grants to organizations or individuals in the
ordinary course in accordance with charitable guidelines and
objectives adopted from time to time.
Collectively the foregoing, including any other transfers, donations,
distributions, contributions made by the Health Foundation in conducting its
operations in the ordinary course or carrying out its social welfare purposes,
are referred to herein as "Permitted Transfers" and the recipients are referred
to herein as "Permitted Transferees".
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BLUE CROSS OF CALIFORNIA
By: /s/ Brian J. Donnelly
-----------------------------------------
Name: Brian J. Donnelly
---------------------------------------
Title: Secretary
--------------------------------------
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Thomas C. Geiser
-----------------------------------------
Name: Thomas C. Geiser
----------------------------------------
Title: Senior Vice President,
--------------------------------------
General Counsel & Secretary
--------------------------------------
WESTERN HEALTH PARTNERSHIPS
By: /s/ Gail C. Watts
-----------------------------------------
Name: Gail C. Watts
----------------------------------------
Title: Vice President and Secretary
--------------------------------------
5
<PAGE> 1
EXHIBIT 99.10
================================================================================
CREDIT AGREEMENT
Dated as of May 15, 1996
among
WELLPOINT HEALTH NETWORKS INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent,
CHEMICAL BANK,
as Documentation Agent,
and
THE OTHER FINANCIAL INSTITUTIONS
PARTY TO THE CREDIT AGREEMENT
Arranged By
BA SECURITIES, INC.
NATIONSBANC CAPITAL MARKETS, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01 Defined Terms...................................................... 1
1.02 Other Interpretive Provisions...................................... 27
(a) Defined Terms............................................... 27
(b) The Agreement............................................... 27
(c) Certain Common Terms........................................ 27
(d) Performance; Time........................................... 27
(e) Contracts................................................... 28
(f) Laws........................................................ 28
(g) Captions.................................................... 28
(h) Independence of Provisions.................................. 28
(i) Construction................................................ 28
1.03 Accounting Principles.............................................. 28
ARTICLE II
THE COMMITTED LOANS
2.01 The Commitments.................................................... 29
2.02 Loan Accounts...................................................... 29
2.03 Procedure for Committed Borrowings................................. 30
2.04 Conversion and Continuation Elections.............................. 31
2.05 Voluntary and Involuntary Reduction or
Termination of Commitments......................................... 32
2.06 Optional Prepayments............................................... 32
2.07 Repayment of Principal............................................. 33
2.08 Interest on Committed Loans........................................ 33
2.09 Fees............................................................... 34
(a) Facility Fee................................................ 34
(b) Structuring and Arrangement Fee and Other
Fees........................................................ 34
(c) Agency Fee.................................................. 34
2.10 Computation of Fees and Interest................................... 35
2.11 Optional Extension of Commitments.................................. 35
ARTICLE III
THE BID LOANS
3.01 Bid Loan Availability.............................................. 36
3.02 Procedure for Bid Borrowings....................................... 36
3.03 Invitations for Submission of Competitive Bids..................... 37
3.04 Submission of Competitive Bids..................................... 37
3.05 Notice to Company.................................................. 39
3.06 Acceptance and Rejection of Competitive Bids....................... 39
3.07 Notification and Making of Bid Loans............................... 40
3.08 Notification of Rates.............................................. 41
3.09 Repayment of Bid Loans............................................. 41
3.10 Interest on Bid Loans.............................................. 42
3.11 Bid Notes.......................................................... 42
3.12 Utilization of Commitments......................................... 43
</TABLE>
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<TABLE>
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ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
<S> <C> <C>
4.01 Taxes.............................................................. 43
4.02 Illegality......................................................... 46
4.03 Increased Costs and Reduction of Return............................ 47
4.04 Funding Losses..................................................... 48
4.05 Inability to Determine Rates....................................... 49
4.06 Reserves on LIBOR Rate Loans....................................... 49
4.07 Certificates of Banks.............................................. 50
4.08 Substitution of Banks.............................................. 50
(a) Replacement of Non-Consenting Banks and
Affected Banks.............................................. 50
(b) Replacement Procedure....................................... 50
4.09 Sharing of Payments, Pro Rata Treatment, Etc....................... 52
4.10 Payments by the Company............................................ 53
4.11 Payments by the Banks to the Administrative
Agent.............................................................. 55
4.12 Survival........................................................... 56
ARTICLE V
CONDITIONS
5.01 Conditions Precedent to Initial Borrowing.......................... 56
(a) Credit Agreement and Notes.................................. 56
(b) Resolutions; Incumbency..................................... 56
(c) Articles of Incorporation; By-laws and Good
Standing.................................................... 57
(d) Legal Opinions.............................................. 57
(e) Certificate................................................. 58
(f) Regulatory Compliance....................................... 58
(g) Termination of Prior Credit Agreement....................... 58
(h) Recapitalization Agreement and Mass Mutual
Notes. .................................................... 58
(i) Approvals................................................... 58
(j) No Litigation Challenging................................... 59
(k) BCC Financial Statements.................................... 59
(l) Pro Forma Financial Statements.............................. 59
(m) Other Documents............................................. 59
5.02 Conditions Precedent to All Borrowings............................. 59
(a) No Default.................................................. 59
(b) Notice of Committed Borrowing or
Continuation/ Conversion.................................... 60
(c) Continuation of Representations and
Warranties.................................................. 60
5.03 Conditions Subsequent to the Initial Borrowing.
................................................................... 60
(a) Assumption Agreement........................................ 60
(b) Resolutions; Incumbency..................................... 60
(c) Articles of Incorporation; By-laws and Good
Standing.................................................... 61
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
(d) Legal Opinions.............................................. 62
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01 Corporate Existence and Power...................................... 62
6.02 Corporate Authorization; No Contravention.......................... 62
6.03 Governmental Authorization......................................... 63
6.04 Binding Effect..................................................... 63
6.05 Litigation......................................................... 63
6.06 No Default......................................................... 63
6.07 ERISA.............................................................. 64
6.08 Use of Proceeds; Margin Regulations................................ 64
6.09 Title to Properties................................................ 64
6.10 Taxes.............................................................. 64
6.11 Financial Condition................................................ 65
6.12 Environmental Matters.............................................. 65
6.13 Regulated Entities................................................. 65
6.14 No Burdensome Restrictions......................................... 66
6.15 Copyrights, Patents, Trademarks and Licenses,
Etc................................................................ 66
6.16 Insurance.......................................................... 66
6.17 Swap Obligations................................................... 66
6.18 Solvency........................................................... 67
6.19 Full Disclosure.................................................... 67
6.20 Material Agreements................................................ 67
6.21 Subsidiaries, Etc.................................................. 67
6.22 Accreditation, Etc................................................. 68
6.23 No Impairment of Subsidiaries' Ability to Pay
Dividends.......................................................... 68
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01 Financial Statements............................................... 69
7.02 Certificates; Other Information.................................... 70
7.03 Notices............................................................ 71
7.04 Preservation of Corporate Existence, Etc........................... 73
7.05 Insurance.......................................................... 74
7.06 Payment of Obligations............................................. 74
7.07 Compliance with Laws............................................... 74
7.08 Inspection of Property and Books and Records....................... 74
7.09 Environmental Laws................................................. 75
7.10 Use of Proceeds.................................................... 75
7.11 Regulatory Tangible Net Equity..................................... 75
7.12 Recapitalization................................................... 75
7.13 Accreditation, Etc................................................. 76
</TABLE>
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<TABLE>
<CAPTION>
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ARTICLE VIII
NEGATIVE COVENANTS
<S> <C> <C>
8.01 Limitation on Liens................................................ 76
8.02 Limitation on Indebtedness......................................... 78
8.03 Fundamental Changes................................................ 79
8.04 Disposition of Assets.............................................. 81
8.05 No More Restrictive Agreements..................................... 81
8.06 Transactions with Affiliates....................................... 82
8.07 Margin Stock....................................................... 82
8.08 Leverage Ratio..................................................... 82
8.09 Fixed Charge Coverage Ratio........................................ 82
8.10 Minimum Net Worth.................................................. 82
8.11 Accounting Changes................................................. 82
8.12 Limitations on Investments......................................... 83
8.13 Restricted Payments................................................ 83
8.14 Lines of Business.................................................. 84
8.15 No Impairment of Subsidiaries' Ability to Pay
Dividends.......................................................... 84
ARTICLE IX
EVENTS OF DEFAULT
9.01 Events of Default.................................................. 84
(a) Non-Payment................................................. 85
(b) Representation or Warranty.................................. 85
(c) Financial Ratios............................................ 85
(d) Specific Defaults........................................... 85
(e) Recapitalization............................................ 85
(f) Other Defaults.............................................. 85
(g) Cross-Default............................................... 85
(h) Insolvency; Voluntary Proceedings........................... 86
(i) Involuntary Proceedings..................................... 86
(j) ERISA....................................................... 86
(k) Monetary Judgments.......................................... 87
(l) Non-Monetary Judgments...................................... 87
(m) Change in Control........................................... 87
(n) HMO Event................................................... 88
(o) Adverse Change.............................................. 88
9.02 Remedies........................................................... 88
9.03 Rights Not Exclusive............................................... 88
ARTICLE X
AGENTS
10.01 Appointment and Authorization...................................... 88
10.02 Delegation of Duties............................................... 89
10.03 Liability of Agents................................................ 89
10.04 Reliance by Agents................................................. 90
10.05 Notice of Default.................................................. 90
10.06 Credit Decision.................................................... 91
10.07 Indemnification.................................................... 91
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
10.08 Agents in Individual Capacity...................................... 92
10.09 Successor Agents................................................... 92
10.10 Delivery of Agreements and Preparation of
Amendments, Modifications and Waivers.............................. 93
10.11 Co-Agents.......................................................... 93
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers............................................. 94
11.02 Notices............................................................ 95
11.03 No Waiver; Cumulative Remedies..................................... 96
11.04 Costs and Expenses................................................. 96
11.05 Indemnity.......................................................... 97
11.06 Payments Set Aside................................................. 97
11.07 Successors and Assigns............................................. 98
11.08 Assignments, Participations, Etc................................... 98
11.09 Set-off............................................................ 101
11.10 Automatic Debits of Fees........................................... 101
11.11 Notification of Addresses, Lending Offices, Etc.................... 102
11.12 Counterparts....................................................... 102
11.13 Severability....................................................... 102
11.14 No Third Parties Benefitted........................................ 102
11.15 Time............................................................... 103
11.16 GOVERNING LAW AND JURISDICTION..................................... 103
11.17 WAIVER OF JURY TRIAL............................................... 103
11.18 Entire Agreement................................................... 103
11.19 Survival of Representations........................................ 104
</TABLE>
- v -
<PAGE> 7
ANNEXES
Annex I Applicable Amount
SCHEDULES
2.01 Commitment of each Bank
6.20 (A) Material Agreements
6.20 (B) Recapitalization Agreements
6.21 (A) Subsidiaries of the Company
6.21 (B) Investments of the Company and its Subsidiaries
8.02 Indebtedness
11.02 Address for Notices
EXHIBITS
A-1 Form of Committed Note
A-2 Form of Bid Note
B Form of Notice of Committed Borrowing
C Form of Notice of Conversion/Continuation
D Form of Competitive Bid Request
E Form of Competitive Bid
F Form of Compliance Certificate
G-1 Form of Assignment and Acceptance
G-2 Form of Notice of Assignment and Acceptance
H-1 Form of Opinion of Brobeck, Phleger & Harrison LLP
(Effective Date)
H-2 Form of Opinion of Thomas C. Geiser (Effective Date)
H-3 Form of Opinion of Brobeck, Phleger & Harrison LLP
(Final Recapitalization Date)
H-4 Form of Opinion of Thomas C. Geiser
(Final Recapitalization Date)
I Form of Assumption Agreement
J Form of Confidentiality Agreement
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<PAGE> 8
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of May 15, 1996, among
WELLPOINT HEALTH NETWORKS INC., a Delaware corporation (together with its
permitted successors, including the Recapitalized Company, the "Company"), each
of the financial institutions that is a signatory to this Agreement identified
under the caption "BANKS" on the signature pages of this Agreement or that,
pursuant to Section 11.08(a), shall become a "Bank" under this Agreement
(individually, a "Bank" and, collectively, the "Banks"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as
administrative and bid agent for the Banks (in such capacity, and together with
any successor administrative and bid loan agent, the "Administrative Agent"),
NATIONSBANK OF TEXAS, N.A., as syndication agent for the Banks (in such
capacity, and together with any successor syndication agent, the "Syndication
Agent"), and CHEMICAL BANK, as documentation agent for the Banks (in such
capacity, and together with any successor documentation agent, the
"Documentation Agent").
The Banks have agreed to make available to the Company, upon the terms
and conditions set forth in this Agreement, a revolving credit and bid loan
facility to enable the Company to finance certain acquisitions, to pay a certain
special dividend to shareholders and for other general corporate purposes.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties to this Agreement agree
as follows:
ARTICLE I
DEFINITIONS
1.01 Defined Terms. In addition to the terms defined elsewhere in this
Agreement, the following terms have the following meanings:
"Absolute Rate" has the meaning specified in Section 3.04.
"Absolute Rate Bid Loan" means a Bid Loan that bears
interest at a rate determined with reference to the Absolute Rate.
<PAGE> 9
"Acquired EBITDAR" means, with respect to any acquisition
permitted under this Agreement, for any period, for the Company and its
Subsidiaries (determined in accordance with GAAP), the sum of
consolidated pre-tax net income (exclusive of extraordinary gains and
losses); plus (to the extent deducted in determining consolidated net
income) (i) Interest Expense; (ii) amortization (iii) depreciation and
(iv) expenses in respect of any Operating Lease, all for such period,
as each of the items specified above are reasonably allocable to the
assets, capital stock, division or business group acquired in such
acquisition.
"Administrative Agent" has the meaning specified in the preamble
to this Agreement.
"Administrative Agent Fee Letter" means the letter agreement
between the Company and the Administrative Agent dated April 10, 1996.
"Affected Bank" has the meaning specified in Section 4.08.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of 10%
or more of the equity of a Person shall, for the purposes of this
Agreement, be deemed to control the other Person. Notwithstanding the
foregoing, no Bank shall be deemed an "Affiliate" of the Company or of
any Subsidiary of the Company.
"Agent" means each of the Administrative Agent, the
Syndication Agent and the Documentation Agent and "Agents" means,
collectively, the Administrative Agent, the Syndication Agent and the
Documentation Agent.
"Agent-Related Persons" means (i) BofA and any successor
Administrative Agent appointed under Section 10.09, together with their
respective Affiliates (including, in the case of BofA, BA Securities,
Inc.), (ii) NationsBank and any successor Syndication Agent appointed
under Section 10.09, together with their respective Affiliates
(including, in the case of
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<PAGE> 10
NationsBank, NationsBanc Capital Markets, Inc.), (iii) Chemical Bank
and any successor Documentation Agent appointed under Section 10.09 and
(iv) the respective officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 11.02 in relation to the Administrative Agent or such
other address as the Administrative Agent may from time to time specify
in accordance with Section 11.02.
"Aggregate Commitment" means the combined Commitments of the
Banks, in the initial amount of $1,250,000,000, as such amount may be
reduced from time to time pursuant to this Agreement.
"Agreement" means this Credit Agreement.
"Applicable Amount" means, with respect to the Facility Fee
and all LIBOR Rate Loans, the amount set forth opposite the indicated
Level in the chart set forth on Annex I in accordance with the
parameters for calculations of such amounts also set forth on Annex I.
The Applicable Amount is determined as provided in Annex I, on the
basis of either the Debt Rating or the Leverage Ratio, as selected, if
applicable, by the Company in its quarterly Compliance Certificates.
"Assignee" has the meaning specified in
Section 11.08(a).
"Assignment and Acceptance" has the meaning specified
in Section 11.08(a).
"Assumption Agreement" means the Assumption Agreement,
substantially in the form of Exhibit I, to be executed by Recapitalized
Company in favor of the Agents and the Banks.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
cost of the Agents' and the Co-Arrangers' internal legal services and
all disbursements of internal counsel.
"Authorized Company Employee" means employees of the Company
designated in writing to the Administrative Agent as such from time to time by a
Responsible Officer, and as to whom the Company has provided to the
Administrative Agent a certificate of the Secretary or Assistant Secretary of
the Company certifying
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<PAGE> 11
each of their names and true signatures and certifying that the Board of
Directors of the Company has delegated such authority to such Responsible
Officer.
"Bank" has the meaning specified in the introductory
clause to this Agreement.
"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) the rate of
interest in effect for such day as publicly announced from time to time
by BofA in San Francisco, California, as its "reference rate" and (b)
0.50% per annum above the most recent Federal Funds Rate. BofA's
reference rate is a rate set by BofA based upon various factors,
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any
change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of
such change.
"Base Rate Loan" means a Committed Loan that bears interest
based on the Base Rate.
"BCC" means Blue Cross of California, a California nonprofit
public benefit corporation.
"BCC Conversion" means the conversion of BCC from a nonprofit
public benefit corporation to a for profit corporation.
"BCC Material Adverse Effect" has the meaning specified
in Section 6.11(c).
"Bid Borrowing" means a borrowing consisting of one or more
Bid Loans made to the Company on the same day by one or more Banks
pursuant to Article III.
"Bid Loan" means the extension of credit by a Bank to the
Company pursuant to Article III.
"Bid Notes" means those master promissory notes by the Company
to the order of each of the Banks, substantially in the form of Exhibit
A-2 evidencing the Bid Loans.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
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<PAGE> 12
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Borrowing" means a Bid Borrowing or a Committed
Borrowing.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York, San
Francisco, California or Dallas, Texas are authorized or required by
law to close and, if the applicable Business Day relates to any LIBOR
Rate Loan or LIBOR Rate Bid Loan, any such day on which dealings are
carried on in the London offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other Governmental Rule, whether or not having the force of law,
regarding capital adequacy of any bank or of any corporation
controlling a bank.
"Capital Expenditures" means, for any period, expenditures
(including the aggregate amount of Capital Lease Obligations incurred
during such period) made by the Company or any of its Subsidiaries to
acquire or to construct fixed assets, plant and equipment (including
renewals, improvements and replacements, but excluding (i) repairs in
the Ordinary Course of Business and (ii) expenditures of proceeds of
insurance settlements in respect of loss, destroyed or damaged assets,
equipment or other property to repair or replace such property to a
like condition or with property of equivalent ability and value) during
such period computed in accordance with GAAP.
"Capital Lease" has the meaning specified in the
definition of "Capital Lease Obligations."
"Capital Lease Obligations" means all material monetary
obligations of the Company or any of its Subsidiaries under any leasing
or similar arrangement which is classified as a capital lease ("Capital
Lease") in accordance with GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards
Board) and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount of such obligation,
determined in accordance with GAAP (including such Statement No. 13).
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<PAGE> 13
"Cash Flow" means, for the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance
with GAAP), the result of the following: sum of (a) consolidated
after-tax net income (exclusive of extraordinary gains and losses) of
the Company and its Subsidiaries for the four-quarter period ending on
the date of determination plus (to the extent deducted in determining
net income) (i) Interest Expense for such period, (ii) amortization for
such period, (iii) depreciation for such period, (iv) expenses in
respect of any Operating Lease for such period, (v) up to $40,000,000
of restructuring charges or expenses incurred in connection with the
Recapitalization and the Mirus Acquisition (determined on an after-tax
basis) and (vi) up to $35,000,000 of non-cash restructuring charges or
expenses (with any reserve constituting a cash charge) incurred in such
period in connection with acquisitions permitted by the terms and
conditions of this Agreement (determined on an after-tax basis) less
(b) dividends (exclusive of the one-time dividend paid as part of the
Recapitalization) and unfinanced Capital Expenditures (exclusive of
acquisitions) for such period.
"CERCLA" has the meaning specified in the definition of
"Environmental Laws."
"Closing Date" means the date of the initial funding of any
Loan under this Agreement.
"Co-Arrangers" means BA Securities, Inc. and
NationsBanc Capital Markets, Inc.
"Co-Arrangers' Fee Letters" means the letter agreement dated
February 26, 1996 between the Company and each Co- Arranger regarding
such Co-Arranger's fees and the letter agreement dated February 26,
1996 between the Co-Arrangers and the Company regarding the Co-Agents'
and the Banks' fees.
"Code" means the Internal Revenue Code of 1986 and regulations
promulgated under the Code.
"Commitment" means, with respect to each Bank, the commitment
of such Bank to make Committed Loans pursuant to Section 2.01 in an
aggregate amount at any one time outstanding up to but not exceeding
the amount set forth opposite such Bank's name in Schedule 2.01 under
the heading "Commitment" (as such amount may be reduced pursuant to
Section 2.05 or Section 4.09 or as a result of one or more assignments
pursuant to Section 11.08).
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<PAGE> 14
"Committed Borrowing" means a borrowing under this Agreement
consisting of Committed Loans made to the Company on the same day by
the Banks pursuant to Section 2.03.
"Committed Loan" means an extension of credit by a Bank to the
Company pursuant to Article II, and may be a Base Rate Loan or a LIBOR
Rate Loan.
"Committed Notes" means those promissory notes by the Company
to the order of each of the Banks, substantially in the form of Exhibit
A-1 evidencing the Committed Loans.
"Competitive Bid" means an offer by a Bank to make a Bid Loan
in accordance with Section 3.04.
"Competitive Bid Request" means a Competitive Bid Request
substantially in the form of Exhibit D.
"Confidentiality Agreement" means the Confidentiality
Agreement, substantially in the form of Exhibit J, to be executed by
each Transferee or prospective Transferee pursuant to Section 11.08(e).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any
Indebtedness, lease, dividend, Surety Instrument or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a)
to purchase, repurchase or otherwise acquire such primary obligations
or any property constituting direct or indirect security for such
primary obligations, or (b) to advance or provide funds (i) for the
payment or discharge of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, or
(c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation, or (d) to guarantee or otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect
thereof; in each case (a), (b), (c) or (d), including arrangements in
which the rights and remedies of the holder of the primary obligation
are limited to repossession or sale of certain property of such Person.
The amount of any Contingent Obligation shall be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Contingent Obligation is made or, if not stated
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<PAGE> 15
or if indeterminable, the maximum reasonably anticipated liability in
respect of such primary obligation, and in the case of other Contingent
Obligations other than in respect of Swap Contracts, shall be equal to
the maximum reasonably anticipated liability in respect of such
Contingent Obligations and, in the case of Contingent Obligations in
respect of Swap Contracts, shall be equal to the Swap Termination
Value.
"Contractual Obligations" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its Property is bound and which is material to such
Person.
"Controlled Group" means any corporation or trade or business
that is a member of any group of organizations described in Section
414(m) of the Code of which the Company is a member.
"Conversion Date" means any date on which the Company elects
to convert a Base Rate Loan into a LIBOR Rate Loan; continue a LIBOR
Rate Loan as a LIBOR Rate Loan; or convert a LIBOR Rate Loan into a
Base Rate Loan.
"Converted BCC" means BCC following the BCC Conversion.
"Debt Rating" means the rating (or "implied" rating) of the
Company's senior unsecured long-term debt by each of S&P and Moody's.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Documentation Agent" has the meaning specified in the
preamble to this Agreement.
"Dollars", "dollars" and "$" each mean lawful money of the
United States of America.
"Domestic Lending Office" means, with respect to each Bank,
the office of that Bank designated as such on Schedule 11.02 or such
other office of the Bank as it may from time to time specify to the
Company and the Administrative Agent.
"EBITDAR" means, for the Company and its Subsidiaries
(determined on a consolidated basis without duplication in
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<PAGE> 16
accordance with GAAP), the sum of consolidated pre-tax net income
(exclusive of extraordinary gains and losses) of the Company and its
Subsidiaries for the four-quarter period ending on the date of
determination plus (to the extent deducted in determining consolidated
pre-tax net income) (i) Interest Expense for such period, (ii)
amortization for such period, (iii) depreciation for such period, (iv)
expenses in respect of any Operating Lease for such period, (v) up to
$65,000,000 of restructuring charges or expenses incurred in connection
with the Recapitalization and the Mirus Acquisition (determined on a
pre-tax basis) and (vi) up to $50,000,000 of non-cash restructuring
charges or expenses (with any reserve constituting a cash charge)
incurred in such period in connection with acquisitions permitted by
the terms and conditions of this Agreement (determined on a pre-tax
basis).
"Effective Date" means May 15, 1996.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000;
provided that such bank is acting through a branch or agency located in
the United States; or (iii) a Person that is primarily engaged in the
business of commercial banking and that is (A) a Subsidiary of a Bank,
(B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a
Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment or threat to public health,
personal injury (including sickness, disease or death), property
damage, natural resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise), cleanup, removal,
remedial or response costs, restitution, civil or criminal penalties,
injunctive relief, or other type of relief, resulting from or based
upon the presence, placement, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental, placement, spills, leaks,
discharges, emissions or releases)
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<PAGE> 17
of any Hazardous Material at, in, or from Property, whether
or not owned by the Company.
"Environmental Laws" means all present and future Governmental
Rules and common law duties, together with all administrative orders,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource
Conservation and Recovery Act, the Toxic Substances Control Act and the
Emergency Planning and Community Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of
1974 and regulations promulgated under ERISA.
"ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations described in Section
414(b) or (c) of the Code, of which the Company is a member.
"ERISA Event" means (a) a Reportable Event with respect to a
Qualified Plan or a Multiemployer Plan; (b) a withdrawal by the Company
or any ERISA Affiliate from a Qualified Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA); (c) a complete or partial
withdrawal by the Company or any ERISA Affiliate from a Multiemployer
Plan; (d) the filing of a notice of intent to terminate, the treatment
of a plan amendment as a termination under Section 4041 or 4041A of
ERISA or the commencement of proceedings by the PBGC to terminate a
Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e)
a failure by the Company or any member of the Controlled Group to make
required contributions to a Qualified Plan or Multiemployer Plan; (f)
an event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Qualified Plan or
Multiemployer Plan; (g) the imposition of any liability under Title IV
of ERISA, other than PBGC premiums due but not delinquent under Section
4007 of ERISA, upon the Company or any ERISA Affiliate; or (h) an
application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code with respect to any Plan.
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<PAGE> 18
"Event of Default" has the meaning specified in
Section 9.01.
"Exchange Act" means the Securities and Exchange Act of 1934,
and regulations promulgated under the Exchange Act.
"Facility Fee" shall mean the facility fee payable
pursuant to Section 2.09(a).
"FDIC" means the Federal Deposit Insurance Corporation, or any
entity succeeding to any of its principal functions.
"Federal Funds Rate" means, for any period, the rate set forth
in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board
(including any such successor, "H.15(519)") for such day opposite the
caption "Federal Funds (Effective)". If on any relevant day such rate
is not yet published in H.15(519), the rate for such day will be the
rate set forth in the daily statistical release designated as the
Composite 3:30 p.m. Quotations for U.S. Government Securities, or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for such previous
day is not yet published in either H.15(519) or the Composite 3:30 p.m.
Quotations, the rate for such day will be the arithmetic mean as
determined by the Administrative Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York time) on that day by each of three leading brokers of Federal
funds transactions in New York City selected by the Administrative
Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any entity succeeding to any of its
principal functions.
"Fee Letters" means, collectively, the Co-Arrangers'
Fee Letters and the Administrative Agent Fee Letter.
"Final Recapitalization Date" means the date on which the
Recapitalization shall have been fully consummated in accordance with
the terms and conditions of the Recapitalization Agreements.
"Fixed Charges" means, for any period, for the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP, an amount
equal to the sum of, without
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<PAGE> 19
duplication, (a) Interest Expense during the preceding four-quarter
period ending on the date of determination plus (b) scheduled principal
payments of Indebtedness for the succeeding four-quarter period
commencing on the date of determination, other than payments in
connection with the Mass Mutual Notes (unless renewable or extendible
at the option of the obligor beyond such period) plus (c) expenses in
respect of any Operating Lease for such succeeding four-quarter period.
"Fixed Charge Coverage Ratio" means the ratio of (a) Cash Flow
to (b) Fixed Charges.
"Form 1001" has the meaning specified in Section 4.01(f).
"Form 4224" has the meaning specified in Section 4.01(f).
"Funded Debt" means, as of any date of determination, for the
Company and its Subsidiaries on a consolidated basis in accordance with
GAAP, an amount equal to the sum of, without duplication, (a) all
Indebtedness of such Person plus (b) an amount equal to eight times the
annual expense of such Person in respect of any Operating Lease for the
four-quarter period commencing on the date of determination plus (c)
all Contingent Obligations of such Person with respect to Funded Debt
of others.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including, without limitation, net income taxes and
franchise taxes), and all liabilities with respect thereto, imposed by
any jurisdiction on account of amounts payable or paid pursuant to
Section 4.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or
in such other statements by such other entity as may be in general use
by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
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<PAGE> 20
"Governmental Approval" means any authorization, consent,
approval, license, lease, ruling, permit, waiver, exemption, filing,
registration or notice by or with any Governmental Authority.
"Governmental Authority" means any nation, any state, any form
of political subdivision, any central bank (or similar monetary or
regulatory authority), any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
national (Federal or foreign), state or local government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing, including any
HMO Regulator.
"Governmental Rules" shall mean any treaty, law, rule,
regulation, ordinance, order, code, judgment, decree, directive,
guideline, policy, including any HMO Regulation, or any similar form of
decision of, or any interpretation or administration of any of the
foregoing by, any Governmental Authority.
"Hazardous Materials" means all those substances which are
regulated by, or which may form the basis of liability under, any
Environmental Law, including all substances identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance, hazardous
material, or toxic substance, or petroleum or petroleum derived
substance or waste.
"Health Foundation" means Western Health Partnerships, a
California nonprofit public benefit corporation.
"HMO" shall mean any Person which operates as a health
maintenance organization.
"HMO Event" shall mean the failure by the Company or any of
its Subsidiaries to comply in any material respect with any of the
terms and provisions of any applicable HMO Regulation pertaining to the
fiscal soundness, solvency or financial condition of the Company or any
of its Subsidiaries if such failure is reasonably likely to have a
Material Adverse Effect; or the assertion in writing, after the
Effective Date, by an HMO Regulator that it intends to take
administrative action against the Company or any of its Subsidiaries to
revoke or modify any Governmental Approval of, or to enforce the fiscal
soundness, solvency or financial provisions or requirements of such HMO
Regulations against, the Company or any of its Subsidiaries, if such
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<PAGE> 21
action, modification or enforcement is reasonably likely to have a
Material Adverse Effect.
"HMO Regulations" shall mean (i) all Governmental Rules
applicable under Federal or state law to HMOs, providers of life,
health care or disability insurance or the provision of health care
services or such insurance or the management of health care services
and (ii) the Blue Cross/Blue Shield Risk-Based Capital Guidelines.
"HMO Regulator" shall mean any Person charged with the
administration, oversight or enforcement of an HMO Regulation, whether
primarily, secondarily, or jointly.
"HMO Subsidiary" shall mean any direct or indirect Subsidiary
of the Company which is actively engaged and operating as an HMO or as
a provider of life, health care or disability insurance and shall not
include any entity in a development or start-up phase or an inactive
phase or which functions solely as a holding company for an operating
HMO or provider of life, health care or disability insurance.
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the Ordinary Course
of Business pursuant to ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced that have
been or are incurred in connection with the acquisition of property,
assets or businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the
Person (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or
sale of such property); (f) all Capital Lease Obligations; (g) all
indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness; and (h) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
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<PAGE> 22
"Indemnified Person" has the meaning specified in
Section 11.05.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other similar arrangement in respect of its
creditors generally or any substantial portion of its creditors; in
either case undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Interest Differential" means, with respect to any prepayment
of a LIBOR Rate Loan or LIBOR Rate Bid Loan on a day other than the
last day of the applicable Interest Period and with respect to any
failure to borrow, continue or convert a LIBOR Rate Loan or LIBOR Rate
Bid Loan on the date or in the amount specified in any Notice of
Committed Borrowing or Notice of Continuation/Conversion, as
applicable, or, if accepted, Competitive Bid, respectively, (a) the per
annum interest rate payable (or, with respect to a failure to borrow,
the interest rate which would have been payable) pursuant to Section
2.08(a) with respect to a LIBOR Rate Loan or Section 3.10 with respect
to a LIBOR Rate Bid Loan minus (b) the LIBOR Rate on, or as near as
practicable to, the date of the prepayment or failure to borrow with
respect to a LIBOR Rate Loan or LIBOR Rate Bid Loan with an Interest
Period commencing on such date and ending on the last day of the
Interest Period of the LIBOR Rate Loan or LIBOR Rate Bid Loan so
prepaid or which would have been borrowed on such date.
"Interest Expense" shall mean, for any period, the sum, for
the Company and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all
interest in respect of Indebtedness accrued or capitalized during such
period (whether or not actually paid during such period) plus (b) the
net amounts payable (or minus the net amounts receivable) under Swap
Contracts accrued during such period (whether or not actually paid or
received during such period).
"Interest Payment Date" means, with respect to any LIBOR Rate
Loan or Bid Loan, the last Business Day of each
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<PAGE> 23
Interest Period applicable to such Loan; with respect to any Base Rate
Loan, the last Business Day of each calendar quarter and each date a
Base Rate Loan is converted into a LIBOR Rate Loan; with respect to all
Loans, the Maturity Date; provided, however, that if any Interest
Period for a LIBOR Rate Loan or Bid Loan (unless waived by the Bank
making such Bid Loan) exceeds three months, interest shall also be paid
on the date which falls three months after the beginning of such
Interest Period.
"Interest Period" means: (a) with respect to any LIBOR Rate
Loan, the period commencing on the Business Day such LIBOR Rate Loan is
made or continued or on the date on which a Committed Loan is converted
into a LIBOR Rate Loan and ending on the date one, two, three or six
months thereafter (and, if approved by all Banks, nine or twelve months
thereafter) as selected by the Company in its Notice of Committed
Borrowing or Notice of Conversion/ Continuation; (b) with respect to
any LIBOR Rate Bid Loan, the period commencing on the Business Day on
which such LIBOR Rate Bid Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth (or, if approved
by the Bank making such Bid Loan, ninth or twelfth month thereafter),
as selected by the Company pursuant to Section 3.06, except that each
Interest Period that commences on the last Business Day of a calendar
month (or any day for which there is no numerically corresponding day
in the appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month; and (c) with
respect to any Absolute Rate Bid Loan, the period commencing on the
Business Day on which such Absolute Rate Bid Loan is made and ending
not less than seven days and not more than 365 days thereafter as
selected by the Company pursuant to Section 3.06; provided that:
(i) if any Interest Period pertaining to a LIBOR Rate
Loan or a Bid Loan would otherwise end on a day which is not a
Business Day, that Interest Period shall be extended to the
next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end
on the immediately preceding Business Day; and
(ii) no Interest Period shall extend beyond the
Maturity Date.
"Investment" means, for any Person: (a) the acquisition
(whether for cash, Property, services, securities or otherwise) of
capital stock, bonds, notes,
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<PAGE> 24
debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such
acquisition (including any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such
Person, but excluding any such advance, loan or extension of credit
having a term not exceeding 90 days representing the purchase price of
inventory or supplies sold by such Person in the Ordinary Course of
Business); (c) the entering into of any Contingent Obligation with
respect to, Indebtedness or other liability of any other Person and
(without duplication) any amount committed to be advanced, lent or
extended to such Person; or (d) the entering into of any Swap Contract.
"Lending Office" means, with respect to any Bank, the office
or offices of such Bank specified as its "Lending Office" or "Domestic
Lending Office" or "LIBOR Lending Office", as the case may be, opposite
its name on Schedule 11.02, or such other office or offices of such
Bank as it may from time to time notify the Company and the
Administrative Agent.
"Leverage Ratio" means the ratio of Funded Debt to the sum of
(a) EBITDAR plus (b) with respect to each acquisition permitted by this
Agreement made during the four consecutive fiscal quarters immediately
preceding any date of determination, the aggregate amount of Acquired
EBITDAR for the period commencing on the first day of such four fiscal
quarter period and ending on the date each such acquisition was made;
provided, however, that solely for purposes of Section 5.01(e)(iv), the
Leverage Ratio shall be calculated based on a consolidated pro forma
basis, with the assumptions that (i) the Recapitalization had been
consummated and (ii) the aggregate consideration paid by the Company in
connection with the Mirus Acquisition (with the Mass Mutual Series B
Note being deemed to be in an amount equal to $35,000,000) constitutes
Indebtedness.
"LIBOR Lending Office" means with respect to each Bank, the
office of such Bank designated as such on Schedule 11.02 or such other
office of such Bank as such Bank may from time to time specify by
written notice to the Company and the Administrative Agent.
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<PAGE> 25
"LIBOR Margin" has the meaning set forth in
Section 3.04.
"LIBOR Rate" means, for any Interest Period with respect to
any LIBOR Rate Loan and each LIBOR Rate Bid Loan in any Bid Borrowing,
the rate of interest per annum determined by the Administrative Agent
to be the arithmetic mean (rounded upward to the nearest 1/16th of 1%)
of the rates of interest per annum quoted to the Administrative Agent
by each Reference Bank as the rates of interest at which Dollar
deposits in an amount comparable to, in the case of LIBOR Rate Bid
Loans and with respect to each LIBOR Rate Bid Loan in the applicable
Bid Borrowing, such LIBOR Rate Bid Loan to be borrowed in such Bid
Borrowing, and, in the case of LIBOR Rate Loans, the principal amount
of the LIBOR Rate Loan to be made, converted or continued under this
Agreement for such Interest Period and having a term comparable to such
Interest Period, would be offered by such Reference Bank to major banks
in the London interbank market at their request at approximately 11:00
a.m. (London time) two Business Days prior to the commencement of such
Interest Period.
"LIBOR Rate Bid Loan" means a Bid Loan that bears interest
based on the LIBOR Rate, excluding any adjustment for Eurodollar
reserves pursuant to Section 4.06.
"LIBOR Rate Loan" means a Committed Loan that bears interest
based on the LIBOR Rate.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance,
lien (statutory or other) or preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever
(including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, any financing lease having
substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to
which such lien relates as debtor, under the Uniform Commercial Code as
in effect in the State of California or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not
including the interest of a lessor under an Operating Lease; provided,
however, that a Lien shall not be deemed to arise from reverse
repurchase agreements where the Borrower is the seller or from programs
where the Company lends securities.
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<PAGE> 26
"Loan" means a Committed Loan or a Bid Loan (collectively, the
"Loans").
"Loan Documents" means this Agreement, the Assumption
Agreement, the Committed Notes, the Bid Notes and the Fee Letters.
"Majority Banks" means, subject to the last paragraph of
Section 11.01, Banks then having at least 51% of the Aggregate
Commitment or if the Commitments shall have terminated, Banks holding
at least 51% of the aggregate unpaid principal amount of the Loans.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Mass Mutual Notes" means the Series A Promissory Note in the
amount of $62,000,000 and the Series B Promissory Note projected to be
in the amount of approximately $35,000,000, respectively, issued (or in
the case of the Series B Promissory Note, projected to be issued in
substantially the same form as the Series A Note other than with
respect to the face amount, which shall not exceed $40,000,000) by the
Company to Massachusetts Mutual Life Insurance Company in connection
with the Mirus Acquisition.
"Material Adverse Effect" means any circumstance or event that
constitutes a material adverse change in, or a material adverse effect
upon, any of (a) the operations, business, properties or condition
(financial or otherwise) of the Company or the Company and its
Subsidiaries taken as a whole; (b) a material impairment of the ability
of the Company to perform under any Loan Document and avoid any Event
of Default; or (c) a material adverse effect upon the legality,
validity, binding effect or enforceability of any Loan Document.
"Maturity Date" means the earlier to occur of (a) May 15, 2001
(or the date to which such date has been extended pursuant to Section
2.11) and (b) the date on which the Aggregate Commitment is terminated
in accordance with the provisions of this Agreement.
"Mirus Acquisition" means the acquisition of Mirus Insurance
Company by the Company from Massachusetts Mutual Life Insurance Company
pursuant to the Purchase Agreement dated as of January 5, 1996.
"Moody's" means Moody's Investors Service, Inc.
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<PAGE> 27
"Multiemployer Plan" means a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA) and to which any member of the
Controlled Group makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
"NationsBank" means NationsBank of Texas, N.A.
"Net Worth" means, at any date for any Person, the sum for
such Person and its Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following:
(a) the amount of capital stock (less the cost of treasury
shares), plus
(b) the amount of additional-paid-in-capital, surplus and
retained earnings (or, in the case of a surplus or retained earnings
deficit, minus the amount of such deficit).
"Non-Consenting Bank" has the meaning specified in Section
4.08.
"Note" means a Committed Note or a Bid Note, and "Notes" means
the Committed Notes and the Bid Notes.
"Notice of Committed Borrowing" means a notice given by the
Company to the Administrative Agent pursuant to Section 2.03, in
substantially the form of Exhibit B.
"Notice of Conversion/Continuation" means a notice given by
the Company to the Administrative Agent pursuant to Section 2.04, in
substantially the form of Exhibit C.
"Notice of Lien" means any "notice of lien" or similar
document intended to be filed or recorded with any court, registry,
recorder's office, central filing office or other Governmental
Authority for the purpose of evidencing, creating, perfecting or
preserving the priority of a Lien securing obligations owing to a
Governmental Authority.
"Obligations" means all Loans, Indebtedness, advances, debts,
liabilities, indemnifications, reimbursements, obligations, covenants
and duties owing by the Company to any Bank or any Agent, or any
indemnification owed to any other Person required to be indemnified,
that arises under any Loan Document, whether or not for the payment of
money, whether arising by reason of an extension of credit, loan,
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<PAGE> 28
guaranty, indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
however acquired.
"Operating Lease" means, as applied to any Person, any lease
of Property which is not a Capital Lease.
"Ordinary Course of Business" means, in respect of any
transaction involving the Company or any Subsidiary of the Company, the
ordinary course of such Person's business, as conducted by any such
Person in accordance with past practice and undertaken by such Person
in good faith and not for purposes of evading any covenant or
restriction in any Loan Document.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation or charter, the bylaws, any
certificate of determination or instrument relating to the rights of
preferred shareholders of such corporation, any shareholder rights
agreement, and all applicable resolutions of the board of directors (or
any committee thereof) of such corporation.
"Other Taxes" has the meaning specified in Section 4.01(b).
"Participant" has the meaning specified in Section 11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any of its principal functions under ERISA.
"Permitted Investments" means: (a) direct obligations of the
United States of America or of any of its agencies or obligations
guaranteed as to principal and interest by the United States of America
or by any of its agencies, in any case maturing not more than 90 days
from the date of acquisition of such obligation; (b) certificates of
deposit issued by any bank or trust company organized under the laws of
the United States of America or any state and having capital, surplus
and undivided profits of at least $500,000,000, maturing not more than
90 days from the date of acquisition; (c) commercial paper rated A-2 or
better or P-2 by S&P or Moody's, respectively, maturing not more than
180 days from the date of acquisition; (d) any repurchase agreement
with any financial institution the short-term obligations of which are
rated "P-2" or better by Moody's or "A-2" or better by S&P, which
agreement is secured by any
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<PAGE> 29
one or more securities of the type described in clause (a) above; and
(e) other readily marketable securities acquired in conformance with
the Company's "investment policy" dated October 19, 1993 (a copy of
which has been delivered to the Agents and the Banks) and any
amendments to such investment policy so long as such amendments do not
substantially modify such investment policy; provided, however that (i)
the amount invested in equity securities (other than such securities of
Subsidiaries of the Company) at any one time shall not exceed 20% of
the amount invested in all securities (other than securities of
Subsidiaries of the Company) and (ii) the amount invested in repurchase
agreements at any one time shall not exceed 20% of the amount invested
in all securities (other than securities of Subsidiaries of the
Company).
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising
under Swap Contracts; provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the Ordinary Course of Business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets
held by such Person, or changes in the value of securities issued by
such Person in conjunction with a securities repurchase program not
otherwise prohibited hereunder, and not for purposes of speculation or
taking a "market view"; and (b) such Swap Contracts do not contain any
provision (commonly known as a "walk-away" provision) exonerating the
non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, limited liability company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means a Multiemployer Plan or a Qualified Plan.
"Prior Credit Agreement" means that certain Credit Agreement
dated as of October 19, 1994 among the Company, the banks party thereto
and the Administrative Agent.
"Pro Rata Share" means, as to any Bank, the percentage
equivalent of such Bank's Commitment divided by the Aggregate
Commitment.
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<PAGE> 30
"Property" means any estate or interest in any kind of
property or asset, whether real, personal or mixed, and whether
tangible or intangible.
"Proxy" means the Company's proxy statement dated April 10,
1996 for solicitation of the shareholder vote in connection with the
Recapitalization.
"Qualified Plan" means a pension plan intended to be
tax-qualified under Section 401(a) of the Code, which is subject to
Title IV of ERISA and which any member of the Controlled Group
sponsors, maintains, or to which it makes, is making or is obligated to
make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding period covering at least five
plan years, but excluding any Multiemployer Plan.
"Recapitalization" means the recapitalization,
recharacterization, merger and other transactions to be effected
pursuant to the terms and conditions of the Recapitalization
Agreements, including (a) the Company's payment of a special cash
dividend to the holders of the Company's common stock, (b) the BCC
Conversion and (c) the merger of the Company with and into Converted
BCC.
"Recapitalization Agreement" means the Amended and Restated
Recapitalization Agreement dated as of March 31, 1995 as executed on
February 20, 1996 among BCC, the Company, the Health Foundation, and
the Western Foundation for Health Improvement, a California nonprofit
public benefit corporation, as in effect on the date of the execution
and delivery of this Agreement.
"Recapitalization Agreements" means (a) the Recapitalization
Agreement and (b) the other material documents executed in connection
with the transactions contemplated by the Recapitalization Agreement as
listed in Part B of Schedule 6.20 to this Agreement.
"Recapitalized Company" means WellPoint Health Networks Inc.,
a California corporation, the successor to the Company and BCC
following the consummation of the transactions contemplated by the
Recapitalization Agreements.
"Reference Banks" means each of BofA, Chemical Bank and
NationsBank (or their respective Lending Offices, as the case may be).
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<PAGE> 31
"Regulatory Tangible Net Equity" shall mean, for any HMO,
"tangible net equity," "tangible equity" or any similar term, as
defined by any HMO Regulation promulgated by any HMO Regulator as shall
be applicable to such HMO.
"Regulatory Tangible Net Equity Requirement" shall mean, as to
any HMO, the minimum level at which an HMO is required by any
applicable HMO Regulation or HMO Regulator to maintain its Regulatory
Tangible Net Equity.
"Replacement Bank" means a financial institution that (a) has
agreed to acquire and assume all or part of a Bank's Loans and
Obligations pursuant to Section 4.08 and (b) is reasonably satisfactory
to the Agents, the Majority Banks (determined without counting the
interest of the replaced Bank) and the Company.
"Reportable Event" means, as to any Plan, (a) any of the
events set forth in Section 4043(b) of ERISA or the regulations under
ERISA, other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
PBGC, (b) a withdrawal from a Plan described in Section 4063 of ERISA,
or (c) a cessation of operations described in Section 4062(e) of ERISA.
"Responsible Officer" means the chief executive officer or the
president of the Company, the Senior Vice President and General Counsel
of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of
the Company, or any other officer having substantially the same
authority and responsibility.
"Restricted Payment" shall mean dividends (in cash, Property
or obligations) on, or other payments or distributions on account of,
or the setting apart of money for a sinking or other analogous fund
for, or the purchase, redemption, retirement or other acquisition of,
any shares of any class of stock of the Company (including common and
preferred) or any of the Company's Subsidiaries or of any warrants,
options or other rights to acquire the same (or to make any payments to
any Person, such as "phantom stock" payments, where the amount is
calculated with reference to the fair market or equity value of the
Company or any of its Subsidiaries), but excluding dividends payable
solely in shares of common stock of the Company or any of the Company's
Subsidiaries.
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<PAGE> 32
"SEC" means the Securities and Exchange Commission, or
any entity succeeding to any of its principal functions.
"S&P" means Standard & Poor's Ratings Group.
"Solvent" means, as to any Person at any time, that (a) the
fair value of the property of such Person is greater than the amount of
such Person's liabilities (including disputed, contingent and
unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(31) of the Bankruptcy Code and,
in the alternative, for purposes of the California Uniform Fraudulent
Transfer Act; (b) the present fair saleable value of the property of
such Person is not less than the amount that will be required to pay
the probable liability of such Person on its debts as they become
absolute and matured; (c) such Person is able to realize upon its
property and pay its debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the Ordinary
Course of Business; (d) such Person has not incurred and does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction,
for which such Person's property would constitute unreasonably small
capital.
"Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than
51% of the Voting Stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option
to enter into any of the foregoing) or
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<PAGE> 33
any combination of the foregoing, and, unless the context otherwise
clearly requires, any master agreement relating to or governing any or
all of the foregoing.
"Swap Termination Value" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and the termination value or values determined in accordance therewith,
such termination values, and (b) for any date prior to the date
referenced in clause (a) the amounts determined as the mark-to-market
value or values for such Swap Contracts.
"Syndication Agent" has the meaning specified in the preamble
to this Agreement.
"Taxes" has the meaning specified in Section 4.01(a).
"Total Assets" means, at any date of determination, all
property, whether real, personal, tangible, intangible or otherwise,
that, in accordance with GAAP, should be included in determining total
assets as shown on the assets portion of a balance sheet.
"Transferee" has the meaning specified in Section 11.08(e).
"Type" means, as to any Loan, its nature as a Base Rate Loan,
a LIBOR Rate Loan or a LIBOR Rate Bid Loan.
"Undertakings" means the Amended and Restated Undertakings
dated as of March 5, 1996 among BCC, the Company, CaliforniaCare Health
Plans, Wellpoint Dental Plan, Wellpoint Pharmacy Plan, Wellpoint Life
Insurance Company, Unicare Life Insurance Company and Comprehensive
Integrated Marketing Services, Inc.
"Unfunded Pension Liabilities" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used by the Plan's actuaries for funding the Plan pursuant
to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each mean the United States
of America.
"Voting Stock" means shares of stock of a corporation
of any class or classes (however designated) having ordinary
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<PAGE> 34
voting power for the election of a majority of the members of the board
of directors (or other governing body) of such corporation, other than
stock having such power only by reason of the happening of a
contingency.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of
the capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
"Withdrawal Liabilities" means, as of any determination date,
the aggregate amount of the liabilities, if any, pursuant to Section
4201 of ERISA if the Controlled Group made a complete withdrawal from
all Multiemployer Plans and any increase in contributions pursuant to
Section 4243 of ERISA.
1.02 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified, all terms
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant to this Agreement. The
meaning of defined terms shall be equally applicable to the singular and plural
forms of the defined terms.
(b) The Agreement. The words "hereof", "herein", "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
section, schedule and exhibit references are to this Agreement unless otherwise
specified.
(c) Certain Common Terms.
(i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(d) Performance; Time. Whenever any performance Obligation
shall be stated to be due or required to be satisfied on a day other than a
Business Day, such performance shall be made or satisfied on the next succeeding
Business Day. In the
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<PAGE> 35
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each mean
"to but excluding", and the word "through" means "to and including." If any
provision of this Agreement refers to any action taken or to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
interpreted to encompass any and all means, direct or indirect, of taking, or
not taking, such action.
(e) Contracts. Unless otherwise expressly provided,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(f) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(g) Captions. The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation of
this Agreement.
(h) Independence of Provisions. The parties acknowledge that
this Agreement and other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
(i) Construction. This Agreement and the other Loan Documents
are the result of negotiations between the Company and the Agents and the Banks
and have been reviewed by counsel to all parties. Accordingly, they shall not be
construed against the Banks or the Agents merely because of the Agents' or
Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, all financial
computations required under this Agreement shall be made and all financial
statements and certificates and reports as to financial matters required to be
delivered under this Agreement shall be prepared, in accordance with GAAP,
consistently applied; provided, however, that, if GAAP shall have been modified
after the Effective Date and the application of such modified GAAP shall have a
material effect on such financial
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<PAGE> 36
computations (including the computations required for the purpose of determining
compliance with the covenants set forth in Article VIII), then such computations
shall be made and such financial statements, certificates and reports shall be
prepared, and all accounting terms not otherwise defined herein shall be
construed, in accordance with GAAP as in effect prior to such modification,
unless and until the Majority Banks and the Company shall have agreed upon the
terms of the application of such modified GAAP.
(b) References herein to "fiscal year" of the Company, refer
to the fiscal period of the Company the last day of which is December 31 of each
year and references to "fiscal quarter" refer to each of the fiscal periods of
the Company, the last day of which is March 31, June 30 and September 30 of each
year, respectively.
ARTICLE II
THE COMMITTED LOANS
2.01 The Commitments. Each Bank severally agrees, on the terms
and conditions of this Agreement, to make loans in Dollars to the Company
pursuant to its Commitment (each such loan, a "Committed Loan") from time to
time on any Business Day during the period from the Effective Date to the
Maturity Date, in an aggregate amount outstanding up to but not exceeding the
amount of the Commitment of such Bank as in effect from time to time; provided,
however, that, after giving effect to any Committed Borrowing of Committed
Loans, the aggregate principal amount of all outstanding Committed Loans and all
outstanding Bid Loans shall not in any event exceed the Aggregate Commitment.
Within the limits of each Bank's Commitment, and subject to the other terms and
conditions hereof, during such period the Company may borrow under this Section
2.01, prepay pursuant to Section 2.06 and reborrow pursuant to this Section
2.01, and may convert or continue Committed Loans as provided in Section 2.04.
No more than ten separate Interest Periods in respect of LIBOR Rate Loans
(including Bid Loans) from the Banks may be outstanding at any one time.
2.02 Loan Accounts. (a) The Committed Loans made by each Bank
shall be evidenced by one or more loan accounts maintained by the Administrative
Agent and such Bank in the Ordinary Course of Business. The loan accounts or
records maintained by the Administrative Agent and each Bank shall be conclusive
absent manifest error of the amount of the Committed Loans made by the Banks to
the Company and the interest and payments thereon. Any failure so to record or
any error in doing
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so shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Committed Loans.
(b) Upon the request of any Bank made through the
Administrative Agent, the Committed Loans made by such Bank may be evidenced by
one or more Committed Notes, instead of loan accounts. Each such Bank shall
endorse on the schedules annexed to its Committed Note(s) the date, amount and
maturity of each Committed Loan made by it and the amount of each payment of
principal made by the Company with respect thereto. Each such Bank is
irrevocably authorized by the Company to endorse its Committed Note(s) and each
Bank's record shall be conclusive absent manifest error; provided, however, that
the failure of a Bank to make, or an error in making, a notation thereon with
respect to any Committed Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Committed Note to such
Bank.
2.03 Procedure for Committed Borrowings.
(a) Each Committed Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Administrative Agent in accordance
with Section 11.02 in the form of a Notice of Committed Borrowing, which notice
must be received by the Administrative Agent prior to 9:00 a.m. (San Francisco
time) (i) three Business Days prior to the requested Borrowing date, in the case
of LIBOR Rate Loans, and (ii) on the requested Borrowing date, in the case of
Base Rate Loans, specifying in each case: (A) the amount of the Committed
Borrowing, which shall be in an aggregate minimum principal amount of $5,000,000
and any multiple of $1,000,000 in excess thereof for each Type of Loan; (B) the
requested Borrowing date, which shall be a Business Day; (C) whether the
Committed Borrowing is to consist of LIBOR Rate Loans or Base Rate Loans; and
(D) the duration of the Interest Period applicable to LIBOR Rate Loans included
in such notice. If the Notice of Committed Borrowing shall fail to specify the
duration of the Interest Period for any Committed Borrowing comprising LIBOR
Rate Loans, such Interest Period shall be one month.
(b) Upon receipt of a Notice of Committed Borrowing, the
Administrative Agent will promptly notify each Bank thereof and of the amount of
such Bank's Pro Rata Share of the Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
the Committed Borrowing available to the Administrative Agent for the account of
the Company at the Agent's Payment Office by 11:00 a.m. (San Francisco time) on
the Borrowing date
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requested by the Company in funds immediately available to the Administrative
Agent. Any such amount which is received by the Administrative Agent later than
11:00 a.m. (San Francisco time) shall be deemed to have been received on the
immediately succeeding Business Day. The proceeds of all such Committed Loans
will then be made available to the Company by the Administrative Agent by wire
transfer in accordance with written instructions provided to the Administrative
Agent by the Company of like funds as received by the Administrative Agent.
(d) Unless the Majority Banks shall otherwise agree, during
the existence of a Default or Event of Default, the Company may not elect to
have a Committed Loan be made as, or converted into or continued as, a LIBOR
Rate Loan.
2.04 Conversion and Continuation Elections.
(a) The Company may (i) elect to convert on any Business Day,
any Base Rate Loans (or any part thereof in an amount not less than $5,000,000
or an integral multiple of $1,000,000 in excess thereof) into LIBOR Rate Loans;
(ii) elect to convert on the last day of the Interest Period therefor, any LIBOR
Rate Loans (or any part thereof in an amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof) into Base Rate Loans; or
(iii) elect to continue, on the last day of the Interest Period therefor, any
LIBOR Rate Loans (or any part thereof in an amount not less than $5,000,000 or
an integral multiple of $1,000,000 in excess thereof); provided, that if the
aggregate amount of LIBOR Rate Loans shall have been reduced, by payment,
prepayment, or conversion of part thereof to be less than $5,000,000, LIBOR Rate
Loans shall automatically convert into Base Rate Loans, and on and after such
date the right of the Company to continue such Loans as, and convert such Loans
into, LIBOR Rate Loans shall terminate.
(b) Each conversion or continuation shall be made upon
irrevocable written notice in the form of a Notice of Conversion/Continuation,
which notice must be received by the Administrative Agent prior to 9:00 a.m.
(San Francisco time) (i) three Business Days in advance of the Conversion Date,
if the Loans are to be converted into or continued as LIBOR Rate Loans; and (ii)
on the Conversion Date, if the Loans are to be converted into Base Rate Loans,
specifying: (A) the proposed Conversion Date; (B) the aggregate amount of Loans
to be converted or continued; (C) the nature of the proposed conversion or
continuation; and (D) the duration of the requested Interest Period, if
applicable.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Rate Loans, the Company has failed to select
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a new Interest Period to be applicable thereto, or if any Default or Event of
Default shall then exist, the Company shall be deemed to have elected to convert
such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date
of such current Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the
Administrative Agent will promptly notify each Bank thereof, or, if no timely
notice is provided by the Company, the Administrative Agent will promptly notify
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made pro rata according to the respective outstanding
principal amounts of the Loans held by each Bank with respect to which the
notice was given.
2.05 Voluntary and Involuntary Reduction or Termination of
Commitments.
(a) The Company may, upon not less than five Business Days'
prior notice to the Administrative Agent, (i) so long as no Loans are
outstanding, terminate the Aggregate Commitment or (ii) permanently reduce the
unused portion of the Aggregate Commitment (for which purpose use of the
Aggregate Commitment shall be deemed to include the aggregate principal amount
of all Bid Loans) by an aggregate minimum amount of $10,000,000 or any multiple
of $5,000,000 in excess thereof; provided that no such reduction or termination
shall be permitted if, after giving effect thereto and to any prepayments of the
Loans made on the effective date thereof, the sum of the then outstanding
principal amount of all Committed Loans plus the then outstanding principal
amount of all Bid Loans would exceed the amount of the Aggregate Commitment then
in effect and, provided, further, that once reduced in accordance with this
Section 2.05, the Aggregate Commitment may not be increased. Any reduction of
the Aggregate Commitment shall be applied to each Bank's Commitment in
accordance with such Bank's Pro Rata Share. All accrued commitment fees to, but
not including the effective date of any termination or reduction of Commitments,
shall be paid on the effective date of such termination or reduction (in the
case of any reduction on the amount so reduced); and
(b) The Aggregate Commitment shall be automatically
reduced to zero on the Maturity Date.
2.06 Optional Prepayments. Subject to Section 4.04, the
Company may, at any time or from time to time, upon at least three Business
Days' written notice to the Administrative Agent, which notice must be received
prior to 9:00 a.m. (San Francisco time), ratably prepay Committed Loans in whole
or in part, in amounts of $5,000,000 or any larger multiple of $1,000,000. Such
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notice of prepayment shall specify the date and amount of such prepayment and
whether such prepayment is of Base Rate Loans or LIBOR Rate Loans, or any
combination thereof; provided that LIBOR Rate Loans prepaid other than on the
last day of an Interest Period for such Loans shall be subject to the terms of
Section 4.04. Such notice shall not thereafter be revocable by the Company and
the Administrative Agent will promptly notify each Bank thereof and of such
Bank's Pro Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount specified
in such notice shall be due and payable on the date specified therein, together
with, in the case of LIBOR Rate Loans, accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 4.04. Accrued
interest on prepaid Base Rate Loans shall remain payable in arrears on the next
Interest Payment Date.
2.07 Repayment of Principal. The Company shall pay to the
Administrative Agent for the account of each Bank the entire outstanding
principal amount of such Bank's Committed Loans, and each Committed Loan shall
mature, on the Maturity Date. In addition, if at any time the aggregate
principal amount of the Loans shall exceed the Aggregate Commitment, the Company
shall immediately prepay Loans in an aggregate amount equal to such excess.
2.08 Interest on Committed Loans.
(a) Subject to Section 2.08(c), each LIBOR Rate Loan shall
bear interest on the outstanding principal amount thereof from the date when
made until it becomes due at a rate per annum equal to the LIBOR Rate plus the
Applicable Amount in effect in accordance with Annex I for LIBOR Rate Loans, and
each Base Rate Loan shall bear interest on the outstanding principal amount
thereof from the date when made until it becomes due at a rate per annum equal
to the Base Rate.
(b) Interest on each Committed Loan shall be paid in arrears
on each Interest Payment Date. Interest shall also be paid on the date of any
prepayment of LIBOR Rate Loans pursuant to Section 2.06 for the portion of the
LIBOR Rate Loans so prepaid and upon payment (including prepayment) in full
thereof and, during the existence of any Event of Default, interest shall be
paid on demand of the Administrative Agent at the request of the Majority Banks.
(c) While any Event of Default exists pursuant to Section
9.01(a), 9.01(c), 9.01(h) or 9.01(i), the Company shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the
principal amount of all
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Loans, fees, and other payment Obligations due and unpaid as follows: (i) in the
case of Loans, at a rate per annum which is determined by adding two percent
(2%) per annum to the interest rate otherwise applicable for such Loans and (ii)
in the case of all other payment Obligations, at a rate per annum equal to the
Base Rate plus two percent (2%); provided, however, that, on and after the
expiration of any Interest Period applicable to any LIBOR Rate Loan outstanding
on the date of occurrence of such Event of Default or acceleration, the
principal amount of such Committed Loan shall, during the continuation of such
Event of Default or after acceleration, bear interest at a rate per annum equal
to the Base Rate plus two percent (2%).
2.09 Fees.
(a) Facility Fee. The Company shall pay to the Administrative
Agent for the account of each Bank a facility fee (the "Facility Fee"), equal to
the Applicable Amount then in effect for the Facility Fee, on the amount of such
Bank's Commitment (without regard to usage), as such Commitment may be reduced
pursuant to Section 2.05, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter, based upon the average daily amount of
such Bank's Commitment for such quarter, as calculated by the Administrative
Agent. The Facility Fee shall accrue during the period from the Effective Date
to the Maturity Date and shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter commencing on the first such date to
occur after the Effective Date through the Maturity Date, with the final payment
to be made on the Maturity Date; provided that, in connection with any
termination of Commitments pursuant to Section 2.05, the accrued Facility Fee
calculated for the period ending on such date shall also be paid on the date of
such termination. The Facility Fee provided in this Section 2.09(a) shall accrue
at all times after the above-mentioned commencement date, including at any time
during which one or more conditions in Article V are not met.
(b) Structuring and Arrangement Fee and Other Fees. The
Company shall pay to the Administrative Agent (i) for the account of the
Co-Arrangers a structuring and arrangement fee and (ii) such other fees and sums
in the amounts and at the times set forth in the Co-Arrangers' Fee Letter.
(c) Agency Fee. The Company shall pay to the Administrative
Agent for the Administrative Agent's own account an agency fee and other sums in
the amount and at the times set forth in the Administrative Agent Fee Letter.
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2.10 Computation of Fees and Interest.
(a) All computations of interest payable in respect of Base
Rate Loans and the Facility Fee shall be made on the basis of a year of 365 or
366 days (unless the Base Rate is calculated by reference to the Federal Funds
Rate, in which case the Base Rate shall be based on a year of 360 days), as the
case may be, and actual days elapsed. All other computations of interest under
this Agreement shall be made on the basis of a 360-day year and actual days
elapsed, which results in more interest being paid than if computed on the basis
of a 365-day year. Interest and fees shall accrue during each period during
which interest or such fees are computed from the first day thereof to the last
day thereof.
(b) The Administrative Agent will, with reasonable
promptness, notify the Company and the Banks of each determination of a LIBOR
Rate and any other change in interest rates hereunder; provided that any failure
to do so shall not relieve the Company of any liability hereunder or provide the
basis for any claim against the Administrative Agent.
(c) Each determination of an interest rate by the
Administrative Agent shall be conclusive and binding on the Company and the
Banks in the absence of manifest error. The Administrative Agent will deliver to
the Company and, at the request of any Bank, deliver to such Bank, a statement
showing the quotations used by the Administrative Agent in determining any
interest rate.
2.11 Optional Extension of Commitments. The Company may
request the Banks to extend the Maturity Date for a period of one year by
delivering a written request for such extension to the Administrative Agent and
each Bank on or before the 30th day (but no more than 60 days) prior to each
anniversary of the Effective Date; and, if such extension has been effected, the
Company may again request that the Banks extend the Maturity Date for one
additional period of one year by delivering a written request for such
additional extension to the Administrative Agent on or before the 30th day (but
no more than 60 days) prior to the sixth anniversary of the Effective Date. Each
such extension shall require the unanimous consent of the Banks. Each Bank shall
respond in writing to the Company's request for extension by providing written
notice of its acceptance or rejection of such request to the Administrative
Agent within 15 Business Days after the date on which such written request was
transmitted by the Company. Any Bank not responding within such period shall be
deemed to have rejected such request for extension. In the event any Bank
rejects or is deemed to have rejected a request for extension pursuant to this
Section 2.11, the replacement of any
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such Bank and extension of the Commitments, if any, shall be governed by Section
4.08. The Maturity Date shall in no event be after the date which is the seventh
anniversary of the Effective Date.
ARTICLE III
THE BID LOANS
3.01 Bid Loan Availability. Subject to the other terms and
conditions of this Agreement, each Bank hereby severally agrees that the Company
may, as set forth in Section 3.02, from time to time on any Business Day from
the Effective Date to the Maturity Date, request one or more Banks to submit
offers to make Bid Loans to the Company in Dollars; provided, however, that,
after giving effect to any Bid Borrowing of Bid Loans, the aggregate principal
amount of all outstanding Committed Loans and all outstanding Bid Loans shall
not in any event exceed the Aggregate Commitment, although the aggregate
principal amount of all outstanding Committed Loans and Bid Loans made by any
individual Bank may exceed such Bank's Commitment; provided, further, that the
Banks may, but shall have no obligation to, submit such offers and the Company
may, but shall have no obligation to, accept any such offers.
3.02 Procedure for Bid Borrowings. The Company may at any time
solicit offers from any or all of the Banks, either directly or by requesting
that the Administrative Agent conduct such a solicitation, to make Bid Loans to
the Company. When the Company wishes that such solicitation be conducted by the
Administrative Agent, the Company shall give irrevocable telephonic notice
requesting a Bid Borrowing to the Administrative Agent, followed immediately by
delivery of a written notice in the form of a Competitive Bid Request in
substantially the form of Exhibit D (which written notice must be received by
the Administrative Agent (a) not later than 9:00 a.m. (San Francisco time) at
least four Business Days prior to the date of the proposed Bid Borrowing, in the
case of a request for LIBOR Rate Bid Loans and (b) not later than 8:00 a.m. (San
Francisco time) at least one Business Day prior to the date of the proposed Bid
Borrowing, in the case of a request for Absolute Rate Bid Loans), specifying:
(i) the date of the proposed Bid Borrowing, which shall be a
Business Day;
(ii) the aggregate amount of such Bid Borrowing, which shall
be a minimum amount of $5,000,000 or in multiples of $1,000,000 in
excess thereof;
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(iii) the duration of the Interest Period or Periods applicable
thereto, subject to the provisions of the definition of Interest Period
and amount for each Interest Period; and
(iv) whether the Bid Loans requested are LIBOR Rate Bid Loans
or Absolute Rate Bid Loans (but not both if such solicitation is to be
made by the Administrative Agent).
Each Competitive Bid Request shall be accompanied by a bid request fee in the
amount set forth in the Fee Letter referred to in Section 2.09(c). If a
solicitation is conducted by the Administrative Agent, the Company may not (i)
request Competitive Bids for more than three Interest Periods, (ii) request more
than one Type of Bid Loan in a single Competitive Bid Request or (iii) request
that the Administrative Agent solicit Bid Loans more than once in any
consecutive seven Business Day period. Notwithstanding any other provision
contained in this Agreement: (A) after giving effect to any Bid Borrowing, there
shall not be more than ten different Bid Loans outstanding and (B) after giving
effect to any funding conversion or continuation of Committed Loans, there may
not be more than ten different Interest Periods in effect in respect of all
Committed Loans and Bid Loans together outstanding at the same time (for which
purpose Interest Periods described in different lettered clauses of the
definition of the term "Interest Period" shall be deemed to be different
Interest Periods even if they are coterminous).
3.03 Invitations for Submission of Competitive Bids. If the
Administrative Agent is soliciting bids, promptly upon its receipt of a
Competitive Bid Request, the Administrative Agent shall notify the Banks of such
receipt and provide a copy thereof to each Bank. If the Company is directly
soliciting offers to make Competitive Bids, the Company shall send by facsimile
to the Bank or Banks from which the Company wishes to solicit offers (with a
copy to the Administrative Agent) a Competitive Bid Request so that such
Competitive Bid Request, which must be received by such Bank or Banks no later
than (i) 9:00 a.m. (San Francisco time) at least three Business Days prior to
the date of the proposed Bid Borrowing in the case of LIBOR Rate Bid Loans and
(ii) 6:30 a.m. (San Francisco time) on the date of the proposed Bid Borrowing in
the case of Absolute Rate Bid Loans, in each case specifying the same matters as
set forth in clauses (i), (ii), (iii) and (iv) of such Section 3.02.
3.04 Submission of Competitive Bids.
(a) In response to a Competitive Bid Request, each Bank, or
in the case of a solicitation by the Company, each Bank that has received such
Competitive Bid Request, may, at its
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option, irrevocably submit a Competitive Bid containing an offer to make one or
more Bid Loans at a rate or rates of interest specified by such Bank in its sole
discretion. If the solicitation was conducted by the Administrative Agent, each
Competitive Bid must be submitted to the Administrative Agent before 6:45 a.m.
(San Francisco time) (i) three Business Days prior to the date of the proposed
Bid Borrowing, in the case of a request for LIBOR Rate Bid Loans and (ii) on the
date of the proposed Bid Borrowing, in the case of a request for Absolute Rate
Bid Loans; provided, that any Competitive Bids submitted by BofA must be
submitted before 6:30 a.m. (San Francisco time) (A) three Business Days prior to
the date of the proposed Bid Borrowing, in the case of a request for LIBOR Rate
Bid Loans, and (B) on the date of the proposed Bid Borrowing, in the case of a
request for Absolute Rate Bid Loans. If the solicitation was conducted by the
Company, each Competitive Bid must be submitted to the Company before (i) 10:00
a.m. (San Francisco time) three Business Days prior to the date of the proposed
Bid Borrowing, in the case of a request for LIBOR Rate Bid Loans and (ii) 7:00
a.m. (San Francisco time) on the date of the proposed Bid Borrowing, in the case
of a request for Absolute Rate Bid Loans, unless otherwise specified by the
Company in its Competitive Bid Request.
(b) Each Competitive Bid shall be substantially in the form
of Exhibit E and shall specify:
(i) the proposed date of the Bid Borrowing;
(ii) the principal amount of each Bid Loan and the Interest
Period for such loan, for which such Competitive Bid is being made,
which aggregate principal amount (x) may be equal to, greater than or
less than such Bank's Commitment, (y) must be at least $5,000,000 or a
larger multiple of $1,000,000 and (z) may not exceed the principal
amount of the Bid Loans for which Competitive Bids were requested;
(iii) in the case of a request for LIBOR Rate Bid Loans, the
margins above or below the applicable LIBOR Rate (the "LIBOR Margin")
offered for each such Bid Loan, expressed in multiples of 1/1000th of
one basis point to be added to or subtracted from the applicable LIBOR
Rate and the applicable Interest Period;
(iv) in the case of a request for Absolute Rate Bid Loans, the
rate per annum (the "Absolute Rate"), expressed in multiples of 1/1000th
of one basis point offered for each such Bid Loan and the applicable
Interest Period;
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(v) the maximum aggregate principal amount of all Bid Loans
being offered by such Bank; and
(vi) the identity of the quoting Bank.
Competitive Bids may contain up to three separate offers by the quoting Bank
with respect to each Interest Period specified in the related Competitive Bid
Request.
(c) Any Competitive Bid shall be disregarded if it: (i) is
not substantially in conformity with Exhibit E or does not specify all of the
information required by Section 3.04(b); (ii) contains qualifying, conditional
or similar language; (iii) proposes terms other than or in addition to those set
forth in the applicable Competitive Bid Request; or (iv) arrives after the time
set forth in Section 3.04(a) above.
(d) Notwithstanding anything to the contrary contained in
this section, a Competitive Bid may contain, and will not be disregarded if it
does contain, a restriction on the use of proceeds consistent with Section 7.10.
3.05 Notice to Company. In the event that the solicitation for
Competitive Bids was conducted by the Administrative Agent, then, no later than
7:15 a.m. (San Francisco time) on the date of the proposed Bid Borrowing (or, in
the case of a Bid Borrowing of LIBOR Rate Bid Loans, on the third Business Day
prior to the date of the proposed Bid Borrowing), the Administrative Agent shall
notify the Company of the terms of any Competitive Bid submitted by a Bank that
is in accordance with Section 3.04. The Administrative Agent's notice to the
Company shall specify (a) the respective principal amounts and LIBOR Margins or
Absolute Rates, as the case may be, so offered and (b) the aggregate principal
amount of Bid Loans for which offers have been received for each Interest Period
specified in the related Competitive Bid Request.
3.06 Acceptance and Rejection of Competitive Bids. Not later
than 7:45 a.m. (San Francisco time) in the case of a solicitation by the
Administrative Agent and, in the case of a solicitation by the Company, not
later than (i) 11:00 a.m. (San Francisco time) three Business Days prior to the
date of the proposed Bid Borrowing, in the case of a Bid Borrowing of LIBOR Rate
Bid Loans and (ii) 8:30 a.m. (San Francisco time) on the date of such Bid
Borrowing in the case of a Bid Borrowing of Absolute Rate Bid Loans, unless
otherwise specified by the Company in its Competitive Bid Request, the Company
shall notify the Administrative Agent of either:
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(a) its cancellation of such Bid Borrowing by giving the
Administrative Agent and each of the Banks having made an offer for such
Bid Loan notice thereof; or
(b) its acceptance of one or more of the offers for any
Interest Period made by any Bank or Banks pursuant to Section 3.04 and
its rejection of any such remaining offers made by the Banks, all in its
sole discretion; provided, however, that: (A) the principal amount of
each Bid Loan shall be not less than the minimum amount nor more than
the maximum amount notified to the Company for such Bid Loan pursuant to
Section 3.04 (but which Bid Loans shall not, in the aggregate, exceed
the aggregate amount of Bid Loans requested pursuant to Section 3.02) to
be made by each such Bank as part of such Bid Borrowing; (B) acceptance
by the Company of offers for Bid Loans may only be made on the basis of
ascending interest rates applicable to the same Interest Period; (C) if
offers are made by two or more Banks with the same interest rate
applicable to the same Interest Period for a greater aggregate amount
than the amount for which such offers are accepted, the principal amount
of Bid Loans accepted shall be allocated among such Banks by the
Administrative Agent or the Company as the case may be (depending on
which of these parties conducted the solicitation) as nearly as possible
(in such multiples not less than $1,000,000 or integral multiples of
$1,000,000 in excess thereof) in proportion to the aggregate principal
amount of such offers; (D) in the event the Company does not, before the
time stated above, either cancel the proposed Bid Borrowing pursuant to
clause (a) above or accept one or more of the offers pursuant to this
clause (b), such Bid Borrowing shall irrevocably be deemed cancelled in
its entirety; and (E) in the event the Company accepts one or more of
the offers in accordance with this clause (b) but does not expressly
reject or accept the remaining offers, such remaining offers shall
automatically be deemed rejected; provided, further, that with respect
to solicitations for Competitive Bids made directly by the Company, the
Company may accept such Competitive Bids in whole or in part.
3.07 Notification and Making of Bid Loans.
(a) Promptly after the Company has notified the
Administrative Agent of its acceptance of any offer or offers pursuant to
Section 3.06, the Administrative Agent shall notify each Bank that submitted a
Competitive Bid whether its offer has been accepted and, if its offer has been
accepted, the amount of the Bid Loan or Bid Loans to be made by it on the date
of the Bid Borrowing.
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(b) If the Company accepts one or more of the offers to make
Bid Loans made by any Bank or Banks, each such Bank which is to make a Bid Loan
or Bid Loans as part of such Bid Borrowing shall, subject to satisfaction of the
conditions set forth in Section 5.02, on the Bid Borrowing date of such proposed
Bid Borrowing make the amount of such Bid Loan available to the Administrative
Agent in immediately available funds, by remitting such amount to the Agent's
Payment Office for the account of the Company no later than 11:00 a.m. (San
Francisco time) in the case of a solicitation by the Administrative Agent and
noon (San Francisco time) in the case of a solicitation by the Company on the
Borrowing date. Upon satisfaction of the conditions set forth in Section 5.02,
the Administrative Agent shall make available to the Company on such Borrowing
date the aggregate of the amounts so made available by such Banks by causing an
amount of immediately available funds equal to such aggregate amount received by
the Administrative Agent to be credited to the account of the Company at such
office of the Administrative Agent.
(c) If such solicitation was conducted by the Administrative
Agent, after the Administrative Agent has been notified of the offers accepted
by the Company pursuant to Section 3.06, the Administrative Agent shall notify
all Banks of the ranges of bids submitted and the highest and lowest bids
accepted for each Interest Period requested by the Company and the aggregate
amount borrowed pursuant to such Bid Borrowing.
3.08 Notification of Rates. Upon being notified by the Company
of the amount of, and the applicable Interest Period for, any LIBOR Rate Bid
Loan, the Administrative Agent shall determine the LIBOR Rate and give notice
thereof to the Company and the relevant Bank or Banks two Business Days prior to
the date of the Bid Borrowing of such LIBOR Rate Bid Loan.
3.09 Repayment of Bid Loans. The Company shall repay to the
Administrative Agent for the account of each Bank that makes any Bid Loan the
principal amount of such Bid Loan, and when such Bid Loan shall mature, on the
last day of the Interest Period for such Bid Loan. Bid Loans may not be
voluntarily prepaid, unless such prepayment has been consented to by the Bank
having made such Bid Loan, nor converted to Loans of another Type or continued.
If any such prepayment is consented to by the applicable Bid Bank, the Company
shall provide at least three Business Days notice prior to any such prepayment
to such Bid Bank and the Administrative Agent.
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3.10 Interest on Bid Loans.
(a) Subject to Section 3.10(c), the Bid Loans shall bear
interest on the unpaid principal amount thereof from the date made to maturity
(whether by acceleration or otherwise) at a rate per annum equal to the interest
rate accepted pursuant to Section 3.07.
(b) Subject to Section 3.10(c), interest shall be payable in
arrears on each Interest Payment Date applicable to the relevant Bid Loan. All
computations of interest payable in respect of Bid Loans shall be made on the
basis of a 360-day year and actual days elapsed, which results in more interest
being paid than if computed on the basis of a 365-day year. Interest shall
accrue during each period during which interest is computed from the first day
thereof to the last day thereof.
(c) While any Event of Default exists pursuant to Section
9.01(a), 9.01(c), 9.01(h) or 9.01(i), the Company shall pay interest on Bid
Loans as set forth in Section 2.08(c).
3.11 Bid Notes.
(a) The Bid Loans made by each Bank shall be evidenced by one
or more loan accounts maintained by the Administrative Agent and such Bank in
the ordinary course of business. The loan accounts or records maintained by the
Administrative Agent and each Bank shall be conclusive absent manifest error of
the amount of the Bid Loan made by the Banks to the Company and the interest and
payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Company to pay any
amount owing with respect to the Bid Loan.
(b) Upon the request of any Bank made through the
Administrative Agent, the Bid Loans made by such Bank may be evidenced by one or
more Bid Notes, instead of loan accounts. Each such Bank shall endorse on the
schedules annexed to its Bid Notes the date, amount and maturity of each Bid
Loan made by it and the amount of each payment of principal made by the Company
with respect thereto. Each such Bank is irrevocably authorized by the Company to
endorse its Bid Notes and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Bid Loan shall not limit or
otherwise affect the obligations of the Company to such Bank.
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3.12 Utilization of Commitments. For purposes of Section 2.01,
each outstanding Bid Loan shall be deemed to utilize the Commitment of each Bank
(whether or not it is making such a Bid Loan) by an amount equal to such Bank's
Pro Rata Share of the amount of such Bid Loan. Except as specifically set forth
in the immediately preceding sentence, Bid Loans shall not constitute a
utilization of the Commitment of the Bank making such Bid Loan.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) Subject to Section 4.01(g), any and all payments by the
Company to each Bank or each Agent under this Agreement shall be made free and
clear of, and without deduction or withholding for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Bank and each
Agent, such taxes (including income taxes or franchise taxes and levies with
respect thereto) as are imposed on or measured by each Bank's net income by the
jurisdiction under the laws of which such Bank or Agent, as the case may be, is
organized or maintains a Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Company shall pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or any Agent, then, subject to Section 4.01(g):
(i) the sum payable shall be increased as necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 4.01), such Bank or Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained had no
such deductions been made; (ii) the Company shall make such deductions; and
(iii) the Company shall pay the full amount deducted to the relevant
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taxation authority or other authority in accordance with applicable law.
(d) The Company agrees to indemnify and hold harmless each
Bank and each Agent for the full amount of (i) Taxes, (ii) Other Taxes, and
(iii) Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes
were correctly or legally asserted. Payment under this indemnification shall be
made within 30 days after the date a Bank or an Agent makes written demand
therefor.
(e) Within 30 days after the date of any payment by the
Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to
each Bank and each Agent evidence of payment satisfactory to such Bank and
Agent.
(f) Each Bank which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes)
agrees that: (i) it shall, no later than the Effective Date (or, in the case of
a Bank which becomes a party hereto pursuant to Section 11.08 after the
Effective Date, the date upon which the Bank becomes a party hereto) deliver to
the Company through the Administrative Agent two accurate and complete signed
originals of Internal Revenue Service Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of Internal Revenue
Service Form 1001 or any successor thereto ("Form 1001"), as appropriate, in
each case indicating that the Bank is on the date of delivery thereof entitled
to receive payments of principal, interest and fees under this Agreement free
from withholding of United States Federal income tax; (ii) if at any time the
Bank makes any changes necessitating a new Form 4224 or Form 1001, it shall with
reasonable promptness deliver to the Company through the Administrative Agent in
replacement for, or in addition to, the forms previously delivered by it
hereunder, two accurate and complete signed originals of Form 4224; or two
accurate and complete signed originals of Form 1001, as appropriate, in each
case indicating that the Bank is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this Agreement free from
withholding of United States Federal income tax; (iii) it shall, before or
promptly after the occurrence of any event (including the passing of time but
excluding any event mentioned in (ii) above) requiring a change in or renewal of
the most recent Form 4224 or Form 1001 previously delivered by such Bank and
deliver to the Company through the Administrative Agent two accurate and
complete
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original signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Bank; and (iv) it shall, promptly upon the Company's
or the Administrative Agent's reasonable request to that effect, deliver to the
Company or the Administrative Agent (as the case may be) such other forms or
similar documentation as may be required from time to time by any applicable
Governmental Rules in order to establish such Bank's tax status for withholding
purposes.
(g) The Company will not be required to pay any additional
amounts in respect of United States Federal income tax pursuant to Section
4.01(d) to any Bank for the account of any Lending Office of such Bank: (i) if
the obligation to pay such additional amounts would not have arisen but for a
failure by such Bank to comply with its obligations under Section 4.01(f) in
respect of such Lending Office; (ii) if such Bank shall have delivered to the
Company a Form 4224 in respect of such Lending Office pursuant to Section
4.01(f), and such Bank shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in respect of
payments by the Company hereunder for the account of such Lending Office as a
result of the status of such Bank for any reason other than a change in United
States law or regulations or in the official interpretation of such law or
regulations by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law) after the date
of delivery of such Form 4224; or (iii) if the Bank shall have delivered to the
Company a Form 1001 in respect of such Lending Office pursuant to Section
4.01(f), and such Bank shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in respect of
payments by the Company hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or any applicable
tax treaty or regulations or in the official interpretation of any such law,
treaty or regulations by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) after the date of delivery of such Form 1001.
(h) If the Company is required to pay any amount to any Bank
or any Agent pursuant to Section 4.01(d), then such Bank shall use its
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Company which may thereafter accrue if such change in the
judgment of such Bank is not otherwise disadvantageous to such Bank.
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4.02 Illegality.
(a) If any Bank shall reasonably determine, based upon the
advice of its counsel, that the introduction of any Governmental Rule, or any
change in any Governmental Rule or in the interpretation or administration
thereof, has made it unlawful, or that any central bank or other Governmental
Authority has asserted that it is unlawful, for any Bank or its Lending Office
to make LIBOR Rate Loans, then, on notice thereof by the Bank to the Company
through the Administrative Agent, the obligation of that Bank to make LIBOR Rate
Loans shall be suspended until the Bank shall have notified the Administrative
Agent and the Company that the circumstances giving rise to such determination
no longer exist.
(b) If a Bank shall reasonably determine, based upon the
advice of its counsel, that it is unlawful to maintain any LIBOR Rate Loan or
LIBOR Rate Bid Loan, the Company shall prepay in full all LIBOR Rate Loans and
LIBOR Rate Bid Loans of that Bank then outstanding, together with interest
accrued thereon, either on the last day of the Interest Period thereof if the
Bank may lawfully continue to maintain such LIBOR Rate Loans or LIBOR Rate Bid
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such LIBOR Rate Loans or LIBOR Rate Bid Loans, together with any
amounts required to be paid in connection therewith pursuant to Section 4.04.
(c) If the Company is required to prepay any LIBOR Rate Loan
or LIBOR Rate Bid Loan immediately as provided in Section 4.02(b), then
concurrently with such prepayment, the Company shall borrow from the affected
Bank, in the amount of such repayment, a Base Rate Loan.
(d) If the obligation of any Bank to make or maintain LIBOR
Rate Loans has been suspended as provided in Section 4.02(a), the Company may
elect, by giving notice to the Bank through the Administrative Agent that all
Loans which would otherwise be made by the Bank as LIBOR Rate Loans shall be
instead Base Rate Loans.
(e) Before giving any notice to the Administrative Agent
pursuant to this Section 4.02, the affected Bank shall designate a different
Lending Office with respect to its LIBOR Rate Loans or LIBOR Rate Bid Loans if
such designation will avoid the need for giving such notice or making such
demand and will not, in the judgment of such Bank, be illegal or otherwise
disadvantageous to such Bank.
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4.03 Increased Costs and Reduction of Return.
(a) If any Bank shall determine that, due to and as a result
of either (i) the introduction of or any change (other than any change by way of
imposition of or increase in reserve requirements included in the calculation of
the LIBOR Rate) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
occurring after the Effective Date, there shall be any increase in the cost to
such Bank of agreeing to make or making, funding or maintaining its Commitment
hereunder or any LIBOR Rate Loans or LIBOR Rate Bid Loans, then the Company
shall be liable for, and shall from time to time, within 15 days following a
demand therefor by such Bank (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Bank, additional
amounts as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by such Bank (or its Lending Office) or any corporation controlling
such Bank, with any Capital Adequacy Regulation resulting from any change in the
interpretation or administration thereof (in each case occurring after the
Effective Date); affects or would affect the amount of capital required or
expected to be maintained by such Bank or any corporation controlling such Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations under this Agreement, then, upon
demand of such Bank (with a copy to the Administrative Agent), the Company
shall, within 15 days following demand, pay to such Bank, from time to time as
specified by such Bank, additional amounts sufficient to compensate such Bank
for such increase.
(c) If the Company is required to pay additional amounts to
any Bank pursuant to Section 4.03(a), then such Bank shall use its reasonable
efforts (consistent with legal and regulatory restrictions) to designate a
different Lending Office with respect to its LIBOR Rate Loans so as to eliminate
any such additional payment by the Company which may thereafter accrue if such
change in the judgment of such Bank is not otherwise disadvantageous to such
Bank. Notwithstanding the foregoing, the
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Company shall not be obligated to compensate such Bank for the amount of such
increased cost or reduction incurred with respect to a period of time prior to
the date which is 180 days before the date on which such Bank first notifies the
Company that it intends to claim such compensation or that an event has occurred
which will entitle it to such compensation; it being understood that the
calculation of the actual amounts may not be possible within such period and
that such Bank may provide such calculation as soon as reasonably practicable
thereafter without affecting or limiting the Company's repayment obligation
under this Agreement. In determining such amount, such Bank may use reasonable
averaging and attributing methods.
4.04 Funding Losses. Upon (a) the failure of the Company to
make any payment of principal of any LIBOR Rate Loan or LIBOR Rate Bid Loan
(including payments made after any acceleration thereof); (b) the failure of the
Company to borrow, continue or convert a Loan after the Company has given (or is
deemed to have given) a Notice of Committed Borrowing or a Notice of
Conversion/Continuation or has given its acceptance of a Competitive Bid; (c)
the failure of the Company to make any prepayment of any Committed Loan after
the Company has given a notice in accordance with Section 2.06; (d) any
principal payment in respect of a LIBOR Rate Loan or LIBOR Rate Bid Loan on a
day which is not the last day of the Interest Period with respect thereto
(including in connection with an extension of the Aggregate Commitment pursuant
to Section 2.11); or (e) the conversion pursuant to Section 2.04 of any LIBOR
Rate Loan to a Base Rate Loan on a day that is not the last day of the
respective Interest Period, the Company shall pay to the appropriate Bank within
15 days of demand an amount equal to the sum of:
(1) the principal amount of the LIBOR Rate Loan or LIBOR Rate
Bid Loan, times the number of days between the date of prepayment or
failure to borrow, continue or convert, as applicable (not counting such
date), and the last day in the applicable Interest Period (counting such
last date), divided by 360, times the applicable Interest Differential,
if positive; plus
(2) all out-of-pocket expenses incurred by the Bank and
reasonably attributable to such payment or prepayment.
Each Bank's determination of the amount of any prepayment fee payable under this
Section 4.04 shall be conclusive in the absence of manifest error. Solely for
purposes of calculating amounts payable by the Company to the Banks under this
Section 4.04, each LIBOR Rate Loan or LIBOR Rate Bid Loan made by a Bank (and
each related reserve, special deposit or similar
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requirement) shall be conclusively deemed to have been funded at the LIBOR Rate
for such LIBOR Rate Loan or LIBOR Rate Bid Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such LIBOR Rate Loan or LIBOR Rate Bid Loan is
in fact so funded.
4.05 Inability to Determine Rates. If the Administrative Agent
or the Majority Banks shall have determined (i) that for any reason adequate and
reasonable means do not exist for ascertaining the LIBOR Rate for any requested
Interest Period with respect to a proposed LIBOR Rate Loan or LIBOR Rate Bid
Loan, or (ii) that the LIBOR Rate applicable pursuant to Section 2.08(a) or 3.10
for any requested Interest Period with respect to a proposed LIBOR Rate Loan or
LIBOR Rate Bid Loan does not adequately and fairly reflect the cost to such Bank
of funding such Loan, the Administrative Agent will forthwith give notice of
such determination to the Company and each Bank. Thereafter, the obligation of
the Banks to make or maintain LIBOR Rate Loans or LIBOR Rate Bid Loans, as the
case may be, hereunder shall be suspended until the Administrative Agent revokes
such notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Committed Borrowing or Notice of Conversion/Continuation then
submitted by it; and, a Competitive Bid Request shall be deemed automatically
revoked. If the Company does not revoke such notice with respect to Committed
Loans, the Banks shall make, convert or continue the Committed Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of LIBOR Rate Loans.
4.06 Reserves on LIBOR Rate Loans. The Company shall pay to
each Bank, as long as such Bank shall be required under regulations of the
Federal Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
"Eurocurrency liabilities"), additional costs on the unpaid principal amount of
each LIBOR Rate Loan equal to the actual costs of such reserves allocated to
such Loan by the Bank (as determined by the Bank in good faith, which
determination shall be conclusive), payable on each date on which interest is
payable on such Loan, provided the Company shall have received at least 15 days'
prior written notice (with a copy to the Administrative Agent) of such
additional interest from such Bank. If a Bank fails to give notice 15 days prior
to the relevant Interest Payment Date, such additional interest shall be payable
15 days from receipt of such notice.
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4.07 Certificates of Banks. Any Bank claiming reimbursement or
compensation pursuant to this Article IV shall deliver to the Company (with a
copy to the Administrative Agent) a certificate setting forth in reasonable
detail the basis for and the computation of the amount payable to the Bank
hereunder and such certificate shall be conclusive absent manifest error.
4.08 Substitution of Banks.
(a) Replacement of Non-Consenting Banks and Affected Banks.
Upon (i) the receipt of notice from a Bank requesting compensation pursuant to
Section 4.01, 4.02, 4.03, or 4.06, or the receipt of notice from the
Administrative Agent that a Bank has failed to make Loans pursuant to Article II
(in either case, an "Affected Bank") or (ii) a Bank or Banks (other than the
Agents) having failed to consent to an extension of the Maturity Date requested
in accordance with Section 2.11 (a "Non-Consenting Bank"), but Banks holding at
least ninety percent of the Commitments having consented to such an extension,
the Company may designate one or more Replacement Banks (which may be one of the
other Banks) to replace such Affected Bank or Non-Consenting Bank pursuant to an
Assignment and Acceptance substantially in the form of Exhibit G-1, assigning of
all such Affected Banks' or Non-Consenting Banks', as applicable, Loans, Notes,
Commitments and all related rights, remedies, powers and privileges under this
Agreement and any other Loan Document to such Replacement Bank or Replacement
Banks. Each Bank hereby consents to such an assignment in the event it becomes
an Affected Bank or a NonConsenting Bank and agrees to execute an Assignment and
Acceptance and other related documents as required by this Section 4.08. Neither
the Agents nor any Bank shall under any circumstance have any obligation to act
as a Replacement Bank.
(b) Replacement Procedure. Any assignment made by a
Non-Consenting Bank or Affected Bank pursuant to this Section 4.08 shall be
subject to the provisions of Section 11.08 and shall satisfy the following
additional conditions:
(i) the purchase price payable to the Non-Consenting Bank or
Affected Bank shall be an amount in Dollars equal to the outstanding
principal amount of such Bank's Loans and shall be payable at such place
and in such funds as such Bank may reasonably specify, and the
assignment shall be made without recourse to such Bank;
(ii) all interest, fees and other amounts, including costs
incurred under Article IV, payable on Loans being assigned by any
Affected Bank or Non-Consenting Bank accrued as of the date of such
assignment shall be paid by the
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Company to such Affected Bank or Non-Consenting Bank on the date of such
assignment;
(iii) all reasonable fees and expenses of the Affected Bank or
Non-Consenting Bank incurred or to be incurred in connection with such
assignment shall promptly be paid by the Company to such Affected Bank
or Non-Consenting Bank when due;
(iv) any assignment of such Affected Bank's or NonConsenting
Bank's Loans, Notes, Commitments and all of its related rights,
remedies, powers and privileges under this Agreement and any other Loan
Document shall be made without representation or warranty (other than
the representation and warranty that the Affected Bank or Non-Consenting
Bank is the legal and beneficial owner of the interest being assigned,
free and clear of any adverse claim); and
(v) the Replacement Bank shall pay the Administrative Agent
for the account of the Affected Bank or Non-Consenting Bank in
immediately available funds all amounts outstanding or payable by such
Affected Bank or Non-Consenting Bank under this Agreement or any other
Loan Document.
Upon satisfaction of the conditions set forth above and the
execution of the Assignment and Acceptance and any other related documents as
required by this Section 4.08, each Replacement Bank shall become a Bank under
this Agreement with outstanding Loans and Commitment in the amounts acquired and
assumed from the Affected Bank or Non-Consenting Bank. Upon accomplishment of
the foregoing, the Affected Bank or NonConsenting Bank (as to the portion
assigned as provided above) shall no longer have any obligations under this
Agreement and (subject to Section 11.08) shall no longer constitute a Bank for
the purposes of this Agreement; provided that if the Replacement Bank or Banks
shall be only willing to acquire less than all of an Affected Bank's outstanding
Loans and Commitment, the Commitment of the Affected Bank shall not terminate as
provided above, but shall be reduced proportionately, and the Affected Bank
shall continue to be a Bank under this Agreement with a reduced Commitment. The
Company shall provide (x) if applicable, a replacement Committed Note and Bid
Note or Bid Notes to each Replacement Bank to reflect the identity of such
Replacement Bank and (y) if applicable, a replacement Committed Note Bid Note or
Bid Notes to any Replacement Bank that is already a Bank to reflect the
increased Commitment of such Bank. Notwithstanding the foregoing, the agreements
set forth in Sections 11.04 and 11.05 shall survive the termination of any
Affected Bank's or Non-Consenting Bank's Commitment as provided above.
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4.09 Sharing of Payments, Pro Rata Treatment, Etc.
(a) If, other than as expressly provided elsewhere herein,
any Bank shall obtain on account of the Loans made by it any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) (i) in excess of its Pro Rata Share of payments in respect of the
Committed Loans obtained by all the Banks or (ii) in excess of its ratable share
of payments in respect of Bid Loans having the same Borrowing date, Interest
Payment Date and maturity date, such Bank shall forthwith notify the
Administrative Agent of such fact, and purchase from the other Banks such
participations (or, if and to the extent specified by such Bank, direct
interests) in the Committed Loans or Bid Loans, as applicable, made by the other
Banks as shall be necessary to cause such purchasing Bank to share the excess
payment ratably with each of the other Banks; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's Pro Rata Share (according to the ratio of (y)
the amount of such paying Bank's required repayment to (z) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
pursuant to this Section 4.09 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, banker's
lien or counterclaim, but subject to Section 11.09) with respect to such
participation as fully as if such Bank were the direct creditor of the Company
in the amount of such participation. If, under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
set-off to which this Section 4.09 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 4.09 to
share in the benefits of any recovery on such secured claim. The Administrative
Agent will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased pursuant to this Section 4.09 and
will in each case notify the Banks following any such purchases or repayments.
(b) Except to the extent otherwise provided in this Agreement:
(i) each borrowing of Committed Loans shall be made from the Banks, each payment
of facility fees under Section 2.09(a) in respect of Commitments shall be made
for the account of the Banks, each termination or reduction of the amount of the
Commitments under Section 2.05 shall be applied to the
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Commitments of the Banks, pro rata according to their respective Pro Rata
Shares, (ii) the making, conversion and continuation of Loans of a particular
Type (other than conversions required or permitted under Article IV) shall be
made pro rata among the relevant Banks according to their respective Pro Rata
Shares and the applicable Interest Period for each Loan of such Type shall be
coterminous, and (iii) each payment on account of any Obligations to or for the
account of one or more of the Banks in respect of any Obligations due on a
particular day (or, if such day is not a Business Day, the next succeeding
Business Day) shall be entitled to priority over payments in respect of
Obligations not then due and shall be allocated among the Banks entitled to such
payments pro rata in accordance with the respective amounts due and payable to
such Banks on such day (or Business Day) and shall be distributed accordingly;
provided, that if immediately prior to giving effect to any such payment in
respect of any Committed Loans the outstanding principal amount of the Committed
Loans shall not be held by the Banks pro rata in accordance with their
respective Pro Rata Shares in effect at the time such Loans were made (by reason
of a failure of a Bank to make a Loan under this Agreement in the circumstances
described in the last paragraph of Section 11.01), then such payment shall be
applied to the Committed Loans in such manner as shall result, as nearly as is
practicable, in the outstanding principal amount of the Committed Loans being
held by the Banks pro rata in accordance with their respective Pro Rata Shares.
Nothing in this Section 4.09(b) shall be deemed to prevent, except in the case
of shortfall, the differential indemnity and other amounts owing to or for the
account of a particular Bank or Banks pursuant to any provisions of any Loan
Document which, by their terms, require differential payments.
4.10 Payments by the Company.
(a) Except to the extent otherwise provided in this Agreement
or another Loan Document, all payments (including prepayments) to be made by the
Company in respect of principal, interest, fees or any other amounts payable
under this Agreement or under any other Loan Document shall be made (i) in
dollars and in immediately available funds, (ii) without set-off, recoupment or
counterclaim, and (iii) to the Administrative Agent at the Agent's Payment
Office (except as otherwise expressly provided herein) no later than 11:00 a.m.
(San Francisco time) on the date specified herein. The Administrative Agent will
promptly distribute on such date to each Bank, for the account of such Bank's
applicable Lending Office for the Loan or other Obligation in respect of which
such payment is made, its Pro Rata Share (or other applicable share as expressly
provided herein) of principal, interest, fees or any other amounts, in like
funds as received. Any payment which is received by the Administrative
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Agent later than 11:00 a.m. (San Francisco time) shall be deemed to have been
received on the immediately succeeding Business Day and any applicable interest
or fee shall continue to accrue. The Company shall, at the time of making any
payment under this Agreement for the account of any Bank, specify to the
Administrative Agent (which shall so notify each intended recipient) to which
Loan principal, Loan interest, fee or any other Obligation such payment is to be
applied (and in the event that the Company fails so to specify, or if an Event
of Default has occurred and is continuing, the Administrative Agent shall
distribute such payment to the Banks for application in such manner as the
Majority Banks, subject to Section 4.09(b), may determine to be appropriate).
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be, subject to
the provisions set forth in the definition of "Interest Period" herein.
(c) Unless the Administrative Agent shall have received
notice from the Company prior to the date on which any payment is due to the
Banks hereunder that the Company will not make such payment in full as, when and
to the extent required hereunder, the Administrative Agent may assume that the
Company has made such payment in full to the Administrative Agent on such date
in immediately available funds and the Administrative Agent may (but shall not
be required to), in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent the Company shall not have made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent on
demand such amount distributed to such Bank, together with interest thereon for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal Funds
Rate as in effect for each such day. If neither the Company nor such Bank or
Banks return such payment or amount to the Administrative Agent within three
Business Days of the date such payment or amount was made available by the
Administrative Agent, then, retroactively to such date, the Company and such
Bank or Banks shall each be obligated to pay interest in respect of such payment
or amount as follows: (i) if such payment or amount represents a payment to be
made by the Company to the Banks, at a rate of interest equal to two percent
(2%) plus the otherwise applicable rate (and, in case the recipient or
recipients shall return such payment or amount to the Administrative Agent,
without limiting the obligation of the Company under Section 2.08 or 3.10 to pay
interest to such Bank
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or Banks at the rate set forth in Section 2.08(c) or 3.10(c) (as and to the
extent applicable) in respect of such payment or amount) and (ii) if such
payment or amount represents proceeds of a Loan to be made by the Banks to the
Company, at a rate of interest equal to the rate provided for such amount or
payment in Section 2.08(c) or 3.10(c), as applicable (and, in case the Company
shall return such amount to the Administrative Agent, without limiting any claim
the Company may have against such Bank or Banks in respect of such amount).
4.11 Payments by the Banks to the Administrative Agent.
(a) Unless the Administrative Agent shall have received
notice from a Bank on the Closing Date or, with respect to each Borrowing after
the Closing Date, prior to 11:00 a.m. (San Francisco time) on the date of any
proposed Borrowing, that such Bank will not make available to the Administrative
Agent as, when and to the extent required hereunder for the account of the
Company the amount of that Bank's Loan, the Administrative Agent may assume that
each Bank has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing date and the Administrative Agent
may (but shall not be required to), in reliance upon such assumption, make such
amount available to the Company on such date. If and to the extent any Bank
shall not have made its full amount available to the Administrative Agent in
immediately available funds and the Administrative Agent in such circumstances
has made available to the Company such amount, that Bank shall on the next
Business Day following the date of such Borrowing make such amount available to
the Administrative Agent, together with interest at the Federal Funds Rate for
and determined as of each day during such period. A notice given by the
Administrative Agent submitted to any Bank with respect to amounts owing under
this Section 4.11(a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Administrative Agent shall constitute
such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to the Administrative Agent on the next
Business Day following the date of such Borrowing, the Administrative Agent
shall notify the Company of such failure to fund and, upon demand by the
Administrative Agent, the Company shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate then applicable to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any date of
Borrowing shall not relieve any other Bank of any obligation hereunder to make a
Loan on the date of such Borrowing, but no Bank shall be responsible for the
failure of
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any other Bank to make the Loan to be made by such other Bank on the date of any
Borrowing.
4.12 Survival. The agreements and obligations of the Company
in this Article IV shall survive the payment of all other Obligations and
termination of this Agreement.
ARTICLE V
CONDITIONS
5.01 Conditions Precedent to Initial Borrowing. The
obligation of each Bank to make its initial Loan is subject to the condition
that (i) the Company shall have paid all accrued and unpaid fees, costs and
expenses to the extent then due and payable on the Effective Date, together with
the Agents' Attorney Costs, together with such additional amounts of Attorney
Costs as shall constitute the Agents' reasonable estimate of Attorney Costs
incurred or to be incurred through the closing proceedings; provided that such
estimating shall not thereafter preclude final settling of accounts between the
Company and the Agents; including any such costs, fees and expenses arising
under or referenced in Sections 2.09, 4.01, 11.04 and the Fee Letters; and (ii)
the Agents shall have received all of the following, in form and substance
satisfactory to the Agents and each Bank and in sufficient copies for the Agents
and each Bank:
(a) Credit Agreement and Notes. This Agreement executed by
the Company, the Agents and each of the Banks and, if requested by any Bank, a
Committed Note and Bid Note for such Bank, duly completed and executed by the
Company;
(b) Resolutions; Incumbency.
(i) True and complete copies of the resolutions
of the board of directors of the Company approving and authorizing the
execution, delivery and performance by the Company of this Agreement and
the other Loan Documents to be delivered hereunder, and authorizing the
borrowing of the Loans, certified by the Secretary or an Assistant
Secretary of the Company as of the Effective Date as being in full force
and effect without amendment or modification;
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, certifying the names and true signatures of
the officers of the Company authorized to execute, deliver and perform,
as applicable, this Agreement, and all other Loan Documents; and
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(iii) A certificate of another officer of the Company
as to the incumbency and specimen signature of the Secretary or
Assistant Secretary, as the case may be, of the Company.
(c) Articles of Incorporation; By-laws and Good Standing.
Each of the following documents:
(i) a true and complete copy of the articles
or certificate of incorporation of the Company as in effect on the
Effective Date, certified by the Secretary of State (or similar
applicable Governmental Authority) of the state of incorporation of the
Company as of a recent date and by the Secretary or Assistant Secretary
of the Company as of the Effective Date as being in full force and
effect without amendment or modification, and the bylaws of the Company
as in effect on the Effective Date, certified by the Secretary or
Assistant Secretary of the Company as of the Effective Date as being in
full force and effect without amendment or modification; and
(ii) a good standing certificate for the Company
from the Secretary of State (or similar applicable Governmental
Authority) of its state of incorporation as of a recent date, together
with a bring-down certificate (which may be by facsimile), dated the
Effective Date;
(d) Legal Opinions.
(i) An opinion, dated the Effective Date, of
Brobeck, Phleger & Harrison LLP, counsel to the Company, addressed to
the Agents and the Banks in substantially the form of Exhibit H-1 and
covering such other matters as the Agents and the Banks may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinion to the Banks and the Agents); and
(ii) An opinion, dated the Effective Date, of
Thomas C. Geiser, Esq., Senior Vice President, General Counsel and
Secretary of the Company and addressed to the Agents and the Banks
substantially in the form of Exhibit H-2 and covering such other matters
as the Agents and the Banks may reasonably request, including as to
compliance with the requirements of all applicable HMO Regulations
(including applicable Regulatory Tangible Net Equity Requirements) (and
the Company hereby instructs such counsel to deliver such opinion to the
Banks and the Agents);
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(e) Certificate. A certificate signed by a Responsible
Officer, dated as of the Effective Date, stating:
(i) that the representations and warranties
contained in Article VI are true and correct on and as of such date, as
though made on and as of such date; and
(ii) that no Default or Event of Default exists or
would result from the consummation of the transactions contemplated by
this Agreement; and
(iii) that since December 31, 1995 no event or
circumstance has occurred that has resulted or could reasonably be
expected to result in a Material Adverse Effect; and
(iv) the Leverage Ratio as of March 31, 1996; and
(v) the Debt Ratings, as of such date.
(f) Regulatory Compliance. A certificate of a Responsible
Officer to the effect that the Company and each HMO Subsidiary is in compliance
in all material respects with the requirements of all applicable HMO
Regulations, including the applicable Regulatory Tangible Net Equity
Requirements, and with all other applicable Governmental Rules except where the
failure to be in compliance would not reasonably be expected to result in a
Material Adverse Effect.
(g) Termination of Prior Credit Agreement. Evidence
satisfactory to the Agents of termination of the Prior Credit Agreement by the
Effective Date, together with payment in full and in cash, for distribution to
the agent and banks parties to the Prior Credit Agreement, of all fees and other
amounts payable by the Company under the Prior Credit Agreement that have
accrued through the Effective Date.
(h) Recapitalization Agreement and Mass Mutual Notes. True
and complete copies of the Recapitalization Agreement and the Series A Mass
Mutual Note, the terms of which shall be satisfactory to the Agents and the
Banks, together with copies of all approvals of Governmental Authorities
referred to in Section 5.01(i), certified by a Responsible Officer as true and
complete copies of the foregoing.
(i) Approvals. A certificate from a Responsible Officer that
all material approvals and consents (including those by shareholders, boards of
directors and, to the extent material, Governmental Authorities (including by
the California Department
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of Corporations and pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1978)) necessary or advisable in connection with the Recapitalization shall
have been duly obtained or made and remain in effect, with all applicable
waiting periods having expired or having been terminated and without any action
having been taken by any Person or Governmental Authority to enjoin, restrict or
prevent the consummation of the Recapitalization or otherwise to impose any
materially adverse condition upon the consummation of the Recapitalization or on
the operations of the Company (or the successor to the Company) and its
Subsidiaries after the consummation of the Recapitalization.
(j) No Litigation Challenging. A certificate of a Responsible
Officer to the effect that no legal or arbitral proceedings shall be pending or,
to the knowledge of the Company, threatened by or before any Governmental Person
with respect to the Recapitalization or the making of the Loan that seeks to
enjoin, restrict or prevent the consummation of the Recapitalization or the
making of any Loan or otherwise to impose materially adverse conditions upon the
consummation of the Recapitalization or the making of any Loan or on the
operations of the Company and its Subsidiaries after the Recapitalization or
that could, if adversely determined, have a Material Adverse Effect.
(k) BCC Financial Statements. The audited consolidated
balance sheet of BCC for the fiscal year ended December 31, 1995 and the related
consolidated statements of income, shareholders' equity and cash flows for such
fiscal year.
(l) Pro Forma Financial Statements. The pro forma financial
statements of the Company, assuming the consummation of the Recapitalization,
for the fiscal year ending December 31, 1995.
(m) Other Documents. Such other approvals, opinions,
documents or materials as the Agents or any Bank may reasonably request.
5.02 Conditions Precedent to All Borrowings. In addition to
the conditions set forth in Section 5.01, the obligation of each Bank to make
any Loan to be made by it hereunder (including its initial Loan) or to continue
or convert any Loan pursuant to Section 2.04 is subject to the satisfaction of
the following conditions precedent on the relevant borrowing, continuation or
conversion date:
(a) No Default. No Default or Event of Default shall have
occurred and be continuing;
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(b) Notice of Committed Borrowing or Continuation/Conversion.
Except as provided in Section 2.04(c), the Administrative Agent shall have
received with respect to any Borrowing or continuation or conversion of
Committed Loans, a Notice of Committed Borrowing or a Notice of
Continuation/Conversion, as applicable; and
(c) Continuation of Representations and Warranties. The
representations and warranties made by the Company contained in Article VI shall
be true and correct on and as of the date of such Borrowing, continuation or
conversion with the same effect as if made on and as of the date of such
Borrowing, continuation or conversion (except to the extent such representations
and warranties expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date).
Each Notice of Committed Borrowing and Notice of Continuation/ Conversion
submitted by the Company hereunder (or the deemed continuation/conversion of any
Loan pursuant to Section 2.04(c)) shall constitute a representation and warranty
by the Company, as of the date of each such notice or application and as of the
date of each Borrowing, continuation or conversion, as applicable, that the
conditions in Section 5.02 are satisfied in all respects.
5.03 Conditions Subsequent to the Initial Borrowing. The
obligations of each Bank under this Agreement (other than with respect to the
initial Borrowing) are subject to the condition that (i) within five Business
Days after the Closing Date, the Recapitalization shall have been consummated in
accordance with all the terms and conditions of the Recapitalization Agreements
(without waiver of any material terms of any such agreements) and (ii) within
seven Business Days after the Closing Date (except as expressly provided in
Section 5.03(c)), the Agents shall have received all of the following, in form
and substance satisfactory to the Agents and each Bank and in sufficient copies
for the Agents and each Bank:
(a) Assumption Agreement. The Assumption Agreement duly
executed by the Recapitalized Company;
(b) Resolutions; Incumbency.
(i) True and complete copies of the resolutions of
the board of directors of the Recapitalized Company approving and
authorizing the execution and delivery of the Assumption Agreement, the
assumption by the Recapitalized Company pursuant to the Assumption
Agreement of the Obligations, the performance by the Recapitalized
Company of the Assumption Agreement, this Agreement and the other
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Loan Documents, and authorizing the borrowing of the Loans, certified by
the Secretary or an Assistant Secretary of the Recapitalized Company as
of a date within two Business Days following the Final Recapitalization
Date as being in full force and effect without amendment or
modification;
(ii) A certificate of the Secretary or Assistant
Secretary of the Recapitalized Company, certifying the names and true
signatures of the officers of the Recapitalized Company authorized to
execute, deliver and perform, as applicable, the Assumption Agreement,
this Agreement, and all other Loan Documents;
(iii) A certificate of another officer of the
Recapitalized Company as to the incumbency and specimen signature of the
Secretary or Assistant Secretary, as the case may be, of the
Recapitalized Company; and
(iv) A certificate of a Responsible Officer as to
the matters set forth in Sections 6.02, 6.03 and 6.04 with respect to
the Recapitalization Agreements.
(c) Articles of Incorporation; By-laws and Good Standing.
Each of the following documents:
(i) a true and complete copy of the articles or
certificate of incorporation of the Recapitalized Company as in effect
on the Final Recapitalization Date, certified by the Secretary of
State (or similar applicable Governmental Authority) of the state of
incorporation of the Recapitalized Company as promptly as is practicable
following the Final Recapitalization Date and certified by the Secretary
or Assistant Secretary of the Recapitalized Company as of a date within
two Business Days following the Final Recapitalization Date, as being in
full force and effect without amendment or modification, and the bylaws
of the Recapitalized Company as in effect on the Final Recapitalization
Date, certified by the Secretary or Assistant Secretary of the
Recapitalized Company as of a date within two Business Days following
the Final Recapitalization Date as being in full force and effect
without amendment or modification; and
(ii) a good standing certificate for the
Recapitalized Company from the Secretary of State (or similar applicable
Governmental Authority) of its state of incorporation as of the Final
Recapitalization Date as promptly as is practicable following the Final
Recapitalization Date.
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(d) Legal Opinions.
(i) an opinion dated within two Business Days
following the Final Recapitalization Date, of Brobeck, Phleger &
Harrison LLP, counsel to the Company and the Recapitalized Company,
addressed to the Agents and the Banks in substantially the form of
Exhibit H-3 and covering such other matters as the Agents and the Banks
may reasonably request (and the Recapitalized Company hereby instructs
such counsel to deliver such opinion to the Banks and the Agents); and
(ii) an opinion dated the Final Recapitalization
Date, of Thomas C. Geiser, Esq., Senior Vice President, General Counsel
and Secretary of the Recapitalized Company, addressed to the Agents and
the Banks in substantially the form of Exhibit H-4 and covering such
other matters as the Agents and the Banks may reasonably request (and
the Recapitalized Company hereby instructs such counsel to deliver such
opinion to the Banks and the Agents).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agents and each Bank that:
6.01 Corporate Existence and Power. The Company and each of
its Subsidiaries: (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation; (b) has
(i) the power and authority and (ii) all governmental licenses, authorizations,
consents and approvals, to own its assets, carry on its business and, as to the
Company, to execute, deliver, and perform its obligations under, the Loan
Documents; (c) is duly qualified as a foreign corporation, and licensed and in
good standing, under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and (d) is in compliance with all Governmental Rules; except, in
each case referred to in clause (b)(ii), clause (c) or clause (d), to the extent
that the failure to have such licenses, authorizations, consents and approvals
in the case of clause (b)(ii), to be so qualified in the case of clause (c), or
so in compliance in the case of clause (d), would not reasonably be expected to
have a Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
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Agreement, any other Loan Document to which the Company is party and the
Recapitalization Agreement, have been duly authorized by all necessary corporate
action, have been duly and validly executed and delivered by the Company and do
not and will not: (a) contravene the terms of any of the Company's organization
documents; (b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any Contractual Obligation
to which the Company is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Company or its Property is subject; or (c)
violate any Governmental Rule, except where such violation would not reasonably
be expected to have a Material Adverse Effect.
6.03 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company of
this Agreement, any other Loan Document or the Recapitalization Agreement, other
than such approvals, consents, exemptions, authorizations, notices or filings
which have been obtained or taken.
6.04 Binding Effect. This Agreement, each other Loan Document
to which the Company is a party and the Recapitalization Agreement constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable principles relating
to enforceability.
6.05 Litigation. Except as set forth in the Proxy, there are
no actions, suits, proceedings, claims or disputes pending, or, to the best
knowledge of the Company, expressly threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the Company
or its Subsidiaries or any of their respective Properties which: (a) purport to
affect or pertain to this Agreement or any other Loan Document or any of the
transactions contemplated hereby or thereby; (b) purport to affect or pertain to
the Recapitalization or any other transaction contemplated in connection with
the Recapitalization Agreements and related documents; or (c) if determined
adversely to the Company or its Subsidiaries, would reasonably be expected to
have a Material Adverse Effect.
6.06 No Default. No Default or Event of Default exists or
would result from the incurring of any Obligations by the Company. Neither the
Company nor any of its Subsidiaries is in default under or with respect to any
Contractual Obligation in
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any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect or that would, if such
default had occurred after the Effective Date, create an Event of Default under
Section 9.01(g).
6.07 ERISA. There is (a) no outstanding liability under Title
IV of ERISA with respect to any Qualified Plan maintained or sponsored by the
Company or any ERISA Affiliate, nor with respect to any Qualified Plan to which
the Company or any ERISA Affiliate contributes or is obligated to contribute;
(b) no Qualified Plan subject to Title IV of ERISA has any Unfunded Pension
Liability in excess of $25,000,000 in the aggregate; and (c) no ERISA Event
which has occurred or is reasonably expected to occur with respect to any Plan
which, in the case of clause (a), clause (b) or clause (c) above, could
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any ERISA Affiliate has incurred nor reasonably expects to incur (i) any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under
Title IV of ERISA (other than premiums due and not delinquent under Section 4007
of ERISA) with respect to a Plan and which, in either case, could reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any ERISA
Affiliate has transferred any Unfunded Pension Liability to a Person other than
the Company or an ERISA Affiliate or otherwise engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA and which could reasonably
be expected to have a Material Adverse Effect.
6.08 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are intended to be and shall be used solely for the purposes set forth in
and permitted by Section 7.10, and are intended to be and shall be used in
compliance with Section 8.07. Neither the Company nor any of its Subsidiaries is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
6.09 Title to Properties. The Company and each of its
Subsidiaries have good record and marketable title in fee simple to, or valid
leasehold interests in, all real Property necessary or used in the ordinary
conduct of their respective businesses, except for such defects in title as
could not, individually or in the aggregate, have a Material Adverse Effect.
6.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other
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material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their Properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP and no Notice of Lien has been filed or recorded. To the knowledge of
the Company, after due inquiry, there is no proposed tax assessment against the
Company or any of its Subsidiaries which would, if the assessment were made,
have a Material Adverse Effect.
6.11 Financial Condition.
(a) The audited consolidated financial statements of the
Company and its Subsidiaries dated December 31, 1995, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date: (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) are complete and correct and fairly
present the financial condition of the Company and its Subsidiaries as of the
date thereof and results of operations for the period covered thereby; and (iii)
show all material indebtedness and other liabilities, direct or contingent, of
the Company and its consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent Obligations.
(b) Since December 31, 1995, there has been no Material
Adverse Effect.
(c) To the best knowledge of the Company, since December 31,
1995 no event or circumstance has occurred that has resulted or could reasonably
be expected to result in a material adverse change in, or a material adverse
effect upon, any of the operations, business, properties or condition (financial
or otherwise) of BCC and its Subsidiaries taken as a whole ("BCC Material
Adverse Effect").
6.12 Environmental Matters. The Company is in compliance with
all Environmental Laws, if any, affecting the business, operations and
properties of the Company and its Subsidiaries, except those which are unlikely
to have a Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any Person
controlling the Company or any Subsidiary of the Company, is (a) an "Investment
Company" within the meaning of the Investment Company Act of 1940; (b) a
"holding company," or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company," within the meaning of, or otherwise subject to
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regulation under, the Public Utility Holding Company Act of 1935; or (c) subject
to any other Governmental Rule restricting its ability to incur debt or to grant
Liens, other than (i) restrictions contained in the Undertakings, (ii)
restrictions imposed by the California Department of Corporations (in the case
of the Company) and (iii) restrictions imposed in connection with the HMO and
insurance activities and businesses of the Subsidiaries in accordance with
Governmental Rules applicable generally to them, with respect to all of which
the Company and its Subsidiaries, as applicable, are in compliance except where
the failure to be in compliance would not reasonably be expected to have a
Material Adverse Effect.
6.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary of the Company is a party to, or bound by, any Contractual
Obligation, or subject to any restriction in any Organization Document or any
Governmental Rule, which could reasonably be expected to have a Material Adverse
Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, Etc. The
Company or its Subsidiaries own or are licensed or otherwise have the right to
use all of the material patents, trademarks, service marks, trade names,
copyrights, contractual franchises, authorizations and other rights that are
reasonably necessary for the operation of their respective businesses. No claim
or litigation regarding any of the foregoing is pending or threatened, and no
patent, invention, device, application, principle or any Governmental Rule is
pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
6.16 Insurance. The properties of the Company and its
Subsidiaries are insured with financially sound and reputable insurance
companies which are not Affiliates of the Company, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
the Company or such Subsidiary operates; or the Company and its Subsidiaries
maintain a system or systems or self-insurance or assumption of risk which
accords with the practices of similar businesses.
6.17 Swap Obligations. Neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any Swap Contracts,
other than Permitted Swap Obligations. The Company has undertaken its own
independent assessment of its consolidated assets, liabilities and commitments
and has considered appropriate means of mitigating and managing risks associated
with such matters and has not relied on any swap
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counterparty or any Affiliate of any swap counterparty in determining whether to
enter into any Swap Contract.
6.18 Solvency. The Company and each of its Subsidiaries that
are currently operational are Solvent and will remain Solvent after the
consummation of the Recapitalization.
6.19 Full Disclosure. None of the representations or
warranties made by the Company or any Subsidiary of the Company in the Loan
Documents as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company or any Subsidiary in
connection with the Loan Documents (including the Proxy, the Recapitalization
Agreements and other offering and disclosure materials delivered by or on behalf
of the Company to the Banks prior to the Effective Date), contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, misleading as of the time when made or
delivered and, if disclosed, would reasonably be expected to have a Material
Adverse Effect.
6.20 Material Agreements.
(a) Part A of Schedule 6.20 is a complete and correct list,
as of the Effective Date, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries, the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $5,000,000, and the aggregate principal or face
amount outstanding or that may become outstanding under each such arrangement is
correctly described in such Part A of Schedule 6.20.
(b) Part B of Schedule 6.20 is a complete and correct list,
as of the Effective Date, of the Recapitalization Agreements. The
Recapitalization Agreement is in full force and effect as of the Effective
Date and has not been rescinded or amended, supplemented or otherwise modified
since the date of its execution and delivery.
6.21 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule 6.21 is a complete and
correct list, as of the Effective Date, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such
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Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Part A of Schedule 6.21, (x) each of the
Company and its Subsidiaries owns, free and clear of Liens, and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule 6.21, (y) all of the issued and
outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including any stockholders' or voting trust agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person (except any such rights
arising with respect to the Recapitalization).
(b) Set forth in Part B of Schedule 6.21 is a summary, as of
the Effective Date, of all Investments (other than Investments disclosed in Part
A of Schedule 6.21 and Permitted Investments) held by the Company or any of its
Subsidiaries in any Person. Except as disclosed in Part B of Schedule 6.21 each
of the Company and its Subsidiaries owns, free and clear of all Liens, all such
Investments.
6.22 Accreditation, Etc. The Company and each of its
Subsidiaries are in compliance with (i) all licenses and certifications required
pursuant to any HMO Regulation; (ii) all certifications and authorizations
necessary to ensure that the Company and each of its Subsidiaries is eligible
for all reimbursements available under the HMO Regulations to the extent
applicable to HMOs and providers of life, health care and disability insurance
of their type; and (iii) all licenses, permits, authorizations and
qualifications required under the HMO Regulations in connection with the
ownership or operation of HMOs and providers of life, health care and disability
insurance and the conduct of the health care, managed care and health insurance
businesses and businesses incidental thereto; except where the failure to be in
compliance with the items described in any of the preceding three clauses would
not reasonably be expected to have a Material Adverse Effect.
6.23 No Impairment of Subsidiaries' Ability to Pay Dividends.
Except as set forth in the Undertakings and in the letter dated April 29, 1996
from the California Department of Insurance, as of the Effective Date, no
Subsidiary of the Company is a party to or is bound by the terms of any
agreement or instrument (other than pursuant to any Loan Document) that,
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directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions on, (a) the
declaration, making or payment of dividends (in cash, Property or obligations)
on, or other payments or distributions on account of, or the setting apart of
money for a sinking or other analogous fund for, or the purchase, redemption,
retirement or other acquisition of, any shares of any class of stock of the
Company or any of the other Subsidiaries of the Company or of any warrants,
options or other rights to acquire the same or (b) the making of loans or other
advances to, or the transfer of property to, the Company.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any Bank shall have
any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or
unsatisfied, unless the Majority Banks waive compliance in writing:
7.01 Financial Statements. The Company shall deliver to the
Administrative Agent in form and detail satisfactory to the Administrative Agent
and the Banks, with sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days after
the end of each fiscal year, a copy of the audited consolidated balance sheet of
the Company as at the end of such year and the related consolidated statements
of income, shareholders' equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, and
accompanied by the opinion of Coopers and Lybrand or another
nationally-recognized independent public accounting firm which report shall
state that such consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years. Such opinion shall not be qualified or limited
because of a restricted or limited examination by such accountant of any
material portion of the Company's or any Subsidiary's records and shall be
delivered to the Administrative Agent pursuant to a reliance agreement between
the Administrative Agent and Banks and such accounting firm in form and
substance satisfactory to the Administrative Agent and such accounting firm;
(b) as soon as available, but not later than 100 days after
the end of each fiscal year, a copy of an unaudited consolidating balance sheet
of the Company and each of its
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Subsidiaries as at the end of such fiscal year and the related consolidating
statements of income, all in reasonable detail certified by an appropriate
Responsible Officer as having been used in connection with the preparation of
the financial statements referred to in Section 7.01(a); and
(c) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each year, a copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, shareholders' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter, and
certified by an appropriate Responsible Officer as being complete and correct
and fairly presenting, in accordance with GAAP, the financial position and the
results of operations of the Company and the Subsidiaries, subject to changes
resulting from year-end audit adjustments and except for the absence of notes;
provided that the Company shall be in compliance with the requirements of this
Section 7.01 with respect to its obligation to furnish financial statements upon
delivery of its annual and quarterly reports as filed by it with the SEC.
7.02 Certificates; Other Information. The Company shall
furnish to the Administrative Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in Sections 7.01(a) and 7.01(c) above, a compliance
certificate signed by a Responsible Officer substantially in the form of Exhibit
F;
(b) concurrently with the delivery of the financial
statements referred to in Sections 7.01(a) and 7.01(c) above, a summary of the
Company's investment portfolio as of the date of such financial statements
substantially in the form of Schedule 6.21(b) or in such other form and detail
as is reasonably satisfactory to the Administrative Agent;
(c) within ten days after the same are sent, copies of all
financial statements and reports which the Company sends to its shareholders;
and promptly after the same are filed, copies of all financial statements and
regular, periodical or special reports which the Company may make to, or file
with, the Securities and Exchange Commission or any successor or similar
Governmental Authority, including any Form 10-Qs, Form 10-Ks and, except as set
forth below, Form 8-Ks (other than Form S-8s, pricing supplements to Form S-3s,
Form 8-Ks filing only exhibits
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to Form S-3s, Form 11-Ks, and Forms 3, 4 and 5 and other than exhibits to any of
the foregoing unless specifically requested);
(d) from time to time upon receipt of a request by any Bank
through the Administrative Agent specifying in reasonable detail the types of
documents to be provided, copies of any and all statements, audits, studies or
reports submitted by or on behalf of the Company or any Subsidiary to any HMO
Regulator;
(e) promptly following the receipt of the same, a copy of
each notice relating to the loss or threatened loss by the Company or any
Subsidiary of any material operating permit, license or certification by any HMO
Regulator;
(f) promptly following the receipt of the same, all
correspondence received by the Company or any Subsidiary from an HMO Regulator
which asserts that the Company or any Subsidiary is not in substantial
compliance with any material HMO Regulation or which threatens the taking of any
action against the Company or any Subsidiary under any HMO Regulation or sets
forth circumstances that if adversely determined would result in an HMO Event
and any correspondence of the Company or any Subsidiary responding to such
correspondence;
(g) promptly following any release of the same, a copy of
each press release issued by the Company; and
(h) promptly following any request, such additional business,
financial, corporate affairs and other information as the Administrative Agent,
at the request of any Bank, may from time to time reasonably request.
7.03 Notices. The Company shall promptly notify the Agents
and each Bank:
(a) (i) of the occurrence of any Default or Event of Default
and (ii) of the occurrence or existence of any event or circumstance that would
cause the condition to Borrowing set forth in Section 5.02(c) not to be
satisfied if a Borrowing were requested on or after the date of such event or
circumstance;
(b) (i) of any breach or non-performance of, or any default
under, any Contractual Obligation of the Company or any of its Subsidiaries that
would reasonably be expected to have a Material Adverse Effect; and (ii) of any
dispute, litigation, investigation, proceeding or suspension which may exist at
any time between the Company or any of its Subsidiaries and any Governmental
Authority which could reasonably be expected to result in a Material Adverse
Effect;
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(c) of the commencement of, or any material development in,
any litigation or proceeding affecting the Company or any Subsidiary (i) in
which the amount of damages claimed is $25,000,000 (or its equivalent in another
currency or currencies) or more, (ii) in which injunctive or similar relief is
sought and which, if adversely determined, would reasonably be expected to have
a Material Adverse Effect, or (iii) in which the relief sought is an injunction
or other stay of the performance of this Agreement or any Loan Document or the
consummation of the Recapitalization;
(d) upon becoming aware thereof (i) any and all enforcement,
cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against the Company or any of its Subsidiaries or any of
their respective Properties pursuant to any applicable Environmental Laws that
would reasonably be expected to result in liability in excess of $25,000,000,
(ii) any other Environmental Claim which would reasonably be expected to result
in liability in excess of $25,000,000, and (iii) any environmental or similar
condition on any real property adjoining or in the vicinity of the property of
the Company or any Subsidiary that would reasonably be expected to cause such
property or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use of such property under any Environmental Laws
and which restrictions would reasonably be expected to have a Material Adverse
Effect;
(e) of any of the following events affecting the Company or
any member of its Controlled Group (but in no event more than ten days after
such event), together with a copy of any notice with respect to such event that
may be required to be filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any member of its
Controlled Group with respect to such event:
(i) an ERISA Event which could reasonably be
expected to result in a Default or Event of Default or which would
reasonably be expected to have a Material Adverse Effect; or
(ii) the adoption of any new Plan that is subject to
Title IV of ERISA or section 412 of the Code by any member of the
Controlled Group, the adoption of any amendment to a Plan that is
subject to Title IV of ERISA or section 412 of the Code, or the
commencement of contributions by any member of the Controlled Group to
any Plan if any such adoption or commencement results in an increase in
unfunded liabilities of $25,000,000 or more, or would reasonably be
expected to have a Material Adverse Effect;
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(f) of any change in either of the Company's Debt Ratings;
and
(g) upon the request from time to time of the Administrative
Agent, of the Swap Termination Values relating to any then-outstanding Swap
Contracts to which the Company or any of its Subsidiaries is party.
Each notice pursuant to this Section 7.03 shall be accompanied by a written
statement by a Responsible Officer of the Company setting forth details of the
occurrence referred to therein, and stating in general what action the Company
proposes to take with respect thereto. Each notice under Section 7.03(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been breached or violated.
7.04 Preservation of Corporate Existence, Etc. Subject to
Section 8.03, the Company shall, and shall cause each of its Subsidiaries in
operation to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect;
(b) preserve and maintain in full force and effect all
rights, privileges, qualifications, permits, licenses and franchises (including
all licenses and certifications required pursuant to any HMO Regulation in
connection with the ownership or operation of HMOs and the conduct of the health
care, managed care and health insurance businesses and businesses incidental
thereto) necessary or desirable in the normal conduct of its business (including
all certification and authorization necessary to ensure that each of the
Subsidiaries is eligible for all reimbursements available under the HMO
Regulations to the extent applicable to HMOs of their type), except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect;
(c) remain in, and continue to operate directly or indirectly
substantially in, the health care, managed care, health insurance business and
businesses substantially similar thereto; and
(d) preserve or renew all of its registered trademarks, trade
names and service marks, the non-preservation and non-renewal of which would
reasonably be expected to have a Material Adverse Effect.
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7.05 Insurance. The Company shall, and shall cause its
Subsidiaries to: (a) insure and maintain insurance with responsible insurance
companies in such amounts and against such risks as is customarily carried by
owners of similar businesses and property; or (b) maintain a system or systems
of self-insurance or assumption of risk which accords with the practices of
similar businesses.
7.06 Payment of Obligations. The Company shall, and shall
cause its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including: (a) all
tax liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; (b) all lawful claims which, if
unpaid, would by law become a Lien upon its Property not constituting a Lien
permitted pursuant to Section 8.01 of this Agreement, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness, where the failure to pay such Indebtedness would constitute
an Event of Default pursuant to Section 9.01(g).
7.07 Compliance with Laws.
(a) The Company shall comply, and shall cause each of its
Subsidiaries to comply, in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business, except
such as may be contested in good faith or as to which a bona fide dispute may
exist and where non-compliance could not be expected to result in a Material
Adverse Effect.
(b) Upon the written request of the Agents or any Bank, the
Company shall submit and cause each of its Subsidiaries to submit, to the
Administrative Agent and with sufficient copies for each Bank, at reasonable
intervals, a general report providing an update of the status of any
environmental, health or safety compliance, hazard or liability issue identified
in any notice or report required pursuant to Section 7.03(d), that may
reasonably, individually or in the aggregate, result in liability in excess of
$25,000,000.
7.08 Inspection of Property and Books and Records. The
Company shall maintain and shall cause each of its Subsidiaries to maintain
books of record and account in conformity with GAAP
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consistently applied. Subject to such confidentiality restrictions as the
Company may reasonably impose, the Company shall permit, and shall cause each of
its Subsidiaries to permit, representatives and independent contractors of the
Agents or any Bank to visit and inspect any of their respective Properties, to
examine their respective financial records, and make copies thereof or abstracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective directors, officers, and independent public accountants, all at
such reasonable times during normal business hours, upon reasonable advance
notice to the Company (and, after the occurrence and during the continuance of
an Event of Default, all at the expense of the Company).
7.09 Environmental Laws. The Company shall, and shall cause
each Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
7.10 Use of Proceeds. The Company shall use the proceeds of
the Loans solely for general corporate purposes, to finance certain acquisitions
and to pay the special dividend to shareholders constituting a part of the
Recapitalization. The Company shall not in any event use the proceeds of any
Loans in contravention of any Governmental Rule.
7.11 Regulatory Tangible Net Equity. The Company and each
Subsidiary shall maintain Regulatory Tangible Net Equity in an amount at least
equal to its Regulatory Tangible Net Equity Requirement, and shall substantially
comply in all other respects with any HMO Regulation relevant to such Regulatory
Tangible Net Equity Requirement, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
7.12 Recapitalization. The Company shall take or shall cause
to be taken all actions necessary to cause the Recapitalization to be
consummated within five Business Days after the Closing Date, including
obtaining the consent of the Health Foundation, as the sole shareholder of
Converted BCC following the payment of the special dividend and the BCC
Conversion, to the merger of Converted BCC with the Company, all as contemplated
by the Recapitalization Agreements.
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7.13 Accreditation, Etc. The Company and each of its
Subsidiaries shall maintain (i) all licenses and certifications required
pursuant to any HMO Regulation; (ii) all certifications and authorizations
necessary to ensure that the Company and each of its Subsidiaries is eligible
for all reimbursements available under the HMO Regulations to the extent
applicable to HMOs and providers of life, health care and disability insurance
of their type; and (iii) all licenses, permits, authorizations and
qualifications required under the HMO Regulations in connection with the
ownership or operation of HMOs and providers of life, health care and disability
insurance and the conduct of the health care, managed care and health insurance
businesses and businesses incidental thereto; except where the failure to
maintain the items described in any of the preceding three clauses would not
reasonably be expected to have a Material Adverse Effect.
ARTICLE VIII
NEGATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Bank shall
have any Commitment hereunder, or any Loan or other Obligation shall remain
unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company shall not, and shall not
suffer or permit any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether now owned or hereafter acquired, other than the
following:
(a) any Lien created under any Loan Document;
(b) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 7.06; provided that no
Notice of Lien has been filed or recorded under the Code;
(c) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the Ordinary Course
of Business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the Property
subject thereto;
(d) Liens (other than any Lien imposed by ERISA) consisting
of pledges or deposits required in the Ordinary Course
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of Business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(e) Liens on the Property of the Company or any of its
Subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases (other than Capital Leases),
statutory obligations, (ii) Contingent Obligations on surety and appeal bonds,
or (iii) other non-delinquent obligations of a like nature; in each case,
incurred in the Ordinary Course of Business; provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect;
(f) Liens consisting of judgment or judicial attachment
liens; provided that the enforcement of such Liens is effectively stayed and all
such Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $20,000,000;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the Ordinary Course of Business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the Property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(h) Liens on assets of Persons which become Subsidiaries
after the date of this Agreement; provided, however, that such Liens existed at
the time the respective Persons became Subsidiaries and were not created in
anticipation thereof, and provided, further that to the extent such Liens secure
Indebtedness, such Indebtedness is permitted by clause (d) of Section 8.02;
(i) purchase money security interests on any Property
acquired or held by the Company or its Subsidiaries in the Ordinary Course of
Business securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of acquiring such Property; provided that (i) any
such Lien attaches to such Property concurrently with or within 20 days after
the acquisition thereof, (ii) such Lien attaches solely to the Property so
acquired in such transaction, (iii) the principal amount of the debt secured
thereby does not exceed 100% of the cost of such Property, and (iv) the
aggregate principal amount of the Indebtedness secured by any and all such
purchase money security interests, together with Indebtedness secured by Liens
permitted under Sections 8.01(j) and 8.01(k), shall not at any time exceed
$75,000,000;
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(j) Liens securing Indebtedness in respect of Capital Leases
on the Property subject to such Capital Leases; provided that the aggregate
Indebtedness secured by such Liens, together with Indebtedness secured by Liens
permitted under Sections 8.01(i) and 8.01(k), shall not at any time exceed
$75,000,000;
(k) other consensual Liens on Property (other than the stock
of any Subsidiary of the Company); provided that the aggregate principal amount
of the Indebtedness secured by any and all such Liens shall not at any time
exceed (i) $10,000,000 and (ii), when aggregated with Indebtedness secured by
Liens permitted under Sections 8.01(i) and 8.01(j), $75,000,000.
(l) Liens arising solely by virtue of any statutory or common
law provision relating to bankers' liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the Federal Reserve Board and (ii) such deposit account is not intended by the
Company or any of its Subsidiaries to provide collateral to the depository
institution in respect of specifically identified or contemplated obligations;
(m) deposits, reserves or contingent payment arrangements
required under or pursuant to HMO Regulations or other provisions of
Governmental Rules regulating HMOs, providers of life, health care or disability
insurance or the provision of health care services or such insurance or the
management of health care services or securing regulatory capital or other
financial responsibility requirements; and
(n) Liens arising by reason of arrangements constituting
Permitted Investments of the type specified in clause (d) of the definition of
"Permitted Investments".
8.02 Limitation on Indebtedness. The Company shall not suffer
or permit any of its Subsidiaries to, directly or indirectly, make, create,
incur or suffer to exist any Indebtedness except:
(a) Indebtedness under the Loan Documents;
(b) Indebtedness existing on the Effective Date and set forth
on Schedule 8.02 and any extensions, modifications or renewals of any such
Indebtedness; provided that any extension, modification or renewal of any Lien
securing such Indebtedness shall be limited to the property encumbered by the
existing Lien
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and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase;
(c) Indebtedness secured by Liens permitted under Section
8.01(i) and any extensions, modifications or renewals of any such Indebtedness;
provided that any extension, modification or renewal of any Lien securing such
Indebtedness shall be limited to the property encumbered by the existing Lien
and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase;
(d) Indebtedness of Subsidiaries of the Company up to but not
exceeding $50,000,000 in the aggregate at any one time outstanding, exclusive of
Indebtedness permitted under Section 8.02(e), and Contingent Obligations of the
Company and Subsidiaries of the Company in respect of such Indebtedness;
provided that at the time any such Indebtedness is incurred, no Default or Event
of Default has occurred and is continuing or would result from the incurrence of
such Indebtedness;
(e) Indebtedness of Subsidiaries of the Company to the
Company or to other Wholly-Owned Subsidiaries of the Company; and
(f) additional Indebtedness of the Company incurred
subsequent to the Closing Date; provided that (i) at the time any such
Indebtedness is incurred, no Default or Event of Default has occurred and is
continuing or would result from the incurrence of such Indebtedness and (ii)
prior to the incurrence of any such Indebtedness in excess of $50,000,000 in the
aggregate, in any single transaction or series of related transactions, (x) the
Company shall have provided to the Administrative Agent, at least 20 days prior
to the incurrence of such Indebtedness, (1) the documents that are to evidence
such Indebtedness, (2) a certificate signed by a Responsible Officer certifying
that no Default or Event of Default has occurred and is continuing or would
result from the incurrence of such Indebtedness and (3) such other information
as the Banks may reasonably request and (y) the Administrative Agent shall have
determined that the incurrence of such Indebtedness is in compliance with the
terms of this Agreement.
8.03 Fundamental Changes. Except as set forth below, the
Company shall not, and shall not permit any of its Subsidiaries to, enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution). Except as set
forth below, the Company will not, nor will it permit any of its Subsidiaries
to, acquire any business or Property from, or capital stock of, or be a party to
any acquisition of, any Person except for purchases of inventory and other
Property to be sold
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or used in the Ordinary Course of Business, and Investments permitted under
Section 8.12. Notwithstanding the foregoing provisions of this Section 8.03:
(a) the Company may be party to, and may consummate, the
Recapitalization on the terms and conditions set forth in the Recapitalization
Agreements;
(b) the Company or any Subsidiary may acquire by purchase or
otherwise a division, business unit or all or substantially all of the business,
property or fixed assets of, or acquire stock or other evidence of beneficial
ownership of, any Person; provided that: (i) no Event of Default or Default has
occurred and is continuing, or would occur as a result of such acquisition
including under Section 8.08 (Leverage Ratio) and Section 8.09 (Fixed Charge
Coverage Ratio), (ii) the acquisition is of a Person engaged in, or assets
utilized directly or indirectly in, the health care, managed care and health
insurance business and businesses substantially similar thereto, (iii) such
acquisition is approved by the board of directors of the Person to be acquired
or the Person owning the assets to be acquired and (iv) if the aggregate
consideration for such acquisition is equal to or in excess of $250,000,000, the
Company shall have provided to the Administrative Agent, at least 20 days prior
to such acquisition, (x) the documents that are to evidence such acquisition,
(y) a certificate from a Responsible Officer certifying that no Default or Event
of Default has occurred and is continuing or would result from such acquisition
and (z) such other information as the Banks may reasonably request;
(c) any Subsidiary of the Company may merge with the Company;
provided that the Company shall be the continuing or surviving corporation, or
with any one or more Subsidiaries of the Company; provided that if any
transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the
Wholly-Owned Subsidiary shall be the continuing or surviving corporation;
(d) any Subsidiary may merge with any other Person in
connection with an acquisition of 100% of the capital stock, partnership
interests or equity of such Person in connection with an acquisition permitted
hereunder;
(e) the Company may dissolve any inactive Subsidiaries; and
(f) any Subsidiary may enter into any transaction of merger,
consolidation or amalgamation, if such action would constitute a disposition
otherwise permitted pursuant to Section 8.04(h).
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8.04 Disposition of Assets. The Company shall not, and shall
not suffer or permit any of its Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any Property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) sales or dispositions of services, inventory, materials
and equipment and similar such items in the Ordinary Course of Business or which
are obsolete, worn out, surplus or otherwise no longer useful in the operation
of the Company or its Subsidiaries;
(b) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) the sale of assets representing a part of any Person or
entity, or any assets, acquired after the Effective Date; provided that such
sale occurs within 180 days subsequent to such acquisition and such sale is made
in good faith to a Person that is not an Affiliate of the Company or any of its
Subsidiaries pursuant to an arms' length transaction;
(d) the sale or other disposition of any shares of capital
stock of any Subsidiary to the Company or any of its other Wholly-Owned
Subsidiaries;
(e) the sale or other disposition of any assets of the
Company or any Subsidiary to any other Wholly-Owned Subsidiary of the Company or
to the Company in the Ordinary Course of Business;
(f) the Company or any Subsidiary may lease and sublease
assets in the Ordinary Course of Business;
(g) deposits of cash and marketable securities or the sale of
marketable securities and other Permitted Investments in the Ordinary Course of
Business; and
(h) other dispositions of Property in any fiscal year of the
Company whose net book value in the aggregate shall not exceed ten percent (10%)
of the Company's Total Assets as shown on its consolidated balance sheet for its
previous fiscal year.
8.05 No More Restrictive Agreements. The Company shall not,
and shall not permit any of its Subsidiaries to, enter into any agreement
providing for the creation, incurrence or
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assumption of Indebtedness, the terms and conditions of which are more
restrictive in any material respect than the terms and conditions of the Loan
Documents.
8.06 Transactions with Affiliates. The Company shall not, and
shall not suffer or permit any of its Subsidiaries to, enter into any
transaction with any Affiliate of the Company or of any such Subsidiary, except
(a) as expressly permitted by this Agreement, or (b) in the Ordinary Course of
Business and pursuant to the reasonable requirements of the business of the
Company or such Subsidiary.
8.07 Margin Stock. The Company shall not and shall not suffer
or permit any of its Subsidiaries to use any portion of the Loan proceeds,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, (iv) to acquire any security in any transaction that
is subject to Section 13 or 14 of the Exchange Act or (v) to finance
acquisitions not approved by the Board of Directors of the entity to be
acquired.
8.08 Leverage Ratio. The Company shall not permit its Leverage
Ratio to exceed (i) 2.75 to 1 during the period from the Effective Date through
December 31, 1996 and (ii) 2.25 to 1 during the period from January 1, 1997
through December 31, 1997 and (iii) 2.0 to 1 thereafter.
8.09 Fixed Charge Coverage Ratio. The Company shall not permit
as of the end of each fiscal quarter commencing with the fiscal quarter ending
on December 31, 1995, its Fixed Charge Coverage Ratio to be less than (i) 3.00
to 1.00 from the Effective Date through December 31, 1996 and (ii) 3.50 to 1.00
thereafter.
8.10 Minimum Net Worth. The Company shall not at any time
permit its Net Worth to be less than an amount equal to the sum of (a) the
greater of an amount equal to (i) seventy-five percent (75%) of the Company's
Net Worth as of the Final Recapitalization Date and (ii) $500,000,000, plus (b)
fifty percent (50%) of the Company's positive net income for each fiscal quarter
ending after January 1, 1996.
8.11 Accounting Changes. Without limiting the provisions of
Section 1.03(a), the Company shall not, and shall not suffer or permit any
Subsidiary to, make any significant change in accounting treatment or reporting
practices, except as allowed by GAAP, or change the fiscal year of the Company
or of any Subsidiary, except to change the fiscal year of a Subsidiary
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acquired in an acquisition to conform its fiscal year to the Company's.
8.12 Limitations on Investments. The Company shall not, nor
shall it permit any of its Subsidiaries to, make or permit to remain outstanding
any Investments except:
(a) Investments outstanding on the Effective Date and
identified in Schedule 6.21;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company and its Subsidiaries in
capital stock of Wholly-Owned Subsidiaries of the Company and advances by the
Company and its Subsidiaries to the Company or Wholly-Owned Subsidiaries of the
Company in the Ordinary Course of Business;
(e) Permitted Swap Obligations;
(f) Investments made in connection with the transactions
permitted under Section 8.03(a) and 8.03(b) with respect to Persons other than
Subsidiaries;
(g) employee loans and guarantees in accordance with the
Company's usual and customary practices with respect to such loans and
guarantees;
(h) extensions of credit in the nature of accounts
receivable, lease receivable or notes receivable arising from the sale or lease
of goods or services in the Ordinary Course of Business;
(i) Investments constituting Indebtedness permitted pursuant
to Section 8.02; and
(j) other Investments not exceeding $50,000,000 in the
aggregate at any time outstanding.
8.13 Restricted Payments. The Company will not, nor will it
permit any of its Subsidiaries to, declare or make any Restricted Payment; other
than dividends paid by Subsidiaries of the Company directly or indirectly to the
Company, (a) at any time after the occurrence and during the continuance of a
Default or (b) if a Default would result from such action. In addition, prior to
declaring or making any Restricted Payment in excess of $50,000,000, except in
connection with the Recapitalization (in any single transaction or related
series of transactions), the
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Company shall provide to the Agent a compliance certificate substantially in the
form of Exhibit F and certifying that prior to and after giving effect to any
such action, no Default will exist or be continuing.
8.14 Lines of Business. Neither the Company nor any of its
Subsidiaries shall engage directly or indirectly to any substantial extent in
any line or lines of business activity other than the provision of health care,
managed care, health insurance and businesses substantially similar thereto.
8.15 No Impairment of Subsidiaries' Ability to Pay Dividends.
The Company shall not permit any of its Subsidiaries to enter into, after the
Effective Date, any agreement or instrument (other than pursuant to any Loan
Document) that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
on, (a) the declaration, making or payment of dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of any such Subsidiary or of any warrants, options or other
rights to acquire the same or (b) the making of loans or other advances to, or
the transfer of property to, the Company; except for (i) encumbrances or
restrictions existing under, or by reason of, any Governmental Rules applicable
to the operation of the businesses of the Company and its Subsidiaries, (ii)
customary provisions of any leases, mortgages or deeds of trust prohibiting the
assignment of the property subject to any such instrument or the instrument
itself, (iii) any agreement or other instrument of a Person acquired by the
Company or any Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person so acquired or the property or assets of the
Person so acquired and was not entered into in contemplation of such
acquisition, and (iv) the restrictions contained in the Undertakings, of which
Undertakings the Banks hereby acknowledge notice.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Events of Default. The occurrence and continuation of
any one or more of the following shall constitute an "Event of Default"
hereunder:
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(a) Non-Payment. The Company fails to pay, when and as
required to be paid herein or in any other Loan Document, (i) any amount of
principal of any Loan, or (ii) any interest on any Bid Loan when due, or (iii)
within three Business Days after the same shall become due, any other interest,
fee or any other amount payable hereunder or pursuant to any other Loan
Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company made or deemed made herein, or in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, or its Responsible Officers, furnished at any
time under this Agreement or any other Loan Document, shall prove to have been
incorrect in any material respect on or as of the date made or deemed made; or
(c) Financial Ratios. The Company fails to perform or
observe its obligations with respect to its Leverage Ratio set forth in Section
8.08, its Fixed Charge Coverage Ratio set forth in Section 8.09 or its minimum
Net Worth test set forth in Section 8.10; or
(d) Specific Defaults. The Company fails to perform or
observe any term, covenant or agreement contained in Section 7.03, 7.11, 7.12 or
Article VIII; or
(e) Recapitalization. The conditions subsequent specified in
Section 5.03 shall not have been satisfied within the time period required by
Section 5.03; or
(f) Other Defaults. The Company fails to perform or observe
any other term or covenant contained in this Agreement or any other Loan
Document, and such default shall continue unremedied for a period of (i) 20
days, in the case such default arises under Section 7.01 or 7.02, or (ii) 30
days, in the case of any other such default, after the date upon which written
notice of such other default is given to the Company by any Agent or any Bank;
or
(g) Cross-Default. The Company or any of its Subsidiaries
(collectively, the "Relevant Parties") shall default in the payment when due of
any principal of or interest on any of its other Indebtedness having an
aggregate principal amount or commitment equal to or in excess of $30,000,000;
or in the payment when due of any amount under any Swap Contract providing for,
upon such default, payments in excess of $30,000,000; or any event specified in
any note, agreement, indenture or other document evidencing or relating to any
such Indebtedness or any event specified in any Swap Contract shall occur if the
effect of such event is to cause, or (with the giving of any notice or the
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lapse of time or both) to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by redemption,
purchase, offer to purchase or otherwise), prior to its stated maturity or to
have the interest rate on such Indebtedness reset to a level so that securities
evidencing such Indebtedness trade at a level specified in relation to its par
value or, in the case of any Swap Contract, to permit payments owing under any
such Swap Contract in excess of $30,000,000 in the aggregate, to be liquidated;
or
(h) Insolvency; Voluntary Proceedings. The Company or any of
its Subsidiaries (i) generally fails to pay, or admits in writing its inability
to pay, its debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct
its business in the ordinary course; (iii) commences any Insolvency Proceeding
with respect to itself; or (iv) takes any action to effectuate or authorize any
of the foregoing; or
(i) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary of the
Company, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
of its Subsidiaries' Properties, and any such proceeding or petition shall not
be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Company or any of its Subsidiaries
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non- U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Company or any of its
Subsidiaries acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its Property or business;
or
(j) ERISA. (i) The Company or an ERISA Affiliate shall fail
to satisfy its contribution requirements under Section 412(c)(11) of the Code,
whether or not it has sought a waiver under Section 412(d) of the Code, and such
failure could reasonably be expected to result in liability of more than
$25,000,000; (ii) in the case of an ERISA Event involving the withdrawal from a
Plan of a "substantial employer" (as defined in Section 4001(a)(2) or Section
4062(e) of ERISA), the withdrawing employer's proportionate share of that Plan's
Unfunded Pension Liabilities is more than $25,000,000; (iii) in the case of an
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ERISA Event involving the complete or partial withdrawal from a Multiemployer
Plan, the withdrawing employer has incurred a withdrawal liability in an
aggregate amount exceeding $25,000,000; (iv) in the case of an ERISA Event not
described in clause (ii) or clause (iii), the Unfunded Pension Liabilities of
the relevant Plan or Plans exceed $25,000,00; or (v) the commencement or
increase of contributions to, or the adoption of or the amendment of a Plan by,
a member of the Controlled Group shall result in a net increase in unfunded
liabilities to the Controlled Group in excess of $25,000,000; or
(k) Monetary Judgments. There shall be entered against the
Company or any Subsidiary one or more judgments or decrees the aggregate amount
of which not paid, not fully covered by insurance or for which no adequate
reserve has been established exceeds $20,000,000 and such judgments or decrees
shall not have been vacated, discharged, stayed or appealed within the
applicable period for appeal from the date of entry thereof; or
(l) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of ten consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(m) Change in Control. (i) After the consummation of the
Recapitalization, any transaction or series of related transactions occur in
which any Person or Persons (other than the Health Foundation or the trust to be
established pursuant to the terms of the Voting Trust Agreement to be entered
into in connection with the Recapitalization) acting in concert (A) acquire,
directly or indirectly, beneficial ownership (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of 20% or more of the
Voting Stock of the Company or (B) acquire or contract to or arrange and acquire
a percentage that would, unless consented to by the Blue Cross Blue Shield
Association ("BCBSA") cause termination of the BCBSA license; or (ii)
individuals who constitute the Board of Directors on the date of the
Recapitalization (after giving effect thereto) (the "Incumbent Board") cease for
any reason to constitute at least 80% thereof; provided that any Person becoming
a director subsequent to such date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least three quarters
(3/4) of the directors composing the Incumbent Board (either by a specific vote
or by approval of the proxy statement of the Company in which such Person is
named as a nominee for director, without
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objection to such nomination) shall be, for purposes of this clause (ii),
considered as though such Person were a member of the Incumbent Board; or
(n) HMO Event. There occurs and continues an HMO Event; or
(o) Adverse Change. There occurs a Material Adverse Effect
or an event resulting in a Material Adverse Effect.
9.02 Remedies. If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the
consent of, the Majority Banks, by notice to the Company (a) declare the
Commitment of each Bank to make Loans to be terminated, whereupon such
Commitments shall forthwith be terminated; (b) declare the unpaid principal
amount of all outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other Loan Document to
be immediately due and payable; without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies available
to it and the Banks under the Loan Documents or applicable law; provided,
however, that upon the occurrence of any event specified in paragraph (h) or (i)
of Section 9.01 above, the obligation of each Bank to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts owing under this Agreement shall
automatically become due and payable without further act of the Administrative
Agent or any Bank.
9.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE X
AGENTS
10.01 Appointment and Authorization. Each Bank hereby
irrevocably appoints, designates and authorizes each Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.
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Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agents shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agents
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agents. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to an Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
10.02 Delegation of Duties. Any Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. No Agent shall be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects in good faith.
10.03 Liability of Agents. None of the Agent-Related Persons
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), (b) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Company or any
Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by any
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder, (c) be required to initiate or conduct any litigation or collection
proceedings under any Loan Document or (d) be responsible for any action taken
or omitted to be taken by it under any Loan Document or under any other document
or instrument referred to or provided for in any Loan Document or in connection
with any Loan Document, except for its own gross negligence or willful
misconduct. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or
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to inspect the properties, books or records of the Company or any of the
Company's Subsidiaries or Affiliates.
10.04 Reliance by Agents.
(a) Any Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by such Agent.
Except for action expressly required of such Agent under the Loan Documents,
each Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless it shall first receive
such advice or concurrence of the Majority Banks as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agents shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
Majority Banks and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by any Agent to such Bank for
consent, approval, acceptance or satisfaction or of which such Bank has
knowledge.
10.05 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Banks, unless the Administrative Agent shall have received written notice from a
Bank or the Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." The
Syndication Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless it shall have received
written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." Each such Agent will notify the Banks of its receipt of any
such
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notice. The Administrative Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Banks in
accordance with Article IX; provided, however, that unless and until such Agent
has received any such request, such Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
10.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by any Agent, including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Bank. Each Bank represents to the Agents that it
has, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agents, the Agents shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
10.07 Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting from such Person's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse
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each Agent upon demand for its ratable share of any costs or out-of-pocket
expenses (including Attorney Costs) incurred by such Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that such Agent is not reimbursed for such expenses by or on
behalf of the Company. The undertaking in this Section 10.07 shall survive the
payment of all Obligations hereunder and the resignation or replacement of such
Agent.
10.08 Agents in Individual Capacity. BofA and its Affiliates
(and any successor acting as Administrative Agent), NationsBank and its
Affiliates (and any successor acting as Syndication Agent) and Chemical Bank and
its Affiliates (and any successor acting as Documentation Agent) may, without
notice to or consent from the Banks, make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Company and its Subsidiaries and Affiliates as though BofA,
NationsBank or Chemical Bank, as applicable, were not an Agent hereunder and may
accept fees and other consideration from the Company for services in connection
with this Agreement or otherwise without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, BofA or its Affiliates,
NationsBank or its Affiliates or Chemical Bank or its Affiliates may receive
information regarding the Company or its Affiliates (including information that
may be subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agents shall be under no obligation to
provide such information to them. With respect to its Commitments and Loans,
BofA, NationsBank and Chemical Bank shall have the same rights, privileges and
powers under this Agreement as any other Bank and may exercise the same as
though each were not an Agent, and the terms "Bank" and "Banks" include BofA,
NationsBank and Chemical Bank in their respective individual capacities.
10.09 Successor Agents. Each Agent may, and at the request of
the Majority Banks shall, resign as such Agent upon 30 days' notice to the
Banks. If any Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks (which successor
agent shall be subject to the consent of the Company, which consent shall not
unreasonably be withheld; provided that during the existence of a Default or an
Event of Default, such consent shall not be required). If no successor agent is
appointed prior to the
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effective date of the resignation of such Agent, such Agent may appoint, on
behalf of the Banks and after consulting with the Banks and the Company, a
successor agent from among the Banks. Upon the acceptance of its appointment as
successor agent, such successor agent shall succeed to and become vested with
all the rights, powers, privileges, duties and obligations of the retiring Agent
(and the term "Administrative Agent," "Syndication Agent" or "Documentation
Agent" as applicable, shall mean such successor agent) and the retiring Agent's
appointment, powers, privileges, duties and obligations as such Agent shall be
terminated. After any retiring Agent's resignation hereunder as such Agent, the
provisions of this Article X and Sections 11.04 and 11.05 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was such
Agent under this Agreement. If no successor agent has accepted appointment as
such Agent by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of such Agent
until such time, if any, as the Majority Banks appoint a successor agent as
provided for above.
10.10 Delivery of Agreements and Preparation of Amendments,
Modifications and Waivers. The Administrative Agent, the Syndication Agent, the
Documentation Agent, the Banks and the Company each acknowledge that the
executed agreements (including this Agreement) and certificates required to be
delivered pursuant to this Agreement shall be delivered to the Administrative
Agent. In addition, the Administrative Agent shall be responsible for managing
the documentation and dissemination of any amendments, modifications or waivers
to such agreements.
10.11 Co-Agents. Any Bank identified on the signature pages of
this Agreement as "co-agent" shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, such Bank shall
not have or be deemed to have any fiduciary relationship with any Bank. Each
Bank acknowledges that it has not relied, and will not rely, on such Bank so
identified in deciding to enter into this Agreement or in taking or not taking
action under this Agreement.
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ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company therefrom, shall be effective unless the
same shall be in writing and signed by the Majority Banks, the Company and
acknowledged by the Agents, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks, the Company and acknowledged by the Agents, do any of
the following: (a) except as set forth in Section 2.11, increase or extend the
Commitment of any Bank (or reinstate any Commitment terminated pursuant to
Section 9.02(a)) or subject any Bank to any additional obligations; (b) postpone
or delay any date fixed for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any Loan Document;
(c) reduce the principal of, or the rate of interest specified on any Loan, or
of any fees or other amounts payable hereunder or under any other Loan Document;
(d) change (i) the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans which shall be required for the Banks or any of
them to take any action hereunder or (ii) the definition of the term "Majority
Banks"; (e) waive any of the conditions precedent or subsequent set forth in
Article V; or (f) amend this Section 11.01 or any provision providing for
consent or other action by all Banks; provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by the Agents in addition
to the Majority Banks or all the Banks, as the case may be, affect the rights or
duties of the Agents under this Agreement or any other Loan Document. Any
modification, supplement or waiver shall be for such period and subject to such
conditions as shall be specified in the instrument effecting the same and shall
be binding upon the Agents, the Banks and the Company, and any such waiver shall
be effective only in the specific instance and for the purpose for which given.
Notwithstanding any other provision of this Agreement, if at a
time when the conditions precedent set forth in Article V to any Committed Loan
are, in the opinion of the Majority Banks, satisfied, any Bank shall fail to
fulfill its obligations to make such Loan, then, for so long as such failure
shall continue, such Bank shall (unless the Majority Banks, determined as if
such Bank were not a "Bank" under the Loan Documents, shall otherwise consent in
writing) be deemed for all purposes relating to amendments, modifications,
waivers or consents under any of the
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<PAGE> 102
Loan Documents (including under this Section 11.01) to have no Loans or
Commitments, shall not be treated as a "Bank" under the Loan Documents when
performing the computation of Majority Banks, and shall have no rights under the
preceding paragraph of this Section 11.01; provided, that any action taken by
the other Banks with respect to the matters referred to in clauses (a) through
(f) of the preceding paragraph shall not be effective as against such Bank.
11.02 Notices.
(a) All notices, requests and other communications provided
for hereunder shall be in writing and mailed, faxed or delivered (unless
expressly otherwise provided in the case of a facsimile transmission; provided
that any matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 11.02, and (ii) a hard copy original shall be promptly mailed or
delivered), to the address or facsimile number specified for notices on Schedule
11.02; or, as directed to the Company or the Administrative Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to each other party, at such other address as shall be
designated by such party in a written notice to the Company and the
Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; except that notices pursuant
to Article II or Article X shall not be effective until actually received by the
Administrative Agent.
(c) The Company acknowledges and agrees that any agreement of
the Administrative Agent and the Banks in Article III to receive certain notices
by telephone and facsimile is solely for the convenience and at the request of
the Company. The Administrative Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Administrative Agent and the Banks shall not have
any liability to the Company or other Person on account of any action taken or
not taken by the Administrative Agent or the Banks in reliance upon such
telephonic or facsimile notice. The obligation of the Company to repay the Loans
shall not be affected in any way or to any extent by any failure by the
Administrative Agent and the Banks to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Administrative Agent and
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the Banks of a confirmation which is at variance with the terms understood by
the Administrative Agent and the Banks to be contained in the telephonic or
facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure on the part of
any Agent or any Bank to exercise and no delay in exercising, and no course of
dealing with respect to, any right, remedy, power or privilege under this
Agreement or any Note shall operate as a waiver of such right, remedy, power or
privilege, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any Note preclude any other or further
exercise of any such right, remedy, power or privilege or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement and the Notes are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
11.04 Costs and Expenses. The Company shall, whether or not
the transactions contemplated hereby shall be consummated:
(a) pay or reimburse the Agents and the Co-Arrangers within
15 Business Days after demand (except that such 15-day period shall not apply
with respect to payments to be made on the Effective Date) for all reasonable
costs and expenses (including travel and printing costs) incurred by the Agents
and the Co-Arrangers in connection with the syndication, development,
preparation, delivery and execution of, this Agreement, any other Loan Document
and any other documents prepared in connection herewith or therewith as well as
any amendment, supplement, waiver or modification (in each case, whether or not
consummated) to this Agreement or any other Loan Document and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including all Attorney Costs
incurred by the Agents and the Co-Arrangers with respect to all of the above;
(b) pay or reimburse each Bank and each Agent within 15
Business Days after demand (except that such 15-day period shall not apply with
respect to payments to be made on the Effective Date) for all costs and expenses
incurred by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies (including in connection with any
"workout" or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding) under this Agreement, any other Loan
Document, and any such other documents, including all Attorney Costs incurred by
any Agent and any Bank with respect to all of the above; and
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(c) pay or reimburse each Agent within 15 Business Days after
demand (except that such 15-day period shall not apply with respect to payments
to be made on the Effective Date) for all costs and expenses incurred by them in
connection with the ongoing administration of the Loans and of this Agreement,
any other Loan Document and any such other documents, including all Attorney
Costs incurred by any Agent with respect to such administration.
The agreements in this Section 11.04 shall survive payment of
all other Obligations and termination of this Agreement.
11.05 Indemnity. The Company shall pay, indemnify, and hold
each Bank, the Agents, the Agent-Related Persons and each of their respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including Attorney Costs) of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section 11.05
shall survive payment of all other Obligations and termination of this
Agreement.
11.06 Payments Set Aside. To the extent that the Company makes
a payment or payments to the Agents or the Banks, or the Agents or the Banks
exercise their rights of set-off, and such payment or payments or the proceeds
of such set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Agents with the consent of the Majority Banks) to
be repaid to a trustee, receiver or any other party in connection with any
Insolvency Proceeding, or otherwise, then (a) to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred, and (b) each Bank severally agrees
to pay
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to the Agents upon demand its ratable share of the total amount so recovered
from or repaid by the Agents.
11.07 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agents and each Bank.
11.08 Assignments, Participations, Etc.
(a) Any Bank may, with the written consent of the Company
(provided that during the existence of a Default or an Event of Default or if
such assignment is to an existing Bank, the consent of the Company shall not be
required) and the Administrative Agent, which consents of the Company and the
Administrative Agent shall not be unreasonably withheld or delayed, at any time
assign and delegate to one or more Eligible Assignees pursuant to an assignment
and acceptance agreement substantially in the form of Exhibit G-1 ("Assignment
and Acceptance") (provided that no written consent of the Company or the
Administrative Agent shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank)
(each an "Assignee") all, or any ratable part of all, of the Loans, the
Commitment and the other rights and obligations of such Bank under each Loan
Document, in a minimum amount of $10,000,000; provided, however, that (i) the
Company and the Administrative Agent may continue to deal solely and directly
with such Bank in connection with the interest so assigned to an Assignee until
(A) written notice of such assignment, together with payment instructions,
addresses and related information with respect to the Assignee, shall have been
given to the Company and the Administrative Agent by such Bank and the Assignee;
(B) such Bank and its Assignee shall have delivered to the Company and the
Administrative Agent a Notice of Assignment and Acceptance in the form of
Exhibit G-2, together with any Note subject to such assignment and (C) the
assignor Bank or Assignee has paid to the Administrative Agent a processing fee
in the amount of $3,500.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received (and provided its consent with
respect to) an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee shall be a party to, and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Bank under, the Loan Documents, and (ii) the assignor Bank
shall, to the extent that rights and obligations
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hereunder and under the other Loan Documents have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Loan Documents; provided, however, that the agreements
set forth in Sections 11.04 and 11.05 shall survive any relinquishment of rights
and release of obligations as provided above.
(c) Within five Business Days after its receipt of notice by
the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee, (and provided that it consents to
such assignment in accordance with Section 11.08(a)), the Company shall execute
and deliver to the Administrative Agent, any new Bid Notes and Committed Notes
requested by the Assignee evidencing such Assignee's assigned Loans and
Commitment and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes in the principal amount of the Loans retained by
the assignor Bank (such Notes to be in exchange for, but not in payment of, any
Notes held by such Bank). Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement shall be deemed
to be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may, upon written notice to the Company given by
such Bank, at any time sell to one or more commercial banks or other Persons
that are not Affiliates of the Company (each, a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company and the
Agents shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant shall have rights to
approve any amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such amendment,
consent or waiver would require unanimous consent of the Banks as described in
clauses (a), (b) or (c) of the first proviso to Section 11.01. In the case of
any such participation, the Participant shall not be entitled to the benefit of
Section 4.01, 4.03 or 11.05 unless the Bank which granted the participation to
such Participant is so entitled. If amounts outstanding under this Agreement are
due
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<PAGE> 107
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement.
(e) Each Bank and each Agent agrees to take normal and
reasonable precautions and exercise due care (in the same manner as it exercises
for its own affairs) to maintain the confidentiality of all information
identified as "confidential" by the Company or any Subsidiary of the Company and
provided to it by the Company or any Subsidiary of the Company, or by the Agents
on such Company's or Subsidiary's behalf, in connection with this Agreement or
any other Loan Document; except to the extent such information (i) was or
becomes generally available to the public other than as a result of a disclosure
in violation of this Section 11.08(e) by such Bank or Agent, or (ii) was or
becomes available on a non-confidential basis from a source other than the
Company; provided that such source is not bound by a confidentiality agreement
with the Company known to such Bank or Agent as the case may be; provided,
however, that any Bank or Agent may disclose such information (A) at the request
or pursuant to any requirement of any Governmental Authority to which such Bank
or Agent is subject or in connection with an examination of such Bank or Agent
by any such authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the provisions of any applicable
Governmental Rule; (D) in connection with any litigation or proceeding to which
any Agent, any Bank or their respective Affiliates may be party, (E) in
connection with the exercise of any remedy hereunder or under any other Loan
Document, and (F) to such Bank's, Agent's or Affiliate's independent auditors,
counsel and other professional advisors. Prior to any disclosure permitted under
clause (B) above, such Bank or Agent shall, if permitted by applicable
Governmental Rules or judicial order, notify the Company of such pending
disclosure, unless litigation is pending between such Bank or Agent and the
Company or any of its Subsidiaries. Notwithstanding the foregoing, the Company
authorizes each Bank to disclose information to (a) any Affiliate of such Bank
or (b) any Participant or Assignee (each, a "Transferee") and to any prospective
Transferee, such financial and other information in such Bank's possession
concerning the Company or its Subsidiaries which has been delivered to the
Agents or the Banks pursuant to this Agreement or which has been delivered to
the Agents or the Banks by the Company in connection with the Banks' credit
evaluation of the Company prior to entering into this Agreement; provided that
such Transferee or prospective Transferee shall acknowledge and agree in writing
to
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be bound by the provisions of this Section 11.08(e) by executing and delivering
to such Bank a Confidentiality Agreement substantially in the form of Exhibit J.
(f) Notwithstanding any other provision contained in this
Agreement or any other Loan Document to the contrary, any Bank may assign all or
any portion of the Loans held by it to any Federal Reserve Bank or the United
States Treasury as collateral security pursuant to Regulation A of the Federal
Reserve Board and any Operating Circular issued by such Federal Reserve Bank;
provided that any payment in respect of such assigned Loans made by the Company
to or for the account of the assigning or pledging Bank in accordance with the
terms of this Agreement shall satisfy the Company's obligations hereunder in
respect to such assigned Loans to the extent of such payment. No such assignment
shall release the assigning Bank from its obligations hereunder.
11.09 Set-off. In addition to (and without limitation of) any
right of set-off, banker's lien, counterclaim or any other right or remedy of
the Banks provided by law, in the event that any payment Obligation is not paid
in full when due, each Bank is authorized at any time and from time to time,
without prior notice to the Company (any such notice being waived by the Company
to the fullest extent permitted by law), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing to, such Bank or any of its
Affiliates, whether in Dollars or other currency, to or for the credit or the
account of the Company against any and all Obligations owing to such Bank or
Affiliate, now or hereafter existing, irrespective of whether or not any Agent
or such Bank shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Company and the Agents after any such set-off and
application made by such Bank or Affiliate; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application. Nothing contained in this Section 11.09 shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company.
11.10 Automatic Debits of Fees. With respect to any commitment
fee, structuring and arrangement fee, administration fee, any other fee, or any
other cost or expense (including Attorney Costs) due and payable to any Agent,
BofA, NationsBank or any Co-Arranger under the Loan Documents, the Company
hereby irrevocably authorizes (i) BofA to debit any deposit account of the
Company with BofA in an amount so due and payable to the Administrative Agent,
BofA or BA Securities, Inc. or to the
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Syndication Agent, NationsBank or NationsBanc Capital Markets, Inc. and (ii)
NationsBank to debit any deposit account of the Company with NationsBank in an
amount so due and payable to the Syndication Agent, NationsBank or NationsBanc
Capital Markets, Inc. or to the Administrative Agent, BofA or BofA Securities,
Inc., such that the aggregate amount debited from all such deposit accounts does
not exceed the aggregate amount of such fees or other costs or expenses. If
there are insufficient funds in such deposit accounts to cover the amount of the
fee or other cost or expense then due, such debits will be reversed (in whole or
in part, in BofA's or NationsBank's sole discretion, as applicable) and such
amount not debited shall be deemed to be unpaid. No such debit under this
Section 11.10 shall be deemed a set-off, including for the purposes of Section
11.09.
11.11 Notification of Addresses, Lending Offices, Etc. Each
Bank shall notify each Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as such Agent shall reasonably request.
11.12 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement in any number of separate counterparts,
each of which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Agents.
11.13 Severability. Any provision of this Agreement or the
Notes that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or the Notes, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
11.14 No Third Parties Benefitted. This Agreement is made and
entered into for the sole protection and legal benefit of the Company, the Banks
and the Agents, and their permitted successors and assigns, and no other Person
shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents. Neither any Agent nor any Bank shall have any
obligation to any Person not a party to this Agreement or other Loan Documents.
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11.15 Time. Time is of the essence as to each term or
provision of this Agreement and each of the other Loan Documents.
11.16 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA PROVIDED THAT
THE AGENTS AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. THE COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
11.17 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE
AGENTS EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENTS EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 11.17
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Entire Agreement. This Agreement, together with the other
Loan Documents and the Fee Letters, embodies the entire agreement and
understanding among the Company, the Banks and the Agents and supersedes all
prior or contemporaneous agreements and understandings of such Persons, verbal
or written, relating to the subject matter hereof and thereof.
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11.19 Survival of Representations. Each representation and
warranty made, or deemed to be made by a notice of any extension of credit, in
or pursuant to any Loan Document shall survive the making or deemed making of
such representation and warranty, and no Bank shall be deemed to have waived, by
reason of making any extension of credit, any Default which may arise by reason
of such representation or warranty proving to have been false or misleading,
notwithstanding that such Bank or any Agent may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such extension of credit was made.
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<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
"COMPANY"
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Yon Y. Jorden
--------------------------------------
Name: Yon Y. Jorden
------------------------------------
Title: Chief Financial Officer
-----------------------------------
"AGENTS"
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/ Christine Cordi
--------------------------------------
Christine Cordi
Vice President
NATIONSBANK OF TEXAS, N.A., as
Syndication Agent
By: /s/ Brad W. DeSpain
--------------------------------------
Brad W. DeSpain
Vice President
CHEMICAL BANK,
as Documentation Agent
By: /s/ Dawn Lee Lum
--------------------------------------
Dawn Lee Lum
Vice President
<PAGE> 113
"BANKS"
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ John Johnson
--------------------------------------
John Johnson
Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Brad W. DeSpain
--------------------------------------
Brad W. DeSpain
Vice President
CHEMICAL BANK
By: /s/ Dawn Lee Lum
--------------------------------------
Dawn Lee Lum
Vice President
ABN AMRO BANK N.V.
Los Angeles International Branch,
as a Bank and as a Co-Agent
By: /s/ David J. Stassel
--------------------------------------
Name: David J. Stassel
Title: Vice President and Director
By: /s/ John A. Miller
--------------------------------------
Name: John A. Miller
Title: Group Vice President/Director
THE BANK OF NEW YORK,
as a Bank and as a Co-Agent
By: /s/ Rebecca K. Levine
--------------------------------------
Name: Rebecca K. Levine
Title: Assistant Vice President
<PAGE> 114
THE BANK OF NOVA SCOTIA,
as a Bank and as a Co-Agent
By: /s/ Alan W. Pendergast
--------------------------------------
Name: Alan W. Pendergast
Title: Relationship Manager
BANQUE NATIONALE DE PARIS,
as a Bank and as a Co-Agent
By: /s/ Clive Bettles
--------------------------------------
Name: Clive Bettles
Title: Senior Vice President &
Manager
By: /s/ Mitchell M. Ozawa
--------------------------------------
Name: Mitchell M. Ozawa
Title: Vice President
DEUTSCHE BANK AG Los Angeles
Branch and/or Cayman Islands
Branch, as a Bank and as a
Co-Agent
By: /s/ J. Scott Jessup
--------------------------------------
Name: J. Scott Jessup
Title: Vice President
By: /s/ Ross A. Howard
--------------------------------------
Name: Ross A. Howard
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK,
as a Bank and as a Co-Agent
By: /s/ Diana H. Imhof
--------------------------------------
Name: Diana H. Imhof
Title: Vice President
<PAGE> 115
<TABLE>
<S> <C>
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
as a Bank and as a Co-Agent
By: /s/ Yutaka Kamisawa
--------------------------------------
Name: Yutaka Kamisawa
Title: Deputy General Manager
BANCA DI ROMA
By: /s/ Augusto Bianchi /s/ Claudio De Luca
-------------------------------------- -----------------------------------
Name: Augusto Bianchi Claudio De Luca
Title: First V.P. S.V.P. & Branch Manager
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Jay G. Sepanski
--------------------------------------
Name: Jay G. Sepanski
Title: Corporate Banking Officer
KREDIETBANK NV
By: /s/ Robert Snauffer /s/ Tod R. Angus
-------------------------------------- ------------------------------------
Name: Robert Snauffer Tod R. Angus
Title: Vice President Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND" NEW YORK BRANCH
By: /s/ Dana W. Hemenway
--------------------------------------
Name: Dana W. Hemenway
Title: Vice President
By: /s/ Ian Reece
--------------------------------------
Name: Ian Reece
Title: Vice President & Manager
UNION BANK OF CALIFORNIA
By: /s/ Jennifer L. Banks
--------------------------------------
Name: Jennifer L. Banks
Title: Vice President
</TABLE>
<PAGE> 116
CREDIT SUISSE
By: /s/ Mark A. Sampson
--------------------------------------
Name: MARK A. SAMPSON
Title: ASSOCIATE
By: /s/ Stephen M. Flynn
--------------------------------------
Name: STEPHEN M. FLYNN
Title: MEMBER OF SENIOR MANAGEMENT
SANWA BANK
By: /s/ Karen Wicks Coleman
--------------------------------------
Name: KAREN WICKS COLEMAN
Title: ASSISTANT VICE PRESIDENT
& MANAGER
SUMITOMO BANK
By: /s/ Goro Hirai
--------------------------------------
Name: GORO HIRAI
Title: JOINT GENERAL MANAGER
SWISS BANK CORPORATION
By: /s/ H. Clark Werthley
--------------------------------------
Name: H. CLARK WERTHLEY
Title:
By: /s/ William S. Lutkins
--------------------------------------
Name: WILLIAM S. LUTKINS
Title: ASSOCIATE DIRECTOR
CREDIT RISK MGMT.
BANK OF MONTREAL
By: /s/ Irene M. Geller
--------------------------------------
Name: IRENE M. GELLER
Title: DIRECTOR
<PAGE> 117
BANKERS TRUST COMPANY
By: /s/ Mary Jo Jolly
--------------------------------------
Name: MARY JO JOLLY
Title: ASSISTANT VICE PRESIDENT
CIBC INC.
By: /s/ Stephen D. Reynolds
--------------------------------------
Name: STEPHEN D. REYNOLDS
Title: AUTHORIZED SIGNATORY
CREDIT LYONNAIS
New York Branch
By: /s/ Farbond Tavangar
--------------------------------------
Name: FARBOND TAVANGAR
Title: VICE PRESIDENT
DAI-ICHI KANGYO BANK
By: /s/ Tomohiro Nozaki
--------------------------------------
Name: TOMOHIRO NOZAKI
Title: SR. VICE PRESIDENT &
JOINT GENERAL MANAGER
FLEET NATIONAL BANK
By: /s/ Ginger Stolzenthaler
--------------------------------------
Name: GINGER STOLZENTHALER
Title: VICE PRESIDENT
THE FUJI BANK, LIMITED
By: /s/ Authorized Signatory
--------------------------------------
Name:
Title:
<PAGE> 118
THE INDUSTRIAL BANK OF JAPAN, LTD.
Los Angeles Agency
By: /s/ Toshinari Iyoda
--------------------------------------
Name: Toshinari Iyoda
Title: Senior Vice President
MELLON BANK, N.A.
By: /s/ Authorized Signatory
--------------------------------------
Name:
Title:
<PAGE> 119
ANNEX I
APPLICABLE AMOUNT
<TABLE>
<CAPTION>
=============================================================================================
Debt Rating (Basis points per
S&P and Moody's annum)
Level Leverage Ratio respectively -------------------------
Facility LIBOR Rate
Fee Spread
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Level Less than A- or above 9.00 16.00
I 1.0 to 1 or
A3 or above
- ---------------------------------------------------------------------------------------------
Level Less than 1.25 BBB+ 11.25 18.75
II to 1 and greater or
than or equal to Baa1
1.0 to 1
- ---------------------------------------------------------------------------------------------
Level Less than 1.5 to BBB 13.75 23.75
III 1 and greater or
than or equal to Baa2
1.25 to 1
- ---------------------------------------------------------------------------------------------
Level Less than 2.0 to BBB- 17.50 27.50
IV 1 and greater or
than or equal to Baa3
1.5 to 1
- ---------------------------------------------------------------------------------------------
Level Less than 2.5 to BB+ 22.50 40.00
V 1 and greater or
than or equal to Ba1
2.0 to 1
- ---------------------------------------------------------------------------------------------
Level Greater than or Less than BB+ or 30.00 57.50
VI equal to 2.5 to Less than Ba1
1
=============================================================================================
</TABLE>
The Applicable Amount shall be based, at the option of the
Company, on (i) the Leverage Ratio or (ii) the Debt Rating, subject to the
following:
(a) If either or both of Moody's and S&P are not providing a Debt
Rating, the Applicable Amount shall be based on the Leverage Ratio; provided in
such case that the Applicable Amount cannot be lower than Level IV (with Level I
being the lowest Level and Level VI the highest Level), even though the Leverage
Ratio would otherwise indicate a lower Level. In addition, if either of the Debt
Ratings is less than Baa3, in the case of Moody's, or less than BBB-, in the
case of S&P, the
<PAGE> 120
Applicable Amount, if based on the Leverage Ratio, cannot be lower than Level IV
even though the Leverage Ratio would otherwise indicate a lower Level.
(b) If a difference exists in the Debt Ratings of Moody's and S&P,
the higher of such Debt Ratings will determine the relevant Level, unless (i)
either of such Debt Ratings is less than Baa3, in the case of Moody's, or less
than BBB-, in the case of S&P, in which case the lower of such Debt Ratings will
determine the relevant Level or (ii) other than in situations governed by clause
(b)(i), if the Debt Ratings differ by more than one Level, the Applicable
Amount, if based on the Debt Rating, shall not be based on a Level that is lower
than one Level below the higher Level of the two, with Level I being the lowest
Level and Level VI the highest Level (for example, if, as of the date of
determination, the Company's Debt Rating from S&P is A- (i.e., Level I) and its
Debt Rating from Moody's is Baa3 (i.e., Level IV), the Applicable Amount may be
based on Level III but cannot be based on Level I or II.)
For purposes of determining the Applicable Amount:
(i) the Leverage Ratio shall be that set forth in the most recent
compliance certificate received by the Administrative Agent pursuant to Section
7.02(a) and shall be effective from the date which is five Business Days after
the date on which the Administrative Agent receives such compliance certificate
until the date five Business Days after which the Administrative Agent receives
the next such compliance certificate; provided, however, that if the
Administrative Agent does not receive a compliance certificate by the date
required by Section 7.02(a), the Applicable Amount shall, effective as of the
date required by Section 7.02(a), be based on Level VI until the date five
Business Days after which the Administrative Agent receives such compliance
certificate; and
(ii) any change in any Debt Rating that would require a change in
the Applicable Amount shall become effective five Business Days after the
earlier of (i) any public announcement of such Debt Rating change and (ii) the
Company's or the Administrative Agent's receipt of written evidence of such Debt
Rating change; provided, however, that the Debt Rating may not continue to be
based upon an "implied" rating at a particular rating level unless such rating
at such level is reconfirmed or renewed by the applicable Rating Agency in a
public announcement or in a writing received by the Administrative Agent within
one year of the issuance of such rating or of the most recent reconfirmation or
renewal of such rating.
I -2
<PAGE> 121
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- --------
<S> <C> <C>
Bank of America
National Trust and
Savings Association $ 95,000,000 7.6%
NationsBank of Texas, N.A. $ 85,000,000 6.8%
Chemical Bank $ 72,500,000 5.8%
ABN AMRO Bank N.V. $ 62,500,000 5.0%
Banca di Roma $ 25,000,000 2.0%
Bank of Montreal $ 25,000,000 2.0%
The Bank of New York $ 62,500,000 5.0%
The Bank of Nova Scotia $ 62,500,000 5.0%
Bankers Trust Company $ 25,000,000 2.0%
Banque National de Paris $ 62,500,000 5.0%
CIBC Inc. $ 25,000,000 2.0%
Credit Lyonnais $ 35,000,000 2.8%
Credit Suisse $ 25,000,000 2.0%
The Dai-Ichi Kangyo Bank $ 35,000,000 2.8%
Deutsche Bank AG $ 62,500,000 5.0%
The First National Bank
of Chicago $ 35,000,000 2.8%
Fleet National Bank $ 35,000,000 2.8%
The Fuji Bank, Limited $ 35,000,000 2.8%
The Industrial Bank of
Japan, Ltd. $ 35,000,000 2.8%
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- --------
<S> <C> <C>
Morgan Guaranty Trust
Company of New York $ 62,500,000 5.0%
Kredietbank NV $ 25,000,000 2.0%
The Long-Term Credit
Bank of Japan, Ltd. $ 62,500,000 5.0%
Mellon Bank, N.A. $ 35,000,000 2.8%
Cooperatieve Centrale
Raiffeisen-Boerenleenbank
B.A. "Rabobank Nederland"
New York Branch $ 35,000,000 2.8%
The Sanwa Bank Limited $ 35,000,000 2.8%
The Sumitomo Bank, Limited $ 35,000,000 2.8%
Swiss Bank Corporation $ 25,000,000 2.0%
Union Bank of California,
N.A. $ 35,000,000 2.8%
=============== ====
TOTAL $ 1,250,000,000 100%
</TABLE>
<PAGE> 123
SCHEDULE 6.20
MATERIAL AGREEMENTS
Part A
1. Purchase and Sale Agreement dated as of January 5, 1996 by and between
the Company and Massachusetts Mutual Life Insurance Company ("MMLIC").
2. Series A Senior Term Note due March 31, 1999 in the principal amount of
$62,000,000 made by the Company in favor of MMLIC.
3. The Company is obligated to issue a Series B Senior Term Note in favor
of MMLIC upon completion of a post-closing audit to occur prior to July 1, 1996.
The principal amount of such promissory note is presently estimated to be
approximately $35,000,000.
4. Guaranty by the Company of all financial obligations and liabilities
of American Managing Company (see Schedule 6.21) related to administrative
services provided to Affiliated Health Plans, Inc. ("AHP").
5. Guaranty by the Company of all financial obligations and liabilities
of AHP up to and including 100% of the authorized reserves necessary for AHP to
comply with financial standard requirements of Texas Insurance Code.
Part B
(Unless otherwise noted, all defined terms used in this Schedule have the
meanings attributed to them in the Recapitalization Agreement)
Voting Agreement
Voting Trust Agreement
Registration Rights Agreement
Share Escrow Agent Agreement
Indemnification Agreement
BCBSA License Agreement and Addendum
<PAGE> 124
SCHEDULE 6.21
SUBSIDIARIES, ETC.
Part A: Subsidiaries of the Company
<TABLE>
<CAPTION>
1. Names of Subsidiaries
Name of Entity Jurisdiction of Name of Equityholder(s) and
-------------- Formation Percentage Held by Such Person(s)
--------- ---------------------------------
<S> <C> <C> <C>
a. CaliforniaCare Health Plans California WellPoint Health Networks Inc.
("WLP") - 100%
b. WellPoint Dental Plan California WLP - 100%
c. WellPoint Pharmacy Plan California WLP - 100%
d. WellPoint Life Insurance Company California WLP - 100%
e. Foxfield Ventures, Inc. Delaware WLP - 100%
f. Health Management Associates of California WLP - 100%
San Luis Obispo
g. WellPoint Dental Services, Inc. Delaware WLP - 100%
("DSO")
h. Comprehensive Integrated Marketing California WLP - 100%
i. UniCARE Financial Corp. ("UFC") California WLP - 100%
j. Professional Claims Services, Inc. California WLP - 100%
k. AHI Healthcare Corporation ("AHI") Texas WLP - 100%
l. Health Management Associates of California WLP - 100%
Santa Barbara
m. MassMutual Holding Company Two, Massachusetts WLP - 100%
Inc. ("MMHC")
n. UniCARE General Insurance Agency, California UFC - 100%
Inc.
o. UniCARE Service Co. California UFC - 100%
p. UniCARE Insurance Company California UFC - 100%
q. Practical Rehabilitation Services, Inc. California UFC - 100%
r. Innovative Care Systems, Inc. California UFC - 100%
</TABLE>
<PAGE> 125
<TABLE>
<S> <C> <C> <C>
s. UniCARE Compensation Insurance California UFC - 100%
Company
t. UniCARE Foundation (a nonprofit California UFC - 100%
entity)
u. American Managing Company Texas AHI - 100%
v. Affiliated Healthcare, Inc. Texas AHI - 100%
w. Affiliated Provider Systems, Inc. Texas AHI - 100%
x. UniCARE of Texas Health Plans, Inc. Texas AHI - 100%
y. Affiliated Re., Inc. Texas AHI - 100%
z. MassMutual Holding Company Two Massachusetts MMHCT - 100%
MSC, Inc. (MMHCT")
aa. National Capital Preferred Provider Maryland MMHCT - 54%
Organization, Inc. ("NCPPO")
bb. UniCARE Life & Health Insurance Delaware MMHCT - 100%
Company
cc. National Capital Health Plans, Inc. Virginia MMHCT - 62%
dd. Check-Up Centers of America, Inc. California WLP - 100%
ee. WellPoint Claims & Services, Inc. California WLP - 100%
</TABLE>
The remaining equity interests in NCPPO not held by the Company are
held by the following persons or entities in the following percentages:
<TABLE>
<CAPTION>
Name Ownership Percentage
---- --------------------
<S> <C>
Elliot Segal 9.4%
Arthur Rubin 9.4%
Robert Berenson 9.4%
INOVA Health System 4.9%
Georgetown University Medical 4.9%
Center
Adventist Health Care Mid- 3.0%
Atlantic
</TABLE>
<PAGE> 126
<TABLE>
<S> <C>
Greater Southeast Community 2.6%
Hospital
Prince William Hospital 1.0%
Potomac Hospital 1.0%
Loudoun Hospital Center 1.0%
</TABLE>
The remaining equity interests in NCHP not held by the Company are held
by the following persons or entities in the following percentages
<TABLE>
<CAPTION>
Name Ownership Percentage
---- --------------------
<S> <C>
INOVA Health System 22%
Elliot Segal 4%
Arthur Rubin 4%
Robert Berenson 4%
Robert McCluskey 4%
</TABLE>
2. Pursuant to the Stock Purchase Agreement dated as of November 10, 1993,
the Third Amended and Restated Shareholders Agreement dated as of May 12,
1995 and Agreement for Election of Directors dated as of November 10,
1993, there are certain restrictions on the voting and transfer of, as
well as rights of first refusal in, the shares of NCPPO (see item 1. aa
above) held by MMHCT. In addition, certain registration rights have been
granted.
3. As of date of this Agreement, DSO (see item 1.g above) has issued
warrants to purchase its common stock to the persons listed below. Each
warrant entitles the holder thereof to purchase one share of common stock
of DSO at a price of $1.50 per share (subject to customary anti-dilution
provisions) and contain certain piggy back registration rights.
<TABLE>
<CAPTION>
Name of Warrant holder Number of Warrants
---------------------- ------------------
<S> <C>
Henry Lucas 130,000
Roy Ingram 130,000
Roy Ingram 24,000
</TABLE>
Part B: Investments
Please see attached schedule. In addition, as of the date of this
Agreement, the Company and its subsidiaries have the following additional
Investments:
<PAGE> 127
1. Asset Purchase Agreement by and between Henry Lucas, D.D.S. and DSO,
dated December 20, 1995.
2. Asset Purchase Agreement by and among Sherill Dental Corporation, Roy D.
Ingram, D.D.S., and DSO, dated December 20, 1995.
3. Asset Purchase Agreement by and among Roy D. Ingram, D.D.S., Inc., Roy D.
Ingram, D.D.S., and DSO, dated December 20, 1995.
4. Asset Purchase Agreement by and among Ingram Dental Corporation, Roy D.
Ingram, D.D.S., and DSO, dated May 1, 1996.
5. MMHCT owns 21% of the outstanding equity interests of Sloan Lake
Management Corp., a Colorado corporation.
6. MMHCT owns 33% of the outstanding equity interests of Benefit Panel
Services, Inc., a California corporation.
7. Foxfield Ventures, Inc. ("Foxfield") owns certain shares of the Series A
Convertible Preferred Stock of Health Partners, Inc. ("Health Partners"),
having a book value of $17,500,000 as of the date hereof. Foxfield is
obligated to make additional purchases of an aggregate of $7,500,000 of
such Series A Preferred Stock upon request by Health Partners.
<PAGE> 128
SCHEDULE 8.02
INDEBTEDNESS
1. Series A Senior Term Note due March 31, 1999 in the principal amount of
$62,000,000 made by the Company in favor of MMLIC.
2. The Company is obligated to issue a Series B Senior Term Note in favor of
MMLIC upon completion of a post-closing audit to occur prior to July 1,
1996. The principal amount of such promissory note is presently estimated
to be approximately $35,000,000.
3. Asset Purchase Agreement by and between Henry Lucas, D.D.S. and DSO,
dated December 20, 1995.
4. Asset Purchase Agreement by and among Sherill Dental Corporation, Roy D.
Ingram, D.D.S., and DSO, dated December 20, 1995.
5. Asset Purchase Agreement by and among Roy D. Ingram, D.D.S., Inc., Roy D.
Ingram, D.D.S., and DSO, dated December 20, 1995.
6. Asset Purchase Agreement by and among Ingram Dental Corporation, Roy D.
Ingram, D.D.S., and DSO, dated May 1, 1996.
<PAGE> 129
SCHEDULE 11.02
LIBOR AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
COMPANY
WellPoint Health Networks, Inc.
21555 Oxnard Street
Woodland Hills, CA 91367
Attention: R. David Kretschmer
Vice President and Treasurer
Telephone: (818) 703-3356
Facsimile: (818) 703-2083
with a copy to:
Michael Rosen
Manager of Investments
Telephone: (818) 703-3899
Facsimile: (818) 703-2083
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Administrative Agent
Bank of America National Trust
and Savings Association
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Christine Cordi, VP
Telephone: (415) 436-2790
Facsimile: (415) 436-2700
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as a Bank
Domestic and LIBOR Lending office:
Bank of America NT&SA
333 South Beaudry Avenue
11th Floor
Los Angeles, California 90017
Attention: Linda Escamilla
Telephone: (213) 345-7748
-1
<PAGE> 130
Facsimile: (213) 345-7797
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Bank of America NT&SA
300 Lakeside Drive, Suite 250
Oakland, CA 94612
Attention: John Johnson, Vice President
Telephone: (510) 273-5288
Facsimile: (415) 273-5299
Attention: Kenneth Beck
Telephone: (510) 273-5309
Facsimile: (415) 273-5299
NATIONSBANK OF TEXAS, N.A.,
as Syndication Agent and as a Bank
Domestic and LIBOR Lending office:
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention: Kay Hibbs
Telephone: (214) 508-3089
Facsimile: (214) 508-0944
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
NationsBank of Texas, N.A.
444 South Flower Street, Suite 4100
Los Angeles, CA 90071
Attention: Brad DeSpain
Telephone: (213) 236-4912
Facsimile: (213) 624-5815
Attention: Pam Randall-Levy
Telephone: (213) 236-4916
Facsimile: (213) 624-5815
- 2
<PAGE> 131
CHEMICAL BANK,
as a Bank and
as Documentation Agent
Domestic and LIBOR Lending Office:
Chemical Bank
140 East 45th Street, 29th Floor
New York, New York 10017
Attention: Renee Pierre Louis
Telephone: (212) 622-1442
Facsimile: (212) 622-0137/0136
Notices (other than Borrowing Notices and Notices of Conversion/Continuation):
Chemical Bank
270 Park Avenue, 9th Floor
New York, NY 10017
Attention: Dawn Lee Lum, VP
Telephone: (212) 270-2472
Facsimile: (212) 270-3279
BANK OF NOVA SCOTIA
Domestic and LIBOR Lending Office:
Bank of Nova Scotia
600 Peachtree St., N.E., Suite 2700
Atlanta, GA 30308
Attention: Craig Subryan, Loan Operations Officer
Telephone: (404) 877-1563
Facsimile: (404) 888-8998
Notices (other than Borrowing Notices and Notices of Conversion/Continuation):
Bank of Nova Scotia
580 California Street
San Francisco, CA 94104
Attention: Alan Pendergast
Telephone: (415) 986-1100
Facsimile: (415) 397-0791
- 3
<PAGE> 132
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
Domestic Lending Office:
Morgan Guaranty Trust Company of New York
60 Wall Street Branch
C/O J.P. Morgan Services, Inc.
500 Stanton-Christiana Road
Newark, DE 19713
Attention: Deborah Jones
Telephone: (302) 634-1940
Facsimile: (302) 634-1091
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
LIBOR Lending Office:
Morgan Guaranty Trust Company of New York
Nassau, Bahamas Office
C/O J.P. Morgan Services, Inc.
500 Stanton-Christiana Road
Newark, DE 19713
Attention: Deborah Jones
Telephone: (302) 634-1940
Facsimile: (302) 634-1091
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260-0060
Attention: Robert M. Osieski, VP
Telephone: (212) 648-7173
Facsimile: (212) 648-5014
Attention: Diana Imhof, VP
Telephone: (212) 648-6948
Facsimile: (212) 648-5014
DEUTSCHE BANK AG
Domestic Lending Office:
Deutsche Bank AG, Los Angeles Branch
550 South Hope Street
Los Angeles, CA 90071
Attention: Anne Norwood
- 4
<PAGE> 133
Telephone: (213) 630-7682
Facsimile: (213) 630-3436
DEUTSCHE BANK AG
LIBOR Lending Office:
Deutsche Bank AG, Cayman Island Branch
c/o Los Angeles Branch
550 South Hope Street
Los Angeles, CA 90071
Attention: Anne Norwood
Telephone: (213) 630-7682
Facsimile: (213) 630-3436
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Scott Jessup
Telephone: (213) 630-7670
Facsimile: (213) 630-3436
BANCA DI ROMA
Domestic and LIBOR Lending Office:
Banca di Roma
One Montgomery Street, Suite 2200
San Francisco, CA 94104
Attention: Paul De Roover, Vice President
Telephone: (415) 765-8245
Facsimile: (415) 433-6725
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Augusto Bianchi, 1st VP
Telephone: (415) 765-8202
Facsimile: (415) 433-6725
THE FIRST NATIONAL BANK OF CHICAGO
Domestic and LIBOR Lending Office:
The First National Bank of Chicago
One First National Plaza, Suite 0091
Chicago, IL 60670-0091
-5
<PAGE> 134
Attention: Kathie Blomquist, Client Services Assoc.
Telephone: (312) 732-4967
Facsimile: (312) 732-2016
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Jay G. Sepanski, Corp. Bkg Officer
Telephone: (312) 732-6726
Facsimile: (312) 732-2016
KREDIETBANK N.V.
Domestic and LIBOR Lending Office:
Kredietbank N.V.
125 W. 55th Street, 10th Floor
New York, NY 10019
Attention: Lynda Resuma
Telephone: (212) 541-0657
Facsimile: (212) 956-5580
Attention: Mayra Ramirez
Telephone: (212) 541-0658
Facsimile: (212) 956-5580
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Kredietbank N.V.
Suite 1775
550 South Flower Street
Los Angeles, CA 90071
Attention: Luc Cools, VP
Telephone: (213) 624-0401
Facsimile: (213) 629-5801
RABOBANK NEDERLAND
Domestic and LIBOR Lending Office:
Rabobank Nederland
245 Park Ave., 37th Floor
New York, NY 10167
Attention: Annette Browne, Sr. Cust. Services Rep.
Telephone: (212) 916-3702
Facsimile: (212) 916-7930
-6-
<PAGE> 135
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Rabobank Nederland
#930
3 Embarcadero Center
San Francisco, CA 94111
Attention: Richard Cerf, VP
Telephone: (415) 986-4258
Facsimile: (415) 986-8349
UNION BANK OF CALIFORNIA, N.A.
Domestic and LIBOR Lending Office:
Union Bank of California, N.A.
550 South Hope Street
Los Angeles, CA 90071
Attention: Hisako Sakamoto
Telephone: (213) 243-3522
Facsimile: (213) 243-3521
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Jennifer L. Banks, VP
Telephone: (213) 243-3517
Facsimile: (213) 243-3552
CREDIT SUISSE
Domestic and LIBOR Lending Office:
Credit Suisse
633 West 5th Street, 64th Floor
Los Angeles, CA 90071
Attention: Rita Asa
Telephone: (213) 955-8284
Facsimile: (213) 955-8245
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Mark Sampson, Associate
Telephone: (213) 955-8202
Facsimile: (213) 955-8245
-7-
<PAGE> 136
SANWA BANK, LIMITED
Domestic and LIBOR Lending Office:
Sanwa Bank, Limited
610 South Figueroa Street
W5-2
Los Angeles, CA 90017
Attention: Washington Boza, AVP and Manager
Telephone: (213) 896-7434
Facsimile: (213) 623-4912
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Sanwa Bank, Limited
610 South Figueroa Street
W5-4
Los Angeles, CA 90017
Attention: Karen Coleman, AVP/Mgr
Telephone: (213) 896-7148
Facsimile: (213) 896-7475
SUMITOMO BANK, LIMITED
Domestic and LIBOR Lending Office:
Sumitomo Bank, Limited
Suite 2600
777 South Figueroa Street, Suite 2600
Los Angeles, CA 90017
Attention: Miriam Delgado, Loan Administration
Telephone: (213) 955-0883
Facsimile: (213) 623-6832
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: Alicia Romo, AVP
Telephone: (213) 955-0854
Facsimile: (213) 623-6832
SWISS BANK CORPORATION, NEW YORK
Domestic and LIBOR Lending Office:
- 8
<PAGE> 137
Swiss Bank Corporation, New York
222 Broadway, 2nd Floor
New York, NY 10038
Attention: Elizabeth Burnett
Telephone: (212) 574-3368
Facsimile: (212) 574-3134
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Swiss Bank Corporation, New York
222 Broadway, 4th Floor
New York, NY 10038
Attention: Clark Worthley, Associate Director
Telephone: (212) 335-1874
Facsimile: (212) 335-1406
ABN-AMRO BANK N.V.
Domestic and LIBOR Lending Office:
ABN-AMRO Bank N.V.
300 South Grand Avenue, Suite 1115
Los Angeles, CA 90071
Attention: Carol Yi, Loan Dept.
Telephone: (213) 687-2026
Facsimile: (213) 687-2085/2061
Attention: Lolita Sarroca, Operations Manager
Telephone: (213) 687-2093
Facsimile: (213) 687-2085/2061
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: David J. Stassel, VP
Telephone: (213) 687-2056
Facsimile: (213) 687-2085/2061
THE BANK OF NEW YORK
Domestic and LIBOR Lending Office:
The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
- 9
<PAGE> 138
Attention: Dawn Hertling
Telephone: (212) 635-6742
Facsimile: (212) 635-6399
Attention: Sandra Morgan
Telephone: (212) 635-6743
Facsimile: (212) 635-6877
Notices (other than borrowing notices and Notices of Conversion/Continuation):
The Bank of New York
Suite 1125
10990 Wilshire Blvd.
Los Angeles, CA 90024
Attention: Lisa Brown
Telephone: (310) 996-8656
Facsimile: (310) 996-8667
BANQUE NATIONALE DE PARIS
Domestic and LIBOR Lending Office:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Attention: Don Hart, Vice President
Telephone: (415) 956-2511
Facsimile: (415) 989-9041
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Banque Nationale de Paris
725 South Figueroa Street, Suite 2090
Los Angeles, CA 90017
Attention: Mitchell Ozawa, Vice President
Telephone: (213) 488-9120
Facsimile: (213) 488-9602
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
Los Angeles Agency
Domestic and LIBOR Lending Office:
The Long-Term Credit Bank of Japan, LTD.,
Los Angeles Agency
444 South Flower Street, Suite 3700
-10-
<PAGE> 139
Los Angeles, CA 90071
Attention: Albert Totten, Loan Admin.
Telephone: (213) 629-5777
Facsimile: (213) 626-1067
Attention: Diane Huynh, Assistant Manager
Telephone: (213) 689-6245
Facsimile: (213) 626-1067
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: Takaomi Tomioka
Telephone: (213) 689-6355
Facsimile: (213) 626-1067
BANK OF MONTREAL
Domestic and LIBOR Lending Office:
Bank of Montreal
11W
115 South LaSalle Street
Chicago, IL 60603
Attention: Debra Sandt
Telephone: (312) 750-4312
Facsimile: (312) 750-3798
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Bank of Montreal
12W
115 South LaSalle Street
Chicago, IL 60603
Attention: Irene M. Geller, Director
Telephone: (312) 750-4368
Facsimile: (312) 750-4314
BANKERS TRUST COMPANY
Domestic and LIBOR Lending Office:
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Attention: Aileen Mosier
11
<PAGE> 140
Telephone: (212) 250-6968
Facsimile: (212) 250-6029/7351
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Bankers Trust Company
300 South Grand Avenue
Los Angeles, CA 90071-3109
Attention: Cristie Sheffield, Associate
Telephone: (213) 620-8189
Facsimile: (213) 620-8484
CANADIAN IMPERIAL BANK OF COMMERCE
Domestic and LIBOR Lending office:
Canadian Imperial Bank of Commerce
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attention: Vickie Summey
Telephone: (770) 319-4852
Facsimile: (770) 319-4950
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Canadian Imperial Bank of Commerce
425 Lexington Ave., 8th Floor
New York, NY 10017
Attention: Stephen D. Reynolds
Telephone: (212) 856-3566
Facsimile: (212) 856-3613
CREDIT LYONNAIS, NEW YORK BRANCH
Domestic and LIBOR Lending Office:
Credit Lyonnais, New York Branch
1301 Avenue of the Americas
New York, NY 10019
Attention: Kenia A. Perez, Admin. Asst.
Telephone: (212) 261-7313
Facsimile: (212) 261-3440
- 12
<PAGE> 141
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: Francoise Giacalone, AVP
Telephone: (212) 261-7748
Facsimile: (212) 261-3440
DAI-ICHI KANGYO BANK, LTD., Los Angeles Agency
Domestic and LIBOR Lending Office:
Dai-Ichi Kangyo Bank, LTD., Los Angeles Agency
555 West 5th Street, 5th Floor
Los Angeles, CA 90013
Attention: Doris Chang
Telephone: (213) 243-4777
Facsimile: (213) 243-4848
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: William Murray, VP
Telephone: (213) 243-4763
Facsimile: (213) 624-5258
FLEET NATIONAL BANK
Domestic and LIBOR Lending office:
Fleet National Bank
75 State Street
Boston, MA 02109
Attention: Cassie Carlan, Loan Administration
Telephone: (617) 346-1635
Facsimile: (617) 346-1634
Notices (other than borrowing notices and Notices of
Conversion/Continuation):
Attention: Ginger Stolzenthaler, VP
Telephone: (617) 346-1647
Facsimile: (617) 346-1634
FUJI BANK, LIMITED, Los Angeles Agency
Domestic and LIBOR Lending office:
- 13
<PAGE> 142
Fuji Bank, Limited, Los Angeles Agency
333 South Grand Avenue, 25th Floor
Los Angeles, CA 90071
Attention: Vivian Chang, Corporate Banking Officer
Telephone: (213) 253-4129
Facsimile: (213) 253-4198
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Steve Brennan, VP/Manager
Telephone: (213) 253-4174
Facsimile: (213) 253-4198
THE INDUSTRIAL BANK OF JAPAN, LTD., LOS ANGELES AGENCY
Domestic and LIBOR Lending Office:
The Industrial Bank of Japan, LTD., Los Angeles Agency
350 South Grand Avenue, Suite 1500
Los Angeles, CA 90071
Attention: Harumi Kanemoto, Officer
Telephone: (213) 893-6492
Facsimile: (213) 688-7486
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Attention: Charles Lilygren, VP
Telephone: (213) 893-6444
Facsimile: (213) 488-9840
MELLON BANK, N.A.
Domestic and LIBOR Lending Office:
Mellon Bank, N.A.
Three Mellon Bank Center, 23rd Floor
Pittsburgh, PA 195259
Attention: Christine Bissell, Loan Admin.
Telephone: (412) 234-6726
Facsimile: (412) 234-5049
Notices (other than borrowing notices and Notices of Conversion/Continuation):
Mellon Bank, N.A.
-14-
<PAGE> 143
Suite 3800
300 South Grand Ave.
Los Angeles, CA 90071
Attention: Robert T. Harkins, VP
Telephone: (213) 680-7355
Facsimile: (213) 617-9691
- 15
<PAGE> 144
EXHIBIT A-1
FORM OF COMMITTED NOTE
$_______________ May __, 1996
FOR VALUE RECEIVED, WELLPOINT HEALTH NETWORKS INC. (the "Company"),
hereby promises to pay to the order of _________________________________ (the
"Bank") the principal sum of ________________________________________ Dollars
($___________) or, if less, the aggregate unpaid principal amount of all
Committed Loans made by the Bank to the Company pursuant to that certain Credit
Agreement dated as of May __, 1996 (as from time to time amended, extended,
restated, modified or supplemented, the "Credit Agreement") among WellPoint
Health Networks Inc., the Banks party thereto, Bank of America National Trust
and Savings Association, as Administrative Agent, NationsBank of Texas, N.A., as
Syndication Agent, and Chemical Bank, as Documentation Agent, on the dates and
in the amounts provided in the Credit Agreement. The Company further promises to
pay interest on the unpaid principal amount of the Committed Loans from time to
time at the rates, on the dates, and otherwise as provided in the Credit
Agreement.
The Bank is authorized to endorse the amount and the date on which each
Committed Loan is made, the maturity date for, and each payment of principal
with respect to, such Committed Loan on the schedules annexed to, and made a
part of, this Promissory Note (this "Note"), or on continuations of such
schedules which shall be attached to, and made a part of this Note; provided
that any failure to endorse such information on such schedule or continuation of
such schedule shall not in any manner affect any obligation of the Company under
the Credit Agreement and this Note.
This Note is one of the Committed Notes referred to in, and is entitled
to the benefits of, the Credit Agreement, which Credit Agreement, among other
things, contains provisions for acceleration of the maturity of obligations
under this Note upon the happening of certain stated events and also for
prepayments on account of principal of this Note prior to the maturity of this
Note upon the terms and conditions specified in the Credit Agreement.
Terms defined in the Credit Agreement are used in this Note with their
defined meanings in the Credit Agreement unless otherwise defined in this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
WELLPOINT HEALTH NETWORKS INC.
By:_______________________________
Title:____________________________
<PAGE> 145
Schedule A to Committed Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(2) (3)
Amount Amount of
of Base (4)
(1) Base Rate Loan Notation
Date Rate Loan Repaid Made By
---- --------- --------- -------
<S> <C> <C> <C>
</TABLE>
A-1 - Page 2
<PAGE> 146
Schedule B to Committed Note
LIBOR RATE LOANS AND REPAYMENT OF LIBOR RATE LOANS
<TABLE>
<CAPTION>
(3)
(2) Interest (4)
Amount Period Amount of
of of LIBOR (5)
(1) LIBOR LIBOR Rate Notation
Date Rate Loan Rate Loan Loan Repaid Made By
---- --------- --------- ----------- --------
<S> <C> <C> <C> <C>
</TABLE>
A-1 - Page 3
<PAGE> 147
EXHIBIT A-2
FORM OF BID NOTE
_____________, ____
FOR VALUE RECEIVED, the undersigned, WELLPOINT HEALTH NETWORKS INC.
(the "Company"), hereby promises to pay to the order of ________________________
(the "Bank") the principal sum of each Bid Loan made by the Bank to the Company
pursuant to that certain Credit Agreement dated as of May __, 1996 (as from time
to time amended, extended, restated, modified or supplemented, the "Credit
Agreement") among WellPoint Health Networks Inc., the Banks party thereto, Bank
of America National Trust and Savings Association, as Administrative Agent,
NationsBank of Texas, N.A., as Syndication Agent, and Chemical Bank, as
Documentation Agent, on the last day of the Interest Period of such Bid Loan.
The Company further promises to pay interest on the unpaid principal amount of
the Bid Loans evidenced hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Bid Loan is made, the maturity date for, and each payment of principal with
respect to, such Bid Loan on the schedules annexed to, and made a part of this
Promissory Note (this "Note"), or on continuations of such schedules which shall
be attached to, and made a part of, this Note; provided that any failure to
endorse such information on such schedule or continuation of such schedule shall
not in any manner affect any obligation of the Company under the Credit
Agreement and this Promissory Note (the "Note").
This Note is one of the Bid Notes referred to in, and is entitled to
the benefits of, the Credit Agreement, which Credit Agreement, among other
things, contains provisions for acceleration of the maturity of obligations
under this Note upon the happening of certain stated events. This Note is not
subject to prepayment.
Terms defined in the Credit Agreement are used in this Note with their
defined meanings in the Credit Agreement unless otherwise defined in this Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
WELLPOINT HEALTH NETWORKS INC.
By:_______________________________
Title:____________________________
A-2 - Page 1
<PAGE> 148
TRANSACTIONS ON
BID NOTE
<TABLE>
<CAPTION>
Amount of Outstanding
Type of Amount of End of Principal or Principal
Loan Made Loan Made Interest Interest Paid Balance Notation
Date This Date This Date Period This Date This Date Made by
- ---- --------- --------- -------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-2 - Page 2
<PAGE> 149
EXHIBIT B
FORM OF NOTICE OF COMMITTED BORROWING
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
Pursuant to Section 2.03 of that certain Credit Agreement dated as of
May __, 1996 (as from time to time amended, extended, restated, modified or
supplemented, the "Credit Agreement"; capitalized terms used herein shall have
the meanings assigned to them in the Credit Agreement), among WellPoint Health
Networks Inc., the Banks party thereto, Bank of America National Trust and
Savings Association, as Administrative Agent (the "Administrative Agent"),
NationsBank of Texas, N.A., as Syndication Agent, and Chemical Bank, as
Documentation Agent, this represents the Company's request to borrow on
________________________ from the Banks, according to their respective Pro Rata
Shares, $____________ as [Base Rate] [LIBOR Rate] Loans. [The initial Interest
period for such LIBOR Rate is requested to be a ____________________-month
period]. The proceeds of such Committed Loans are to be deposited in the
Company's account at the Administrative Agent.
I, the undersigned Authorized Company Employee, hereby certify on
behalf of the Company that to the best of my knowledge and belief:
(a) the representations and warranties of the Company contained in the
Credit Agreement are true and correct on and as of the date hereof to the same
extent as though made on and as of the date hereof;
(b) no Default or Event of Default has occurred and is continuing under
the Credit Agreement or will result from the proposed borrowing;
(c) the Company's Leverage Ratio as of the fiscal quarter most recently
ended is ____; and
<PAGE> 150
(d) the Company's Debt Ratings as of the date hereof and as of the date
five Business Days prior to the date hereof are:
S&P: _____
Moody's: _____
DATED:_____________________
WELLPOINT HEALTH NETWORKS INC.
By____________________________
Title_________________________
B - 2
<PAGE> 151
EXHIBIT C
FORM OF NOTICE OF CONVERSION/CONTINUATION
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
1. Conversion Selection. Pursuant to Section 2.04 of that certain
Credit Agreement dated as of May , 1996 (as from time to time amended,
extended, restated, modified or supplemented, the "Credit Agreement";
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement), among WellPoint Health Networks Inc., the Banks party
thereto, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent, this represents the Company's request to
convert on , , $ of existing [Base Rate] [LIBOR Rate]
Loans, the final day of the current Interest Period (if applicable) of which is
__________, ____, to [LIBOR Rate] [Base Rate] Loans, as follows:
<TABLE>
<CAPTION>
Interest Period
(LIBOR
Dollar Amount Rate loans)
------------- ---------------
<S> <C>
$ months
------------ -----
</TABLE>
2. Continuation Selection (LIBOR Rate Loans). Pursuant to Section 2.04
of the Agreement, please continue $ of existing LIBOR Rate Loans, the
final day of the current Interest Period of which is , , as
follows:
<TABLE>
<CAPTION>
Requested
Dollar Amount Interest Period
------------- ---------------
<S> <C>
$ months
------------ -----
</TABLE>
I, the undersigned Authorized Company Employee, hereby certify on
behalf of the Company that to the best of my knowledge and belief:
<PAGE> 152
(a) the representations and warranties of the Company contained in the
Credit Agreement are true and correct on and as of the date hereof to the same
extent as though made on and as of the date hereof;
(b) no Default or Event of Default has occurred and is continuing under
the Credit Agreement;
(c) the Company's Leverage Ratio as of the last day of the fiscal
quarter most recently ended is ; and
(d) the Company's Debt Ratings as of the date hereof and as of the date
five Business Days prior to the Date hereof are:
S&P:
-----
Moody's:
-----
Unless otherwise defined herein, capitalized terms used herein have the
meanings assigned to them in the Agreement.
WELLPOINT HEALTH NETWORKS INC.
By
----------------------------
Title
-------------------------
C - 2
<PAGE> 153
EXHIBIT D
FORM OF COMPETITIVE BID REQUEST
_______________, ____
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
Facsimile No.: (415) ________
[AND IF TO THE BANKS:]
[To the Banks listed on the Attached Schedule:]
Reference is made to the Credit Agreement dated as of May __, 1996 (as
from time to time amended, extended, restated, modified or supplemented, the
"Credit Agreement"; capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement), among WellPoint Health Networks Inc.,
the Banks party thereto, Bank of America National Trust and Savings Association,
as Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent.
This is a Competitive Bid Request for Bid Loans pursuant to Section
3.02 of the Credit Agreement as follows:
(i) The Business Day of the proposed Bid Borrowing is _______________,
____.
(ii) The aggregate amount of the proposed Bid Borrowing is
$_______________.
(iii) The Interest Period[s] for the Bid Loans comprised in the
Borrowing shall be [_____________], [______________] and [_____________] [days]
[months].
(iv) The amount per Interest Period is $_______________.
(v) The proposed Bid Borrowing shall be comprised of [LIBOR Rate Bid
Loans] [Absolute Rate Bid Loans].
<PAGE> 154
All Competitive Bids must be in the form of Exhibit E to the Credit Agreement.
Please respond to this Competitive Bid Request by no later than 6:45 a.m.
(unless this Competitive Bid Request is made through the Agent on behalf of the
Company, in which case, for BofA only, 6:30 a.m.) (San Francisco time) on
________, _____.(1) [This invitation is made through the Agent on behalf of the
Company and your response should be submitted to the Agent.](2) [This invitation
is from the Company directly and your response should be submitted directly to
the Company; with a copy of such response to be concurrently provided to the
Administrative Agent.](3)
Very truly yours,
WELLPOINT HEALTH NETWORKS INC.
By:___________________________
Title:________________________
____________________
(1) Insert a date which is three (3) Business Days prior to the date of
Borrowing, in the case of a request for LIBOR Rate Bid Loans, or on the
date of Borrowing, in the case of a request for Absolute Rate Bid Loans.
(2) To be included if the request is made by the Company through the
Administrative Agent.
(3) To be included if the request is made by the Company directly to the Banks.
D - 2
<PAGE> 155
EXHIBIT E
FORM OF COMPETITIVE BID
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
Facsimile No.: (415) ________
[AND IF TO THE BANKS:]
[To the Banks listed on the Attached Schedule:]
Reference is made to the Credit Agreement dated as of May __, 1996 (as
from time to time amended, extended, restated, modified or supplemented, the
"Credit Agreement"; capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement), among WellPoint Health Networks Inc.,
the Banks party thereto, Bank of America National Trust and Savings Association,
as Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent.
In response to the Competitive Bid Request of the Company dated
_________________________, ____ and in accordance with Section 3.04 of the
Credit Agreement, the undersigned Bank offers to make Bid Loan(s) in the
following principal amount(s) at the following interest rate(s) for the
following Interest Period(s):
Date of Borrowing: ______________________, ____
OFFER 1 (MAXIMUM AMOUNT $_______________):
Interest Period Interest Period Interest Period
__________ __________ __________
Principal Amount Principal Amount Principal Amount
$_______________ $_______________ $_______________
Absolute Rate Absolute Rate Absolute Rate
____% ____% ____%
or or or
LIBOR Margin LIBOR Margin LIBOR Margin
____% ____% ____%
<PAGE> 156
Page 2
Date of Borrowing: ______________________, ____
OFFER 2 (MAXIMUM AMOUNT $_______________):
Interest Period Interest Period Interest Period
__________ __________ __________
Principal Amount Principal Amount Principal Amount
$_______________ $_______________ $_______________
Absolute Rate Absolute Rate Absolute Rate
____% ____% ____%
or or or
LIBOR Margin LIBOR Margin LIBOR Margin
____% ____% ____%
________________________________________________________________________________
Date of Borrowing: ______________________, ____
OFFER 3 (MAXIMUM AMOUNT $_______________):
Interest Period Interest Period Interest Period
__________ __________ __________
Principal Amount Principal Amount Principal Amount
$_______________ $_______________ $_______________
Absolute Rate Absolute Rate Absolute Rate
____% ____% ____%
or or or
LIBOR Margin LIBOR Margin LIBOR Margin
____% ____% ____%
E - 2
<PAGE> 157
Subject to Section 3.06(b), the Company may accept any combination of
Interest Periods from one or more offers for the principal amounts indicated;
provided that the aggregate principal amount accepted from one offer does not
exceed the maximum amount specified for such offer and the aggregate principal
of all Bid Loans accepted does not exceed $ ; provided, further, that with
respect to solicitations for Competitive Bids made directly by the Company, the
Company may accept such Competitive Bids in whole or in part.
[NAME OF BANK]
By:_____________________________
Title:__________________________
E - 3
<PAGE> 158
EXHIBIT F
FORM OF COMPLIANCE CERTIFICATE
[DATE]
Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
Re: Compliance Certificate
Ladies and Gentlemen:
This Certificate is given in accordance with Section 7.02(a) of that
certain Credit Agreement dated as of May __, 1996 (as from time to time amended,
extended, restated, modified or supplemented, the "Credit Agreement";
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement), among WellPoint Health Networks Inc., the Banks party
thereto, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent. I the undersigned Responsible Officer
hereby certify that:
(a) I am the ________________ of the Company;
(b) The Company hereby selects the [Leverage Ratio] [Debt Rating] as
the method for determining the Applicable Amount;
(c) The enclosed consolidated balance sheet, related consolidated
statement of income, shareholders' equity and cash flows and the enclosed
consolidating balance sheets and the related statements of income are
complete and correct and fairly present, in accordance with GAAP, the
financial position and the results of operations of the Company and the
Subsidiaries for the periods indicated;
(d) We have reviewed the terms of the Credit Agreement and have made or
caused to be made under our supervision, a review in reasonable detail of
the transactions and financial condition of the Company during the
accounting period covered by the enclosed financial statements;
(e) No event or condition exists which constitutes an Event of Default
or Default as of the date of this certificate except as set forth below;
<PAGE> 159
(f) The representations and warranties set forth in Article VI of the
Credit Agreement are true, correct and complete in all material respects on
and as of the date of this Certificate to the same extent as though made on
and as of the date hereof; and
(g) The Company is in compliance with all of the terms and conditions
of the Credit Agreement except as set forth below.
(h) The calculations in Attachment No. 1 to this Certificate are true,
correct and complete.
(i) Pursuant to Section 7.03(f) of the Credit Agreement, the Company's
Debt Ratings as of the date of this certificate are ____, in the case of
Moody's, and ____, in the case of S&P.
(j) Pursuant to Section 8.01(i) of the Credit Agreement, the aggregate
principal amount of Indebtedness secured by any and all purchase money
security interests on any Property acquired or held by the Company or its
Subsidiaries in the Ordinary Course of Business is $________________.
(k) Pursuant to Section 8.01(j) of the Credit Agreement, the aggregate
amount of Indebtedness secured by Liens in respect of Capital Leases on
Property subject to such Capital Leases is $_______________.
(l) Pursuant to Section 8.02(d) of the Credit Agreement, the aggregate
amount of Indebtedness of Subsidiaries of the Company (exclusive of
Indebtedness permitted under Section 8.02(e) and Contingent Obligations of
the Company and Subsidiaries of the Company in respect of such Indebtedness)
is $_______________.
(m) Pursuant to Section 8.04(h) of the Credit Agreement, the net book
value in the aggregate of all dispositions of Property during the current
fiscal year is __% of the Company's Total Assets as shown on its
consolidated balance sheet for the previous fiscal year.
(n) Pursuant to Section 8.08 of the Credit Agreement, the Company's
Leverage Ratio is _________.
(o) Pursuant to Section 8.09 of the Credit Agreement, the Company's
Fixed Charge Ratio is __________.
(p) Pursuant to Section 8.10 of the Credit Agreement, the Company's Net
Worth is $____________.
F - 2
<PAGE> 160
(q) Pursuant to Section 8.12(j) of the Credit Agreement, the aggregate
outstanding amount of Investments is $_______________.
Described below (or in a separate attachment hereto) are the
exceptions, if any, to paragraphs (d) and (f), listing in detail, the nature
of the conditions or event, the period during which it has existed and the
action which the Company has taken, is taking or proposes to take with
respect to each such condition or event:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
The foregoing certifications are made and delivered this ____ day of
_______________, ____.
WELLPOINT HEALTH NETWORKS INC.
By:______________________________
Title:___________________________
F - 3
<PAGE> 161
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
(This attachment is as of [ ] and (in the case of the Fixed
Charge Coverage Ratio and the Leverage Ratio set forth below) pertains to the
four-quarter period from [ ] (the "Period"; the last day of the
Period is referred to herein as the "Period End Date"). Financial covenant
information is provided for only those covenants which are required to be tested
as of the Period End Date.) All amounts are as of the Period End Date except as
noted.
Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement dated as of May , 1996 (such
agreement, as it may be amended, supplemented, restated or otherwise modified
from time to time, the "Credit Agreement") by and among WellPoint Health
Networks Inc., the Banks party thereto, Bank of America National Trust and
Savings Association, as Administrative Agent NationsBank of Texas, N.A., as
Syndication Agent, and Chemical Bank, as Documentation Agent. Section references
are to the sections of the Credit Agreement.
FIXED CHARGE COVERAGE RATIO
1. Consolidated after-tax net income
(exclusive of extraordinary gains
and losses) of the Company and its
Subsidiaries; $
2. Interest Expense:
Related to Indebtedness $
Related to Swap Contracts $
Total $
3. Depreciation: $
4. Amortization: $
5. After-tax non-cash Restructuring
charges (up to $35,000,000): $
[Effective Date only]
After-tax Recapitalization and
Mirus Acquisition Restructuring
charges (up to $40,000,000): $
6. Operating Lease expense: $
F - 4
<PAGE> 162
7. Dividends: $
8. Unfinanced Capital Expenditures: $
9. Cash Flow Total:
Lines 1 + 2 + 3 + 4 + 5 + 6 - 7 - 8 = $
10. Scheduled principal payments
of Indebtedness (other than
Mass Mutual Notes): $
11. Fixed Charges Total:
Lines 2 + 6 + 10 = $
12. Fixed Charge Coverage:
Ratio (Line 9 / Line 11) = to 1.00
----
13. Minimum Fixed Charge Coverage:
For the period from Effective Date
through December 31, 1996 3:00 to 1.00
Thereafter 3.50 to 1.00
LEVERAGE RATIO
1. Indebtedness: $
2. Operating Lease expense,
multiplied by eight: $
3. Contingent Obligations re
Funded Debt of Others: $
4. Funded Debt Total:
Lines: 1 + 2 + 3 = $
5. Consolidated pre-tax net income
(exclusive of extraordinary gains
or losses) of the Company and its
Subsidiaries: $
6. Interest Expense: $
7. Amortization: $
8. Depreciation: $
9. Operating Lease expense: $
10. Pre-tax non-cash Restructuring
F - 5
<PAGE> 163
charges (up to $50,000,000): $
[Effective Date only]
Pre-tax Recapitalization and
Mirus Acquisition Restructuring
charges (up to $65,000,000): $
11. EBITDAR:
Lines 5 + 6 + 7 + 8 + 9 +10= $
12. Leverage Ratio:
Line 11 / Line 4 = to 1.00
-----
13. Maximum Leverage Ratio:
For the period from Effective
Date through December 31, 1996: 2.75 to 1.00
For the period from January 1,
1997 through December 31, 1997: 2.25 to 1.00
Thereafter: 2.00 to 1.00
MINIMUM NET WORTH
1. Capital Stock: $
2. Treasury Shares: $
3. Additional Paid In Capital: $
4. Surplus and Retained Earnings: $
5. Net Worth:
Lines 1 - 2 + 3 +/- 4 = $
6. Minimum Net Worth at Final
Recapitalization Date
(The greater of (i) 75% of the
Company's Net Worth as of the
Final Recapitalization Date
and (ii) $500,000,000): $
7. Fifty Percent of Net Income from
and after January 1, 1996: $
8. Total Required Minimum Net Worth:
Lines 6 + 7 = $
F - 6
<PAGE> 164
DISPOSITIONS OF ASSETS
1. Total Assets for
previous fiscal year: $
2. Permitted disposition amount
Line 1 / 10 = $
2. Net book value of dispositions
of Property during current
fiscal year: $
F - 7
<PAGE> 165
EXHIBIT G-1
[FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT]
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated as of
______________, _____ is made between __________________________________________
_______________________________ (the "Assignor") and ___________________________
_____________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement dated
as of May __, 1996 among WELLPOINT HEALTH NETWORKS INC. (the "Company"), the
banks parties thereto (including the Assignor, the "Banks"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent, NATIONSBANK OF
TEXAS, N.A., as Syndication Agent, and CHEMICAL BANK, as Documentation Agent (as
from time to time amended, modified or supplemented, the "Credit Agreement").
Any terms defined in the Credit Agreement and not defined in this Agreement are
used herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to make Committed Loans to the Company in an aggregate amount not to
exceed $____________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $_____________ to the Company] [no Committed Loans are
outstanding under the Credit Agreement] [and has made Bid Loans in the aggregate
principal amount of $___________ to the Company]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Loans,] in an amount equal to $____________ (the "Assigned Amount")
on the terms and subject to the conditions set forth herein, and the Assignee
wishes to accept assignment of such rights and to assume such obligations from
the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained in this Agreement, the parties to this Agreement agree as
follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Agreement, (i) the
Assignor hereby sells, transfers and
<PAGE> 166
assigns to the Assignee, without recourse, and (ii) the Assignee hereby
purchases, assumes and undertakes from the Assignor, without recourse
and without representation or warranty (except as provided in this
Agreement) ___% (the "Assignee's Percentage Share") of (A) the
Commitment [and the Loans] of the Assignor and (B) all related rights,
benefits, obligations, liabilities and indemnities of the Assignor
under and in connection with the Credit Agreement and the Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor by
Assignee of outstanding principal of, accrued interest on, and fees
with respect to, Loans assigned.]
(b) With effect on and after the Effective Date (as defined in this
Agreement), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the
obligations of a Bank under the Credit Agreement, including the
requirements concerning confidentiality, with a Commitment in an amount
equal to the Assigned Amount. The Assignee agrees that it will perform
in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a
Bank. It is the intent of the parties hereto that the Commitment of the
Assignor shall, as of the Effective Date, be reduced by an amount equal
to the Assigned Amount and the Assignor shall relinquish its rights and
be released from its obligations under the Credit Agreement to the
extent such obligations have been assumed by the Assignee.
(c) After giving effect to the assignment and assumption, on the
Effective Date the Assignee's Revolving Commitment will be $________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1, the Assignee shall pay to the Assignor on
the Effective Date in immediately available funds an amount equal to
$ , representing the Assignee's Percentage Share of the
principal amount of all Loans previously made, and currently owed,
by the Company to the Assignor under the Credit Agreement and
outstanding on the Effective Date.
(b) The [Assignor] [Assignee] further agrees to pay to the
Administrative Agent a processing fee in the amount specified in
Section 11.08(a) of the Credit Agreement.
G-1
2
<PAGE> 167
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Loans and the Commitment shall be for the account of the
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account
of the Assignee. Each of the Assignor and the Assignee agrees that it will
hold in trust for the other party any interest, fees and other amounts which
it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the
Credit Agreement and the Schedules and Exhibits to the Credit Agreement,
together with copies of the financial statements referred to in Section 5.01
of the Credit Agreement, and such other documents and information as it has
deemed appropriate to make its own credit and legal analysis and decision to
enter into this Agreement; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agents, the Co-Arrangers or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit and legal decisions
in taking or not taking action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date for
this Agreement shall be _____________________, ____ (the "Effective
Date"); provided that the following conditions precedent have been
satisfied on or before the Effective Date:
(i) this Agreement shall be executed and delivered by the
Assignor and the Assignee;
(ii) the consent of the Company and the Administrative Agent
required for an effective assignment of the Assigned Amount by the
Assignor to the Assignee under Section 11.08 of the Credit Agreement
(if applicable) shall have been duly obtained and shall be in full
force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due to
the Assignor under this Agreement;
G-1
3
<PAGE> 168
(iv) the Assignee shall have complied with Section 11.08 of the
Credit Agreement (if applicable); and
(v) the processing fee referred to in Section 2(b) of this
Agreement and in Section 11.08 of the Credit Agreement shall have
been paid to the Administrative Agent.
(b) Promptly following the execution of this Agreement, the Assignor
shall deliver to the Company and the Administrative Agent for
acknowledgement by the Administrative Agent, a Notice of Assignment and
Acceptance substantially in the form attached to the Credit Agreement
as Exhibit G-2.
6. Agents.
(a) The Assignee hereby irrevocably appoints and authorizes the
Agents to take such action as agent on its behalf and to exercise such
powers under the Credit Agreement as are delegated to the Agents by the
Banks pursuant to the terms of the Credit Agreement.
[INCLUDE ONLY IF ASSIGNOR IS AN AGENT]
(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as [Administrative] [Syndication]
[Documentation] Agent under the Credit Agreement.
7. Withholding Tax.
The Assignee agrees to comply with Section 4.01(f) of the Credit
Agreement (if applicable).
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any lien, security interest or
other adverse claim; (ii) it is duly organized and existing and it has
the full power and authority to take, and has taken, all action
necessary to execute and deliver this Agreement and any other documents
required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations hereunder; (iii) no
notices to, or consents, authorizations or approvals of, any person are
required (other than any already given or obtained) for its due
execution, delivery and performance of this Agreement, and apart from
any agreements or undertaking or filings
G-1
4
<PAGE> 169
required by the Credit Agreement, no further action by, or notice to,
or filing with, any person is required of it for such execution,
delivery or performance; and (iv) this Agreement has been duly executed
and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors' rights and to general
equitable principles.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other instrument or
document furnished pursuant to the Credit Agreement. The Assignor makes
no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or
statements of the Company, or the performance or observance by the
Company, of any of its respective obligations under the Credit
Agreement or any other instrument or document furnished in connection
with the Credit Agreement.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and
has taken, all action necessary to execute and deliver this Agreement
and any other documents required or permitted to be executed or
delivered by it in connection with this Agreement, and to fulfill its
obligations under this Agreement; (ii) no notices to, or consents,
authorizations or approvals of, any person are required (other than any
already given or obtained) for its due execution, delivery and
performance of this Agreement; and apart from any agreements or
undertaking or filings required by the Credit Agreement, no further
action by, or notice to, or filing with, any person is required of it
for such execution, delivery or performance; (iii) this Agreement has
been duly executed and delivered by it and constitutes the legal, valid
and binding obligation of the Assignee, enforceable against the
Assignee in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, moratorium, reorganization and other laws of
general application relating to or affecting creditors' rights and to
general equitable principles; and (iv) it is an Eligible Assignee.
G-1
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<PAGE> 170
9. Further Assurances.
The Assignor and the Assignee each hereby agrees to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Agreement, including the delivery of any notices or other documents or
instruments to the Company or the Agents, which may be required in connection
with the assignment and assumption contemplated by this Agreement.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Agreement shall
be in writing signed by the parties to this Agreement. No failure or
delay by either party to this Agreement in exercising any right, power
or privilege hereunder shall operate as a waiver of this Agreement and
any waiver of any breach of the provisions of this Agreement shall be
without prejudice to any rights with respect to any other or further
breach of this Agreement.
(b) All payments made under this Agreement shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement.
(d) This Agreement may be executed in any number of counterparts and
all of such counterparts taken together shall be deemed to constitute
one and the same instrument.
(e) THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF CALIFORNIA; PROVIDED
THAT THE ASSIGNOR AND THE ASSIGNEE SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH WAIVE THEIR RESPECTIVE RIGHTS
TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING
OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, OR
OTHERWISE. THE ASSIGNOR AND THE ASSIGNEE EACH AGREE THAT ANY SUCH CLAIM
OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
G-1
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<PAGE> 171
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION 10(f) AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not
inconsistent with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
ASSIGNOR:___________________________
By:________________________
Title:
Address:
ASSIGNEE:___________________________
By:________________________
Title:
G-1
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<PAGE> 172
EXHIBIT G-2
FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, _____
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: Agency Management Services #5596
Reference is made to the Credit Agreement dated as of May __, 1996 (as
from time to time amended, extended, restated, modified or supplemented, the
"Credit Agreement"; capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement) among WellPoint Health Networks Inc.,
the Banks party thereto, Bank of America National Trust and Savings Association,
as Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent,
1. We hereby give you notice of, and request your consent to, the
assignment by ________________ (the "Assignor") to _______________ (the
"Assignee") of % of the right, title and interest of the Assignor in and to
the Credit Agreement, including without limitation the right, title and
interest of the Assignor in and to the Commitment of the Assignor, and all
outstanding Loans made by the Assignor. Before giving effect to such assignment:
(a) the aggregate amount of the Assignor's Commitment is $_________;
and
(b) the aggregate principal amount of its outstanding Loans is
$_________.
2. The Assignee hereby represents and warrants that it has complied
with the requirements of Section 11.08(a) of the Credit Agreement in connection
with this assignment.
3. The Assignee agrees that, upon receiving your consent to such
assignment and from and after , the Assignee will be bound by the terms
of the Credit Agreement, with respect to the interest in the Credit Agreement
assigned to it as specified above, as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.
5. The following administrative details apply to the Assignee:
<PAGE> 173
(a) LIBOR Lending Office:
Assignee name:
Address:
Attention:
Telephone: ( )
Facsimile: ( )
Telex (Answerback):
(b) Domestic Lending Office:
Assignee name:
Address:
Attention:
Telephone: ( )
Facsimile: ( )
Telex (Answerback):
(c) Notice Address:
Assignee name:
Address:
Attention:
Telephone: ( )
Facsimile: ( )
Telex (Answerback):
(d) Payment Instructions:
Account No.:
At:
Ref.:
Attention:
2
<PAGE> 174
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[Name of Assignor]
By:_________________________________
Title:
[Name of Assignee]
By:_________________________________
Title:
WE HEREBY CONSENT TO THE
FOREGOING ASSIGNMENT:
WELLPOINT HEALTH NETWORKS INC.
By:_________________________________
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:_________________________________
Vice President
3
<PAGE> 175
Exhibit H-1
[Form of Opinion of Brobeck, Phleger & Harrison LLP (Effective Date)]
May 15, 1996
To the Banks party to the
Credit Agreement referred to
below, Bank of America National
Trust and Savings Association, as
Administrative Agent,
NationsBank of Texas, N.A., as
Syndication Agent, and
Chemical Bank, as Documentation Agent
Re: WellPoint Health Networks Inc.
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section
5.01(d)(i) of the Credit Agreement dated as of May 15, 1996 (the "Credit
Agreement") among WellPoint Health Networks Inc. as borrower (the "Company"),
each of the financial institutions party to the Credit Agreement, Bank of
America National Trust and Savings Association, as Administrative Agent,
NationsBank of Texas, N.A., as Syndication Agent, and Chemical Bank, as
Documentation Agent. We have acted as counsel for the Company in connection with
the Credit Agreement and the transactions contemplated by the Recapitalization
Agreement (the "Recapitalization Agreement"), dated as of March 31, 1995 and
executed on February 20, 1996, among the Company, Blue Cross of California,
Western Health Partnerships and The Western Foundation for Health Improvement.
Unless otherwise defined herein, terms used herein shall have the meanings
assigned to them in the Credit Agreement.
In connection with this opinion letter, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the Recapitalization Agreement and such other documents, corporate records,
certificates, including certificates of public officials, and other instruments
as we have deemed necessary or advisable for purposes of this opinion letter,
including those relating to the authorization, execution and delivery of the
Credit Agreement. In addition, we have examined the following documents (the
items referred to in subclauses (2) and (3) below herein referred to as the
"Loan Documents"):
(1) an executed copy of the Recapitalization Agreement;
1.
<PAGE> 176
(2) an executed copy of the Credit Agreement;
(3) the form of the Notes to be delivered by the Company
pursuant to the Credit Agreement;
(4) the Certificate of Incorporation and the Bylaws of the
Company, each as in effect on the date hereof;
(5) an executed copy of the certificate of the Secretary of
the Company dated May 15, 1996, certifying: (a) a true copy of the
resolutions of the Board of Directors of the Company, adopted on May 8,
1996, authorizing, among other things, the execution, delivery and
performance of the Loan Documents, and (b) the incumbency, authority
and true signatures of the officers of the Company authorized to sign
the Loan Documents, any other documents and certificates delivered in
connection therewith;
(6) an executed copy of the certificate (the "Officer's
Certificate") of the Chief Financial Officer and the Senior Vice
President and General Counsel of the Company, dated May 15, 1996; and
(7) such other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed.
We have also examined photostatic copies of the agreements
(the "Material Agreements") identified in Exhibit A attached to this opinion
letter and any consents in connection with the Material Agreements. In our
examination and review we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of the documents submitted
to us as originals, the conformity to the original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such copies. As to any facts material to the opinions hereinafter
expressed which we did not independently establish or verify, we have relied
without investigation upon certificates, statements and representations of
representatives of the Company. We have also assumed that each Bank has filed
any required California state franchise, income or similar tax returns and has
paid any such required state franchise, income or similar taxes. Regarding
documents executed by parties other than the Company, we have assumed (i) that
each such other party had the power to enter into and perform all its
obligations thereunder, (ii) the due authorization of, and the due execution and
delivery of, such documents by each such party, and (iii) that such documents
constitute the legal, valid and binding obligations of each such party.
With respect to our opinion in paragraph 1 below, we are
relying solely on our review and examination of the certificates received from
the Secretary of State of the State of Delaware and the State of California
without further investigation of the corporate records of the Company.
2.
<PAGE> 177
Based upon and subject to the foregoing, and subject to the
further assumptions, limitations, qualifications and exceptions set forth
herein, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company is qualified as a foreign corporation and in good standing under the
laws of the State of California.
2. The Company has the corporate power and authority to
execute and deliver the Loan Documents and the Recapitalization Agreement and
perform its obligations thereunder, and has taken all necessary corporate action
to authorize the execution, delivery and performance of the Loan Documents, the
execution and delivery of the Recapitalization Agreement, the payment of the
WellPoint Dividend (as defined in the Recapitalization Agreement) and the
consummation of the WellPoint Merger (as defined in the Recapitalization
Agreement).
3. No consents, approvals or authorizations of, or notices to
or filings with, any governmental authority or agency under the Delaware General
Corporation Law, the laws of the State of California or the laws of the United
States, as presently in effect and interpreted, are required or necessary on the
part of the Company in connection with the execution, delivery and performance
by the Company of the Loan Documents, the execution and delivery by the Company
of the Recapitalization Agreement, or, except for such consents, approvals and
authorizations as have been obtained and are in effect and such other consents,
approvals and authorizations as are set forth in Exhibit B hereof, the payment
by the Company of the WellPoint Dividend or the consummation of the WellPoint
Merger.
4. The Credit Agreement and the Recapitalization Agreement
are, and the Notes when duly executed and delivered pursuant to the Credit
Agreement will be, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
5. The execution and delivery by the Company of the Loan
Documents and the Recapitalization Agreement, the payment by the Company of the
WellPoint Dividend, and the consummation of the WellPoint Merger will not (i)
violate or be in conflict with any provision of the Certificate of Incorporation
or Bylaws of the Company, (ii) violate or be in conflict with any federal or
California law having applicability to the Company, or the Delaware General
Corporation Law, as presently in effect and interpreted, (iii) violate or
contravene any judgment, decree, injunction or order of any federal or
California court, or any arbitrator or governmental agency or authority, having
jurisdiction over the Company or its properties or by which the Company may be
bound, of which we have knowledge, or (iv) constitute a material breach of, or
result in a material default under, any term or provision of any of the Material
Agreements.
3.
<PAGE> 178
6. To our knowledge, the Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
7. To our knowledge, there are no pending or threatened
actions, suits, proceedings or investigations against the Company or any
Subsidiary of the Company in any court or by or before any arbitrator or
Governmental Authority which, if determined adversely to the Company, would be
likely to have a material adverse effect on the Company, except for the matters
described in the Proxy.
8. The extension of credit under the Credit Agreement does not
violate the provisions of Regulations U or X of the Board of Governors of the
Federal Reserve System.
Whenever a statement herein is qualified by the expressions
"known to us," "to our knowledge," "we are not aware" or a similar phrase with
respect to our knowledge of matters of fact, it is intended to mean that our
knowledge is based upon the records, documents, instruments and certificates
described above and the current actual knowledge of the attorneys in this Firm
who have devoted substantive attention to the transactions contemplated by the
Loan Documents or the Recapitalization Agreement who are presently involved in
substantive legal representation of the Company (but not including any
constructive or imputed notice of any information) and that we have not
otherwise undertaken any independent investigations for the purpose of rendering
this opinion.
This opinion is limited to the laws of the State of
California, the General Corporation Law of the State of Delaware and applicable
federal laws of the United States, and we express no opinion herein with respect
to the effect or applicability of the laws of other jurisdictions.
Our opinions in paragraph 3 above and in clause (ii) of
paragraph 5 above, in each case as they relate to the Loan Documents, are
limited to laws and regulations normally applicable to transactions of the type
contemplated in the Loan Documents and do not extend to licenses, permits and
approvals necessary for the conduct of the Company's business. In addition and
without limiting the previous sentence, we express no opinion herein with
respect to the effect of any land use, environmental or similar law, any state
or federal antitrust law, state or federal securities laws, state or federal tax
laws or any local law. Further, we express no opinion as to compliance or
noncompliance by any Bank with any federal, state or other law (i) requiring
such Bank to be licensed as a bank, finance company or other type of financial
institution, (ii) pertaining to matters regulating the assets held by any Bank
on the basis of portfolio requirements or any Bank's capitalization, such as
loan limits and capital adequacy requirements, and (iii) otherwise applicable to
any Bank and relating to its legal or regulatory status or the nature of its
business.
4.
<PAGE> 179
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The validity, binding nature and enforceability of the
Company's obligations under the Loan Documents and the Recapitalization
Agreement may be subject to or limited by (i) bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent transfer and other similar
laws affecting the rights of creditors generally; (ii) general principles of
equity (whether relief is sought in a proceeding at law or in equity),
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, and the discretion of any court of competent
jurisdiction in awarding specific performance or injunctive relief and other
equitable remedies; and (iii), without limiting the generality of the foregoing,
the effect of California court decisions and statutes which indicate that
provisions of the Loan Documents and the Recapitalization Agreement which permit
any Bank or any other Person to take action or make determinations may be
subject to a requirement that such action be taken or such determinations be
made on a reasonable basis in good faith or that it be shown that such action is
reasonably necessary for the protection of the Banks or such other Person.
(b) We express no opinion as to:
(1) the enforceability of provisions of the Loan
Documents pursuant to which the Company agrees to make payments without set-off,
defense or counterclaim;
(2) provisions purporting to require the award or
payment of attorneys' fees, expenses or costs in any action where the Banks are
not the prevailing party, or the impact of California Civil Code Section 1717 et
seq. on any such provisions;
(3) under certain circumstances, provisions to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right or
remedy, that the election of some particular remedy or remedies does not
preclude recourse to one or another remedy or that failure to exercise or delay
in exercising rights or remedies will not operate as a waiver of any such right
or remedy;
(4) provisions prohibiting waivers of any terms or
provisions of any of the Loan Documents or the Recapitalization Agreement other
than in writing, or prohibiting oral modifications thereof or modification by
course of dealing to the extent such provisions are inconsistent with applicable
law;
(5) the enforceability under certain circumstances of
provisions indemnifying a party against, or requiring contributions toward, that
party's liability for its own wrongful or negligent acts or where such
indemnification or contribution is contrary to public policy or prohibited by
law;
5.
<PAGE> 180
(6) any provision providing for the exclusive
jurisdiction of a particular court or purporting to waive rights to trial by
jury, service of process or objections to the laying of venue or to forum on the
basis of forum non conveniens, in connection with any litigation arising out of
or pertaining to the Loan Documents;
(7) provisions providing for an increase in the rate
of interest or imposing a late charge or penalty in the event of delinquency or
default;
(8) provisions purporting to waive statutory or
common law rights, including the right to receive notice or to be allowed to
cure, reinstate or redeem in the event of default, and provisions expressly or
by implication waiving broadly or vaguely stated rights, unknown future rights
and defenses to obligations, in each case to the extent such rights or defenses
are not waivable under applicable law; and
(9) provisions authorizing any Bank to set off and
apply any deposits at any time held, and any other indebtedness at any time
owing, by such Bank to or for the account of the Company.
(c) Our opinion expressed in Paragraph 8 above assumes the
accuracy of Section 6.08 of the Credit Agreement and that the proceeds of the
Loans will be used in compliance with Sections 7.10 and 8.07 of the Credit
Agreement.
(d) Our opinions are subject to the effect of judicial
decisions which may permit the introduction of extrinsic evidence to interpret
the terms of written contracts.
(e) Insofar as this opinion letter concerns the law of the
State of California limiting the rates of interest legally chargeable or
collectible, we have relied upon our understanding that each Bank is (i) a
subsidiary of a bank holding company, (ii) a bank organized under the laws of
the United States or any State thereof, or (iii) a foreign (other nation) bank
within the meaning of Section 1716 of the California Financial Code, and, in
each case as a result thereof, is exempt from the restrictions of Section 1 of
Article XV of the Constitution of the State of California relating to rates of
interest upon the loan of money. We further assume in this regard that all Loans
have been and will be made by the Banks for their own account and without intent
to circumvent otherwise applicable interest rate limitations under California
law and that there is no present express or implied agreement or plan to sell
participations or any other interest in the Loans or the Credit Agreement to any
Person other than a Person that also qualifies for an exemption from the
interest rate limitations of California law.
(f) We wish to point out that each Bank, as holder of a Note,
may be required to prove the outstanding amount thereof.
6.
<PAGE> 181
The opinions expressed herein are solely for your benefit and
for the benefit of your successors and assigns pursuant to the Credit Agreement,
and such opinions may not be relied on in any manner or for any purpose by any
other Person. In addition, this opinion is rendered as of the date hereof and
speaks only to the original Bank, and it shall not be deemed to have been
updated to any date upon which any such other Person may rely hereon. Further,
we do not undertake to advise you or such other Person of matters which occur
subsequent to the date hereof and which affect the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
7.
<PAGE> 182
EXHIBIT A
(Material Agreements)
1. Purchase and Sale Agreement dated as of January 5, 1996 by and between
the Company and Massachusetts Mutual Life Insurance Company ("MMLIC").
2. Series A Senior Term Note due March 31, 1999 in the principal amount of
$62,000,000 made by the Company in favor of MMLIC.
3. The Company is obligated to issue a Series B Senior Term Note in favor
of MMLIC upon completion of a post-closing audit to occur prior to July
1, 1996. The principal amount of such promissory note is presently
estimated to be approximately $35,000,000.
4. Guaranty by the Company of all financial obligations and liabilities of
American Managing Company related to administrative services provided
to Affiliated Health Plans, Inc. ("AHP").
5. Guaranty by the Company of all financial obligations and liabilities of
AHP up to and including 100% of the authorized reserves necessary for
AHP to comply with financial standard requirements of Texas Insurance
Code.
8.
<PAGE> 183
EXHIBIT B
(Consents, Approvals and Authorizations)
Filing of Amended and Restated Articles of Incorporation of BCC with
California Secretary of State to convert from non-profit to for profit
corporation.
Declaration of Effectiveness of Form 8-B successor registrant Exchange
Act registration statement by the SEC.
Filing of Certificate of Merger with Secretary of State of Delaware.
Filing of Agreement of Merger with Secretary of State of California.
9.
<PAGE> 184
Exhibit H-2
[FORM OF OPINION OF THOMAS C. GEISER]
[Date]
To the Banks part to the
Credit Agreement referred to
below, Bank of America National
Trust and Savings Association, as
Administrative Agent,
NationsBank of Texas, N.A., as
Syndication Agent and
Chemical Bank, as Documentation Agent
Ladies and Gentlemen:
I am the General Counsel of WellPoint Health Networks Inc.
(The "Company") and in such capacity I am delivering this opinion letter in
connection with the transactions contemplated by the Recapitalization Agreement,
dated as of March 31, 1995 and executed February 20, 1996, among the Company,
Blue Cross of California, Western Health Partnerships and The Western Foundation
for Health Improvement and the financing transactions contemplated by the Credit
Agreement dated as of May 15, 1996 (the "Credit Agreement") between each of the
financial institutions that are a signatory to the Credit Agreement identified
under the caption "BANKS" on the signature pages of the Credit Agreement or that
pursuant to Section 11.08, shall become a "Bank" under the Credit Agreement (the
"Banks"), Bank of America National Trust and Savings Association, in its
capacity as the Administrative Agent, NationsBank of Texas, N.A., in its
capacity as Syndication Agent, and Chemical Bank, in its capacity as
Documentation Agent. All capitalized terms used herein and not otherwise defined
have the same meanings ascribed to such terms in the Credit Agreement.
In rendering the opinion expressed below, I have examined (a)
the Credit Agreement and the Notes (collectively, the "Loan Documents"), (b) the
Recapitalization Agreements and (c) such corporate records of the Company and
such other documents as I have deemed necessary as a basis for the opinions
expressed below. In my examination, I have assumed the genuineness of all
signatures, the authenticity of documents submitted to me as original and the
conformity with authentic original documents of all documents submitted to me as
copies. In addition, I have made inquiry of other attorneys in the legal
department of the Company as to their knowledge of the matters addressed below
in this opinion letter.
1
<PAGE> 185
Bank of America National Trust
and Savings Association, et al.
[Date]
Page Two
Based upon and subject to the foregoing and having considered
such questions of law as I have deemed necessary as a basis for the opinion
expressed below, I am of the opinion that:
1. There are no pending or, to my knowledge, expressly
threatened actions, suits, proceedings or investigations against the Company or
any of its Subsidiaries in any court or by or before any arbitrator or
Governmental Authority, except for the matters set forth in the Proxy or except
as which would not have a Material Adverse Effect.
2. To my knowledge, except as set forth on Schedule A to this
opinion letter, the Company has not received any written notice or
correspondence (i) relating to the loss or threatened loss by the Company or any
of its Subsidiaries of any material operating permit, license or certification
by any HMO Regulator or (ii) asserting that the Company or any of its
Subsidiaries is not in substantial compliance with any HMO Regulation or
threatening the taking of any action against the Company or any of its
Subsidiaries under any HMO Regulation, except where such noncompliance or the
taking of such action, if adversely determined, would not have a Material
Adverse Effect.
I am admitted to practice law in the State of California. This
opinion is limited to the effects on the matters covered herein of the present
laws of the State of California, the United States of America and, for the
limited purpose of the statements in Paragraph 1 regarding the existence of
actions, suits, proceedings or investigations and the statements in Paragraph 2
regarding the receipt of written notice or correspondence, the relevant laws of
the other jurisdictions in which the Company or any of its Subsidiaries
currently conducts business. I assume no responsibility as to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction. I assume
no obligation to revise or supplement this opinion in the event of a future
change in the law or interpretations thereof and disclaim any undertaking or
obligation to update this opinion in respect of changes or circumstances or
events that occur subsequent to this date.
Whenever my opinion herein with respect to the existence or
absence of facts is stated to be based upon my knowledge, it is intended to
signify that no information has come to my attention that would give me actual
knowledge of the existence or absence of such facts. However, except to the
extent expressly set forth herein, I have not undertaken any independent
investigation to determine the existence or absence of such facts, and no
inference as to my knowledge of the existence or absence of such facts should be
drawn from my participation in the referenced transactions.
2
<PAGE> 186
Bank of America National Trust
and Savings Association, et al.
May 15, 1996
Page Three
This opinion letter is provided to you by me in my capacity as
the General Counsel of the Company pursuant to Section 5.01(d) (ii) of the
Credit Agreement and may not be relied upon by any other person or for any
purpose other than in connection with the transactions contemplated by the Loan
Documents without my prior written consent in each instance.
Very truly yours,
Thomas C. Geiser
General Counsel
3
<PAGE> 187
Exhibit H-3
[Form of Opinion of Brobeck, Phleger & Harrison LLP
(Final Recapitalization Date)]
May 22, 1996
To the Banks party to the
Credit Agreement referred to
below, Bank of America National
Trust and Savings Association, as
Administrative Agent,
NationsBank of Texas, N.A., as
Syndication Agent, and
Chemical Bank, as Documentation Agent
Re: WellPoint Health Networks Inc.
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section
5.03(d)(i) of the Credit Agreement dated as of May 15, 1996 (the "Credit
Agreement") among WellPoint Health Networks Inc., a Delaware corporation, as
borrower ("WellPoint"), each of the financial institutions party to the Credit
Agreement, Bank of America National Trust and Savings Association, as
Administrative Agent, NationsBank of Texas, N.A., as Syndication Agent, and
Chemical Bank, as Documentation Agent. We have acted as counsel for (a)
WellPoint in connection with the Credit Agreement and the transactions
contemplated by the Amended and Restated Recapitalization Agreement (the
"Recapitalization Agreement"), dated as of March 31, 1995 and executed on
February 20, 1996, among WellPoint, Blue Cross of California, Western Health
Partnerships and The Western Foundation for Health Improvement and (b) WellPoint
Health Networks Inc., a California corporation (the "Recapitalized Company") in
connection with the Assumption Agreement dated as of May 20, 1996, signed by the
Recapitalized Company in favor of the Agents and the Banks. Unless otherwise
defined herein, terms used herein shall have the meanings assigned to them in
the Credit Agreement.
In connection with this opinion letter, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
the Recapitalization Agreement and such other documents, corporate records,
certificates, including certificates of public officials, and other instruments
as we have deemed necessary or advisable for purposes of this opinion letter,
including those relating to the authorization,
1.
<PAGE> 188
execution and delivery of the Credit Agreement. In addition, we have examined
the following documents (the items referred to in subclauses (2) through (4)
below herein referred to as the "Loan Documents"):
(1) an executed copy of the Recapitalization Agreement;
(2) an executed copy of the Credit Agreement;
(3) the form of the Notes to be delivered by the
Recapitalized Company pursuant to the Credit Agreement;
(4) an executed copy of the Assumption Agreement;
(5) the Articles of Incorporation and the Bylaws of the
Recapitalized Company, each as in effect on the date hereof;
(6) an executed copy of the certificate of the Secretary of
the Recapitalized Company dated May 22, 1996 certifying: (a) true
copies of the resolutions of the Board of Directors of the
Recapitalized Company, adopted on May 21, 1996, authorizing, among
other things, the execution, delivery and performance of the Loan
Documents, and (b) the incumbency, authority and true signatures of the
officers of the Recapitalized Company authorized to sign the Loan
Documents, any other documents and certificates delivered in connection
therewith;
(7) an executed copy of the certificate (the "Officer's
Certificate") of the Chief Financial Officer and the Senior Vice
President and General Counsel of the Recapitalized Company, dated May
22, 1996; and
(8) such other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed.
We have also examined photostatic copies of the agreements
(the "Material Agreements") identified in Exhibit A attached to this opinion
letter and any consents in connection with the Material Agreements. In our
examination and review we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of the documents submitted
to us as originals, the conformity to the original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such copies. As to any facts material to the opinions hereinafter
expressed which we did not independently establish or verify, we have relied
without investigation upon certificates, statements and representations of
representatives of the Company and the Recapitalized Company. We have also
assumed that each Bank has filed any required California state franchise, income
or similar tax returns and has paid any such required state franchise, income or
similar taxes. Regarding documents
2.
<PAGE> 189
executed by parties other than the Company and the Recapitalized Company, we
have assumed (i) that each such other party had the power to enter into and
perform all its obligations thereunder, (ii) the due authorization of, and the
due execution and delivery of, such documents by each such party, and (iii) that
such documents constitute the legal, valid and binding obligations of each such
party.
With respect to our opinion in paragraph 1 below, we are
relying solely on our review and examination of the certificates received from
the Secretary of State of the State of California without further investigation
of the corporate records of the Recapitalized Company.
Based upon and subject to the foregoing, and subject to the
further assumptions, limitations, qualifications and exceptions set forth
herein, we are of the opinion that:
1. The Recapitalized Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California.
2. The Recapitalized Company has the corporate power and
authority to execute and deliver the Assumption Agreement and perform its
obligations under the Loan Documents, and has taken all necessary corporate
action to authorize the execution and delivery of the Assumption Agreement and
the performance of its obligations under the Loan Documents, including the
assumption by the Recapitalized Company pursuant to the Assumption Agreement of
the Obligations, and the borrowings by the Recapitalized Company under the
Credit Agreement.
3. No consents, approvals or authorizations of, or notices to
or filings with, any governmental authority or agency under the laws of the
State of California or the laws of the United States, as presently in effect and
interpreted, are required or necessary on the part of the Recapitalized Company
in connection with the execution and delivery of the Assumption Agreement and
the performance by the Recapitalized Company of its obligations under the Loan
Documents, including the assumption by the Recapitalized Company pursuant to the
Assumption Agreement of the Obligations, and the borrowings by the Recapitalized
Company under the Credit Agreement, except for such consents, approvals and
authorizations as have been obtained and are in effect and such other consents,
approvals and authorizations as are set forth in Exhibit B hereof (if any).
4. The Credit Agreement and the Assumption Agreement are, and
the Notes when duly executed and delivered pursuant to the Credit Agreement will
be, the legal, valid and binding obligations of the Recapitalized Company,
enforceable against the Recapitalized Company in accordance with their
respective terms.
3.
<PAGE> 190
5. The execution and delivery by the Recapitalized Company of
the Assumption Agreement, and the performance by the Recapitalized Company of
its obligations under the Loan Documents (including the assumption by the
Recapitalized Company pursuant to the Assumption Agreement of the Obligations,
and the borrowings by the Recapitalized Company under the Credit Agreement),
will not (i) violate or be in conflict with any provision of the Articles of
Incorporation or Bylaws of the Recapitalized Company, (ii) violate or be in
conflict with any federal or California law having applicability to the
Recapitalized Company, as presently in effect and interpreted, (iii) violate or
contravene any judgment, decree, injunction or order of any federal or
California court, or any arbitrator or governmental agency or authority, having
jurisdiction over the Recapitalized Company or its properties or by which the
Recapitalized Company may be bound, of which we have knowledge, or (iv)
constitute a material breach of, or result in a material default under, any term
or provision of any of the Material Agreements.
6. To our knowledge, the Recapitalized Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
7. To our knowledge, there are no pending or threatened
actions, suits, proceedings or investigations against the Recapitalized Company
or any Subsidiary of the Recapitalized Company in any court or by or before any
arbitrator or Governmental Authority which, if determined adversely to the
Recapitalized Company, would be likely to have a material adverse effect on the
Recapitalized Company, except for the matters described in the Proxy.
8. The extension of credit under the Credit Agreement does not
violate the provisions of Regulations U or X of the Board of Governors of the
Federal Reserve System.
Whenever a statement herein is qualified by the expressions
"known to us," "to our knowledge," "we are not aware" or a similar phrase with
respect to our knowledge of matters of fact, it is intended to mean that our
knowledge is based upon the records, documents, instruments and certificates
described above and the current actual knowledge of the attorneys in this Firm
who have devoted substantive attention to the transactions contemplated by the
Loan Documents or the Recapitalization Agreement who are presently involved in
substantive legal representation of the Company and the Recapitalized Company
(but not including any constructive or imputed notice of any information) and
that we have not otherwise undertaken any independent investigations for the
purpose of rendering this opinion.
This opinion is limited to the laws of the State of California
and applicable federal laws of the United States, and we express no opinion
herein with respect to the effect or applicability of the laws of other
jurisdictions.
4.
<PAGE> 191
Our opinions in paragraph 3 above and in clause (ii) of
paragraph 5 above, in each case as they relate to the Loan Documents, are
limited to laws and regulations normally applicable to transactions of the type
contemplated in the Loan Documents and do not extend to licenses, permits and
approvals necessary for the conduct of the Recapitalized Company's business. In
addition and without limiting the previous sentence, we express no opinion
herein with respect to the effect of any land use, environmental or similar law,
any state or federal antitrust law, state or federal securities laws, state or
federal tax laws or any local law. Further, we express no opinion as to
compliance or noncompliance by any Bank with any federal, state or other law (i)
requiring such Bank to be licensed as a bank, finance company or other type of
financial institution, (ii) pertaining to matters regulating the assets held by
any Bank on the basis of portfolio requirements or any Bank's capitalization,
such as loan limits and capital adequacy requirements, and (iii) otherwise
applicable to any Bank and relating to its legal or regulatory status or the
nature of its business.
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The validity, binding nature and enforceability of the
Recapitalized Company's obligations under the Loan Documents may be subject to
or limited by (i) bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent transfer and other similar laws affecting the rights of
creditors generally; (ii) general principles of equity (whether relief is sought
in a proceeding at law or in equity), including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing, and the discretion of
any court of competent jurisdiction in awarding specific performance or
injunctive relief and other equitable remedies; and (iii), without limiting the
generality of the foregoing, the effect of California court decisions and
statutes which indicate that provisions of the Loan Documents which permit any
Bank or any other Person to take action or make determinations may be subject to
a requirement that such action be taken or such determinations be made on a
reasonable basis in good faith or that it be shown that such action is
reasonably necessary for the protection of the Banks or such other Person.
(b) We express no opinion as to:
(1) the enforceability of provisions of the Loan
Documents pursuant to which the Recapitalized Company agrees to make payments
without set-off, defense or counterclaim;
(2) provisions purporting to require the award or
payment of attorneys' fees, expenses or costs in any action where the Banks are
not the prevailing party, or the impact of California Civil Code Section 1717 et
seq. on any such provisions;
5.
<PAGE> 192
(3) under certain circumstances, provisions to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right or
remedy, that the election of some particular remedy or remedies does not
preclude recourse to one or another remedy or that failure to exercise or delay
in exercising rights or remedies will not operate as a waiver of any such right
or remedy;
(4) provisions prohibiting waivers of any terms or
provisions of any of the Loan Documents other than in writing, or prohibiting
oral modifications thereof or modification by course of dealing to the extent
such provisions are inconsistent with applicable law;
(5) the enforceability under certain circumstances of
provisions indemnifying a party against, or requiring contributions toward, that
party's liability for its own wrongful or negligent acts or where such
indemnification or contribution is contrary to public policy or prohibited by
law;
(6) any provision providing for the exclusive
jurisdiction of a particular court or purporting to waive rights to trial by
jury, service of process or objections to the laying of venue or to forum on the
basis of forum non conveniens, in connection with any litigation arising out of
or pertaining to the Loan Documents;
(7) provisions providing for an increase in the rate
of interest or imposing a late charge or penalty in the event of delinquency or
default;
(8) provisions purporting to waive statutory or
common law rights, including the right to receive notice or to be allowed to
cure, reinstate or redeem in the event of default, and provisions expressly or
by implication waiving broadly or vaguely stated rights, unknown future rights
and defenses to obligations, in each case to the extent such rights or defenses
are not waivable under applicable law; and
(9) provisions authorizing any Bank to set off and
apply any deposits at any time held, and any other indebtedness at any time
owing, by such Bank to or for the account of the Recapitalized Company.
(c) Our opinion expressed in Paragraph 8 above assumes the
accuracy of Section 6.08 of the Credit Agreement and that the proceeds of the
Loans will be used in compliance with Sections 7.10 and 8.07 of the Credit
Agreement.
(d) Our opinions are subject to the effect of judicial
decisions which may permit the introduction of extrinsic evidence to interpret
the terms of written contracts.
6.
<PAGE> 193
(e) Insofar as this opinion letter concerns the law of the
State of California limiting the rates of interest legally chargeable or
collectible, we have relied upon our understanding that each Bank is (i) a
subsidiary of a bank holding company, (ii) a bank organized under the laws of
the United States or any State thereof, or (iii) a foreign (other nation) bank
within the meaning of Section 1716 of the California Financial Code, and, in
each case as a result thereof, is exempt from the restrictions of Section 1 of
Article XV of the Constitution of the State of California relating to rates of
interest upon the loan of money. We further assume in this regard that all Loans
have been and will be made by the Banks for their own account and without intent
to circumvent otherwise applicable interest rate limitations under California
law and that there is no present express or implied agreement or plan to sell
participations or any other interest in the Loans or the Credit Agreement to any
Person other than a Person that also qualifies for an exemption from the
interest rate limitations of California law.
(f) We wish to point out that each Bank, as holder of a Note,
may be required to prove the outstanding amount thereof.
The opinions expressed herein are solely for your benefit and
for the benefit of your successors and assigns pursuant to the Credit Agreement,
and such opinions may not be relied on in any manner or for any purpose by any
other Person. In addition, this opinion is rendered as of the date hereof and
speaks only to the original Bank, and it shall not be deemed to have been
updated to any date upon which any such other Person may rely hereon. Further,
we do not undertake to advise you or such other Person of matters which occur
subsequent to the date hereof and which affect the opinions expressed herein.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
7.
<PAGE> 194
EXHIBIT A
(Material Agreements)
1. Purchase and Sale Agreement dated as of January 5, 1996 by and between
WellPoint and Massachusetts Mutual Life Insurance Company ("MMLIC").
2. Series A Senior Term Note due March 31, 1999 in the principal amount of
$62,000,000 made by WellPoint in favor of MMLIC.
3. WellPoint is obligated to issue a Series B Senior Term Note in favor of
MMLIC upon completion of a post-closing audit to occur prior to July 1,
1996. The principal amount of such promissory note is presently
estimated to be approximately $35,000,000.
4. Guaranty by WellPoint of all financial obligations and liabilities of
American Managing Company related to administrative services provided
to Affiliated Health Plans, Inc. ("AHP").
5. Guaranty by WellPoint of all financial obligations and liabilities of
AHP up to and including 100% of the authorized reserves necessary for
AHP to comply with financial standard requirements of Texas Insurance
Code.
8.
<PAGE> 195
EXHIBIT B
(Consents, Approvals and Authorizations)
None.
9.
<PAGE> 196
Exhibit H-4
[FORM OF OPINION OF THOMAS C. GEISER
FINAL RECAPITALIZATION DATE]
[Date]
To the Banks part to the
Credit Agreement referred to
below, Bank of America National
Trust and Savings Association, as
Administrative Agent,
NationsBank of Texas, N.A., as
Syndication Agent and
Chemical Bank, as Documentation Agent
Ladies and Gentlemen:
I am the General Counsel of WellPoint Health Networks Inc.
(the "Recapitalized Company") and in such capacity I am delivering this opinion
letter in connection with (i) the transactions contemplated by the
Recapitalization Agreement, dated as of March 31, 1995 and executed February 20,
1996, among Blue Cross of California, WellPoint Health Networks Inc. (the
"Company"), Western Health Partnerships and The Western Foundation for Health
Improvement and (ii) the financing transactions contemplated by the Credit
Agreement dated as of May 15, 1996 (the "Credit Agreement") between the Company
each of the financial institutions that are a signatory to the Credit Agreement
identified under the caption "BANKS" on the signature pages of the Credit
Agreement or that pursuant to Section 11.08, shall become a "Bank" under the
Credit Agreement (the "Banks"), Bank of America National Trust and Savings
Association, in its capacity as the Administrative Agent, NationsBank of Texas,
N.A., in its capacity as Syndication Agent, and Chemical Bank, in its capacity
as Documentation Agent. All capitalized terms defined in the Credit Agreement
are used with the same meanings, unless otherwise defined, in this opinion
letter.
In rendering the opinion expressed below, I have examined (a)
the Assumption Agreement, the Credit Agreement and the Notes (collectively, the
"Loan Documents"), (b) the Recapitalization Agreements and (c) such corporate
records of the Recapitalized Company and such other documents as I have deemed
necessary as a basis for the opinion expressed below. In my examination, I have
assumed the genuineness of all signatures, the authenticity of documents
submitted to me as original and the conformity with authentic original documents
of all documents submitted to me as copies. In addition, I have made inquiry of
other attorneys in the legal department of the Company as to their knowledge of
the matters addressed below in this opinion letter.
Based upon and subject to the foregoing and having considered
such questions of law as I have deemed necessary as a basis for the opinion
expressed below, I am of the opinion that:
1. There are no pending or, to my knowledge, expressly
threatened actions, suits, proceedings or investigations against the
Recapitalized Company or any of its Subsidiaries in any court
1
<PAGE> 197
Bank of America National Trust
and Savings Association, et al.
[Date]
Page Two
or by or before any arbitrator or Governmental Authority, except for the matters
set forth in the Proxy or except as which would not have a Material Adverse
Effect.
2. To my knowledge, except as set forth on Schedule A to this
opinion letter, neither the Company nor the Recapitalized Company has received
any written notice or correspondence (i) relating to the loss or threatened loss
by the Company, the Recapitalized Company or any of their respective
Subsidiaries of any material operating permit, license or certification by any
HMO Regulator or (ii) asserting that the Company, the Recapitalized Company or
any of their respective Subsidiaries is not in substantial compliance with any
HMO Regulation or threatening the taking of any action against the Company, the
Recapitalized Company or any of their respective Subsidiaries under any HMO
Regulation, except where such noncompliance or the taking of such action, if
adversely determined, would not have a Material Adverse Effect.
I am admitted to practice law in the State of California. This
opinion is limited to the effects on the matters covered herein of the present
laws of the State of California, the United States of America and, for the
limited purpose of the statements in Paragraph 1 regarding the existence of
actions, suits, proceedings or investigations and the statements in Paragraph 2
regarding the receipt of written notice or correspondence, the relevant laws of
the other jurisdictions in which the Company or any of its Subsidiaries
currently conducts business. I assume no responsibility as to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction. I assume
no obligation to revise or supplement this opinion in the event of a future
change in the law or interpretations thereof and disclaim any undertaking or
obligation to update this opinion in respect of changes or circumstances or
events that occur subsequent to this date.
Whenever my opinion herein with respect to the existence or
absence of facts is stated to be based upon my knowledge, it is intended to
signify that no information has come to my attention that would give me actual
knowledge of the existence or absence of such facts. However, except to the
extent expressly set forth herein, I have not undertaken any independent
investigation to determine the existence or absence of such facts, and no
inference as to my knowledge of the existence or absence of such facts should be
drawn from my participation in the referenced transactions.
This opinion letter is provided to you by me in my capacity as
the General Counsel of the Recapitalized Company pursuant to Section 5.03(d)(ii)
of the Credit Agreement and may not be relied upon by any other person or for
any purpose other than in connection with the transactions contemplated by the
Loan Documents without my prior written consent in each instance.
Very truly yours,
Thomas C. Geiser
General Counsel
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EXHIBIT I
FORM OF
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Agreement"), dated this ____ day of
May, 1996, is made by WellPoint Health Networks, Inc. the "Recapitalized
Company") in favor of Bank of America National Trust and Savings Association, a
national banking association, as a Bank and as administrative and bid agent (the
"Administrative Agent") under the Credit Agreement (as defined below),
Nationsbank of Texas, N.A., as a bank and as syndication agent (the "Syndication
Agent") under the Credit Agreement, Chemical Bank, as a bank and as
documentation agent (the "Documentation Agent," and, collectively with the
Administrative Agent and the Syndication Agent, the Agents) and each of the
financial institutions that is a signatory to the Credit Agreement identified
under the caption "BANKS" on the signature page of the Credit Agreement or that,
pursuant to Section 11.08(a) of the Credit Agreement, shall become a "Bank"
under the Credit Agreement (collectively with the Agents, the "Banks").
RECITALS
A. Pursuant to that certain Credit Agreement, dated as of May 1, 1996
among WellPoint Health Networks Inc. (the "Company") and the Banks (the "Credit
Agreement"), the Banks have agreed to make available to the Company, upon the
terms and conditions set forth in the Credit Agreement, a revolving credit and
bid loan facility to enable the Company to finance certain acquisitions, to
repay certain existing senior indebtedness, to pay certain special dividends to
shareholders and for other general corporate purposes. (Capitalized terms used
in this Agreement and not otherwise defined shall have the meanings assigned to
them in the Credit Agreement, unless the context otherwise requires.)
B. Pursuant to the Amended and Restated Recapitalization Agreement,
dated as of March 31, 1995 and executed on February 20, 1996, among Blue Cross
of California ("BCC"), the Company, Western Health Partnerships and the Western
Foundation For Health Improvement (the "Recapitalization Agreement"), as a part
of the recapitalization, recharacterization and merger of the Company and BCC,
among other things, (i) the Company paid a one-time cash dividend to the holders
of the Company's common stock, (ii) BCC was converted
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from a nonprofit public benefit corporation to a for-profit corporation and
(iii) BCC and the Company merged (the "Recapitalization").
C. The execution and delivery of this Agreement by the Recapitalized
Company is a condition subsequent to the obligations of the Banks under the
Credit Agreement.
D. The Recapitalization has been consummated.
E. To satisfy the conditions subsequent to the Credit Agreement, the
Recapitalized Company desires to assume the Obligations of the Company under the
Loan Documents.
AGREEMENT
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Recapitalized Company, hereby
agrees for the benefit of the Agents and the Banks as follows:
SECTION I. Assumption of Obligations. The Recapitalized Company hereby
assumes and agrees to perform each and every covenant, agreement and obligation
of Company under or in connection with the Credit Agreement, the Notes and the
other Loan Documents, and the Recapitalized Company shall at all times hereafter
be the "Company" for all purposes of the Credit Agreement as fully as though it
had originally signed the Loan Documents.
SECTION II. Representations and Warranties. The Recapitalized Company
represents and warrants that each of the representations and warranties made by
the Company in Article VI of the Credit Agreement is true and correct with
respect to the Recapitalized Company as of the date of this Agreement, both
before and after giving effect to the Recapitalization, with the same effect as
if such representations and warranties and this Agreement had been made on and
as of the date of this Agreement.
SECTION III. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF
CALIFORNIA; PROVIDED THAT THE BANKS SHALL RETAIN THE RIGHTS ARISING UNDER
FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE CENTRAL
DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
RECAPITALIZED COMPANY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE
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RECAPITALIZED COMPANY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. THE
RECAPITALIZED COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
SECTION IV. WAIVER OF JURY TRIAL. THE RECAPITALIZED COMPANY WAIVES ITS
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE RECAPITALIZED COMPANY AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE RECAPITALIZED COMPANY FURTHER AGREES THAT
ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION IV AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION V. Indemnity. The Recapitalized Company shall pay, indemnify,
and hold each Bank, the Agents, the Agent-Related Persons and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses or disbursements (including Attorney Costs) of any kind
or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided that the
Recapitalized Company shall have no obligation under this Agreement to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person.
SECTION VI. Waivers; Amendment. Neither this Agreement nor any
provision hereof may be waived, amended or modified except pursuant to an
agreement or agreements in writing entered into by all the parties hereto.
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SECTION VII. Costs and Expenses. The Recapitalized Company shall,
whether or not the transactions contemplated by this Agreement shall be
consummated:
(a) pay or reimburse the Agents within 15 Business Days after demand
for all reasonable costs and expenses incurred by the Agents in connection with
the preparation, delivery and execution of this Agreement and any other
documents prepared in connection with this Agreement and the consummation of the
transactions contemplated by this Agreement, including all Attorney Costs
incurred by the Agents with respect to all of the above; and
(b) pay or reimburse each Bank and each Agent within 15 Business Days
after demand for all costs and expenses incurred by them in connection with the
enforcement, attempted enforcement or preservation of any rights or remedies
(including in connection with any "workout" or restructuring and any Insolvency
Proceeding or appellate proceeding) under this Agreement, including all Attorney
Costs incurred by any Bank or any Agent with respect to all of the above.
SECTION VIII. Further Assurances. The Recapitalized Company agrees to
perform any further acts and to execute and deliver any other documents which
may be reasonable requested by the Banks to effect the purposes of this
Agreement.
SECTION IX. Headings. The Section and other headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered by its proper and duly authorized officer as of the
day and year first above written.
WELLPOINT HEALTH SYSTEMS, INC.
By___________________________________
Its:_______________________________
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EXHIBIT J
FORM OF CONFIDENTIALITY AGREEMENT
CONFIDENTIALITY AGREEMENT
[Date]
[Name and Address of
prospective Participant
or Assignee]
Re: Credit Agreement dated May 15, 1996 ("Credit Agreement"), among Wellpoint
Health Networks Inc. (the "Company"), each of the financial institutions
that is a signatory to the Credit Agreement identified under the caption
"BANKS" on the signature pages of the Credit Agreement (the "Banks"), Bank
of America National Trust and Savings Association, as administrative and
bid agent for the Banks (the "Administrative Agent"), NationsBank Texas,
N.A., as syndication agent for the Banks (the "Syndication Agent"), and
Chemical Bank, as documentation agent for the Banks (the "Documentation
Agent"). (All capitalized terms used but not defined in this
Confidentiality Agreement shall have the meanings assigned to them in the
Credit Agreement.)
Ladies and Gentlemen:
We have agreed with the Company pursuant to Section 11.08(e) of the
Credit Agreement to use normal and reasonable precautions and exercise due care
to keep confidential, except as otherwise provided in the Credit Agreement, all
nonpublic information identified by the Company as being confidential at the
time the same is delivered to us pursuant to the Credit Agreement.
As provided in that Section 11.08(e), we are permitted to provide you,
as a prospective [Participant] [Assignee], with certain of such nonpublic
information subject to the execution and delivery by you, prior to receiving
such nonpublic information, of a Confidentiality Agreement in this form. Such
information will not be made available to you until your execution and return to
us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree to take
normal and reasonable precautions and exercise due care (in the same manner as
you exercise for your own affairs) to maintain the confidentiality of all
information identified as
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"confidential" by the Company or any Subsidiary of the Company and provided to
you by the Company or any Subsidiary of the Company, or by the Agents on such
Company's or Subsidiary's behalf, in connection with the proposed
[participation] [assignment] mentioned above; except to the extent such
information (i) was or becomes generally available to the public other than as a
result of a disclosure in violation of this Confidentiality Agreement by you, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company; provided that such source is not bound by a confidentiality
agreement with the Company known to you.
Notwithstanding the foregoing paragraph, you may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which you are subject or in connection with an
examination of you by any such Governmental Authority; (B) pursuant to subpoena
or other court process; (C) when required to do so in accordance with the
provisions of any applicable Governmental Rule; (D) in connection with any
litigation or proceeding to which you may be party, (E) to your Affiliates,
independent auditors, counsel and other professional advisors. Prior to any
disclosure permitted under clause (B) above, you shall, if permitted by
applicable Governmental Rules or judicial order, notify the Company of such
pending disclosure, unless litigation is pending between you and the Company or
any of its Subsidiaries.
Very truly yours,
[Name of Bank]
The foregoing is agreed to
as of the date of this letter.
[NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By: _____________________________
Name:
Title:
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