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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) 12/30/97
WELLPOINT HEALTH NETWORKS INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 001-13803 95-4635504
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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
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Effective as of December 30, 1997, WellPoint Health Networks Inc., a
Delaware corporation (the "Company" or "WellPoint"), has entered into an amended
and restated California Blue Cross License Addendum (as amended and restated,
the "Amended Addendum") between the Company, Blue Cross of California and the
Blue Cross Blue Shield Association (the "BCBSA"). The Amended Addendum modifies
in certain respects the terms of the Blue Cross License Agreement dated as of
August 4, 1997 (the "Primary License Agreement") between the Company and the
BCBSA. The California Blue Cross License Addendum previously provided that the
Primary License Agreement would be subject to termination in certain
circumstances if any person other than the California HealthCare Foundation
beneficially owned WellPoint shares representing more than 5% of the voting
power in WellPoint. As described in greater detail below, under the Amended
Addendum, certain institutional investors (such as, certain broker/dealers,
banks, insurance companies, investment companies and investment advisors) will
be permitted to beneficially own shares representing up to (but not including)
10% of the voting power of WellPoint, provided that such shares are held in the
ordinary course of business and not with the purpose or effect of influencing or
changing the control of WellPoint. The current five percent (5%) ownership
limitation will be maintained for noninstitional investors. This modification
will also apply to the "Ownership Limit" contained in the Company's Restated
Certificate of Incorporation. The Amended Addendum also subjects the Company to
termination of the Primary License Agreement if any person, other than the
California HealthCare Foundation, becomes the beneficial owner of 20% or more of
the Company's common stock or other equity securities, regardless of the voting
power of such securities.
As provided in the Amended Addendum, the Primary License Agreement will
be subject to termination 30 days after the Company first learns, or there is a
public filing with the Securities and Exchange Commission (the "SEC") that
discloses, that:
(i) any Institutional Investor (as defined below) has become the
beneficial owner of Company shares representing 10% or more of the
voting power of the Company (an "Excess Institutional Voter"), unless
such Excess Institutional Voter shall cease to be an Excess
Institutional Voter prior to the end of such 30-day period;
(ii) any Noninstitutional Investor, other than the California HealthCare
Foundation (the "Foundation"), has become the beneficial owner of
Company shares representing 5% or more of the voting power of the
Company (an "Excess Noninstitutional Voter"), unless such Excess
Noninstitutional Voter shall cease to be an Excess Noninstitutional
Voter prior to the end of such 30-day period;
(iii) any person, other than the Foundation, has become the beneficial
owner of 20% or more of the Company's then-outstanding common stock or
other equity securities which (either by themselves or in combination)
represent an ownership interest of 20% or more
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pursuant to determinations to be made by the BCBSA (an "Excess Owner"),
unless such Excess Owner shall cease to be an Excess Owner prior to the
end of such 30-day period; or
(iv) the Company consolidates 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 Company is the
surviving entity and immediately after which merger no person is an
Excess Institutional Voter, an Excess Noninstitutional Voter or an
Excess Owner.
For such purposes, "Institutional Investor" means any person if (but
only if) (i) such person is an entity or group identified in Rule
13d-1(b)(1)(ii) of the rules and regulations promulgated under the Securities
and Exchange Act of 1934 (the "Exchange Act") as constituted on June 1, 1997,
and (ii) every filing made by such person with the SEC under Regulation 13D- G
(or any successor Regulation) under the Exchange Act with respect to such
person's beneficial ownership shall have contained a certification having
substantially identical terms to the one required by Item 10 of Schedule 13G as
constituted on June 1, 1997. For such purposes, "Noninstitutional Investor"
means any person that is not an Institutional Investor.
The Amended Addendum, further provides that WellPoint shall not issue
any class or series of securities other than (i) shares of common stock having
identical terms or options or derivatives of common stock; (ii) non-voting,
non-convertible debt securities; or (iii) such other securities as the Company
may approve, provided that the BCBSA shall receive notice at least 30 days prior
to the issuance of such securities, including a description of the terms
thereof, and the BCBSA shall have the authority to determine how such other
securities will be counted in determining whether any person is an Excess
Institutional Voter, Excess Noninstitutional Voter or an Excess Owner.
Finally, in connection with the Amended Addendum and as contemplated by
Section 14(f)(2) of Article VII of the Company's Restated Certificate of
Incorporation, the Company and the BCBSA have agreed that the term "Ownership
Limit" defined in Article VII of the Restated Certificate of Incorporation shall
for all purposes mean the following effective as of December 30, 1997:
(i) for all stockholders that are Noninstitutional Investors (as defined
above), that number of shares of Capital Stock (as defined in the
Restated Certificate or Incorporation) one share lower than the number
of shares of Capital Stock which would represent 5% of the Voting Power
(as defined in the Restated Certificate of Incorporation); and
(ii) for all stockholders that are Institutional Investors (as defined
above), that number of shares of Capital Stock one share lower than the
number shares of Capital Stock which would represent 10% of the Voting
Power.
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A copy of the Amended Addendum is being filed as an exhibit to this
Current Report on Form 8-K and the description of the terms thereof contained
above is qualified in its entirety by reference to such exhibit.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(C) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
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<S> <C>
99.1 California Blue Cross License Addendum (Amended and
Restated as of December 30, 1997) by and between
the Company, Blue Cross of California and the BCBSA.
</TABLE>
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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: December 30, 1997
WELLPOINT HEALTH NETWORKS INC.
By: /s/ Thomas C. Geiser
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Name: Thomas C. Geiser
Title: Executive Vice President
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CALIFORNIA BLUE CROSS LICENSE ADDENDUM
AMENDED AND RESTATED AS OF DECEMBER 30, 1997
This License Addendum ("this Addendum") has been amended and restated as
of December 30, 1997 (the "date hereof") by the Blue Cross and Blue Shield
Association ("BCBSA"), WellPoint Health Networks Inc. ("WellPoint"), and the
corporation identified herein as "California Blue Cross." Capitalized terms not
otherwise defined herein shall have the meanings given them in Article VII of
WellPoint's Charter.
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: (i) 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 (ii) function as an integral part of
the Blue Cross and Blue Shield national system of health benefits.
Whereas: WellPoint was incorporated in Delaware for the purpose of
becoming the ultimate parent corporation in an organization (the "WellPoint
Organization") which among other things provides health care plans and related
services in California under the "Blue Cross" name and under various related
marks.
Whereas: WellPoint has assumed its position as the ultimate parent in
the WellPoint Organization as a result of a number of inter-related actions
which are collectively called the "Reincorporation" in this Addendum. The
Reincorporation occurred effective as of August 4, 1997.
Whereas: Prior to the Reincorporation, the WellPoint Organization was
headed by a corporation incorporated in California which had the name "WellPoint
Heath Networks Inc." (and which is called "California Blue Cross" in this
Addendum). As a result of the Reincorporation: (i) every share of common stock
issued by California Blue Cross and outstanding immediately prior to the
Reincorporation was converted into a share of common stock issued by WellPoint;
(ii) California Blue Cross became an indirect wholly owned subsidiary of
WellPoint; and (iii) the name of California Blue Cross was changed to "Blue
Cross of California."
Whereas: Prior to May 1996, California Blue Cross was organized as a
nonprofit public benefit corporation. In May 1996, California Blue Cross was
converted into a for-profit business stock corporation as part of a series of
interrelated actions which in this Addendum are collectively called the "1996
For-Profit Conversion." As part of the 1996 For-Profit Conversion, California
Blue Cross issued shares of its common stock to a California nonprofit public
benefit corporation which (i) then had the name "Western Health Partnerships,"
(ii) now has the name "California HealthCare Foundation, and (iii) is called the
"Foundation" in this Addendum. The common shares issued to
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the Foundation represented (i) a substantial majority of California Blue Cross's
common stock outstanding immediately after the 1996 For-Profit Conversion and
(ii) carried voting power significantly in excess of the amount which BCBSA's
licensing requirements allow to be concentrated in the hands of any single
shareholder of a primary licensee.
Whereas: To mitigate the risks and disadvantages of the concentration of
common stock in the hands of the Foundation (i) certain mechanisms and covenants
(the "Original Basic Protections") were incorporated in the Articles of
Incorporation and Bylaws governing California Blue Cross and in agreements
between California Blue Cross and the Foundation and (ii) California Blue Cross
entered into a License Addendum dated as of May 17, 1996 (the "Original
Addendum") which provided among other things that the primary Blue Cross license
for the WellPoint Organization would automatically terminate if there were any
failure to comply with any of the Original Basic Protections specified in the
Original Addendum.
Whereas: In the Reincorporation, the common stock previously held by the
Foundation in California Blue Cross was converted on a share for share basis to
common stock issued by WellPoint in the Reincorporation. The Foundation held the
same percentage of WellPoint's common stock outstanding immediately after the
Reincorporation as the percentage of the outstanding common stock which the
Foundation held in California Blue Cross immediately prior to the
Reincorporation. The voting power attributable to the WellPoint common stock
held by the Foundation immediately after the Reincorporation was, and as of the
date hereof, continues to be significantly higher than the percentage that
BCBSA's licensing requirements allow to be concentrated in the hands of any
single shareholder of a primary licensee.
Whereas: In connection with the Reincorporation, WellPoint requested
that notwithstanding the concentration of its common stock in the hands of the
Foundation resulting from the Reincorporation, BCBSA issue the following
licenses (the "New Licenses"): a Primary Blue Cross License to WellPoint to
replace the primary license held prior to the Reincorporation by California Blue
Cross; a Controlled Affiliate License to California Blue Cross to entitle it to
conduct operations in California under the Blue Cross name; and various other
affiliate licenses to other WellPoint subsidiaries to enable them to continue to
conduct operations under the "Blue Cross" name and/or related names.
Whereas: To induce BCBSA to issue the New Licenses, WellPoint: (i)
incorporated into its Certificate of Incorporation and Bylaws mechanisms
designed to protect WellPoint from being controlled by the Foundation (or any
other large shareholder which might emerge in the future) which are analogous to
the mechanisms previously incorporated into California Blue Cross's governing
instruments; (ii) agreed with the Foundation and California Blue Cross to amend
and restate the agreements previously made by California Blue Cross with the
Foundation to obtain for WellPoint the benefit of the covenants in those
agreements designed to protect WellPoint from being controlled by the
Foundation; and (iii) entered into a new license addendum (the "New Addendum")
to take the place of the Original Addendum.
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Whereas: The parties have executed this amendment and restatement of
the New Addendum in order to, among other things, (i) implement revised
restrictions on beneficial ownership of WellPoint securities embodied in Section
2.1(f) hereof, and (ii) modify the definition of the term "Ownership Limit."
Each of the terms "this Addendum," "herein," "hereof" and so forth as used in
this instrument refers to the New Addendum as constituted by the amendment and
restatement set forth in this instrument.
THE PARTIES HEREBY AMEND AND RESTATE THE AGREEMENTS IN THE NEW ADDENDUM TO READ
AS FOLLOWS:
1. Waiver. BCBSA hereby agrees that the ownership of WellPoint shares by the
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 Charter 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 May 20, 2001, the Foundation's board of
directors does not contain at least a majority of directors who
served as directors of California Blue Cross prior to May 17,
1996.
(d) The 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 California Attorney
General over similar situated entities and other than in
accordance with
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California Blue Cross' Undertakings to the California Department
of Corporations dated March 5, 1996 as provided to BCBSA prior to
May 17, 1996.
(e) The 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 May 20, 1999; or
(2) 20% or more of the voting power at any time from
and including May 20, 1999 to but not including
May 20, 2001; or
(3) 5% or more of the voting power at any time on or
after May 20, 2001.
(f) (i) any Institutional Investor shall become the Beneficial Owner
of WellPoint shares representing 10% or more of the voting power
of WellPoint (an "Excess Institutional Voter"), unless such
Excess Institutional Voter shall cease to be an Excess
Institutional Voter prior to the end of the Applicable Interval
arising from such Beneficial Ownership; or
(ii) any Noninstitutional Investor other than the Foundation
shall become the Beneficial Owner of WellPoint shares
representing 5% or more of the voting power of WellPoint (an
"Excess Noninstitutional Voter") unless such Excess
Noninstitutional Voter shall cease to be an Excess
Noninstitutional Voter prior to the end of the Applicable
Interval arising from such Beneficial Ownership; or
(iii) any person other than the Foundation shall become the
Beneficial Owner of 20% or more of WellPoint's then-outstanding
common stock or other equity securities which (either by
themselves or in combination) represent an ownership interest of
20% or more pursuant to determinations made under paragraph 2.6
below (each, an "Excess Owner"), unless such Excess Owner shall
cease to be an Excess Owner prior to the end of the Applicable
Interval arising from such Beneficial Ownership; or
(iv) WellPoint 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 WellPoint is the surviving entity and immediately after
which merger no person is an Excess Institutional Voter, an
Excess Noninstitutional Voter or an Excess Owner.
For the purposes hereof, a person shall be deemed to be an
"Institutional Investor" if (but only if) (x) such person is an
entity or group identified in Rule 13d-1(b)(1)(ii) of the rules
and regulations promulgated under the Securities Exchange Act of
1934
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(the "Exchange Act") as constituted on June 1, 1997, and (y)
every filing made by such person with the Securities and Exchange
Commission under Regulation 13D-G (or any successor Regulation)
under the Exchange Act with respect to such person's Beneficial
Ownership shall have contained a certification having
substantially identical terms to the one required by Item 10 of
Schedule 13G as constituted on June 1, 1997. For the purposes
hereof, the term "Noninstitutional Investor" means any person who
is not an Institutional Investor.
(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 Charter as constituted immediately after the
Reincorporation.
(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.
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) (i), or (ii) or (iii) of Section 2.1 shall begin upon
the occurrence of that event and shall end on the 30th day after
the earlier of the time WellPoint shall first learn of such event
or the occurrence of a public filing with the Securities and
Exchange Commission disclosing 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 any related controlled affiliate license shall be deemed
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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 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 No Implied Exemption for Other Changes. The references in the
definitions of "WellPoint's Charter," "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.
2.6 Restrictions on Issuance of Securities. WellPoint shall not issue
any class or series of securities other than (i) shares of common stock having
identical terms or options or derivatives of common stock; (ii) non-voting,
non-convertible debt securities; or (iii) such other securities as WellPoint may
approve, provided that BCBSA shall receive notice at least 30 days prior to the
issuance of such securities, including a description of the terms of such
securities, and BCBSA shall have the authority to determine how such securities
will be counted in determining whether any person is an Excess Institutional
Voter, Excess Noninstitutional Voter or an Excess Owner.
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 as of August 4, 1997
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.
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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.
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);
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(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 Amended and
Restated Registration Rights Agreement between
WellPoint and the Foundation dated as of August 4,
1997) 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.
(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
Charter), 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
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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
(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
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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 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 Charter: Section 1 of Article
IV; all provisions in Article VII and Article IX; and the
provision is 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, 8 or 10 in Article IV of
WellPoint's Charter. (The term "WellPoint's Charter" as used in
this Addendum means WellPoint's Restated Certificate of
Incorporation as in effect from time to time after the
Reincorporation. In the event WellPoint's Charter shall be
replaced by another governing instrument as a result of a merger,
a reorganization or other similar event, if any, then the term
"WellPoint's Charter" shall thereafter refer to such other
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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, 8, and 10 in Article IV in WellPoint's
Charter.
(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
Reincorporation. In the event WellPoint's Bylaws shall be
replaced by another governing instrument as a result of a
merger, a reorganization or other similar event, if any,
then the 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 Amended and Restated
Voting Agreement dated as of August 4, 1997 between
WellPoint, California Blue Cross and the Foundation as in
effect from time to time after the Reincorporation. In the
event the Voting Agreement shall be replaced by another
agreement as 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
Amended and Restated Voting Trust Agreement dated as of
August 4, 1997 between the Foundation and Wilmington Trust
Company as in effect from time to time after the
Reincorporation. In the event the Voting Trust Agreement
shall be replaced by another agreement as 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.)
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(5) Section 12 of the Amended and Restated Registration Rights
Agreement among WellPoint, California Blue Cross and the
Foundation.
3.6 Diversity Goal. The 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 and shall not be an Excess Owner.
3.7 Independent Director. Any particular individual shall be deemed
to be a "Independent Director" if (but not unless) such individual
(a) either (i) is David R. Banks, W. Toliver Besson, Roger E. Birk,
Sheila P. Burke, Stephen L. Davenport, Julie A. Hill, Elizabeth
A. Sanders, or Leonard D. Schaeffer or (ii) was elected to the
Board after the date hereof with the approval of two thirds of
the directors then in office who then constituted Independent
Directors
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 or who is an
"Excess Owner" 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 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 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 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
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.
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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.
3.11 Ownership Limit.
(a) From and after the date hereof, the term "Ownership Limit"
defined in Article VII of WellPoint's Restated Certificate of
Incorporation shall for all purposes mean the following:
(1) For all stockholders that are Noninstitutional Investors (as
defined herein), 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 (as defined in the
Restated Certificate of Incorporation); and
(2) For all stockholders that are Institutional Investors (as
defined herein), that number of shares of Capital Stock one
share lower than the number of shares of Capital Stock which
would represent 10% of the Voting Power.
(b) The parties hereto intend that the revisions contained herein to
the definition of the term "Ownership Limit" shall constitute an
agreement in writing between the parties hereto within the
meaning of Section 14(f)(2) of Article VII of WellPoint's
Restated Certificate of Incorporation and as such shall apply to
the interpretation of such term for all purposes under
WellPoint's Restated Certificate of Incorporation.
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 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 California Blue Cross or its subsidiary
which then had the name "CaliforniaCare Health Plans" and the businesses in
California which may develop or evolve from those businesses after February 13,
1996. The term "Relevant Businesses" shall not include (except as provided in
Section 4.2) the business acquired by California Blue Cross from
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Massachusetts Mutual Life Insurance Company on March 31, 1996 (the "MassMutual
Business") 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, California Blue Cross, or BC Life & Health Insurance Company on or
prior to May 17, 2001 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 May 17, 1996, but rather all new accounts with California
headquarters arising after May 17, 1996 shall be offered by WellPoint,
California Blue Cross, or BC Life & Health 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 BC Life & Health Insurance Company and WellPoint shall take the
actions necessary so that BC Life & Health Insurance Company (i) continuously
meets all qualifications necessary to hold a controlled affiliate license from
BCBSA, (ii) utilizes the Blue Cross of California name and Blue Cross marks in
marketing materials, (iii) identifies its products in marketing materials as
being brought to its subscribers by "Blue Cross of California," and (iv) shall
identify itself in marketing materials as an affiliate of Blue Cross of
California.
4.4 Transfers of businesses from WellPoint or California Blue Cross
to BC Life & Health Insurance Company after January 13, 1997 (the "Transferred
Businesses") shall not violate this Part 4 if, on or prior to May 17, 2001, 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.
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 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 other circumstances which were
made or arose prior to the issuance of the Primary License granting WellPoint,
California Blue Cross or any of their respective subsidiaries or predecessors
licenses or rights in the Blue Cross name or other rights licensed by BCBSA are
hereby terminated effective as of the issuance of the Primary License, and
neither WellPoint nor California Blue Cross nor any of their respective
affiliates shall have any rights under or by reason of such earlier agreements,
understandings or other circumstances. The rights of WellPoint, California Blue
Cross and their respective subsidiaries to use the Blue Cross name and other
rights licensed by BCBSA shall instead be derived from the date hereof
exclusively from the Primary Blue Cross License and related
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agreements granted on or after the time of the issuance of the Primary License.
The New Addendum shall govern during the period from the issuance of the Primary
License to but not including the date hereof and the terms of this amendment and
restatement of the new Addendum shall govern from and 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) the Merger identified in
the proxy statement issued on May 9, 1997 by California Blue Cross has become
effective in Delaware and California on the terms and with the effect described
in that proxy statement; (ii) WellPoint provided BCBSA prior to August 4, 1997
with complete and accurate copies of WellPoint's Charter, WellPoint's Bylaws,
the Voting Agreement, the Voting Trust Agreement and the Registration Rights
Agreement as constituted immediately after the Reincorporation; (iii) the
Foundation has executed and delivered the Voting Agreement, the Voting Trust
Agreement, and the Registration Rights Agreement; (iv) on the date hereof, the
Foundation Beneficially Owns approximately 43% of WellPoint's common stock
outstanding; and (v) no person other than the Foundation Beneficially Owns
WellPoint shares representing more than 5% of the voting power.
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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.
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Each of the parties has executed this amendment and restatement of the
New Addendum to evidence its agreement to be bound by all of its terms.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
BY: /s/ MARK A. ORLOFF
------------------------------------
NAME: Mark A. Orloff
TITLE: Vice President
WELLPOINT HEALTH NETWORKS INC.
(a Delaware corporation identified herein
as "WellPoint")
BY: /s/ THOMAS C. GEISER
------------------------------------
NAME: Thomas C. Geiser
TITLE: Secretary
BLUE CROSS OF CALIFORNIA
(a California corporation identified herein
as "California Blue Cross")
BY: /s/ THOMAS C. GEISER
------------------------------------
NAME: Thomas C. Geiser
TITLE: Secretary
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