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EXHIBIT 99.7
CALIFORNIA BLUE CROSS LICENSE ADDENDUM
This License Agreement Addendum ("this Addendum") has been executed as
of August 4, 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 immediately prior to the execution of this Addendum.
The Reincorporation is described in a proxy statement issued on May 9, 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 has become an indirect wholly owned subsidiary of
WellPoint; and (iii) the name of California Blue Cross is being 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
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Foundation, and (iii) is called the "Foundation" in this Addendum. The common
shares issued to 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 (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 holds
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 is 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: WellPoint has 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 has: (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 this Addendum to take the place of the
Original Addendum.
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The parties agree 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 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
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(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) Any person other than the 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 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) 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.
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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 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. 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.
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
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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);
(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
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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 entered into on or
prior to the consummation of the Reincorporation)
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
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
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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 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:
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(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 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:
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(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 the date hereof
between WellPoint, California Blue Cross and the
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 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
the date hereof 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.)
(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.
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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 ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 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 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.
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.
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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 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 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 and Health Insurance Company and WellPoint shall take the
actions necessary so that BC Life and 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.
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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 date hereof 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 date hereof, 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
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.
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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 has provided BCBSA 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
immediately after the Reincorporation; and (v) no person other than the
Foundation Beneficially Owns WellPoint shares representing more than 5% of the
voting power. This Addendum replaces and supersedes the Original Addendum
effective upon its execution and delivery by the parties hereto.
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.
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: Sr. Vice Pres.,
Gen. Counsel, Corp. Secy.
WellPoint Health Networks Inc.
(a Delaware Corporation identified
herein as "WellPoint")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
Blue Cross of California
(a California corporation identified
herein as "California Blue Cross")
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
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