EXHIBIT 1.1
____________________________________________________________________________
____________________________________________________________________________
WELLPOINT HEALTH NETWORKS INC.
(a Delaware corporation)
7,200,000 Shares of Common Stock
U.S. UNDERWRITING AGREEMENT
Dated: June [ ], 1999
____________________________________________________________________________
____________________________________________________________________________
WELLPOINT HEALTH NETWORKS INC.
(a Delaware corporation)
7,200,000 Shares of Common Stock
(Par Value $.01 Per Share)
U.S. UNDERWRITING AGREEMENT
June [ ], 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED
DEUTSCHE BANK SECURITIES INC.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ READ LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
WellPoint Health Networks Inc., a Delaware corporation (the
"COMPANY"), and the California HealthCare Foundation, a California non-profit
corporation (the "SELLING STOCKHOLDER"), confirm their respective agreements
with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") and each of the other
U.S. Underwriters named in Schedule A hereto (collectively, the "U.S.
UNDERWRITERS," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, Deutsche Bank Securities Inc.,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Read LLC are acting as representatives (in such capacity, the
"U.S. REPRESENTATIVES"), with respect to (i) the sale by the Selling
Stockholder, and the purchase by the U.S. Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01 per
share, of the Company ("COMMON STOCK") set forth in Schedule A hereto and (ii)
the grant by the Selling Stockholder to the U.S. Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of 1,350,000 additional shares of Common Stock to cover
over-allotments, if any. The aforesaid 7,200,000 shares of Common Stock (the
"INITIAL U.S. SECURITIES") to be purchased by the U.S. Underwriters and all or
any part of the 1,350,000 shares of Common Stock subject to the option described
in Section 2(b) hereof (the "U.S. OPTION SECURITIES") are hereinafter called,
collectively, the "U.S. SECURITIES."
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It is understood that the Company and the Selling Stockholder are
concurrently entering into an agreement dated the date hereof (the
"INTERNATIONAL UNDERWRITING AGREEMENT") providing for the offering by the
Selling Stockholder of an aggregate of 1,800,000 shares of Common Stock (the
"INTERNATIONAL SECURITIES") outside the United States and Canada with ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. International Limited, ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, Deutsche Bank
AG London, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ International, Salomon Brothers
International Limited and Warburg Dillon Read LLC (the "INTERNATIONAL
MANAGERS"). It is understood that the Selling Stockholder is not obligated to
sell and the U.S. Underwriters are not obligated to purchase, any Initial U.S.
Securities unless all of the International Securities are contemporaneously
purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "UNDERWRITERS," the Initial U.S. Securities and the
International Securities are hereinafter collectively called the "INITIAL
SECURITIES," and the U.S. Securities, and the International Securities are
hereinafter collectively called the "SECURITIES."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "INTERSYNDICATE AGREEMENT") providing for
the coordination of certain transactions among the Underwriters under the
direction of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (in such capacity, the "GLOBAL COORDINATOR").
The Company and the Selling Stockholder understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities in the
United States, and a private placement of the U.S. Securities in Canada, as soon
as the U.S. Representatives deem advisable after this Agreement has been
executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (No. 333-80153), as amended
by pre-effective Amendment No. 1 thereto, covering the registration of the
Securities under the Securities Act of 1933, as amended (the "1933 ACT"),
including the related preliminary prospectus or prospectuses. Promptly after
execution and delivery of this Agreement, the Company will either (i) prepare
and file a prospectus in accordance with the provisions of Rule 430A ("RULE
430A") of the rules and regulations of the Commission under the 1933 Act (the
"1933 ACT REGULATIONS") and paragraph (b) of Rule 424 ("RULE 424(b)") of the
1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434
("RULE 434") of the 1933 Act Regulations, prepare and file a term sheet (a "TERM
SHEET") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the U.S. Securities (the "FORM OF U.S.
PROSPECTUS") and one relating to the International Securities (the "FORM OF
INTERNATIONAL PROSPECTUS"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover page and the
inclusion in the Form of International Prospectus of a section under the caption
"United States Tax Consequences to Non-United States Holders." The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "RULE 430A INFORMATION" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "RULE 434 INFORMATION." Each Form of U.S. Prospectus and Form of
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International Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto, schedules thereto, if any, and the documents incorporated by reference
therein (including the exhibits to any such documents) pursuant to Item 12 of
Form S-3 under the 1933 Act, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "REGISTRATION STATEMENT." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final Form
of U.S. Prospectus and the final Form of International Prospectus, including the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, in the forms first furnished to the Underwriters for use in
connection with the offering of the Securities are herein called the "U.S.
PROSPECTUS" and the "INTERNATIONAL PROSPECTUS," respectively, and collectively,
the "PROSPECTUSES." If Rule 434 is relied on, the terms "U.S. Prospectus" and
"International Prospectus" shall refer to the preliminary U.S. Prospectus dated
June 14, 1999 and preliminary International Prospectus dated June 14, 1999,
respectively, each together with the applicable Term Sheet and all references in
this Agreement to the date of such Prospectuses shall mean the date of the
applicable Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the U.S. Prospectus, the
International Prospectus or any Term Sheet or any amendment or supplement to any
of the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectuses, as the case may be.
The Underwriters acknowledge that concurrently with the offering of
the Securities, the Company is offering $285,000,000 aggregate principal amount
at maturity of its Zero Coupon Convertible Subordinated Debentures due 2019
($327,750,000 aggregate principal amount at maturity if the over-allotment
option to the underwriters is exercised in full) (the "DEBT OFFERING") The
consummation of the offerings of the Securities is not contingent upon the
consummation of the Debt Offering or vice versa.
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SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b) hereof, and agrees with each U.S. Underwriter,
as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets
the requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither the Prospectuses nor any amendments or supplements
thereto, at the time the Prospectuses or any such amendment or supplement
was issued and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter relating to
such U.S. Underwriter through ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ expressly for use in the
Registration Statement or the Prospectuses.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(ii) INCORPORATED DOCUMENTS. The documents incorporated or deemed
to be incorporated by reference in the Registration Statement and the
Prospectuses, at the time they were or hereafter are filed with the
Commission, complied and will comply in all
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material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 ACT
REGULATIONS") and, when read together with the other information in the
Prospectuses, at the time the Registration Statement became effective,
at the time the Prospectuses were issued and at the Closing Time (and,
if any U.S. Option Securities are purchased, at the Date of Delivery),
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) FINANCIAL STATEMENTS. The Company's consolidated financial
statements included in the Registration Statement and the Prospectuses,
together with the related schedules and notes, present fairly the financial
position of the Company and its consolidated subsidiaries at the dates
indicated and the statement of operations, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries for the periods
specified; such financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected financial
data and the summary financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included in
the Registration Statement. The pro forma financial statements and the
related notes thereto included in the Registration Statement and the
Prospectuses present fairly the information shown therein, have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly compiled
on the bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to
give effect to the transactions and circumstances referred to therein.
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(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "MATERIAL ADVERSE EFFECT"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(vi) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the state of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vii) GOOD STANDING OF SUBSIDIARIES. Each subsidiary of the Company
listed on Schedule C hereto (the "SUBSIDIARIES") has been duly organized
and is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of
each such Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any such Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
Other than the Subsidiaries, the Company has no subsidiaries which either
(i) are "SIGNIFICANT SUBSIDIARIES," as such term is defined under
Regulation S-X under the 1933 Act, or (ii) are material to the Company's
financial condition or results of operations.
(viii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses under the
captions "Capitalization" and "Description of Capital Stock" (except for
subsequent issuances, if any, under the Company's 1999 Stock Incentive
Plan, 1994 Stock Option/Award Plan, Employee Stock Option Plan or Employee
Stock Purchase Plan). The shares of issued and outstanding capital stock,
including the Securities to be purchased by the Underwriters from the
Selling Stockholder, have been duly authorized and validly issued and are
fully paid and
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non-assessable; none of the outstanding shares of capital stock,
including the Securities to be purchased by the Underwriters from the
Selling Stockholder, was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(ix) AUTHORIZATION OF AGREEMENT. This Agreement and the
International Underwriting Agreement have been duly authorized, executed
and delivered by the Company.
(x) ABSENCE OF MANIPULATION. None of the Company or its
subsidiaries or any of their respective officers and directors has taken,
or will take, directly or indirectly, any action which is designed to or
which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities. The parties
hereto acknowledge that, in connection with the proposed issuance of the
Company's Zero Coupon Convertible Subordinated Debentures Due 2019, the
Company intends to use a portion of the net proceeds to purchase additional
shares of Common Stock from the Selling Stockholder, and in connection
with the proposed acquisition of Cerulean Companies, Inc., the Company
intends to issue additional shares of Common Stock in exchange for the
shares of capital stock of Cerulean Companies, Inc.
(xi) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The Common Stock
conforms to all statements relating thereto contained in the Prospectuses
and such description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder.
(xii) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor
any of its subsidiaries is in violation of its charter or bylaws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any subsidiary is subject (collectively,
"AGREEMENTS AND INSTRUMENTS") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the International Underwriting Agreement
and the consummation of the transactions contemplated in this Agreement,
the International Underwriting Agreement and the Registration Statement and
compliance by the Company with its obligations under this Agreement and the
International Underwriting Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to, the Agreements and Instruments (except for such conflicts,
breaches, defaults or Repayment Events or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such action
result in any violation by the Company or any of its subsidiaries of the
provisions of the charter or by-laws of the Company or any subsidiary or
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or
any of their assets, properties or operations. As used herein, a
"REPAYMENT EVENT" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such
7
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary.
(xiii) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xiv) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the consummation of the transactions
contemplated in this Agreement and the International Underwriting Agreement
or the performance by the Company of its obligations hereunder or
thereunder; the aggregate of all pending legal or governmental proceedings
to which the Company or any subsidiary is a party or of which any of their
respective property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material
Adverse Effect.
(xv) ACCURACY OF EXHIBITS. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xvi) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
subsidiaries own, possess, or can acquire on reasonable terms, adequate
rights to use all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "INTELLECTUAL PROPERTY") necessary for the conduct of the
business now operated or to be operated by the Company and its
subsidiaries, as described in the Prospectuses, and neither the Company nor
any of its subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xvii) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the
8
Company of its obligations under this Agreement and the International
Underwriting Agreement, in connection with the offering or sale of the
Securities by the Selling Stockholder under this Agreement and the
International Underwriting Agreement, or the consummation of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except such as have been already obtained or
made or as may be required under the 1933 Act or the 1933 Act
Regulations or state or foreign securities laws.
(xviii) ▇▇▇▇-▇▇▇▇▇ LICENSE. Blue Cross of California has been
licensed in the State of California as a health care service plan under
the ▇▇▇▇-▇▇▇▇▇ Health Care Service Plan Act of 1975, as amended (the
"▇▇▇▇-▇▇▇▇▇ ACT"), and such license has not been modified since the
issuance thereof (other than modifications filed in the ordinary course
of business) in any respect that would materially and adversely affect
the ability of the Company to conduct its business in the manner
described in the Registration Statement. None of the Company's other
subsidiaries are required to be licensed under the ▇▇▇▇-▇▇▇▇▇ Act.
(xix) BCBSA LICENSE. The Company is in full compliance with the
requirements of the Blue Cross License Agreement, dated as of August 4,
1997, between the Company and the Blue Cross and Blue Shield Association
(the "BCBSA") and the California Blue Cross License Addendum, dated as of
June 10, 1998, between the Company and the BCBSA, except in each case where
such noncompliance would not have a Material Adverse Effect. Each of the
Company's subsidiaries that is required by the BCBSA as of the date hereof,
or that will be required by the BCBSA as of the Closing Time, to be a party
to a Blue Cross Affiliate License Agreement is in full compliance with the
requirements of such agreement, except in each case where such
noncompliance would not have a Material Adverse Effect.
(xx) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations, including, without limitation, under the ▇▇▇▇-▇▇▇▇▇ Act
(collectively, "GOVERNMENTAL LICENSES"), issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them and the Company and its subsidiaries are
in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to possess such Governmental Licenses
or to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect; and neither the Company nor any
of its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xxi) TITLE TO PROPERTY. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except
9
such as (a) are described in the Prospectuses or (b) do not, singly or
in the aggregate, have a Material Adverse Effect and do not interfere in
any material respect with the use made and proposed to be made of such
property by the Company or any of its subsidiaries; and all of the
leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company
or any of its subsidiaries holds properties described in the
Prospectuses, are in full force and effect, and neither the Company nor
any subsidiary has any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any
subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any
such lease or sublease.
(xxii) MAINTENANCE OF INSURANCE. The Company and each of its
subsidiaries maintain insurance policies with respect to such insurable
properties, potential liabilities and occurrences that merit or require
catastrophic insurance in amounts deemed adequate in the reasonable opinion
of the management, or the Company and each of its subsidiaries maintain a
system or systems of self-insurance or assumption of risk which accords
with the practices of similar businesses; all such insurance policies are
in full force and effect; and, at the time that each of the physicians and
physician groups with which the Company or any of its subsidiaries has
contracted entered into such agreement, such physician or physician group
represented that they had professional liability and medical malpractice
insurance in minimum amounts which the Company believes to be adequate for
such physicians and physician groups generally.
(xxiii) COMPLIANCE WITH TAX LAWS. All material income, payroll and
sales tax returns required to be filed by the Company or any of its
subsidiaries, in any jurisdiction, have been so filed, and all material
taxes, including related withholding taxes, penalties and interest,
assessments and other charges due or claimed to be due from such entities
have been paid, other than those being contested in good faith and for
which adequate reserves have been provided or those currently payable
without penalty or interest.
(xxiv) COMPLIANCE WITH CUBA ACT. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "CUBA ACT") or is exempt therefrom.
(xxv) INVESTMENT COMPANY ACT. The Company is not an "investment
company" or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended (the "1940
ACT").
(xxvi) REGISTRATION RIGHTS. Except as disclosed in the
Prospectuses, there are no holders of any security of the Company or any
Subsidiary (debt or equity) who have or will have any right to require the
registration of such security by virtue of the filing of the Registration
Statement or the execution by the Company of this Agreement.
(xxvii) ENVIRONMENTAL LAWS. Except as described in the Registration
Statement or except as would not, singly or in the aggregate, result in a
Material Adverse Effect, (A)
10
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "HAZARDOUS
MATERIALS") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company or any of its subsidiaries relating to Hazardous Materials
or any Environmental Laws.
(b) REPRESENTATIONS AND WARRANTIES BY THE SELLING STOCKHOLDER. The Selling
Stockholder represents and warrants to each U.S. Underwriter as of the date
hereof, as of the Closing Time and, if the Selling Stockholder is selling U.S.
Option Securities on a Date of Delivery, as of each such Date of Delivery, and
agrees with each U.S. Underwriter, as follows:
(i) ACCURATE DISCLOSURE. To the extent that any statements or
omissions made in the Registration Statement or Prospectuses, or any
amendment or supplement thereto, are made in reliance on, and in conformity
with, written information furnished to the Company by or on behalf of the
Selling Stockholder specifically for use in the preparation thereof, each
such part of the Registration Statement, when it became effective, did not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement
therein not misleading, and each such part of either of the Prospectuses,
or of any amendments or supplements thereto, at the time it was issued and
as of the Closing Time, did not include nor will it include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; the Selling
Stockholder is not prompted to sell the Securities to be sold by the
Selling Stockholder hereunder by any material nonpublic information
concerning the Company or any subsidiary of the Company which is not set
forth in the Prospectuses. The Company and the Underwriters acknowledge
that the statements relating to such Selling Stockholder under the heading
"Selling Stockholder" in any Prospectus, and under the heading "Item 1.
Business--May 1996 Recapitalization and August 1997 Reincorporation" in
the Company's Form 10-K which is incorporated by reference into the
Prospectuses (but only insofar as such paragraphs purport to describe
agreements to which the Selling Stockholder is a party), constitute the
only information furnished in writing by or on behalf of such Selling
Stockholder for inclusion in the Registration Statement or any Prospectus.
11
(ii) AUTHORIZATION OF AGREEMENTS. The Selling Stockholder has the
full right, power and authority to enter into this Agreement, the
International Underwriting Agreement and to sell, transfer and deliver the
Securities to be sold by the Selling Stockholder hereunder. The execution
and delivery of this Agreement, the International Underwriting Agreement
and the sale and delivery of the Securities to be sold by the Selling
Stockholder and the consummation of the transactions contemplated in this
Agreement and the International Underwriting Agreement and compliance by
the Selling Stockholder with its obligations hereunder have been duly
authorized by the Selling Stockholder and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default under, or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Securities to
be sold by the Selling Stockholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease or
other agreement or instrument to which the Selling Stockholder is a party
or by which the Selling Stockholder may be bound, or to which any of the
property or assets of the Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the charter or by-laws
or other organizational instrument of the Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Selling Stockholder or any of its properties.
(iii) GOOD AND MARKETABLE TITLE. The Selling Stockholder has and
will at the Closing Time and, if any Option Securities are purchased, on
the Date of Delivery have good and marketable title to the Securities to be
sold by the Selling Stockholder hereunder, free and clear of any security
interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of
any kind, other than pursuant to this Agreement, the International
Underwriting Agreement and the Voting Agreement and the Voting Trust
Agreement, each as defined in the Registration Statement; and upon delivery
of such Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any adverse
claim, each of the Underwriters will receive good and marketable title to
the Securities purchased by it from the Selling Stockholder, free and clear
of any security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) ABSENCE OF MANIPULATION. The Selling Stockholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.
(v) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or consent,
approval, authorization, order, registration, qualification or decree of,
any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by the Selling Stockholder of its
obligations under this Agreement or the International Underwriting
Agreement, or in connection with the sale and delivery of the Securities
under this Agreement or the International Underwriting Agreement or the
consummation of the transactions contemplated by this Agreement and the
International Underwriting Agreement, except such as may have previously
been made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
12
(vi) NO ASSOCIATION WITH NASD. Except as disclosed in writing
to the Underwriter, neither the Selling Stockholder nor any of its
affiliates directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, or has
any other association with (within the meaning of Article I, Section
1(m) of the By-laws of the National Association of Securities Dealers,
Inc.), any member firm of the National Association of Securities
Dealers, Inc.
(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of the
Selling Stockholder as such and delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters pursuant to the terms of
this Agreement shall be deemed a representation and warranty by the Selling
Stockholder as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO U.S. UNDERWRITERS; CLOSING.
(a) INITIAL U.S. SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Selling Stockholder agrees to sell to each U.S. Underwriter and each
U.S. Underwriter, severally and not jointly, agrees to purchase from the Selling
Stockholder, at the price per share set forth in Schedule B, the number of
Initial U.S. Securities set forth in Schedule A, plus any additional number of
Initial U.S. Securities which such U.S. Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof, subject, in each case,
to such adjustments among such U.S. Underwriters as the U.S. Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) U.S. OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Selling Stockholder hereby grants an option to
the U.S. Underwriters, severally and not jointly, to purchase up to an
additional 1,350,000 shares of Common Stock at the price per share set forth in
Schedule B, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial U.S. Securities but not
payable on the U.S. Option Securities. The option hereby granted will expire
30 days after the date hereof and may be exercised in whole or in part from time
to time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial U.S. Securities
upon notice by the Global Coordinator to the Selling Stockholder setting forth
the number of U.S. Option Securities as to which the several U.S. Underwriters
are then exercising the option and the time and date of payment and delivery for
such U.S. Option Securities. Any such time and date of delivery (a "DATE OF
DELIVERY") shall be determined by the Global Coordinator, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the U.S. Option Securities, each of the
U.S. Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of U.S. Option Securities then being purchased
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the U.S.
13
Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) PAYMENT. The closing of the purchase and sale of the Initial
Securities, including acknowledgment of the payment of the purchase price
therefor and delivery of certificates therefor, shall be at the offices of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or
at such other place as shall be agreed upon by the U.S. Representatives and the
Company and the Selling Stockholder, at 7:00 A.M. (California time) on the third
business day (or the fourth business day, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given business day) after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
U.S. Representatives and the Selling Stockholder (such time and date of payment
and delivery being herein called "CLOSING TIME"). Delivery of certificates for
the Initial Securities shall be made at the Closing Time at the office of ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase price
for, and delivery of certificates for, such U.S. Option Securities shall be made
at the above-mentioned offices, or at such other place as shall be agreed upon
by the U.S. Representatives and the Company and the Selling Stockholder, on each
Date of Delivery as specified in the notice from the U.S. Representatives to the
Company and the Selling Stockholder.
Payment shall be made to the Selling Stockholder by wire transfer of
immediately available funds to a bank account designated by the Selling
Stockholder not later than two business days preceding the Closing Time against
delivery to the U.S. Representatives for the respective accounts of the U.S.
Underwriters of certificates for the Securities to be purchased by them. It is
understood that each U.S. Underwriter has authorized the U.S. Representatives,
for its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial U.S. Securities and the U.S. Option Securities,
if any, which it has agreed to purchase. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually and not
as representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. COVENANTS.
(a) COVENANTS OF THE COMPANY. The Company covenants with each U.S.
Underwriter as follows:
14
(i) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUEST.
The Company, subject to Section 3(ii), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the U.S.
Representatives immediately, and confirm the notice in writing, (i) when
any post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to
the Prospectuses or for additional information, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly
whether the form of any prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was
not, it will promptly file such prospectus. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(ii) FILING OF AMENDMENTS. The Company will give the U.S.
Representatives notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectuses included in the Registration Statement at the time it became
effective or to the Prospectuses, whether pursuant to the 1933 Act, the
1934 Act or otherwise, will furnish the U.S. Representatives with copies of
any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such
document to which the U.S. Representatives or counsel for the U.S.
Underwriters shall object.
(iii) DELIVERY OF REGISTRATION STATEMENTS. The Company has
furnished or will deliver to the U.S. Representatives and counsel for the
U.S. Underwriters, without charge, signed copies of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference therein and documents
incorporated or deemed to be incorporated by reference therein) and signed
copies of all consents and certificates of experts, and will also deliver
to the U.S. Representatives, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the U.S. Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T.
(iv) DELIVERY OF PROSPECTUSES. The Company has delivered to each
U.S. Underwriter, without charge, as many copies of each preliminary
prospectus as such U.S. Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each U.S. Underwriter, without
charge, during the period when the U.S. Prospectus is required to be
15
delivered under the 1933 Act or the 1934 Act, such number of copies of the
U.S. Prospectus (as amended or supplemented) as such U.S. Underwriter may
reasonably request. The U.S. Prospectus and any amendments or supplements
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(v) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the International
Underwriting Agreement and the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with
sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the reasonable opinion of counsel for
the U.S. Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectuses in order that the
Prospectuses will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, or if it shall be necessary, in the
reasonable opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement the Prospectuses in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b) of the 1933 Act, such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.
(vi) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the U.S. Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions (domestic or foreign) as the U.S.
Representatives may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date
of the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the
Company will file such statements and reports as may be required by the
laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(vii) RULE 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to
its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
16
(viii) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right, or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or any other
arrangement that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Common Stock, whether any such
swap or transaction described in clause (i) or (ii) above is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (A) the Securities to be sold
under this Agreement and the International Underwriting Agreement, (B) the
Zero Coupon Convertible Subordinated Debentures to be sold under that
certain Underwriting Agreement, dated June [ ], 1999, between the Company,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and each of the underwriters named therein, (C) the
issuance of securities in connection with the acquisition of a business,
including, without limitation, upon consummation of that certain Agreement
and Plan of Merger, dated July 9, 1998, between the Company, Water Polo
Acquisition Corp. and Cerulean Companies, Inc., (D) any shares of Common
Stock issued by the Company upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof and referred to
in the Prospectuses, (E) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to the Company's 1999 Stock
Incentive Plan, 1994 Stock Option/Award Plan, Employee Stock Option Plan,
Employee Stock Purchase Plan or any other existing employee benefit plans
of the Company referred to in the Prospectuses (as well as the filing of
any registration statement on Form S-8 (or similar form) for the purpose of
registering under the 1933 Act shares of Common Stock issued in connection
with any such plan), (F) the issuance by the Company of up to 50,000 shares
of Common Stock pursuant to a restricted stock plan for agents and brokers
which market the products of the Company or any of its Subsidiaries (as
well as the filing of any registration statement on Form S-3 (or similar
form) for the purpose of registering under the 1933 Act shares of Common
Stock issued in connection with any such plan) and cash-settled stock
appreciation rights that the Company may issue to agents or brokers, or (G)
the purchase of securities from the Selling Stockholder.
(ix) REPORTING REQUIREMENTS. The Company, during the period when
the Prospectuses are required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
(b) COVENANT OF THE SELLING STOCKHOLDER. The Selling Stockholder
covenants with each U.S. Underwriter as follows:
(i) RESTRICTION ON SALE OF SECURITIES. During a period of 120
days from the date of the Prospectuses, the Selling Stockholder will not,
without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock
17
or file any registration statement under the 1933 Act with respect to
any of the foregoing or (ii) enter into any swap or any other agreement
or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, PROVIDED, HOWEVER, that beginning on
the 91st day after the date of the Prospectuses, the Selling Stockholder
may sell shares of Common Stock, in one or more transactions, but only
to the extent that (i) as of the time of any such sale the Selling
Stockholder owns 10% or more of the total issued and outstanding Common
Stock and (ii) such sale reduces the shares of Common Stock owned by the
Selling Stockholder to an amount not less than 10,000 shares less than
10% of the total issued and outstanding common stock; PROVIDED, FURTHER,
that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall give the Selling Stockholder at least two
business days' notice of any waiver of the restriction on sales by the
Company contained in Section 3(viii) hereof and the Selling Stockholder
shall be deemed to have been granted a waiver of this subsection 3(b)(i)
on the same terms as any such waiver granted to the Company. The
foregoing sentence shall not apply (x) to the Securities to be sold
hereunder, or under the International Underwriting Agreement, or (y) to
any deposit or withdrawal of Common Stock in or from the trust
established pursuant to the Voting Trust Agreement, or (z) to the sale
of any Common Stock by the Selling Stockholder to the Company.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay or cause to be paid all expenses
incident to the performance of its or the Selling Stockholder's obligations
under this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, the International
Underwriting Agreement, any Agreement among Underwriters, the Intersyndicate
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale or delivery of the Securities to the Underwriters
and the transfer of the Securities between the U.S. Underwriters and the
International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(vi) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Preliminary Blue Sky Survey, the Final Blue Sky Survey and any
supplements thereto, (vi) the printing and delivery to the Underwriters of
copies of each preliminary prospectus, any Term Sheets and of the Prospectuses
and any amendments or supplements thereto, (vii) the preparation, printing and
delivery to the Underwriters of copies of the Preliminary Blue Sky Survey, the
Final Blue Sky Survey and any supplements thereto, (viii) the fees and expenses
of any transfer agent or registrar for the Securities, (ix) the filing fees
incident to the review by the National Association of Securities Dealers, Inc.
(the "NASD") of the terms of the sale of the Securities and (x) the fees and
expenses incurred in connection with the listing of the Securities on the New
York Stock Exchange. The Selling Stockholder will pay or cause to be paid the
fees and expenses of its counsel, agents and advisors for which it is
responsible under the terms of the Registration Rights Agreement between the
Selling Stockholder and the Company.
18
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or
Section 9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the U.S. Underwriters. If this Agreement is
terminated by the U.S. Representatives in accordance with the provisions of
Section 11 hereof, the Selling Stockholder shall reimburse the U.S. Underwriters
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the U.S. Underwriters.
(c) ALLOCATION OF EXPENSES. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholder may make for
the sharing of such costs and expenses.
SECTION 5. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The obligations
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholder
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of the Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) OPINION OF COUNSEL FOR COMPANY. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the U.S. Underwriters may reasonably request.
(c) OPINION OF GENERAL COUNSEL FOR THE COMPANY. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., general counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in Exhibit B hereto and to such further
effect as counsel to the U.S. Underwriters may reasonably request.
(d) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDER. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the Selling
Stockholder, in form and substance satisfactory to
19
counsel for the U.S. Underwriters, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters to the
effect set forth in Exhibit C hereto and to such further effect as
counsel to the U.S. Underwriters may reasonably request.
(e) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters with respect to the matters set forth in clauses (i) (solely with
respect to the Company), (ii) (solely with respect to the Company), (v) through
(vii), inclusive, (ix) (solely as to the information in the Prospectus under
"Description of Capital Stock--Common Stock") and the penultimate paragraph of
Exhibit A hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the laws of the States
of New York, Delaware and California and the federal securities laws of the
United States, upon the opinions of counsel satisfactory to the U.S.
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(f) OFFICERS' CERTIFICATE. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the U.S.
Representatives shall have received a certificate of the Chief Executive Officer
or a Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of Closing Time, to the effect that
(i) there has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Company has
complied in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing Time,
and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to such persons' knowledge, are contemplated by
the Commission.
(g) CERTIFICATE OF SELLING STOCKHOLDER. At Closing Time, the U.S.
Representatives shall have received a certificate of an officer of the Selling
Stockholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of the Selling Stockholder contained in Section
1(b) hereof are true and correct in all respects with the same force and effect
as though expressly made at and as of Closing Time and (ii) the Selling
Stockholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to
Closing Time.
(h) ACCOUNTANTS' COMFORT LETTER.
(i) PRICEWATERHOUSECOOPERS LLP. At the time of the execution of
this Agreement, the U.S. Representatives shall have received from
PricewaterhouseCoopers LLP a letter dated such date, in form and substance
satisfactory to the U.S. Representatives, together with signed or
reproduced copies of such letter for each of the other U.S.
20
Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the Company's consolidated financial statements and
certain financial information contained in the Registration Statement
and the Prospectuses.
(ii) ERNST & YOUNG LLP. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter
for each of the other Underwriters containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the Cerulean Companies, Inc. financial
statements and certain financial information of the Cerulean Companies,
Inc. contained in the Registration Statement and the Prospectus.
(i) BRING-DOWN COMFORT LETTERS.
(i) PRICEWATERHOUSECOOPERS LLP. At Closing Time, the U.S.
Representatives shall have received from PricewaterhouseCoopers LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (h)(i) of
this Section, except that the specified date referred to shall be a date
not more than three business days prior to Closing Time.
(ii) Ernst & Young LLP. At Closing Time, the Representatives shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (h)(ii) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(j) LOCK-UP AGREEMENTS. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit D hereto signed by each of the persons listed on Schedule D hereto.
(k) CONDITIONS TO PURCHASE OF U.S. OPTION SECURITIES. In the event that
the U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company and the Selling Stockholder contained herein and
the statements in any certificates furnished by the Company, any subsidiary of
the Company and the Selling Stockholder hereunder shall be true and correct as
of each Date of Delivery and, at the relevant Date of Delivery, the U.S.
Representatives shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such Date of
Delivery, of the Chief Executive Officer or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant to
Section 5(f) hereof remains true and correct as of such Date of Delivery.
(ii) CERTIFICATE OF SELLING STOCKHOLDER. A certificate, dated such
Date of Delivery, of an officer of the Selling Stockholder confirming that
the certificate delivered at Closing Time pursuant to Section 5(g) remains
true and correct as of such Date of Delivery.
21
(iii) OPINION OF COUNSEL FOR COMPANY. The favorable opinion of
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company, in form and substance
satisfactory to counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(b) hereof.
(iv) OPINION OF GENERAL COUNSEL FOR COMPANY. The favorable opinion
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., general counsel for the Company, in form and
substance satisfactory to counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(c) hereof.
(v) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDER. The favorable
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the Selling Stockholder,
in form and substance satisfactory to counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(d) hereof.
(vi) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. The favorable
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(e) hereof.
(vii) BRING-DOWN COMFORT LETTERS.
(1) PRICEWATERHOUSECOOPERS. A letter from
PricewaterhouseCoopers LLP, in form and substance satisfactory to the
U.S. Representatives and dated such Date of Delivery, substantially in
the same form and substance as the letter furnished to the U.S.
Representatives pursuant to Section 5(h)(i) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than three days prior to such Date of
Delivery.
(2) ERNST & YOUNG LLP. A letter from Ernst & Young LLP, in
form and substance satisfactory to the Representatives and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the U.S. Representatives pursuant to Section
5(h)(ii) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
three days prior to such Date of Delivery.
(l) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of Delivery
counsel for the U.S. Underwriters shall have been furnished with such documents
and opinions as they may reasonably require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Stockholder in connection with the sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the U.S. Representatives and counsel for the U.S. Underwriters.
22
(m) TERMINATION OF AGREEMENT. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant U.S.
Option Securities, may be terminated by the U.S. Representatives by notice to
the Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company and the Selling
Stockholder, jointly and severally, agree to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company and the Selling Stockholder; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission to
the extent that any such expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that (A) this indemnity agreement shall not apply
to any loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information relating to such U.S.
Underwriter furnished to the Company by any U.S. Underwriter through ▇▇▇▇▇▇
▇▇▇▇▇▇▇ expressly for use in the Registration Statement (or any
23
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto) and (B) the
foregoing indemnity agreement with respect to any untrue statement
contained in or omission from a preliminary prospectus shall not inure
to the benefit of the U.S. Underwriter from whom the person asserting
any such losses, liabilities, claims, damages or expenses purchased U.S.
Securities, or any person controlling such U.S. Underwriter, if (i) the
Company and the Selling Stockholder shall sustain the burden of proving
that a copy of the U.S. Prospectus (as then amended or supplemented, if
the Company shall have furnished any amendments or supplements thereto)
was not sent or given by or on behalf of the U.S. Underwriters to such
person at or prior to the written confirmation of the sale of such U.S.
Securities to such person, (ii) the Company shall have delivered the
U.S. Prospectus (as then supplemented or amended) to the U.S.
Underwriters on a timely basis and in the requisite quantity to permit
the U.S. Underwriters to send or deliver such U.S. Prospectus to such
person at or prior to such written confirmation of the sale of such U.S.
Securities and (iii) the untrue statement contained in or omission from
such preliminary prospectus was corrected in the U.S. Prospectus (or the
U.S. Prospectus as amended or supplemented).
In making a claim for indemnification under this Section 6 or for
contribution under Section 7 hereof by the Company or the Selling Stockholder,
and subject to the further provisions of this paragraph, the indemnified parties
may proceed against either (i) both the Company and the Selling Stockholder
jointly or (ii) the Company only, but may not proceed solely against the Selling
Stockholder. In the event that the indemnified parties are entitled to seek
indemnity or contribution hereunder against any loss, liability, claim, damage
and expense incurred as contemplated by clauses (a)(i), (a)(ii) or (a)(iii) of
this Section 6, including, without limitation, a final judgment from a trial
court then, as a precondition to any indemnified party obtaining indemnification
or contribution from the Selling Stockholder, the indemnified parties shall
first obtain a final judgment from a trial court that such indemnified parties
are entitled to indemnity or contribution under this Agreement with respect to
such loss, liability, claim, damage or expense (the "Final Judgment") from the
Company and the Selling Stockholder and shall seek to satisfy such Final
Judgment in full from the Company by making a written demand upon the Company
for such satisfaction. Only in the event such Final Judgment shall remain
unsatisfied in whole or in part 30 days following the date of receipt by the
Company of such demand shall any party entitled to indemnification hereunder
have the right to take action to satisfy such Final Judgment by making demand
directly on the Selling Stockholder (but only if and to the extent the Company
has not already satisfied such Final Judgment, whether by settlement, release or
otherwise). The indemnified parties shall, however, be relieved of their
obligation to first obtain a Final Judgment, to seek to obtain payment from the
Company with respect to such Final Judgment or, having sought such payment, to
wait such 30 days after failure by the Company to immediately satisfy any such
Final Judgment if (i) the Company files a petition for relief under the United
States Bankruptcy Code (the "Bankruptcy Code") and such order remains unstayed
and in effect for 60 days, (ii) an order for relief is entered against the
Company in an involuntary case under the Bankruptcy Code and such order remains
unstayed and in effect for 60 days, (iii) the Company makes an assignment for
the benefit of its creditors, or (iv) any court orders or approves the
appointment of a receiver or custodian for the Company or a substantial portion
of its assets and such order remains unstayed and in effect for 60 days .
24
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS AND SELLING
STOCKHOLDER. Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the
Selling Stockholder and each person, if any, who controls the Selling
Stockholder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S. Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information relating to such U.S. Underwriter furnished to the Company
by such U.S. Underwriter through ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim,
(ii) is accompanied or preceded by reimbursement of expenses of each such
indemnified party pursuant to clause (a)(iii) of this Section 6 and (iii) does
not include a statement as to or an admission of fault, culpability or a faiure
to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have
25
reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) OTHER AGREEMENTS WITH RESPECT TO INDEMNIFICATION. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.
SECTION 7. CONTRIBUTION. Subject to the last paragraph of Section 6(a)
hereof, if the indemnification provided for in Section 6 hereof is for any
reason unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholder on the one hand and the U.S. Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company and the Selling Stockholder
on the one hand and of the U.S. Underwriters on the other hand in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company and the Selling
Stockholder on the one hand and the U.S. Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder and the total
underwriting discount received by the U.S. Underwriters, in each case as set
forth on the cover of the U.S. Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet bear to the aggregate public offering
price of the U.S. Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholder on the
one hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such 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 Company or the Selling Stockholder
or by the U.S. Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
26
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company or the Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company or the Selling Stockholder, as the case may be. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among
the Company and the Selling Stockholder with respect to contribution.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholder submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any U.S. Underwriter or controlling person, or by or on behalf
of the Company or the Selling Stockholder, and shall survive delivery of the
U.S. Securities to the U.S. Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The U.S. Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholder, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the U.S. Representatives, impracticable to market the U.S.
Securities or to enforce contracts for the sale of the U.S. Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York
27
Stock Exchange or in the Nasdaq National Market has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or
by such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or New York
authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE U.S. UNDERWRITERS. If one or
more of the U.S. Underwriters fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the
non-defaulting U.S. Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
U.S. Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of the
U.S. Underwriters to purchase and of the Company to sell the U.S. Option
Securities to be purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the U.S. Underwriters to purchase and the Company to sell the relevant U.S.
Option Securities, as the case may be, either (i) the U.S. Representatives or
(ii) the Company and the Selling Stockholder shall have the right to postpone
Closing Time or the relevant Date of Delivery, as the case may be, for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements. As used herein, the term "U.S. Underwriter" includes any person
substituted for a U.S. Underwriter under this Section 10.
SECTION 11. DEFAULT BY THE SELLING STOCKHOLDER. If the Selling
Stockholder shall fail at Closing Time or at a Date of Delivery to sell and
deliver the number of U.S. Securities which the
28
Selling Stockholder is obligated to sell hereunder, then the U.S.
Underwriters may, at option of the U.S. Representatives, by notice from the
U.S. Representatives to the Company and the Selling Stockholder terminate
this Agreement without any liability on the fault of any non-defaulting party
except that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full
force and effect. No action taken pursuant to this Section 11 shall relieve
the Selling Stockholder so defaulting from liability, if any, in respect of
such default.
In the event of a default by the Selling Stockholder as referred to in
this Section 11, each of the U.S. Representatives and the Company shall have the
right to postpone Closing Time or Date of Delivery for a period not exceeding
seven days in order to effect any required change in the Registration Statement
or Prospectus or in any other documents or arrangements.
SECTION 12. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention of Syndicate Operations (with
a copy, which shall not constitute notice, to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention of ▇▇▇▇ ▇▇▇▇▇,
Esq.); notices to the Company shall be directed to it at ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., General
Counsel (with a copy, which shall not constitute notice, to ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.); and notices to the Selling
Stockholder shall be directed to California HealthCare Foundation, c/o Munger,
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, attention of ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
SECTION 13. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any U.S. Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME, EXCEPT AS EXPRESSLY NOTED OTHERWISE.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and to the Selling Stockholder
a counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the U.S. Underwriters, the Company and the
Selling Stockholder in accordance with its terms.
Very truly yours,
WELLPOINT HEALTH NETWORKS INC.
By
------------------------------------
Name:
Title:
CALIFORNIA HEALTHCARE FOUNDATION
By
------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED
DEUTSCHE BANK SECURITIES INC.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ READ LLC
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
By
------------------------------------
Name:
Title:
For themselves and as U.S. Representatives of the other U.S. Underwriters named
in Schedule A hereto.
30
SCHEDULE A
Number of
Initial
Name of Underwriter U.S. Securities
------------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated..........................
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated.........
Deutsche Bank Securities Inc...............................
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation........
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc...................................
Warburg Dillon Read LLC....................................
---------
Total.................................................. 7,200,000
---------
---------
Sch A-1
SCHEDULE B
WELLPOINT HEALTH NETWORKS INC.
9,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The public offering price per share for the U.S. Securities,
determined as provided in said Section 2, shall be $[ ].
2. The purchase price per share for the U.S. Securities to be
paid by the several U.S. Underwriters shall be $[ ], being an amount equal
to the public offering price set forth above less $[ ] per share; provided
that the purchase price per share for any U.S. Option Securities purchased upon
the exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial U.S. Securities but not payable on the
U.S. Option Securities.
Sch B-1
SCHEDULE C
List of subsidiaries
1. Blue Cross of California
2. BC Life & Health Insurance Company
3. UNICARE Life & Health Insurance Company
4. UNICARE of Texas Health Plans, Inc.
5. WellPoint California Services, Inc.
[6. UNICARE Specialty Services, Inc.]
7. UNICARE National Services, Inc.
Sch C-1
SCHEDULE D
List of persons and entities
subject to lock-up
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Sch D-1
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company and each of its Subsidiaries (a) has been duly
organized and (b) is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation.
(ii) The Company and each of its Subsidiaries has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement.
(iii) The Company and each of its Subsidiaries, other than UNICARE
Life & Health Insurance Company ("UL&H"), is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, except where the failure to so qualify
would not have a Material Adverse Effect (such jurisdictions to be listed
opposite the name of each of the Company and the Subsidiaries other than UL&H on
Exhibit 1 hereto). UL&H is duly qualified as a foreign corporation to transact
business and is in good standing in such jurisdictions as are listed opposite
its name on Exhibit 1 hereto.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses under the caption "Description of
Capital Stock" (except for subsequent issuances, if any, under the Company's
1999 Stock Incentive Plan, 1994 Stock Option/Award Plan, Employee Stock
Option Plan or Employee Stock Purchase Plan); all of the shares of issued and
outstanding capital stock of the Company, including the Securities to be
purchased by the Underwriters from the Selling Stockholder, have been duly
authorized and validly issued and are fully paid and nonassessable and the
shares of issued and outstanding capital stock of each Subsidiary of the
Company are owned, directly or through subsidiaries, by the Company and have
been duly authorized and validly issued, are fully paid and nonassessable and
are owned free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(v) The U.S. Underwriting Agreement and the International
Underwriting Agreement have been duly authorized, executed and delivered by the
Company.
(vi) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
A-1
(vii) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectuses, excluding the documents incorporated by
reference therein, and each amendment or supplement to the Registration
Statement and Prospectuses, excluding the documents incorporated by reference
therein, as of their respective effective or issue dates (other than the
financial statements and supporting schedules included therein or omitted
therefrom, as to which such counsel need express no opinion) complied as to form
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(viii) The documents incorporated by reference in the Prospectuses
(other than the financial statements and supporting schedules included therein
or omitted therefrom, as to which we need express no opinion), when they were
filed with the Commission, complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder.
(ix) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectuses under the
caption "Description of Capital Stock," and the form of certificate used to
evidence the Common Stock is in due and proper form and complies in all material
respects with all applicable statutory requirements and the requirements of the
New York Stock Exchange.
(x) There are no legal or governmental proceedings pending or, to
the knowledge of such counsel, threatened to which the Company or any of its
Subsidiaries is or may become a party or to which any of the properties of the
Company or any of its Subsidiaries is or may become subject that are required to
be described in the Registration Statement or the Prospectuses and are not so
disclosed therein and described as required, or any statute or regulation that
is required to be described in the Registration Statement or the Prospectuses
and is not so disclosed therein and described as required; all pending legal or
governmental proceedings to which the Company or any of its Subsidiaries is a
party or to which any of their property is subject which are not described in
the Registration Statement, including ordinary routine litigation incidental to
the businesses, are, considered in the aggregate, not material.
(xi) To the knowledge of such counsel, there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be filed as exhibits to the Registration Statement (or to any
documents incorporated by reference therein) which have not been so filed.
(xii) The information in the Prospectuses under the captions
"Selling Stockholder" and "United States Federal Tax Consequences to
Non-United States Holders," and the information under the caption "Item 1.
Business--May 1996 Recapitalization and August 1997 Reincorporation" in the
Company's Form 10-K which is incorporated by reference into the Prospectuses
to the extent that it constitutes matters of law, summaries of legal matters,
documents or proceedings or legal conclusions, has been reviewed by such
counsel and is correct in all material respects.
(xiii) No authorization, approval, consent or order of any court or
governmental authority or agency is required in connection with the sale to the
Underwriters of the Securities,
A-2
except such as may be required under the 1933 Act, the 1934 Act or the
respective rules and regulations of the Commission thereunder or state or
foreign securities laws (on which such counsel expresses no opinion) and the
filing of an amendment to Blue Cross of California's Health Care Service Plan
application with the California Department of Corporations (which filing has
been made); and the execution, delivery and performance of the U.S.
Underwriting Agreement and the International Underwriting Agreement, and the
consummation of the transactions contemplated thereby by the Company, will
not conflict with or constitute a material breach of or material default, or
cause an acceleration of any obligation under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Company or any of its Subsidiaries pursuant to, any instrument included
as an exhibit to the Registration Statement (and, including, without
limitation, as an exhibit to the documents incorporated by reference therein)
to which the Company or any of its Subsidiaries is a party or by which any of
them may be bound, or to which any of the property or assets of the Company
or any of its Subsidiaries is subject, nor will such action result in any
violation of the provisions of the charter or bylaws of the Company or any of
its Subsidiaries, or any applicable law, administrative regulation or
administrative or court decree.
(xiv) Neither the Company nor any of its Subsidiaries is (a) in
violation of its articles or certificate of incorporation or bylaws; or (b) to
the knowledge of such counsel, in violation of or in default in the performance
or observance of any obligation, agreement, covenant or condition contained in
any instrument included as an exhibit to the Registration Statement (and,
including, without limitation, as an exhibit to the documents incorporated by
reference therein) to which the Company or any of its Subsidiaries is a party or
by which any of them may be bound, or to which any of the property or assets of
the Company or any of its Subsidiaries is subject, or any applicable law,
administrative regulation or administrative or court order or decree, which
violation or default would have a Material Adverse Effect on the Company and its
subsidiaries considered as one enterprise, as the case may be. The applicable
law, administrative regulations and administrative and court orders and decrees
referred to in clause (b) above are those that a lawyer exercising customary
professional diligence would reasonably recognize as being directly applicable
to the Company, the Subsidiaries or the transaction contemplated by the U.S.
Underwriting Agreement and the International Underwriting Agreement.
(xv) To the knowledge of such counsel, the Company and its
Subsidiaries possess such certificates necessary to conduct the business now
operated by them. The opinion of such counsel for purposes of this paragraph is
limited to certificates the failure of which to possess would have a Material
Adverse Effect on the Company and its Subsidiaries considered as one enterprise.
(xvi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
Nothing has come to the attention of such counsel that would lead such
counsel to believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if applicable),
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which such
counsel need make no statement), at the time such Registration
A-3
Statement or any such amendment became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
or that the Prospectuses or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which such
counsel need make no statement), at the time the Prospectuses were issued, at
the time any such amended or supplemented prospectuses were issued or at the
Closing Time, included or include an untrue statement of a material fact or
omitted or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-4
EXHIBIT 1
State of Foreign
Name of Entity Incorporation Qualifications
-------------- ------------- --------------
WellPoint Health Networks Inc. Delaware Arizona, California,
Nevada, New York
SUBSIDIARIES
------------
(1) Blue Cross of California California Massachusetts,
Michigan, Ohio, Texas
(2) UNICARE Life & Health Insurance Delaware California, Florida,
Company Georgia, Illinois,
Massachusetts, New
Jersey,
New York, Ohio, Texas
and Virginia
(3) UNICARE of Texas Health Plans, Inc. Texas None
(4) WellPoint California Services, Inc. Delaware None
[(5) UNICARE Specialty Services, Inc. Delaware None]
(6) UNICARE National Services, Inc. Delaware None
(7) BC Life & Health Insurance Company California None
1
Exhibit B
FORM OF OPINION OF GENERAL COUNSEL TO THE COMPANY TO BE
DELIVERED PURSUANT TO SECTION 5(c)
(i) The statements under the captions "Item 1. Business--Government
Regulation" and "Item 3. Legal Proceedings" of the Company's Annual Report on
Form 10-K, which is incorporated by reference into the Prospectus, insofar as
such statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such legal matters, documents and proceedings and fairly summarize,
in all material respects, the matters referred to therein.
(ii) Blue Cross of California has been duly qualified and licensed in the
State of California as a health care service plan under the ▇▇▇▇-▇▇▇▇▇ Act, and
none of the Company's other subsidiaries are required to be licensed under the
▇▇▇▇-▇▇▇▇▇ Act.
(iii) The Company is in full compliance with the requirements of the Blue
Cross License Agreement, dated as of August 4, 1997, between the Company and the
Blue Cross and Blue Shield Association (the "BCBSA") and the California Blue
Cross License Addendum, dated as of June 10, 1998, between the Company, Blue
Cross of California and the BCBSA, except in each case where such noncompliance
would not have a Material Adverse Effect. Each of the Company's subsidiaries
that is required by the BCBSA as of the date of such opinion to be a party to a
Blue Cross Affiliate License Agreement is in full compliance with the
requirements of such agreement, except in each case where such noncompliance
would not have a Material Adverse Effect.
(iv) To such counsel's knowledge, none of the Company and its subsidiaries
have received any notice or correspondence (i) relating to the loss or
threatened loss by the Company or any of its subsidiaries of any material
permit, license, franchise or authorization by any applicable managed health
care or insurance regulatory agency or body or (ii) asserting that the Company
or any of its subsidiaries is not in substantial compliance with any applicable
regulation relating to the operation or conduct of managed health care or
insurance businesses (the "HMO Regulations") 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 on the business, operations
or financial condition of the Company and its subsidiaries, taken as a whole.
B-1
Exhibit C
FORM OF OPINION OF COUNSEL FOR THE SELLING STOCKHOLDER
TO BE DELIVERED PURSUANT TO SECTION 5(d)
(i) No filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental authority or
agency (other than the issuance of the order of the Commission declaring the
Registration Statement effective and such authorizations, approvals or consents
as may be necessary under state securities laws, as to which we need express no
opinion), is necessary or required to be obtained by the Selling Stockholder for
the performance by the Selling Stockholder of its obligations under the U.S.
Underwriting Agreement, the International Underwriting Agreement or in
connection with the offer, sale or delivery of the Securities.
(ii) The U.S. Underwriting Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by or on behalf of
the Selling Stockholder.
(iii) The execution, delivery and performance of the U.S. Underwriting
Agreement, the International Underwriting Agreement and the sale and delivery of
the Securities and the consummation of the transactions contemplated in the U.S.
Underwriting Agreement and the International Underwriting Agreement and
compliance by the Selling Stockholder with its obligations under the U.S.
Underwriting Agreement and the International Underwriting Agreement have been
duly authorized by all necessary action on the part of the Selling Stockholder
and do not and will not, whether with or without the giving of notice or passage
of time or both, conflict with, constitute a breach of, or default under or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Securities pursuant to, the terms of any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
instrument or agreement known to such counsel and to which the Selling
Stockholder is a party or by which it may be bound, or to which any of the
property or assets of the Selling Stockholder may be subject nor will such
action result in any violation of the provisions of the charter or by-laws of
the Selling Stockholder, if applicable, or any law, administrative regulation,
judgment, order or decree known to us to be applicable to the Selling
Stockholder of any court, regulatory body, administrative agency or governmental
body or arbitrator having jurisdiction over the Selling Stockholder or any of
its properties.
(iv) To the best of such counsel's knowledge, the Selling Stockholder has valid
and marketable title to the Securities to be sold by the Selling Stockholder
pursuant to the U.S. Underwriting Agreement and the International Underwriting
Agreement, free and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind, other than as disclosed in the Registration
Statement, and has full right, power and authority to sell, transfer and deliver
such Securities pursuant to the U.S. Underwriting Agreement and the
International Underwriting Agreement. By delivery of a certificate or
certificates therefor the Selling Stockholder will transfer to the Underwriters
who have purchased such Securities pursuant to the U.S. Underwriting Agreement
and the International Underwriting Agreement (without notice of any defect in
the title of the Selling Stockholder and who are otherwise bona fide purchasers
for purposes of the Uniform Commercial Code) valid and marketable title to such
Securities, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
C-1
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(l)]
Exhibit D
June [ ], 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED
DEUTSCHE BANK SECURITIES INC.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ READ LLC
as U.S. Representatives of the several U.S. Underwriters
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Proposed Public Offering by WellPoint Health Networks Inc.
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Dear Sirs:
The undersigned, a shareholder and an officer and/or director of
WellPoint Health Networks Inc., a Delaware corporation (the "Company"),
understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇
Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated, Deutsche Bank Securities Inc.,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Read LLC propose(s) to enter into a U.S. Underwriting
Agreement (the "U.S. Underwriting Agreement") with the Company and the Selling
Stockholder providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $.01 per share (the "Common Stock").
Capitalized terms used but not defined herein shall have the meaning given to
them in the Underwriting Agreement.
In recognition of the benefit that such an offering will confer upon
the undersigned as a shareholder and an officer and/or director of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the Underwriting Agreement that, during a period of 90 days from the
date of the Underwriting Agreement, provided that such person continues to be an
officer of the Company during such period, the undersigned will not, without the
prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right, or warrant to purchase, and or otherwise
transfer or dispose of any shares of the Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition, or file any
registration statement under the Securities Act of 1933, as amended, with
respect to any of the foregoing or (ii) enter into any swap or any other
arrangement that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
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transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.
Notwithstanding the provisions of the preceding sentence, the
undersigned shall be permitted to (a) sell shares of Common Stock to the Company
in connection with a "stock-for-stock" exercise of stock options granted under
the Company's existing stock option plans (providing that any resulting shares
received by the undersigned upon such exercise shall be subject to the terms of
this letter), and (b) sell, transfer or otherwise dispose of shares of Common
Stock to (1) the undersigned's spouse, children, spouses of children, siblings
and spouses of siblings, provided that any such transferee shall have agreed in
writing to be subject to the terms of this letter; and (2) any trust or
charitable foundation established by the undersigned and/or one or more of the
persons listed in the foregoing clause (1), provided that any such trust or
charitable foundation and their respective beneficiaries shall have agreed in
writing to be subject to the terms of this letter.
Very truly yours,
Signature:
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Print Name:
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