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Exhibit 99.12
UNDERTAKINGS
WELLPOINT HEALTH NETWORKS INC., a Delaware corporation ("WellPoint"), WELLPOINT
CALIFORNIA SERVICES, INC., a California corporation, and BLUE CROSS OF
CALIFORNIA, a California corporation ("BCC") (together, the "Parties"), hereby
undertake to the California Department of Corporations ("Department") as
follows with regard to certain of their obligations under the Xxxx-Xxxxx Health
Care Service Plan Act of 1975, as amended ("Act"), and the regulations
promulgated thereunder ("Rules"), it being acknowledged that these Undertakings
restate and consolidate in a single document certain Undertakings to the
Department dated January 7, 1993 and March 5, 1996:
1. The Parties undertake that the previous Undertakings that they have
entered into with the Department, dated January 7, 1993 (at Section II.11
thereof), amended on September 7, 1995 and reaffirmed on March 5, 1996,
with regard to inter-company payments shall be amended and restated to
provide as follows:
Except as permitted by this Undertaking, the Parties undertake not to
make payments or distributions of either cash or property to or on behalf
of WellPoint or any affiliate of WellPoint, either in the form of
dividends, payments intended to service indebtedness of WellPoint or any
affiliate of WellPoint or otherwise ("WellPoint Payments") without the
prior approval of the Department. This Undertaking shall not restrict or
limit BCC from making the following WellPoint Payments:
(a) Any payments by BCC to WellPoint or any affiliate of WellPoint
which are permitted under the terms of the Administrative Services
Agreement approved by the Department and to which WellPoint and
BCC are parties; and
(b) Any payments by BCC to WellPoint or any affiliate of WellPoint
which are permitted under the terms of any tax sharing or tax
allocation agreement entered into between BCC and WellPoint and/or
any affiliate of WellPoint and approved by the Department.
This Undertaking shall not restrict or limit BCC from making any
WellPoint Payments in addition to the WellPoint Payments permitted to be
paid by BCC pursuant to this Undertaking, when and to the extent that the
tangible net equity of BCC, as defined in and calculated under the Act
and the Rules ("TNE"), after giving effect to the WellPoint Payment,
would equal at least the greater of (i) 100% of the minimum TNE
required under the Act and the Rules as of the date of this Undertaking,
or such greater level of TNE as may be required by future amendment of
the Act and Rules, or (ii) the applicable minimum level of TNE as set
forth in Rule 1300.84.3(d)(1).
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2. The Parties undertake that whenever the prior approval of the Department
is required under the Undertaking in paragraph 1 hereof, such prior
approval should be sought by the filing of a Notice of Material
Modification pursuant to Section 1352(b) of the Act.
3. The Parties undertake that the previous Undertakings that have been
entered into with the Department, dated September 5, 1995 and amended and
restated on March 5, 1996, with regard to certain actions of the Blue
Cross Blue Shield Association ("BCBSA") and certain matters relating to
indebtedness, shall be amended and restated to provide as follows:
(a) Acknowledging that certain of the terms and conditions set forth
in the documents memorializing the transactions which are the
subject of Undertakings to the Department dated September 5, 1995,
and amended and restated on March 5, 1996, reflect compliance with
the rules and regulations of the BCBSA, WellPoint undertakes to
review on a periodic basis and report to its Board of Directors
changes in the current rules and regulations of the BCBSA regarding
for-profit licensees of the BCBSA, waivers to such rules and
regulations which may be granted by the BCBSA and license addenda
of which WellPoint becomes aware which are entered into between
BCBSA and other for-profit licensees of BCBSA (together, "BCBSA
Changes"). If the Board of Directors of WellPoint concludes, in its
discretion consistent with its fiduciary duties to its
stockholders, that adoption of particular BCBSA Changes would be in
the best interests of WellPoint and its stockholders, taking into
account, among other things, the potential effect of the particular
BCBSA Changes upon WellPoint stockholder value, then WellPoint
undertakes to use commercially reasonable efforts to seek to amend
the License Addendum or such other instruments governing the
license between WellPoint and the BCBSA to incorporate such of the
BCBSA Changes as may be deemed appropriate by the Board of
Directors of WellPoint in its discretion consistent with its
fiduciary duties to its stockholders.
(b) WellPoint undertakes to the Department that any loan agreement or
loan agreements ("Loan Agreements") entered into by it will not
include any provisions (i) calling for the pledge of the stock of
any entity licensed under the Act ("Act Licensee"), (ii) calling
for the pledge of any assets of any Act Licensee or (iii) calling
for any guarantee of WellPoint indebtedness by any Act Licensee.
BCC undertakes to the Department that the terms of the Loan
Agreements will not be at variance with the terms of this
Undertaking and that it will advise the parties to the Loan
Agreements that paragraph 1 of these Undertakings provides for
limitations on certain payments which may be made by the Act
Licensees in the event those payments adversely affect defined
levels of the Act Licensees' tangible net equity, as defined in the
Act and as specifically provided in paragraph 1 of these
Undertakings.
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(c) WellPoint undertakes to file with the Department, at least five
days prior to their execution, copies of any Loan Agreements and
shall file executed versions thereafter.
4. BCC undertakes to submit to the Department combining financial statements
with WellPoint on an annual and quarterly basis.
5. The Parties undertake to comply with the terms of the Administrative
Services Agreements filed with the Department as part of the Notices of
Material Modification on April 28, 1997, as amended, including the
provisions thereof prohibiting the removal of BCC's books and records
from the State of California without the Department's permission.
6. BCC, formerly named WellPoint Health Networks Inc., is the surviving
entity of a merger (the "Merger") between BCC, Blue Cross of California,
a California corporation ("Old Blue Cross"), WellPoint Dental Plan and
WellPoint Pharmacy Plan. Such Merger has been effected through the filing
of a Certificate of Ownership as specified under Section 1110 of the
California Corporations Code with the California Secretary of State. The
Parties undertake to file promptly after the date hereof with the
Department the Amended and Restated Articles of Incorporation and Bylaws
of BCC and the Certificate of Ownership. Such Restated Articles and
Certificate of Ownership shall be certified by the California Secretary
of State and the Bylaws shall be certified by the Secretary or an
Assistant Secretary of BCC.
7. BCC, as the surviving entity under the Merger, undertakes to demonstrate
to the Department's satisfaction the adequate resolution of, or take the
necessary corrective actions to address, the concerns that may be raised
by the Department in connection with the medical survey audits of Old
Blue Cross, WellPoint Dental Plan and WellPoint Pharmacy Plan pending as
of the time of the Merger.
Date: July 31, 1997
WELLPOINT HEALTH NETWORKS, INC.
/s/ Xxxxxx X. Xxxxxx
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By: Xxxxxx X. Xxxxxx
WELLPOINT CALIFORNIA SERVICES, INC.
/s/ Xxxxxx X. Xxxxxx
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By: Xxxxxx X. Xxxxxx
BLUE CROSS OF CALIFORNIA
/s/ Xxxxxx X. Xxxxxx
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By: Xxxxxx X. Xxxxxx
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