EXHIBIT 9.1
VOTING TRUST AND DIVESTITURE AGREEMENT
BY AND AMONG
WELLCHOICE, INC.,
THE MEMBERS OF THE BOARD OF THE NEW YORK
PUBLIC ASSET FUND
AND
THE BANK OF NEW YORK, AS TRUSTEE
DATED _____________, 2002
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ................................................ 1
ARTICLE II DEPOSIT OF STOCK ........................................... 5
Section 2.01 Delivery of Capital Stock ........................ 5
Section 2.02 Certificate Book and Inspection of Agreement ..... 5
ARTICLE III THE FUND'S INTEREST IN CAPITAL STOCK ....................... 6
Section 3.01 Retained Interest ................................ 6
Section 3.02 Withdrawal of Shares from Trust .................. 6
ARTICLE IV TRUSTEE'S POWERS AND DUTIES ................................ 7
Section 4.01 Limits on Trustee's Powers ....................... 7
Section 4.02 Right to Vote .................................... 7
Section 4.03 Voting on Particular Matters ..................... 7
Section 4.04 Presence at Meetings ............................. 8
Section 4.05 Sales ............................................ 8
Section 4.06 Contrary Instructions ............................ 8
Section 4.07 Execution by Trustee ............................. 8
ARTICLE V STANDSTILL ................................................. 8
Section 5.01 Acquisition of Capital Stock ..................... 8
Section 5.02 Solicitation of Proxies; Stockholder Proposals ... 8
Section 5.03 Acquisition Proposals ............................ 9
Section 5.04 Sale of Capital Stock............................. 9
Section 5.05 Nomination of Directors .......................... 9
Section 5.06 Change of Control Proposals ...................... 10
Section 5.07 Litigation ....................................... 11
Section 5.08 Consultation Rights .............................. 11
ARTICLE VI AGREEMENT TO DIVEST SHARES OF CAPITAL STOCK ................ 11
Section 6.01 Sale of Fund's Capital Stock by Third Anniversary 11
Section 6.02 Sale of Fund's Capital Stock by Fifth Anniversary 12
Section 6.03 Sale of Fund's Capital Stock by Tenth Anniversary 12
Section 6.04 Extension of Divestiture Deadlines Sought by Fund 12
Section 6.05 Failure to Meet Divestiture Deadlines............. 12
Section 6.06 Conversion of Class B Common Stock ............... 13
ARTICLE VII DIVIDENDS AND DISTRIBUTIONS ................................ 13
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TABLE OF CONTENTS
(continued)
Page
Section 7.01 Cash ............................................. 13
Section 7.02 Stock ............................................ 13
Section 7.03 Other Distributions .............................. 14
ARTICLE VIII THE TRUSTEE ................................................ 14
Section 8.01 Use of Proxies ................................... 14
Section 8.02 Expenses ......................................... 14
Section 8.03 Compensation ..................................... 14
Section 8.04 Successor Trustee ................................ 14
Section 8.05 Qualifications of Trustee ........................ 14
Section 8.06 Trustee's Liability .............................. 15
Section 8.07 Duties of Trustee ................................ 15
ARTICLE IX TERMINATION ................................................ 15
Section 9.01 Termination ...................................... 15
Section 9.02 Delivery of Stock Certificate(s) ................. 16
ARTICLE X MISCELLANEOUS .............................................. 16
Section 10.01 Ownership; Authority ............................. 16
Section 10.02 Merger, Consolidation, Sale of Assets ............ 16
Section 10.03 Successors ....................................... 16
Section 10.04 Amendments and Waivers ........................... 17
Section 10.05 Notices .......................................... 17
Section 10.06 Governing Law .................................... 18
Section 10.07 Specific Performance; Injunctive Relief .......... 18
Section 10.08 Effect of Headings ............................... 18
Section 10.09 Entire Agreement ................................. 18
Section 10.10 Severability ..................................... 19
Section 10.11 Counterparts ..................................... 19
Section 10.12 Legends; Certificates ............................ 19
Section 10.13 Further Assurances ............................... 20
Section 10.14 Corporate Governance Covenants ................... 20
Section 10.15 Hedging Transactions ............................. 20
Section 10.16 Asset Preservation ............................... 20
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VOTING TRUST AND DIVESTITURE AGREEMENT
THIS VOTING TRUST AND DIVESTITURE AGREEMENT (this "Agreement") is made
and entered into as of the ____ day of _________, 2002, by and among WellChoice,
Inc., a Delaware corporation (the "Company"), the Members of the Board of The
New York Public Asset Fund, the "public asset fund" established by Section 7317
of the New York Insurance Law (the "Fund") and The Bank of New York, as trustee
(the "Trustee").
RECITALS
A. The Fund Beneficially Owns (as defined below) _____________________
million (___________) shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"), representing approximately [__%] of the issued and
outstanding shares of Common Stock, and one (1) share of class B common stock,
par value $.01 per share, of the Company (the "Class B Common Stock"),
representing all of the issued and outstanding shares of Class B Common Stock.
B. The Company is a licensee of the Blue Cross and Blue Shield
Association (the "BCBSA"), enabling the Company to use the "Blue Cross" and
"Blue Shield" names and related rights (the "Marks").
C. The BCBSA has conditioned the Company's license to continue to use
the Marks upon the Company maintaining the provisions set forth in this
Agreement and in Article VII of its Certificate of Incorporation (as defined
below) which are intended by the BCBSA to enable the Company to remain
independent of the Fund and any other Person (as defined below) who may in the
future acquire shares of Capital Stock (as defined below) in excess of the
Ownership Limit (as defined below) applicable to such Person.
AGREEMENT
In consideration of the foregoing and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which hereby is acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) "Acquisition Proposal" means any tender or exchange offer for
shares of Capital Stock.
(b) "Additional Issuance" has the meaning set forth in Section
3.02.
(c) "Additional Issuance Notice" has the meaning set forth in
Section 3.02.
(d) "Affiliate" with respect to a particular Person means a Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under
common control with, the particular Person, but as used with respect to the Fund
shall be deemed to not include the Company and its subsidiaries and as used with
respect to the Company and its subsidiaries shall be deemed to not include the
Fund.
(e) "Agreement" has the meaning set forth in the Preamble hereof.
(f) "Approved Change of Control Proposal" means a Change of
Control Proposal submitted by the Board of Directors to the stockholders of the
Company for a vote thereon.
(g) "BCBSA" has the meaning set forth in Recital B hereof.
(h) "Beneficial Ownership", "Beneficially Own" or "Beneficial
Owner" have the meaning set forth in Section 1 of Article VII of the Certificate
of Incorporation.
(i) "Blackout Period" has the meaning set forth in Section 5 of
the Registration Rights Agreement.
(j) "Board of Directors" means the Board of Directors of the
Company.
(k) "Bylaws" means the Bylaws of the Company as in effect at the
time that reference is made thereto.
(l) "Capital Stock" has the meaning set forth in Section 1 of
Article VII of the Certificate of Incorporation.
(m) "Certificate of Incorporation" means the Certificate of
Incorporation of the Company as in effect at the time that reference is made
thereto.
(n) "Change of Control Proposal" means any agreement, plan or
proposal involving any sale of Capital Stock, merger, consolidation,
recapitalization, exchange of shares or other transaction that, if consummated
in accordance with its terms, would result in the holders of the voting Capital
Stock of the Company immediately prior to such sale of Capital Stock, merger,
consolidation, recapitalization, exchange of shares or other transaction owning
less than 50.1% of the outstanding voting securities of the Company or, if not
the Company, the resulting entity arising out of such merger, consolidation,
recapitalization, exchange of shares or other transaction or any agreement, plan
or proposal involving the sale of all or substantially all of the assets of the
Company and subsidiaries on a consolidated basis.
(o) "Class B Common Stock" has the meaning set forth in Recital A
hereof.
(p) "Company" has the meaning set forth in the Preamble hereof.
(q) "Common Stock" has the meaning set forth in Recital A hereof.
(r) "Confidentiality Agreement" has the meaning set forth in
Section 5.05(b)(ii).
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(s) "Delinquent Shares" means any and all shares of Capital Stock
Beneficially Owned by the Fund in excess of the number of shares of Capital
Stock that the Fund is permitted to Beneficially Own under ARTICLE VI hereof at
the Three Year Divestiture Deadline, Five Year Divestiture Deadline or the Ten
Year Divestiture Deadline, as the case may be, or at any date to which any such
Divestiture Deadline may be extended pursuant to Section 6.04 hereof.
(t) "Demand" has the meaning set forth in Section 2 of the
Registration Rights Agreement.
(u) "Difference" has the meaning set forth in Section 3.02.
(v) "Divestiture Deadline" means the Three Year Divestiture
Deadline, the Five Year Divestiture Deadline and/or the Ten Year Divestiture
Deadline.
(w) "Election Notice" has the meaning set forth in Section 3.02.
(x) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(y) "Five Year Determination Date" means the date that is one
hundred eighty (180) days prior to the fifth (5th) anniversary of the IPO Date.
(z) "Five Year Divestiture Deadline" means the fifth (5th)
anniversary of the IPO Date, extended day for day, up to a maximum of seven
hundred thirty (730) days, for each day from and after the Five Year
Determination Date that the Company is not required to file a Registration
Statement as a result of the pendency of any Blackout Period.
(aa) "Fund" has the meaning set forth in the Preamble hereof. ----
(bb) "Fund Restricted Shares" means all Fund Shares in excess of
the Voting Ownership Limit and deposited in the Voting Trust pursuant to the
provisions of this Agreement.
(cc) "Fund Shares" means all shares of Capital Stock Beneficially
Owned by the Fund at any particular time.
(dd) "Indemnified Party" has the meaning set forth in Section 8.06
hereof.
(ee) "Independent Director" has the meaning set forth in the
Certificate of Incorporation.
(ff) "Independent Board Majority" has the meaning set forth in
Section 4.B.3 of Article IV of the Certificate of Incorporation.
(gg) "Institution" means any Institutional Investor (as defined in
the Certificate of Incorporation) and any other Person whose primary business is
the buying, selling and holding of securities.
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(hh) "IPO Date" means the closing date of an initial underwritten
public offering of Common Stock.
(ii) "Knowledge of the Fund" means (i) with respect to (x) sales
of Capital Stock pursuant to a public offering registered under the Securities
Act of 1933, as amended, and (y) sales pursuant to Rule 144, the actual
knowledge of the members of the board of the Fund with no duty to inquire and
(ii) in connection with (A) any sales of Capital Stock in a privately negotiated
transaction and (B) meetings or other communications contemplated by Section
5.04(b), the actual knowledge of any member of the board of the Fund after
reasonable inquiry by the board of the Fund.
(jj) "Legal Requirement" means any federal, state, local,
municipal or other administrative order, law, regulation, statute or rule,
including, but not limited to, the rules and regulations of the Securities and
Exchange Commission and any self-regulatory organization, including, without
limitation, the New York Stock Exchange.
(kk) "Marks" has the meaning set forth in Recital B hereof.
(ll) "Ownership Limit" has the meaning set forth in Section 1 of
Article VII of the Certificate of Incorporation.
(mm) "Non-Fund Shares" means all shares of Capital Stock
Beneficially Owned by Persons other than the Fund or its Affiliates at any
particular time.
(nn) "Permitted Withdrawal" has the meaning set forth in Section
3.02.
(oo) "Person" means any individual, firm, partnership, corporation
(including, without limitation, a business trust), limited liability company,
trust, unincorporated association, joint stock company, joint venture or other
entity, and shall include any successor (by merger or otherwise) of any such
entity.
(pp) "Piggy-Back Rights" has the meaning set forth in Section 3 of
the Registration Rights Agreement.
(qq) "Registration Rights Agreement" means that certain
Registration Rights Agreement, of even date herewith, by and among the Company,
the Fund and The New York Charitable Asset Foundation, a New York not-for-profit
corporation.
(rr) "Registration Statement" has the meaning set forth in Section
1 of the Registration Rights Agreement.
(ss) "Sales Agent" has the meaning set forth in Section 6.05.
(tt) "Successor Trustee" has the meaning set forth in Section 8.04
hereof.
(uu) "Ten Year Determination Date" means the date that is one
hundred eighty (180) days prior to the tenth (10th) anniversary of the IPO Date.
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(vv) "Ten Year Divestiture Deadline" means the tenth (10th)
anniversary of the IPO Date, extended day for day, up to a maximum of seven
hundred thirty (730) days, for each day from and after the Ten Year
Determination Date that the Company is not required to file a Registration
Statement as a result of the pendency of any Blackout Period.
(ww) "Three Year Determination Date" means the date that is one
hundred eighty (180) days prior to the third (3rd) anniversary of the IPO Date.
(xx) "Three Year Divestiture Deadline" means the third (3rd)
anniversary of the IPO Date, extended day for day, up to a maximum of one three
hundred sixty-five (365) days, for each day from and after the Three Year
Determination Date that the Company is not required to file a Registration
Statement as a result of the pendency of any Blackout Period.
(yy) "Trustee" has the meaning set forth in the Preamble hereof.
(zz) "Voting Ownership Limit" means the number of shares of
Capital Stock equal to one share lower than the number of shares of Capital
Stock which would represent five percent (5%) of the Voting Power of all shares
of Capital Stock issued and outstanding at the time of determination.
(aaa) "Voting Power" has the meaning set forth in Section 1 of
Article VII of the Certificate of Incorporation.
(bbb) "Voting Trust" means the voting trust established by this
Agreement.
(ccc) "Withdrawal Certificate" has the meaning set forth in
Section 3.02.
ARTICLE II
DEPOSIT OF STOCK
Section 2.01 Delivery of Capital Stock. The Fund shall make such
contributions to the Voting Trust of Capital Stock that the Fund may
Beneficially Own such that the number of shares of Capital Stock Beneficially
Owned by the Fund outside of the Voting Trust shall never exceed the Voting
Ownership Limit. The Trustee acknowledges receipt of _________ shares of Common
Stock from the Fund. The Company shall pay any taxes and costs imposed upon the
transfer of shares of Capital Stock Beneficially Owned by the Fund to or from
the Voting Trust at the time of transfer. The Fund shall remit to the Company
any refunds of such taxes or costs that are paid to the Fund.
Section 2.02 Certificate Book and Inspection of Agreement. The Trustee
shall keep at the address set forth in Section 10.05 hereof correct books of
account of all the Trustee's business and transactions relating to the Voting
Trust, and a book setting forth the number of shares of Capital Stock held by
the Voting Trust. A duplicate of this Agreement and any extension thereof shall
be filed with the Secretary of the Company and shall be open to inspection by a
stockholder upon the same terms as the record of stockholders of the Company is
open to inspection.
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ARTICLE III
THE FUND'S INTEREST IN CAPITAL STOCK
Section 3.01 Retained Interest. Subject to the powers, duties and rights of
the Company and the Trustee set forth herein and further subject to the terms of
this Agreement, the Registration Rights Agreement, the Certificate of
Incorporation and the Bylaws, the Fund shall retain the entire economic and
beneficial ownership rights in all of the shares of Capital Stock held in the
Voting Trust.
Section 3.02 Withdrawal of Shares from Trust. The Fund shall not be
entitled to withdraw any shares of Capital Stock from the Voting Trust except to
sell its entire Beneficial Ownership interest in such shares of Capital Stock
provided that (i) such shares of Capital Stock shall be registered in the name
of the purchaser thereof or its nominee before being withdrawn from the Voting
Trust, (ii) such sale of shares of Capital Stock shall not be to an Affiliate of
the Fund, (iii) such sale of shares of Capital Stock shall not, to the Knowledge
of the Fund, be made to any Person Beneficially Owning any shares of Capital
Stock in excess of the Ownership Limit applicable to such Person, (iv) such sale
of shares of Capital Stock shall not, to the Knowledge of the Fund, result in
any Person Beneficially Owning any shares of Capital Stock in excess of the
Ownership Limit applicable to such Person, and (v) such sale of shares of
Capital Stock shall otherwise be permitted pursuant to this Agreement, the
Registration Rights Agreement, the Certificate of Incorporation and the Bylaws.
The Fund shall not transfer any of its retained rights or interest in shares of
Capital Stock held in the Voting Trust. Any shares of Capital Stock withdrawn in
accordance with this Section 3.02 shall, upon withdrawal, cease to be subject to
the terms and conditions of this Agreement. If at any time the Company shall
issue additional shares of Capital Stock (an "Additional Issuance"), and as a
result of such Additional Issuance the number of shares of Capital Stock held by
the Fund outside of the Voting Trust shall be less than the Voting Ownership
Limit (the amount of such shortfall being referred to hereafter as the
"Difference"), the Fund shall be permitted to withdraw from the Voting Trust (in
accordance with the procedures specified below) up to such number of shares of
Capital Stock as shall be equal to the Difference (a "Permitted Withdrawal").
The Company shall within five (5) Business Days of any Additional Issuance
notify the Trustee and the Fund in writing of the occurrence of any Additional
Issuance (which notice shall include the type and number of additional Capital
Shares issued) (an "Additional Issuance Notice"). The Fund shall notify the
Company and the Trustee in writing within five (5) Business Days following its
receipt of an Additional Issuance Notice if it wishes to exercise a Permitted
Withdrawal (an "Election Notice"). In the event the Fund shall deliver an
Election Notice as specified in the preceding sentence, the Company and the Fund
shall jointly prepare and deliver to the Trustee within two (2) Business Days
after the Company's receipt of the Election Notice a certificate certifying the
type and number of shares of Capital Stock which shall comprise the Permitted
Withdrawal (a "Withdrawal Certificate"). Any such Permitted Withdrawal shall be
effected as promptly as practical after the Trustee's receipt of a Withdrawal
Certificate. The Trustee and the Company shall cause the shares so withdrawn to
be registered in the name of the Fund or its nominee before being so withdrawn.
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ARTICLE IV
TRUSTEE'S POWERS AND DUTIES
Section 4.01 Limits on Trustee's Powers. The Trustee shall have only the
powers set forth in this Agreement. It is expressly understood and agreed by the
parties hereto that under no circumstances shall the Trustee be personally
liable for the payment of any indebtedness or expenses of this Agreement or be
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Trustee under this Agreement, except as set
forth in this Agreement.
Section 4.02 Right to Vote. With respect to all shares of Capital Stock
held in the Voting Trust, the Trustee shall have the exclusive and absolute
right in respect of such shares of Capital Stock to vote or consent such shares
of Capital Stock at all times during the term of this Agreement, subject to
Section 4.03 hereof.
Section 4.03 Voting on Particular Matters. In exercising the Trustee's
powers and duties under this Agreement, the Trustee shall at all times vote or
consent all shares of Capital Stock held in the Voting Trust as follows:
(a) if the matter concerned is the election of directors of the
Company, the Trustee shall vote or consent all Fund Restricted Shares (x) in
favor of each nominee to the Board of Directors whose nomination has been
approved by an Independent Board Majority and vote against any candidate for the
Board of Directors for whom no competing candidate has been nominated or
selected by an Independent Board Majority, and (y) if the nomination of a
nominee has not been approved by an Independent Board Majority, in favor of such
nominee if such nominee has been nominated by the Board of Directors in the
manner provided in Section 5.05(b)(i) hereof;
(b) unless such action is initiated by or with the consent of an
Independent Board Majority, the Trustee shall vote against removal of any
director of the Company;
(c) if the matter concerned is (x) an employee compensation plan
for which stockholder approval is sought or (y) a precatory stockholder proposal
(i.e., advisory proposals made by a stockholder of the Company pursuant to Rule
14a-8 promulgated under the Exchange Act (or in any successor provision) that
merely recommend or request that the Board of Directors or the Company take
certain action), the Trustee shall vote all Fund Restricted Shares in the same
proportions as the shares voted by all holders of Capital Stock other than
shares voted by (i) the Voting Trust, (ii) the Fund and (iii) directors,
officers, trustees of any employee benefit plans of the Company and other
Affiliates of the Company (whether acting in their individual ownership or
fiduciary capacities or pursuant to a discretionary proxy (other than any
revocable proxy given by a stockholder other than a director, officer, trustee
of any Company employee benefit plan or other Affiliate of the Company in
response to a solicitation of proxies by the Board of Directors of the Company)
or other discretionary delegation of the right to direct the voting of another
stockholder's shares of Capital Stock);
(d) if the matter concerned is an Approved Change of Control
Proposal, the Trustee shall vote all Fund Restricted Shares as directed by the
Fund, in its sole discretion; and
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(e) to the extent not otherwise covered in Section 4.03(a),
Section 4.03(b), Section 4.03(c) or Section 4.03(d), in accordance with the
recommendation of the Independent Board Majority.
Section 4.04 Presence at Meetings. The Trustee shall ensure, with respect
to all Fund Restricted Shares, that such shares are counted as being present for
the purposes of any quorum required for stockholder action of the Company and to
vote or consent such shares as set forth in this ARTICLE IV so long as the
Trustee has reasonable notice of the time to vote or consent (and the Trustee
shall be deemed to have reasonable notice if it shall receive notice within the
time periods under the applicable provisions of the Delaware General Corporation
Law).
Section 4.05 Sales. The Trustee shall have no authority to sell any of the
shares of Capital Stock deposited pursuant to the provisions of this Agreement,
unless expressly permitted pursuant to the terms hereof. Upon the sale of shares
of Capital Stock in accordance with the terms hereof, the Trustee shall deliver
or cause to be delivered certificates representing such shares of Capital Stock
to the Person entitled thereto.
Section 4.06 Contrary Instructions. The Trustee shall have no obligation
whatsoever to follow any instruction of the Fund if such instruction is contrary
to the terms of this Agreement, unless such contrary instruction shall be agreed
to in writing by the Fund and the Company.
Section 4.07 Execution by Trustee. The Trustee shall execute all documents
as follows:
"By: The Bank of New York, not in its individual capacity, but solely
as Trustee
By: Xxxxxxx Xxxxxx, Vice President."
ARTICLE V
STANDSTILL
Section 5.01 Acquisition of Capital Stock. The Fund shall not, directly or
indirectly, (i) individually, or as part of a group, acquire, offer or propose
to acquire, or agree to acquire, by purchase or otherwise, Beneficial Ownership
of any additional shares of Capital Stock not Beneficially Owned by it on the
date of this Agreement, or direct or indirect rights or options to acquire
(through purchase, exchange, conversion or otherwise) Beneficial Ownership of
any such shares of Capital Stock (except by reason of a stock dividend, stock
split, restructuring or recapitalization that in each case has been approved by
the Board of Directors) or (ii) enter into any agreement, arrangement or
understanding with any Person relating to any sale or other disposition of
Capital Stock, other than any agreement, arrangement or understanding (A) with
one or more underwriters and the Company as permitted by the Registration Rights
Agreement or (B) with any Person that is not prohibited by Section 5.04 below.
Section 5.02 Solicitation of Proxies; Stockholder Proposals. The Fund shall
not (i) solicit proxies from stockholders of the Company, (ii) become a
"participant" (as defined in Instruction 3 to Item 4 to Schedule 14A promulgated
under the Exchange Act or in any successor provision) in any solicitation of
proxies from stockholders of the Company or (iii) initiate or solicit any
stockholder proposals to the Company. For purposes of this Section 5.02, the
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following actions by the Fund shall not result in the Fund being a "participant"
in a proxy solicitation: (x) voting shares of Capital Stock Beneficially Owned
by the Fund, (y) executing and furnishing the Company or any other Person with a
revocable proxy, or (z) publicly announcing the Fund's vote (and its reasons
therefore) on any matter submitted to stockholders of the Company.
Section 5.03 Acquisition Proposals. So long as the Fund Beneficially Owns
Fund Restricted Shares, the Fund shall not tender or otherwise sell or offer to
sell to any Person any shares of Capital Stock in response to any Acquisition
Proposal that is opposed by the Independent Board Majority.
Section 5.04 Sale of Capital Stock.
(a) Except as provided in Section 5.03 above or pursuant to an
Approved Change in Control Proposal, the Fund shall not sell or otherwise
dispose of any shares of Capital Stock, whether in a private sale, pursuant to a
registered offering of securities or otherwise, if, to the Knowledge of the
Fund, (i) such sale or other disposition is being made to a Person who
Beneficially Owns an amount of Capital Stock in excess of the Ownership Limit
applicable to such Person, or (ii) the effect of such sale or other disposition
would be to cause such Person to Beneficially Own an amount of Capital Stock
which would exceed the Ownership Limit applicable to such Person.
(b) The Fund shall not meet or otherwise communicate with any
Person if, to the Knowledge of the Fund, such meeting or communication relates
to a proposal by such Person to acquire Beneficial Ownership of shares of
Capital Stock in excess of the Ownership Limit applicable to such Person.
Section 5.05 Nomination of Directors.
(a) Subject to Section 5.05(b), the Fund shall not itself, nor
shall it initiate, suggest or otherwise encourage the Board of Directors or any
other Person to, (i) nominate any individual as a candidate for election to the
Board of Directors, or (ii) appoint any individual to fill any vacancy on the
Board of Directors. The Fund shall not support, endorse or otherwise encourage
the election of any candidate for election to the Board of Directors other than
a candidate or candidates nominated by the Board of Directors except as set
forth in Section 5.05(b).
(b) (i) Notwithstanding the foregoing, for so long as the Fund
Beneficially owns 5% or more of the issued and outstanding Capital Stock, but in
no event for a period of time longer than five (5) years from the date hereof,
the Fund will have the right to propose a slate of three (3) individuals from
which the Board of Directors will nominate one (1) such individual to serve as a
member of the Board of Directors (the "Designated Member"). If none of such
proposed individuals (or any additional proposed individuals) are reasonably
acceptable to the Board of Directors for election to the Board of Directors, the
Board of Directors will promptly notify the Fund of such determination and the
Fund will propose one or more additional individuals from which the Board of
Directors will choose. Each of the individuals proposed by the Fund must (i)
qualify as an Independent Director, (ii) not hold an elective or appointive
full-
9
time governmental office or be an employee of any governmental body or agency or
have held such office in New York State or have been so employed in New York
State for the prior three (3) years and (iii) acknowledge in writing that
notwithstanding his or her designation by the Fund, he or she owes fiduciary
duties to all stockholders to the same extent as the other members of the Board
of Directors. For so long as the Fund has the rights set forth in the first
sentence of this Section 5.05 (b)(i), the Designated Member shall be submitted
to the stockholders of the Company for election in the manner by which a
Qualified Candidate (as defined in the By-laws of the Company) is submitted to
the stockholders for election by the Independent Board Majority. The Designated
Member shall be a Class III director whose term shall expire in 2005. For so
long as the Fund has the rights set forth in the first sentence of this Section
5.05(b)(i), in the event the Designated Member resigns before the end of his or
her term and at the end of the Designated Member's term, the Fund shall be
entitled to propose a new Designated Member in accordance with the procedures
established by this Section 5.05(b)(i).
(i) So long as the Fund Beneficially Owns twenty percent (20%) or
more of the outstanding Capital Stock of the Company, and subject to the
provisions of this Section 5.05(b)(ii), the Company acknowledges and agrees that
the Designated Member may, from time to time on a quarterly basis, meet with the
members of the board of the Fund to discuss matters involving the Company and
relevant to the Fund's investment in the Company. Any such communications
between the Designated Member and the members of the board of the Fund will be
conducted on a confidential basis (and not in any meeting of the members of the
board of the Fund that may be open to the public) in compliance with the
confidentiality agreement in the form agreed to by the parties (as it may be
amended from time to time) (the "Confidentiality Agreement"). The provisions of
this Section 5.05(b)(ii) shall automatically terminate and be of no force and
effect from and at the time that the Fund Beneficially Owns less than twenty
percent (20%) of the outstanding Capital Stock of the Company.
(ii) At the expiration of the current terms of the Class I
directors in 2003, the Company will cause two (2) members of such class who are
not Independent Directors not to stand for re-election, and in lieu thereof to
nominate for election to the Board of Directors two (2) other individuals who,
if elected, would qualify as Independent Directors.
Section 5.06 Change of Control Proposals.
(a) The Fund shall not solicit or encourage inquiries or proposals
with respect to, or provide any confidential information to, or have any
discussions, meetings or other communications with, any Person relating to a
Change of Control Proposal; provided, however, that the Fund may have such
discussions, meetings and communications with a Person who has made a Change of
Control Proposal that is approved by the Board of Directors of the Company.
(b) If the Fund receives an unsolicited offer, proposal or
communication from a Person for a Change of Control Proposal, then (i) the Fund
shall not, directly or indirectly, communicate with such Person with respect to
such matter, except that the Fund shall promptly notify such Person that the
Fund will notify the Chairman of the Board of Directors and the Chief Executive
Officer of the Company of such matter, (ii) the Fund shall promptly notify the
Chairman of the Board of Directors and the Chief Executive Officer of the
Company of the existence of such matter and all material information
communicated to the Fund in connection with the making thereof, shall promptly
inform the Chairman of the Board, or a member of the Board of Directors of the
Company designated by him or her, of the occurrence and the substance of any
further communications by or on behalf of such Person concerning such matter and
(iii) the Company shall notify the Fund of the Company's position and the basis
therefor
10
with respect to such matter promptly upon its consideration thereof, and the
consideration of such matter shall be in accord with the fiduciary duties of the
Company's Board of Directors and management. The matters set forth in this
Section 5.06(b) shall be covered by the Confidentiality Agreement.
Section 5.07 Litigation. The Fund shall not publicly allege or claim, and
shall not initiate or join in any litigation, suit or cause of action that
alleges (i) that any of the provisions of the Certificate of Incorporation, the
Bylaws or this Agreement are not enforceable in accordance with their terms,
(ii) that the Board of Directors should not enforce any of the provisions of the
Certificate of Incorporation, the Bylaws or this Agreement, or (iii) that the
Board of Directors should approve, adopt, disapprove or abandon any Acquisition
Proposal or Change of Control Proposal. Notwithstanding anything in this
Agreement to the contrary, the provisions of this Section 5.07 shall not be
construed to prevent the Fund from initiating or joining as a party in any
litigation, suit or cause of action that alleges that the Company has wrongfully
applied or otherwise violated any provision of the Certificate of Incorporation,
the Bylaws, this Agreement or a Legal Requirement.
Section 5.08 Consultation Rights. For so long as the Designated Member may
communicate with the directors of the Fund pursuant to Section 5.05(b)(ii), the
Designated Member shall consult with the Fund if the Board of Directors
authorizes management of the Company to solicit any Change of Control Proposal
and shall consult with the Fund in the event that the Board of Directors shall
consider and discuss any Change of Control Proposal that may be received by the
Company from any Person. Nothing in this Agreement shall be construed to limit
the rights of the Fund as a stockholder of the Company regarding Change of
Control Proposals or any other matters except as specifically set forth in this
Agreement. The matters set forth in this Section 5.08 shall be covered by the
Confidentiality Agreement.
ARTICLE VI
AGREEMENT TO DIVEST SHARES OF CAPITAL STOCK
Section 6.01 Sale of Fund's Capital Stock by Third Anniversary.
(a) Subject to the Fund's obligations in Section 6.01(b), Section
6.02 and Section 6.03, the Fund will, to the extent consistent with its duties
and obligations and purposes and taking into account market conditions, reduce
its Beneficial Ownership of Capital Stock in a prudent and reasonably prompt
manner. The Company will likewise use its commercially reasonable efforts, in
response to reasonable requests from the Fund, to facilitate the Fund's
reduction in its Beneficial Ownership of Capital Stock. The reduction may be
effected pursuant to the Registration Rights Agreement and the use of Rule 144
promulgated under the Securities Act of 1933, as amended or by any private sale
to an Institution, subject to applicable Ownership Limits.
(b) The Fund hereby covenants and agrees that it shall sell,
convey, or otherwise dispose of shares of Capital Stock (so that the Fund is no
longer a Beneficial Owner of such shares of Capital Stock) so that the Fund
Beneficially Owns less than fifty percent (50%) of the issued and outstanding
shares of Capital Stock on or prior to the Three Year Divestiture
11
Deadline. Any such disposition shall comply with the terms of this Agreement,
the Registration Rights Agreement, the Certificate of Incorporation and the
Bylaws.
Section 6.02 Sale of Fund's Capital Stock by Fifth Anniversary. The Fund
hereby covenants and agrees that it shall sell, convey, or otherwise dispose of
shares of Capital Stock (so that the Fund is no longer a Beneficial Owner of
such shares of Capital Stock) so that the Fund Beneficially Owns less than
twenty percent (20%) of the issued and outstanding shares of Capital Stock on or
prior to the Five Year Divestiture Deadline. Any such disposition shall comply
with the terms of this Agreement, the Registration Rights Agreement, the
Certificate of Incorporation and the Bylaws.
Section 6.03 Sale of Fund's Capital Stock by Tenth Anniversary. The Fund
hereby covenants and agrees that it shall sell, convey, or otherwise dispose of
shares of Capital Stock (so that the Fund is no longer a Beneficial Owner of
such shares of Capital Stock) so that the Fund Beneficially Owns less than five
percent (5%) of the issued and outstanding shares of Capital Stock on or prior
to the Ten Year Divestiture Deadline. Any such disposition shall comply with the
terms of this Agreement, the Registration Rights Agreement, the Certificate of
Incorporation and the Bylaws.
Section 6.04 Extension of Divestiture Deadlines Sought by Fund.
Notwithstanding Section 6.01, Section 6.02 or Section 6.03 hereof, the Company
shall extend a Divestiture Deadline if (i) the Fund makes a good faith and
reasonable determination (and provides the reasons therefor) that compliance
with Section 6.01, Section 6.02 or Section 6.03 hereof would have a material
adverse effect on the Fund's ability to maximize the value of its assets or
would be in conflict with its legal or fiduciary duties, (ii) the Fund advises
the Company of such determination in writing (and provides the reasons therefor)
no later than ninety (90) days prior to the Divestiture Deadline and makes a
reasonable request for an extension of the Divestiture Deadline and (iii) the
Company receives written confirmation from the BCBSA that the extension of the
Divestiture Deadline requested by the Fund would not cause a violation of the
license agreements governing the Company's use of the Marks. The Company shall
not oppose the Fund's request for an extension of a Divestiture Deadline and
shall take reasonable steps, as reasonably requested by the Fund, to assist the
Fund in its efforts to obtain an extension of the Divestiture Deadline. The Fund
acknowledges that, notwithstanding the scope or degree of assistance provided by
the Company, the BCBSA shall have the sole and absolute authority and discretion
to determine whether to consent to an extension of a Divestiture Deadline but
shall have no obligation to grant such consent, and that in no event shall the
Company have any liability to the Fund or any other Person in the event that the
BCBSA shall determine to deny any such extension request.
Section 6.05 Failure to Meet Divestiture Deadlines. In the event that the
Fund shall fail to meet a Divestiture Deadline and an extension thereof shall
not have been granted or required pursuant to Section 6.04 hereof, or shall fail
to meet any extended Divestiture Deadline that may have been granted or required
pursuant to Section 6.04 hereof, then within ten (10) Business Days after such
deadline, the Company shall provide a list to the Fund of three (3)
institutions, none of which shall be an Affiliate of the Company or the Fund,
none of which shall have had any business relationship with the Company or its
Affiliates (other than in the capacity as Sales Agent pursuant to this
Agreement) for the previous five (5) years, each constituting a
12
nationally known investment banking firm that provides research coverage of
participants in the HMO/managed care industry and makes a market in the Common
Stock, and each providing a quotation of its fee for services as Sales Agent
hereunder. Within ten (10) business days after delivery of such list, the Fund
shall select one institution (the "Sales Agent") from such list. The Sales
Agent, the Fund and the Company shall enter into an agreement within fifteen
(15) days after selection of the Sales Agent providing for the payment to the
Sales Agent by the Fund of a reasonable fee for the services to be rendered by
it and reimbursement to the Sales Agent by the Fund of its reasonable expenses,
obligating the Sales Agent to vote the Delinquent Shares as described in this
Section 6.05, and addressing the other applicable matters set forth in this
Section 6.05. The Sales Agent shall arrange for the sale of the Delinquent
Shares in as prompt a manner as shall be commercially reasonable under the
circumstances (giving effect to, among other things, market conditions and
related matters). Subject to the foregoing, the Sales Agent and the Company
shall have no liability to the Fund and any other Person on the grounds that the
Sales Agent failed to take actions which could have produced higher proceeds for
the sale of the Delinquent Shares. The Fund, the Company and the Trustee shall
promptly take all action reasonably requested by the Sales Agent to facilitate
the sale of the Delinquent Shares, and the Sales Agent (or the transferee of the
Delinquent Shares) shall be entitled to receive customary representations and
warranties from the Fund and the Trustee regarding the Delinquent Shares
(including, without limitation, representations regarding good title to such
shares, free and clear of all liens, claims, security interests and other
encumbrances). The Sales Agent shall, to the extent permitted by law, also be
entitled to receive such indemnification from the Company as is normal and
customary in similar circumstances. Until sold, the Delinquent Shares shall be
voted in accordance with the recommendation of the Independent Board Majority on
all matters. Upon the sale of the Delinquent Shares, the Trustee shall deliver
the shares to the purchaser thereof as directed by the Sales Agent, and all
proceeds from such sale, less the agreed upon fees and expense reimbursement of
the Sales Agent, shall be distributed to the Fund as soon as practicable. The
periods of time set forth in this Section 6.05 may be extended at any time by
mutual written agreement of the Company and the Fund and notice to the Trustee.
Section 6.06 Conversion of Class B Common Stock. Within five (5) days after
the date upon which the Fund ceases to be the record holder or Beneficial Owner
of five percent (5%) or more of the issued and outstanding shares of Capital
Stock, the Fund shall (i) provide written notice to the Company of the
occurrence of such event and (ii) make available to the Company for exchange (in
accordance with the provisions of Section 2.A.6 of Article III of the
Certificate of Incorporation) the certificate representing the Class B Common
Stock then held by the Fund.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Section 7.01 Cash. The Fund shall be entitled to receive payments equal to
the amount of cash dividends, if any, collected or received by the Trustee or
its successor upon the number of shares of Capital Stock held in the Voting
Trust. The Trustee and the Company shall arrange for the direct payment by the
Company of such cash dividends to the Fund.
Section 7.02 Stock. In the event that the Trustee shall receive, as a
dividend or other distribution upon any shares of Capital Stock held by the
Trustee under this Agreement, any
13
shares of stock or securities convertible into stock of the Company, the Trustee
shall hold the same and said shares shall be subject to all of the terms and
conditions of this Agreement to the same extent as if originally deposited
hereunder.
Section 7.03 Other Distributions. In the event that, at any time during the
term of this Agreement, the Trustee shall receive or collect any monies through
a distribution by the Company to its stockholders, other than in payment of cash
dividends, or shall receive any property (other than shares of Capital Stock or
securities convertible into Capital Stock) through a distribution by the Company
to its stockholders, the Trustee shall distribute the same to the Fund.
ARTICLE VIII
THE TRUSTEE
Section 8.01 Use of Proxies. The Trustee may vote or consent with respect
to all shares of Capital Stock held in the Voting Trust in person or by such
person or persons as it may from time to time select as its proxy, provided that
the Trustee shall at all times do so in conformity with the provisions of
Section 4.03 hereof.
Section 8.02 Expenses. The Trustee is expressly authorized to incur and pay
such reasonable expenses and charges, to employ and pay such agents, attorneys
and counsel, and to incur and pay such other charges and expenses as the Trustee
may deem reasonably necessary and proper for administering this Agreement. The
Company shall reimburse the Trustee for any such expense and charges.
Section 8.03 Compensation. The Company shall compensate the Trustee for its
services as Trustee hereunder as provided in the Trustees' fee schedule,
attached hereto as Exhibit A.
Section 8.04 Successor Trustee. The Trustee may resign after giving thirty
(30) days' advance written notice of its resignation to the Company and the
Fund; provided that such resignation shall not become effective until a
reasonably competent alternate (the "Successor Trustee") shall have become bound
by this Agreement. The Company and the Fund each may terminate the Trustee after
giving thirty (30) days' advance written notice thereof to the Trustee with a
copy to the other party; provided that such termination of the Trustee shall not
become effective until a Successor Trustee shall have become bound by this
Agreement. If the Trustee shall resign or be so terminated by the Company, the
Trustee shall be replaced by a Successor Trustee. The Successor Trustee shall be
designated by the Fund and shall be reasonably acceptable to the Company. The
Successor Trustee shall enjoy all the rights, powers, interests and immunities
of the Trustee originally designated and shall agree in writing to be bound by
this Agreement.
Section 8.05 Qualifications of Trustee. Throughout the term of the Voting
Trust, the Trustee or Successor Trustee, as the case may be, must satisfy each
of the following qualifications: (i) the Trustee or Successor Trustee, as the
case may be, must be an institution duly authorized to act as such a Trustee or
Successor Trustee under the laws of the State of New York; (ii) the Trustee or
Successor Trustee, as the case may be, must, either on an individual
14
basis or on a consolidated basis together with its subsidiaries and affiliates,
have minimum stockholders' equity of $500,000,000; (iii) the Trustee or
Successor Trustee, as the case may be, must not own for its own account more
than one percent (1%) of the issued and outstanding securities of either the
Company or the Fund; and (iv) no director or officer of the Trustee or any
Successor Trustee, as the case may be, may serve as a director or officer of the
Company or the Fund (and no director or officer of the Company or the Fund shall
serve as a director or officer of the Trustee or Successor Trustee, as the case
may be). In the event that the Trustee or Successor Trustee, as the case may be,
shall fail to meet any of the conditions set forth in this Section 8.05, the
Company shall replace the Trustee or the Successor Trustee, as the case may be,
as provided in Section 8.04 hereof.
Section 8.06 Trustee's Liability. The Trustee shall not be liable for any
act or omission undertaken in connection with its powers and duties under this
Agreement, except for any willful misconduct or gross negligence by the Trustee.
The Trustee shall have no obligation or liability with respect to the failure of
the Fund to perform its obligations under this Agreement or with respect to
divestitures provided for herein. No Successor Trustee shall be liable for
actions or omissions of the Trustee or any other Successor Trustee. The Trustee
shall not be liable in acting on any notice, request, consent, certificate,
instruction, or other paper or document or signature reasonably believed by it
to be genuine and to have been signed by the proper party. The Trustee may
consult with legal counsel (reasonably competent for the purpose) and any act or
omission undertaken by it in good faith in accordance with the opinion of such
legal counsel shall not result in any liabilities of the Trustee. The Company
agrees to indemnify and hold harmless the Trustee and its affiliates, directors,
officers, employees, agents and advisors (each an "Indemnified Party") from and
against any and all claims, damages, losses, liability, obligations, actions,
suits, costs, disbursements and expenses (including without limitation
reasonable fees and expenses of counsel) incurred by any Indemnified Party, in
any way relating to or arising out of or in connection with or by reason of the
preparation for a defense of any investigation, litigation or proceeding arising
out of this Agreement or the shares of Capital Stock held pursuant to this
Agreement, the administration of this Agreement or the action or inaction of the
Trustee hereunder; except to the extent such claim, damage, loss, liability,
obligation, action, suit, cost, disbursement or expense results from such
Indemnified Parties' gross negligence or willful misconduct. The indemnity set
forth in this Section 8.06 shall be in addition to any other obligation or
liabilities of the Company hereunder or at common law or otherwise and shall
survive the termination of this Agreement.
Section 8.07 Duties of Trustee. The Trustee need perform only those duties
that are specifically set forth in this Agreement and no others; and in the
absence of bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement, but in case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Agreement, but need not
confirm or investigate the accuracy of mathematical calculations or other facts.
15
ARTICLE IX
TERMINATION
Section 9.01 Termination. This Agreement shall terminate upon the joint
written notice by the Company and the Fund to the Trustee that the Fund
Beneficially Owns less than five percent (5%) of the issued and outstanding
shares of each class of Capital Stock; provided, that, all or any part of such
reduction in Beneficial Ownership did not occur as a result of a violation of
this Agreement. Otherwise, the Voting Trust is hereby expressly declared to be
and shall be irrevocable. Notwithstanding the foregoing, if, at any time, the
Company's license agreement with respect to the Marks is permanently terminated,
with no further right to cure or appeal, by BCBSA as a result of the Company's
breach of its obligations thereunder, then so long as such breach is not due to
any act or omission of the Fund, the Fund shall have the right to terminate this
Agreement upon giving written notice to the Company and the Trustee.
Section 9.02 Delivery of Stock Certificate(s). As soon as practicable after
the termination of this Agreement, the Trustee shall deliver to the Fund or its
nominee stock certificate(s), with the appropriate legend as provided in the
Certificate of Incorporation, representing the number of shares of Capital Stock
Beneficially Owned by the Fund at the date of termination, if any, held by the
Voting Trust and upon payment by the Fund of any and all taxes and other
expenses relating to the transfer or delivery of such certificates.
ARTICLE X
MISCELLANEOUS
Section 10.01 Ownership; Authority. The Fund represents, warrants and
covenants to the Company that (i) as of the effective date of this Agreement,
the Fund is the Beneficial Owner of ________________ million (______________)
shares of Common Stock, (ii) the Fund does not Beneficially Own any shares of
Capital Stock other than __________________ million (_________) shares of Common
Stock and one (1) share of Class B Common Stock, (iii) for so long as the Fund
Beneficially Owns Fund Restricted Shares, those Fund Restricted Shares are, and
at all times will be, free and clear of any liens, claims, options, charges or
other encumbrances and (iv) the Fund has full power and authority to make, enter
into and carry out the terms of this Agreement.
Section 10.02 Merger, Consolidation, Sale of Assets. If, during the term of
this Agreement, the Company shall merge into or consolidate with another
corporation or corporations, or if all or substantially all of the assets of the
Company are transferred to another corporation, the shares of which are issued
to stockholders of the Company in connection with such merger, consolidation or
transfer, then the terms "WellChoice, Inc." or the "Company" shall be construed,
so long as the Marks continue to be licensed by such entity from BCBSA, to
include such successor corporation, and the Trustee shall receive and hold under
this Agreement any shares of such successor corporation received by it on
account of its ownership as Trustee of shares of Capital Stock held by it
hereunder prior to such merger, consolidation or transfer.
Section 10.03 Successors. This Agreement shall bind and inure to the
benefit of the parties hereto and each and all of their respective heirs,
executors, administrators, successors and
16
permitted assigns. Notwithstanding any provision of this Agreement to the
contrary, the provisions of this Agreement shall not be binding on any
transferee or purchaser from the Fund (other than a Person who is an Affiliate
of the Fund and except that any and all shares of Capital Stock sold in
violation of this Agreement, the Registration Rights Agreement, the Certificate
of Incorporation or the Bylaws shall remain subject to this Agreement). In case
at any time the Trustee shall resign and no Successor Trustee shall have been
appointed within thirty (30) days after notice of such resignation has been
filed and mailed as required by Section 8.04 hereof, the resigning Trustee may
forthwith apply to a court of competent jurisdiction for the appointment of a
Successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and appropriate, appoint a Successor Trustee.
Section 10.04 Amendments and Waivers. No amendment, modification,
supplement, termination, consent or waiver of any provision of this Agreement,
nor consent to any departure herefrom, shall in any event be effective unless
the same is in writing and is signed by the party against whom enforcement of
the same is sought. Any waiver of any provision of this Agreement and any
consent to any departure from the terms of any provision of this Agreement shall
be effective only in the specific instance and for the specific purpose for
which given.
Section 10.05 Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing, and shall be deemed to have been
duly given or made: (i) when delivered in person; (ii) three (3) days after
deposited in the United States mail, first class postage prepaid; (iii) in the
case of overnight courier services, one (1) business day after delivery to the
overnight courier service with payment provided; or (iv) in the case of telex or
telecopy or fax, when sent, verification received; in each case addressed as
follows:
if to the Company:
WellChoice, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
if to the Fund:
The New York Public Asset Fund
c/o LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
000 Xxxx 00xx Xxxxxx
00
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to the Trustee:
The Bank of New York
Corporate Trust Division
000 Xxxxxxx Xxxxxx,
0xx Xxxxx Xxxx
Xxx Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Ms. Xxxxxxx Xxxxxx, Vice President
Email: xxxxxxxx@xxxxxxxx.xxx
with a copy to:
Xxxxx Xxxx Xxxxxxxx Xxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxxxxx, Esq.
Email: xxxxxxxxxx@xxxxxxxxx.xxx
Section 10.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to conflicts of laws principles.
Section 10.07 Specific Performance; Injunctive Relief. The parties
acknowledge that there will be irreparable harm and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements set
forth herein. Therefore, it is agreed that, in addition to any other remedies
that may be available to any party upon any such violation, the non-defaulting
party shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to such party at
law or in equity.
Section 10.08 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
Section 10.09 Entire Agreement. This Agreement, including any exhibits and
attachments referred to herein, together with the Certificate of Incorporation,
Bylaws and Registration Rights Agreement contains the entire agreement between
the parties hereto regarding the subject matter hereof, and may not be amended,
altered or modified except by a writing signed by the parties hereto. This
Agreement supersedes all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof, all
of which
18
are specifically integrated into this Agreement. No party hereto shall be bound
by or charged with any oral or written agreements, representations, warranties,
statements, promises, information, arrangements or understandings, express or
implied, not specifically set forth herein; and the parties hereto further
acknowledge and agree that in entering into this Agreement they have not in any
way relied and will not rely in any way on any of the foregoing not specifically
set forth herein.
Section 10.10 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated. If any term, provision,
covenant or restriction contained in ARTICLE IV hereof is held by a court of
competent jurisdiction to be invalid, void or unenforceable, then such provision
shall be construed so as to require Fund Restricted Shares to be voted in the
identical proportions in favor of or in opposition to such matters as votes of
holders of Non-Fund Shares are cast.
Section 10.11 Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original of the party
executing it, but all of which together shall constitute one and the same
instrument.
Section 10.12 Legends; Certificates. Each certificate representing (i) Fund
Restricted Shares and (ii) any other securities issued in respect of Fund
Restricted Shares by reason of stock dividends, stock splits, spin-offs,
mergers, recapitalization, combinations, conversions, exchanges of shares or the
like, shall bear a legend to the effect that:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A VOTING
TRUST AND DIVESTITURE AGREEMENT (THE "AGREEMENT") DATED __________, 2002,
BY AND AMONG WELLCHOICE, INC. (THE "COMPANY"), THE BOARD OF THE NEW YORK
PUBLIC ASSET FUND (THE "FUND") AND THE BANK OF NEW YORK, AS TRUSTEE ("THE
TRUSTEE"), A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE
COMPANY."
No shares of Capital Stock may be held by the Fund or any of its Affiliates in
any street or nominee name. All Fund Restricted Shares shall be represented at
all times by stock certificates which do not represent any shares other than
Fund Restricted Shares and which are registered in the name of the Fund or any
of its Affiliates or are registered in a way which they can be readily
identified by the Company and its transfer agent(s) as Fund Restricted Shares.
The Fund shall provide such information and assistance as the Company may
reasonably request at any time to identify Fund Restricted Shares.
Section 10.13 Further Assurances. The Fund hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of the Company, to carry out the purpose and intent of this
Agreement.
Section 10.14 Corporate Governance Covenants. The Company covenants to the
Fund that, during the term of this Agreement, the Company shall:
19
(a) develop and implement an ethics policy, including, but not
limited to: (i) the designation of an ethics officer; (ii) the ability for the
ethics officer to have direct consultation with the audit committee of the Board
of Directors; (iii) the establishment of an ethics hotline for employees,
subscribers and providers; (iv) the adoption of a "code of conduct and ethics"
for directors and officers; and (v) the adoption and enforcement of an
anti-retaliation policy for individuals who report potential ethical wrongdoing;
(b) not make, offer or arrange any loans to directors or officers
of the Company to the extent prohibited by law;
(c) not engage any audit firm to provide consulting or other
non-accounting services (other than tax services and other services permitted by
law) at any time prior to the date which is five (5) years from the completion
of the most recent audit of the Company performed by such firm; and
(d) for a period of six (6) years from the IPO Date, maintain the
composition of the Company's Board of Directors such that at least seventy-one
percent (71%) of its members qualify as Independent Directors.
Section 10.15 Hedging Transactions. To the extent otherwise permitted by
the Certificate of Incorporation and this Agreement, the Fund may engage in
transactions designed to reduce its economic exposure (either risk of loss or
benefit of appreciation, or both) to its ownership of Capital Stock, including
swaps, put or call options, collars and forward sales transactions.
Section 10.16 Asset Preservation.
(a) Subject to the provisions of the next sentence hereof, the
affirmative vote of the Fund, as the holder of Class B Common Stock, shall be
required for (i) a recapitalization or restructuring of the Capital Stock (as
defined in the Certificate of Incorporation) of the Company; (ii) the creation
of a new class of Capital Stock of the Company or the creation of a series of
Preferred Stock (as defined in the Certificate of Incorporation); or (iii) the
issuance of additional shares of Capital Stock (including without limitation, as
to any of the foregoing, by means of an amendment to the Certificate of
Incorporation) that, in any of cases (i), (ii) or (iii), would adversely affect
the financial interests, voting rights, or Transferability (as defined in the
Certificate of Incorporation) of the Fund's shares of Capital Stock, as such
interests, voting rights and Transferability exist pursuant to the Certificate
of Incorporation and the Transaction Documents (as defined in the Certificate of
Incorporation). It is understood that the foregoing will not apply to, and the
affirmative vote of the Fund, as the holder of the Class B Common Stock, shall
not be required for: (1) the creation, authorization or issuance of shares of
Capital Stock to acquire the assets or stock of a Person (whether by asset or
stock purchase, merger or otherwise) provided such transaction is approved by an
Independent Board Majority or any recapitalization or restructuring of the
Capital Stock or amendment to the Certificate of Incorporation in connection
with a merger to which the Company is a party and which constitutes an Approved
Change of Control Proposal; (2) the creation, authorization or issuance of
additional shares of Capital Stock for stock option plans and other equity-based
compensation plans that are approved by an Independent Board Majority; (3) any
creation, authorization or
20
issuance of non-convertible indebtedness; (4) the creation of a series of
Preferred Stock and the authorization or issuance of additional shares of
Capital Stock for a shareholder rights plan; (5) the creation, authorization and
issuance of Capital Stock or debt convertible into Capital Stock for
underwritten public offerings and offerings pursuant to Rule 144A (promulgated
under the Securities Act) of securities at or above market price (it being
understood that an offering at a customary discount to then-prevailing market
prices will be deemed for this purpose to be at market price), except that
approval of the Fund, as the holder of the Class B Common Stock, will be
required if the securities have (or upon conversion could have) a class vote
(other than a customary class vote to elect directors arising from the failure
to make scheduled dividend payments and other than as required by applicable
law) or the securities are (or upon conversion could be) senior in right of
payment to the Capital Stock held by the Fund; or (6) from and after the fifth
anniversary of the IPO Date, the creation, authorization and issuance of a
series of Preferred Stock for sale in public or private transactions. It also is
understood that the affirmative vote of the Fund, as the holder of the Class B
Common Stock, in respect of the matters referenced in this Section 10.16(a)
shall not be required from and after the time that the share of Class B Common
Stock shall have been converted into Common Stock as provided in the Certificate
of Incorporation.
(b) In the event the Company engages in (i) a recapitalization or
restructuring of the Capital Stock of the Company; (ii) the creation of a new
class of Capital Stock of the Company or the creation of a series of Preferred
Stock; (iii) the issuance of additional shares of Capital Stock (including
without limitation, as to any of the foregoing, by means of an amendment to the
Certificate of Incorporation) that, in any of cases (i), (ii) or (iii) would
adversely affect the financial interests, voting rights, or Transferability of
the Fund's shares of Capital Stock as such interests, voting rights and
Transferability exist pursuant to the Certificate of Incorporation and the
Transaction Documents, such action shall be taken in a manner consistent with
the fiduciary obligations that the Board of Directors of the Company owes to its
stockholders upon advice of outside counsel.
(c) The Company shall not amend Section 2.A.4(b) of Article III of
its Certificate of Incorporation without the prior written consent of the Fund.
[signature page follows]
21
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
WELLCHOICE, INC.
By:
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Name:
------------------------------
Title:
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THE MEMBERS OF THE BOARD OF THE NEW
YORK PUBLIC ASSET FUND
Name:
---------------------------------
Name:
---------------------------------
Name:
---------------------------------
Name:
---------------------------------
Name:
---------------------------------
THE BANK OF NEW YORK
By:
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Name:
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Title:
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22
EXHIBIT A
Trustee Fee Schedule
