LICENSE AGREEMENT
License Agreement, dated as of November 1, 1994, between United Wisconsin
Services, Inc., a Wisconsin corporation ("UWS"), and U-Care HMO, Inc., a
Wisconsin service insurance corporation ("U-Care").
RECITALS
Blue Cross & Blue Shield United of Wisconsin ("Blue Cross"), UWS,
University Health Care, Inc. ("UHC"), U-Care and Health Professionals, Inc.
("HPI") have formed a joint venture (the "UHC Joint Venture") pursuant to an
amended and restated joint venture agreement, dated as of October 31, 1994 (the
"UHC Joint Venture Agreement"). Blue Cross, UWS, UWS Acquisition Corporation,
HMO-W, Incorporated and HMO of Wisconsin Insurance Corporation ("HMOW") have
formed a joint venture (the "HMOW Joint Venture") pursuant to an agreement of
merger and joint venture, dated as of October 11, 1994 (the "HMOW Joint Venture
Agreement" and, together with the UHC Joint Venture Agreement, the "Joint
Venture Agreements"). The parties to the Joint Venture Agreements have agreed
to coordinate the efforts of the UHC Joint Venture and the HMOW Joint Venture in
a single joint venture (the "Joint Venture").
Under Article 5 of the UHC Joint Venture Agreement, U-Care is selling its
assets, excluding the name "U-Care," to UWS. UWS and U-Care recognize that the
name "U-Care" is a valuable asset that will enhance the ability of the Joint
Venture to offer managed care products. UWS and U-Care wish to provide for the
licensing by U-Care to UWS of the right to use the name "U-Care."
Accordingly, UWS and U-Care agree as follows:
X. XXXXX OF LICENSE. U-Care grants to UWS the exclusive license (the
"License") to use the trademark "U-Care" and all related logos and marks now
used by U-Care to identify services provided by U-Care, including, without
limitation, the name "UW-Care" (collectively, the "Trademarks"). UWS may use
the Trademarks solely for the purpose of marketing and providing managed care
products offered by the Joint Venture, and may not grant sublicenses or
franchises of the License. Without limiting the generality of the foregoing,
U-Care may not use the Trademarks while the License is in effect. The License
terminates on the date, if any, on which (i) U-Care or its successors or assigns
repurchases U-Care's business as provided in the UHC Joint Venture Agreement or
(ii) the UHC Joint Venture terminates. If the U-Care business is not so
repurchased and the UHC Joint Venture is not terminated, the License continues
indefinitely. If the UHC Joint Venture terminates other than by reason of the
repurchase of the U-Care business, UHC may use the Trademarks without
restriction, unless (i) the termination occurs after November 1, 2004 or (ii)
the termination occurs prior to November 1, 2004 because of a breach or default
under the Joint Venture Agreement by UHC, in which case neither UWS nor UHC may
use the Trademarks for any purpose.
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2. PAYMENT OF ROYALTIES.
(a) In consideration of the grant of the License, UWS shall pay or
cause to be paid royalties ("Royalties") to U-Care calculated as follows:
(i) so long as the UHC Joint Venture and the HMOW Joint Venture
remain in effect, 10% of the aggregate income (loss) before income taxes
for the applicable period of all insured preferred provider organization
("PPO"), health maintenance organization ("HMO") and point of service
("POS") plans offered by the Joint Venture in the Applicable Geographical
Area (as defined in Section 2(c)(i)), which means (A) for PPO plans, (1)
net earned premium minus (2) the sum of incurred claims and administrative
expenses plus (3) net investment income earned and (B) for HMO and POS
plans, the amount determined in accordance with generally accepted
accounting principles; and
(ii) if the HMOW Joint Venture or the Service Period (as defined
in the Service Agreement, dated as of November 1, 1994 (the "LLC Service
Agreement"), between UWS and Community Health Systems, L.L.C. (the "LLC"))
terminates for any reason, 25% of the sum of:
(A) (1) the aggregate income (loss) before income taxes for the
applicable period of all HMO and POS plans offered by the UHC Joint Venture in
the Applicable Geographical Area, determined in accordance with the accounting
principles applied to prepare
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the financial statements of U-Care for the year ended December 31, 1993, minus
(2) an amount equal to U-Care's net profits for 1993 (or, in the case of the
first distribution, an amount equal to the sum of U-Care's net profits for 1993
and the fourth quarter of 1992), and
(B) the aggregate income (loss) before income taxes for the applicable
period of all PPO plans offered by the UHC Joint Venture in the Applicable
Geographical Area (calculated as provided above).
(b) Royalties shall be calculated for each calendar year or portion
thereof, commencing October 1, 1994, and ending on the date this Agreement
terminates in accordance with Section 3, by an independent accounting firm of
recognized standing selected by the Governing Board. Such accounting firm shall
make the calculation with respect to each year not later than March 31 of the
next succeeding year and shall promptly notify the Governing Board, Blue Cross,
UWS, UHC, U-Care and, unless the HMOW Joint Venture has terminated, HMOW in
writing of such calculation and shall set forth in reasonable detail the basis
therefor. Promptly following receipt of such notice, payment shall be made to
U-Care by check mailed to its address specified in Section 11. Any disputes
between UWS and U-Care regarding the calculation of Royalties shall be resolved
in accordance with Section 4. The first calculation of Royalties shall be made
for the period commencing October 1, 1994 and ending December 31, 1995.
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(c) For purposes of calculating Royalties:
(i) "Applicable Geographical Area" means (A) so long as the UHC
Joint Venture and the HMOW Joint Venture remain in effect, the following
Wisconsin counties: Xxxxx, Columbia, Xxxxxxxx, Xxxx, Dodge, Fond du Lac,
Grant, Green, Green Lake, Iowa, Juneau, Lafayette, Marquette, Monroe,
Richland, Sauk, Xxxxxx, Waushara and Winnebago and (ii) if the HMOW Joint
Venture terminates for any reason, the following Wisconsin counties:
Columbia, Dane, Dodge, Grant, Iowa, Juneau, Lafayette, Marquette, Richland
and Sauk;
(ii) income does not include investment income attributable to
funds of UWS not withdrawn from the Joint Venture or attributable to
additional capital contributions from UWS or one of its affiliates to HMOW;
(iii) the administrative expenses of each plan offered shall
not exceed the actual costs incurred by the underwriter(s) of such plan;
(iv) the amount of an aggregate loss for the applicable period
shall carry over and reduce income from the plans offered by the Joint
Venture in the successive applicable period(s) to the extent of such loss;
(v) no expense, loss or liability attributable to the
approximate $4.4 million debt assumed and outstanding by U-Care to
University of Wisconsin Hospital and Clinics referred to in Section 13.4 of
the UHC Joint Venture
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Agreement shall be taken into account;
(vi) income (loss) shall be computed without regard to
(A) administrative service payments by UWS affiliates to UWS pursuant to
any administrative service agreement between UWS and its affiliates in
connection with the payments to (1) LLC under the LLC Services Agreement,
(2) U-Care under this Agreement or (3) HPI under the Service Agreement,
dated as of November 1, 1994, between UWS and HPI, (B) any payment to LLC
under the LLC Services Agreement, (C) any payment to U-Care under this
Agreement or (D) any payment to HPI under the Service Agreement, dated as
of November 1, 1994, between UWS and HPI; and
(vii) if the HMOW Joint Venture terminates other than on
December 31 of any year, Royalties for that year shall be calculated in
accordance with Section 2(a)(i) for the period prior to termination and in
accordance with Section 2(a)(ii) for the period after termination.
3. TERMINATION AND FINAL ACCOUNTING.
This Agreement will terminate automatically if the UHC Joint Venture
terminates for any reason, including, without limitation, UHC's exercise of its
option to reacquire the U-Care business pursuant to Article 8 of the UHC Joint
Venture Agreement. If this Agreement terminates, a Royalty shall be calculated
for the period commencing October 1, 1994 and ending on the date of termination
("Aggregate Royalties") in accordance with the method for
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calculating Royalties under Section 2(a), subject to Section 2(c). To the
extent that Aggregate Royalties exceed the sum of the Royalties previously
received by U-Care, the excess shall be paid to U-Care within 60 days of the
date of termination. To the extent the sum of the Royalties previously received
by or owed to U-Care exceeds Aggregate Royalties, U-Care shall pay to UWS such
excess less the amount of any Royalty owed to U-Care (which shall be canceled)
within 60 days of the date of termination, but not in an amount greater than the
sum of the Royalties received by U-Care hereunder.
4. ARBITRATION. If UWS and U-Care cannot resolve a dispute arising from
this Agreement, the dispute will be submitted to arbitration in accordance with
this Section 4.
(a) Each side shall appoint an individual as arbitrator and the two
so appointed shall then appoint a third arbitrator. If either side refuses or
neglects to appoint an arbitrator within 30 days of receipt of a written notice
of demand for arbitration, the other side may appoint the second arbitrator. If
the two arbitrators do not agree on a third arbitrator within 30 days of their
appointment, each of the arbitrators shall nominate three individuals. Each
arbitrator shall then decline two of the nominations presented by the other
arbitrator. The third arbitrator shall then be chosen from the remaining two
nominations by drawing lots. The arbitrators shall be active or former officers
of insurance or reinsurance companies, managed
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care organizations, or Lloyd's of London Underwriters; the arbitrators shall not
have a personal or financial interest in the result of the arbitration.
(b) The arbitration hearings shall be held in Madison, Wisconsin, or
such other place as may be mutually agreed. Each side shall submit its case to
the arbitrators within 30 days of the selection of the third arbitrator or
within such longer period as may be agreed by the arbitrators. The arbitrators
shall not be obliged to follow judicial formalities or the rules of evidence
except to the extent required by governing law, that is, the state law of the
situs of the arbitration as herein agreed; they shall make their decisions
according to the practice of the reinsurance business. The decision rendered by
a majority of the arbitrators shall be final and binding on both sides. Such
decision shall be a condition precedent to any right of legal action arising out
of the arbitrated dispute which either side may have against the other.
Judgment upon the award rendered may be entered in any court having jurisdiction
thereof.
(c) Each side shall pay (i) the fees and expenses of its own
arbitrator, (ii) one-half of the fees and expenses of the third arbitrator and
(iii) one-half of the other expenses that the parties jointly incur directly
related to the arbitration proceeding. Other than as set forth above, each
party shall bear its own costs in connection with any such arbitration,
including, without limitation, (i) all legal, accounting and other
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professional fees and expenses and (ii) all other costs and expenses each party
incurs to prepare for such arbitration.
(d) Except as provided above, arbitration shall be based, insofar as
applicable, upon the Commercial Arbitration Rules of the American Arbitration
Association.
5. REPRESENTATIONS AND WARRANTIES. Each of UWS and U-Care represents to
the other that (a) it has the corporate power and authority to enter into,
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and (b) the execution and deliver of this Agreement and the
consummation of such transactions (i) have been duly authorized by all necessary
corporate action and (ii) will not conflict with, or result in a violation of,
any contract, commitment, agreement or arrangement to which it is a party.
6. AMENDMENTS. This Agreement may be amended only by a written agreement
signed by UWS and U-Care.
7. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall inure to the benefit of and bind UWS and
U-Care and their respective successors and assigns. Neither this Agreement nor
any right hereunder may be assigned by either party without the prior written
consent of the other.
(b) In accordance with Article 4 of the UHC Joint Venture Agreement,
U-Care will be dissolved. Prior to dissolution, U-Care may assign its rights
under this Agreement to a third party. In that event, the assignee will be
entitled to
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all rights of U-Care under this Agreement as if it were an original party to
this Agreement.
8. INDEPENDENT CONTRACTOR. U-Care shall at all times be an independent
contractor. U-Care shall have no authority to bind UWS, Blue Cross or HMOW to
any agreement, except to the extent such authority is expressly conferred upon
it by UWS in writing (exclusive of this Agreement) and U-Care will not take any
actions inconsistent with the provisions of this Section 8.
9. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of any party will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement will be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid, or unenforceable provision or by its severance herefrom, and
(d) in lieu of such illegal, invalid, or unenforceable provision, there will be
added automatically as a part of this Agreement, a legal, valid, and enforceable
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible.
10. WAIVER. A waiver by a party of any breach by the other party of any
provision of this Agreement shall not be deemed to be a waiver by such first
party of any subsequent breach.
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11. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Wisconsin (without giving effect to
principles of conflicts of laws) applicable to a contract executed and to be
performed in such state.
12. HEADINGS, ETC. The headings used in this Agreement have been inserted
for convenience and do not constitute matters to be construed or interpreted in
connection with this Agreement. Unless the context of this Agreement otherwise
requires, (a) words using the singular or plural number also include the plural
or singular number, respectively, and (b) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement.
13. NOTICES. Any notice or communication given pursuant to this Agreement
must be in writing and will be deemed to have been duly given if mailed (by
registered or certified mail, postage prepaid, return receipt requested), or if
transmitted by facsimile, or if delivered by courier, as follows:
To UWS
United Wisconsin Services, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Facsimile: 000-000-0000
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Attention: President
To U-Care
U-Care HMO, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Facsimile: 000-000-0000
Attention: President
All notices and other communications required or permitted under this Agreement
that are addressed as provided in this paragraph will, whether sent by mail,
facsimile or courier, be deemed given upon the first business day after actual
delivery to the party to whom such notice or other communication is sent (as
evidenced by the return receipt or shipping invoice signed by a representative
of such party or by the facsimile confirmation). Either party from time to time
may change its address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice will be deemed to
have been given until it is actually received by the party sought to be charged
with the contents thereof.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first set forth
above.
UNITED WISCONSIN SERVICES, INC.
By:
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Name:
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Title:
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U-CARE HMO, INC.
By:
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Name:
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Title:
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