**Exhibit10.09**

 

**BLUESHIELD****CONTROLLEDAFFILIATE LICENSE AGREEMENT****(Includesrevisions adopted by Member Plans through their June 12, 2003 meeting)**

 

This Agreement by and among Blue Cross and Blue ShieldAssociation (“BCBSA”) and Claim Management Services, Inc. (“ControlledAffiliate”), a Controlled Affiliate of the Blue Shield Plan(s), known asWellPoint Health Networks Inc. (“Plan”), which is also a Party signatory hereto.

 

WHEREAS, BCBSA is the owner of the BLUE SHIELD andBLUE SHIELD Design service marks;

 

WHEREAS, Plan and Controlled Affiliate desire that thelatter be entitled to use the BLUE SHIELD and BLUE SHIELD Design service marks(collectively the “Licensed Marks”) as service marks and be entitled to use theterm BLUE SHIELD in a trade name (“Licensed Name”);

 

NOW THEREFORE, in consideration of the foregoing andthe mutual agreements hereinafter set forth and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereby agree as follows:

 

**1.****                                      GRANTOF LICENSE**

 

Subject to the terms and conditions of this Agreement,BCBSA hereby grants to Controlled Affiliate the right to use the Licensed Marksand Name in connection with, and only in connection with:  (i) health care plans and related services,as defined in BCBSA’s License Agreement with Plan, and administering thenon-health portion of workers’ compensation insurance, and (ii) underwritingthe indemnity portion of workers’ compensation insurance, provided thatControlled Affiliate’s total premium revenue comprises less than 15 percent ofthe sponsoring Plan’s net subscription revenue.

 

This grant of rights is non-exclusive and is limited to the ServiceArea served by the Plan.  ControlledAffiliate may use the Licensed Marks and Name in its legal name on thefollowing conditions: (i) the legal name must be approved in advance, inwriting, by BCBSA; (ii) Controlled Affiliate shall not do business outside theService Area under any name or mark; and (iii) Controlled Affiliate shall notuse the Licensed Marks and Name, or any derivative thereof, as part of any nameor symbol used to identify itself in any securities market. ControlledAffiliate may use the Licensed Marks and Name in its Trade Name only with theprior, written, consent of BCBSA.

 

**2.****                                      QUALITYCONTROL**

 

A.                                   ControlledAffiliate agrees to use the Licensed Marks and Name only in connection with thelicensed services and further agrees to be bound by the conditions regardingquality control shown in attached Exhibit A as they may be amended by BCBSAfrom time-to-time.

**Amendedas of November 16, 2000**

 

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B.                                     ControlledAffiliate agrees to comply with all applicable federal, state and local laws.

 

C.                                     ControlledAffiliate agrees that it will provide on an annual basis (or more often ifreasonably required by Plan or by BCBSA) a report or reports to Plan and BCBSAdemonstrating Controlled Affiliate’s compliance with the requirements of thisAgreement including but not limited to the quality control provisions of thisparagraph and the attached Exhibit A.

 

D.                                    ControlledAffiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonablenotice, review and inspect the manner and method of Controlled Affiliate’srendering of service and use of the Licensed Marks and Name.

 

E.                                      Asused herein, a Controlled Affiliate is defined as an entity organized andoperated in such a manner, that it meets the following requirements:

 

(1)                                  APlan or Plans authorized to use the Licensed Marks in the Service Area of theControlled Affiliate pursuant to separate License Agreement(s) with BCBSA,other than such Controlled Affiliate’s License Agreement(s),  (the “Controlling Plan(s)”), must have thelegal authority directly or indirectly through wholly-owned subsidiaries toselect members of the Controlled Affiliate’s governing body having not lessthan 50% voting control thereof and to:

 

(a)                                  preventany change in the articles of incorporation, bylaws or other establishing orgoverning documents of the Controlled Affiliate with which the ControllingPlan(s) do(es) not concur;

 

(b)                                 exercisecontrol over the policy and operations of the Controlled Affiliate at leastequal to that exercised by persons or entities (jointly or individually) otherthan the Controlling Plan(s); and

 

Notwithstanding anything to the contrary in (a) through (b) hereof, theControlled Affiliate’s establishing or governing documents must also requirewritten approval by the Controlling Plan(s) before the Controlled Affiliatecan:

 

(i)                                     changeits legal and/or trade names;

 

(ii)                                  changethe geographic area in which it operates;

 

(iii)                               changeany of the type(s) of businesses in which it engages;

 

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(iv)                              create,or become liable for by way of guarantee, any indebtedness, other thanindebtedness arising in the ordinary course of business;

 

(v)                                 sellany assets, except for sales in the ordinary course of business or sales ofequipment no longer useful or being replaced;

 

(vi)                              makeany loans or advances except in the ordinary course of business;

 

(vii)                           enterinto any arrangement or agreement with any party directly or indirectlyaffiliated with any of the owners or persons or entities with the authority toselect or appoint members or board members of the Controlled Affiliate, otherthan the Plan or Plans (excluding owners of stock holdings of under 5% in apublicly traded Controlled Affiliate);

 

(viii)                        conductany business other than under the Licensed Marks and Name;

 

(ix)                                takeany action that any Controlling Plan or BCBSA reasonably believes will adverselyaffect the Licensed Marks and Name.

 

 

In addition, a Plan or Plans directly or indirectly through whollyowned subsidiaries shall own at least 50% of any for-profit ControlledAffiliate.

 

Or

 

(2)                                  APlan or Plans authorized to use the Licensed Marks in the Service Area of theControlled Affiliate pursuant to separate License Agreement(s) with BCBSA,other than such Controlled Affiliate’s License Agreement(s), (the “ControllingPlan(s)”), have the legal authority directly or indirectly through wholly-ownedsubsidiaries to select members of the Controlled Affiliate’s governing bodyhaving more than 50% voting control thereof and to:

 

(a)                                  preventany change in the articles of incorporation, bylaws or other establishing orgoverning documents of the Controlled Affiliate with which the ControllingPlan(s) do(es) not concur;

(b)                                 exercisecontrol over the policy and operations of the Controlled Affiliate.

 

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In addition, a Plan or Plans directly or indirectly throughwholly-owned subsidiaries shall own more than 50% of any for-profit ControlledAffiliate.

 

 

**3.****                                      SERVICEMARK USE**

 

A.                                   ControlledAffiliate recognizes the importance of a comprehensive national network ofindependent BCBSA licensees which are committed to strengthening the LicensedMarks and Name.  The ControlledAffiliate further recognizes that its actions within its Service Area mayaffect the value of the Licensed Marks and Name nationwide.

 

B.                                     ControlledAffiliate shall at all times make proper service mark use of the Licensed Marksand Name, including but not limited to use of such symbols or words as BCBSAshall specify to protect the Licensed Marks and Name and shall comply with suchrules (generally applicable to Controlled Affiliates licensed to use theLicensed Marks and Name) relative to service mark use, as are issued fromtime-to-time by BCBSA.  ControlledAffiliate recognizes and agrees that all use of the Licensed Marks and Name byControlled Affiliate shall inure to the benefit of BCBSA.

 

C.                                     ControlledAffiliate may not directly or indirectly use the Licensed Marks and Name in amanner that transfers or is intended to transfer in the Service Area thegoodwill associated therewith to another mark or name, nor may ControlledAffiliate engage in activity that may dilute or tarnish the unique value of theLicensed Marks and Name.

 

D.                                    IfControlled Affiliate meets the standards of 2E(1) but not 2E(2) above and anyof Controlled Affiliate’s advertising or promotional material is reasonably determinedby BCBSA and/or the Plan to be in contravention of rules and regulationsgoverning the use of the Licensed Marks and Name,  Controlled Affiliate shall for ninety (90) days thereafter obtainprior approval from BCBSA of advertising and promotional efforts using theLicensed Marks and Name, approval or disapproval thereof to be forthcomingwithin five (5) business days of receipt of same by BCBSA or its designee.  In all advertising and promotional efforts,Controlled Affiliate shall observe the Service Area limitations applicable toPlan.

 

E.                                      ControlledAffiliate shall use its best efforts in the Service Area to promote and buildthe value of the Licensed Marks and Name.

 

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**4.****                                      SUBLICENSINGAND ASSIGNMENT**

 

Controlled Affiliate shall not, directly orindirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, byoperation of law or otherwise, the rights granted hereunder and any such actshall be voidable at the sole option of Plan or BCBSA.  This Agreement and all rights and dutieshereunder are personal to Controlled Affiliate.

 

**5.****                                      INFRINGEMENT**

 

Controlled Affiliate shall promptly notify Plan andPlan shall promptly notify BCBSA of any suspected acts of infringement, unfaircompetition or passing off that may occur in relation to the Licensed Marks andName.  Controlled Affiliate shall not beentitled to require Plan or BCBSA to take any actions or institute anyproceedings to prevent infringement, unfair competition or passing off by thirdparties.  Controlled Affiliate agrees torender to Plan and BCBSA, without charge, all reasonable assistance inconnection with any matter pertaining to the protection of the Licensed Marksand Name by BCBSA.

 

**6.****                                      LIABILITYINDEMNIFICATION**

 

Controlled Affiliate and Plan hereby agree to save,defend, indemnify and hold BCBSA harmless from and against all claims, damages,liabilities and costs of every kind, nature and description (except thosearising solely as a result of BCBSA’s negligence) that may arise as a result ofor related to Controlled Affiliate’s rendering of services under the LicensedMarks and Name.

 

**7.****                                      LICENSETERM**

 

A.                                   Exceptas otherwise provided herein, the license granted by this Agreement shallremain in effect for a period of one (1) year and shall be automaticallyextended for additional one (1) year periods unless terminated pursuant to theprovisions herein.

 

B.                                     ThisAgreement and all of Controlled Affiliate’s rights hereunder shall immediatelyterminate without any further action by any party or entity in the event thatPlan ceases to be authorized to use the Licensed Marks and Name.

 

C.                                     Notwithstandingany other provision of this Agreement, this license to use the Licensed Marksand Name may be forthwith terminated by the Plan or the affirmative vote of themajority of the Board of Directors of BCBSA present and voting at a specialmeeting expressly called by BCBSA for the purpose on ten (10) days writtennotice to the Plan advising of the specific matters at issue and granting thePlan an opportunity to be heard and to present its response to

 

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the Board for:  (1) failure tocomply with any applicable minimum capital or liquidity requirement under thequality control standards of this Agreement; or (2) failure to comply with the“Organization and Governance” quality control standard of this Agreement; or(3) impending financial insolvency; or (4) for a Smaller Controlled Affiliate(as defined in Exhibit A), failure to comply with any of the applicablerequirements of Standards 2, 3, 4, 5 or 7 of attached Exhibit A; or (5) thependency of any action instituted against the Controlled Affiliate seeking itsdissolution or liquidation of its assets or seeking appointment of a trustee,interim trustee, receiver or other custodian for any of its property orbusiness or seeking the declaration or establishment of a trust for any of itsproperty or business, unless this Controlled Affiliate License Agreement hasbeen earlier terminated under paragraph 7(e); or (6) failure by a ControlledAffiliate that meets the standards of 2E(1) but not 2E(2) above to obtainBCBSA’s written consent to a change in the identity of any owner, in the extentof ownership, or in the identity of any person or entity with the authority toselect or appoint members or board members, provided that as to publicly tradedControlled Affiliates this provision shall apply only if the change affects aperson or entity that owns at least 5% of the Controlled Affiliate’s stock beforeor after the change; or (7) such other reason as is determined in good faithimmediately and irreparably to threaten the integrity and reputation of BCBSA,the Plans, any other licensee including Controlled Affiliate and/or theLicensed Marks and Name.

 

D.                                    Exceptas otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, shouldControlled Affiliate fail to comply with the provisions of this Agreement andnot cure such failure within thirty (30) days of receiving written noticethereof (or commence a cure within such thirty day period and continue diligentefforts to complete the cure if such curing cannot reasonably be completedwithin such thirty day period) BCBSA or the Plan shall have the right to issuea notice that the Controlled Affiliate is in a state of noncompliance.  If a state of noncompliance as aforesaid isundisputed by the Controlled Affiliate or is found to exist by a mandatorydispute resolution panel and is uncured as provided above, BCBSA shall have theright to seek judicial enforcement of the Agreement or to issue a notice oftermination thereof.  Notwithstandingany other provisions of this Agreement, any disputes as to the termination ofthis License pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shallnot be subject to mediation and mandatory dispute resolution.  All other disputes between BCBSA, the Planand/or Controlled Affiliate shall be submitted promptly to mediation andmandatory dispute resolution.  Themandatory dispute resolution panel shall have authority to issue orders forspecific performance and assess monetary penalties.  Except, however, as provided in Paragraphs 7(B) and 7(E) of thisAgreement, this license to use the Licensed Marks and Name may not be finally terminatedfor any reason without the affirmative vote of a majority of the present andvoting members of the Board of Directors of BCBSA.

 

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E.                                      ThisAgreement and all of Controlled Affiliate’s rights hereunder shall immediatelyterminate without any further action by any party or entity in the event that:

 

(1)                                  ControlledAffiliate shall no longer comply with item 2(E) above;

 

(2)                                  Appropriatedues, royalties and other payments for Controlled Affiliate pursuant toparagraph 9 hereof, which are the royalties for this License Agreement, aremore than sixty (60) days in arrears to BCBSA; or

 

(3)                                  Anyof the following events occur:  (i) avoluntary petition shall be filed by Controlled Affiliate seeking bankruptcy,reorganization, arrangement with creditors or other relief under the bankruptcylaws of the United States or any other law governing insolvency or debtorrelief, or (ii) an involuntary petition or proceeding shall be filed againstControlled Affiliate seeking bankruptcy, reorganization, arrangement withcreditors or other relief under the bankruptcy laws of the United States or anyother law governing insolvency or debtor relief and such petition or proceedingis consented to or acquiesced in by Controlled Affiliate or is not dismissedwithin sixty (60) days of the date upon which the petition or other documentcommencing the proceeding is served upon the Controlled Affiliate, or (iii) anorder for relief is entered against Controlled Affiliate in any case under thebankruptcy laws of the United States, or Controlled Affiliate is adjudgedbankrupt or insolvent as those terms are defined in the Uniform Commercial Codeas enacted in the State of Illinois by any court of competent jurisdiction, or(iv) Controlled Affiliate makes a general assignment of its assets for thebenefit of creditors, or (v) the Department of Insurance or other regulatoryagency assumes control of Controlled Affiliate or delinquency proceedings(voluntary or involuntary) are instituted, or (vi) an action is brought byControlled Affiliate seeking its dissolution or liquidation of its assets orseeking the appointment of a trustee, interim trustee, receiver or othercustodian for any of its property or business, or (vii) an action is institutedby any governmental entity or officer against Controlled Affiliate seeking itsdissolution or liquidation of its assets or seeking the appointment of atrustee, interim trustee, receiver or other custodian for any of its propertyor business and such action is consented to or acquiesced in by ControlledAffiliate or is not dismissed within one hundred thirty (130) days of the dateupon which the pleading or other document commencing the action is served uponthe Controlled Affiliate, provided that if the action is stayed or itsprosecution is enjoined, the one hundred thirty (130) day period is tolled forthe duration of the stay or injunction, and provided further, that theAssociation’s Board of Directors may toll or extend the 130 day period at anytime prior to its expiration, or (viii) a trustee, interim trustee, receiver orother custodian for any of Controlled Affiliate’s property or business isappointed or the Controlled Affiliate is ordered dissolved or liquidated.  Notwithstanding any other provision of thisAgreement,

 

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a declaration or a request for declaration of the existence of a trustover any of the Controlled Affiliate’s property or business shall not in itselfbe deemed to constitute or seek appointment of a trustee, interim trustee,receiver or other custodian for purposes of subparagraphs 7(e)(3)(vii) and(viii) of this Agreement.

 

F.                                      Upontermination of this Agreement for cause or otherwise, Controlled Affiliateagrees that it shall immediately discontinue all use of the Licensed Marks andName, including any use in its trade name.

 

G.                                     Upontermination of this Agreement, Controlled Affiliate shall immediately notifyall of its customers that it is no longer a licensee of BCBSA and, if directedby the Association’s Board of Directors, shall provide instruction on how thecustomer can contact BCBSA or a designated licensee to obtain furtherinformation on securing coverage.  Thenotification required by this paragraph shall be in writing and in a formapproved by BCBSA.  The BCBSA shall havethe right to audit the terminated entity’s books and records to verifycompliance with this paragraph.

 

H.                                    Inthe event this Agreement terminates pursuant to 7(b) hereof, or in the eventthe Controlled Affiliate is a Larger Controlled Affiliate (as defined inExhibit A), upon termination of this Agreement, the provisions of Paragraph7.G. shall not apply and the following provisions shall apply:

 

(1)                                  TheControlled Affiliate shall send a notice through the U.S. mails, with firstclass postage affixed, to all individual and group customers, providers,brokers and agents of products or services sold, marketed, underwritten oradministered by the Controlled Affiliate under the Licensed Marks andName.  The form and content of thenotice shall be specified by BCBSA and shall, at a minimum, notify therecipient of the termination of the license, the consequences thereof, andinstructions for obtaining alternate products or services licensed byBCBSA.  This notice shall be mailedwithin 15 days after termination.

 

(2)                                  TheControlled Affiliate shall deliver to BCBSA within five days of a request byBCBSA a listing of national accounts in which the Controlled Affiliate isinvolved (in a control, participating or servicing capacity), identifying thenational account and the Controlled Affiliate’s role therein.

 

(3)                                  Unlessthe cause of termination is an event respecting BCBSA stated in paragraph 15(a)or (b) of the Plan’s license agreement with BCBSA to use the Licensed Marks andName, the Controlled Affiliate, the Plan, and any other Licensed ControlledAffiliates of the Plan shall be jointly liable for payment to BCBSA of anamount equal to $25 multiplied by the number of Licensed Enrollees of theControlled Affiliate; provided that if any other Plan is permitted by BCBSA touse marks or names licensed by BCBSA in the Service Area

 

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established by this Agreement, the payment shall be multiplied by afraction, the numerator of which is the number of Licensed Enrollees of theControlled Affiliate, the Plan, and any other Licensed Controlled Affiliatesand the denominator of which is the total number of Licensed Enrollees in theService Area.  Licensed Enrollee meanseach and every person and covered dependent who is enrolled as an individual ormember of a group receiving products or services sold, marketed or administeredunder marks or names licensed by BCBSA as determined at the earlier of (i) theend of the last fiscal year of the terminated entity which ended prior totermination or (ii) the fiscal year which ended before any transactions causingthe termination began.  Notwithstandingthe foregoing, the amount payable pursuant to this subparagraph H. (3) shall bedue only to the extent that, in BCBSA’s opinion, it does not cause the networth of the Controlled Affiliate, the Plan or any other Licensed ControlledAffiliates of the Plan to fall below 100% of the capital benchmark formula, orits equivalent under any successor formula, as set forth in the applicablefinancial responsibility standards established by BCBSA (provided suchequivalent is approved for purposes of this sub paragraph by the affirmativevote of three-fourths of the Plans and three-fourths of the total then currentweighted vote of all the Plans); measured as of the date of termination, andadjusted for the value of any transactions not made in the ordinary course ofbusiness.  This payment shall not be duein connection with transactions exclusively by or among Plans or theiraffiliates, including reorganizations, combinations or mergers, where the BCBSABoard of Directors determines that the license termination does not result in amaterial diminution in the number of Licensed Enrollees or the extent of theircoverage.

 

(4)                                  BCBSAshall have the right to audit the books and records of the ControlledAffiliate, the Plan, and any other Licensed Controlled Affiliates of the Planto verify compliance with this paragraph 7.H.

 

(5)                                  Asto a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligationsare immediately enforceable in a court of competent jurisdiction.  As to a breach of 7.H.(1), (2) or (4) by theControlled Affiliate, the parties agree there is no adequate remedy at law andBCBSA is entitled to obtain specific performance.

 

I.                                         Inthe event the Controlled Affiliate is a Smaller Controlled Affiliate (asdefined in Exhibit A), the Controlled Affiliate agrees to be jointly liable forthe amount described in H.3. hereof upon termination of the BCBSA licenseagreement of any Larger Controlled Affiliate of the Plan.

 

J.                                        BCBSAshall be entitled to enjoin the Controlled Affiliate or any related party in acourt of competent jurisdiction from entry into any transaction which wouldresult in a termination of this Agreement unless the Plan’s license from BCBSAto use the Licensed Marks and Names has been terminated

 

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pursuant to 10(d) of the Plan’s license agreement upon the required 6month written notice.

 

K.                                    BCBSAacknowledges that it is not the owner of assets of the Controlled Affiliate.

 

L.                                      Inthe event that the Plan has more than 50 percent voting control of theControlled Affiliate under Paragraph 2(E)(2) above and is a Larger ControlledAffiliate (as defined in Exhibit A), then the vote called for in Paragraphs7(C) and 7(D) above shall require the affirmative vote of three-fourths of thePlans and three-fourths of the total then current weighted vote of all thePlans.

 

**8.****                                      DISPUTERESOLUTION**

 

The parties agree that any disputes between them orbetween or among either of them and one or more Plans or Controlled Affiliatesof Plans that use in any manner the Blue Shield and Blue Shield Marks and Nameare subject to the Mediation and Mandatory Dispute Resolution process attachedto and made a part of Plan’s License from BCBSA to use the Licensed Marks andName as Exhibits 5, 5A and 5B as amended from time-to-time, which documents areincorporated herein by reference as though fully set forth herein.

 

**9.****                                      LICENSEFEE**

 

Controlled Affiliate will pay to BCBSA a fee for thisLicense determined pursuant to the formula(s) set forth in Exhibit B.

 

**10.****                               JOINTVENTURE**

 

Nothing contained in the Agreement shall be construedas creating a joint venture, partnership, agency or employment relationshipbetween Plan and Controlled Affiliate or between either and BCBSA.

 

**Amendedas of March 11, 1999**

 

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**11.****                               NOTICESAND CORRESPONDENCE**

 

Notices regarding the subject matter of this Agreementor breach or termination thereof shall be in writing and shall be addressed induplicate to the last known address of each other party, marked respectively tothe attention of its President and, if any, its General Counsel.

 

**12.****                               COMPLETEAGREEMENT**

 

This Agreement contains the complete understandings ofthe parties in relation to the subject matter hereof.  This Agreement may only be amended by the affirmative vote ofthree-fourths of the Plans and three-fourths of the total then current weightedvote of all the Plans as officially recorded by the BCBSA Corporate Secretary.

 

 

**13.****                               SEVERABILITY**

 

If any term of this Agreement is held to be unlawfulby a court of competent jurisdiction, such findings shall in no way affect theremaining obligations of the parties hereunder and the court may substitute alawful term or condition for any unlawful term or condition so long as theeffect of such substitution is to provide the parties with the benefits of thisAgreement.

 

**14.****                               NONWAIVER**

 

No waiver by BCBSA of any breach or default in performanceon the part of Controlled Affiliate or any other licensee of any of the terms,covenants or conditions of this Agreement shall constitute a waiver of anysubsequent breach or default in performance of said terms, covenants orconditions.

 

**14A.****                      VOTING**

 

For all provisions of this Agreement referring to voting, the term‘Plans’ shall mean all entities licensed under the Blue Cross License Agreementand/or the Blue Shield License Agreement, and in all votes of the Plans underthis Agreement the Plans shall vote together. For weighted votes of the Plans, the Plan shall have a number of votesequal to the number of weighted votes (if any) that it holds as a Blue CrossPlan plus the number of weighted votes (if any) that it holds as a Blue ShieldPlan.  For all other votes of the Plans,the Plan shall have one vote.  For allquestions requiring an affirmative three-fourths weighted vote of the Plans,the requirement shall be deemed satisfied with a lesser weighted vote unlesssix (6) or more Plans fail to cast weighted votes in favor of the question.

 

 

**Amendedas of June 16, 2000**

 

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THIS PAGE ISINTENTIONALLY BLANK.

 

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**15.****                               GOVERNINGLAW**

 

This Agreement shall be governed by, and construed andinterpreted in accordance with, the laws of the State of Illinois.

 

**16.****                               HEADINGS**

 

The headings inserted in this agreement are forconvenience only and shall have no bearing on the interpretation hereof.

 

IN WITNESS WHEREOF, the parties have caused thisLicense Agreement to be executed and effective as of the date of last signaturewritten below.

 

 
| **Claim  Management Services, Inc.:**       |
|---------------------------------------------|
|                                        |   |
| By:                                         | /s/ Thomas P.  Casper |   |
|                                        |   |
| Date:                                       | 9/30/03 |   |
|                                        |   |
|                                        |   |
| **WellPoint  Health Networks Inc.:**        |
|                                        |   |
| By:                                         | /s/ Leonard  Schaeffer |   |
|                                        |   |
| Date:                                       | 10/3/03 |   |
|                                        |   |
|                                        |   |
| **BLUE  CROSS AND BLUE SHIELD ASSOCIATION** |
|                                        |   |
| By:                                         | /s/ Roger G.  Wilson |   |
|                                        |   |
| Date:                                       | 10/6/03 |   |
|                                             |  |  |  |  |

 

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**EXHIBIT A**

 

 

**CONTROLLEDAFFILIATE LICENSE STANDARDS**

June 2003

**PREAMBLE**

 

 

The standards for licensing Controlled Affiliates are established byBCBSA and are subject to change from time-to-time upon the affirmative vote ofthree-fourths (3/4) of the Plans and three-fourths (3/4) of the total weightedvote.  Each licensed Plan is required touse a standard Controlled Affiliate license form provided by BCBSA and tocooperate fully in assuring that the licensed Controlled Affiliate maintainscompliance with the license standards.

 

The Controlled Affiliate License provides a flexible vehicle toaccommodate the potential range of health and workers’ compensation relatedproducts and services Plan Controlled Affiliates provide.  The Controlled Affiliate License collapsesformer health Controlled Affiliate licenses (HCC, HMO, PPO, TPA, and IDS) intoa single license using the following business-based criteria to provide aframework for license standards:

 

•                  Percent ofControlled Affiliate controlled by parent: Greater than 50 percent or 50 percent?

 

•                  Riskassumption:  yes or no?

 

•                  Medical caredelivery:  yes or no?

 

•                  Size of theControlled Affiliate: If the Controlled Affiliate has health or workers’compensation administration business, does such business constitute 15 percentor more of the parent’s and other licensed health subsidiaries’ memberenrollment?

 

 

**Amended September 19, 2002**

 

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For purposes of definition:

 

•                  A “smallerControlled Affiliate:”  (1) comprisesless than fifteen percent (15%) of Plan’s and its licensed ControlledAffiliates’ total member enrollment (as reported on the BCBSA QuarterlyEnrollment Report, excluding rider and freestanding coverage, and treating anentity seeking licensure as licensed);* or (2) underwrites the indemnityportion of workers’ compensation insurance and has total premium revenue lessthan 15 percent of the sponsoring Plan’s net subscription revenue.

 

•                  A “largerControlled Affiliate” comprises fifteen percent (15%) or more of Plan’s and itslicensed Controlled Affiliates’ total member enrollment (as reported on theBCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage,and treating an entity seeking licensure as licensed.)*

 

Changes in Controlled Affiliate status:

 

If **any** Controlled Affiliate’s status changes regarding: its Planownership level, its risk acceptance or direct delivery of medical care, theControlled Affiliate shall notify BCBSA within thirty (30) days of suchoccurrence in writing and come into compliance with the applicable standardswithin six (6) months.

 

If a smaller Controlled Affiliate’s health and workers’ compensationadministration business reaches or surpasses fifteen percent (15%) of the totalmember enrollment of the Plan and licensed Controlled Affiliates, theControlled Affiliate shall:

 

**AmendedSeptember 19, 2002**

 

 

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1.               Within thirty (30)days, notify BCBSA of this fact in writing, including evidence that theControlled Affiliate meets the minimum liquidity and capital (BCBSA “HealthRisk-Based Capital (HRBC)” as defined by the NAIC and state-established minimumreserve) requirements of the larger Controlled Affiliate FinancialResponsibility standard; and

 

2.               Within six (6)months after reaching or surpassing the fifteen percent (15%) threshold,demonstrate compliance with all license requirements for a larger ControlledAffiliate.

 

If a Controlled Affiliate that underwrites the indemnity portion ofworkers’ compensation insurance receives a change in rating or proposed changein rating, the Controlled Affiliate shall notify BCBSA within 30 days ofnotification by the external rating agency.

 

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*For purposes of this calculation,

 

The numerator equals:

 

Applicant Controlled Affiliate’s member enrollment, as defined inBCBSA’s Quarterly Enrollment Report (excluding rider and freestandingcoverage).

 

The denominator equals:

 

Numerator PLUS Plan and all other licensed Controlled Affiliates’member enrollment, as reported in BCBSA’s Quarterly Enrollment Report(excluding rider and freestanding coverage).

 

**AmendedSeptember 19, 2002**

 

 

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**STANDARDSFOR LICENSED CONTROLLED AFFILIATES**

 

As described in Preamble section of Exhibit A to the Affiliate LicenseAgreement, each controlled affiliate seeking licensure must answer fourquestions.  Depending on the controlledaffiliate’s answers, certain standards apply:

 

1.                                       Whatpercent of the controlled affiliate is controlled by the parent Plan?

 
| **More than 50%** |   | **50%**        |   | **100% and Primary Business is  Government Non-Risk** |
|-------------------|--------|----------------|--------|-------------------------------------------------------|
|              |   |           |   |                                                  |
|                   |   |                |   |                                                       |
|              |   |           |   |                                                  |
| Standard 1A, 4    |   | Standard 1B, 4 |   |                                                  |
|              |   |           |   | Standard 4*,10A                                       |
|              |   |           |   |                                                  |

 

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*  Applicable only if using thenames and marks.

 

**IN ADDITION,**

 

2.                                       Isrisk being assumed?

 
| **Yes**                                                                                                              |   | **No**                                                                                                                                                                                           |
|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                      |   |                                                                                                                                                                                                  |   |  |   |  |   |  |   |  |
| Controlled Affiliate  underwrites any indemnity portion of workers’ compensation insurance

Standards 7A-7E, 12 |   | Controlled Affiliate  comprises < 15% of total member enrollment of Plan and its licensed  affiliates, and does not underwrite the indemnity portion of workers’  compensation insurance |   | Controlled Affiliate  comprises > 15% of total member enrollment of Plan and its licensed  affiliates, and does not underwrite the indemnity portion of workers’  compensation insurance |   | Controlled Affiliate  comprises < 15% of total member enrollment of Plan and its licensed  affiliates |   | Controlled Affiliate  comprises > 15% of total member enrollment of Plan and its licensed  affiliates

 

  Standard 6H |   | Controlled Affiliate’s  Primary Business is Government Non-Risk

 

  Standard 10B |
|                                                                                                                 |   |                                                                                                                                                                                             |   |   |   |   |   |   |   |   |
|                                                                                                                 |   | Standard 2 (Guidelines  1.1,1.2) and Standard 11                                                                                                                                                 |   | Standard 6H |   | Standard 2  (Guidelines 1.1,1.3) and Standard 11 |   |   |   |   |

 

**IN ADDITION,**

 

3.                                       Ismedical care being directly provided?

 
| **Yes**     |   | **No**      |
|-------------|--------|-------------|
|        |   |        |
|             |   |             |
|        |   |        |
| Standard 3A |   | Standard 3B |

 

**IN ADDITION,**

 

4.                                       Ifthe controlled affiliate has health or workers’ compensation administrationbusiness, does such business comprise 15% or more of the total memberenrollment of Plan and its licensed controlled affiliates?

 
| **Yes**         |   | **No**                                                                                                       |
|-----------------|--------|--------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                              |   |  |   |  |   |  |
| Standards 6A-6J |   | Controlled Affiliate is  not a former primary licensee and elects to participate in BCBSA national  programs |   | Controlled Affiliate is  a former primary licensee |   | Controlled Affiliate is  not a former primary licensee and does not elect to participate in BCBSA  national programs |   | Controlled Affiliate’s  Primary Business is Government Non-Risk |
|            |   |                                                                                                         |   |   |   |   |   |   |
|            |   | Standards 5,8,9B,12                                                                                          |   | Standards 5,8,9A,11,12 |   | Standards 5,8,12 |   | Standards 8, 10(C),12 |

 

17

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**Standard1 - Organization and Governance**

 

1A.)                         TheStandard for more than 50% Plan control is:

 

A Controlled Affiliate shall be organized and operated in such a mannerthat a licensed Plan or Plans authorized to use the Licensed Marks in theService Area of the Controlled Affiliate pursuant to separate LicenseAgreement(s) with BCBSA, other than such Controlled Affiliate’s LicenseAgreement(s), (the “Controlling Plan(s)”), have the legal authority, directlyor indirectly through wholly-owned subsidiaries: 1) to select members of theControlled Affiliate’s governing body having more than 50% voting controlthereof; and 2) to prevent any change in the articles of incorporation, bylawsor other establishing or governing documents of the Controlled Affiliate withwhich the Controlling Plan(s) do(es) not concur; and 3) to exercise controlover the policy and operations of the Controlled Affiliate. In addition, a Planor Plans directly or indirectly through wholly-owned subsidiaries shall ownmore than 50% of any for-profit Controlled Affiliate.

 

1B.)                           TheStandard for 50% Plan control is:

 

A Controlled Affiliate shall be organized and operated in such a mannerthat a licensed Plan or Plans authorized to use the Licensed Marks in theService Area of the Controlled Affiliate pursuant to separate LicenseAgreement(s) with BCBSA, other than such Controlled Affiliate’s LicenseAgreement(s), (the “Controlling Plan(s)”), have the legal authority, directlyor indirectly through wholly-owned subsidiaries:

 

1)                                      toselect members of the Controlled Affiliate’s governing body having not lessthan 50%  voting control thereof ; and

 

2)                                      toprevent any change in the articles of incorporation, bylaws or otherestablishing or governing documents of the Controlled Affiliate with which theControlling Plan(s) do(es)  not concur;and

 

3)                                      toexercise control over the policy and operations of the Controlled Affiliate atleast equal to that exercised by persons or entities (jointly or individually)other than the Controlling Plan(s).

 

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Notwithstanding anything to the contrary in 1) through 3) hereof, theControlled Affiliate’s establishing or governing documents must also requirewritten approval by the Controlling Plan(s) before the Controlled Affiliatecan:

 

•                                          changethe geographic area in which it operates

 

•                                          changeits legal and/or trade names

 

•                                          changeany of the types of businesses in which it engages

 

•                                          create,or become liable for by way of guarantee, any indebtedness, other thanindebtedness arising in the ordinary course of business

 

•                                          sellany assets, except for sales in the ordinary course of business or sales ofequipment no longer useful or being replaced

 

•                                          makeany loans or advances except in the ordinary course of business

 

•                                          enterinto any arrangement or agreement with any party directly or indirectlyaffiliated with any of the owners or persons or entities with the authority toselect or appoint members or board members of the Controlled Affiliate, otherthan the Plan or Plans (excluding owners of stock holdings of under 5% in apublicly traded Controlled Affiliate)

 

•                                          conductany business other than under the Licensed Marks and Name

 

•                                          takeany action that any Controlling Plan or BCBSA reasonably believes willadversely affect the Licensed Marks and Name.

 

In addition, a Plan or Plans directly or indirectly throughwholly-owned subsidiaries shall own at least 50% of any for-profit ControlledAffiliate.

 

19

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**Standard2 - Financial Responsibility**

 

A Controlled Affiliate shall be operated in a manner that providesreasonable financial assurance that it can fulfill all of its contractualobligations to its customers.  If arisk-assuming Controlled Affiliate ceases operations for any reason, Blue Crossand/or Blue Cross Plan coverage will be offered to all Controlled Affiliatesubscribers without exclusions, limitations or conditions based on healthstatus.  If a nonrisk-assumingControlled Affiliate ceases operations for any reason, sponsoring Plan(s) willprovide for services to its (their) customers.

 

**Standard3 - State Licensure/Certification**

 

3A.)                         TheStandard for a Controlled Affiliate that employs, owns or contracts on asubstantially exclusive basis for medical services is:

 

A Controlled Affiliate shall maintain unimpaired licensure orcertification for its medical care providers to operate under applicable statelaws.

 

 

3B.)                           TheStandard for a Controlled Affiliate that does not employ, own or contract on asubstantially exclusive basis for medical services is:

 

A Controlled Affiliate shall maintain unimpaired licensure orcertification to operate under applicable state laws.

 

**Standard4 - Certain Disclosures**

 

A Controlled Affiliate shall make adequate disclosure in contractingwith third parties and in disseminating public statements of 1) the structureof the Blue Cross and Blue Shield System; and 2) the independent nature ofevery licensee; and 3) the Controlled Affiliate’s financial condition.

 

**Standard5 - Reports and Records for Certain Smaller Controlled Affiliates**

 

For a smaller Controlled Affiliate that does not underwrite theindemnity portion of workers’ compensation insurance, the Standard is:

 

20

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A Controlled Affiliate and/or its licensed Plan(s) shall furnish, on atimely and accurate basis, reports and records relating to these Standards andthe License Agreements between BCBSA and Controlled Affiliate.

 

**Standard6 - Other Standards for Larger Controlled Affiliates**

 

Standards 6(A) - (I) that follow apply to larger Controlled Affiliates.

 

Standard 6(A):  Board ofDirectors

 

A Controlled Affiliate Governing Board shall act in the interest of itsCorporation in providing cost-effective health care services to itscustomers.  A Controlled Affiliate shallmaintain a governing Board, which shall control the Controlled Affiliate,composed of a majority of persons other than providers of health care services,who shall be known as public members.  Apublic member shall not be an employee of or have a financial interest in ahealth care provider, nor be a member of a profession which provides healthcare services.

 

Standard 6(B):  Responsivenessto Customers

 

A Controlled Affiliate shall be operated in a manner responsive tocustomer needs and requirements.

 

Standard 6(C):  Participation inNational Programs

 

A Controlled Affiliate shall effectively and efficiently participate ineach national program as from time to time may be adopted by the Member Plansfor the purposes of providing portability of membership between the licenseesand ease of claims processing for customers receiving benefits outside of theControlled Affiliate’s Service Area.

 

Such programs are applicable to licensees, and include:

 

1.               Transfer Program;

 

2.               BlueCard Program;

 

21

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3.               Inter-PlanTeleprocessing System (ITS)

 

4.               Electronic ClaimsRouting Process;

 

5.               National AccountPrograms, effective January 1, 2002; and

 

6.               Business AssociateAgreement for Blue Cross and Blue Shield Licensees, effective April 14, 2003.

 

Standard 6(D):  FinancialPerformance Requirements

 

In addition to requirements under the national programs listed in

Standard 6C:  Participation inNational Programs, a Controlled Affiliate shall take such action as required toensure its financial performance in programs and contracts of an inter-licenseenature or where BCBSA is a party.

 

Standard 6(E):  Cooperation withPlan Performance Response Process

 

A Controlled Affiliate shall cooperate with BCBSA’s Board of Directorsand its Plan Performance and Financial Standards Committee in theadministration of the Plan Performance Response Process and in addressingControlled Affiliate performance problems identified thereunder.

 

Standard 6(F):  IndependentFinancial Rating

 

A Controlled Affiliate shall obtain a rating of its financial strengthfrom an independent rating agency approved by BCBSA’s Board of Directors forsuch purpose.

 

Standard 6(G):  Best Efforts

 

During each year, a Controlled Affiliate shall use its best efforts inthe designated Service Area to promote and build the value of the Blue CrossMark.

 

Standard 6(H):  FinancialResponsibility

 

A Controlled Affiliate shall be operated in a manner that providesreasonable financial assurance that it can fulfill all of its contractualobligations to its customers.

 

**AmendedSeptember 19, 2002**

 

22

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Standard 6(I):  Reports andRecords

 

A Controlled Affiliate shall furnish to BCBSA on a timely and accuratebasis reports and records relating to compliance with these Standards and theLicense Agreements between BCBSA and Controlled Affiliate.  Such reports and records are the following:

 

A)                                                                                  BCBSAControlled Affiliate Licensure Information Request; and

 

B)                                                                                    Biennialtrade name and service mark usage material, including disclosure material; and

 

C)                                                                                    Changesin the ownership and governance of the Controlled Affiliate, including changesin its charter, articles of incorporation, or bylaws, changes in a ControlledAffiliate’s Board composition, or changes in the identity of the ControlledAffiliate’s Principal Officers, and changes in risk acceptance, contractgrowth, or direct delivery of medical care; and

 

D)                                                                                   QuarterlyFinancial Report, Semi-annual “Health Risk-Based Capital (HRBC) Report” as definedby the NAIC, Annual Financial Forecast, Annual Certified Audit Report,Insurance Department Examination Report, Annual Statement filed with StateInsurance Department (with all attachments), and

 

E)                                                                                     QuarterlyEnrollment Report.

 

**Amended March 14, 2002**

 

23

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Standard 6(J):  Control byUnlicensed Entities Prohibited

 

No Controlled Affiliate shall cause or permit an entity other than aPlan or a Licensed Controlled Affiliate thereof to obtain control of the ControlledAffiliate or to acquire a substantial portion of its assets related tolicensable services.

 

**Standard7 - Other Standards for Risk-Assuming Workers’ Compensation ControlledAffiliates**

 

Standards 7(A) - (E) that follow apply to Controlled Affiliates thatunderwrite the indemnity portion of workers’ compensation insurance.

 

Standard 7 (A):  FinancialResponsibility

 

A Controlled Affiliate shall be operated in a manner that providesreasonable financial assurance that it can fulfill all of its contractualobligations to its customers.

 

Standard 7(B):  Reports andRecords

 

A Controlled Affiliate shall furnish, on a timely and accurate basis,reports and records relating to compliance with these Standards and the LicenseAgreements between BCBSA and the Controlled Affiliate.  Such reports and records are the following:

 

A.           BCBSA ControlledAffiliate Licensure Information Request; and

 

B.             Biennial trade nameand service mark usage materials, including disclosure materials; and

 

C.             Annual CertifiedAudit Report, Annual Statement as filed with the State Insurance Department(with all attachments), Annual NAIC’s Risk-Based Capital Worksheets forProperty and Casualty Insurers, Annual Financial Forecast; and

 

D.            Quarterly FinancialReport, Quarterly Estimated Risk-Based Capital for Property and CasualtyInsurers, Insurance Department Examination Report, Quarterly Enrollment Report;and

 

**Amended September 19, 2002**

 

24

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E.              Notification of allchanges and proposed changes to independent ratings within 30 days of receiptand submission of a copy of all rating reports; and

 

F.              Changes in theownership and governance of the Controlled Affiliate including changes in itscharter, articles of incorporation, or bylaws, changes in a ControlledAffiliate’s Board composition, Plan control, state license status, operatingarea, the Controlled Affiliate’s Principal Officers or direct delivery ofmedical care.

 

Standard 7(C):  Loss Prevention

 

A Controlled Affiliate shall apply loss prevention protocol to both newand existing business.

 

Standard 7(D):  ClaimsAdministration

 

A Controlled Affiliate shall maintain an effective claimsadministration process that includes all the necessary functions to assureprompt and proper resolution of medical and indemnity claims.

 

Standard 7(E):  Disability andProvider Management

 

A Controlled Affiliate shall arrange for the provision of appropriateand necessary medical and rehabilitative services to facilitate earlyintervention by medical professionals and timely and appropriate return towork.

 

**Amended November 16, 2000**

 

25

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**Standard8 - Cooperation with Controlled Affiliate License Performance Response ProcessProtocol**

 

A Controlled Affiliate and its Sponsoring Plan(s) shall cooperate withBCBSA’s Board of Directors and its Plan Performance and Financial StandardsCommittee in the administration of the Controlled Affiliate License PerformanceResponse Process Protocol (ALPRPP) and in addressing Controlled Affiliatecompliance problems identified thereunder.

 

**Standard9(A) - Participation in National Programs by Smaller Controlled Affiliates thatwere former Primary Licensees**

 

A smaller controlled affiliate that formerly was a Primary Licensee shalleffectively and efficiently participate in certain national programs from timeto time as may be adopted by Member Plans for the purposes of providing ease ofclaims processing for customers receiving benefits outside of the ControlledAffiliate’s service area and be subject to certain relevant financial andreporting requirements.

 

A.                                   Nationalprogram requirements include:

 

•                                          BlueCardProgram;

 

•                                          Inter-PlanTeleprocessing System (ITS);

 

•                                          TransferProgram;

 

•                                          ElectronicClaims Routing Process, effective until October 16, 2003; and

 

•                                          NationalAccount Programs, effective January 1, 2002

 

B.                                     FinancialRequirements include:

 

•                                          Standard6(D): Financial Performance Requirements and Standard 6(H): FinancialResponsibility; or

 

•                                          Afinancial guarantee covering the Controlled Affiliate’s BlueCard Programobligations in a form, and from a guarantor, acceptable to BCBSA.

 

26

----

 

 

C.                                     Reportingrequirements include:

 

•                                          TheSemi-annual Health Risk-Based Capital (HRBC) Report.

 

**AmendedJune 13, 2002**

 

27

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**Standard9(B) - Participation in National Programs by Smaller Controlled Affiliates**

 

A smaller controlled affiliate that voluntarily elects to participatein national programs in accordance with BlueCard and other relevant Policiesand Provisions shall effectively and efficiently participate in nationalprograms from time to time as may be adopted by Member Plans for the purposesof providing ease of claims processing for customers receiving benefits outsideof the controlled affiliate’s service area and be subject to certain relevantfinancial and reporting requirements.

 

A.                                   Nationalprogram requirements include:

 

•                  BlueCardProgram;

 

•                  Inter-PlanTeleprocessing System (ITS);

 

•                  ElectronicClaims Routing Process, effective until October 16, 2003; and

 

•                  National AccountPrograms, effective January 1, 2002.

 

B.                                     FinancialRequirements include:

 

•                  Standard 6(D):Financial Performance Requirements and Standard 6(H): Financial Responsibility;or

 

•                  A financialguarantee covering the Controlled Affiliate’s BlueCard Program obligations in aform, and from a guarantor, acceptable to BCBSA.

 

**AmendedJune 13, 2002**

 

28

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**Standard10 - Other Standards for Controlled Affiliates Whose Primary Business isGovernment Non-Risk**

 

Standards 10(A) - (C) that follow apply to Controlled Affiliates whoseprimary business is government non-risk.

 

Standard 10(A) - Organization and Governance

 

A Controlled Affiliate shall be organized and operated in such a mannerthat it is 1) wholly owned by a licensed Plan or Plans and 2) the sponsoringlicensed Plan or Plans have the legal ability to prevent any change in thearticles of incorporation, bylaws or other establishing or governing documentsof the Controlled Affiliate with which it does not concur.

 

29

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Standard 10(B) - Financial Responsibility

 

A Controlled Affiliate shall be operated in a manner that providesreasonable financial assurance that it can fulfill all of its contractualobligations to its customers.

 

Standard 10(C):- Reports and Records

 

A Controlled Affiliate shall furnish, on a timely and accurate basis,reports and records relating to compliance with these Standards and the LicenseAgreements between BCBSA and the Controlled Affiliate.  Such reports and records are the following:

 

A.                                   BCBSAAffiliate Licensure Information Request; and

 

B.                                     Biennialtrade name and service mark usage materials, including disclosure material; and

 

C.                                     AnnualCertified Audit Report, Annual Statement (if required) as filed with the StateInsurance Department (with all attachments), Annual NAIC Risk-Based CapitalWorksheets (if required) as filed with the State Insurance Department (with allattachments), and Insurance Department Examination Report (if applicable)*; and

 

D.                                    Changesin the ownership and governance of the Controlled Affiliate, including changesin its charter, articles of incorporation, or bylaws, changes in the ControlledAffiliate’s Board composition, Plan control, state license status, operatingarea, the Controlled Affiliate’s Principal Officers or direct delivery ofmedical care.

 

30

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**Standard 11- Participation inElectronic Claims Routing Process**

 

A smaller controlled affiliate for which this standard applies pursuantto the Preamble section of Exihibit A of the Controlled Affiliate LicenseAgreement shall effectively and efficiently participate in certain nationalprograms from time to time as may be adopted by Member Plans for the purposesof providing ease of claims processing for customers receiving benefits outsideof the controlled affiliate’s service area.

 

National program requirements include:

 

A.           Electronic ClaimsRouting Process effective upon October 16, 2003.

 

**AmendedJune 13, 2002**

 

31

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**Standard 12: Participation in MasterBusiness Associate Agreement by Smaller Controlled Affiliate Licensees**

 

Effective April 14, 2003, all smaller controlled affiliates shallcomply with the terms of the Business Associate Agreement for Blue Cross andBlue Shield Licensees to the extent they perform the functions of a businessassociate or subcontractor to a business associate, as defined by the BusinessAssociate Agreement.

 

**Amended September 19, 2002**

 

32

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**EXHIBIT B**

ROYALTY FORMULA FOR SECTION 9 OF THE

CONTROLLED AFFILIATE LICENSE AGREEMENT

 

 

Controlled Affiliate will pay BCBSA a fee for this license inaccordance with the following formula:

 

**FOR RISKAND GOVERNMENT NON-RISK PRODUCTS:**

 

For Controlled Affiliates not underwriting the indemnity portion ofworkers’ compensation insurance:

 

An amount equal to its pro rata share of each sponsoring Plan’s duespayable to BCBSA computed with the addition of the Controlled Affiliate’ssubscription revenue and contracts arising from products using the marks.  The payment by each sponsoring Plan of itsdues to BCBSA, including that portion described in this paragraph, will satisfythe requirement of this paragraph, and no separate payment will be necessary.

 

For Controlled Affiliates underwriting the indemnity portion ofworkers’ compensation insurance:

 

An amount equal to 0.35 percent of the gross revenue per annum ofControlled Affiliate arising from products using the marks; plus, an annual feeof $5,000 per license for a Controlled Affiliate subject to Standard 7.

 

For Controlled Affiliates whose primary business is government non-risk:

 

An amount equal to its pro-rata share of each sponsoring Plan’s duespayable to BCBSA computed with the addition of the Controlled Affiliate’sgovernment non-risk beneficiaries.

 

33

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**FORNONRISK PRODUCTS:**

 

An amount equal to 0.24 percent of the gross revenue per annum ofControlled Affiliate arising from products using the marks; plus:

 

1)                   An annual feeof $5,000 per license for a Controlled Affiliate subject to Standard 6 D.

 

2)                   An annual feeof $2,000 per license for all other Controlled Affiliates.

 

The foregoing shall be reduced by one-half where both a BLUE CROSS® andBLUE SHIELD® License are issued to the same Controlled Affiliate.  In the event that any license period isgreater or less than one (1) year, any amounts due shall be prorated.  Royalties under this formula will becalculated, billed and paid in arrears.

 

34

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