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EXHIBIT 10.2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of August 7, 2002, is made by and between
COBALT CORPORATION (the "PLEDGOR"), and M&I MARSHALL & ILSLEY BANK ("M&I").
RECITALS
A. The Pledgor is the legal and beneficial owner of the shares of Pledged
Stock (as hereinafter defined) hereby pledged by the Pledgor.
B. Pursuant to a Loan Agreement of even date herewith (as amended or
modified from time to time, the "LOAN AGREEMENT"), between M&I and the Pledgor,
M&I has made available certain credit facilities to the Pledgor.
C. It is a condition precedent to M&I making any loans or otherwise
extending credit to the Pledgor under the Loan Agreement that the Pledgor
execute and deliver to M&I a pledge agreement in the form hereof.
AGREEMENTS
In consideration of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby agrees with M&I, as follows:
1. DEFINED TERMS. All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Loan Agreement. All
terms defined in the Uniform Commercial Code in effect from time to time in the
State and used herein shall have the same definitions herein as specified
therein; provided, however, if a term is defined in Article 9 of the Uniform
Commercial Code of the State differently than in another Article of the Uniform
Commercial Code of the State, the term has the meaning specified in Article 9.
As used herein, the following terms have the following meanings:
"CODE" means the Uniform Commercial Code from time to time in effect
in the State.
"COLLATERAL" means the Pledged Stock and all Proceeds.
"ISSUER" means each issuer of Pledged Stock listed on SCHEDULE 1
hereto.
"OBLIGATIONS" has the meaning given to it in the Loan Agreement.
"PLEDGED STOCK" means the shares of capital stock or other equity
interests listed on SCHEDULE 1 hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be issued
or granted by the Issuer to the Pledgor in respect of the Pledged Stock
while this Agreement is in effect.
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"PROCEEDS" means all "proceeds" as such term is defined in Section
9-102 of the Code and shall include, without limitation, all dividends or
other income from the Pledged Stock, collections thereon, or distributions
with respect thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STATE" means the State of Wisconsin.
2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby delivers to
M&I, all of the Pledged Stock and hereby grants to M&I a first priority security
interest in the Collateral as security for the prompt and complete performance
of the Obligations.
3. STOCK POWERS. Concurrently with the delivery to M&I of each
certificate representing one or more shares of Pledged Stock, the Pledgor shall
deliver an undated stock power covering such certificate, duly executed in blank
by the Pledgor.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants
that:
(a) all the shares of such Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(b) the Pledgor is the record and beneficial owner of, and
has good and marketable title to, such Pledged Stock, free of any and
all liens or options in favor of, or claims of, any other person,
except the security interest created by this Agreement and Permitted
Liens; and
(c) upon delivery to M&I of the stock certificates
evidencing such Pledged Stock and the stock powers, the security
interest created by this Agreement will constitute a valid, perfected
first priority security interest in the Collateral granted by the
Pledgor, enforceable in accordance with its terms against all
creditors of the Pledgor and any persons purporting to purchase any
Collateral from the Pledgor, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
5. COVENANTS. The Pledgor covenants and agrees with M&I that, from and
after the date of this Agreement until the Obligations are performed in full:
(a) If the Pledgor shall, as a result of its ownership of
any Pledged Stock, become entitled to receive or shall receive any
stock certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares of any Pledged Stock, or otherwise in respect
thereof, the Pledgor shall accept the same as the agent of M&I, hold
the same in trust for M&I and deliver the same forthwith to M&I in the
exact form received, duly indorsed by the Pledgor to M&I, if required,
together with an undated
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stock power covering such certificate duly executed in blank by the
Pledgor, to be held by M&I, subject to the terms hereof, as additional
collateral security for the Obligations of the Pledgor. Any property
distributed to the Pledgor upon or in respect of any Pledged Stock
upon the liquidation, dissolution, recapitalization or reorganization
of an Issuer, shall be delivered to M&I as additional collateral
security for the Obligations of the Pledgor. If any property
distributed in respect of any Pledged Stock shall be received by the
Pledgor while an Event of Default exists, the Pledgor shall, until
such property is delivered to M&I, hold the property in trust for M&I,
segregated from other property of the Pledgor, as additional
collateral security for the Obligations of the Pledgor.
(b) Without the prior written consent of M&I, the Pledgor
shall not vote to enable, or take any other action to permit, an
Issuer to issue any stock or other equity securities of any nature or
to issue any other securities convertible into or granting the right
to purchase or exchange for any stock or other equity securities of
any nature of an Issuer, sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Collateral, or create, incur or permit to exist any lien or option in
favor of, or any claim of any person with respect to, any of the
Collateral, or any interest therein, except for the security interests
created by this Agreement (other than Permitted Liens). The Pledgor
will defend the right, title and interest of M&I in and to the
Collateral against the claims and demands of all persons whomsoever
other than holders of Permitted Liens.
(c) At any time and from time to time, upon the written
request of M&I to the Pledgor, and at its sole expense, the Pledgor
will promptly and duly execute and deliver such further instruments
and documents and take such further actions as M&I may reasonably
request for the purposes of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall
be or become evidenced by any promissory note, other instrument or
chattel paper, such note, instrument or chattel paper shall be
immediately delivered to M&I, duly endorsed in a manner satisfactory
to M&I, to be held as Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save M&I harmless from, any
and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the
Collateral granted by the Pledgor or in connection with any of the
transactions contemplated by this Agreement.
6. VOTING RIGHTS. Unless an Event of Default shall have occurred and
be continuing, the Pledgor shall be permitted to exercise all voting and
corporate rights with respect to such Pledged Stock; PROVIDED, HOWEVER, that no
vote shall be cast or corporate right exercised or other action taken which, in
M&I's reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of this Agreement.
7. RIGHTS OF M&I. If an Event of Default shall occur and be
continuing, M&I shall have the right to have any or all shares of Pledged Stock
registered in its name or the name of its nominee, and M&I or its nominee may
thereafter exercise all voting, corporate and other rights
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pertaining to such Pledged Stock at any meeting of shareholders of an Issuer or
otherwise and any and all rights of conversion, exchange, subscription and any
other rights, privileges or options pertaining to such Pledged Stock as if it
were the absolute owner thereof (including, without limitation, the right to
exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of an Issuer, or upon the exercise by the Pledgor or M&I
of any right, privilege or option pertaining to such Pledged Stock, and in
connection therewith, the right to deposit and deliver any and all of such
Pledged Stock with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as M&I may determine).
The rights of M&I hereunder shall not be conditioned or
contingent upon the pursuit by M&I of any right or remedy against an Issuer or
any obligor or against any other person which may be or become liable in respect
of all or any part of the Obligations or against any collateral security
therefor, guarantee thereof or right of offset with respect thereto. M&I shall
not be liable for any failure to demand, collect or realize upon all or any part
of the Collateral or for any delay in doing so, nor shall M&I be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other person or to take any other action whatsoever with
regard to the Collateral or any part thereof.
8. REMEDIES; SALE PROCEEDS.
(a) If an Event of Default shall occur and be continuing,
M&I may exercise, in addition to all other rights and remedies granted
in this Agreement, all rights and remedies of a secured party under
the Code as M&I deems advisable. Without limiting the generality of
the foregoing, M&I, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Pledgor, an
Issuer, any obligor or any other person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels at public or private
sale or sales, in the over-the-counter market, at any exchange,
broker's board or office of M&I or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption
of any credit risk.
M&I shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in the Pledgor, which right
or equity is hereby waived or released. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten
(10) days before such sale or other disposition.
(b) M&I shall apply any Proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after
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deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of
M&I hereunder, including, without limitation, reasonable attorneys'
fees and disbursements of counsel to M&I, to the payment in whole or
in part of the Obligations, in such order as set forth in the Loan
Agreement or as M&I may otherwise decide, and only after such
application and after the payment by M&I of any other amount required
by any provision of law, including, without limitation, Section
9-615(1)(c) of the Code, need M&I account for the surplus, if any, to
the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against M&I
arising out of the exercise by it of any rights hereunder, except such
claims and damages arising out of the gross negligence or willful
misconduct of M&I. The Pledgor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of Collateral are
insufficient to pay the Obligations of the Pledgor and the reasonable
fees and disbursements of any attorneys employed by M&I to collect
such deficiency.
9. PRIVATE SALES.
(a) The Pledgor recognizes that M&I may be unable to effect
a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to
the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms
less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner.
M&I shall be under no obligation to delay a sale of any of the Pledged
Stock for the period of time necessary to permit the applicable Issuer
thereof to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if
such Issuer would agree to do so.
(b) The Pledgor further agrees to use its best efforts to
do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Pledged Stock pursuant
to this section valid and binding and in compliance with any and all
other applicable requirements of law. The Pledgor further agrees that
a breach of any of the covenants contained in this Section will cause
irreparable injury to M&I, that M&I has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this Section 9 shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred.
10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUER AND OBLIGOR.
The Pledgor hereby authorizes and instructs each Issuer of its Pledged Stock to
comply with any instruction received by it from M&I in writing that (a) states
that an Event of Default exists and (b) is otherwise in
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accordance with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
11. SECURITY AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT. The Pledgor
hereby irrevocably constitutes and appoints M&I and any officer or agent of
M&I, with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in M&I's own name, from time to
time in M&I's discretion so long as an Event of Default exists, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
including, without limitation, any financing statements, endorsements,
assignments or other instruments of transfer.
The Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
Section 11. All powers, authorizations and agencies contained in this Agreement
are coupled with an interest and are irrevocable until the Obligations are
performed in full.
12. DUTY OF M&I. M&I's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it in the same
manner as M&I deals with similar securities and property for its own account.
Neither M&I nor any of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other person or
to take any other action whatsoever with regard to the Collateral or any part
thereof.
13. FILING FINANCING STATEMENTS. The Pledgor authorizes M&I to file
financing statements with respect to the Collateral without the signature of
the Pledgor in such form and in such filing offices as M&I reasonably
determines appropriate to perfect the security interests of M&I under this
Agreement.
14. NOTICES. All notices, requests and demands to or upon M&I
or the Pledgor to be effective shall be delivered in the manner and to the
addresses set forth in Section 8.7 of the Loan Agreement. All notices, requests
and demands to or upon an Issuer shall be effective, shall be delivered in the
manner set forth in Section 8.7 of the Loan Agreement and addressed to the
Issuer at the address of the Pledgor set forth in Section 8.7 of the Loan
Agreement.
15. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
16. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES. M&I shall
not by any act (except by a written instrument signed by M&I), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of
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Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of M&I, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by M&I of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which M&I would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
17. SECTION HEADINGS. The section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
18. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of M&I and
their successors and assigns.
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19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF WISCONSIN
WITHOUT GIVING EFFECT TO ITS CONFICTS OF LAW PROVISIONS.
20. CONSENT TO JURISDICTION AND VENUE. All judicial proceedings
brought against the Pledgor with respect to this Pledge Agreement shall be
brought in any state or federal court of competent jurisdiction in the State of
Wisconsin, and, by execution and delivery of this Pledge Agreement, the Pledgor
accepts, for itself and in connection with its properties, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any final judgment rendered thereby in
connection with this Pledge Agreement from which no appeal has been taken or is
available. The Pledgor irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
FORUM NON CONVENIENS which it may now or hereafter have to the bringing of any
such action or proceeding in any such jurisdiction. Nothing herein shall limit
the right of M&I to bring proceedings against the Pledgor in a court of any
other jurisdiction.
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IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.
COBALT CORPORATION
BY: /s/ Thomas R. Hefty
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Its: Chairman & CEO
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BY: /s/ Gail L. Hanson
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Its: Sr VP, Treasurer & CFO
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M&I MARSHALL & ILSLEY BANK
BY: /s/ Thomas F. Bickelhaupt
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Its: Vice President
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SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
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<Caption>
Stock No. of
Certificate Shares
Issuer Class of Stock No(s). Pledged
Blue Cross & Blue Shield Common Stock 2 2,000,000
United of Wisconsin
</Table>
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ACKNOWLEDGMENT AND CONSENT
The undersigned is an Issuer referred to in the foregoing Pledge Agreement
and hereby acknowledges receipt of a copy of the Pledge Agreement, dated as of
August 7, 2002, made by the Pledgor (as defined therein) in favor of M&I (as
defined therein) (as amended, supplemented or otherwise modified from time to
time, the "PLEDGE AGREEMENT"). The undersigned agrees for the benefit of M&I as
follows:
1. The undersigned will be bound by the terms of the Pledge Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify M&I promptly in writing of the
occurrence of any of the events described in paragraph 5(a) of the Pledge
Agreement.
BLUE CROSS & BLUE SHIELD UNITED OF
WISCONSIN
By: /s/ Thomas R. Hefty
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Title: Chairman & CEO
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