Fill and Sign the Amended Agreement Form

AMENDED AND RESTATED SETTLEMENT AGREEMENT 1. Parties. The parties (collectively, the "Parties" and individually, a "Party") to this Amended and Restated Settlement Agreement (this "Agreement") are: (a) Jeremiah W. "Jay" Nixon, Attorney General of the State of Missouri (the "Attorney General"); (b) The Missouri Department of Insurance and Keith A. Wenzel, its Director (referred to collectively as the "Department of Insurance"); (c) Blue Cross and Blue Shield of Missouri ("Blue Cross Blue Shield"), a Missouri not for profit health services corporation; and (d) RightCHOICE Managed Care, Inc. ("RightCHOICE"), a Missouri for profit general business corporation. This Agreement amends, restates and supersedes in its entirety that certain Settlement Agreement between the Parties dated September 20, 1998, and all amendments thereto. 2. Pending Litigation. A purpose of this Agreement is to settle certain civil actions. Those actions are: (a) Blue Cross Blue Shield of Missouri, Plaintiff v. Jay Angoff, Director of the Missouri Department of Insurance, the Missouri Department of Insurance and Jeremiah W. "Jay" Nixon, No. CV196-619CC, in the Circuit Court of Cole County, Missouri (the "Purposes Litigation"). The Purposes Litigation arises from a series of transactions consummated in 1994 (the "1994 Reorganization"). In those transactions, certain assets and liabilities of Blue Cross Blue Shield were transferred to a newly formed for-profit subsidiary, RightCHOICE, and a minority interest in RightCHOICE was sold pursuant to a public stock offering; and (b) Blue Cross Blue Shield of Missouri v. Jay Angoff, Director of the Missouri Department of Insurance, the Missouri Department of Insurance and Jeremiah W. "Jay" Nixon, No. 81172, in the Supreme Court of Missouri (on transfer from Appeal WD 53798, in the Missouri Court of Appeals, Western District) (collectively, the "Purposes Litigation Appeal"). 3. Additional Purposes. Additional purposes of this Agreement include: (a) Providing that the assets of Blue Cross Blue Shield will be used in a manner which is consistent with Missouri law and the history and past purposes of Blue Cross Blue Shield; (b) Protecting the interests of all those who subscribe to the indemnity and managed care plans of Blue Cross Blue Shield and its affiliates, consistent with the contracts that define their rights and any additional rights that they might have under law; (c) Providing for the continuation, on the part of a successor to Blue Cross Blue Shield, of its membership in the national Blue Cross and Blue Shield Association and rights as a licensee of the Blue Cross and Blue Shield names and marks; (d) Fulfilling all duties owed by Blue Cross Blue Shield and its directors and officers; (e) Fulfilling all duties owed by RightCHOICE and its directors and officers to its shareholders; and (f) Providing for the reorganization of Blue Cross Blue Shield in accordance with the Missouri General Not For Profit Corporation Law and the Reorganization Agreement described below. 4. Payment for Public Purpose. On the Closing Date (as defined in Paragraph 8 below), but prior to and separate from the implementation of the Reorganization Agreement (as defined below), Blue Cross Blue Shield shall pay to the Foundation the amount of $12,780,000 in partial satisfaction of claims by various parties, including the Attorney General, Department of Insurance and amici curiae, that Blue Cross Blue Shield has a public purpose obligation, which amount is to be used by the Foundation (as defined below) to carry out its stated purposes. 5. Reorganization Agreement. As partial consideration for their mutual undertakings in this Agreement, promptly following the dismissal of the Purposes Litigation and Purposes Litigation Appeal in accordance with paragraph 7 hereof: (a) the Attorney General and Department of Insurance shall (1) cause a new Missouri not for profit public benefit corporation (the "Foundation") to be organized and incorporated by filing with the Missouri Secretary of State Articles of Incorporation in the form attached hereto as Exhibit A, causing Bylaws in the form attached hereto as Exhibit B to be adopted as the Bylaws of the Foundation, and appointing the initial members of the Board of Directors of the Foundation, (2) cause a new Delaware for profit corporation ("New RIT") to be organized and incorporated by filing with the Secretary of State of Delaware a Certificate of Incorporation in the form attached hereto as Exhibit C, causing one share of its common stock to be issued to the Foundation, and causing Bylaws in the form attached as Exhibit D to be adopted as the Bylaws of New RIT, (3) cause the Board of Directors of the Foundation to authorize the Foundation to execute an Agreement and Plan of Reorganization (the "Reorganization Agreement") in the form attached as Exhibit E and fulfill all obligations and satisfy all conditions thereunder, and take all other actions as are necessary or appropriate to consummate the transactions contemplated by the Reorganization Agreement in accordance with the Reorganization Agreement, (4) cause the Board of Directors of New RIT to authorize New RIT to execute the Reorganization Agreement and fulfill all obligations and satisfy all conditions thereunder, and take all other actions as are necessary or appropriate to consummate the transactions contemplated by the Reorganization Agreement in accordance with the Reorganization Agreement, and (5) cause the Foundation and New RIT to execute the Reorganization Agreement; and (b) Blue Cross Blue Shield and RightCHOICE shall execute the Reorganization Agreement, and take all other actions necessary or appropriate to consummate the transactions contemplated by the Reorganization Agreement in accordance with the Reorganization Agreement. The terms of the Reorganization Agreement and other agreements to be executed in connection therewith control as to the rights of the parties and steps to be taken thereunder. The Reorganization Agreement provides for the consummation of a series of transactions (the "Reorganization") whereby Blue Cross Blue Shield will be converted into a Missouri for profit general business corporation, reincorporated in Delaware, and subsequently merged with RightCHOICE. The Foundation will become the owner of the same percentage of the issued and outstanding stock of the resulting entity ("New RightCHOICE") as Blue Cross Blue Shield owns in RightCHOICE immediately prior to the Reorganization. The public shareholders of RightCHOICE immediately prior to the Reorganization will become the owners of the remainder of the issued and outstanding stock of New RightCHOICE. Shares of New RightCHOICE owned by the Foundation will be liquidated over time and the proceeds applied to purposes stated in the Foundation's charter documents. 6. [This paragraph is intentionally left blank.] 7. Disposition of Litigation. In further consideration of their mutual undertakings in this Agreement and the Reorganization Agreement, the Parties shall dispose of certain pending litigation as follows: (a) Immediately upon execution of this Agreement, the Parties who are litigants in the Purposes Litigation shall file in the Circuit Court of Cole County a Joint Notice of Dismissal (in the form attached hereto as Exhibit F) of all pending claims in the Purposes Litigation; (b) At such later time on or before February 8, 2000 as is agreed to by the Parties, those Parties who are litigants in the Purposes Litigation Appeal shall file a joint motion in the Supreme Court of Missouri in the form attached hereto as Exhibit F for dismissal of all appeals pending in the Purposes Litigation Appeal; (c) No Party shall take any step to prosecute any claim that is now asserted in the Purposes Litigation or the Purposes Litigation Appeal so long as this Agreement remains in force and effect; provided, however, that the undertaking of the Department of Insurance under this subparagraph is subject to the limitations of R.S.Mo. section 374.217 (1994) if those limitations are applicable to that undertaking; and (d) On the Closing Date, if there remains pending any claims in the Purposes Litigation or the Purposes Litigation Appeal that have not already been dismissed, the Parties will stipulate to the dismissal with prejudice of such claims. 8. Releases in Favor of Blue Cross Blue Shield and RightCHOICE. In further consideration of their mutual undertakings in this Agreement and the Reorganization Agreement, the Parties agree to the releases described in this paragraph. The releases described in this paragraph shall become effective on the date (referred to herein as the "Closing Date") after which all of the conditions precedent to the Reorganization are satisfied or waived and on which the Reorganization is consummated. Blue Cross Blue Shield and RightCHOICE will not consummate the Reorganization unless and until they receive written notice from the Attorney General and Director of the Department of Insurance that the Sarkis litigation and legal opinion conditions precedent in Sections 4.01(f) and 4.05(h)(iii), respectively, of the Reorganization Agreement have been satisfied or waived. (a) Subject to the exceptions contained in subparagraph 8(e), the Attorney General and Department of Insurance on behalf of themselves, their offices, and the State of Missouri (collectively, "the Paragraph 8 Releasors") release Blue Cross Blue Shield, RightCHOICE, their respective present and past affiliated corporations, their successors and assigns, their present and past directors, officers, agents, employees and independent contractors (all of whom are collectively referred to as "the Paragraph 8 Releasees") from any and all claims, causes of action, liabilities and judgments arising out of or relating to the 1994 Reorganization or the operation of Blue Cross Blue Shield from the date of the 1994 Reorganization through April 20, 1998. (b) Subject to the exceptions contained in subparagraph 8(e), the Paragraph 8 Releasors release the Paragraph 8 Releasees from all claims, causes of action, liabilities and judgments that were asserted or might have been asserted in the Purposes Litigation and Purposes Litigation Appeal. (c) Subject to the exceptions contained in subparagraph 8(e), the Paragraph 8 Releasors release the Paragraph 8 Releasees from any and all claims, causes of action, liabilities and judgments arising from or related to the execution and performance of this Agreement, the Reorganization Agreement, or the consummation of the Reorganization. (d) Subject to the exceptions contained in subparagraph 8(e), the Paragraph 8 Releasors release the Paragraph 8 Releasees from any and all claims, causes of action, judgments, claims, disputes, investigations, audits or complaints listed on Exhibit G attached hereto. (e) Claims in the following classes are excluded from the releases given in this paragraph 8: (i) Any claim by consumers lodged with the Department of Insurance or the Attorney General; (ii) Any claims of criminal liability of any kind; (iii) Any claims of liability from or on account of any conduct which is finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct; and (iv) Any claim for breach of this Agreement, the Reorganization Agreement or any other agreement executed by any of the Paragraph 8 Releasees in connection with the consummation of the Reorganization. 9. Releases in Favor of the Attorney General and the Department of Insurance. In further consideration of their mutual undertakings in this Agreement and the Reorganization Agreement, the Parties agree to the releases described in this paragraph. The releases described in this paragraph shall become effective on the Closing Date. (a) Subject to the exceptions contained in subparagraph 9(d), Blue Cross Blue Shield and RightCHOICE, and their respective affiliated corporations, successors and assigns (collectively, "the Paragraph 9 Releasors") release the State of Missouri, the Attorney General, the Department of Insurance and their respective present and past officers, agents, employees, independent contractors, affiliates, successors and assigns (all of whom are collectively referred to as "the Paragraph 9 Releasees") from any and all claims, causes of action, liabilities and judgments arising out of or relating to actions taken or statements made by the Attorney General or the Department of Insurance or their past and present agents, employees or independent contractors in connection with the 1994 Reorganization. (b) Subject to the exceptions contained in subparagraph 9(d), the Paragraph 9 Releasors release the Paragraph 9 Releasees from all claims, causes of action, liabilities and judgments that were asserted or might have been asserted in the Purposes Litigation and Purposes Litigation Appeal. (c) Subject to the exceptions contained in subparagraph 9(d), the Paragraph 9 Releasors release the Paragraph 9 Releasees from any and all claims, causes of action, liabilities and judgments arising out of or related to the execution and performance of this Agreement, the Reorganization Agreement, or the consummation of the Reorganization. (d) Claims in the following classes are excluded from the releases given in this paragraph 9: (i) Any claims of liability from or on account of any conduct which is finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct; and (ii) Any claim for breach of this Agreement, the Reorganization Agreement or any other agreement executed by any of the Paragraph 9 Releasees in connection with the consummation of the Reorganization. 10. Representation As To Existence of Claims. The Attorney General and the Department of Insurance represent and warrant that, on April 20, 1998, except as described on the list which is attached hereto as Exhibit G and as described in Paragraph 8(e)(i) above, there were no claims, disputes, investigations, audits or complaints pending against Blue Cross Blue Shield, RightCHOICE or any of their affiliates, and to their knowledge there is no basis for any such claims, disputes, investigations, audits or complaints. Blue Cross Blue Shield represents and warrants to the Attorney General and the Department of Insurance that, except as described on the list attached hereto as Exhibit H, it had no knowledge as of September 20, 1998, of any pending or threatened claim that will or might be subject to indemnity from the Foundation under the terms of the Indemnification Agreement attached as Exhibit K to the Reorganization Agreement. 11. Termination. (a) This Agreement shall automatically terminate upon termination of the Reorganization Agreement for any reason. (b) This Agreement may be terminated by any Party hereto by giving written notice to all other Parties in the event the Closing Date has not occurred on or before December 31, 2000. (c) This Agreement may be terminated at any time by written agreement signed by all Parties. (d) If any Party breaches its obligations under Paragraph 18(k) hereof, and fails to cure such breach within thirty (30) days after written notice from any other Party (the "Notifying Party") describing the alleged breach (or fails to undertake to cure within such thirty (30) day period and to diligently pursue to completion such cure as cannot reasonably be completed within the thirty (30) day time period), the Notifying Party may terminate this Agreement by giving written notice to all other Parties. (e) If this Agreement terminates pursuant to subparagraph (a), or is terminated pursuant to subparagraph (b), subparagraph (c), or subparagraph (d), the Agreement shall thereafter be void and have no force or effect. 12. No Admission of Liability. This Agreement is a good faith, negotiated resolution of disputed claims. Neither the Agreement nor any act performed or document executed pursuant to or in furtherance of this Agreement is admissible in any court proceeding, except those proceedings, if any, leading to judicial approval of the transactions contemplated by this Agreement and the Reorganization Agreement, and any proceeding brought to enforce this Agreement or the Reorganization Agreement. No Party, by signing this Agreement, admits liability or fault, or admits the validity of any claim made by any other Party or person with respect to any matter that is the subject of this Agreement or the Reorganization Agreement. 13. Binding Effect on Successors of Governmental Parties. This Agreement shall be binding, to the fullest extent permissible under law, on the State of Missouri, the Attorney General, the Department of Insurance, their respective offices and departments, and all of their successors in office. Should the State of Missouri, any Attorney General of Missouri or the Department of Insurance take the position at any time that any of the commitments or undertakings of the State of Missouri, the Attorney General, or the Department of Insurance hereunder is not fully valid and enforceable, then Blue Cross Blue Shield, RightCHOICE, and each of their corporate successors may, at the sole option of any of them, declare this Agreement and the Reorganization Agreement void and of no force or effect, in which event they will be discharged from any further obligations thereunder, and may take such actions (including but not limited to the commencement of a judicial proceeding seeking a declaration of the rights of the parties, injunctive relief, and the restoration of the status quo prior to the Reorganization) as are appropriate to rescind this Agreement and the Reorganization, and restore the Parties to the position that would have applied had the Reorganization not taken place or this Agreement not been signed, including the restoration or repayment of all consideration given or received by any Party, including all assets received by the Foundation in connection with the Reorganization. As part of the Reorganization, the Attorney General and Department of Insurance shall cause the Foundation to execute an agreement to be bound by the provisions of this paragraph 13. 14. Approval of Certain Stock Purchases. After consummation of the Reorganization, New RightCHOICE will have certain options and rights of first refusal to repurchase its shares from the Foundation in one or more transactions that may require the prior approval of the Department of Insurance under applicable law. The Department of Insurance shall not disapprove any such transaction unless New RightCHOICE or one of its insurance subsidiaries licensed in Missouri fails to meet Missouri regulatory capital and reserve requirements after consummation of the transaction, or fails to satisfy any other objective criteria required to be satisfied under Missouri law as a condition to obtaining approval of the Department of Insurance. 15. Amendments to Charter Documents of the Foundation. From the date the Foundation is incorporated until the Closing Date, and thereafter until the Foundation owns less than five percent (5%) of the issued and outstanding shares of capital stock of New RightCHOICE, the Attorney General shall not consent to any amendment to the Articles of Incorporation or Bylaws of the Foundation if the amendment would increase the influence or control of any governmental authority or its agents over the governance of the Foundation over the level of influence and control provided in the Articles of Incorporation and Bylaws of the Foundation attached hereto as Exhibits A and B, respectively. 16. Amendments to Reorganization Agreement. Blue Cross Blue Shield and RightCHOICE shall not consent to any amendment to the Reorganization Agreement after it is signed without first obtaining the written consent of the Attorney General and the Department of Insurance. 17. Nominating Committee Expenses. The Attorney General and Department of Insurance will review, approve and then submit to Blue Cross Blue Shield for payment, in an amount not to exceed $50,000 in the aggregate, the reasonable and necessary costs incurred in connection with the search for qualified candidates to serve on the Foundation Board to be conducted by the Nominating Committee, and Blue Cross Blue Shield shall pay such amounts. 18. General Provisions. (a) Captions contained in this Agreement have been inserted herein only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. (b) This Agreement may be executed by the Parties on any number of separate counterparts, and all such counterparts so executed constitute one agreement binding on all the Parties notwithstanding that all the Parties are not signatories to the same counterpart. (c) This Agreement and the Reorganization Agreement, including all exhibits attached hereto and thereto, constitute the entire agreement among the Parties pertaining to the subject matter hereof and supersede all prior agreements, letters of intent, understandings, negotiations and discussions of the Parties, whether oral or written. (d) All of the exhibits attached to this Agreement are material and integral parts hereof, and are fully incorporated herein by this reference. (e) The Parties will execute and deliver such further documents and do such further acts and things as may be required to carry out the intent and purpose of this Agreement, including the execution of all documents necessary to continue existing standstills of the litigation to be settled by this Agreement, such standstills to continue until the earlier of the termination of this Agreement or the Closing Date. (f) This Agreement and the rights and obligations of the Parties hereunder are to be governed by and construed and interpreted in accordance with the laws of the State of Missouri applicable to contracts made and to be performed wholly within Missouri, without regard to choice or conflict of laws rules. (g) Blue Cross Blue Shield and RightCHOICE shall be solely responsible for payment of all legal, accounting and investment banking fees and other costs and expenses incurred by them in connection with this Agreement and the Reorganization and shall have no responsibility or liability for payment of any fees, costs or expenses incurred by any other Party. (h) All notices, consents, requests, demands and other communications hereunder are to be in writing, and are deemed to have been duly given or made: (i) when delivered in person; (ii) three days after deposited in the United States mail, first class postage prepaid; (iii) in the case of overnight courier services, one business day after delivery to the overnight courier service with payment provided; or (iv) in the case of telecopy or fax, when sent, verification received; in each case addressed as follows: If to Blue Cross Blue Shield: John A. O'Rourke President and Chief Executive Officer Blue Cross and Blue Shield of Missouri 1831 Chestnut Street St. Louis, Missouri 63103-2275 Fax: (314) 923-8958 with a copy to: Joseph D. Lehrer, Esq. Greensfelder, Hemker & Gale, P.C. 2000 Equitable Building 10 South Broadway St. Louis, Missouri 63102-1774 Fax: (314) 241-8624 If to RightCHOICE: John A. O'Rourke Chairman, President and Chief Executive Officer RightCHOICE Managed Care, Inc. 1831 Chestnut Street St. Louis, Missouri 63103-2275 Fax: (314) 923-8958 with a copy to: John J. Riffle, Esq. Lewis, Rice & Fingersh, L.C. 500 North Broadway, Suite 2000 St. Louis, MO 63102 Fax: (314) 612-1349 If to the Attorney General: Jeremiah W. (Jay) Nixon P.O. Box 899 Jefferson City, MO 65102 Fax: (573) 751-0774 If to the Department of Insurance: Keith A. Wenzel P.O. Box 690 Jefferson City, MO 65102 Fax: (573) 526-4898 or to such other address as any Party may designate by notice to the other Parties in accordance with the terms of this paragraph. (i) All provisions of this Agreement are binding upon, inure to the benefit of and are enforceable by or against the Parties and their respective legal representatives and successors and assigns. (j) This Agreement is the product of negotiations and shall be deemed to have been drafted by all of the Parties. It shall be construed in accordance with the fair meaning of its terms and its language shall not be strictly construed against, nor shall ambiguities be resolved against, any particular Party. (k) The Parties agree to the following: (i) that it is their intent to carry out all of the terms of this Agreement and to consummate the Reorganization; and (ii) that they shall cooperate to the extent necessary to effectuate and implement all terms and satisfy all of the conditions of the Agreement and, with respect to Blue Cross Blue Shield and RightCHOICE, subject to their fiduciary obligations, to exercise their best efforts promptly to accomplish the terms and satisfy the conditions of the Reorganization Agreement. (l) The Parties executing this Agreement warrant and represent that they have the full authority to do so and that they have the authority to take appropriate action required or permitted to be taken pursuant to this Agreement to effectuate its terms. (m) Nothing in this Agreement shall be construed as preventing the Department of Insurance or the Attorney General from taking regulatory action against Blue Cross Blue Shield, RightCHOICE or New RightCHOICE based on (1) acts or omissions occurring after April 20, 1998 that are not covered by the releases described in Paragraph 8, (2) acts or omissions occurring prior to April 20, 1998 that are not covered by the releases described in Paragraph 8, and (3) claims described in Paragraph 8(e) of this Agreement. [Remainder of page intentionally left blank] Executed this 6th day of January, 2000. /s/ Jeremiah W. Nixon Jeremiah W. (Jay) Nixon Attorney General of Missouri Missouri Department of Insurance By: /s/ Keith A. Wenzel Keith A. Wenzel, Director Director, Missouri Department of Insurance Blue Cross and Blue Shield of Missouri By: /s/ John A. O'Rourke John A. O'Rourke, President RightCHOICE Managed Care, Inc. By: /s/ John A. O'Rourke John A. O'Rourke, President and Chief Executive Officer LIST OF EXHIBITS Exhibit A Articles of Incorporation of the Foundation Exhibit B Bylaws of the Foundation Exhibit C Certificate of Incorporation of New RIT Exhibit D Bylaws of New RIT Exhibit E Agreement and Plan of Reorganization Exhibit F Joint Notice of Dismissal and Joint Motion to Dismiss Exhibit G List of Known Claims as of April 20, 1998 Exhibit H List of Claims Prepared by Blue Cross and Blue Shield of Missouri