IN THE CIRCUIT COURT OF COLE COUNTY,MISSOURI

BLUE CROSS AND BLUE SHIELD OF MISSOURI.      )
a Nonprofit Corporation,                     )
                             Plaintiff,      )
                                             )
              vs.                            )  Case No. CV196-0619CC
                                             )
JAY ANGOFF, Director,                        )
Missouri Department of Insurance, and        )
                                             )
JEREMIAH W. (JAY) NIXON, Attorney General    )
of State of Missouri,                        )
                                             )
                             Defendants.     )

                            ORDER

        Now on this 28th day of October, 1999. the Court takes up for hearing

the Joint Motion by All Parties and the Amici Curiae to Approve Settlement

Agreement as Amended, dated and filed March 12, 1999. The Court also takes up

the Second Report of the Special Master, dated and filed October 8,

1999(1), along with the objections thereto.

        The Court finds that before proceeding to hear any testimony, the

Special Master took and subscribed an oath faithfully to hear and examine

the matters at issue and to make a just, impartial and true report,

in compliance with Rule 68.01 (d). The Court further finds that the

Special Master has filed transcripts, evidence and exhibits from all

proceedings before him, that being from hearings on December 4th, 16th and 22nd

1998, and February 4th and October  4rh, 1999, as well as from the hearing

on September 3, 1999 (the transcript for which was filed by the Special

Master on October 28, 1999), in compliance with Rule 68.OI(g)(l).

     Plaintiff offers two letters marked as Exhibit Numbers 117 and 118.

Without objection,  those exhibits are admitted. Plaintiff offers an affidavit

marked as Exhibit Number 119, which exhibit is not admitted. Plaintiff tenders

a witness. The Court finds that the proffered testimony is on matters that

were the subject of hearings before the Special Master. There being no

good cause shown for reopening the record under the present circumstances,

that tender is denied. Plaintiff makes an offer of proof regarding the

testimony of the witness. The Court adheres to its prior ruling. Thereafter,

plaintiff presents argument, followed by arguments in behalf of the

defendants. The Court takes the matters under advisement.

        Now on this 29th day of October, 1999, having considered the evidence

and the record before the Special Master, having considered his Second Report,

and having considered the objections, suggestions and arguments of the

parties, the Court overrules the objections and adopts the Second Report of

the Special Master, pursuant to Rule 68.01 (g)(3).

        As to the Settlement

Agreement as Amended, the parties unanimously agree in their joint motion

that a review of the settlement properly begins with the question of

whether the conversion envisioned by the Settlement Agreement as Amended

produces full and fair value for the non-profit assets of Blue Cross

and Blue Shield of Missouri ("Blue Cross") that are being

converted.(2)  The Court agrees that if the proposed settlement fails to

produce full and fair value for the citizens of Missouri, it cannot

be approved. Review of the settlement on any other issue at

this time would be pointless if it fails this threshold test.(3)

     The Court finds that the value of Blue Cross is now at least $3OO million

and may be worth upwards of $500 million.  But that much value will not be

obtained if the most valuable asset of Blue Cross, its 80.1% interest in

RightCHOICE Managed Care, Inc., is sold in the manner required by the

proposed settlement.  The essential framework requires a forced, piecemeal

divestiture of the stock on the open market over a period of several years.

The control premium that normally enhances the value of an 80.1% interest

would be lost.  The stock is thinly traded and is selling on the market below

the intrinsic value of the company.  The manner of disposition required by

the proposed settlement, which is to sell dispersed shares on the market, will

drastically reduce the value of the 80.1% interest by at least 50%, and the

loss may be as high as 70%.

        The proposed settlement fails to meet the legal test

under any standard suggested by the parties.  The Attorney General argues that

the settlement should be approved unless it is found to be unreasonable,

unfair and inadequate.  The Court finds that the proposed settlement is

unreasonable, unfair and inadequate.  The Court finds it is also unconscionable.

Blue Cross argues that the legal standard appropriate in determining the

sufficiency of value is that of section 355.621, RSMo 1994. Section 355.621

requires that before a not-for-profit, public benefit corporation can convert

to a for-profit corporation, the corporation must transfer out to a

not-for-profit entity "assets with a value equal to the greater of the fair

market value of the net tangible and intangible assets, including goodwill, of

the public benefit corporation or the fair market value of the public benefit

corporation if it were to be operated as a business concern. . . ."  The

proposed settlement fails this test, too.

     Section 355.726.2(1) requires that the Court consider reasonable

alternatives to dissolution where a corporation has continued to exceed or

abuse the authority conferred upon it by law.  The Court finds that the

transactions contemplated by the Settlement Agreement as Amended are not a

reasonable alternative to dissolution.

     IT IS, THEREFORE, ORDERED that the Joint Motion by All Parties and

the Amici Curiae to Approve Settlement Agreement as Amended should be

and the same is hereby denied.

     IT IS FURTHER ORDERED that the Settlement Agreement as Amended,

dated March 12, 1999, is disapproved.

     IT IS FURTHER ORDERED that the Special Master and his

counsel shall continue with their unfinished assignments under the Second

Order of Reference and report to the Court not later than 45 days after

the Missouri Supreme Court issues its mandate on the pending appeal.

     IT IS FURTHER ORDERED that this order is interlocutory, that it does not

make final disposition of this case or any part of this case,

that it makes no disposition subject to appeal, and that the Court retains

jurisdiction over all matters not presently on appeal.

    IT IS FURTHER ORDERED that the Cleric shall promptly

transmit a copy of this Order to the Missouri Supreme Court and to the parties.





                           /s/ Thomas J. Brown, III
                           THOMAS J. BROWN III, CIRCUIT JUDGE


_______________________________
     (1) The Second Report of the Special Master is
not and
clearly was not intended as a full and final
response to Second Order of Reference. The Special
Master's recommendations on
the limited question of the lawfulness of the
Settlement Agreement as Amended took on some urgency
when the Supreme Court of Missouri ordered this
Court to reject or approve the
amended settlement agreement on or before November
9. 1999.
The Special Master's interim report which is the
subject of this Order does not preclude his further
inquiries as hereinafter directed and a final report
fully responsive to the Second
Order of Reference.
 (2)  Page 3 of Joint Motion by All Parties and the
                        Amici
Curiae to Approve Settlement Agreement as Amended.
The Court acknowledges and appreciates the position
of the Department of Insurance articulated at
hearing that its concern in this matter is limited
to whether a viable insurance company would result
from the Settlement Agreement as Amended.  While the
Settlement Agreement as Amended may well satisfy the
more-circumscribed concerns of the Department of
Insurance, the overriding issue is whether the
Settlement Agreement as Amended delivers full and fair
value for the non-profit assets of
Blue Cross.
    (3) In their Objections, Blue Cross and the
Attorney
General insinuate that the Special Master's recommended
rejection of the proposed settlement for its failure to
transfer full value is a mere pretext for some hidden
agenda tied to court control
of the non-profit assets. The parties do the Special
Master a great disservice. He is a former circuit judge
whose reputation on both sides of the bench over thirty
years is beyond reproach. His conclusions on the issue
of value are not only supported by the evidence - they
are compelled by the evidence. Blue Cross and the
Attorney General would be well-advised to address the
value
problem and desist from unfounded, irresponsible
attacks on the Special Master's motives.