Document:

exv10w1

Exhibit 10.1

27TH JUDICIAL DISTRICT COURT FOR THE PARISH OF ST. LANDRY

STATE OF LOUISIANA

	 	 	 

	NO: 09-C-5244

	 	DIVISION: “C”

GEORGE RAYMOND WILLIAMS M.D,, ORTHOPAEDIC SURGERY, A PROFESSIONAL MEDICAL, L.L.C.

Versus

S.I.F. CONSULTANTS OF LOUISIANA, ET AL.

	 	 	 

	FILED:                                                      
	 	 
	 

	 	 
	 

	 	DEPUTY CLERK

SETTLEMENT AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	No.	 	 	Section	 	 	Page	 
	 	1	 	 	Definitions of Terms of General Application
	 	 	1	 
	 	2	 	 	Nature and Status of the Class Action and Related Proceedings
	 	 	8	 
	 	3	 	 	Basis for the Proposed Settlement
	 	 	8	 
	 	4	 	 	General Provisions and Purposes of this Settlement
	 	 	9	 
	 	5	 	 	Stay Order/Stand Down
	 	 	12	 
	 	6	 	 	Opt-Out Parties
	 	 	13	 
	 	7	 	 	Preliminary Approval of the Settlement Agreement and Certification of the Class for
Settlement Purposes Only
	 	 	15	 
	 	8	 	 	Final Approval and Effect of the Agreement
	 	 	15	 
	 	9	 	 	Signed Releases/Assignment
	 	 	18	 
	 	10	 	 	Contributions to and Disbursements from the Class Settlement Fund
	 	 	19	 
	 	11	 	 	Insurance Assignment
	 	 	20	 
	 	12	 	 	Termination of Agreement
	 	 	21	 
	 	13	 	 	Additional Obligations of the PSC and CorVel
	 	 	24	 
	 	14	 	 	Miscellaneous Provisions
	 	 	25	 
	 	 	 	 	List of Exhibits
	 	 	31	 

- i -

 

27TH JUDICIAL DISTRICT COURT FOR THE PARISH OF ST. LANDRY

STATE OF LOUISIANA

	 	 	 

	NO: 09-C-5244

	 	DIVISION: “C”

GEORGE RAYMOND WILLIAMS M.D,, ORTHOPAEDIC SURGERY, A PROFESSIONAL MEDICAL, L.L.C.

Versus

S.I.F. CONSULTANTS OF LOUISIANA, ET AL.

	 	 	 

	FILED:                                                  
	 	 
	 

	 	 
	 

	 	DEPUTY CLERK

SETTLEMENT AGREEMENT

     This Settlement Agreement is made and entered into, on the dates indicated below, by and
between the Plaintiff Steering Committee, individually and on behalf of the Class and the
Plaintiffs, George Raymond, Williams, M.D., Orthopaedic Surgery, A Professional Medical, L.L.C. and
Southwest Louisiana Medical Center dbs Lake Charles Memorial Hospital and Defendant CorVel
Corporation, (“CorVel”). This Settlement Agreement sets forth the terms, conditions, and
provisions of a settlement of all Liability; it shall be Exhibit A attached to and made part of the
Joint Motion for Preliminary Approval of Proposed Settlement to be filed in the Class Action; and
it is subject to the recitals, definitions, terms, and conditions set forth herein.

RECITALS

     WHERAS, on March 24, 2011, plaintiff, George Raymond Williams, M.D., Orthopaedic Surgery, A
Professional Medical, L.L.C. filed a First Amended and Re-Stated Petition for Damages and Class
Certification naming CorVel Corporation as a defendant and alleging that medical providers’ bills
in workers’ compensation matters were discounted through PPO Agreements with CorVel or accessed by
CorVel without the benefit of prior notice as required by La.R.S. 40:2203.1(B).

     WHERAS, Plaintiffs allege that they are entitled to damages from CorVel Corporation under
La.R.S. 40:2203.1(G) in an amount equal to double the fair market value of the medical services
provided, but in no event less than fifty dollars per day of non-compliance or two thousand
dollars, whichever is greater, together with attorney’s fees.

- 2 -

 

     WHEREAS, Louisiana medical providers have filed over one hundred (100) actions in the
Louisiana Office of Workers’ Compensation against CorVel’s payor clients alleging that CorVel’s
payor clients violated La. R.S. 23:1201(F) by underpaying medical bills.

     WHERAS, it is conceivable that CorVel’s payor clients may make demand for contribution or
indemnification upon CorVel if they are cast in judgment by the Louisiana Office of Workers’
Compensation.

     WHERAS, CorVel denies the material allegations raised in this class action petition.

     WHERAS, CorVel denies the material allegations raised by the OWC plaintiffs against CorVel’s
payor clients.

     WHERAS, CorVel denies that it that it would owe any contribution or indemnification to
CorVel’s payor clients if they are cast in judgment by the Louisiana Office of Workers’
Compensation.

1. DEFINITIONS OF TERMS OF GENERAL APPLICATION

     Unless otherwise expressly stated herein, the following terms, as capitalized and used in this
Settlement Agreement, shall have the following meanings and definitions:

     1.1 The term “Affiliates” when used in connection with CorVel shall mean CorVel Corporation
and/or CorVel Healthcare Corporation, together with each of their respective predecessors,
successors, assignors, assignees, subsidiaries, parents, affiliated entities, acquired entities,
officers, directors, employees, agents, legal representatives, partnerships, joint ventures,
attorneys, owners, and/or shareholders. Notwithstanding the foregoing, any and all Insurers are
excluded from the definition of the term “Affiliate” to the extent of their obligations of defense
or indemnity under policies of liability insurance as they pertain to the claims asserted in the
matter bearing number 09-C-5244 on the docket of the 27th Judicial District Court, State
of Louisiana and the Related Proceedings only.

     1.2 The term “Affiliates” when used in connection with the terms “Class Member” or “Class
Members” shall mean and include their respective predecessors, successors, assignors, assignees,
subsidiaries, parents, affiliated entities, acquired entities, officers, insurer, directors,
employees, agents, legal representatives, partnerships, joint ventures, attorneys, owners, and/or
shareholders.

     1.3 The term “Agreement” shall mean and include this Settlement Agreement, all exhibits and
attachments to this Settlement Agreement, and all judgments or orders of the Court approving or
incorporating this Settlement Agreement.

- 3 -

 

     1.4 The term “Class Action” shall mean and refer to Suit No. 09-C-5244, Div. “C,” on the
docket of the 27th Judicial District Court in and for the Parish of St. Landry,
Louisiana.

     1.5 The term “Class” shall mean the persons and/or entities included in the Class Definition.

     1.6 The term “Class Definition” or “Class as Defined” shall mean and refer to the following:

“All medical providers, institutions, and facilities that have provided services to
workers’ compensation patients pursuant to the Louisiana Workers’ Compensation Act,
LSA-R.S. 23:1021 et seq., and whose bills have been discounted, adjusted, paid on a
reduced basis, or otherwise paid at less than the billed amount pursuant to a
Preferred Provider Agreement contracted with CorVel or owned or operated by CorVel.
“

     In the event the Court should alter or modify the above class definition, and such amended
class definition is accepted in writing by the PSC and CorVel, such amended class definition shall
be considered the “Class Definition” or “Class as Defined” under this Settlement Agreement, and all
references to “Class Definition” or “Class as Defined” in this Settlement Agreement shall mean and
refer to such accepted amended class definition.

     1.7 The terms “Class Members” or “Class Member” shall mean and refer to those persons and/or
entities who or which are included within the Class Definition and do not timely opt out.
The terms “Class Members” or “Class Member” shall not include the Opt-Out Parties.

     1.8 The term “Class Representatives” shall mean and refer to George Raymond Williams, M.D.,
Orthopaedic Surgery, A Professional Medical, L.L.C. and Southwest Louisiana Hospital Association
d/b/a Lake Charles Memorial Hospital.

     1.9 The term “Class Settlement Fund” shall mean and refer to the total amount of settlement
funds deposited in the Escrow Account pursuant to Section 10.1, together with all interest earned
or accrued thereon, and less (a) the charges, expenses, etc., specified in the Escrow Agreement,
and (b) the reserves, if any, established in furtherance of this Settlement Agreement.

     1.10 The term “Class Settlement Notice” shall mean and refer to the legal notice of the terms
of the settlement embodied in this Settlement Agreement which is to be provided in accordance with
the order of the Court, articles 591, et seq. of the Louisiana Code of Civil Procedure, and the
terms of this Settlement Agreement.

     1.11 The term “Court” shall mean and refer to the 27th Judicial District Court in
and for the Parish of St. Landry, Louisiana, and the Honorable Alonzo Harris, or his successor.

- 4 -

 

     1.12 The terms “Court Appointed Disbursing Agent” or “CADA” shall mean and refer to the
accounting firm to be appointed by the Court, after consideration of the recommendations of the PSC
and CorVel. The accounting firm of Bourgeois Bennett, LLC, CPAs, shall be proposed for use as the
CADA.

     1.13 The term “Effective Date” shall mean and refer to the first business day following the
date that the Final Order and Judgment becomes Final and non-appealable, or such other date as may
be agreed to in writing by the PSC and CorVel.

     1.14 The term “Episode” shall mean and refer to and include each and every event,
circumstance, and/or situation upon which allegations have been made or could have been made
relating in any way to repricing, payment for, or reimbursement of a Provider’s bill for medical
services or supplies furnished to a workers’ compensation patient from January 1, 2000 through the
Effective Date of the Settlement, and including but not limited to, claims that discounts under
provider contracts or the manner or absence of notice of discounts violated Louisiana workers’
compensation laws or regulations or any provisions of the Louisiana Any Willing Provider Act,
including La. R.S. 40:2203.1, and/or the Louisiana Workers’ Compensation Law, La. R.S. 23:1021, et
seq., and/or that these discounts were not applied appropriately, that notice or payment was
insufficient, inadequate, improper, or untimely, or that reimbursement amounts for Provider charges
were computed incorrectly, provided that the bill was discounted pursuant to a PPO contract owned
or operated by CorVel or contracted with CorVel or any of its Affiliates, including but not limited
to CorVel’s CorCare network and MedComp USA PPO network.

     1.15 The term “Escrow Account” shall mean and refer to the interest-bearing escrow account to
be established and administered in accordance with the Settlement Agreement and the Escrow
Agreement. All interest accrued in the Escrow Account, from the date of deposit of settlement
funds, shall be distributed pursuant to the terms of the Escrow Agreement.

     1.16 The term “Escrow Agent” shall mean and refer to the escrow agent under the Escrow
Agreement to be appointed by the Court, after consideration of the recommendations of the PSC and
CorVel. First NBC Bank, New Orleans, Louisiana, shall be proposed for use as the Escrow Agent.

     1.17 The term “Escrow Agreement” shall mean and refer to an agreement substantially in the
form attached hereto as Exhibit 1.

     1.18 The term “Final” shall mean that: (a) the Court shall approve the Settlement Agreement
in all respects and enter a Final Order and Judgment, and (b) either no timely appeals,

- 5 -

 

writs, petitions, lawsuits, or requests for court review or extraordinary relief have been
taken within seventy (70) days from or with respect to such Final Order and Judgment, or if any
such appeal, writ, petition, lawsuit, or request for court review or extraordinary relief has been
taken from or with respect to the Final Order and Judgment, and that Final Order and Judgment has
been affirmed without revision and there is no further right to appeal, petition, bring a writ or
lawsuit or request court review or extraordinary relief from or with respect to such judgment,
order, ruling, or decision, unless otherwise agreed to in writing by both Thomas A. Filo, on behalf
of the PSC, and John V. Quaglino, on behalf of CorVel (such agreement not to be unreasonably
withheld).

     1.19 The term “Final Order and Judgment” shall mean and refer to the order and judgment to be
entered by the Court pursuant to Section 8.2 below.

     1.20 The term “CorVel” shall mean CorVel Corporation and its affiliates.

     1.21 The term “Insurer” shall mean and refer to those persons or entities who/which may owe
CorVel obligations of defense or indemnity under policies of liability insurance for the claims
asserted in the matter bearing number 09-C-5244 on the docket of the 27th Judicial
District Court, State of Louisiana and the Related Proceedings.

     1.22 The term “Liability” shall mean and refer to all claims against and/or potential
liabilities of the Released Parties of whatever nature arising out of, related to, or connected in
any way with any and all Episodes, regardless of whether the claims, liabilities, and/or resulting
damages are not yet known or manifested or whether such claims, liabilities, and/or resulting
damages are known or unknown, asserted or unasserted, including but not limited to the Released
Party’s liability for contribution, indemnification, contractual liability, statutory violation
and/or tort, to any other person or entity.

     1.23 The term “Notice Plan” shall mean and refer to the plan for disseminating the Class
Settlement Notice.

     1.24 The terms “Opt-Out Parties” or “Opt-Out Party” shall mean and refer to those persons
and/or entities who or which are included within the Class Definition but timely opt out of the
Class pursuant to the procedures specified by the Court. Unless otherwise ordered by the Court, to
opt out of the Class, a putative Class Member must take timely affirmative written action pursuant
to Section 6.1 and the procedure to be approved by the Court, even if the putative Class Member
desiring to opt out of the Class (a) files or has filed a separate action against any

- 6 -

 

of the Released Parties, or (b) is, or becomes, a putative class member in any other class
action filed against any of the Released Parties.

     1.25 The term “Opt-Out Reserve” shall mean and refer to the reserve that may be set aside
within the Escrow Account pursuant to Sections 6.3 — 6.5.

     1.26 The term “Order of Preliminary Approval” shall mean and refer to the order to be entered
by the Court pursuant to Section 7.1.

     1.27 The terms “Parties” or “Party” as referring to this Settlement Agreement shall mean and
refer to CorVel, the Class, the PSC, and the Plaintiffs.

     1.28 The terms “Plaintiffs” or “Plaintiff” shall mean and refer to the named plaintiffs and
Class Representatives in the Class Action.

     1.29 The terms “Plaintiffs’ Steering Committee” or “PSC” shall mean and refer to the following
attorneys appointed by the Court:

Thomas A. Filo, Chairman and Liaison Counsel

Stephen B. Murray

Arthur M. Murray

Stephen B. Murray, Jr.

John S. Bradford

William B. Monk

Michael K. Cox

Patrick Morrow

     1.30 The terms “Preferred Provider Organization” and “PPO” shall mean and refer to preferred
provider organization as defined in La. R.S. 40:2202(5).

     1.31 The term “Provider” shall mean and refer to any provider as defined in La. R.S.
40:2202(6) and/or La. R.S. 23:1021(6).

     1.32 The term “Related Proceedings” shall mean and refer to all proceedings brought by any
Class Member or any of its Affiliates against any of the Released Parties, other than the Class
Action, whether in the Office of Workers’ Compensation courts, state court, federal court, or any
arbitral forum in which any claims and/or defenses related to any Episode have been asserted that
have led to, or could lead to, Liability on the part of the Released Parties.

     1.33 The terms “Released Parties” or “Released Party” shall mean and refer to CorVel and all
Affiliates thereof and all of their respective payors, clients, contractors, or any entity or
person, who paid or repriced/adjusted an invoice for medical services provided to injured workers
that was discounted or reduced under a PPO network owned or operated by CorVel or its Affiliates or
a PPO network contracted with CorVel or its Affiliates. Notwithstanding the foregoing, any and all
Insurers are excluded from the definition of the term “Released Party” to the extent of their
obligations of defense or indemnity under policies of liability insurance as

- 7 -

 

they pertain to the claims asserted in the matter bearing number 09-C-5244 on the docket of
the 27th Judicial District Court, State of Louisiana and the Related Proceedings only.

     1.34 The term “Settlement Agreement” shall mean and refer to this agreement, together with all
of its exhibits and attachments, and any properly perfected amendments.

     1.35 The term “Special Master” shall mean and refer to that person appointed, or to be
appointed, by the Court, with the consent of counsel for the Parties, pursuant to La. R.S. 13:4165,
to assist the Court, in cooperation and coordination with the PSC, with the management of the Class
Action. Patrick A. Juneau shall be proposed as the Special Master.

     1.36 The term “Stay Order” shall mean and refer to the order to be entered pursuant to Section
5.2 below.

2. NATURE AND STATUS OF THE CLASS ACTION AND RELATED PROCEEDINGS

     2.1 Stated generally, the Class Action and Related Proceedings involve, among other claims,
claims for injuries and/or damages allegedly related to Episodes.

     2.2 Stated generally, the Plaintiffs and the Class allege (and CorVel denies) that such
damages are the responsibility of CorVel.

     2.3 The claims involved in the Class Action and Related Proceedings have been substantially
litigated and/or are substantially understood, such that the Parties are in a reasonable position
to assess the merits and weaknesses of their respective claims and defenses.

     2.4 Substantial time and effort has been expended by the Parties and their counsel in
negotiating this Settlement Agreement.

3. BASIS FOR THE PROPOSED SETTLEMENT

     3.1 As a result of the extensive litigation to date, the Plaintiffs and CorVel entered into
negotiations to settle the Class Action and Related Proceedings regarding the Liability of the
Released Parties, taking into account the following considerations: (a) the merits of the
complaints or the lack thereof covered by the Settlement Agreement; (b) the relative strengths and
weaknesses of the Class’ claims; (c) the time, expense and effort necessary to maintain the Class
Action and/or Related Proceedings to conclusion; (d) the possibilities of success weighed against
the possibilities of loss; (e) the range of final judgment values; (f) the legal complexities of
the contested issues in the Class Action and Related Proceedings; (g) the risks inherent in
protracted litigation; (h) the magnitude of benefits to be gained from immediate settlement in
light of both the maximum potential of a favorable outcome with the attendant expense and

- 8 -

 

likelihood of an unfavorable outcome; and (i) the fairness of benefits to or from an immediate
settlement under all of the foregoing considerations.

4. GENERAL PROVISIONS AND PURPOSES OF THIS SETTLEMENT

     4.1 The Parties have reached agreement on the terms of a settlement of claims in the Class
Action and Related Proceedings, through the establishment of a conditional settlement class to
afford a procedural vehicle by which all potential Liability of Released Parties to Class Members
may finally be concluded and settled. The Parties agree that proceeding in this manner is in their
best interests and also shall contribute to judicial efficiency.

     4.2 In entering into this Settlement Agreement, each Party hereto has taken into account the
uncertainties, delays, expenses and exigencies of the litigation process, including the extensive
depositions, document production, and other discovery taken to date in the Class Action and Related
Proceedings. The Released Parties have each denied, and continue to deny, any liability,
wrongdoing or responsibility for the claims asserted in the Class Action and Related Proceedings
and believe that any and all claims for Liability are without merit.

     4.3 The Parties hereto have evaluated the claims related to Liability asserted against the
Released Parties, considering the nature and extent of the alleged injury and the alleged liability
of the Released Parties.

     4.4 CorVel is willing to enter into this Settlement Agreement so that all of the Released
Parties will thereby be relieved and discharged from all Liability to all Class Members. In view
of the present procedural status of the Class Action and Related Proceedings, the Parties recognize
the necessity for a procedural means by which any negotiated settlement of all potential Liability
asserted against the Released Parties may finally be resolved. It is expressly the intention of
this Settlement Agreement that no claims whatsoever by Class Members or any of their Affiliates
against the Released Parties arising out of an Episode will survive the approval of this Settlement
Agreement.

     4.5 The Parties agree that immediate payment to the proposed settlement fund and the
management thereof pursuant to the Escrow Agreement and under the supervision of the Court would
more likely result in greater benefit to the Released Parties and the Class Members than would
continued prosecution of the Class Action and Related Proceedings. Accordingly, a class certified
for settlement purposes in the Class Action meets the standards of articles 591, et seq. of the
Louisiana Code of Civil Procedure so as to permit conditional certification of a settlement class.
Accordingly, as more fully described in Section 7 below, the Parties will submit this

- 9 -

 

Settlement Agreement to the Court via a Joint Motion for Preliminary Approval of Proposed
Settlement and will marshal and present at any hearing thereon evidence to support the motion.

     4.6 The PSC is entering into this Settlement Agreement on behalf of each of the Class Members
and the Plaintiffs to terminate and settle all potential Liability of the Released Parties in
recognition of (a) the existence of complex and contested issues of law and fact, (b) the risk,
difficulty, and uncertainty of success associated with pursuing the claims asserted in this action,
(c) the comparative degree of the alleged liability or culpability of the Released Parties, (d) the
risks inherent in litigation, (e) the likelihood that future proceedings will be unduly protracted
and expensive if these matters are not settled by voluntary agreement with the Parties, (f) the
magnitude of the benefits derived from the contemplated settlement in light of both the maximum
potential and likely range of recovery to be obtained through further litigation and the expense
thereof and the exposure associated therewith, and (g) the determination by the Plaintiffs and its
counsel that the settlement is fair, reasonable, adequate, and in the best interests of, and will
substantially benefit, the members of the Class.

     4.7 CorVel enters into this Settlement Agreement, notwithstanding its continuing denial of
liability for alleged injuries and/or compensatory damages and/or statutory damages allegedly
related to Liability, and notwithstanding its denials concerning causation of any alleged injuries
and/or damages, to terminate the Class Action and Related Proceedings insofar as affecting the
Released Parties, and to finally resolve all potential Liability, and to avoid further litigation,
without any admission on the part of the Released Parties of any liability or fault whatsoever.

     4.8 It is the intention and a condition of this Settlement Agreement, and the Parties agree,
that the Class reserves all rights against any and all Insurers.

     4.9 It is the intention and a condition of this Settlement Agreement, and the Parties agree,
that as of the Effective Date, this settlement shall fully, completely, finally, and conclusively
settle, compromise, and release all Liability of the Released Parties to Class Members and their
Affiliates. Without limiting the foregoing, it is also the intention and a condition of this
Settlement Agreement, and the Parties hereto agree, that upon the Effective Date, (a) the Released
Parties shall be finally released from all Liability, by, through, or on behalf of each of the
Class Members and their Affiliates, (b) the Class Action shall be dismissed as to CorVel, with
prejudice and with each party to bear its own costs through dismissal, (c) the Released Parties
shall be dismissed with prejudice from all Related Proceedings and with each

- 10 -

 

party to bear its own costs, including costs paid through dismissal, (d) each of the Class
Members and their Affiliates shall be forever barred and enjoined from instituting, maintaining, or
prosecuting any action against the Released Parties with respect to the Released Parties’
respective Liability, and (e) that as against any of the Released Parties, the exclusive remedy of
all Class Members and their Affiliates with respect to any Liability shall be claims against the
Class Settlement Fund as described in the Settlement Agreement. Nothing in this paragraph is
intended to limit the intention, condition and agreement set forth in Section 4.8.

     4.10 It is the intention and a condition of this Settlement Agreement that the Final Order and
Judgment be entered and become Final. The Parties agree to take all actions reasonably necessary
and appropriate to fulfill and satisfy this intention and condition.

     4.11 Without limiting the foregoing, it is the intention and a condition of this Settlement
Agreement, and the Parties agree, that no Class Member or Class Member’s Affiliate shall recover,
directly or indirectly, any sums for Liability, from any Released Party other than those received
from the Escrow Account (or a subaccount thereof) under the terms of this Settlement Agreement.
Nothing in this paragraph is intended to limit the intention, condition and agreement set forth in
Section 4.8.

     4.12 Without limiting the foregoing, it is the intention and a condition of this Settlement
Agreement, and the Parties agree, that each of the Class Members and their Affiliates shall not
attempt to execute or to collect any judgment or any portion of any judgment if such execution or
collection could create liability of any Released Party in connection with any Episode, whether
through contribution, indemnity or otherwise.

     4.13 Without limiting the foregoing, it is the intention and a condition of this Settlement
Agreement, and the Parties agree, that each of the Class Members and their Affiliates shall reduce,
remit or satisfy any judgment, based, in whole or in part, on Liability of any Released Party that
any Class Member and/or Class Member’s Affiliate has obtained or may obtain to the extent necessary
to extinguish any claims against any Released Party, including but not limited to claims against
any Released Party for contribution, indemnity, subrogation, breach of contract, statutory
violation, and/or tort.

     4.14 Without limiting the foregoing, it is the intention and a condition of this Settlement
Agreement, and the Parties agree, that the commencement and prosecution of any and all claims of
the Class as a whole and/or the Class Members and/or their Affiliates individually against the
Released Parties (including, without limitation, subrogation claims derived from or

- 11 -

 

through the Class, Class Members or their Affiliates) related to Liability (including, without
limitation, all of the claims of the Class set forth in the Class Action and/or Related Proceedings
involving the Released Parties, to the extent based upon their respective Liability) be immediately
enjoined and stayed during the pendency of the settlement proceedings referred to herein and that
they be permanently barred and enjoined and dismissed with prejudice on the Effective Date of the
Final Order and Judgment. The Parties agree to use their best efforts to fulfill and satisfy this
intention and condition.

     4.15 Without limiting the foregoing, it is the intention and a condition of this Settlement
Agreement, and the Parties agree, that the Parties shall use their best efforts to (a) obtain the
Stay Order as part of the Court’s Order of Preliminary Approval, (b) ensure that the Stay Order is
maintained during the pendency of the settlement proceedings, and (c) obtain the dismissal with
prejudice of any Released Party from any Related Proceeding upon the Effective Date.

     4.16 It is the intention and a condition of this Settlement Agreement that any attempt by a
Class Member or its Affiliate to collect or seek additional reimbursement from a Released Party for
any Episode will constitute a violation of this Settlement Agreement; the Class Members and their
Affiliates agree to the immediate dismissal of any such current or future action brought in any
forum and further agree that all such actions are subject to involuntary dismissal based upon the
terms of this Settlement Agreement.

     4.17 Anything in this Settlement Agreement to the contrary notwithstanding, CorVel or any of
its Affiliates shall have the unilateral right, in their sole discretion, to waive, in writing, in
whole or in part, any condition inuring to its benefit set forth in Section 4, Section 5, Section
6, Section 8, and Section 12 of this Settlement Agreement, which waiver shall be binding upon the
PSC, the Class, and the Plaintiffs. Waiver by CorVel or its Affiliates of any condition as to any
Class Member shall not constitute a waiver as to any other condition or any other Class Member.

5. STAY ORDER/STAND DOWN

     5.1 Immediately upon execution of this Settlement Agreement by or on behalf of all Parties,
the Parties shall submit to the American Arbitration Association a Joint Motion to Stay the matter
filed by Southwest Louisiana Hospital Association d/b/a Lake Charles Memorial Hospital until the
Effective Date.

- 12 -

 

     5.2 In the Joint Motion for Preliminary Approval described in Section 7.1, the Parties shall
request that the Court stay the Class Action and enjoin and stay, during the pendency of the
settlement proceedings contemplated by this Settlement Agreement, the commencement and/or continued
prosecution of any and all Related Proceedings pending the completion of the settlement embodied in
this Settlement Agreement (the “Stay Order”) (excluding, therefrom, however, those proceedings in
the Class Action itself necessary to obtain certification of the Class as Defined and final
approval of the settlement embodied in this Settlement Agreement), unless requested otherwise by
CorVel.

6. OPT-OUT PARTIES

     6.1 All persons and/or entities included within the Class Definition but who properly file a
timely written request to opt out of the Class as set forth in Section 6.1(a) below will not be
included as Class Members, shall have no rights as Class Members pursuant to this Settlement
Agreement, and shall receive no payments as provided herein.

(a) A request to opt out of the Class must be in writing and state the name, address
and phone number of the person(s) seeking to opt out. Each request must also
contain a duly authorized and signed statement that: “I hereby request that I be
excluded from the proposed Class in the Williams Class Action.” The request must be
mailed to the PSC at the address provided in the Class Notice and postmarked by the
deadline specified in the Class Notice. An opt out request that does not include
all of the foregoing information, that is sent to an address other than the one
designated in the Class Notice, or that is not postmarked within the time or sent in
the manner specified, shall be invalid and the person or entity serving such a
request shall be included as a Class Member and shall be bound by this settlement.

(b) The PSC shall make best efforts to encourage the clients they represent,
including but not limited to those who are parties to any Related Proceeding, to
remain a Class Member and not opt out of the Class. The PSC likewise acknowledge
that each of them and their firms have an unwaivable conflict of interest in
representing any Opt-Out Party.

     6.2 The PSC shall forward, by overnight mail, copies of all opt out requests to counsel for
CorVel no later than ten (10) days after the deadline for Class Members to submit such opt out
requests. Within fifteen (15) business days after the expiration of the period for

- 13 -

 

persons or entities within the Class Definition to opt out of the Class, the PSC and counsel for
CorVel shall jointly prepare a list identifying all Opt-Out Parties, any actions in which such
Opt-Out Parties have asserted claims related to any Episode against any of the Released Parties,
the number of Episodes reflected in claims asserted by Opt-Out Parties, and the types of claims
asserted by such Opt-Out Parties. This description of any such actions shall be amended from time
to time as further information becomes available to the PSC and counsel for CorVel. Further,
immediately following the end of such fifteen-day period, the PSC and counsel for CorVel shall hold
a conference to review the nature and status of all Opt-Out Parties.

     6.3 If there are any Opt-Out Parties, funds that would have been distributed to Opt-Out
Parties if they had not opted out shall be reserved, earmarked, and held escrowed from the funds on
deposit in the Escrow Account (pursuant to Section 10) and placed within an opt-out reserve;
provided, however, if at any time after the establishment of the Opt-Out Reserve, (a) the PSC,
acting through Thomas A. Filo, and (b) CorVel, acting through John V. Quaglino, both determine that
the amount of the Opt-Out Reserve should be reduced, the amount of the Opt-Out Reserve shall be so
reduced (such consent not to be unreasonably withheld). In preparing the plan of distribution and
in order to properly calculate the Opt-Out Reserve, the Special Master shall not treat Opt-Out
Parties differently than Class Members. Until the Special Master has prepared a plan of
distribution that would enable the Parties to determine the amount of the Opt-Out Reserve, no funds
deposited under Section 10.1, with the exception of plaintiffs’ counsel’s costs, fees and expenses,
shall be distributed from the Escrow Account, until such time as the Opt-Out Reserve amount can be
determined, unless agreed in writing by the PSC, acting through Thomas A. Filo, and CorVel, acting
through John V. Quaglino. Nothing in this paragraph shall be construed as conferring upon Opt-Out
Parties any right to payment.

     6.4 The Opt-Out Reserve may be used by CorVel, in its sole discretion, to pay settlement or
judgment amounts to Opt-Out Parties and/or litigation costs/expenses associated with litigating the
claims of the Opt-Out Parties.

     6.5 The Opt-Out Reserve shall be terminated upon the earliest of the following to occur: (a)
one year from the Effective Date; (b) the date when all claims of Opt-Out Parties are released or
dismissed with prejudice; (c) the date when the amount held in the Opt-Out Reserve is reduced to
zero; or (d) such other date as agreed upon, in writing, by (i) the PSC, acting through Thomas A.
Filo, and (ii) CorVel, acting through John V. Quaglino. Upon the

- 14 -

 

termination of the Opt-Out Reserve and the payment therefrom of all valid claims made against the
Opt-Out Reserve, any funds then remaining in the Opt-Out Reserve shall revert to CorVel.

     6.6 The list identifying all Opt-Out Parties prepared pursuant to Section 6.2 shall be jointly
submitted to the Court prior to the final approval hearing. As part of the Final Order and
Judgment granting final approval of this settlement, the Court will incorporate a final list of all
Opt-Out Parties. The list identifying Opt-Out Parties will be attached as an exhibit to the Final
Order and Judgment granting final approval of the Settlement Agreement.

	7.	 	PRELIMINARY APPROVAL OF THE SETTLEMENT AGREEMENT AND CERTIFICATION OF THE CLASS FOR
SETTLEMENT PURPOSES ONLY

     7.1 On or before May 27, 2011, this Settlement Agreement shall be signed by all Parties and
the Parties shall submit this Settlement Agreement to the Court for preliminary approval. This
submission shall be made by means of a Joint Motion for Preliminary Approval of Proposed Settlement
signed by or on behalf of the Class, the Plaintiffs, and CorVel with a proposed form of order of
preliminary approval attached thereto, which order of preliminary approval will include the Court’s
preliminary approval of the Settlement Agreement, a preliminary determination that the settlement
set forth therein is fair, reasonable, and adequate, a conditional certification of the Class as
Defined for settlement purposes only, and provisions specifying notice to the Class. The Order of
Preliminary Approval shall be substantially in the form attached hereto as Exhibit 2.

     7.2 At the preliminary approval hearing, prior to the Court’s entry of the Order of
Preliminary Approval, the PSC shall move to grant conditional certification of the Class as Defined
for settlement purposes only and the appointment of the Class Representatives as appropriate
representatives for the Class under articles 591, et seq., of the Louisiana Code of Civil
Procedure. CorVel shall not object to the conditional certification of the Class as Defined for
settlement purposes only and/or the appointment of the Class Representatives as appropriate
representatives for the Class. The Parties acknowledge and agree, and shall so stipulate to the
Court, that (a) the Class as Defined is being certified for settlement purposes only pursuant to
the Settlement Agreement, and (b) the Released Parties reserve the right to object to class
certification de novo in the event this Agreement is terminated for any reason.

8. FINAL APPROVAL AND EFFECT OF THE AGREEMENT

     8.1 If the Court enters the orders as described in Section 7, the Parties shall proceed with
due diligence to conduct the fairness hearing as ordered by the Court.

- 15 -

 

     8.2 The Settlement Agreement is subject to and conditioned upon (a) the issuance by the Court
and subsequent entry, following the fairness hearing, of a Final Order and Judgment granting final
approval of the Settlement Agreement in accordance with article 594 of the Louisiana Code of Civil
Procedure, (b) such Final Order and Judgment becoming Final, and (c) compliance with Section 6. It
is a condition of this Settlement Agreement that the Final Order and Judgment shall be
substantially in the form attached hereto as Exhibit 3. The Parties shall take all reasonable and
necessary actions to obtain the Final Order and Judgment and to have it made Final as promptly as
practical.

     8.3 The Parties agree that, to the extent CorVel, its Affiliates, and/or Clients/Payors,
comply with the procedure described in Exhibit 4 attached hereto, the Released Parties shall not
incur any future liability or contractual impairment under the Louisiana Workers Compensation Act
or La. R.S. 40:2203.1 or otherwise by reason of any alleged failure to comply with La. R.S.
40:2203.1 or give adequate notice to Providers of the entities accessing Providers’ contractual
rates of payment, and, under such circumstances, any and all claims against the Released Parties
related thereto are hereby released, discharged, and forever waived, and the Class Members agree,
on their own behalf and for their Affiliates, that they shall not assert such claims in the future.
The Parties agree that the foregoing is a settlement of the Class’ extant and potential future
injunctive relief claims against the Released Parties. The Final Order and Judgment shall include
a specific finding by the Court that such notice procedure is fair to the Class.. The Parties
further agree that this provision shall not afford any person or entity other than CorVel,
its Affiliates and the Released Parties protection from future liability under La R.S. 40:2201, et
seq. and/or 23:1021, et seq.

     8.4 Upon the Effective Date, each of the Class Members and their Affiliates releases and shall
defend and hold harmless the Released Parties from and against any and all past, present, or future
claims, demands, suits, causes of action, rights of action, liabilities, liens, privileges, or
judgments of any kind whatsoever, including, without limitation, claims for damages, fines,
workers’ compensation or other penalties, contribution, indemnity, subrogation, breach of contract,
statutory violation, and/or tort, by, on behalf of, through, or deriving from the claims of that
Class Member and/or its Affiliate, or by, on behalf of, through, or deriving from his, her, or its
heirs, executors, representatives, relatives, custodians, attorneys or former attorneys,
successors, employers, insurers, employers’ insurers, health insurers, healthcare providers,
assignees, subrogees, predecessors in interest, successors in interest, beneficiaries or

- 16 -

 

survivors or any other person or entity asserting a right to sue any of the Released Parties by
virtue of a personal or legal relationship with that Class Member or its Affiliate related to any
Episode and/or related to or connected in any way with claims of that Class Member or its Affiliate
that might give rise to any Liability. The release, hold harmless and defense obligation of this
Section shall include any and all claims, demands, suits, causes of action, rights of action,
liabilities, liens, privileges, or judgments of any kind whatsoever related, directly or
indirectly, to the disbursement of or from, or the failure to make disbursement of or from, the
Class Settlement Fund with respect to that Class Member or its Affiliate, but shall not include any
proceedings before the Court to enforce rights under the settlement.

     8.5 It is expressly understood and agreed that the release, hold harmless, defense, and
judgment-reduction obligations set forth in Section 8.4 and this Agreement shall exist regardless
of the legal basis for the claim, demand, cause of action, right of action, suit, liability, lien,
privilege, or judgment asserted by any person and/or entity to the extent related to an Episode.
In particular, the Class Members and their Affiliates expressly bind themselves to the foregoing
release, hold harmless, defense and judgment-reduction obligations. regardless of whether the
claim, demand, suit, liability, lien, privilege, judgment, cause of action, or right of action
related to any Episode is based on or related to contribution, indemnity, subrogation, breach of
contract, statutory violation, and/or tort.

     8.6 This Settlement Agreement shall be the exclusive remedy for any and all claims of Class
Members and their Affiliates against the Released Parties based on any Episode or giving rise to
any Liability. When the Final Order and Judgment becomes Final, each of the Class Members and
their Affiliates shall be barred from initiating, asserting, prosecuting or continuing to prosecute
any such claims; notwithstanding the foregoing, the Class and/or any member of the Class (a)
reserves all rights against any and all Insurers of CorVel Corporation, and (b) reserves its right
to proceed with any and all claims it may now have (whether currently pending or not) or may in the
future have against any and all persons or entities that are not released or otherwise addressed
pursuant to this Settlement Agreement.

     8.7 The Parties agree that, to the best of their knowledge, information and belief, the
Settlement Agreement is made in good faith and in accordance with the laws of the United States and
the State of Louisiana. The Parties agree to cooperate by providing affidavits and/or testimony
concerning the circumstances of this settlement and attesting to the fact that it is a good faith
settlement.

- 17 -

 

     8.8 The Court shall retain jurisdiction over the Class Action, the Settlement Agreement, the
Final Order and Judgment, the Class Settlement Fund, the Escrow Agreement, the Escrow Account and
the Parties to this Settlement Agreement solely for the purpose of administering, supervising,
construing, and enforcing the Agreement and the Final Order and Judgment and supervising the
management and disbursement of the funds in the Escrow Account.

     8.9 This Court shall have jurisdiction over any dispute that arises under this Settlement
Agreement. If any dispute is so submitted, each concerned party shall be entitled to fifteen (15)
days’ written notice (or otherwise, as the Court may for good cause direct) and the opportunity to
submit evidence and to be heard on oral argument as the Court may direct.

9. SIGNED RELEASES/ASSIGNMENT

     9.1 Without limiting the foregoing, each Class Member who receives any money from the Class
Settlement Fund shall, on or before the time that such Class Member receives such money, execute
for delivery to CorVel a receipt and release substantially in the form attached hereto as Exhibit
5, expressly memorializing the release of all Liability, and each and all of the claims based on
any Episode, by, through, or on behalf of that Class Member; holding the Released Parties harmless
from and defending them against any claims or cross-claims for indemnity or contribution and/or any
claims by any person who or which derives or obtains any right or claim from or through any such
Class Member (e.g., subrogation claims by worker’s compensation insurers, employers, and/or health
care providers, heirs, relatives and/or custodians); and acknowledging his/her/its receipt of the
money to be paid to that Class Member. The receipt and release required pursuant to this Section
9.1 may be in the form of an instrument included with the allocation check for each Class Member;
in such event, a Class Member’s endorsement and/or deposit of such allocation check shall serve as
that Class Member’s acknowledgment of, and agreement to, the terms and conditions set forth in the
instrument included with the allocation check. The CADA shall, within a reasonable period of time
following the CADA’s receipt thereof, deliver to CorVel the endorsed allocation checks (or copies
thereof, if appropriate).

     9.2 Nothing in the Agreement shall affect or release claims available to the Released Parties
except as otherwise expressly set forth in Section 11.

     9.3 The claims of each Class Member based on any Episode or giving rise to any Liability, as
against each of the Released Parties shall be assigned to that Released Party for the

- 18 -

 

purpose of legally extinguishing any further liability of the Released Parties.

10.

CONTRIBUTIONS TO AND DISBURSEMENTS FROM THE CLASS SETTLEMENT FUND

     10.1 Within seven (7) business days after the Court’s entry of the Order of Preliminary
Approval, CorVel shall pay into the Escrow Account the sum of Nine Million and No/100
($9,000,000.00) Dollars. The Released Parties shall never be called upon to pay any sums in
addition to these amounts to or on behalf of the Class Members or their counsel as a result of
their respective Liability.

     10.2 If CorVel fails to timely make the above payments in full, the PSC may notify CorVel in
writing of such failure, and CorVel shall have a reasonable time (no more than five (5) days) to
pay any unpaid amounts.

     10.3 All contributions into the Escrow Account shall be held in an interest-bearing trust
account, and, as applicable, in separate subaccounts within the Escrow Account prior to the
Effective Date and, if necessary, after the Effective Date, pursuant to the terms of the Escrow
Agreement.

     10.4 The obligations of CorVel under the Agreement are not intended to and shall not create or
be deemed to create any joint or joint and several or in solido obligations on the part of any
person and/or entity, including the Released Parties.

     10.5 The Escrow Account shall be formed and operated to meet all requirements of a qualified
settlement fund within the meaning of Section 468B of the Internal Revenue Code of 1986 and all
regulations and rulings thereunder. CorVel shall be permitted, in its discretion, and at its own
cost, to seek a private letter ruling from the Internal Revenue Service regarding the tax status of
the Escrow Account. The Parties agree to negotiate in good faith any changes to the Agreement
necessary to obtain IRS approval of the Escrow Account as a qualified settlement fund.

     10.6 Except as otherwise expressly provided herein, all of the costs, fees, and expenses for
plaintiffs’ counsel shall come from the contribution made by CorVel to the Escrow Account pursuant
to Section 10.1; provided, however, that no sums shall be paid for the costs, expenses (other than
as otherwise expressly provided for herein), or fees of plaintiffs’ counsel until after the
Effective Date.

     10.7 The Class shall be responsible for the costs of notice and administration associated with
obtaining final approval of the Class Action Settlement and distribution of the

- 19 -

 

Settlement Fund, including the obligations set forth in paragraphs 14.21 and 14.22 of the
Agreement.

     10.8 Until the Effective Date, except as otherwise specifically provided herein and/or in the
Escrow Agreement, no monies in the Escrow Account shall be used or disbursed.

     10.9 Upon the Effective Date: (a) except as otherwise provided herein, the Class Settlement
Fund shall vest in and to the benefit of Class Members; (b) except as otherwise specifically
provided for herein, the interests of CorVel in the Class Settlement Fund shall cease; and (c) the
Released Parties shall have no further obligations to the Class or the Class Members in connection
with their respective Liability.

     10.10 Except as otherwise specifically provided herein and/or in the Escrow Agreement, after
the Effective Date, all costs or expenses in connection with or incidental to this settlement,
shall, to the extent approved by the Court, be paid exclusively from the Class Settlement Fund.
CorVel shall not be liable for any such costs or expenses, except that CorVel shall be responsible
for the cost of its own attorneys, expert witnesses, consultants, and employees.

     10.11 The Parties agree that at such time as the Effective Date has occurred, the Court may
proceed in the manner prescribed by due process of law and article 594 of the Louisiana Code of
Civil Procedure to the allocation and distribution of the Class Settlement Fund to Class Members
according to a protocol submitted by the Special Master and approved by the Court. As of the one
year anniversary of the Effective Date, any funds which remain unclaimed by the Class Member to
whom they have been allotted by the Special Master shall revert to CorVel.

11. INSURANCE ASSIGNMENT

     11.1 In addition to the consideration paid in Section 10 above, upon final approval of this
Settlement, CorVel shall assign to the Class any and all of its rights to: (a) receive any and all
proceeds available/awarded pursuant to CorVel’s insurance policies with respect to the released
claims, with the exception that CorVel shall retain the right to reimbursement on a first dollar
basis of the legal fees and litigation costs incurred by CorVel in the defense or prosecution of
any and all litigation or arbitration proceeding up to $1,000,000; and (b) pursue a declaratory
judgment and/or damages action with respect to indemnity coverage under these policies for the
released claims. The claims excepted from the assignment to the Class shall have priority over
those assigned to the Class in terms of payment from the proceeds of the policies.

- 20 -

 

     11.2 By making this partial assignment of its right to recover under the above policies with
respect to the released claims, CorVel and its Affiliates make no warranty as to either the
existence or extent of coverage afforded by these policies or the validity of the assignment. The
Parties agree that the validity and finality of this Settlement is not contingent upon the outcome
of any declaratory judgment and/or damages action or actual payment of any proceeds from any of the
policies.

     11.3 CorVel’s good faith defense and prosecution of the existing Delaware coverage litigation,
entitled Homeland Insurance Company of New York v. CorVel Corporation and docketed as Civil Action
No. N11E-01-089 in the Superior Court of Delaware in New Castle County, until the date any
assignment pursuant hereto takes effect shall not provide the basis for any allegation of breach of
this Settlement Agreement and shall not provide any cause of action against CorVel or its
Affiliates. Subject to the provisions of any confidentiality order, CorVel shall provide to the
PSC a copy of all pleadings that have been filed in the Delaware coverage litigation and any
subsequently filed pleadings.

     11.4 Upon any assignment pursuant this Section 11, the Class shall assume sole responsibility
for any and all legal fees and litigation costs related to the defense and prosecution of any
coverage litigation relating to indemnity under the policies. Following such assignment, the
members of the PSC recognize that each of them and their firms may be provided with confidential
information by CorVel and its Affiliates in their discretion, for the defense and prosecution of
the coverage litigation. In that event, the PSC agrees that an attorney-client relationship with
CorVel and its Affiliates would be created such that the PSC and each of them and their firms would
have an unwaivable conflict of interest in representing, directly or indirectly, any party adverse
to CorVel or its Affiliates concerning the same subject matter litigated in or related to either
the assigned claims or information shared by CorVel or its Affiliates.

     11.5 If final approval of this Settlement is not obtained, all right, title and interest to
the policies and their proceeds, including the right to pursue the aforementioned declaratory
judgment and/or damages action with respect to coverage under the policies and to recover funds
available or previously paid under those policies, shall remain with CorVel.

12. TERMINATION OF AGREEMENT

     12.1 As provided below, the Agreement may be terminated by CorVel or the PSC upon written
notice if any one or more of the following events occur (provided, however, that a Party

- 21 -

 

whose willful conduct causes the event giving rise to the right to terminate shall not have a right
to terminate the Agreement by reason of such event and further provided that copies of any written
notice of termination shall be provided to the Court and filed in the record of the Class Action):

     (a) this Settlement Agreement is not signed by or on behalf of all Parties and
CorVel gives the PSC written notice of termination of this Agreement for such reason
or the PSC gives CorVel written notice of termination of this Agreement for such
reason;

     (b) the Joint Motion for Preliminary Approval of Proposed Settlement described in
Section 7.1 is not submitted to the Court on or before April 30, 2011, and CorVel
gives the PSC written notice of termination of this Agreement for such reason or the
PSC gives CorVel written notice of termination of this Agreement for such reason;

     (c) the Court does not issue the Order of Preliminary Approval substantially in the
form attached hereto as Exhibit 2, and CorVel gives the PSC written notice of
termination of this Agreement for such reason or the PSC gives CorVel written notice
of termination of this Agreement for such reason;

     (d) the Court does not enter the Final Order and Judgment substantially in the form
attached hereto as Exhibit 3 or in a form mutually acceptable to the PSC and CorVel,
and CorVel gives the PSC written notice of termination of this Agreement for such
reason or the PSC gives CorVel written notice of termination of this Agreement for
such reason;

     (e) the Final Order and Judgment does not become Final, and CorVel gives the
PSC written notice of termination of this Agreement for such reason or the PSC gives
CorVel written notice of termination of this Agreement for such reason;

     (f) there are Opt-Out Parties who have claims affecting more than 5% of the Episodes
to which this Settlement applies (see Section 6.2, above) and CorVel gives the PSC
written notice of termination of this Agreement;

     (g) contributions to the Escrow Account are not made timely in accordance with the
provisions of this Settlement Agreement and the PSC gives CorVel written notice of
termination of this Agreement for such reason;

     (h) the Final Order and Judgment is substantively modified or reversed on any writ or
appeal, and CorVel gives the PSC written notice of termination of this Agreement

- 22 -

 

for such reason or the PSC gives CorVel written notice of termination of this
Agreement for such reason;

     (i) CorVel or the Affiliates thereof are ordered or required to pay any amount over
the amounts set forth in Section 10.1, whether in settlement, administration fees, costs,
attorneys’ fees, or any other award, fee, or cost of any nature whatsoever as a result of
their respective Liability, and CorVel gives the PSC written notice of termination
of this Agreement for such reason;

     (j) there are any material alterations to the terms and conditions of the Settlement
Agreement, unless agreed to by the Parties, and CorVel gives the PSC written notice
of termination of this Agreement for such reason or the PSC gives CorVel written
notice of termination of this Agreement for such reason;

     (k) the Effective Date does not occur on or before the later of May 27, 2012 or any
extended date mutually agreed upon, in writing, by (i) Thomas A. Filo, on behalf of the PSC,
and (ii) John V. Quaglino., on behalf of CorVel, gives the PSC written notice of termination
of this Agreement for such reason or the PSC gives CorVel written notice of
termination of this Agreement for such reason.

     12.2 In the event of termination of the Agreement, (a) the Settlement Agreement shall be null
and void and have no force and effect and, except as otherwise provided in this Settlement
Agreement, no Party shall be bound by its terms, (b) all Parties shall be restored to their
respective positions immediately before execution of the Settlement Agreement; (c) any and all
monies or other contributions paid into the Escrow Account, by CorVel (actual and accrued) thereon,
shall be returned to CorVel; and (d) the Class Action and Related Proceedings shall revert to their
status before the execution of the Settlement Agreement as if related orders and papers and the
efforts leading to the Agreement had not been entered, prepared, or taken. Further, in the event
of such termination, CorVel shall have full authority to immediately withdraw from the Escrow
Account CorVel’s contributions and payments, and the earnings (actual and accrued) thereon, without
further proceedings or approval of any court, subject to and in accordance with the Escrow
Agreement. In the event any settlement funds are to be returned to CorVel in accordance with this
Agreement, the necessary consent by the PSC shall be deemed to have been given as required for
Section 468B of the Internal Revenue Code of 1986.

- 23 -

 

13. ADDITIONAL OBLIGATIONS OF THE PSC AND CORVEL

     13.1 The PSC covenants, represents and warrants to CorVel, and CorVel covenants, represents
and warrants to the PSC, that, as applicable:

          13.1.1 The PSC and CorVel have not been notified of any pending lawsuit, claim, or legal
action related to any Episode brought or made by or on behalf of any putative Class Member other
than the Class Action and Related Proceedings;

          13.1.2 The PSC and CorVel have not been notified of any lawsuit, claim, or legal action
against CorVel or any Released Party related to any Episode brought or made by or on behalf of any
person and/or entity who is not a putative Class Member against CorVel;

          13.1.3 All liens, assigned claims, interventions, subrogation interests and/or claims, and
other encumbrances attaching to the proceeds of this settlement, or the interest of any individual
Class Member therein, of which the PSC or CorVel have been placed on notice are set forth in
Exhibit 6 hereto, and as additional liens, assigned claims, interventions, subrogation interests
and/or claims, and other encumbrances become known to the PSC and/or CorVel, such exhibit shall be
supplemented accordingly; and

          13.1.4 The PSC and CorVel have exercised due diligence in ascertaining that their respective
representations contained in this Settlement Agreement are true and accurate, and the PSC and
CorVel shall have, until the Effective Date, a continuing obligation to ensure that their
representations are accurate, and the PSC and CorVel shall notify each other within a reasonable
time after learning that any of the representations are or become inaccurate.

     13.2 The PSC further covenants, represents and warrants to CorVel that:

          13.2.1 Prior to the fairness hearing, the PSC shall have explained the terms and effect of
this Settlement Agreement to the Plaintiffs;

          13.2.2 The PSC has not and will not make any undisclosed payment or promise to any Class
Representative;

          13.2.3 The PSC have read and reviewed the Settlement Agreement and believe that the settlement
embodied therein is in the best interests of each of its clients;

          13.2.4 The PSC will strongly recommend to each of its clients that they settle their claims
under the terms of the Settlement Agreement; and

          13.2.5 Thomas A. Filo, Arthur M. Murray, and John S. Bradford have full authority to enter
into and execute this Settlement Agreement and all related settlement documents for and on behalf
of and to bind the PSC, individually and on behalf of the Class and the Plaintiffs.

- 24 -

 

          13.2.6 Each named Plaintiff has full authority to enter into and execute this Settlement
Agreement and all related documents for, and on behalf of and to bind, him or it.

     13.3 The Parties shall use their best efforts to conclude the settlement and obtain the Final
Order and Judgment. The Parties agree that it is essential that this proposed settlement be
prosecuted to a successful conclusion in accordance with all applicable provisions of law and in
the exercise of good faith on the part of the Parties. Inherent in the accomplishment of this
mutual goal is the understanding among the Parties that the Parties assume the mutual obligation to
each other to assist and cooperate in the effectuation of the settlement in accordance with all
applicable legal requirements. To that end, the Parties are obliged to affirmatively support the
settlement in the event of appeal, to maintain the integrity and goals of the settlement in all
further proceedings in the Class Action, and to take such actions as may be legally proper to
assure the jurisdiction of the Court in this and all subsequent proceedings. The settlement is
intended to be a final and binding resolution of all Liability.

14. MISCELLANEOUS PROVISIONS

     14.1 The execution of this Settlement Agreement by or on behalf of CorVel shall not be
construed to release—and the Released Parties expressly do not intend to release and, instead,
expressly reserve—any claims the Released Parties have, or may have, against any party (other than
the Class and the Class Members acting consistent with the terms of this settlement), including,
but not limited to, any claim for any cost or expense incurred in connection with this Settlement
Agreement and/or all actions and proceedings contemplated hereunder, including attorneys’ fees and
costs. Moreover, nothing in this Settlement Agreement shall be construed as an admission or
acknowledgement that CorVel has any obligation to any other Released Party, whether for
contribution, for indemnification, or based in contract, related to any Episode.

     14.2 Neither this Settlement Agreement, nor the settlement contemplated thereby, nor any
proceeding taken hereunder shall be construed as or deemed to be evidence of any fact or an
admission or concession by the Released Parties of any liability or wrongdoing whatsoever, which is
expressly denied by the Released Parties, or, on the part of the Class Members, of any lack of
merit in their claims. None of the provisions of this Settlement Agreement, nor evidence of any
negotiations or proceedings in pursuance of the compromise and settlement herein, shall be offered
or received in evidence in the Class Action or any other action or proceeding as an admission or
concession of liability or wrongdoing of any nature on the part of the Released Parties, or as an
admission of any fact or presumption on the part of the Class, or to establish

- 25 -

 

jurisdiction or venue or to create a waiver of any affirmative defense. None of the provisions of
this Settlement Agreement or the Agreement shall be considered an admission or stipulation that the
notice requirements of La. R.S. 40:2203.1 are binding on CorVel or apply to PPO discounts for
workers’ compensation services. The provisions of the Settlement Agreement and/or the Agreement may
be offered or received in evidence solely to enforce the terms and provisions thereof and shall not
be offered in evidence or used in the Class Action or any other action or proceeding for any other
purpose, including in support of the existence, certification, or maintenance of any purported
class. The Parties specifically acknowledge, agree and admit that this Settlement Agreement and
the Agreement, along with all related motions and pleadings, shall be considered an offer to
compromise and a compromise within the meaning of Rule 408 of the Federal Rules of Evidence,
article 408 of the Louisiana Code of Evidence, and any equivalent rule of evidence of any state or
federal court, and shall not be offered or received into evidence as an admission or concession of
liability or wrongdoing on the part of the Released Parties. This Section 14.2 shall survive the
termination of the Agreement.

     14.3 This Settlement Agreement constitutes the entire agreement among the Parties and may not
be modified, amended, or waived except by a written instrument duly executed by all the Parties or
their authorized representatives; provided, however, CorVel may exercise the waiver rights provided
under Section 4.17. Each Party hereto represents and warrants that it is not relying on any
representation that is not specifically included in this Settlement Agreement. This Settlement
Agreement supersedes any previous agreements or understandings between or among the Parties on the
subject matter of this Settlement Agreement.

     14.4 This Settlement Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one and the same
instrument.

     14.5 The terms and conditions of this Settlement Agreement shall bind and inure to the benefit
of the heirs, executors, administrators, predecessors in interest, successors in interest, legal
representatives, and assigns of all Parties.

     14.6 Except with respect to any waiver provided pursuant to Sections 4.17 or 14.3, any waiver
by a Party of any term, condition, covenant, or breach of the Settlement Agreement shall not be
deemed to be a continuing waiver of same.

     14.7 The Parties agree that the terms and conditions of this Settlement Agreement are the
result of arm’s length negotiations between the Parties or their counsel. None of the Parties

- 26 -

 

shall be considered to be the drafter of the Settlement Agreement or any provision hereof for the
purpose of any statute, jurisprudential rule, or rule of contractual interpretation or construction
that might cause any provision to be construed against the drafter.

     14.8 For purposes of this Settlement Agreement, the use of the singular form of any word
includes the plural and vice versa.

     14.9 The table of contents and the headings of each Section in this Settlement Agreement are
included for convenience only and shall not be deemed to constitute part of this Settlement
Agreement or to affect its construction.

     14.10 The Parties have agreed that the validity and interpretation of this Settlement
Agreement and any of the terms or provisions hereof, as well as the rights and duties of the
Parties thereunder, shall be governed solely by the laws of the State of Louisiana without giving
effect to any conflict of laws principles and that the exclusive forum for any claim related to the
interpretation or enforcement of the Settlement Agreement shall be the 27th Judicial District Court
in and for the Parish of St. Landry, Louisiana.

     14.11 Any notice, request, instruction, or other document to be given by any Party to any
other Party (other than class notification) shall be in writing and delivered personally, sent by
registered or certified mail, postage prepaid, or sent by private, overnight delivery carrier
operating in the United States of America, providing a receipt with evidence of delivery, as
follows:

     (a) If to CorVel or the Released Parties, to:

John V. Quaglino.

3320 West Esplanade North

Metairie, Louisiana 70002

     (b) If to the PSC, the Class, or the Plaintiffs, to:

Thomas A. Filo

Cox, Cox, Filo, Camel & Wilson, L.L.P.

723 Broad Street

Lake Charles, Louisiana 70601

and

Arthur M. Murray

The Murray Law Firm

625 S. Charles Ave., 3rd Floor

New Orleans, LA 70130

The Parties may change their respective recipients and addresses for notice by giving notice of
such change to the other Parties pursuant to this Section 14.11.

- 27 -

 

     14.12 Thomas A. Filo, as Chairman and Liaison Counsel for the PSC, shall provide, or otherwise
ensure the provision of, all required notices to the other members of PSC, including, without
limitation, any orders issued by the Court.

     14.13 The PSC may seek an order from the Court, which CorVel shall not oppose, stating that
any contingency fee contracts entered into and dated after March 31, 2010 shall not be enforceable
without approval of the Court.

     14.14 CorVel agrees that in the event that any appeal is taken with respect to the settlement
embodied in this Settlement Agreement, CorVel will join in a motion to require any appellant other
than CorVel to post an appeal bond set at the maximum amount allowed by law.

     14.15 In the event that one or more of the provisions of this Settlement Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision, but only if the Parties
mutually elect to proceed as if such invalid, illegal, or unenforceable provision had never been
included in this Settlement Agreement.

     14.16 In entering into this Settlement Agreement, each Party represents and warrants that it
has relied upon its own knowledge and judgment and the advice of counsel. It is expressly
understood, agreed, and warranted that, in entering into this Settlement Agreement, no Party has
acted in reliance upon any representation, warranty, advice, or action by any other Party except as
specifically set forth herein.

     14.17 Except as otherwise provided herein or as may be required by law or in connection with
notice of the settlement or as otherwise agreed in writing by the Parties, the Parties shall keep
the existence of the settlement in confidence until the Court’s entry of the Order of Preliminary
Approval.

     14.18 Anything contained herein to the contrary notwithstanding, nothing contained in this
Settlement Agreement shall afford a Class Member any right to reserve rights against any of the
Released Parties, except as provided in Section 1.1, Section 4.8, and Section 8.6.

     14.19 All valid liens, assigned claims, interventions, subrogation interests and/or claims,
and encumbrances of any third parties related to any Episode and/or otherwise attaching to the
proceeds of this settlement, or the interest of any individual Class Member therein shall be
satisfied solely from the Class Settlement Fund. The Released Parties shall not be subject to any
liability or expense of any kind to any person and/or entity with regard to such liens, assigned
claims, interventions, subrogation interests and/or claims, and encumbrances. The PSC and the

- 28 -

 

Class reserve the right to contest the validity and/or amount of any such lien, assigned claim,
intervention, subrogation interest and/or claim, and encumbrance.

     14.20 In order to assist the Special Master in allocating settlement funds, CorVel shall
provide the Special Master appropriate data concerning benefits, claims, and workers’ compensation
payments made to Louisiana Providers since January 1, 2000 where a PPO discount was taken by or
through any CorVel network or a CorVel Networks Access Agreement with another network.

     14.21 The Class Settlement Notice will be designed to (a) provide proper notice to the Class
Members; (b) effectively reach the Class Members; and (c) satisfy federal and state due process and
other relevant standards. The Class Settlement Notice will be prepared to allow persons and
entities to opt out of the Class as Defined.

     14.22 The Notice Plan, as approved by the Court, shall provide for dissemination: (a) by
first class mail to the last known address of all putative Class Members, if reasonably
ascertainable; (b) by publication in the Lake Charles American Press, The Times (Shreveport), and
The Advocate (Baton Rouge), and the Times Picayune, each on two separate days; (c) by such other
newspaper publication(s), if any, as necessary to satisfy due process; (d) to all known attorneys
who have in the past represented or presently represent any Class Member individually in matters
related to any Episode with instructions that such counsel are to disseminate a copy of the notice
to their respective clients who have not received notice pursuant to (a) above; (e) by posting at
the courthouse of the 27th Judicial District Court in and for the Parish of St. Landry in the
office of the Clerk of Court; (f) by posting at such other public places as may be further ordered
by the Court; and (g) by posting a copy at a neutral website. The dissemination of the notice shall
be the responsibility of the PSC.

     14.23 The PSC and CorVel must jointly agree on the Class Settlement Notice and the Notice Plan
prior to submission to the Court.

     14.24 If, for any reason, John V. Quaglino or Thomas A. Filo become unable to fulfill their
respective roles under this Settlement Agreement and/or any exhibit hereto, including, without
limitation, the Escrow Agreement, they may be replaced by the Party and/or Parties they represent
via written notice provided to the other Parties pursuant to Section 14.11.

 

	 	 	 	 

	 

Date

	 	 
 Thomas
A. Filo	 
	 

	 	Michael K. Cox	 
	 

	 	Cox, Cox, Filo, Camel & Wilson, L.L.P.	 
	 

	 	723 Broad Street	 

- 29 -

 

	 	 	 

	 

	 	Lake Charles, Louisiana 70601
	 
	 	 
	 
	 	 
	 

Date

	 	 
 Stephen
B. Murray
	 

	 	Arthur M. Murray
	 

	 	Stephen B. Murray, Jr.
	 

	 	The Murray Law Firm
	 

	 	625 St. Charles Ave., 3rd Floor
	 

	 	New Orleans, LA 70130
	 
	 	 
	 
	 	 
	 

Date

	 	 
 John
S. Bradford
	 

	 	William B. Monk
	 

	 	Stockwell, Sievert, Viccellio,
	 

	 	Clements & Shaddock, L.L.P.
	 

	 	One Lakeside Plaza, Fourth Floor
	 

	 	Lake Charles, Louisiana 70601
	 
	 	 
	 

	 	REPRESENTING THE PSC, INDIVIDUALLY AND ON
	 

	 	BEHALF OF THE CLASS AND THE PLAINTIFFS
	 
	 	 
	 
	 	 
	 

Date

	 	 
 John
V. Quaglino.
	 

	 	3320 West Esplanade North
	 

	 	Metairie, Louisiana 70002
	 

	 	Office: 504-831-7270
	 

	 	Fax: 504-831-7284
	 
	 	 
	 

	 	ATTORNEY FOR CORVEL CORP.
	 
	 	 
	 

	 	CorVel Corporation
	 
	 	 
	 
	 	 
	 

Date
	 	By:

	 
	 	 
	 

	 	Its:

	 
	 	 
	 

	 	DEFENDANT

- 30 -

 

Exhibit 1

ESCROW AGREEMENT

Except as otherwise expressly provided below or as the context
otherwise requires, all capitalized terms used in this Escrow
Agreement (“EA”) shall have the meanings and/or definitions given
them in the Settlement Agreement (“SA”) entered into by or on
behalf of the PSC, the Class, the Plaintiffs, and CorVel as of
____________, 2011.

THIS AGREEMENT made effective as of ___, 2011, by and among:

	 	A.	 	the PSC;
	 
	 	B.	 	the Class, by their attorneys, the PSC;
	 
	 	C.	 	the Plaintiffs, by their attorneys, the PSC;
	 
	 	D.	 	CorVel Corporation, by its counsel of record; and
	 
	 	E.	 	First NBC Bank (“Escrow Agent”).

     The PSC, the Class, the Plaintiffs, and CorVel are collectively referred to herein as the
“Settling Parties”.

RECITALS

     The Court appointed the PSC to represent the Class and all Class Members in the Class Action.

     The PSC, the Class, the Plaintiffs, and CorVel have entered into the SA which contemplates, as
a condition of the SA, that they execute this EA.

     A copy of the SA has been delivered to the Escrow Agent.

     In accordance with the terms and conditions of the SA, the Settling Parties desire: (1) to
resolve all Liability; (2) that CorVel place in an account referred to as the Escrow Account
certain funds in accordance with the SA; (3) that the funds in the Escrow Account be used to pay
claims asserted, and fees, costs, and expenses incurred as set forth in the SA; (4) that the Escrow
Account qualify as a qualified settlement fund as defined by Int. Rev. Code §468B and the
regulations promulgated thereunder; (5) to appoint the Escrow Agent as escrow agent for the Escrow
Account to accept, invest, administer, disburse and transfer funds into, within, and from the
Escrow Account in accordance with the provisions of this EA and the SA; (6) to establish, pursuant
to this EA, certain subaccounts within the Escrow Account to facilitate the administration,
disbursement and accounting of the funds in the Escrow Account; and (7) to otherwise implement the
SA, including, without limitation, to effectuate a complete and final settlement and compromise of
all Liability.

     The Escrow Agent is willing to accept, invest, administer, disburse and transfer funds into,
within and from the Escrow Account as provided in this EA.

     NOW, THEREFORE, THE SETTLING PARTIES AND THE ESCROW AGENT AND EACH OF THEM, HEREBY AGREE AND
OBLIGATE THEMSELVES AS FOLLOWS:

1. RECITALS

     Recitals. The Settling Parties and the Escrow Agent acknowledge and agree that the
recitals set forth above are an integral part of this EA and incorporate them herein and make them
a part hereof.

- 1 -

 

2. THE SETTLEMENT FUND

     2.1 Creation. Funds will be deposited into the Escrow Account in accordance with the
provisions of the SA. CorVel shall be responsible only for its agreed contributions to the Escrow
Account.

     2.2 Order. The Class, the Plaintiffs, and CorVel shall jointly seek from the Court an
order which provides that the Escrow Account and all funds deposited therein shall be formed and
operate to meet all the requirements of a qualified settlement fund within the meaning of Section
468B of the Internal Revenue Code of 1986 and all regulations and rulings thereunder.

     2.3 Name. The Escrow Account shall be known as the CorVel Settlement Fund, and it
shall be referred to under that name in its official actions and dealings, including its: (1)
investments; (2) applications for taxpayer identification number(s); and (3) tax returns, reports
and other documents related thereto filed or prepared by the Escrow Agent.

     2.4 Investments. The Escrow Agent shall invest the funds deposited in the Escrow
Account in a fund which meets each of the following requirements: (1) it is rated in the highest
rating category by both Moody’s Investors Service and Standard and Poor’s Corporation, (2) it is a
diversified money market fund that seeks current income with daily liquidity and stability of
principal, (3) it accrues interest daily and credits said interest no less frequently than monthly,
and (4) it invests exclusively in short-term U.S. Treasury obligations, repurchase agreements
collateralized by the U.S. Government, and other obligations issued or guaranteed by the U.S.
Government (hereinafter “the Fund”). The Escrow Agent will maintain the Escrow Account as a Trust
Class Shares account as described in the Fund prospectus provided to the PSC and CorVel, and the
Fund will be subject only to the fees and expenses described in such prospectus as applicable to
such Trust Class Shares accounts. The Escrow Agent hereby confirms and agrees that 12b-1 fees will
not be applicable to or assessed against the Escrow Account or the earnings thereof. In the event
the Fund fails to meet each of the above requirements, the Escrow Account shall immediately be
transferred to another U. S. Treasury money market mutual fund that meets each of said requirements
and has comparable fund fees and expenses. All parties acknowledge and agree that collected funds
must be delivered to the Escrow Agent no later than 11:00 a.m. (Central Standard Time) in order to
be invested that business day. Otherwise, the funds will be invested on the next business day.
The parties further recognize and agree that the Escrow Agent will not provide supervision,
recommendations or advice related to either investment of moneys held in the Escrow Account or the
purchase, sale, retention, or other disposition of any investment. The Escrow Agent is hereby
authorized to execute purchases and sales of investments through the facilities of its own trading
or capital markets operations or those of an affiliated entity. Although each of the parties
recognizes that it may obtain broker confirmation or a written statement containing comparable
information at no additional cost, such parties hereby agree that confirmation of investments are
not required to be issued by the Escrow Agent for each month in which a monthly statement is
issued.

     2.5 Earnings. All investment income resulting from the investment of the funds in the
Escrow Account shall constitute and be held and administered as part of the CorVel Settlement Fund.
Each subaccount established hereunder shall be credited with its respective investment income
earned.

     2.6 Disbursements and Transfers. The Escrow Agent shall disburse or otherwise
transfer amounts in the Escrow Account only as follows: (1) pursuant to an order of the Court; (2)
upon the Escrow Agent’s receipt of and pursuant to written notice from CorVel, substantially in the
form attached hereto as Exhibit A; (3) pursuant to Paragraphs 4.1.4, 5.1.3, 6.1, and/or 6.3 below;
(4) upon receipt of and pursuant to written instructions signed by each of (i) John V. Quaglino, on
behalf of CorVel, and (ii) Thomas A. Filo, on behalf of the PSC; (5) solely with respect to
payments from the Opt-Out Reserve pursuant to Section 6 of the SA, upon receipt of and pursuant to
written instructions signed by John V. Quaglino, on behalf of CorVel; and/or (6) upon the Effective
Date, as otherwise provided for in the SA. Notwithstanding anything to the contrary that may be
contained in this EA, any amounts to be disbursed, paid or otherwise transferred pursuant to
clauses (2), (3), (4), (5) or (6) of this Paragraph 2.6 shall be distributed by the Escrow Agent
without the need for any court order or court approval.

     2.7 Accounting. The Escrow Agent shall cause to be maintained at all times detailed
written accounts that reflect, separately for each subaccount that may be established hereunder and
in the aggregate: (1) the principal amounts deposited into the Escrow Account by

- 2 -

 

CorVel; (2) the earnings thereon; (3) the taxes imposed upon the Escrow Account and paid by the
Escrow Agent pursuant to this EA; (4) the fees and expenses (including legal expenses) paid,
assessed or debited pursuant to this EA; and (5) the amounts transferred or disbursed from the
Escrow Account pursuant to Paragraph 2.6 above. The Escrow Agent shall cause a written report,
including a full accounting for each such subaccount and for the settlement fund as a whole to be
delivered to the PSC and CorVel not less than once each calendar month throughout the period that
this EA remains in effect. After the Court has given its preliminary approval to the SA, this
report shall also be delivered to the Court Appointed Disbursing Agent (as such term is defined in
the SA (the “CADA”)) and the Court.

3. TERM

     3.1 Termination of Agreement. This EA shall terminate when the disbursement or other
transfer of all of the amounts in the Escrow Account is completed in accordance with the provisions
of this EA and the SA and the amount in the Escrow Account (including all subaccounts) is thereby
reduced to zero. The Escrow Agent’s rights to receive payments of its fees and expenses as
permitted hereunder shall survive the termination of this EA.

4. TAX COMPLIANCE

     4.1 Tax Compliance. The Escrow Agent shall:

          4.1.1 as necessary, forthwith apply for a taxpayer identification number for the Escrow
Account;

          4.1.2 as necessary, promptly after being requested in writing by the Settling Parties, file or
caused to be filed, a “relation-back election” as defined in Treas. Reg. § 468B-1(j)(2) to treat
the Escrow Account as a qualified settlement fund from the earliest possible date;

          4.1.3 timely file, or cause to be filed, all tax returns the Escrow Account is required to
file under federal, state or other laws, and provide on a timely basis to CorVel all information
which CorVel requires in order to prepare timely federal and state income tax returns in respect of
the earnings of the Escrow Account for all periods when it does not qualify as a qualified
settlement fund under Int. Rev. Code § 468B and CorVel, as grantor, is deemed the owner of the
amounts CorVel transferred to the Escrow Account;

          4.1.4 (a) timely pay or cause to be paid from the Escrow Account all taxes that are imposed
upon the Escrow Account and/or the earnings thereof by federal, state or other laws, it being
understood and agreed that except as may otherwise be provided in Paragraph 6.3, if subaccounts
within the Escrow Account are established pursuant to Paragraph 5.1.3, the taxes shall be paid in
the same proportion as earnings are credited to such subaccounts pursuant to Paragraph 2.5 above;

          4.1.4 (b) from time to time, pay from the Escrow Account to CorVel, within ten days after
receipt thereof, the amount set forth on any certificate (“Tax Certificate”), signed by an
authorized officer of CorVel (a copy of which shall be delivered to all other Parties), stating
that (i) the Escrow Account was not treated as a qualified settlement fund under Int. Rev. Code
§468B for a period set forth in such Tax Certificate, and (ii) the amount set forth on such Tax
Certificate, which the Escrow Agent is thereby requested to pay, is equal to the amount of all
taxes that would be imposed on CorVel at the maximum applicable federal income tax rate in respect
of the earnings of the portion of the funds in the Escrow Account contributed by CorVel (for
purposes of this Paragraph 4.1.4(b), the Escrow Account shall be treated as not a qualified
settlement fund (x) for all periods prior to the date of the entry of the order referred to in
Paragraph 2.2 above, provided, however, that if the Escrow Agent properly files the “relation-back
election” as required by Paragraph 4.1.2 above, the Escrow Account shall be treated as not a
qualified settlement fund for all periods prior to January 1 of the calendar year in which such
order is entered, and (y) for all other periods identified in a Tax Certificate, which certifies
that, based on (i) written advice of counsel, a copy of which shall be attached to such Tax
Certificate, or (ii) a ruling of the Internal Revenue Service, a copy of which shall be attached to
such Tax Certificate, the Escrow Account is not a qualified settlement fund under Int. Rev. Code
§468B and CorVel is treated for federal income tax purposes as the owner of, and required to
include in its income, the earnings of the portion of the funds in the Escrow Account contributed
by CorVel);

- 3 -

 

          4.1.5 promptly file, or cause to be filed, tax elections available to the Escrow Account,
including a request for a prompt assessment under Int. Rev. Code §6501(d) upon the joint request of
the Settling Parties; and

          4.1.6 prepare and deliver to CorVel such returns, statements or other documents that CorVel,
as transferor of the above-stated contributions to the Escrow Account, is required to provide to
the Internal Revenue Service relating to the Escrow Account, the earnings therefrom or its
contributions thereto, it being understood that CorVel will assist the Escrow Agent in preparing
such returns, statements or other documents.

     4.2 Assistance in Tax Compliance. The Escrow Agent may engage the CADA to advise and
assist the Escrow Agent in fulfilling its obligations under Paragraph 4.1 above.

5. OTHER OBLIGATIONS OF THE ESCROW AGENT

     5.1 Duties and Responsibilities. The Escrow Agent shall (in addition to any other
obligations set forth in this EA):

          5.1.1 accept, invest, administer, disburse and transfer all or portions of the amounts in the
Escrow Account pursuant to this EA;

          5.1.2. maintain the Escrow Account and all investments as assets of the trust department of
the Escrow Agent for the benefit of the Escrow Account;

          5.1.3 upon written notice jointly from CorVel and the PSC, divide all or a portion of the
Escrow Account into subaccounts within the Escrow Account as so instructed in the written notice,
it being agreed that one such subaccount shall be established to hold the amounts constituting the
Class Settlement Fund;

          5.1.4 send monthly reports to the PSC and CorVel of all investments, transactions, earnings,
transfers, disbursements and other activities of the Escrow Agent affecting or otherwise relating
to the Escrow Account;

          5.1.5 disburse and otherwise transfer the amounts in the Escrow Account in accordance with
Paragraph 2.6 and not otherwise;

          5.1.6 act in good faith and exercise due care and prudence in fulfilling its obligations under
this EA; and

          5.1.7 provide tax and financial information to the party responsible for tax filings under
Article 4 of this EA (if other than the Escrow Agent).

     5.2 Limitations on Obligations of the Escrow Agent.

          5.2.1 The Escrow Agent shall not:

               5.2.1.1 be required or be under any duty to independently corroborate or investigate the
truth, validity, correctness or efficacy of a certified copy of any order issued by the Court;

               5.2.1.2 be responsible for the application or use by others of the funds in the Escrow Account
if the Escrow Agent invests, disburses or transfers amounts in the Escrow Account in accordance
with this EA;

               5.2.1.3 be bound by any waiver, modification, amendment or rescission of this EA prior to its
receipt of written notice thereof from the Settling Parties; and

               5.2.1.4 have any duties, responsibilities or obligations under this EA, except those which are
set forth herein.

          5.2.2 Notwithstanding any provision contained herein to the contrary, the Escrow Agent,
including its officers, directors, employees and agents, shall:

- 4 -

 

               5.2.2.1 have no responsibility to ensure the genuineness, authenticity, or sufficiency of
any securities, checks, or other documents or instruments submitted to it in connection with
its duties hereunder;

               5.2.2.2 be entitled to deem the signatories of any documents or instruments submitted
to it hereunder as being those purported to be authorized to sign such documents or
instruments on behalf of the parties hereto, and shall be entitled to rely upon the
genuineness of the signatures of such signatories without inquiry and without requiring
substantiating evidence of any kind;

               5.2.2.3 have no responsibility or liability for any diminution in value of any assets held
hereunder which may result from any investments or reinvestment made in accordance with any
provision which may be contained herein;

               5.2.2.4 have only those duties as are specifically provided herein, which shall be
deemed purely ministerial in nature, and shall under no circumstance be deemed a fiduciary
for any of the parties to this EA. Except as otherwise provided herein, the Escrow Agent shall
neither be responsible for, nor chargeable with, knowledge of the terms and conditions
of any other agreement (except for the SA), instrument or document between the other parties
hereto. This EA sets forth all matters pertinent to the escrow contemplated hereunder, and no
additional obligations of the Escrow Agent shall be inferred from the terms of this EA or any other
agreement; and

               5.2.2.5 notwithstanding any other provision of this EA, the Escrow Agent shall not be
obligated to perform any obligation hereunder and shall not incur any liability for the
nonperformance or breach of any obligation hereunder to the extent that the Escrow Agent is
delayed in performing, unable to perform or breaches such obligation because of acts of God,
war, terrorism, fire, floods, strikes, electrical outages, equipment or transmission
failures, or other causes reasonably beyond its control. Any banking association or corporation
into which the Escrow Agent may be merged, converted or with which the Escrow Agent may be
consolidated, or any corporation resulting from any merger, conversion or consolidation to which
the Escrow Agent shall be a party, shall succeed to all the Escrow Agent’s rights and obligations
hereunder without the execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.

     5.3 Agreement Not to Sue the Escrow Agent. The PSC, the Class, the Plaintiffs, and
CorVel each agree that they will not bring any legal action against the Escrow Agent based upon any
claim, loss or liability they may incur or sustain by reason of the Escrow Agent carrying out its
obligations hereunder unless the claim, loss or liability is caused or results from the Escrow
Agent’s (1) failure to act as required by this EA, or (2) negligence or willful misconduct (or that
of the Escrow Agent’s agents, employees or representatives). In addition, it is agreed that any
legal expenses, including attorneys’ fees (other than in-house counsel) reasonably incurred by the
Escrow Agent (i) in defending any legal action prohibited by this Paragraph 5.3 or (ii) in
connection with the performance of its duties under this EA, including, without limitation,
obtaining any court order as set forth in Paragraph 5.5, shall be paid to the Escrow Agent from the
Escrow Account; provided, however, that no legal or other expenses incurred by the Escrow Agent
shall be paid from the Escrow Account if such expenses arise from actions or failures to act
described in clauses (1) or (2) above and/or from legal actions arising from such actions or
failures. In no event shall the Escrow Agent be liable to the PSC, the Class, the Plaintiffs, or
CorVel for special, indirect, or consequential damages or lost profits or loss of business arising
under or in connection with this EA. This Paragraph 5.3 shall survive the termination of this EA.

     5.4 Resignation or Removal of Escrow Agent. The Escrow Agent shall have the right to
resign upon 30 days prior written notice to each of the PSC and CorVel. Upon such resignation, the
PSC and CorVel shall have the joint right to appoint a successor and shall endeavor to appoint a
successor acceptable to each of them as promptly as reasonably possible. In the event that a
successor has not been agreed to by the PSC and CorVel and appointed by the end of such 30 day
period, the Escrow Agent shall have the right to request the Court to appoint a successor. The PSC
and CorVel, acting jointly, shall have the right to remove the Escrow Agent at any time for cause
and to appoint an agreed upon successor.

- 5 -

 

     5.5 Inconsistent Instructions. In the event the Escrow Agent receives inconsistent
instructions or claims with regard to the Escrow Account, the Escrow Agent shall rely upon an order
of the Court to resolve such inconsistency. Notwithstanding anything to the contrary contained in
this EA, the Settling Parties expressly agree that the Escrow Agent is authorized and directed to
rely conclusively on any written notice given (1) by CorVel pursuant to Paragraph 2.6(2) above; or
(2) by each of (i) John V. Quaglino, on behalf of CorVel, and (ii) Thomas A. Filo, on behalf of the
PSC, pursuant to Paragraph 2.6(4) above; or (3) by John V. Quaglino, on behalf of CorVel, pursuant
to Paragraph 2.6(5) above; or (4) in connection with Paragraph 4.1.4(b) above, by CorVel.

6. TAXES, FEES AND EXPENSES

     6.1 Fees Due the Escrow Agent. The entire compensation of the Escrow Agent for its
duties and obligations hereunder are the fees set forth in Exhibit B. The Escrow Agent is
authorized to withdraw payment for such compensation from the Escrow Account monthly.

     6.2 Limitation on Payment of Expenses. The Escrow Agent shall pay from the Escrow
Account, only such taxes, fees, costs and expenses (1) as are specified in this EA or (2) as are
ordered by the Court.

     6.3 Other Costs/Expenses/Subaccounts. Until the Effective Date, all other costs and
expenses incidental to the settlement embodied in the SA shall be paid as provided in Section 10.7
of the SA. Until the Effective Date, if subaccounts within the Escrow Account are established
pursuant to Paragraph 5.1.3, the Escrow Agent shall pay from the subaccounts in the Escrow Account
all applicable taxes and fees of the Escrow Agent in the same proportion as earnings are credited
to such subaccounts pursuant to Paragraph 2.5 of this EA.

7. NOTICES

     7.1 Notices. Any notice, accounting, direction, request or instructions required or
which may be given pursuant to this EA shall be in writing and shall be considered give when
delivered personally, sent by registered or certified mail, postage prepaid, or sent by private,
overnight delivery carrier operating in the United States of America, providing a receipt with
evidence of delivery, to each of the following:

     (a) If to CorVel, to:

John V. Quaglino

3320 West Esplanade Ave. North

Metairie, LA 70001

     (b) If to the PSC, the Class, or the Plaintiffs, to:

Thomas A. Filo

Cox, Cox, Filo, Camel & Wilson, L.L.P.

723 Broad Street

Lake Charles, Louisiana 70601

and

Arthur M. Murray

The Murray Law Firm

625 St. Charles Ave., 3rd Floor

New Orleans, LA 70130

- 6 -

 

     (c) If to the Escrow Agent, to:

First NBC Bank

Attention: William M. Roohi

Senior Vice President

210 Baronne Street

New Orleans, LA 70112

or any other addresses as may hereafter be specified by written notice given to the other parties
in accordance with this Paragraph 7.1.

8. MISCELLANEOUS

     8.1 Governing Law. The rights and obligations of the parties hereto are to be
construed, interpreted, and enforced solely in accordance with the laws of Louisiana, without
giving effect to any conflict of laws principles. The Settling Parties and the Escrow Agent agree
that any judicial proceeding arising out of or resulting from this EA or the breach thereof shall
be filed only in the 27th Judicial District Court in and for the Parish of St. Landry,
Louisiana, the Honorable Alonzo Harris, or his successor, presiding.

     8.2 Scope of Agreement. This EA, together with the SA, constitutes the entire
understanding and agreement of the Settling Parties and the Escrow Agent regarding the subject
matter hereof. This EA may not be modified except in writing signed by the Settling Parties and
the Escrow Agent or their respective authorized agents.

     8.3 Counterparts. This EA may be executed simultaneously in two or more counterparts,
and those counterparts shall be construed together and constitute one agreement.

     8.4 Non-Assignability. Except as otherwise provided in Paragraph 5.2.2.5, neither
this EA nor any of the rights or obligations hereunder may be assigned without the prior written
consent of the Settling Parties and the Escrow Agent, which consent shall not be unreasonably
withheld.

     8.5 Headings. Paragraph headings in this EA are included herein for convenience of
reference only and shall not constitute a part of this agreement for any other purpose.

     SIGNED in multiple originals on the dates indicated below.

	 	 	 	 

	 

	 	 
	Date

	 	John V. Quaglino

3320 West Esplanade Ave. North

Metairie, LA 70002
	 
	 	 
	 
	 

	 	ATTORNEY FOR CORVEL CORPORATION
	 
	 
	 	 
	 

	 	 
	Date

	 	Thomas A. Filo

Michael K. Cox

Cox, Cox, Filo, Camel & Wilson, L.L.C.

723 Broad Street

Lake Charles, Louisiana 70601
	 
	 	 
	 
	 

	 	 
	Date

	 	Stephen B. Murray

Arthur M. Murray

Stephen B. Murray, Jr.

The Murray Law Firm

625 St. Charles Ave., 3rd Floor

New Orleans, LA 70130

- 7 -

 

	 	 	 	 

	 

	 	 
	Date

	 	John S. Bradford

William B. Monk

Stockwell, Sievert, Viccellio,

Clements & Shaddock, L.L.P.

One Lakeside Plaza, Fourth Floor

Lake Charles, Louisiana 70601
	 
	 	 
	 

	 	REPRESENTING THE PSC, INDIVIDUALLY AND ON

BEHALF OF THE CLASS AND THE PLAINTIFF

	 	 	 	 

	 

	 	FIRST NBC BANK
	 
	 	 
	 

	By:	 
	 

	 	 
	Date

	 	William M. Roohi

Senior Vice President
	 
	 	 
	 

	 	ESCROW AGENT

- 8 -

 

EXHIBIT A

CorVel Corporation

_____________________

_____________________

_____________________

[DATE]

First NBC Bank

_____________________

_____________________

_____________________

     Attn: William M. Roohi

Ladies & Gentlemen:

Reference is made to the Escrow Agreement made effective as of ______, 2010 and signed by or on
behalf of the PSC, the Class, the Plaintiffs, CorVel, and First NBC Bank, as Escrow Agent.
Capitalized terms used herein and not otherwise defined shall have the respective meanings set
forth in the Settlement Agreement (“SA”) executed by or on behalf of the PSC, the Class, the
Plaintiffs, and CorVel.

This letter constitutes notice by CorVel of the termination of the SA in accordance with the
provisions of the SA. The Escrow Agent is hereby directed to disburse to CorVel in accordance with
the instructions annexed hereto as Exhibit 1, the full amount of the Escrow Account, less any
amount required to pay accrued taxes, fees, costs, and expenses pursuant to Paragraphs 6.1, 6.2,
and 6.3 of the Escrow Agreement.

Very truly yours,                    

 

 

EXHIBIT B

ESCROW AGENT’S FEES

MONTHLY FEE: $250.00

MINIMUM
FEE (over life of account): $2,500.00

	 	 	 

	LEGAL EXPENSES:

	 	All legal expenses of the PSC, the Class,
the Plaintiffs, and CorVel shall be borne by the
PSC, the Class, and the Plaintiffs. Subject to
Paragraph 5.3 of the Escrow Agreement, all legal
expenses incurred by the Escrow Agent in rendering
its services under the Escrow Agreement shall be
paid for out of the Escrow Account.

Escrow Agent will provide up to three subaccounts for no additional charge. In the event more than
three subaccounts are required, there will be an additional monthly charge of $25.00 per additional
subaccount in excess of three.

THE ABOVE FEES AND EXPENSES WILL BE ASSESSED AND DEBITED AGAINST THE INCOME EARNED BY THE ESCROW
ACCOUNT MONTHLY.

 

 

Exhibit 2

27TH JUDICIAL DISTRICT COURT FOR THE PARISH OF ST. LANDRY

STATE OF LOUISIANA

	 	 	 

	NO: 09-C-5244
	 	DIVISION: “C”

GEORGE RAYMOND WILLIAMS M.D., ORTHOPAEDIC SURGERY, A

PROFESSIONAL MEDICAL, L.L.C.

Versus

S.I.F. CONSULTANTS OF LOUISIANA, ET AL.

	 	 	 	 	 	 	 

	FILED:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	DEPUTY CLERK

ORDER OF PRELIMINARY APPROVAL OF PROPOSED SETTLEMENT

 

Except as otherwise expressly provided below or as context otherwise requires, all
capitalized terms used in this Preliminary Order shall have the meanings and/or definition
given them in the Settlement Agreement (“SA” or “Settlement Agreement”) entered into by or
on behalf of the PSC, the Class, the Plaintiffs and Corvel on June 23, 2011. The original
of the SA is filed in these proceedings as Exhibit A to the Joint Motion for Preliminary
Approval of Proposed Settlement signed by or on behalf of the Class, the Plaintiffs and
Corvel.

     On considering Joint Motion for Preliminary Approval of Proposed Settlement (“Motion”), the
evidence submitted to the Court by the parties in support of their Motion, the record of these
proceedings, the recommendation of Class Counsel, and the requirements of law, the Court finds,
upon preliminary review, that: (1) this court has jurisdiction over the subject matter and the
Parties; (2) the proposed Settlement is the result of arms-length negotiations between the Parties;
(3) the proposed Settlement bears a probable, reasonable relationship to the claims alleged by the
Plaintiffs and the litigation risks of Plaintiffs and the Class; and (4) the proposed settlement is
within the range of possible judicial approval. Accordingly:

     IT IS HEREBY ORDERED THAT:

     (1) For settlement purposes only, and pursuant to La. Code of Civil Procedure 591(B)(3) and
(B)(4), the Court conditionally certifies the following Class:

All medical providers, institutions, and facilities that have provided services to workers’
compensation patients pursuant to the Louisiana Workers’ Compensation Act, LSA-R.S. 23:1021 et
seq., and whose bills have been discounted, adjusted, paid on a reduced basis, or otherwise paid at
less than the billed amount pursuant to a Preferred Provider Agreement contracted with CorVel or
owned or operated by CorVel.

 

 

     (2) For settlement purposes only, and pursuant to La. Code of Civil Procedure 591(B)(3) and
(B)(4), the Court finds that the prerequisites of articles 591 and 592 of the Louisiana Code of
Civil Procedure are satisfied and that, subject to final approval, the Class may be certified for settlement
purposes only. Further, for purposes of the settlement only, it is determined that (a) the putative
Class Members are so numerous that joinder of all such Class members is impracticable; (b) there
are a number of questions of law and fact common in the Class which predominates over any
individual questions affecting only individual Class Members; (c) a class action is superior to
other available methods for the fair and efficient resolution of the controversy in that, among
other reasons, it will avoid the need for costly individual adjudications of the Class Members’
claims, and, in the present circumstances, there will be no further litigation of the issues and no
trial either of the Class Action against CorVel or its Affiliates of the Related Proceedings as to
the Released Parties; (d) the claims and defenses of the Plaintiffs are typical of the claims and
defenses of the Class; (e) the Plaintiffs have protected, and will fairly and adequately protect,
the interest of the Class; (f) the Class is defined objectively in terms of ascertainable criteria,
such that the Court may determine the constituency of the Class for the purposes of the
conclusiveness of any judgment that may be rendered in this matter; (g) the interests of the
individual Class Members in controlling the prosecution of separate actions is outweighed by the
interests of the Class as a whole in bringing this matter to a successful conclusion via the
proposed settlement. The Court recognizes that the Released Parties have preserved all of their
defenses and objectives against and rights to oppose certification of the Class for litigation
purposes, if the proposed settlement does not become Final in accordance with the Settlement
Agreement and the Settlement Agreement is terminated for any reason.

     (3) Plaintiffs, George Raymond Williams, MD, Orthopedic Surgery, A Professional Medical, LLC
and Southwest Louisiana Hospital Association d/b/a Lake Charles Memorial Hospital, are certified as
Class Representatives, and Thomas File, Michael Cox, John Bradford, William Monk, Stephen Murray,
Sr., Arthur Murray, Stephen Murray, Jr., and Patrick Morrow, as Class Counsel, on the condition
that this certification for settlement purposes and any related designations shall be automatically
vacated if the Settlement Agreement is terminated or is disapproved in whole or in part by the
Court, any appellate court, or any of the Parties;

     (4) The Settlement Agreement and the settlement set forth therein, and all exhibits therefore,
are preliminarily approved by the Court as being fair, reasonable, and adequate, entered into in
good faith, free of collusion, and within the range of possible judicial approval.

 

 

     (5) Any certification by the Court of the Class is for settlement purposes only and shall not
constitute, nor be construed as, an admission on the part of the Released Parties that class
certification is appropriate pursuant to articles 591, et seq, of the Louisiana Code of Civil
Procedure or any similar class action statute or rule. If the Settlement Agreement is not finally
approved, terminate, or fails to be implemented for any reason, the conditional certification of
the Settlement Class shall be null and void ab initio.

     (6) Unless otherwise expressly agreed in writing by the Class, the Plaintiffs, Class Counsel
and counsel for Corvel, if the Effective Date does not occur, or in the event that the Settlement
Agreement does not become effective as required by its terms for any other reason, any order
entered by this Court pursuant to the Settlement Agreement (each a “Settlement Class Order”) shall
become null and void, and the parties shall be restored to their respective positions status quo
ante; in such event, all Settlement Orders shall have no force and effect, and may not be used or
referred to for any purpose whatsoever.

     (7) A final approval hearing shall commence on the _____ day of ________, 2011 at ______ at
the St. Landry Parish Courthouse, 118 South Court Street, Opelousas, LA 70570.

     (8) Subject to the Court’s consideration of additional evidence regarding the Class Settlement
Notice at the final approval hearing, and based on the documents submitted to the Court in
connection with preliminary approval, the Class Settlement Notice fully complies with the
requirements of La. Code of Civil Procedure 594(A)(2) and due process, constitutes the best notice
practicable under the circumstances, and is due and sufficient notice to all persons entitled to
notice of the settlement of this lawsuit;

     (9) In further aid of the Court’s jurisdiction to implement and enforce the proposed
settlement, all Class Members and each of their Affiliates shall be preliminarily enjoined and
barred from instituting, maintaining, prosecuting or continuing to prosecute any and all actions
and proceedings related to any Episode against the Related Parties, including by not limited to any
and all contributions, indemnity, subrogation, breach of contract, statutory violation and/or tort
claims by, on behalf of or through any Class Members and/or their Affiliates, either directly,
representatively, derivatively, or in any other capacity, whether by a complaint, counterclaim,
reconventional demand, defense, or otherwise, in any local, state, or federal court, or in any
agency or other authority or forum wherever located. Any person or entity who knowingly violates
such injunction shall pay attorneys’ fees and costs incurred by any Released Party as a result of
the violation. Nothing in this paragraph shall be construed

 

 

to preclude any proceedings in the Class Action itself necessary to obtain certification of the Class as Defined and final approval of
the settlement embodied in the Settlement Agreement unless otherwise requested by Corvel or to
prevent a Class Member from presenting objections to the Court regarding the Settlement Agreement
in accordance with this Order.

     (10) All persons and entities who are included within the Class Definition and who submit a
Request for exclusion that conforms to the terms of this Order may be excluded from the Class.

     (A) Any request to opt out of the Class must be postmarked no later than ________, 2011 and
addressed to CorVel Exclusions, 723 Broad Street, Lake Charles, LA 70601.

     (B) A request to opt out of the Class must be in writing and state the name, address and
phone number of the person(s) seeking to opt out. Each request must also contain a duly authorized
and signed statement that: “I hereby request that I be excluded from the proposed Class in the
Williams Class Action.” An opt out request that does not include all of the foregoing information,
that is sent to an address other than the one designated in the Class Settlement Notice, or that
is not sent within the time or in the manner specified, shall be invalid and the person or entity
serving such a request shall be included as a Class Member and shall be bound by this settlement.

     (C) The PSC shall make best efforts to encourage the clients they represent in any Related
Proceeding to remain a Class Member and not opt out of the Class. The PSC likewise acknowledge
that each of them and t heir firms have an unwaivable conflict of interest in representing any
Opt-Out Party.

     (D) Class Counsel shall forward copies of all reports for exclusion to counsel for Corvel no
later than ten (10) days after the deadline for class members to submit such requests.

     (E) All persons and entities who are included within the Class Definition and who properly
file a timely written request to opt out of the settlement shall be excluded from the Class, shall
have no rights as Class Members pursuant to the Settlement Agreement, and shall receive no
payments pursuant to the Settlement Agreement.

     (11) Any Class Member who objects to the settlement may appear in person or through counsel,
at his or her own expense, at the final approval hearing to present any evidence or argument that
may be proper and relevant. No Class Member shall he heard and no papers,

 

 

briefs, pleadings, or other documents submitted by any such Class Member shall be received and considered by the Court
unless, no later than ______________, 2011, such Class Member both files with the Court and mails
to Class Counsel and counsel for Corvel, a written objection that includes (a) notice of intent to
appear, (b) proof of membership in the Class and, (c) the specific grounds for the objection and
any reasons why such Class Member desires to appear and be heard, as well as all documents,
writings or materials that such Class Member desires the Court to consider. Any Class Member who
fails to object in the manner prescribed herein shall be deemed to have waived his or her
objections and forever be barred from making any such objections in this action or in any other
action, proceeding or appeal.

     (12) Patrick A. Juneau is appointed as Special Master, pursuant to La. R.S. 13:4165, to assist
the Court, in cooperation and coordination with Class Counsel, to: (i) establish proposed
allocations for each Class Member, (ii) prepare a proposed plan for distribution of the proposed allocations, (iii)
submit to the court a report on the above, along with recommendations for the Court’s consideration
in proceeding with the allocation and distribution process following the Effective Date, and (iv)
engage such staff, deputies and experts as reasonably necessary and conduct such hearings as may be
necessary and appropriate to carry out his duties.

     (13) The form and execution of the Escrow Agreement and the nomination of First NBC Bank as
the Escrow Agent are hereby approved.

     (14) The accounting firm of Bourgeois Bennett, LLC, CPAs, shall serve as the Court Appointed
Disbursing Agent in connection with this settlement under the supervision of the Court or its
designee, and as such, is hereby charged with the responsibility, in conjunction with the Special
Master, of maintaining records pertaining to receipts and the computerized generation and
preparation of all data regarding evaluation of claims; managing the financial aspects of the
eventual disbursement of the Class Settlement Fund, and administering, with the Escrow Agent, the
Class Settlement Fund, subject in all respects to further orders and direction of the Court;

     (15) Class Counsel and counsel for Corvel are hereby authorized to use all reasonable
procedures in connection with approval and administration of the settlement that are not materially
inconsistent with this Order or the Settlement Agreement, including making, without further
approval of the Court, minor changes to the form or content of the Class Settlement Notice, the
Notice Plan, the Mailed Summary Notice, the Publication Summary Notice, the Detailed Notice, or any
exhibits to the Settlement Agreement that the parties jointly agree are reasonable or necessary.

 

 

Thus done and signed this _____ day of ____________, 2011, Opelousas, Louisiana.

	 	 	 	 	 
	 	 	 
	 	
 	 
	 	HONORABLE ALONZO HARRIS 	 
	 	JUDGE, 27TH JUDICIAL DISTRICT COURT 	 

 

 

Exhibit 4

NOTICE PROCEDURE 

Except as otherwise expressly provided below or as the context otherwise requires,
all capitalized terms used in this Exhibit 4—Notice Procedure shall have the
meanings and/or definitions given them in the Settlement Agreement to which this
Exhibit 4—Notice Procedure is attached.

          Notices to Providers purportedly required under La. R.S. 40:2203.1 shall be provided pursuant
to the following procedure:

	 	1.	 	Prior to allowing a client to access a PPO Agreement owned, operated
or contracted with CorVel,, CorVel will instruct its client in writing to send Providers
written notice at the time an initial request for authorization to treat a patient is
requested by a provider that a PPO Agreement owned, operated or contracted with CorVel
network will be accessed to discount the provider’s services under the terms of the PPO
Agreement. Additionally, CorVel will amend its existing PPO agreements and will require
all new PPO Agreements entered into with a Provider to include language similar to “CorVel
will require its clients utilizing PPO discounts in Louisiana to send Provider written
notice that a PPO Agreement owned, operated or contracted with CorVel will be accessed with
respect to the work related accident for which authorization to treat is sought by the
Provider at the time Provider seeks its initial authorization to treat the injured worker.”
	 
	 	2.	 	To the extent that CorVel maintains a website or other electronic format
for its contracted providers, it shall include current listing of all entities that have
contracted to access CorVel’s network in Louisiana.
	 
	 	3.	 	CorVel will be deemed to be in compliance with this Settlement Agreement if CorVel
complies with its obligations under Paragraph 1. With respect to CorVel’s clients and/or
parties accessing a PPO agreement owned, operated or contracted with CorVel, such client
and/or party accessing a CorVel PPO agreement will be deemed to be in compliance with this
Settlement Agreement if it complies with the notice obligations to the provider as set
forth in Paragraph1.
	 
	 	4.	 	It is expressly understood that written notice required pursuant to this Settlement
Agreement shall not be required where no prior authorization for treatment is sought by the
provider. Where no prior authorization is sought by the provider, this Settlement
Agreement shall preclude any claim against CorVel, its clients, and or parties accessing a
PPO agreement owned, operated or contracted with CorVel for a claim for violation of the
notice requirements of La. R.S. 40:2203.1.
	 
	 	5.	 	The agreed to settlement procedure outline herein shall serve between the parties as
any and all notice required to the provider under the Louisiana Willing Provider Act, La.
R.S. 40:2201, et seq., unless and until such time as the Act is repealed or the notice
requirements of the Act are substantially altered.

Page 1 of 1

 

Exhibit 5

RECEIPT, RELEASE, AND CONFIRMATION OF SETTLEMENT AGREEMENT

(Class Member)

NOTICE! NOTICE! NOTICE! NOTICE! NOTICE! NOTICE!

PLEASE BE ADVISED THAT THE ENDORSEMENT AND/OR DEPOSIT OF THE ENCLOSED ALLOCATION CHECK SHALL
CONSTITUTE THE BINDING AGREEMENT OF THE PERSON OR ENTITY TO WHOM SUCH CHECK IS MADE PAYABLE
(“Releasor”) TO THE FOLLOWING:

     1. Except as otherwise expressly provided herein or as the context otherwise requires, all
capitalized terms used in this Receipt, Release, and Confirmation of Settlement Agreement shall
have the meanings and/or definitions given them in the Settlement Agreement entered into by or on
behalf of the PSC, the Class, the Plaintiffs, and CorVel, and approved by the 27thth
Judicial District Court in and for the Parish of St. Landry, Louisiana, on _______, 2011 in those
proceedings entitled “George Raymond Williams, M.D., Orthopaedic Surgery, A Professional Medical
L.L.C.. v. S.I.F. Consultants., et al.,” Suit No. 2009-C-5944, Div. “C,” on the docket of such
court. Such Settlement Agreement is hereinafter referred to as the “SA”. The SA, Court-ordered
notices, other Court orders, and related documents may be found at the following website:
____________. Generally speaking, the enclosed allocation check is being provided to Releasor
because of the settlement of certain Class claims based on alleged deficiencies in the provision of
notices related to preferred provider discounts in Louisiana. More details regarding the
settlement can be found in the controlling settlement documents (copies of which may be found at
the foregoing website).

     2. Releasor
is a Class Member. Releasor’s S.S.N./T.I.N. is                                   
       ), and Releasor’s permanent mailing address is                                   
                                          
                              
                                          
                                          
            .

     3. Releasor hereby acknowledges receipt of $ from the Class Settlement Fund in full and final
settlement of all claims based on Liability, that Releasor may have against any one or more of the
Released Parties.

     4. Without limiting the foregoing, Releasor hereby releases and forever discharges all
Liability, and each and all claims based thereon that Releasor may have against any one or more of
the Released Parties. Releasor also agrees to hold the Released Parties harmless from and defend
them against any claims or cross-claims for indemnity or contribution and/or any claims by any
person who or which derives or obtains any right or claim from or through Releasor (e.g.,
subrogation claims by worker’s compensation insurers, employers, and/or health care providers,
heirs, relatives and/or custodians). Releasor further subjects Releasor to the jurisdiction of the
Court for any and all purposes necessary or desirable in order to effectuate the settlement
embodied in the SA.

     5. Releasor hereby acknowledges and confirms that: (a) Releasor has been given an
opportunity to read and review a complete copy of the SA, (b) the pages from the SA setting forth
the definition of Liability, have been brought to the particular attention of Releasor and Releasor
has had the opportunity to read them before executing this Release, Receipt and Confirmation of
Settlement Agreement, (c) Releasor is bound by all of the terms, conditions, and obligations
contained in the SA, including, without limitation, any indemnification/hold harmless/defense
obligations imposed on Class Members in the SA, (d) any questions that Releasor may have had
regarding the intent, effect and meaning of the SA and this Release, Receipt and Confirmation of
Settlement Agreement (including, without limitation, the definition of the Liability being released
and discharged hereby and the obligations imposed by the SA) have been answered to Releasor’s
satisfaction by Releasor’s lawyer or a lawyer for the Class, and (e) Releasor is satisfied that the
settlement embodied in the SA and this Release, Receipt and Confirmation of Settlement Agreement
insofar as it relates to Releasor’s rights, claims, and

- 1 -

 

obligations (including, without limitation, the monetary settlement received as set forth above) is
fair and adequate.

     6. Releasor acknowledges that Releasor fully understands the nature of the claims released
and the obligations undertaken by the Releasor herein and/or in the SA.

SHOULD THE PERSON OR ENTITY TO WHOM THE ENCLOSED ALLOCATION CHECK IS MADE PAYABLE NOT AGREE TO THE
FOREGOING, THE ALLOCATION CHECK SHOULD NOT BE ENDORSED OR DEPOSITED. INSTEAD, THE ALLOCATION CHECK
SHOULD BE RETURNED TO THE FOLLOWING ADDRESS: ____________________.

The front of each allocation check shall bear the following inscription:

Full Settlement of Liability.

The back of each allocation check shall bear the following inscription:

Enclosed in the envelope with this allocation check is a written document entitled Receipt,
Release, and Confirmation of Settlement Agreement (“Release”). Please be advised that your
endorsement and/or deposit of this allocation check constitutes your binding acknowledgment of your receipt of the Release and your binding agreement to the terms and conditions set forth in
the Release, including, without limitation, your release of certain claims. If you have any questions, call 1-800-__-_____ or write to class counsel at                                               
              ____ before
you endorse or deposit this allocation check.

- 2 -exv4w1

Exhibit 4.1

CAPITAL PLAN

for the

Federal Home Loan Bank of Dallas

This capital plan is neither an offer to sell or exchange nor a solicitation of an offer to
purchase or exchange any capital stock of the Federal Home Loan Bank of Dallas.

Amended and Revised

April 28, 2011

(Approved
as Amended by Federal Housing Finance Agency on August 5, 2011)

 

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

Table of Contents

	 	 	 	 	 	 	 
	Section	 	 	 	Page
	Definition of Terms	 	 	4	 
	 
	 	 	 	 	 	 
	Section 1:

	 	Overview
	 	 	5	 
	 
	 	 	 	 	 	 
	1.1

	 	General	 	 	 	 
	1.2

	 	Legal Authorities	 	 	 	 
	1.3

	 	Amendments to the Capital Plan	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2:

	 	Capital Structure
	 	 	5	 
	 
	 	 	 	 	 	 
	2.1

	 	Authorized Class of Capital Stock	 	 	 	 
	2.2

	 	Par Value of Capital Stock	 	 	 	 
	2.3

	 	Ownership of Retained Earnings	 	 	 	 
	2.4

	 	Preference in Liquidation, Consolidation or Merger	 	 	 	 
	2.5

	 	Finance Agency Authority	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3:

	 	Capital Stock 	 	 	6 	 
	 
	 	 	 	 	 	 
	3.1

	 	Purchase of Capital Stock	 	 	 	 
	3.2

	 	Transfers of Capital Stock	 	 	 	 
	3.3

	 	Redemption of Capital Stock	 	 	 	 
	3.4

	 	Repurchase of Capital Stock	 	 	 	 
	3.5

	 	Limitations on Redemption or Repurchase of Capital Stock	 	 	 	 
	3.6

	 	Retirement of Capital Stock	 	 	 	 
	3.7

	 	Dividends on Capital Stock	 	 	 	 
	3.8

	 	Voting Rights	 	 	 	 

2

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	 	 	 	 

	Section 4:

	 	Minimum Investment Requirements
	 	 	10	 
	 
	 	 	 	 	 	 
	4.1

	 	Membership Investment Requirement	 	 	 	 
	4.2

	 	Activity-Based Investment Requirement	 	 	 	 
	4.3

	 	Periodic Review of Minimum Investment Requirements	 	 	 	 
	4.4

	 	Member Compliance	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5:

	 	Termination of Membership
	 	 	13	 
	 
	 	 	 	 	 	 
	5.1

	 	Voluntary Withdrawal	 	 	 	 
	5.2

	 	Involuntary Termination of Membership	 	 	 	 
	5.3

	 	Termination by Charter Dissolution	 	 	 	 
	5.4

	 	General Membership Termination Provisions	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6:

	 	Capital Structure Conversion
	 	 	15	 
	6.1

	 	Capital Structure Conversion Process	 	 	 	 
	6.2

	 	Transition Procedures	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7:

	 	Capital Plan Reviews
	 	 	18	 
	 
	 	 	 	 	 	 
	7.1

	 	Independent Certified Public Accountant	 	 	 	 
	7.2

	 	Nationally Recognized Statistical Rating Organization	 	 	 	 
	7.3

	 	Good Faith Determination	 	 	 	 
	 
	 	 	 	 	 	 
	Section 8:

	 	Retained Earnings Capital Plan Amendment
	 	 	19	 
	 
	 	 	 	 	 	 
	8.1

	 	Retained Earnings Enhancement Implementation and Definitions	 	 	 	 
	8.2

	 	Establishment of Restricted Retained Earnings	 	 	 	 
	8.3

	 	Limitation on Dividends, Stock Purchase and Stock Redemption	 	 	 	 
	8.4

	 	Termination of Retained Earnings Capital Plan Amendment Obligations	 	 	 	 

3

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

Definition of Terms

	1.	 	Acquired Member Assets (“AMA”) means assets that may be acquired by the Bank
through its members in accordance with the Regulations.
	 
	2.	 	Capital Plan means the plan for a new capital structure as required by Section 6(b)
of the Bank Act, 12 U.S.C. §1426(b).
	 
	3.	 	Class B Stock means capital stock held by members and issued by the Bank pursuant to
the Capital Plan, which will be redeemable by the Bank for cash at Par Value with five years
prior written notice provided by a member to the Bank.
	 
	4.	 	Conversion Date means the date upon which the Bank converts to the new capital
structure described in this Capital Plan and the existing capital stock is exchanged for Class
B Stock.
	 
	5.	 	Excess Stock means that amount of Class B Stock held by a member in excess of the
member’s minimum investment requirement as defined in this Capital Plan.
	 
	6.	 	Minimum Capital Requirement(s) means the amount of capital the Bank is required to
hold in order to comply with all statutory and regulatory capital requirements, or any other
capital requirement that may be imposed on the Bank by the Finance Agency.
	 
	7.	 	Par Value means the par value specified in Section 2.2 of this Capital Plan for shares of Class B Stock issued in accordance with this Capital Plan.
	 
	8.	 	Stock Redemption means redemption of Class B Stock by the Bank pursuant to a stock
redemption notice in accordance with Section 3.3 of the Capital Plan or pursuant to a
withdrawal notice in accordance with Section 5.1 of the Capital Plan.
	 
	9.	 	Stock Repurchase means repurchase of Class B Stock by the Bank at its discretion in
accordance with the Regulations and Section 3.4 of the Capital Plan. The decision to
repurchase Class B Stock rests with the Bank and cannot be compelled by a member.

4

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	1.	 	Overview
	 
	1.1	 	General
	 
	 	 	Pursuant to the Federal Home Loan Bank Act, as amended (12 U.S.C. §1421, et seq.) (“the
Bank Act”) and the governing Regulations (“Regulations”) of the Federal Housing Finance
Board (“Finance Board”) and / or the Federal Housing Finance Agency or any successor
(“Finance Agency”), the Board of Directors of the Federal Home Loan Bank of Dallas (“the
Bank”) hereby establishes this Capital Plan to provide a new capital structure for the Bank,
and ensure that the Bank is able to comply with its Minimum Capital Requirements at all
times after the Conversion Date. This Capital Plan is designed to facilitate the
continuation of the Bank’s cooperative business model.
	 
	1.2	 	Legal Authorities
	 
	 	 	This document is governed by the Bank Act and the Regulations. Any action designated
by this Capital Plan as being subject to the “discretion” or “sole discretion” of the Bank
or the Board of Directors shall nevertheless be subject to the regulatory oversight of the
Finance Board Agency.
	 
	1.3	 	Amendments to the Capital Plan
	 
	 	 	In accordance with the Regulations, any amendments to this Capital Plan must be
submitted by the Bank’s Board of Directors to the Finance Agency for approval prior to
implementation.
	 
	2.	 	Capital Structure
	 
	2.1	 	Authorized Class of Capital Stock
	 
	 	 	The Board of Directors of the Bank hereby authorizes the issuance of one class of
capital stock to be designated as Class B Stock, which will have a five year redemption
notice period.
	 
	2.2	 	Par Value of Capital Stock
	 
	 	 	All Class B Stock will have a Par Value of $100 per share. All Class B Stock will be
issued, redeemed, repurchased and transferred only at Par Value.
	 
	2.3	 	Ownership of Retained Earnings
	 
	 	 	In accordance with the Bank Act (12 U.S.C. §1426(h)(1)), the retained earnings,
surplus, undivided profits and equity reserves, if any, of the Bank are owned by the holders
of Class B Stock in proportion to each holder’s share of the total outstanding shares of
Class B Stock. Holders of Class B Stock have no right to receive any portion of the
retained earnings, surplus, undivided profits and equity reserves, if any, of the Bank
except through the declaration of a dividend or capital distribution approved by the Board
of Directors, or upon liquidation of the Bank.
	 
	2.4	 	Preference in Liquidation, Consolidation or Merger
	 
	 	 	In the event of liquidation of the Bank, the Board of Directors may authorize the pro
rata distribution of any retained earnings, surplus, undivided profits, and equity reserves
of the Bank, to holders of Class B Stock in proportion to each holder’s share of the total shares of outstanding Class B Stock, provided that all payment obligations to the Bank’s
existing creditors have been fully satisfied, and all Class B Stock has been redeemed at Par
Value.
	 
	 	 	In the event the Bank is merged or consolidated into another Federal Home Loan Bank, the
holders of the outstanding Class B Stock of the Bank will be entitled to the rights and
benefits set forth in any applicable plan of merger and/or terms established or approved by
the Finance

5

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	Agency. In the event another Federal Home Loan Bank is merged or consolidated into the
Bank, the holders of the outstanding capital stock of the other Federal Home Loan Bank will
be entitled to the rights and benefits set forth in any applicable plan of merger and/or
terms established or approved by the Finance Agency.
	 
	2.5	 	Finance Agency Authority
	 
	 	 	No part of Section 2.4 of this Capital Plan will be construed to limit the authority
granted to the Finance Agency under 12 U.S.C. §1446 to prescribe rules, regulations or
orders governing the liquidation, reorganization or merger of a Federal Home Loan Bank.
	 
	3.	 	Capital Stock
	 
	 	 	All members are required to purchase and redeem capital stock in accordance with the
requirements of the Bank Act, the Regulations and this Capital Plan, and the Bank will not
issue capital stock other than in accordance with the Regulations.
	 
	3.1	 	Purchase of Capital Stock
	 
	 	 	All members are required to purchase Class B Stock as a
condition of membership in accordance with the requirements of
Section 4 of this Capital Plan. The Class B Stock of the Bank may
be issued only to members of the Bank and institutions that have
been approved by the Bank to be members, and may be held only by
members of the Bank, non-member institutions that acquire Class B
Stock by virtue of acquiring member institutions, or by former
members that retain Class B Stock in accordance with this Capital
Plan following termination of membership. The Class B Stock of
the Bank may be traded only between the Bank and its members.
All Class B Stock will be issued in book entry form, and the Bank
will act as its own transfer agent.
	 
	3.2	 	Transfers of Capital Stock
	 
	 	 	In accordance with the Regulations, and only with the prior
approval of the Bank as it deems appropriate, a member may
transfer, at Par Value, any Excess Stock to any other member or
institution that has satisfied all conditions for becoming a
member other than the purchase of the Class B Stock required to
satisfy its minimum investment requirement. All transfers of
Class B Stock will be effective upon being recorded on the
appropriate books and records of the Bank. Approval for all
transfers is subject to the requirement that, following the
transfer, the transferring member would continue to hold
sufficient stock to meet the member’s minimum investment
requirement. Except as provided in Section 5.3 of the Capital
Plan, stock redemption notices will not transfer with Excess
Stock that is transferred.
	 
	3.3	 	Redemption of Capital Stock
	 
	 	 	Subject to the limitations in this Capital Plan, Class B Stock will be redeemable for
cash at Par Value with five (5) years prior written notice provided by the member to the
Bank. A member may request redemption of Class B Stock by providing a written stock
redemption notice to the Bank in accordance with Section 3.3.1 of this Capital Plan
indicating the number of shares of Class B Stock to be redeemed and the date(s) those shares
were issued to the member, or by submitting a membership withdrawal notice in accordance
with Section 5.1 of this Capital Plan. If the redemption notice fails to properly identify
the particular shares to be redeemed, the member shall be deemed to have requested
redemption of the most recently issued shares that are not already subject to a pending
redemption request. The five-year stock redemption notice period will commence upon receipt
by the Bank of the written stock redemption or withdrawal notice. A member may not have
more than one stock redemption or withdrawal notice outstanding at any one time for the same shares of Class B Stock.

6

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	The Bank will not be obligated to redeem a
member’s Class B Stock other than in
accordance with this Capital Plan. Nothing in
this section will preclude the Bank from
repurchasing Excess Stock in accordance with
Section 3.4 of this Capital Plan, including
Class B Stock for which a stock redemption
notice has been submitted.

	 	3.3.1	 	Notice of Redemption
	 
	 	 	 	Subject to the limitations in this Capital Plan, a member may request
redemption of Class B Stock by submitting five years written notice to the Bank. No
member may have more than one stock redemption notice outstanding for the same
share(s) of Class B Stock. To facilitate this limitation, no member may have one or
more stock redemption notices in effect at any one time that represent an aggregate
amount of Class B Stock that is greater than the total amount of Class B Stock the
member owns. If, subsequent to submitting a stock redemption notice, a member’s
holdings of Class B Stock fall below the amount of Class B Stock subject to
outstanding stock redemption notices, the Bank will automatically reduce the number
of shares of stock subject to stock redemption notices. If a member has more than
one stock redemption notice outstanding, this reduction will be applied first to the
most recently received stock redemption notice unless specified otherwise by the
member in writing within 30 days of the reduction in Class B Stock.
	 
	 	 	 	At the expiration of the five year period following receipt by the Bank of the stock
redemption notice, and subject to the limitations contained in Section 3.5 of this
Capital Plan, the Bank will pay the stated Par Value of the Class B Stock covered by
the stock redemption notice to the member in cash to the extent the Bank determines
that the Class B Stock is Excess Stock, as determined in accordance with the minimum
investment requirements in effect at the end of the redemption notice period.
	 
	 	 	 	Only Class B Stock that is Excess Stock at the expiration of the five year
redemption notice period will be redeemed pursuant to a stock redemption notice. A
stock redemption notice does not constitute a withdrawal notice as described in
Section 5.1 of this Capital Plan. At the expiration of the redemption notice
period, if the amount of Class B Stock subject to the stock redemption notice
exceeds the amount of Excess Stock held by the member, the Bank will redeem Class B
Stock equal to the amount of Excess Stock held by the member, and the stock
redemption notice for the remaining shares of Class B Stock subject to that notice
will be cancelled and a redemption cancellation fee will be assessed in accordance
with Section 3.3.2 of this Capital Plan. Alternatively, within five business days
of the expiration of the redemption notice period, the member may reduce its
activity with the Bank (subject to any applicable prepayment fees) to reduce its
minimum investment requirement and increase its holdings of Excess Stock which would
then be eligible for redemption.
	 
	 	3.3.2	 	Redemption Cancellation Notice
	 
	 	 	 	A member that has previously notified the Bank in writing of its intent to
redeem some or all of its Class B Stock may cancel the stock redemption notice for
all or a portion of the shares of Class B Stock subject to the stock redemption
notice prior to the expiration of the redemption notice period by providing a
written redemption cancellation notice to the Bank. A member may rescind a
redemption cancellation notice by providing written notice to the Bank within 30
days of the original redemption cancellation notice.
	 
	 	 	 	A member that cancels a stock redemption notice more than 30 days after it is
received by the Bank and prior to its expiration will be subject to a redemption
cancellation fee calculated as a percentage of the Par Value of the shares of Class
B Stock subject to the redemption cancellation notice.

7

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	When a member submits a redemption cancellation notice more than 30 days after the
original redemption notice is received by the Bank but during the first year after
the Bank receives the original stock redemption notice, the redemption cancellation
fee will be 1.0 percent of the Par Value of the shares of Class B Stock subject to
the redemption cancellation notice; the fee during the second year will be 2.0
percent of the Par Value of the shares of Class B Stock subject to the redemption
cancellation notice; the fee during the third year will be 3.0 percent of the Par
Value of the shares of Class B Stock subject to the redemption cancellation notice;
the fee during the fourth year will be 4.0 percent of the Par Value of the shares of
Class B Stock subject to the redemption cancellation notice; and the fee during the
fifth year will be 5.0 percent of the Par Value of the shares of Class B Stock
subject to the redemption cancellation notice.
	 
	 	 	 	The Bank’s Board of Directors may from time to time modify the redemption
cancellation fee to any percentage(s) of the Par Value of the shares of Class B
Stock subject to the redemption cancellation notice that is not less than 0.0
percent and not more than the percentages specified in the preceding paragraph. In
the event the Board of Directors reduces the redemption cancellation fee, the Board
of Directors will also determine whether the reduced fee will apply to cancellation
of previously submitted stock redemption notices as well as those submitted in the
future. Otherwise, the fee in effect at the time the stock redemption notice was
originally received by the Bank will apply to the cancellation of that notice. The
Bank will notify members in writing at least 30 days in advance of any changes in
the redemption cancellation fee. Any change in the redemption cancellation fee will
be applied equally and without discrimination to all members.

	3.4	 	Repurchase of Capital Stock
	 
	 	 	The Bank in its sole discretion may repurchase Excess Stock from time to time without
regard to the five year redemption notice period. Excess Stock repurchases may be initiated
by the Bank or requested by members, and will be subject to the limitations contained in
Section 3.5 of this Capital Plan. The decision to repurchase Excess Stock will rest with
the Bank and cannot be compelled by a member.
	 
	 	 	Upon 15 days written notice, the Bank may initiate the repurchase of any amount of members’
Excess Stock. The Bank will determine the criteria for Excess Stock repurchases from time
to time, and will apply the repurchase criteria equally and without discrimination to all
members. Pursuant to an application submitted by a member to the Bank in writing or in such
other form as the Bank may designate from time to time, the Bank may repurchase Class B
Stock that the Bank determines to be Excess Stock.
	 
	 	 	Unless the Bank is notified by a member otherwise in writing within 30 days of a Class B
Stock repurchase transaction, repurchases of Excess Stock will automatically reduce the
amount of Class B Stock subject to any outstanding stock redemption or withdrawal notices by
the amount of Class B Stock repurchased. If a member has more than one stock redemption and
/ or withdrawal notice outstanding, this reduction will be applied first to the most
recently received stock redemption or withdrawal notice.
	 
	 	 	A member’s submission of a withdrawal notice in accordance with Section 5.1 of this Capital
Plan, or its termination of membership in any other manner, will not, in and of itself,
cause any Class B Stock to be deemed Excess Stock for purposes of this section.
	 
	3.5	 	Limitations on Redemption or Repurchase of Capital Stock

The Bank will not redeem or repurchase Class B Stock without
the prior written approval of the Finance Agency if the Finance
Agency or the Board of Directors has determined that the Bank

8

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	has incurred, or is likely to incur, losses that result in, or are likely to result in,
charges against the capital of the Bank, as defined in the Regulations. This prohibition
will apply even if a Bank is in compliance with its Minimum Capital Requirements, and will
remain in effect for however long the Bank continues to incur such charges or until the
Finance Agency determines that such charges are not expected to continue.
	 
	 	 	The Bank will not redeem or repurchase Class B Stock if the redemption or repurchase would
cause the Bank to be out of compliance with its Minimum Capital Requirements, or if the
redemption or repurchase would cause the member to be out of compliance with its minimum
investment requirement.
	 
	 	 	In accordance with the Regulations, the Bank’s Board of Directors may suspend redemption of
Class B Stock if the Bank reasonably believes that continued redemption of Class B Stock
would cause the Bank to fail to meet its Minimum Capital Requirements in the future, would
prevent the Bank from maintaining adequate capital against a potential risk that may not be
adequately reflected in its Minimum Capital Requirements, or would otherwise prevent the
Bank from operating in a safe and sound manner.
	 
	 	 	In accordance with the Regulations, the Bank will not repurchase any Class B Stock without
the written consent of the Finance Agency during any period in which the Bank has suspended
redemptions of Class B Stock in accordance with this section. As required by the
Regulations, in the event the Bank suspends Class B Stock redemptions, the Bank will notify
the Finance Agency in writing within two business days of the date of the decision to
suspend redemptions, informing the Finance Agency of the reasons for the suspension and the
Bank’s strategies and time frames for addressing the conditions that led to the suspension.
The Finance Agency may require the Bank to re-institute the redemption of Class B Stock.
	 
	 	 	If at any time the Bank determines that the total amount of Class B Stock subject to
outstanding stock redemption or withdrawal notices with expiration dates within the
following 12 months exceeds the amount of Class B Stock the Bank could redeem and still
comply with its Minimum Capital Requirements, the Bank will determine whether to suspend
redemption and repurchase activities altogether, to fulfill requests for redemption
sequentially in the order in which they were received, to fulfill the requests on a pro rata
basis, or to take other action deemed appropriate by the Bank

	3.6	 	Retirement of Capital Stock
	 
	 	 	All shares of Class B Stock that are acquired by the Bank pursuant to redemption or
repurchase transactions will be retired.
	 
	3.7	 	Dividends on Capital Stock
	 
	 	 	The Board of Directors may declare dividends to be paid on Class B Stock on a quarterly
basis or otherwise as it determines in its discretion. Each member will be entitled to
receive dividends on all Class B Stock held during the applicable period for the period of
time that the member owns the Class B Stock. Dividends are non-cumulative with respect to
payment obligation. A member that has provided a withdrawal notice, or whose membership is
otherwise terminated, will continue to receive dividends on its Class B Stock as long as the
institution or its successor owns Class B Stock.
	 
	 	 	In accordance with the Bank Act and the Regulations, dividends may only be paid from current
earnings or previously retained earnings. In accordance with the Regulations, the Bank’s
Board of Directors may not declare or pay a dividend if the Bank is not in compliance with
its Minimum Capital Requirements or if the Bank would fall below its Minimum Capital
Requirements as a result of the payment of the dividend. Dividend payments may be made in
the form of cash,

9

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	additional shares of Class B Stock, or a combination thereof as determined by the Bank’s
Board of Directors.
	 
	 	 	Except as otherwise provided herein or by regulation or statute, the Bank’s Board of
Directors has sole discretion to determine the amount, form, frequency and timing of
dividend payments.
	 
	3.8	 	Voting Rights
	 
	 	 	Members’ voting rights are limited to the election of directors as provided by the Bank
Act. The voting rights of holders of the Bank’s Class B Stock are as follows:

	 	3.8.1	 	Allocation of Elected Director Seats and Votes
	 
	 	 	 	In accordance with the Bank Act and the Regulations, the Finance Agency will
annually designate member director seats by state and independent director seats for
at-large election. Each member will be entitled to vote in the election of member
directors representing the state in which the member is located, and in the election
of all independent directors. Each member will be entitled to cast one vote in the
election of member directors and in the election of independent directors for each
share of capital stock that the member was required to hold as of the immediately
preceding December 31, except that no member may cast a number of votes greater than
the average number of shares of capital stock required to be held by all members in
its state as of the preceding December 31. Shares of capital stock held by members
that were Excess Stock as of the preceding December 31 will not convey voting rights
in the election of directors.
	 
	 	3.8.2	 	Initial Election of Directors after Conversion
	 
	 	 	 	In accordance with the Regulations, the number of votes eligible to be cast in
the initial election of directors after the Conversion Date will be based on the
number of shares of capital stock that members were required to hold as of the
immediately preceding December 31. If this Capital Plan was in effect on the
preceding December 31, the minimum investment requirements of this Capital Plan will
be used to determine the number of votes; otherwise, the number of votes will be
determined based on the number of shares required to be held in accordance with the
Regulations in effect prior to the implementation of the Capital Plan.
	 
	 	 	 	If any member’s actual holdings of capital stock were less than the applicable
minimum investment requirement on the preceding December 31, the number of shares
eligible to be voted will be based on the number of shares of capital stock actually
held by that member as of the preceding December 31.

	4.	 	Minimum Investment Requirements
	 
	 	 	The Bank requires all members to purchase Class B Stock of the Bank and to maintain a
minimum investment in Class B Stock equal to the sum of the membership investment
requirement described in Section 4.1 plus the activity-based investment requirement
described in Section 4.2. The Bank’s Board of Directors will periodically review and may
adjust these investment requirements as described in Section 4.3.
	 
	4.1	 	Membership Investment Requirement
	 
	 	 	Beginning on the Conversion Date, each member will be required to maintain at all times
a membership investment requirement equal to 0.25 percent of the member’s total assets as of
the most recent December 31, as reported on the member’s regulatory financial report for
that date, or its audited financial statements for that date if the member does not file
regulatory financial

10

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	reports, subject to a minimum membership investment requirement of $1,000 and a maximum
membership investment requirement of $25 million.

	 	 	As described in Section 4.3, the Bank’s Board of Directors may from time to time increase or
decrease the membership investment requirement to an amount not less than 0.02 percent of
each member’s total assets nor more than 0.15 percent of each member’s total assets. The
Bank’s Board of Directors may also increase or decrease the maximum membership investment
requirement to an amount not less than $5 million or more than $25 million.
	 
	 	 	The membership investment requirement will be calculated for all members at least annually
during the first calendar quarter of the year, or as soon thereafter as members’ applicable
financial data becomes available. The annual recalculation of membership investment
requirements will become effective on or within 30 days of April 1 of each year. For new
members, the membership investment requirement will be calculated based on the new member’s
total assets as of the end of the most recent calendar quarter for which financial
information is available. Members will be notified in writing of the amount of their
membership investment requirements at least 10 days in advance of the effective date.
	 
	 	 	The Bank may recalculate all members’ membership investment requirements more often than
annually if it deems appropriate, and may recalculate individual members’ membership
investment requirements more often than annually at the member’s request. In each of these
cases, membership investment requirements will be recalculated based on members’ total
assets as of the end of the most recent calendar quarter for which financial data is
available. In addition, after the end of each calendar quarter, at the time the quarterly
financial data used to calculate members’ membership investment requirements becomes
available, the Bank will recalculate the membership investment requirements for institutions
whose membership terminated during the quarter.
	 
	 	 	Notwithstanding any other provision of this Capital Plan, in the event that (a) a receiver
or conservator has been appointed for the member, and (b) the Bank has terminated the
member’s membership, then that member’s membership investment requirement shall be zero.
	 
	4.2	 	Activity-Based Investment Requirement
	 
	 	 	In addition to its membership investment requirement, each member must maintain an
activity-based investment requirement equal to the sum of the advances investment
requirement described in Section 4.2.1 and the AMA investment requirement described in
Section 4.2.2. Each member, former member, or successor to a member with applicable
activity outstanding must comply with the activity-based investment requirement for as long
as the relevant activity remains outstanding, including periods beyond the termination of
the member’s membership in the Bank.
	 
	 	 	The activity-based investment requirement for each member, former member, or successor to a
member will change whenever the institution’s activity with the Bank changes. In addition,
the Bank’s Board of Directors may periodically adjust the activity-based investment
requirements in accordance with Section 4.3 of this Capital Plan.

	 	4.2.1	 	Advances Investment Requirement
	 
	 	 	 	Beginning on the Conversion Date, each member must maintain an activity-based
investment in Class B Stock in an amount equal to 4.25 percent of the outstanding
principal balance of all advances outstanding. The Bank’s Board of Directors may
from time to time increase or decrease the advances-based investment requirement to
an amount not less than 3.0 percent of members’ advances outstanding nor more than
5.0 percent of members’ advances outstanding. The Bank’s Board of Directors may
apply

11

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	changes to the advances investment requirement only to new advances, or to current
and new advances.
	 
	 	 	 	The advances investment requirement will be calculated daily and each time a member
enters into a new advances transaction. Complying with the advances investment
requirement at the time a new advances transaction is funded will be a condition of
funding the new transaction.
	 
	 	4.2.2	 	Acquired Member Asset (AMA) Investment Requirement
	 
	 	 	 	Beginning on the Conversion Date, each member must maintain an activity-based
investment in Class B Stock in an amount equal to 4.25 percent of the outstanding
principal balance of all Acquired Member Assets (AMA) acquired by the Bank through
the member and currently outstanding on the Bank’s balance sheet. However, this AMA
investment requirement will apply only to AMA acquired pursuant to commitments
executed after the Conversion Date, or AMA acquired pursuant to commitments executed
prior to the Conversion Date that explicitly stipulate that those AMA will be
subject to AMA investment requirements.
	 
	 	 	 	The Bank’s Board of Directors may from time to time increase or decrease the AMA
investment requirement to an amount not less than 0.0 percent of AMA outstanding on
the Bank’s balance sheet nor more than 5.0 percent of AMA outstanding on the Bank’s
balance sheet. At the discretion of the Board of Directors, any reduction in the
AMA investment requirement percentage may be applied only to AMA acquired pursuant
to commitments executed after the reduction becomes effective, or to previously
acquired and new AMA. Any increase in the AMA investment requirement will apply
only to AMA acquired pursuant to commitments executed after the effective date of
the change, or to AMA acquired pursuant to commitments executed prior to the
effective date of such change that explicitly stipulate that those AMA will be
subject to future changes in AMA investment requirements.
	 
	 	 	 	The AMA investment requirement for outstanding AMA will be calculated at least
monthly (and as often as daily at the Bank’s discretion), and for new AMA each time
new AMA are funded. Complying with the AMA investment requirement at the time
applicable AMA transactions are funded will be a condition of funding the new
transactions.

	4.3	 	Periodic Review of Minimum Investment Requirements
	 
	 	 	In accordance with the Bank Act and the Regulations, and to ensure ongoing compliance
with the Bank’s Minimum Capital Requirements, the Bank’s Board of Directors will review the
Bank’s Capital Plan at least annually, or more often as the Board of Directors deems
necessary. As part of this review, the Board of Directors will determine whether changes in
the minimum investment requirements are necessary to ensure that the Bank remains in
compliance with its Minimum Capital Requirements, or are otherwise appropriate. Adjustments
may be made to the specific percentages and the maximum amount for the membership investment
requirement as specified in Section 4.1, and the specific percentages for the activity-based
investment requirements as specified in Section 4.2. Any changes the Bank’s Board of
Directors makes to the minimum investment requirements will be communicated by written
notice (and otherwise as deemed appropriate by the Bank in its sole discretion) to be sent
to Bank members at least 30 days in advance of their effective date.

12

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	Any changes to members’ minimum investment requirement deemed appropriate by the Bank’s
Board of Directors but not authorized by this Capital Plan may be implemented only after the
Finance Board approves an amended Capital Plan reflecting such changes.
	 
	4.4	 	Member Compliance
	 
	 	 	The Bank will monitor the minimum investment requirement of each member on an ongoing
basis to ensure that the member remains in compliance with the applicable requirement. Each
member is required to comply promptly with any adjusted minimum investment requirements
established by the Board of Directors. However, members will be allowed a reasonable time
to comply, not to exceed 30 days from the effective date established by the Board of
Directors for the change in minimum investment requirement. Members may reduce their
outstanding activity with the Bank (subject to any prepayment fees applicable to the
reduction in activity) as an alternative to purchasing additional Class B Stock.
	 
	 	 	To facilitate the sale of additional stock which members are required to purchase as a
result of any changes in their minimum investment requirements, the Bank is authorized to
issue stock in the name of a member and to debit the member’s demand deposit account at the
Bank.
	 
	5.	 	Termination of Membership
	 
	 	 	Membership in the Bank may be terminated through voluntary withdrawal, through
involuntary termination by action of the Bank’s Board of Directors, through acquisition of a
member by another member institution, through acquisition of a member by a non-member
institution, or otherwise through dissolution of a member’s charter.
	 
	5.1	 	Voluntary Withdrawal
	 
	 	 	A member may withdraw from membership in the Bank by providing five years prior written
notice to the Bank. During the five year period following receipt by the Bank of the
member’s withdrawal notice, the member will be entitled to all the benefits and will incur
all the obligations of membership, including the obligation to comply with all minimum
investment requirements throughout the five year period. However, the Bank may limit any
new advances or AMA to terms that would mature on or before the expiration of the withdrawal
notice period. The membership of an institution that has submitted a withdrawal notice will
terminate at the expiration of the five year period following receipt by the Bank of the
withdrawal notice.
	 
	 	 	A withdrawal notice will also constitute a stock redemption notice for the amount of Class B
Stock held by the member at the time the Bank receives the withdrawal notice. At the
expiration of the five year period following receipt by the Bank of the member’s withdrawal
notice, the member’s membership in the Bank will terminate and, subject to the limitations
contained in Section 3.5 of this Capital Plan, the Bank will pay the stated Par Value of the
Class B Stock covered by the withdrawal notice to the member in cash in accordance with the
following conditions.
	 
	 	 	If the withdrawing member has no outstanding advances or AMA that require maintenance of
Class B Stock in accordance with Section 4.2 of this Capital Plan, the Bank will redeem all
of the outstanding Class B Stock subject to the withdrawal notice. If the withdrawing
member has outstanding advances or AMA that require maintenance of Class B Stock in
accordance with Section 4.2 of this Capital Plan, the Bank will redeem all the shares of
Class B Stock subject to the withdrawal notice, except those shares of Class B Stock
required to be held to comply with the activity-based investment requirement related to the
remaining advances and AMA.
	 
	 	 	During the remaining term of advances or AMA outstanding after the termination of
membership, the former member or its successor must continue to comply with any changes in
the activity-

13

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	based investment requirements related to the remaining advances or AMA. If the withdrawing
member holds any Class B Stock subject to a withdrawal notice that cannot be redeemed at the
expiration of the withdrawal notice period because it is required to meet a continuing
activity-based investment requirement, that stock will become redeemable when it is no
longer needed to comply with an activity-based investment requirement.
	 
	 	 	Nothing in this section will preclude the Bank from repurchasing Excess Stock in accordance
with Section 3.4 of this Capital Plan.

	 	5.1.1	 	Automatic Stock Redemption Notice
	 
	 	 	 	If a member has filed a withdrawal notice, that notice will also automatically
constitute a stock redemption notice for any shares of Class B Stock subsequently
acquired, with such automatic redemption notice to be effective and the redemption
notice period to begin on the date any additional Class B Stock is acquired. Such
Class B Stock will be redeemable at the end of its respective redemption notice
period in accordance with Section 3.3.1 or, if such Class B Stock is required to
comply with an ongoing activity-based investment requirement, that Class B Stock
will become redeemable when it is no longer needed to comply with an activity-based
investment requirement.
	 
	 	5.1.2	 	Withdrawal Cancellation Notice
	 
	 	 	 	A member that has previously submitted a withdrawal notice to the Bank in
writing in accordance with Section 5.1 of this Capital Plan may cancel its
withdrawal notice prior to the expiration of the withdrawal notice period by
providing written notice to the Bank. A member may also rescind a withdrawal
cancellation notice by providing written notice to the Bank within 30 days of the
original withdrawal cancellation notice and incur no redemption cancellation fee.
	 
	 	 	 	A withdrawal cancellation notice or withdrawal notice rescission will constitute a
redemption cancellation notice for the amount of Class B Stock subject to redemption
pursuant to the original withdrawal notice. The redemption cancellation fees and
conditions contained in Section 3.3.2 of this Capital Plan will also apply to a
withdrawal cancellation notice. A withdrawal cancellation notice or withdrawal
notice rescission will also cancel without fee any related automatic notices of
redemption created by the original withdrawal notice pursuant to Section 5.1.1 of
this Capital Plan, unless otherwise directed by the member.

	5.2	 	Involuntary Termination of Membership
	 
	 	 	The Bank Act and the Regulations grant the Board of Directors the authority to
terminate an institution’s membership under certain specified conditions. In the event the
Board of Directors terminates a member’s membership, that membership will terminate on the
date the Board of Directors acts to terminate the membership, and the five year stock
redemption notice period will begin on the same date.
	 
	5.3	 	Termination by Charter Dissolution
	 
	 	 	If an institution’s membership terminates by virtue of the dissolution of its charter
either through acquisition by another institution or otherwise, the membership of the
disappearing institution will terminate upon the cancellation of its charter. In the event
of an acquisition of a member, the Class B Stock held by the member will be transferred
automatically to the acquiring institution.
	 
	 	 	If the acquiring institution is a member of the Bank, the acquired Class B Stock may be
applied to the acquiring member’s minimum investment requirement, and any outstanding stock
redemption notices will remain in effect, except that any stock redemption notices related
to a withdrawal

14

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	notice previously submitted by the acquired member may be cancelled without a redemption
cancellation fee at the acquiring member’s request. If the acquiring institution is not a
member of the Bank, and does not apply for membership as provided in the Regulations, the
five year stock redemption notice period will begin on the date the institution’s membership
terminates, or earlier if the Bank has received a withdrawal notice from the disappearing
member.
	 
	5.4	 	General Membership Termination Provisions
	 
	 	 	Upon the termination of an institution’s membership, or upon the conclusion of the
transition period provided in the Regulations for acquiring institutions to make application
for membership in the Bank, the Bank will determine an orderly manner for liquidating all
remaining outstanding indebtedness (including prepayment fees) owed by that member to the
Bank, and settling all other claims against the member. After the expiration of any
redemption notice periods required by this Capital Plan, the Bank will redeem any remaining
Class B Stock in accordance with the provisions of this Capital Plan and applicable Finance
Agency regulations. After all remaining obligations and claims have been extinguished or
settled, the Bank will redeem the remaining shares of Class B Stock.
	 
	 	 	Nothing in this section will preclude the Bank from repurchasing any Excess Stock in
accordance with the provisions of this Capital Plan prior to the expiration of the stock
redemption notice periods, or redeeming Class B Stock in accordance with the provisions of
this Capital Plan prior to the extinguishment or settlement of all obligations and claims
against a member whose membership is being or has been terminated. However, in accordance
with the Regulations and this Capital Plan, the Bank may not redeem or repurchase any Class
B Stock required to support advances or AMA in accordance with Section 4.2 of this Capital
Plan until the respective advances or AMA have been repaid.
	 
	6.	 	Capital Structure Conversion
	 
	 	 	The Conversion Date for this Capital Plan will be not later than 25 months following
Finance Board approval of the Capital Plan.
	 
	6.1	 	Capital Structure Conversion Process

	 	6.1.1	 	Preliminary Estimate of Members’ New Minimum Investment Requirements
	 
	 	 	 	At least 60 days prior to the Conversion Date, the Bank will calculate an
estimate of each member’s new minimum investment requirement, with the membership
investment requirement calculated based on the member’s total assets as of the
immediately preceding December 31 for which financial information is available, and
the activity-based investment requirement calculated based on the member’s
outstanding balances of advances and applicable AMA as of the most recent month end.
The Bank will provide this preliminary minimum investment requirement to each
member by written notice.
	 
	 	6.1.2	 	Member Choice to Opt Out of Capital Plan
	 
	 	 	 	A member that chooses to opt out of this Capital Plan must notify the Bank in
writing at least 30 days prior to the Conversion Date of its decision not to
participate in the capital structure conversion process set forth herein. An opt out
notice will constitute a notice of the member’s intention to withdraw from
membership and must be submitted to the Finance Board as well as the Bank at least
30 days prior to the Conversion Date for this Capital Plan. If the Finance Board and
the Bank receive the opt out notice more than six months prior to the Conversion
Date, the notice will be governed by the six month notification requirement and the
redemption terms in effect prior to the implementation of the Capital Plan. In this
case, the member’s membership will terminate six months from

15

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	the date the Finance Board receives the opt out / withdrawal notice, and its old
capital stock will be redeemable on that date.
	 
	 	 	 	If the Finance Board and the Bank receive the opt out notice less than six months
but at least 30 days in advance of the Conversion Date, the member’s membership will
terminate and its old capital stock will be redeemable on the Conversion Date.
	 
	 	 	 	If the opt out notice is received less than 30 days prior to the Conversion Date,
the Bank will exchange the member’s existing shares of capital stock for an equal
number of shares of Class B Stock in accordance with Section 6.1.5 of this Capital
Plan; the member’s membership will terminate and its Class B Stock will become
redeemable five years from the date the opt out / withdrawal notice was received. A
member that elects to opt out of the Capital Plan and whose opt out notice is
received less than 30 days prior to the Conversion Date will be required to purchase
additional shares of Class B Stock to comply with the minimum investment
requirements of this Capital Plan and to support any new activity entered into by
the member after the Conversion Date until its membership terminates. Any additional shares of Class B Stock acquired after the Conversion Date by an institution that
elects to opt out of the Capital Plan will be subject to the same terms and
conditions as any other shares of Class B Stock acquired by any member after the
Conversion Date.
	 
	 	 	 	If an institution has withdrawn from membership in the Bank prior to the Conversion
Date (either through the opt out provisions of this Section of the Capital Plan or
otherwise) but still owns capital stock at the Conversion Date related to activity
that remains outstanding, that institution’s existing capital stock will be
converted to Class B Stock on the Conversion Date. The amount of Class B Stock
required to be maintained by that institution while the activity remains outstanding
will be the lesser of the amount of capital stock owned immediately prior to the
conversion date, the amount of capital stock required to be held to support that
activity immediately prior to the conversion date, or the activity-based investment
requirement specified in this Capital Plan.
	 
	 	6.1.3	 	Member Transition Period
	 
	 	 	 	In accordance with the Bank Act and the Regulations, members that joined a
Federal Home Loan Bank after November 12, 1999 must comply with the minimum
investment requirements of the Capital Plan on the Conversion Date. Any institution
that becomes a member of the Bank after the Conversion Date must comply with the
minimum investment requirements of this Capital Plan as of the date on which it
becomes a member of the Bank.
	 
	 	 	 	Members that joined a Federal Home Loan Bank on or before November 12, 1999 and for
which this Capital Plan establishes a higher minimum investment requirement than
under the requirements in effect immediately prior to implementation of this Capital
Plan will have the option to meet the additional minimum investment requirement in
four equal quarterly increments, provided, however, that members must immediately
purchase Class B Stock required to support any change in member activity subsequent
to the Conversion Date. A member must advise the Bank in writing of its intent to
exercise this option at least 30 days prior to the Conversion Date.
	 
	 	 	 	For a member eligible to elect to utilize these transition provisions and that
elects to do so, the Bank will reduce the membership investment requirement during
the first quarter following the Conversion Date by an amount equal to 100 percent of
the amount by which this Capital Plan increases the member’s total minimum
investment requirement; during the second quarter following the Conversion Date, the
Bank will reduce the

16

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	membership investment requirement by 75 percent of the amount by which the Capital
Plan increases the member’s total minimum investment requirement; during the third
quarter following the Conversion Date, the Bank will reduce the membership
investment requirement by 50 percent of the amount by which the Capital Plan
increases the member’s total minimum investment requirement; and during the fourth
quarter following the Conversion Date, the Bank will reduce the membership
investment requirement by 25 percent of the amount by which the Capital Plan
increases the member’s total minimum investment requirement. At all times beginning
on the Conversion Date, the member must comply with all applicable activity-based
investment requirements.

	 	6.1.4	 	Minimum Investment Requirements on Conversion Date
	 
	 	 	 	Each member’s minimum investment requirement at the opening of business on the
Conversion Date will be calculated as the sum of the membership investment
requirement based on the member’s total assets as of the immediately preceding
December 31 for which the applicable financial information is available (subject to
any applicable transition adjustments as described in Section 6.1.3), and the
application of the relevant activity-based investment requirements to the member’s
outstanding balances of advances and applicable AMA at the close of business on the
business day immediately prior to the Conversion Date.
	 
	 	6.1.5	 	Conversion Date Process
	 
	 	 	 	The following actions, which constitute the Bank’s Plan of Reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, are to be taken in order to implement this Capital
Plan.
	 
	 	 	 	At the opening of business on the Conversion Date, the Bank will:

	 	1.	 	Exchange the member’s existing shares of capital stock for an
equal number of shares of Class B Stock.
	 
	 	2.	 	Advise the member by written or electronic notice the details
of its new minimum investment requirement, including an explicit notation of
the member’s excess or deficit position.
	 
	 	3.	 	A member whose investment in capital stock on the Conversion
Date exceeds the new minimum investment requirement will hold Excess Stock that
the Bank may repurchase in accordance with the provisions of Section 3.4 of
this Capital Plan.
	 
	 	4.	 	A member whose actual holdings of capital stock on the
Conversion Date are less than the minimum investment requirement on the
Conversion Date must purchase sufficient additional Class B Stock to satisfy
the new minimum investment requirement. A member eligible to utilize the
transition provisions of Section 6.1.3 of this Capital Plan and that elects to
do so may purchase the additional shares of Class B Stock in four equal
quarterly installments as described in Section 6.1.3. To facilitate the
purchase of any required additional shares of Class B Stock, the Bank is
authorized to issue Class B Stock in the member’s name and debit the member’s
demand deposit account at the Bank.

	 	6.1.6	 	Post-Conversion Activity-Based Stock Purchases
	 
	 	 	 	Any member that obtains an advance or enters into any AMA transaction subject
to an activity-based investment requirement subsequent to the Conversion Date is
required to comply with the activity-based investment requirement related to that
transaction at the time the transaction occurs.

17

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	6.2	 	Transition Procedures

	 	6.2.1	 	The Bank’s Transition
	 
	 	 	 	It is the Bank’s intent to be in full compliance with its Minimum Capital
Requirements on the Conversion Date.
	 
	 	6.2.2	 	Member Transition
	 
	 	 	 	For a member eligible to utilize the transition provisions of Section 6.1.3 of
this Capital Plan and that elects to do so, the membership investment requirement
will increase in even increments over four quarterly periods as specified in Section
6.1.3 of this Capital Plan. Additional purchases of Class B Stock required to
maintain compliance with the minimum investment requirements of this Capital Plan
will be made automatically by issuing stock in the member’s name and debiting the
member’s demand deposit account at the Bank.

	7.	 	Capital Plan Reviews

	 	7.1	 	Independent Certified Public Accountant
	 
	 	 	 	PricewaterhouseCoopers (PwC), an independent Certified Public Accounting (CPA)
firm, reviewed the October 22, 2001 draft of this Capital Plan and concluded, to the
extent possible, that the implementation of this Capital Plan would not result in
any write-down of the redeemable stock owned by the Bank’s members. A copy of PwC’s
review has been provided to the Finance Board. The Bank represents that no
substantive modifications have been made to the October 22, 2001 draft in this
Capital Plan that it believes would have an impact on PwC’s conclusion. A letter
from PwC confirming that conclusion for this Capital Plan will be provided following
Finance Board approval of the Capital Plan.
	 
	 	7.2	 	Nationally Recognized Statistical Rating Organization (NRSRO)
	 
	 	 	 	Standard & Poor’s (S&P), a Nationally Recognized Statistical Rating
Organization (NRSRO), reviewed the July 19, 2001 draft of this Capital Plan and
determined, to the extent possible, that the implementation of this Capital Plan
would not have a material effect on the credit rating of the Bank. A copy of S&P’s
review has been provided to the Finance Board with this Capital Plan. The Bank
represents that no substantive modifications have been made to the July 19, 2001
draft in this Capital Plan that it believes would have an impact on the Bank’s
credit rating. A letter from S&P confirming that conclusion for this Capital Plan
will be provided following Finance Board approval of the Capital Plan.
	 
	 	7.3	 	Good Faith Determination
	 
	 	 	 	The Bank has made a good faith determination that this Capital Plan can be
implemented. The Bank has provided evidence of this determination to the
Finance Board.

	8.	 	Retained Earnings Capital Plan Amendment
	 
	8.1	 	Retained Earnings Enhancement Implementation and Definitions

	 	8.1.1	 	Implementation
	 
	 	 	 	The provisions of sections 8.1 through 8.4 shall become effective upon, and
only upon, the occurrence of the Interim Capital Plan Amendment Implementation Date.
Until the Restriction Termination Date, in the event of any conflict between
sections 8.1 through

18

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

8.4 and the remainder of this Capital Plan, the applicable terms of sections 8.1
through 8.4 shall govern, and shall be interpreted in a manner such that the
restrictions set forth therein are supplementary to, and not in lieu of, the
requirements of the remainder of this Capital Plan.

8.1.2 Definitions Applicable to Section 8 of this Capital Plan

As used in these sections 8.1 through 8.4, the following capitalized terms shall have
the following meanings. Other capitalized terms used but not defined in these sections 8.1
through 8.4 shall have the meanings set forth in the Definition of Terms section just before
section 1 of this Capital Plan.

	 	 	 	Act means the Federal Home Loan Bank Act, as amended as of the Effective
Date.
	 
	 	 	 	Adjustment to Prior Net Income means either an increase, or a decrease, to a
prior calendar quarter’s Quarterly Net Income subsequent to the date on which any
allocation to Restricted Retained Earnings for such calendar quarter was made.
	 
	 	 	 	Agreement means the Joint Capital Enhancement Agreement adopted by the
FHLBanks on the Effective Date and amended on the date on which the FHFA has
approved the Retained Earnings Capital Plan Amendments for all of the FHLBanks that
have issued capital stock pursuant to a capital plan as of the Effective Date.
	 
	 	 	 	Allocation Termination Date means the date the Bank’s obligation to make
allocations to the Restricted Retained Earnings account is terminated permanently.
That date is determined pursuant to section 8.4 of this Capital Plan.
	 
	 	 	 	Automatic Termination Event means (i) a change in the Act, or another
applicable statute, occurring subsequent to the Effective Date, that will have the
effect of creating a new, or higher, assessment or taxation on net income or capital
of the FHLBanks, or (ii) a change in the Act, another applicable statute, or the
Regulations, occurring subsequent to the Effective Date, that will result in a
higher mandatory allocation of an FHLBank’s Quarterly Net Income to any Retained
Earnings account than the annual amount, or total amount, specified in an FHLBank’s
capital plan as in effect immediately prior to the Automatic Termination Event.
	 
	 	 	 	Automatic Termination Event Declaration Date means the date specified in
section 8.4.1.1 or 8.4.1.2 of this Capital Plan.
	 
	 	 	 	Bank’s Total Consolidated Obligations means the daily average carrying value for the
calendar quarter, excluding the impact of fair value adjustments (i.e., fair value
option and hedging adjustments), of the Bank’s portion of outstanding System
Consolidated Obligations for which it is the primary obligor.
	 
	 	 	 	Declaration of Automatic Termination means a signed statement, executed by
officers authorized to sign on behalf of each FHLBank that is a signatory to the
Agreement, in which at least 2/3 of the then existing FHLBanks declare their
concurrence that a specific statutory or regulatory change meets the definition of
an Automatic Termination Event.
	 
	 	 	 	Dividend means a distribution of cash, other property, or stock to a
Stockholder with respect to its holdings of capital stock.

19

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	Dividend Restriction Period means any calendar quarter: (i) that includes
the REFCORP Termination Date, or occurs subsequent to the REFCORP Termination Date;
(ii) that occurs prior to an Allocation Termination Date; and (iii) during which the
amount of the Bank’s Restricted Retained Earnings is less than the amount of the
Bank’s RREM. If the amount of the Bank’s Restricted Retained Earnings is at least
equal to the amount of the Bank’s RREM, and subsequently the Bank’s Restricted
Retained Earnings becomes less than its RREM, the Bank shall be deemed to be in a
Dividend Restriction Period (unless an Allocation Termination Date has occurred).
	 
	 	 	 	Effective Date means February 28, 2011.
	 
	 	 	 	GAAP means accounting principles generally accepted in the United States as
in effect from time to time.
	 
	 	 	 	FHLBank means a Federal Home Loan Bank chartered under the Act.
	 
	 	 	 	Interim Capital Plan Amendment Implementation Date means 31 days after the
date by which the Finance Agency approved a capital plan amendment substantially the
same as the Retained Earnings Capital Plan Amendments for all of the FHLBanks that
have issued capital stock pursuant to a capital plan as of the Effective Date.
	 
	 	 	 	Net Loss means that the Quarterly Net Income of the Bank is negative, or
that the annual net income of the Bank calculated on the same basis is negative.
	 
	 	 	 	Quarterly Net Income means the amount of net income of an FHLBank for a
calendar quarter calculated in accordance with GAAP, after deducting the FHLBank’s
required contributions for that quarter to the Affordable Housing Program under
section 10(j) of the Act, as reported in the FHLBank’s quarterly and annual
financial statements filed with the Securities and Exchange Commission.
	 
	 	 	 	REFCORP Termination Date means the last day of the calendar quarter in which
the FHLBanks’ final regular payments are made on obligations to REFCORP in
accordance with Section 997.5 of the Regulations and section 21B(f) of the Act.
	 
	 	 	 	Regular Contribution Amount means the result of (i) 20 percent of Quarterly
Net Income; plus (ii) 20 percent of a positive Adjustment to Prior Net Income for
any prior calendar quarter that includes the REFCORP Termination Date, or occurred
subsequent to the REFCORP Termination Date, to the extent such adjustment has not
yet been made in the current calendar quarter; minus (iii) 20 percent of the
absolute value of a negative Adjustment to Prior Net Income for any prior calendar
quarter that includes the REFCORP Termination Date, or occurred subsequent to the
REFCORP Termination Date, to the extent such adjustment has not yet been made in the
current calendar quarter.
	 
	 	 	 	Regulations mean: (i) the rules and regulations of the Federal Housing
Finance Board (except to the extent that they may be modified, terminated, set aside
or superseded by the Director of the FHFA) in effect on the Effective Date; (ii) the
rules and regulations of the FHFA, as amended from time to time.
	 
	 	 	 	Restricted Retained Earnings means the cumulative amount of Quarterly Net
Income and Adjustments to Prior Net Income allocated to the Bank’s Retained Earnings
account restricted pursuant to the Retained Earnings Capital Plan Amendment, and does not
	 
	 	 	 	

20

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	include amounts retained in: (i) any accounts in existence at the Bank on the
Effective Date; or (ii) any other Retained Earnings accounts subject to restrictions
that are not part of the terms of the Retained Earnings Capital Plan Amendment.
	 
	 	 	 	Restricted Retained Earnings Minimum (RREM) means a level of Restricted
Retained Earnings calculated as of the last day of each calendar quarter equal to
one percent of the Bank’s Total Consolidated Obligations.
	 
	 	 	 	Restriction Termination Date means the date the restriction on the Bank
paying Dividends out of the Restricted Retained Earnings account, or otherwise
reallocating funds from the Restricted Retained Earnings account, is terminated
permanently. That date is determined pursuant to section 8.4 of this Capital Plan.
	 
	 	 	 	Retained Earnings means the retained earnings of an FHLBank calculated
pursuant to GAAP.
	 
	 	 	 	Retained Earnings Capital Plan Amendment means the amendment to this Capital
Plan, made a part thereof, adopted effective on the Interim Capital Plan Amendment
Implementation Date adding sections 8.1 through 8.4 to this Capital Plan.
	 
	 	 	 	Special Contribution Amount means the result of: (i) 50 percent of Quarterly
Net Income; plus (ii) 50 percent of a positive Adjustment to Prior Net Income for
any prior calendar quarter that includes the REFCORP Termination Date, or occurred
subsequent to the REFCORP Termination Date, to the extent such adjustment has not
yet been made in the current calendar quarter; minus (iii) 50 percent of the
absolute value of a negative Adjustment to Prior Net Income for any prior calendar
quarter that includes the REFCORP Termination Date, or occurred subsequent to the
REFCORP Termination Date, to the extent such adjustment has not yet been made by the
current calendar quarter.
	 
	 	 	 	Stockholder means: (i) an institution that has been approved for membership
in the Bank, and has purchased capital stock in accordance with the Regulations;
(ii) a former member of the Bank that continues to own capital stock; or (iii) a
successor to an entity that was a member of the Bank that continues to own capital
stock.
	 
	 	 	 	System Consolidated Obligation means any bond, debenture, or note authorized
under the Regulations to be issued jointly by the FHLBanks pursuant to Section 11(a)
of the Act, as amended, or any bond or note previously issued by the Federal Housing
Finance Board on behalf of all FHLBanks pursuant to Section 11(c) of the Act, on
which the FHLBanks are jointly and severally liable, or any other instrument issued
through the Office of Finance, or any successor thereto, under the Act, that is a
joint and several liability of all the FHLBanks.
	 
	 	 	 	Total Capital means Retained Earnings, the amount paid-in for capital stock,
the amount of any general allowance for losses, and the amount of other instruments
that the FHFA has determined to be available to absorb losses incurred by the Bank.

	8.2	 	Establishment of Restricted Retained Earnings

	 	8.2.1	 	Segregation of Account.
	 
	 	 	 	No later than the REFCORP Termination Date, the Bank shall establish an account
in its official books and records in which to allocate its Restricted Retained
Earnings, with such

21

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	account being segregated on its books and records from the Bank’s Retained Earnings
that are not Restricted Retained Earnings for purposes of tracking the accumulation
of Restricted Retained Earnings and enforcing the restrictions on the use of the
Restricted Retained Earnings imposed in the Retained Earnings Capital Plan
Amendment.

	 	8.2.2	 	Funding of Account.

8.2.2.1 Date on which Allocation Begins

The Bank shall allocate to its Restricted Retained Earnings account an amount at
least equal to the Regular Contribution Amount beginning on the REFCORP Termination
Date. The Bank shall allocate amounts to the Restricted Retained Earnings account
only through contributions from its Quarterly Net Income or Adjustments to Prior Net
Income occurring on or after the REFCORP Termination Date, but nothing in the
Retained Earnings Capital Plan Amendment shall prevent the Bank from allocating a
greater percentage of its Quarterly Net Income or positive Adjustment to Prior Net
Income to its Restricted Retained Earnings account than the percentages set forth in
the Retained Earning Capital Plan Amendment.

8.2.2.2 Ongoing Allocation

During any Dividend Restriction Period that occurs before the Allocation Termination
Date, the Bank shall continue to allocate its Regular Contribution Amount (or when
and if required under subsection 8.2.2.4 below, its Special Contribution Amount) to
its Restricted Retained Earnings account.

8.2.2.3 Treatment of Quarterly Net Losses and Annual Net Losses

In the event the Bank sustains a Net Loss for a calendar quarter, the following
shall apply: (i) to the extent that its cumulative calendar year-to-date net income
is positive at the end of such quarter, the Bank may decrease the amount of its
Restricted Retained Earnings such that the cumulative addition to the Restricted
Retained Earnings account calendar year-to-date at the end of such quarter is equal
to 20 percent of the amount of such cumulative calendar year-to-date net income;
(ii) to the extent that its cumulative calendar year-to-date net income is negative
at the end of such quarter (a) the Bank may decrease the amount of its Restricted
Retained Earnings account such that the cumulative addition calendar year-to-date to
the Restricted Retained Earnings at the end of such quarter is zero, and (b) the
Bank shall apply any remaining portion of the Net Loss for the calendar quarter
first to reduce Retained Earnings that are not Restricted Retained Earnings until
such Retained Earnings are reduced to zero, and thereafter may apply any remaining
portion of the Net Loss for the calendar quarter to reduce Restricted Retained
Earnings; and (iii) for any subsequent calendar quarter in the same calendar
year, the Bank may decrease the amount of its quarterly allocation to its Restricted
Retained Earnings account in that subsequent calendar quarter such that the
cumulative addition to the Restricted Retained Earnings account calendar
year-to-date is equal to 20 percent of the amount of such cumulative calendar
year-to-date net income.

In the event the Bank sustains a Net Loss for a calendar year, any such Net Loss
first shall be applied to reduce Retained Earnings that are not Restricted Retained
Earnings until such Retained Earnings are reduced to zero, and thereafter any
remaining portion of the Net Loss for the calendar year may be applied to reduce
Restricted Retained Earnings.

22

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

8.2.2.4 Funding at the Special Contribution Amount

If during a Dividend Restriction Period, the amount of the Bank’s Restricted
Retained Earnings decreases in any calendar quarter, except as provided in
subsections 8.2.2.3(i) and (ii)(a) above, the Bank shall allocate the Special
Contribution Amount to its Restricted Retained Earnings account beginning at the
following calendar quarter-end (except as provided in the last sentence of this
subsection). Thereafter, the Bank shall continue to allocate the Special
Contribution Amount to its Restricted Retained Earnings account until the cumulative
difference between: (i) the allocations made using the Special Contribution Amount;
and (ii) the allocations that would have been made if the Regular Contribution
Amount applied, is equal to the amount of the prior decrease in the amount of its
Restricted Retained Earnings account arising from the application of subsection
8.2.2.3(ii)(b). If at any calendar quarter-end the allocation of the Special
Contribution Amount would result in a cumulative allocation in excess of such prior
decrease in the amount of Restricted Retained Earnings: (i) the Bank may allocate
such percentage of Quarterly Net Income to the Restricted Retained Earnings account
that shall exactly restore the amount of the prior decrease, plus the amount of the
Regular Contribution Amount for that quarter; and (ii) the Bank in subsequent
quarters shall revert to paying at least the Regular Contribution Amount.

8.2.2.5 Release of Restricted Retained Earnings

If the Bank’s RREM decreases from time to time due to fluctuations in the Bank’s
Total Consolidated Obligations, amounts in the Restricted Retained Earnings account
in excess of 150 percent of the RREM may be released by the Bank from the
restrictions otherwise imposed on such amounts pursuant to the provisions of the
Retained Earnings Capital Plan Amendment, and reallocated to its Retained Earnings
that are not Restricted Retained Earnings. Until the Restriction Termination Date,
the Bank may not otherwise reallocate amounts in its Restricted Retained Earnings
account (provided that a reduction in the Restricted Retained Earnings account
following a Net Loss pursuant to subsection 8.2.2.3 is not a reallocation).

8.2.2.6 No Effect on Rights of Shareholders as Owners of Retained Earnings

In the event of the liquidation of the Bank, or a taking of the Bank’s Retained
Earnings by any future federal action, nothing in the Retained Earnings Capital Plan
Amendment shall change the rights of the holders of the Bank’s Class B stock that
confer ownership of Retained Earnings, including Restricted Retained Earnings, as
granted under section 6(h) of the Act.

	8.3	 	Limitation on Dividends, Stock Purchase and Stock Redemption

	 	8.3.1	 	General Rule on Dividends.
	 
	 	 	 	From the REFCORP Termination Date through the Restriction Termination Date, the
Bank may not pay Dividends, or otherwise reallocate funds (except as expressly
provided in subsection 8.2.2. 5, and further provided that a reduction in the
Restricted Retained Earnings account following a Net Loss pursuant to subsection
8.2.2.3 is not a reallocation), out of Restricted Retained Earnings. During a
Dividend Restriction Period, the Bank may not pay Dividends out of the amount of
Quarterly Net Income required to be allocated to Restricted Retained Earnings.
	 
	 	8.3.2	 	Limitation on Repurchase and Redemption.
	 
	 	 	 	From the REFCORP Termination Date through the Restriction Termination Date, the Bank
shall not engage in a repurchase or redemption transaction if following such

23

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

	 	 	 	transaction the Bank’s Total Capital as reported to the FHFA falls below the Bank’s
aggregate paid-in amount of capital stock.

	8.4	 	Termination of Retained Earnings Capital Plan Amendment Obligations

	 	8.4.1	 	Notice of Automatic Termination Event.

8.4.1.1 Action by FHLBanks

If the Bank desires to assert that an Automatic Termination Event has occurred (or
will occur on the effective date of a change in a statute or the Regulations), the
Bank shall provide prompt written notice to all of the other FHLBanks (and provide a
copy to the FHFA) identifying the specific statutory or regulatory change that is
the basis for the assertion. For the purposes of this section, ‘prompt written
notice’ means notice delivered no later than 90 calendar days subsequent to: (1) the
date the specific statutory change takes effect; or (2) the date an interim final
rule or final rule effecting the specific regulatory change is published in the
Federal Register.

If within 60 calendar days of transmission of such written notice to all of the
other FHLBanks, at least 2/3 of the then existing FHLBanks (including the Bank)
execute a Declaration of Automatic Termination concurring that the specific
statutory or regulatory change identified in the written notice constitutes an
Automatic Termination Event, then the Declaration of Automatic Termination shall be
delivered by the Bank to the FHFA within 10 calendar days of the date that the
Declaration of Automatic Termination is executed. After the expiration of a 60
calendar day period that begins when the Declaration of Automatic Termination is
delivered to the FHFA, an Automatic Termination Event Declaration Date shall be
deemed to occur (except as provided in subsection 8.4.1.3.

After the expiration of a 60 calendar day period that begins when the Declaration of
Automatic Termination is delivered to the FHFA by another FHLBank pursuant to the
terms of its capital plan, an Automatic Termination Event Declaration Date shall
also be deemed to occur (except as provided in subsection 8.4.1.3).

If a Declaration of Automatic Termination concurring that the specific statutory or
regulatory change identified in the written notice constitutes an Automatic
Termination Event has not been executed by at least the required 2/3 of the then
existing FHLBanks within 60 calendar days of transmission of such notice to all of
the other FHLBanks, the Bank may request a determination from the FHFA that the
specific statutory or regulatory change constitutes an Automatic Termination Event.
Such request must be filed with the FHFA within 10 calendar days after the
expiration of the 60 calendar day period that begins upon transmission of the
written notice of the basis of the assertion to all of the other FHLBanks.

8.4.1.2 Action by FHFA

The Bank may request a determination from the FHFA that a specific statutory or
regulatory change constitutes an Automatic Termination Event, and may claim that an
Automatic Termination Event has occurred, or will occur, with respect to a specific
statutory or regulatory change only if the Bank has complied with the time
limitations and procedures of subsection 8.4.1.1.

If within 60 calendar days after the Bank delivers such request to the FHFA, or a
similar request is delivered by another FHLBank pursuant to its capital plan, the
FHFA provides the requesting FHLBank with a written determination that a specific
statutory or regulatory change is an Automatic Termination Event, then an Automatic
Termination

24

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

Event Declaration Date shall be deemed to occur as of the expiration of such 60
calendar day period (except as provided in subsection 8.4.1.3). The date of such
Automatic Termination Event Declaration Date shall be as of the expiration of such
60 calendar day period (except as provided in subsection 8.4.1.3) no matter on which
day prior to the expiration of the 60 day calendar period the FHFA has provided its
written determination.

If the FHFA fails to make a determination within 60 calendar days after an FHLBank
delivers such request to the FHFA, then an Automatic Termination Event Declaration
Date shall be deemed to occur as of the date of the expiration of such 60 calendar
day period (except as provided in subsection 8.4.1.3); provided, however, that the
FHFA may make a written request for information from that FHLBank, and toll such 60
calendar day period from the date that the FHFA transmits its request until that
FHLBank delivers to the FHFA information responsive to its request.

If within 60 calendar days after that FHLBank delivers to the FHFA a request for
determination that a specific statutory or regulatory change constitutes an
Automatic Termination Event (or such longer period if the 60 calendar day period is
tolled pursuant to the preceding sentence), the FHFA provides that FHLBank with a
written determination that a specific statutory or regulatory change is not an
Automatic Termination Event, then an Automatic Termination Event shall not have
occurred with respect to such change.

8.4.1.3 Proviso as to Occurrence of Automatic Termination Event Declaration Date

In no case under this subsection 8.4.1 may an Automatic Termination Event
Declaration Date be deemed to occur prior to: (1) the date the specific statutory
change takes effect; or (2) the date an interim final rule or final rule effecting
the specific regulatory change is published in the Federal Register.

	 	8.4.2	 	Notice of Voluntary Termination.
	 
	 	 	 	If the FHLBanks terminate the Agreement, then the FHLBanks shall provide written
notice to the FHFA that the FHLBanks have voted to terminate the Agreement.
	 
	 	8.4.3	 	Consequences of an Automatic Termination Event or Vote to Terminate the Agreement.

8.4.3.1 Consequences of Voluntary Termination

In the event the FHLBanks deliver written notice to the FHFA that the FHLBanks have
voted to terminate the Agreement, then without any further action by the Bank or the
FHFA: (i) the date of delivery of such notice shall be an Allocation Termination
Date; and (ii) one year from the date of delivery of such notice shall be a
Restriction Termination Date.

8.4.3.2 Consequences of an Automatic Termination Event Declaration Date

If an Automatic Termination Event Declaration Date has occurred, then without
further action by the Bank or the FHFA: (i) the date of the Automatic Termination
Event Declaration Date shall be an Allocation Termination Date; and (ii) one year
from the date of the Automatic Termination Event Declaration Date shall be a
Restriction Termination Date.

25

 

Federal Home Loan Bank of Dallas Capital Plan:

Amended April 28, 2011

8.4.4.4
Deletion of Operative Provisions of Retained Earnings Capital Plan Amendment

Without any further action by the Bank or the FHFA, on the Restriction Termination
Date, sections 8.1 through 8.4 of this Capital Plan shall be deleted.

26

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00192-of-00352.parquet"}]]