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CONFIDENTIAL

COMMON INTEREST MATERIAL

ATTORNEY-CLIENT PRIVILEGE - WORK PRODUCT

ASSOCIATED HOSPITAL SERVICE OF MAINE

PLAN OF RECAPITALIZATION AND CONVERSION

DATED SEPTEMBER 15, 1999

ARTICLE I

INTRODUCTION

This Plan of Recapitalization and Conversion (the "Plan of Conversion") provides for the conversion of Associated Hospital Service of Maine d/b/a Blue Cross Blue Shield of Maine ("BCBSME") from a charitable non-profit hospital and medical service organization to a domestic stock insurer (the "Converted Insurer," as defined below), the conveyance of substantially all of the assets of Converted Insurer to Anthem Health Plans of Maine, Inc. ("Anthem BCBSMEHPM"), a wholly-owned subsidiary of Anthem Insurance Companies, Inc. ("Anthem") to be organized under Maine law. AHPMAnthem BCBSME will assume substantially all of the obligations of BCBSME to its customers, vendors and employees and will continue the business of BCBSME under the trade name "Anthem Blue Cross and Blue Shield of Maine."

On July 13, 1999, the Blue CrossBCBSME Board of Directors unanimously approved the conversion of Blue CrossBCBSME into a stock company and the execution of an Asset Purchase Agreement with Anthem as being in the best interests of Blue CrossBCBSME and its customers. This transaction will result in a company that will have the scale and capital necessary to compete with other large, well-capitalized insurers in the Maine market. It will ensure that Blue CrossBCBSME' customers will continue to receive access to quality health care and superior service. On September 15, 1999, the Blue CrossBCBSME Board of Directors unanimously approved this Plan of Recapitalization and Conversion, and the transactions contemplated hereby or related hereto, as being in the best interests of Blue CrossBCBSME and its customers.

In accordance with the Charitable Trust Plan submitted by Blue CrossBCBSME on this date to the Department of the Attorney General, the net proceeds of the transaction, and all assets and liabilities of the Converted Insurer not transferred to or assumed by AHPMAnthem BCBSME, will be distributed to and assumed by a newly-formed charitable organization under 5 M.R.S.A § 194-A having the purposes set forth in Section 194-A(5)(B)(2), which will be the sole shareholder of the Converted Insurer.

Submitted to the Superintendent with this Plan of Conversion, in accordance with 24 M.R.S.A. § 2301(9-D)(F), (H) & (I), respectively, are the Amended and Restated Articles of Incorporation and Bylaws of the Converted Insurer, a Comparative Premium Rate Analysis and an independent appraisal of fair market value of Blue CrossBCBSME.

ARTICLE II

DEFINITIONS

As used in this Plan of Conversion, the following terms shall have the meanings indicated below:

"Amended and Restated Charter" means the Amended and Restated Certificate of Organization of the Converted Insurer attached hereto as Exhibit A. For purposes of this Plan of Conversion, the term "Charter" as used in Title 24-A of the Maine Revised Statutes shall have the same meaning as the term "Articles of Incorporation" as used in Title 13-A of the Maine Revised Statutes, and vice versa.

"Asset Purchase Agreement" means that certain Asset Purchase Agreement dated as of July 13, 1999 between Associated Hospital Service of Maine and Anthem Insurance Companies, Inc.

"Assignment and Assumption Agreements" has the meaning set forth in Section 1.01 of the Asset Purchase Agreement.

"Charitable Trust Plan" means the Charitable Trust Plan submitted to the Attorney General concurrently with the filing of this Plan of Conversion in accordance with 5 M.R.S.A. § 194-A.

"Closing" means the consummation of the transactions contemplated in the Asset Purchase Agreement as described in Section 2.04 of that Agreement.

"Closing Date" means the date for the Closing established in accordance with Section 2.04 of the Asset Purchase Agreement.

"Closing Tax Reserve" means the reserve to be established in accordance with Section 7.06 of the Asset Purchase Agreement.

"Conversion Stock" means the 1,000 shares of common stock, $1,000.00 par value, issued by the Converted Insurer at the Effective Time to the Foundation pursuant to this Plan of Conversion.

"Conversion" means

1. the amendment of Blue CrossBCBSME's Charter to authorize the issuance of the Common Stock and to otherwise conform with the requirements of all laws and regulations applicable to a Maine stock insurance company,
2. the issuance of the Conversion Stock to the Foundation, and
3. the consummation of the related transactions provided for or referred to in this Plan of Conversion that are to be consummated at or about the Effective Date.

"Converted Insurer" means Blue CrossBCBSME after it is converted to a Maine stock insurance company pursuant to this Plan.

"Effective Time" means the time at which the Amended and Restated Charter has been filed with the office of the Secretary of State of Maine and has become effective, in accordance with applicable law and regulations.

"Escrow Agent" means State Street Bank and Trust Company, or its successor, acting as Escrow Agent under the Escrow Agreement provided for in Section 2.08 of the Asset Purchase Agreement.

"Foundation" means the charitable non-profit organization established in accordance with the Charitable Trust Plan.

"Liquidating Trustee" means the trustee of the Liquidating Trust formed for the benefit of the Foundation and identified in the Plan of Liquidation and approved by the Superintendent.

"Plan of Liquidation" means the Plan of Complete Liquidation and Dissolution of the Converted Insurer, providing for the voluntary liquidation of the Converted Insurer in accordance with 24-A M.R.S.A. § 3484, submitted concurrently herewith for approval by the Superintendent of Insurance.

"Surplus Notes" means the Surplus Note issued by Blue CrossBCBSME to Patriot Mutual Insurance Company dated March 1, 1999 in the original principal amount of $4,000,000 and the Surplus Note issued by Blue CrossBCBSME to Patriot Life Insurance Company dated December 31, 1998 in the original principal amount of $1,500,000.

"Transaction Expenses" means the expenses associated with the Plan of Conversion and the transactions contemplated by or related to said Plan, including the Asset Purchase Agreement and the Plan of Liquidation, and including without limitation the expenses described in Section 11.01 of the Asset Purchase Agreement and expenses reimbursable to the Attorney General and the Superintendent of Insurance pursuant to 5 M.R.S.A. § 194-A(4)(B).

ARTICLE III

APPROVALS AND ADOPTION

This Plan of Conversion shall become effective when the steps set forth in this Article III shall have been completed:

• 3.1. Approval of the Charitable Trust Plan, Etc. The Charitable Trust Plan shall have been approved by the Superior Court in accordance with 5 M.R.S.A. § 194-A(5), and, if there be any modifications thereof, such modifications shall be satisfactory to Blue CrossBCBSME and to Anthem; and, pursuant to the Charitable Trust Plan, the Foundation shall have been duly formed and be existing.
• 3.2. Approval of the Plan of Liquidation. The Plan of Liquidation of the Converted Insurer shall have been approved by the Superintendent in accordance with 24-A M.R.S.A. § 3484.
• 3.3. Issuance of Certificates of Authority and Approval of Transfers of Health Benefit Permits. The Superintendent shall have approved the issuance or transfer to AHPMAnthem BCBSME of certificates of authority and Health Benefit Permits (as defined in the Asset Purchase Agreement) necessary to allow AHPMAnthem BCBSME immediately after the Closing to continue the health insurance and health maintenance organization businesses of Blue CrossBCBSME without interruption, as a for-profit stock insurer governed by 24-A M.R.S.A.
• 3.4. Approval of Transfers of Stock and Amendments of Charters of HMO Subsidiaries. The Charters of Blue CrossBCBSME's' two HMO subsidiaries (Maine Partners Health Plan, Inc. and Central Maine Partners Health Plan, Inc.) shall have been amended, with the approval of the Superintendent and consistent with 5 M.R.S.A. §194-A(7)(B)(3), to remove all charitable purposes or obligations of such entities, in order that they may be operated as for-profit stock health maintenance organizations governed by 24-A M.R.S.A. § 4201 et seq.immediately following the Closing.

• 3.5. Form A Approvals, etc. Pursuant to 24-A M.R.S.A. §222 and 3476 and all other applicable law, the Superintendent shall have approved the acquisition by AHPMAnthem BCBSME of the business of Blue CrossBCBSME, including the stock of its two HMO subsidiaries as provided in the Asset Purchase Agreement.
• 3.6. Approval of the Plan by the Superintendent. This Plan of Conversion and the transactions contemplated thereby, including the bulk reinsurance transaction between the Converted Insurer and AHPMAnthem BCBSME contemplated by the Asset Purchase Agreement, shall have been approved by the Superintendent after notice and hearing in accordance with 24 M.R.S.A. § 2301(9-D), 24-A M.R.S.A. § 3483, and all other applicable law.
• 3.7 Satisfaction of Conditions. The conditions to closing in Article VIII of the Asset Purchase Agreement shall have been satisfied or waived in accordance with said Agreement.

ARTICLE IV

IMPLEMENTATION

• 4.1. Formation of Anthem Health Plans of Maine, Inc. Anthem will cause to be executed and delivered to the Superintendent the AHPMAnthem BCBSME Certificate of Organization in accordance with 24-A M.R.S.A. § 3306 and 3307 for the formation of AHPMAnthem BCBSME. Following approval of the AHPMAnthem BCBSME Certificate of Organization under Section 3307 by the Superintendent and the Attorney General, Anthem will make the required filings with the officials and offices as set forth in Section 3307(2). AHPMAnthem BCBSME will issue stock in accordance with AHPMAnthem BCBSME's Certificate of Organization to Anthem, or a wholly-owned subsidiary of Anthem. At the Effective Time, all stock issued by AHPMAnthem BCBSME will be owned by Anthem, or a wholly-owned subsidiary of Anthem.
• 4.2. Initial Capitalization of AHPMAnthem BCBSME. Immediately prior to the Closing, Anthem, or a wholly-owned subsidiary of Anthem will furnish to or on behalf of AHPMAnthem BCBSME immediately available funds sufficient to enable AHPMAnthem BCBSME to consummate the acquisition by it of the assets of Blue CrossBCBSME and assumption of the liabilities of Blue CrossBCBSME as provided in the Asset Purchase Agreement. Immediately following the Closing, AHPMAnthem BCBSME shall have capital and surplus at least equal to the capital and surplus that the Converted Insurer will have at the Effective Time (and before the repayment by the Converted Insurer of the Surplus Notes).
• 4.3. Formation of the Foundation. Prior to the Closing, the Foundation shall have been incorporated as a charitable, non-profit organization in accordance with the Charitable Trust Plan as approved by the Superior Court.
• 4.4. Conversion of Blue CrossBCBSME to Stock Insurer; Conversion Stock Subject to Irrevocable Proxy.
  1. At the Effective Time, the Amended and Restated Certificate of Organization and Bylaws shall become effective, whereupon Blue CrossBCBSME shall be converted into the Converted Insurer, whose name shall be "AHS Liquidating Corp." Immediately thereafter, the Conversion Stock shall be issued to the Foundation pursuant to this Plan of Conversion and 24 M.R.S.A. § 2301(9-D)(E)(3).
  2. Upon its issuance, the Conversion Stock shall be subject to the requirement that it be voted unanimously in favor of (i) the Asset Purchase Agreement and the transactions contemplated thereby, and (ii) the Plan of Liquidation and the transactions contemplated thereby. In furtherance of this requirement, the Conversion Stock shall upon its issuance be subject to a directed proxy in the favor of Anthem to vote the Conversion Stock as directed in the preceding sentence. Such proxy shall be deemed coupled with an interest and shall be irrevocable.
• 4.5. Completion of the Asset Sale. At the Closing, immediately following the Conversion of Blue CrossBCBSME, (i) the Converted Insurer shall (A) convey to AHPMAnthem BCBSME substantially all of the assets of the Converted Insurer as provided in the Asset Purchase Agreement, and (B) perform the other obligations provided for in the Asset Purchase Agreement, and (ii) AHPMAnthem BCBSME shall (A) assume substantially all of the liabilities of the Converted Insurer as provided in the Asset Purchase Agreement, (B) pay to the Converted Insurer the consideration provided for in the Asset Purchase Agreement, (C) pay $17,500,000 to the Escrow Agent, (D) pay to the Liquidating Trustee the amount of the Closing Tax Reserve, and (E) perform the other obligations provided for in the Asset Purchase Agreement. Immediately thereafter, the Converted Insurer shall pay or make adequate provision for the payment of all other remaining liabilities of the Converted Insurer in accordance with the Plan of Liquidation, including the payment or adequate provision for the payment of Transaction Expenses.
• 4.6. 4.6 Distribution of Funds; Liquidation and Dissolution. Immediately following the completion of the asset sale and the disposition of certain proceeds thereof as set forth in Section 4.5 of this Plan of Conversion, the Converted Insurer shall proceed to wind up its affairs and dissolve pursuant to the Plan of Liquidation. Under the Plan of Liquidation, from the proceeds of the asset sale, the Converted Insurer shall set aside a sufficient sum to provide for outstanding claims, obligations and expenses relating to the winding up of the affairs of the Converted Insurer, shall distribute the net amount to the Foundation as the sole shareholder of the Converted Insurer, make appropriate distributions to the Liquidating Trust and dissolve pursuant to 24-A M.R.S.A. §3484.

ARTICLE V

MISCELLANEOUS PROVISIONS

• 5.1. No Director, Officer or Employee Compensation. No director, officer, agent or employee of Blue CrossBCBSME, or any other person, will receive any fee, commission or other valuable consideration in connection with this conversion, other than usual and regular salary and compensation for employees, officers and directors and compensation for professional and other services performed.
• 5.2. Continuity of Corporate Existence. Upon the recapitalization and conversion of Blue CrossBCBSME as provided for in this Plan, the corporate existence of Blue CrossBCBSME shall continue uninterrupted. All rights, franchises, licenses and interests of Blue CrossBCBSME in and to every type of property, real, personal and mixed, and all choses in action shall continue unaffected and uninterrupted by this transaction. All obligations and liabilities of Blue CrossBCBSME shall continue unaffected and uninterrupted by the recapitalization and conversion. No action or proceeding pending at the Effective Date to which Blue CrossBCBSME is a party shall be abated or discontinued by reason of this transaction but may be prosecuted to final judgment in the same manner as if the recapitalization and conversion had not taken place. For all purposes the Converted Insurer shall be deemed to have been organized on December 26, 1939, the initial date of incorporation of Blue CrossBCBSME.
• 5.3. Directors and Officers. The directors and officers of Blue CrossBCBSME shall continue to serve as directors and officers of the Converted Insurer after the Effective Date until new directors and officers have been duly elected or appointed pursuant to the charter and bylaws of the Converted Insurer.