Exhibit 10.42

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (the “Agreement”) dated as of December 28, 2005 between
WellPoint, Inc., an Indiana corporation (“WellPoint”) with its headquarters and
principal place of business in Indianapolis, Indiana (WellPoint, together with
its subsidiaries and affiliates are collectively referred to herein as the
“Company”), and Dr. Michael A. Stocker (“Executive”).

 

W I T N E S S E T H

 

WHEREAS, Executive currently serves as the Chief Executive Officer of
WellChoice, Inc., a Delaware corporation (“WellChoice”);

 

WHEREAS, WellPoint, WellChoice, and WellPoint Holding Corp., a Delaware
corporation and a direct wholly owned subsidiary of WellPoint (“Merger Sub”)
have entered into an Agreement and Plan of Merger dated as of September 27, 2005
(the “Merger Agreement”) pursuant to which WellChoice will be merged with and
into Merger Sub (“Merger”);

 

WHEREAS, WellPoint and Executive entered into a Memorandum of Understanding
dated September 27, 2005 (the “MOU”), pursuant to which WellPoint and Executive
agreed before the closing of the Merger to sign a definitive document
incorporating the terms of the MOU; and

 

WHEREAS, the Company desires to retain the services and employment of Executive
on behalf of the Company following the “Effective Time,” as such term is defined
in the Merger Agreement, and Executive desires to continue his employment with
the Company following the Effective Time, upon the terms and conditions
hereinafter set forth.

 

NOW THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1. POSITION/DUTIES.

 

(a) During the Employment Period (as defined in Section 2 below), Executive
shall serve as an Executive Vice President of WellPoint and President and Chief
Executive Officer of WellPoint’s East Region. In this capacity, Executive shall
have such duties, authorities and responsibilities as the Company shall
designate that are commensurate with Executive’s position.

 

(b) During the Employment Period, Executive shall comply with Company policies
and procedures, and shall devote all of Executive’s business time, energy and
skill, best efforts and undivided business loyalty to the performance of
Executive’s duties with the Company. Executive further agrees that while
employed by the Company he shall not perform any services for remuneration for
or on behalf of any other entity without the advance written consent of the
Company.

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2. EMPLOYMENT PERIOD.    Subject to the termination provisions hereinafter
provided, the “Employment Period” under this Agreement shall commence at the
Effective Time and end on May 1, 2007 (the “Expiration Date”). Expiration of
this Agreement shall not be construed to terminate the employment of Executive.
If the employment of Executive does not terminate on or before the Expiration
Date in accordance with this Agreement, Executive shall (a) continue to be an
employee at will of the Company after the Expiration Date unless such employment
is otherwise terminated by the Company or Executive but (b) will not, during
such period, unless otherwise agreed by WellPoint and Executive, be entitled to
any bonus described in Section 4, long-term incentive bonus opportunity
described in Section 5 or benefits or protections described in Sections 6, 10
and 11.

 

3. BASE SALARY.    The Company agrees to pay Executive a base salary at an
annual rate of $650,000, payable in accordance with the regular payroll
practices of the Company. Executive’s Base Salary shall be subject to annual
review for increase (but not decrease) by the Company. The base salary as
determined herein from time to time shall constitute “Base Salary” for purposes
of this Agreement.

 

4. BONUS.    For each full and partial calendar year during the Employment
Period, the Company will provide Executive with an annual incentive bonus
opportunity, with entitlement to such bonus dependent upon the achievement of
performance goals annually determined by the Company. The target bonus
opportunity will be 80% of Executive’s Base Salary and the maximum bonus
opportunity will be 240% of Executive’s Base Salary. For calendar year 2005, the
Company will pay Executive his annual incentive bonus in accordance with the
existing targets and percentages that have previously been established for
Executive by WellChoice without any material modification thereto, such payment
to be made no later than the time that similar annual incentive bonus payments
have customarily been made to Executive by WellChoice (i.e., by March 15, 2006).

 

5. LONG TERM INCENTIVE PLAN.    The Company will provide Executive with a
long-term incentive bonus opportunity, with respect to each of the 2003-2005 and
2004-2006 performance cycles, that is no less favorable than that provided to
Executive immediately prior to the Effective Time, based on the same terms
(except as provided below) as the long-term incentive plan in effect for
Executive immediately prior to the Effective Time. Notwithstanding the
foregoing, (a) there will be no material modifications to the performance goals
applicable to the 2003-2005 performance cycle, (b) the Company may modify the
performance goals applicable to the 2004-2006 performance cycle to be consistent
with the integration of WellChoice as a subsidiary of the Company, and (c) the
transactions contemplated by the Merger Agreement will not be deemed a “change
in control” for purposes of the long-term incentive plan for any performance
cycles thereunder and Executive will not be entitled to any payment (including
any pro-rata payment) as a result thereof. The outstanding 2005-2007 performance
cycle under the long-term incentive plan in effect for Executive immediately
prior to the Effective Time will terminate at the Effective Time and Executive
will not be entitled to any payment (including any pro-rata payment) with
respect thereto.

 

6. BENEFITS/EXPENSES.    During the Employment Period, Executive will continue
to participate in WellChoice’s (or be entitled to participate in the Company’s)
medical, dental, hospitalization and life insurance plans and other employee
benefit plans at a level that is,

 

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in the aggregate, no less favorable than the lesser of (a) that provided to
Executive at the Effective Time and (b) that provided to the Company’s similarly
situated employees. Executive will be entitled to reimbursement of business
expenses in accordance with the Company’s expense reimbursement policy. In this
regard, Executive may charter a private airplane in lieu of the method of travel
permitted by the Company’s standard business travel policy; provided that such
travel is in compliance with the Company’s travel policy relating to the use of
private airplanes with respect to safety issues and/or to protect the interests
of the Company, and provided, further, that the Company will only reimburse
Executive for the amount of Executive’s actual business travel expenditures up
to the amount that would have been incurred had Executive traveled using the
method of travel permitted by the Company’s standard business travel policy.
During the Employment Period, Executive will be entitled to reimbursement of
personal expenditures, up to a maximum of $15,000 per year, for advice and/or
services relating to financial planning and/or tax planning. During the
Employment Period, Executive will also be entitled to participate in the
Company’s executive perquisite benefit program, pursuant to which he will be
entitled to receive a monthly cash benefit of $2,500. Notwithstanding the
foregoing, the Company may modify or terminate any employee benefit plan at any
time in accordance with its terms.

 

7. SPECIAL PAYMENT.    In consideration of Executive’s promises contained in
Section 12, within ten (10) business days following the date that is six
(6) months following the Effective Time, the Company will make a one-time
lump-sum cash payment to Executive of $5,580,075 (the “Special Payment”),
provided that in no event will such payment be made sooner than the expiration
of any revocation period relating to a release described below or sooner than
allowable under applicable law. As a condition to receiving the Special Payment,
Executive will be required to execute and deliver to the Company a general
release in the form attached hereto as Exhibit A.

 

8. RESTRICTED STOCK.    At the Effective Time, the Company will grant Executive
a total of 30,000 shares of the common stock of WellPoint which will be
non-transferable and forfeitable on the terms set forth below (the “Restricted
Stock”). The restrictions on the Restricted Stock will lapse on the Expiration
Date. Notwithstanding the foregoing, the portion of the Restricted Stock to
which the restrictions have not so lapsed will be immediately forfeited upon
termination of Executive’s employment for any reason; provided, however, that:
(a) in the event that Executive’s employment is involuntarily terminated by the
Company without Cause (as defined below), or voluntarily terminated by Executive
for Good Reason (as defined below), the restrictions with respect to the
Restricted Stock will lapse; and (b) in the event that Executive’s employment is
terminated due to his death or Disability (as defined below), the restrictions
will lapse with respect to a number of shares of Restricted Stock equal to:
30,000 times a fraction, the numerator of which is the number of days Executive
was employed by the Company during the period commencing with the Effective Time
and ending on the date of Executive’s death or Disability, and the denominator
of which is the number of days in the period commencing with the Effective Time
and ending on the Expiration Date.

 

9. COMPANY OPTIONS/ STOCK.    In accordance with the terms of the Merger
Agreement, all restrictions will lapse on Company Restricted Stock Awards (as
defined in the Merger Agreement) held by Executive as of the Effective Time.
Notwithstanding any language set forth in the Merger Agreement to the contrary,
each option for shares of common stock of

 

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WellChoice held by Executive immediately prior to the Effective Time will (a) be
converted into an option for shares of the Company in accordance with the terms
of the Merger Agreement and (b) will vest and become non-forfeitable at the
Effective Time, but (c) become exercisable in accordance with the original terms
of such option as set forth in the applicable option agreement (without regard
to any Change in Control provisions therein). For the avoidance of doubt,
Executive may, at any time on or after the Effective Time, exercise any vested,
non-forfeitable Company options he may hold and/or sell any non-forfeitable
shares of Company stock he may hold (including Company stock issued in respect
of Executive’s Company Restricted Stock Awards), subject only to: (i) the
limitations set forth in the immediately preceding sentence and/or under the
“Restricted Stock” section of this Agreement above; (ii) any “window-period”
restrictions that the Company applies to other similarly-situated executives of
the Company; (iii) any restrictions contained in the underlying stock option or
restricted stock award agreement; and/or (iv) any restrictions imposed under
applicable law.

 

10. TERMINATION.    Executive’s employment and the Employment Period shall
terminate on the first of the following to occur:

 

(a) DISABILITY.    Subject to applicable law, upon ten (10) days’ prior written
notice by the Company to Executive of termination due to Disability. Whether or
not Executive has a “Disability” will be determined on the same basis as
determined under any long-term disability plan in which Executive is eligible to
participate at the time of such determination. In the absence of any such
long-term disability plan, any question as to the existence of Executive’s
Disability will be governed by a qualified independent physician selected by the
Company and approved by Executive, said approval not to be unreasonably
withheld. The determination of such physician made in writing to the Company and
to Executive will be final and conclusive.

 

(b) DEATH.    Automatically on the date of death of Executive.

 

(c) CAUSE.    The Company may terminate Executive’s employment hereunder for
Cause. For purposes of this Agreement, “Cause” will mean:

 

(i) Executive’s willful breach of a material duty or other material willful
misconduct in the course of his employment which, if curable, is not cured by
Executive within ten (10) business days following written notice thereof from
the Board of Directors of the WellPoint (the “Board”);

 

(ii) Executive’s commission of a felony or a crime involving moral turpitude
(other than a petty misdemeanor); or

 

(iii) Executive’s habitual neglect of Executive’s employment duties provided
Executive was provided prompt written notice of such neglect by the Board and a
reasonable opportunity to cure such neglect.

 

No act, or failure to act, on Executive’s part will be deemed “willful” unless
done, or omitted to be done, by Executive not in good faith and without
reasonable belief that Executive’s action or omission was in and not opposed to
the interests of the Company. Notwithstanding the foregoing, Executive will not
be deemed to have been terminated for Cause unless and until there will have
been delivered to Executive a copy of a resolution

 

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duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purposes (after reasonable notice to Executive and a reasonable opportunity
for Executive, together with Executive’s counsel, to be heard before the Board),
finding that in the reasonable, good faith opinion of the Board Executive was
guilty of conduct set forth above and specifying the particulars thereof in
detail.

 

(d) WITHOUT CAUSE.    Upon written notice by the Company to Executive of an
involuntary termination without Cause, other than for death or Disability.

 

(e) GOOD REASON.    Executive may terminate his employment hereunder for Good
Reason. For purposes of this Agreement, “Good Reason” will mean the occurrence,
without Executive’s express written consent, of any of the following
circumstances, unless such circumstances are fully corrected within thirty
(30) days following Executive’s written notification of such circumstances to
the Company:

 

(i) the assignment to Executive of any duties that are not commensurate or
consistent with Executive’s status as Executive Vice President of WellPoint and
President and Chief Executive Officer of WellPoint’s East Region, Executive’s
removal from such position, or a substantial diminution in the nature or status
of Executive’s responsibilities from those in effect immediately following the
Effective Time;

 

(ii) a reduction in Executive’s annual base salary as in effect immediately
following the Effective Time or as the same may be increased from time to time;

 

(iii) the failure by the Company to continue in effect any bonus or incentive
compensation plan in which Executive participates pursuant to this Agreement,
unless an equitable substitute or alternate compensation arrangement (embodied
in a substitute or alternate plan) has been provided for Executive; or

 

(iv) the relocation of the office in which Executive is based to a location more
than thirty-five (35) miles from the office in which Executive is based
immediately following the Effective Time, unless such relocation does not
increase Executive’s commute by more than twenty (20) miles.

 

(f) WITHOUT GOOD REASON.    Upon written notice by Executive to the Company of a
termination of his employment without Good Reason.

 

11. CONSEQUENCES OF TERMINATION.    Upon the involuntary termination of
Executive’s employment by the Company other than for Cause and not due to
Executive’s death or Disability, or upon Executive’s resignation for Good
Reason, the Company will continue Executive’s participation, as if Executive
were still an employee, in the medical, dental, and hospitalization plans,
programs and/or arrangements of the Company on the same terms and conditions as
other similarly situated employees under such plans, programs and/or
arrangements until the earlier of (a) the end of the twenty-four (24) month
period following the date of the termination of Executive’s employment or
(b) the date, or dates Executive receives equivalent coverage and benefits under
the plans, programs and/or arrangements of a subsequent employer (such coverage
and benefits to be determined on a coverage-by-coverage or benefit-by-benefit

 

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basis). In addition, if Executive is eligible for retiree medical benefits under
WellChoice’s retiree medical benefit plan at the time he retires from the
Company, Executive will be eligible to receive retiree medical benefits in
accordance with the terms of WellChoice’s retiree medical benefit plan in effect
from time to time; provided, however, that in no event will the benefits that
Executive would otherwise be entitled to receive thereunder: (i) be less than
those provided to the Company’s eligible retirees, provided that Executive has
satisfied the eligibility requirements to receive retiree medical benefits in
accordance with the terms of WellChoice’s or the Company’s retiree medical plan,
or (ii) be eliminated.

 

12. RESTRICTIVE COVENANTS.

 

(a) CONFIDENTIALITY.

 

(i) Executive recognizes that the Company derives substantial economic value
from information created and used in its business which is not generally known
by the public, including, but not limited to, plans, designs, concepts,
improvements, modifications, inventions, processes, research, know-how,
compositions, computer programs, formulae, algorithms, databases, and equations;
product fulfillment and supplier information; customer and supplier lists, and
confidential business practices of the Company, its affiliates and any of its
customers, vendors, business partners or suppliers; profit margins and the
prices and discounts the Company obtains or has obtained or at which it sells or
has sold or plans to sell its products or services (except for public pricing
lists); manufacturing, assembling, labor and sales plans and costs; business and
marketing plans, ideas, or strategies; confidential financial performance and
projections; employee compensation; employee staffing and recruiting plans and
employee personal information; and other confidential concepts and ideas related
to the Company’s business (collectively, “Confidential Information”). Executive
expressly acknowledges and agrees that by virtue of his employment with the
Company, Executive will have access and will use in the course of Executive’s
duties certain Confidential Information and that Confidential Information
constitutes trade secrets and confidential and proprietary business information
of the Company, all of which is the exclusive property of the Company. For
purposes of this Agreement, Confidential Information includes the foregoing, any
information protected under the Indiana Uniform Trade Secrets Act (the “Act”),
and any information entitled to comparable protection by any other applicable
law, but does not include information that Executive establishes by clear and
convincing evidence, is or may become known to Executive or to the public from
sources outside the Company and through means other than a breach of this
Agreement.

 

(ii) Executive agrees that Executive will not for himself or for any other
person or entity, directly or indirectly, without the prior written consent of
the Company, while employed by the Company and thereafter: (1) use Confidential
Information for the benefit of any person or entity other than the Company or
its affiliates; (2) remove, copy, duplicate or otherwise reproduce any document
or tangible item embodying or pertaining to any of the Confidential Information,
except as required to perform Executive’s duties for the Company or its
affiliates; or (3) while employed and thereafter, publish, release, disclose or
deliver or otherwise make available to any third party any Confidential
Information by any communication, including oral, documentary, electronic or
magnetic

 

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information transmittal device or media. Upon termination of employment,
Executive shall return all tangible media embodying Confidential Information and
all other property of the Company. This obligation of non-disclosure and non-use
of information shall continue to exist for so long as such information remains
Confidential Information.

 

(b) DISCLOSURE AND ASSIGNMENT OF INVENTIONS AND IMPROVEMENTS.

 

(i) Without prejudice to any other duties express or implied imposed on
Executive hereunder it shall be part of Executive’s normal duties at all times
to consider in what manner and by what methods or devices the products,
services, processes, equipment or systems of the Company and any customer or
vendor of the Company might be improved and promptly to give to the Chief
Executive Officer of WellPoint or his or her designee full details of any
improvement, invention, research, development, algorithm, article, composition,
concept, device, idea, know-how, method, modification, process, program, system,
technique, discovery, design, code, model, suggestion or innovation, or other
work of authorship (collectively called “Work Product”), which Executive (alone
or with others) may make, discover, create, conceive or reduce to practice in
the course of Executive’s employment or within one (1) year thereafter.
Executive acknowledges that the Work Product is the property of the Company. To
the extent that any of the Work Product is capable of protection by copyright,
Executive acknowledges that it is created within the scope of Executive’s
employment and is a work made for hire. To the extent that any such material may
not be a work made for hire, Executive hereby assigns to the Company all right,
title, and interest in and to such material. To the extent that any of the Work
Product is an invention, discovery, process or other potentially patentable
subject matter (the “Inventions”), Executive hereby assigns to the Company all
right, title, and interest in and to all Inventions. The Company acknowledges
that the assignment in the preceding sentence does not apply to an Invention
that Executive develops entirely on his own time without using the Company’s
equipment, supplies, facilities or Confidential Information, except for those
Inventions that either:

 

(1) relate at the time of conception or reduction to practice of the Invention
to the Company’s business, or actual or demonstrably anticipated research or
development of the Company, or

 

(2) result from any work performed by Executive for the Company.

 

Execution of this Agreement constitutes Executive’s acknowledgment of receipt of
written notification of this Section and of notice of the general exception to
assignments of Inventions provided under the Uniform Employee Patents Act, in
the form adopted by the state having jurisdiction over this Agreement or
provision, or any comparable applicable law.

 

(ii) Executive shall cooperate fully at all times during and subsequent to
Executive’s employment to effect any assignment pursuant to this Section,
including by (i) signing such further documents as the Company may request and
(ii) performing any other necessary actions reasonably requested by the Company
to confirm transfer and assignment and/or enforce the Company’s rights therein.

 

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(c) NON-COMPETITION.    During the Employment Period, and any period in which
Executive is employed by the Company during or after the Employment Period, and
for a period of twelve (12) months commencing upon Executive’s termination of
employment for any reason (whether voluntary or involuntary), Executive will
not, without prior written consent of the Company, directly or indirectly seek
or obtain a Competitive Position in a Restricted Territory and perform a
Restricted Activity with a Competitor, as those terms are defined herein.

 

(i) Competitive Position means any employment or performance of services with a
Competitor (a) in which Executive has executive level duties for such Competitor
or (b) in which Executive will use any Confidential Information of the Company.

 

(ii) Restricted Territory means any geographic area in which the Company does
business and in which Executive had responsibility for, or Confidential
Information about, such business within the thirty six (36) months prior to
Executive’s termination of employment from the Company.

 

(iii) Restricted Activity means any activity for which Executive had executive
responsibility for the Company within the thirty-six (36) months prior to
Executive’s termination of employment from the Company or about which Executive
had Confidential Information.

 

(iv) Competitor means any entity or individual (other than the Company), engaged
in management of network-based managed care plans and programs, or the
performance of managed care services, long term care insurance, dental, life or
disability life insurance, behavioral health, vision, flexible spending
accounts, COBRA administration or other product or services substantially the
same or similar to those offered by the Company while Executive was employed, or
other products or services offered by the Company within twelve (12) months
after the termination of Executive’s employment if Executive had responsibility
for, or Confidential Information about, such other products or services while
Executive was employed by the Company.

 

(d) NON-SOLICITATION OF CUSTOMERS.    During the Employment Period, and any
period in which Executive is employed by the Company during or after the
Employment Period, and for a period of twelve (12) months commencing upon
Executive’s termination of employment for any reason (whether voluntary or
involuntary), Executive will not, either individually or as a employee, partner,
consultant, independent contractor, owner, agent, or in any other capacity,
directly or indirectly, for a Competitor of the Company as defined in
Section 12(c)(iv) above: (i) solicit business from any client or account of the
Company or any of its affiliates with which Executive had contact, or
responsibility for, or about which Executive had knowledge of Confidential
Information by reason of Executive’s employment with the Company, (ii) solicit
business from any client or account which was pursued by the Company or any of
its affiliates and with which Executive had contact, or responsibility for, or
about which Executive had knowledge of Confidential Information by reason of
Executive’s employment with the Company, within the twelve (12) month period
prior to termination of employment. For

 

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purposes of this provision, an individual policyholder in a plan maintained by
the Company or by a client or account of the Company under which individual
policies are issued, or a certificate holder in such plan under which group
policies are issued, shall not be considered a client or account subject to this
restriction solely by reason of being such a policyholder or certificate holder.

 

(e) NON-SOLICITATION OF EMPLOYEES.    During the Employment Period, and any
period in which Executive is employed by the Company during or after the
Employment Period, and for a period of twelve (12) months commencing upon
Executive’s termination of employment for any reason (whether voluntary or
involuntary), Executive will not, either individually or as a employee, partner,
independent contractor, owner, agent, or in any other capacity, directly or
indirectly solicit, hire, attempt to solicit or hire, or participate in any
attempt to solicit or hire, for any non-Company affiliated entity, any person
who on or during the six (6) months immediately preceding the date of such
solicitation or hire is or was an officer or employee of the Company, or whom
Executive was involved in recruiting while Executive was employed by the
Company.

 

(f) EQUITABLE RELIEF AND OTHER REMEDIES—CONSTRUCTION.

 

(i) Executive acknowledges that each of the provisions of this Agreement are
reasonable and necessary to preserve the legitimate business interests of the
Company, its present and potential business activities and the economic benefits
derived therefrom; that they will not prevent him from earning a livelihood in
Executive’s chosen business and are not an undue restraint on the trade of
Executive, or any of the public interests which may be involved.

 

(ii) Executive agrees that beyond the amounts otherwise to be provided under
this Agreement, the Company will be damaged by a violation of this Agreement and
the amount of such damage may be difficult to measure. Executive agrees that if
Executive commits or threatens to commit a breach of any of the covenants and
agreements contained in Sections 12 and 13 to the extent permitted by applicable
law, then the Company shall have the right to seek and obtain all appropriate
injunctive and other equitable remedies, without posting bond therefor, except
as required by law, in addition to any other rights and remedies that may be
available at law or under this Agreement, it being acknowledged and agreed that
any such breach would cause irreparable injury to the Company and that money
damages would not provide an adequate remedy. Further, if Executive violates
Section 12(b) - (e) hereof Executive agrees that the period of violation shall
be added to the period in which Executive’s activities are restricted.

 

(iii) The parties agree that the covenants contained in this Agreement are
severable. If an arbitrator or court shall hold that the duration, scope, area
or activity restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope, area or activity
restrictions reasonable and enforceable under such circumstances shall be
substituted for the stated duration, scope, area or activity restrictions to the
maximum extent permitted by law.

 

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13. COOPERATION.    Upon the receipt of reasonable notice from the Company
(including outside counsel), Executive agrees that while employed by the Company
and for two years after the termination of Executive’s employment for any
reason, Executive will respond and provide information with regard to matters in
which Executive has knowledge as a result of Executive’s employment with the
Company, and will provide reasonable assistance to the Company, its affiliates
and their respective representatives in defense of any claims that may be made
against the Company or its affiliates, and will assist the Company and its
affiliates in the prosecution of any claims that may be made by the Company or
its affiliates, to the extent that such claims may relate to the period of
Executive’s employment with the Company (or any predecessor); provided, that
with respect to periods after the termination of Executive’s employment, the
Company shall reimburse Executive for any out-of-pocket expenses incurred in
providing such assistance and if Executive is required to provide more than ten
(10) hours of assistance per week after his termination of employment then the
Company shall pay Executive a reasonable amount of money for his services at a
rate agreed to between the Company and Executive; and provided further that
after Executive’s termination of employment with the Company such assistance
shall not unreasonably interfere with Executive’s business or personal
obligations. Executive agrees to promptly inform the Company if Executive
becomes aware of any lawsuits involving such claims that may be filed or
threatened against the Company or its affiliates. Executive also agrees to
promptly inform the Company (to the extent Executive is legally permitted to do
so) if Executive is asked to assist in any investigation of the Company or its
affiliates (or their actions), regardless of whether a lawsuit or other
proceeding has then been filed against the Company or its affiliates with
respect to such investigation, and shall not do so unless legally required.

 

14. LEGAL FEES.

 

(a) The Company shall reimburse Executive for reasonable attorney’s fees (based
on his attorney’s standard hourly rates) Executive incurs in connection with the
negotiation, preparation and/or execution of this Agreement up to $20,000,
subject to the review by the Company of a statement from such attorney including
rates and hours.

 

(b) The Company shall also pay Executive all legal fees and expenses reasonably
incurred by Executive in contesting or disputing the nature of any termination
of Executive’s employment for purposes of this Agreement or in seeking to obtain
or enforce any right or benefit provided by this Agreement; provided that the
Company shall not be obligated to pay any amount under this Section 14(b) to the
extent a court or a mutually agreed upon arbitrator determines that Executive’s
claim, contest, dispute or enforcement of this Agreement is frivolous.

 

15. PARACHUTE TAX GROSS-UPS.

 

(a) In the event that any payment or benefit received or to be received by
Executive pursuant to the terms of this Agreement (the “Contract Payments”) or
in connection with or contingent upon a Change in Control of WellPoint pursuant
to any other agreement, plan or arrangement with the Company (“Other Payments”
and, together with the Contract Payments, the “Payments”) would be subject to
the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), the
Company shall pay Executive an additional amount (the “Gross-Up

 

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Payment”) such that the net amount of Payments retained by Executive shall be
equal to the amount Executive would have retained if none of such Payments were
subject to the Excise Tax. In particular, the Company will timely pay to
Executive an amount equal to the Excise Tax on the Payments, any interest,
penalties or additions to tax payable by Executive by reason of Executive’s
filing income tax returns and making tax payments in a manner consistent with an
opinion of tax counsel selected by the Company and reasonably acceptable to
Executive (“Tax Counsel”), and any federal, state and local income tax and
Excise Tax upon the payments by the Company to Executive provided for by this
Section 15. Notwithstanding the foregoing provisions of this Section 15, in the
event the amount of Payments exceeds the product (“Parachute Payment Limit”) of
2.99 and Executive’s applicable “base amount” (as such term is defined for
purposes of Section 4999 of the Code) by less than ten percent (10%) of
Executive’s annual base salary, Executive shall be treated as having waived such
rights with respect to Payments designated by Executive to the extent required
such that the aggregate amount of Payments subject to the Excise Tax is less
than the Parachute Payment Limit.

 

(b) For purposes of this Agreement, a Change in Control shall be deemed to have
occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or
becomes the “beneficial owner” (as determined for purposes of Regulation 13D-G
under the Exchange Act as currently in effect), directly or indirectly, of
securities of WellPoint representing 25% or more of the combined voting power of
WellPoint’s then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board and any new director whose election to the Board or nomination for
election to the Board was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board; or (iii) WellPoint
effects a merger or consolidation with any other corporation, other than a
merger or consolidation (x) which does not result in any person becoming the
beneficial owner, directly or indirectly, of securities of WellPoint or the
surviving entity representing 25% or more of the combined voting power of
WellPoint’s (or such surviving entity’s) then outstanding securities and (y) in
which a majority of the Board of Directors of WellPoint or such surviving entity
immediately after such merger or consolidation is comprised of directors of
WellPoint immediately prior to such merger or consolidation; or (D) WellPoint
sells or disposes of all or substantially all of WellPoint’s assets.

 

16. NOTIFICATION OF EXISTENCE OF AGREEMENT.    Executive agrees that in the
event that Executive is offered employment with another employer (including
service as a partner of any partnership or service as an independent contractor)
at any time during the existence of this Agreement, or such other period in
which post termination obligations of this Agreement apply, Executive shall
immediately advise said other employer (or partnership) of the existence of this
Agreement and shall immediately provide said employer (or partnership or service
recipient) with a copy of Sections 12 and 13 of this Agreement.

 

17. NOTIFICATION OF SUBSEQUENT EMPLOYMENT.    Executive shall report promptly to
the Company any employment with another employer (including service as a partner
of any partnership or service as an independent contractor or establishment of
any business as a sole proprietor) obtained during the period in which
Executive’s post termination obligations set forth in Section 12(b) - (e) apply.

 

11

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18. NOTICE.    For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:

 

(a) If to Executive,

 

Dr. Michael A. Stocker

1056 Fifth Avenue

#12

New York, NY 10028

 

with a copy to

 

Wayne N. Outten

Outten & Golden LLP

3 Park Avenue 29th Floor

New York, NY 10016

 

(b) if to the Company, to

 

WellPoint Inc.

120 Monument Circle

Indianapolis, IN 46204

Attention:    Randal L. Brown

 Senior Vice President, Human Resources

 

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt.

 

19. SECTION HEADINGS; INCONSISTENCY.    The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement. In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or
policy of the Company, the terms of this Agreement shall control.

 

20. SUCCESSORS AND ASSIGNS—BINDING EFFECT.    This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and permitted
assigns, as the case may be. The Company may assign this Agreement to any
affiliate of the Company and to any successor or assign of all or a substantial
portion of the Company’s business. This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive’s devisee, legatee or other designee or, if there is no such designee,
to Executive’s estate.

 

12

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21. SEVERABILITY.    The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

 

22. COUNTERPARTS.    This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

23. DISPUTE RESOLUTION.    Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of Executive’s right to be paid until the last date on
which Executive’s employment terminates during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

 

24. GOVERNING LAW.    The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Indiana
applicable to contracts made and to be performed entirely within that State,
without regard to its conflicts of law principles.

 

25. MISCELLANEOUS.    No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Executive and such officer or director as may be designated by the
Company. No waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. All references to
sections of the Code shall be deemed also to refer to any successor provisions
to such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations contained in Section 11, 12 and 13 of this Agreement shall survive
the cessation of the Employment Period and Executive’s employment with the
Company and shall be fully enforceable thereafter.

 

26. OTHER EMPLOYMENT ARRANGEMENTS.    This Agreement together with all exhibits
hereto constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof and, as of the Effective Time, supersedes all prior
agreements and undertakings, both written and oral, including, but not limited
to, the MOU. The existing Change in Control Retention Agreement between
Executive and WellChoice will be cancelled immediately prior to the Effective
Time in consideration for entering into this Agreement. Notwithstanding the
foregoing, in the event of the termination of the Merger Agreement prior to the
Effective Time, this Agreement will terminate upon such termination of the
Merger Agreement.

 

13

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

 

WELLPOINT, INC.

By:

 

/s/    LARRY C. GLASSCOCK        

--------------------------------------------------------------------------------

Name:

Its:

 

Larry C. Glasscock

Chief Executive Officer

Date:

  12/28/2005 EXECUTIVE

/s/    MICHAEL A. STOCKER, M.D.        

--------------------------------------------------------------------------------

Date:   12/28/2005

 

14

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Exhibit A

 

                    , 200    

 

[Name]

[Address]

[Address]

 

Re:    Agreement and General Release

 

Dear                                     :

 

This letter is provided in connection with your employment with WellPoint, Inc.
(“WellPoint”) regarding your eligibility for a Change in Control Payment, as
defined in your employment agreement, dated                     , 2005.

 

Provided that you agree to the terms contained in this Agreement and General
Release, indicate your agreement by signing and returning this Agreement and
General Release and do not revoke your agreement as provided below, WellPoint is
prepared to provide you with the Change in Control Payment.

 

In consideration for WellPoint’s payment of the Change in Control Payment to
which you are not otherwise entitled, you hereby agree to release WellPoint and
any and all of WellPoint’s predecessors (including but not limited to
WellChoice, Inc.), successors, assigns, parents, subsidiaries, affiliates and
related entities (collectively, “WellPoint Entities”) and the present and former
officers, directors, employees and agents of WellPoint and any and all of
WellPoint’s predecessors, successors, assigns, parents, subsidiaries, affiliates
and related entities (collectively, “WellPoint Officials”), individually and in
their official capacities, of and from all causes of action, claims, damages,
judgments and agreements of any kind including, but not limited to, all matters
arising out of your employment with WellPoint and any and all WellPoint
Entities. This release includes, but is not limited to, any and all alleged
claims based on the following in each case as amended: the Age Discrimination in
Employment Act (including the Older Workers Benefit Protection Act), the
Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1866, the New York State and New York City Human Rights
Laws, the New York Labor Law, and the Employee Retirement Income Security Act of
1974 (except any valid claim to recover vested benefits, if applicable), and any
common law, public policy, contract (whether oral or written, express or
implied) or tort law, and any other local, state or federal law, regulation,
ordinance or rule having any bearing whatsoever on the terms and conditions of
your employment and the cessation thereof.

 

A-1

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Notwithstanding the foregoing, the above general release does not release any
claims to (i) payments and benefits to which you may be entitled pursuant to the
Memorandum of Understanding, dated September 26, 2005, and the Employment
Agreement, dated                     , 200    , (ii) any benefits to which you
are vested in connection with your employment with WellPoint,
(iii) indemnification pursuant to the by-laws of WellPoint, and (iv) coverage
under WellPoint’s Directors’ and Officers’ insurance policies.

 

By signing this Agreement and General Release, you are providing a complete
waiver of all claims that may have arisen, whether known or unknown, up until
the time that this Agreement and General Release is executed. If you breach this
Agreement and General Release, WellPoint will seek restitution and/or offset of
any payments or benefits provided to the extent permitted by law.

 

Since your execution of this Agreement and General Release releases WellPoint,
any WellPoint Entities and any WellPoint Officials from all claims you may have,
you should review this carefully before signing it. You can take at least
twenty-one (21) days from your receipt of this Agreement and General Release to
consider its meaning and effect and to determine whether you wish to enter into
it. You are advised to consult with anyone of your choosing, including an
attorney, prior to executing this Agreement and General Release.

 

Once you have signed this Agreement and General Release, you may choose to
revoke your execution within seven (7) days. Any revocation of this Agreement
and General Release must be in writing and personally delivered to
                    , WellPoint, Inc.,                     ,
                    ,                     , or if mailed, postmarked within
seven (7) days of the date upon which it was signed by you.

 

TO RECEIVE THE CHANGE IN CONTROL PAYMENT, YOU MUST SIGN AND RETURN THE AGREEMENT
AND GENERAL RELEASE NO LATER THAN                     , 200    , AND DELIVER THE
ATTACHED LETTER INDICATING THAT YOU DO NOT WISH TO REVOKE YOUR AGREEMENT NO
EARLIER THAN SEVEN (7) DAYS AFTER THE DATE YOU SIGN THIS AGREEMENT AND GENERAL
RELEASE. This Agreement and General Release should be returned to
                    , WellPoint, Inc.,                     ,
                    ,                     . WellPoint will not make any payment
pursuant to this Agreement and General Release until after the seven (7) day
period expires and WellPoint receives the attached letter indicating that you
have not revoked your agreement.

 

A-2

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This Agreement and General Release contains the entire understanding of the
parties relating to the subject matter hereof. You acknowledge that no
representations, oral or written, have been made other than those expressly set
forth herein, and that you have not relied on any other representations in
executing this Agreement and General Release. This Agreement and General Release
may be modified only in a document signed by the parties and referring
specifically hereto.

 

Sincerely yours,

 

WellPoint, Inc.

 

[Name]

[Title]

 

A-3

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ACKNOWLEDGMENT

 

I AGREE TO THE TERMS AND CONDITIONS SPECIFIED IN THIS AGREEMENT AND GENERAL
RELEASE, AND I INTEND TO RELEASE ALL CLAIMS THAT I MAY HAVE AGAINST WELLPOINT,
ANY WELLPOINT ENTITIES AND ANY WELLPOINT OFFICIALS. I UNDERSTAND THAT THIS
AGREEMENT AND GENERAL RELEASE CREATES A TOTAL AND UNLIMITED RELEASE OF ALL
CLAIMS, WHETHER KNOWN OR UNKNOWN, THAT I MAY HAVE EXISTING AS OF THIS DATE
AGAINST WELLPOINT, ANY WELLPOINT ENTITIES AND ANY WELLPOINT OFFICIALS.

 

I HAVE HAD AMPLE TIME TO REVIEW THIS AGREEMENT AND GENERAL RELEASE AND TO
CONSIDER MY GENERAL RELEASE OF ALL CLAIMS AS SET FORTH IN THIS AGREEMENT AND
GENERAL RELEASE. I AM SIGNING THIS AGREEMENT AND GENERAL RELEASE KNOWINGLY,
VOLUNTARILY AND WITH FULL UNDERSTANDING OF ITS TERMS AND EFFECTS. I UNDERSTAND
THAT I CAN TAKE AT LEAST TWENTY-ONE (21) DAYS FROM RECEIPT OF THIS AGREEMENT AND
GENERAL RELEASE TO DETERMINE WHETHER I WISH TO SIGN IT, THAT I HAVE BEEN ADVISED
TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING IT, AND THAT I HAVE SEVEN (7) DAYS
FROM THE DATE I SIGN THIS AGREEMENT AND GENERAL RELEASE TO REVOKE IT.

 

I ACKNOWLEDGE THAT I HAVE NOT RELIED ON ANY REPRESENTATIONS OR STATEMENTS NOT
SET FORTH HEREIN. I WILL NOT DISCLOSE THIS AGREEMENT AND GENERAL RELEASE TO
ANYONE EXCEPT TO MY IMMEDIATE FAMILY AND ANY TAX, LEGAL OR OTHER COUNSEL THAT I
HAVE CONSULTED REGARDING THE MEANING OR EFFECT OF THIS AGREEMENT AND GENERAL
RELEASE, EXCEPT AS OTHERWISE REQUIRED BY LAW.

 

In witness hereof, I have executed this Agreement and General Release this     
day of                     , 200    .

 

--------------------------------------------------------------------------------

[Name]

 

STATE OF NEW YORK

   )             :     

ss.:

COUNTY OF                     

   )       

 

On this      day of                     , 200    , before me, a Notary Public of
the State of New York, personally appeared                     , to me known and
known to me to be the person described and who executed the foregoing agreement
and general release and did then and there acknowledge to me that s/he
voluntarily executed the same.

 

--------------------------------------------------------------------------------

Notary Public

 

YOU MUST RETURN THE ENTIRE AGREEMENT AND GENERAL RELEASE

(INCLUDING THIS ACKNOWLEDGMENT PAGE).

 

A-4

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                    , 200    

 

[Name]

[Title]

WellPoint, Inc.

[Address]

[Address]

 

Re:    Agreement and General Release

 

Dear                             :

 

On                     , 200    , I executed an Agreement and General Release
between WellPoint, Inc. and me. I was advised in writing to consult with an
attorney of my choosing prior to signing the Agreement and General Release.

 

At least seven (7) days have elapsed since I executed the above-mentioned
Agreement and General Release, and I have not revoked my acceptance or execution
thereof. I hereby request that WellPoint, Inc. provide me with the Change in
Control Payment described in that Agreement and General Release.

 

Very truly yours,

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