Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.06    
  

 
  RIGHTCHOICE MANAGED CARE, INC.
  
  
  SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
  As Restated Effective October 10, 2001    
  

 
 

TABLE OF CONTENTS    
  

	 
	Page
	 	 

	1.	Name and Purpose of the Plan	 	1
	

2.	

Definitions	
 	

1
	

3.	

Administration of the Plan	
 	

5
	

4.	

Participation	
 	

6
	

5.	

Benefits	
 	

6
	

6.	

Determination of the Company's Obligations	
 	

8
	

7.	

Conditions and Other Matters	
 	

8
	

8.	

Amendment and Termination	
 	

10
	

9.	

Arbitration	
 	

10
	

10.	

Change in Control	
 	

10
	

11.	

Effective Date	
 	

11

RIGHTCHOICE MANAGED CARE, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Restated October 10, 2001  

        WHEREAS, RightCHOICE Managed Care, Inc. (the "Company") maintains the RightCHOICE Managed Care, Inc. Supplemental Executive Retirement Plan
("Plan"); and 

        WHEREAS,
the Company has undergone a restructuring and wishes to amend and restate the Plan to reflect such restructuring; and 

        WHEREAS,
The Company desires to amend certain other provisions of the Plan; 

        NOW,
THEREFORE, the Company does hereby amend and restate the Plan in its entirety, effective as of October 10, 2001, so that it will read as follows: 

	1.
	Name and Purpose of the Plan

        The
purpose of the Plan is to assist the Company in attracting and retaining key employees in order to further the long-term growth and enhance the performance of the Company
by providing them with retirement benefits which they may not be able to receive from the Pension Plan, or because of the limitations provided in Sections 401(a)(17) and 415(b) and (d) of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"), or because the individual does not have 20 years of service in the Pension Plan. 

	2.
	Definitions

	(a)
	"Affiliate"
means any corporation which together with the Company is a member of a "controlled group" of corporations within the meaning of Sections 414(b) and (c) of the Code
and which has adopted this Plan pursuant to the written consent of the Board.

	(b)
	Except
as otherwise provided in Section 10 of the Plan, "Actuarial Equivalent" means a benefit having the same value as the benefit which it replaces, using the following
factors:

	(i)
	for
purpose of determining the single life annuity under Section 2(u) below, the interest rate and the mortality table shall be determined by the actuary selected by the
Committee;

	(ii)
	for
purpose of determining the single sum payment under Section 5(a), 5(b) (i) and 5(c)(iii), the interest rate and the mortality table shall be determined by the
actuary selected by the Committee; and

	(iii)
	for
all other purposes, the actuarial factors shall be those as provided in the Pension Plan. 

	(c)
	"Beneficiary"
means the person or persons designated by a Participant as his surviving beneficiary(ies) on a beneficiary designation form in effect at the time of the Participant's
death, if any, or if no beneficiary designation form is in effect at the time of the Participant's death, the Participant's spouse, or if none, the legal representative for the Participant's estate. A
beneficiary designation form shall be in effect when it is completed and executed by the Participant and received by the Committee. Thereafter a Participant may change a Beneficiary by completing and
executing a new Beneficiary designation form and submitting it to the Committee.

	(d)
	"Board"
means the Board of Directors of the Company, as it may be constituted from time to time.

	(e)
	"Change
in Control" means the happening of any of the following events:

	(i)
	the
acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock of the Company or the 

 

combined
voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by
(A) the Company or any of its Subsidiaries, or (B) any employee benefit plan (or related trust) of the Company
or its Subsidiaries, or (C) any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were of the beneficial owners, respectively, of the Common Stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common Stock of the Company or the combined voting power
of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, as the case may be; 

	(ii)
	individuals
who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board,
provided that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);

	(iii)
	consummation
of (a) a reorganization, merger or consolidation of the Company, in each case, with respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners o the Common Stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation or (b) the sale,
lease, exchange, or other disposition of all or substantially all of the assets of the Company to any other corporation or entity (except a subsidiary or parent corporation as defined in
Section 424 of the Internal Revenue Code of 1986);

	(iv)
	approval
by the stockholders of the Company of a complete liquidation or dissolution of the Company; or

	(v)
	the
Company ceases to have its Common Stock listed on a nationally recognized stock exchange or quoted on the Nasdaq National Market) (or any successor quotation system). 

        For
purposes of this Section 2(e), the term "Subsidiary" means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or
indirectly, a proprietary interest of 50% or more by reason of stock ownership or otherwise. 

	(f)
	"Code"
means the Internal Revenue Code of 1986, as amended from time to time.

	(g)
	"'Committee"
or "Retirement Committee" means the committee appointed pursuant to Section 3(a) of the Plan. 

2

 

	(h)
	"Company"
means RightCHOICE Managed Care, Inc., a Delaware corporation, or any other company that hereafter adopts this Plan and agrees to become obligated to provide benefits
hereunder.

	(i)
	"Employee"
means any person employed by the Company or an Affiliate who is in a select group of management or highly compensated employees within the meaning of ERISA.

	(j)
	"ERISA"
means the Employee Retirement Income Security Act of 1974, as amended from time to time.

	(k)
	"Executive
Deferred Compensation Plan" means the Company's Executive Deferred Compensation Plan, as amended from time to time.

	(l)
	"Final
Average Earnings" means a Participant's Final Average Earnings as defined in the Pension Plan disregarding any limitation thereto under Code Section 401(a)(17) and
including any amounts that were contributed by such Participant to the Executive Deferred Compensation Plan; provided, however, that for purposes of calculating Final Average Earnings under this Plan,
accelerated bonus payments made in December 2001 for the 2001 year will be treated as earnings received in 2002.

	(m)
	"Joint
and Contingent Benefit" shall mean the Actuarial Equivalent of the Supplemental Benefit and shall be payable in the form of a life annuity to the Participant with a death
benefit in the form of a lump sum payment payable to the participant's Beneficiary upon the Participant's death. The death benefit shall be equal to the Actuarial Equivalent of a monthly payment of
50% of the monthly payment being paid to the Participant during his life (or if the Participant death occurred before payment began, the monthly payment the Participant would have been entitled to if
he had retired and began receiving benefits hereunder on the day before his death) for the life of a beneficiary the same age and the opposite sex as the Participant. The Actuarial Equivalent of such
amount shall be payable in the form of a lump sum payment to the Participant's Beneficiary, as soon as practicable following the Participant's death.

	(n)
	"Normal
Retirement Age" means Normal Retirement Age as defined in the Pension Plan.

	(o)
	"Participant"
means an Employee who has qualified for participation in the Plan in accordance with Section 4, hereof, and whose active participation has not been terminated.

	(p)
	"Pension
Plan" means the Non-Contributory Retirement Program maintained by the Company and any of its Affiliates, as amended from time to time.

	(q)
	"Plan"
means this Supplemental Executive Retirement Plan, as amended from time to time.

	(r)
	"Plan
Year" or "Plan Years" means the calendar year.

	(s)
	"Prior
Pension Programs" means any qualified retirement program, other than the Pension Plan, that a Participant or former Participant has participated in and for which such
participation is included as Years of Prior Service under this Plan.

	(t)
	"Savings
Program" means the 401(k) Savings Program maintained by the Company and any of its Affiliates, as amended from time to time.

	(u)
	"Secretary"
means the secretary of the Committee as selected in accordance with Section 3(c).

	(v)
	"Supplemental
Benefit" means an annual amount, payable in monthly installments to the Participant over his life commencing on the first day of the first month coincident with or next 

3

 

following
the day the Participant attains Normal Retirement Age, equal to (i) minus (ii), where: 

	(i)
	is
equal to the product of 2.5% multiplied by the Participant's Final Average Earnings multiplied by the Participant's Years of Credited Service (up to a maximum of 20 Years of
Credited Service), and

	(ii)
	is
equal to the sum of (A), (B) and (C) where:

	(A)
	is
equal to the Participant's normal retirement benefit under the Pension Plan and any employer paid benefits accrued by or payable to or on behalf of the Participant under a Prior
Pension Program which relate to service with any employer by the Participant that is included in such Participant's Years of Prior Service, hereunder, payable in the form of a single life annuity,
determined without regard to any early retirement factors or benefit options elected;

	(B)
	is
equal to the annual amount, payable in the form of a single life annuity, which is payable at Normal Retirement Age and is the Actuarial Equivalent of the balance (increased by the
amount of any prior distribution) in the Participant's deferral account under the Executive Deferred Compensation Plan attributable to Company contributions made pursuant to the Executive Deferred
Compensation Plan and the Prior Plan (as defined in the Executive Deferred Compensation Plan), and

	(C)
	is
equal to the annual amount, payable in the form of a single life annuity, which is the Actuarial Equivalent of any prior amounts (not included in Subsection (A), above) received
under this Plan or the Pension Plan or any employer paid benefits received under any Prior Pension Programs which relate to service by the Participant that is included in such Participant's Years of
Prior Service, hereunder. 

        Notwithstanding
the foregoing, in no event shall a Participant's benefit be less than the benefit that would have been provided under the terms of this Plan in effect on July 31,
1994, determined as if the Participant had a termination of employment an such date. 

	(w)
	"Trust"
or "Trust Agreement" means the irrevocable Trust Agreement established by the Company for the purpose of providing benefits under this Plan, the assets of which remain subject
to the claims of general creditors in the event of the Company's insolvency.

	(x)
	"Years
of Credited Service" means the sum of (i) the aggregate number of the Participant's Years of Prior Vested Service, and (ii) the aggregate number of the
Participant's Years of Plan Service as determined by the Committee.

	(y)
	"Years
of Plan Service" shall mean "Years of Plans and Association Service" as such term is defined and credited under the Pension Plan for Plan Years beginning on or after the later
of the Participant's employment with the Company or January 1, 1994.

	(z)
	"Years
of Prior Service" shall mean the years of service, including, in some situations, service with other employers, credited by the Committee to a Participant for service before
the later of the Participant's employment by the Company or January 1, 1994 for benefit accrual purposes, as set forth on Appendix B, attached hereto.

	(aa)
	"Years
of Prior Vested Service" shall mean for a Participant, as of December 31, 1993, the greater of (i) or (ii), where:

	(i)
	is
equal to 50% of the Participant's Years of Prior Service as of December 31, 1993, and

	(ii)
	is
equal to the lesser of (A) the Participant's Years of Prior Service as of December 31, 1993; or (B) 5 Years of Prior Service. 

4

 

        Notwithstanding
the above, if a Participant meets one of the following while a Participant in the Plan, then, the Participant's Years of Prior Vested Service shall be equal to the
Participant's Years of Prior Service: 

	(iii)
	the
Participant is a Senior Vice-President or higher of the Company, has attained the age of 55, and has a combination of Years of Prior Service and Years of Plan
Service equal to or greater than 20;

	(iv)
	the
Participant has attained the age of 62 and has a combination of Years of Prior Service and Years of Plan Service equal to or greater than 20; or

	(v)
	the
Participant attains the age of 65. 

	3.
	Administration of the Plan

	(a)
	Committee. The Committee shall consist of at least three (3) persons who shall serve at the pleasure of the Board. Any
individual member of the Committee may, but need not, be: (i) a member of the Board or of any committee of the Board having responsibility for the compensation of any Employee; and/or
(ii) an Employee. Vacancies in the membership of the Committee shall be filled only by action of the Board. A member of the Committee may be eligible for participation in the Plan while serving
as such member but shall not vote on, or otherwise participate in the consideration of, any matter specifically relating to the benefits of such member under the Plan.

	(b)
	Committee Advisors. The Committee, in its sole discretion, may select and appoint not more than five (5) individuals to be
Committee Advisors. Any Committee Advisor shall be an Employee and may, but need not, be a Participant and/or a member of the Board or of any committee of the Board having responsibility for the
compensation of any Employee. A Committee Advisor may attend Committee meetings, participate in Committee business, and otherwise advise and assist the Committee but shall not be entitled to vote and
shall not be a member of the Committee.

	(c)
	Administration by Committee. The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee
shall have sole discretionary authority to:

	(i)
	Interpret
the Plan,

	(ii)
	Determine
eligibility and level of participation,

	(iii)
	Create
and revise rules and procedures for the administration of the Plan,

	(iv)
	Employ
or retain such persons (including independent accountants, attorneys and actuaries) as it may deem necessary or appropriate to assist it in the proper administration of the
Plan,

	(v)
	Take
any other actions and make other determinations as it may deem necessary and proper for the administration of the Plan, provided that no such action or determination shall
adversely affect the rights of any Participant that have accrued, or may in the future accrue, under this Plan, and

	(vi)
	Direct
the trustee of the Trust to distribute the Participants' benefits pursuant to the Trust Agreement. 

        Decisions
and determinations by the Committee shall be final and binding upon all persons and shall be made by majority vote of the Committee. All decisions and determinations of the
Committee shall be reflected in permanent records of Committee actions recorded and maintained by the Secretary of the Committee. The Secretary shall be a member of the Committee, or a Committee
Advisor, who is designated as such by vote of the Committee. Determinations and decisions by the Committee shall be 

5

 

made at meetings at which a majority of the members are present or, in the alternative, by unanimous written consent. Notwithstanding anything to the contrary in the Plan, the Board shall also have
all power and authority to perform any act granted to the Committee pursuant to the Plan. 

	4.
	Participation

	(a)
	Appendix A Participants. Effective August 1, 1994, the Participants in the Plan shall be those individuals listed in
Appendix A. The Committee in its sole discretion may amend Appendix A at any time to add an individual's name to or to delete an individual's name, provided, however, no deletion of an
individual's name from Appendix A shall, without the consent of a Participant, adversely affect the rights of that Participant to the benefits that have accrued under this Plan before such
deletion. Notice of any addition or deletion shall be given in writing to the affected Participant. Each Participant listed in Appendix A shall be entitled to benefits as provided in
Section 5(b) of the Plan.

	(b)
	Appendix C Participants. In lieu of adding an Employee's name to Appendix A, the Board in its sole discretion may add
such Employee's name to Appendix C. The Committee in its sole discretion may amend Appendix C at any time to add other Employees' names or to delete an individual's name; provided,
however, no deletion of a Participant's name from Appendix C shall, without the consent of such Participant, adversely affect the rights of that Participant to the benefits that have accrued
under this Plan before such deletion. Notice of any addition or deletion shall be given in writing to the affected Participant. Each Participant listed in Appendix C shall not be entitled to
benefits as provided in Section 5(b) of the Plan and shall be entitled to benefits as provided in Section 5(c) of the Plan.

	(c)
	Notwithstanding
any other provision of the Plan, the Committee, by means of resolution, may agree to vary the terms of the Plan as to any Participant in the Plan; provided, however,
that in no event may any Committee action have the effect of depriving Participants of benefits or rights accrued under the Plan as of the date of such action, including methods of benefit payment. 

	5.
	Benefits

	(a)
	Former Participants. Individuals who were Participants or former Participants in the Plan on July 31, 1994, but who were not
listed on Appendix A or Appendix C as of August 1, 1994, shall no longer be eligible to participate in the Plan. Within 90 days of the execution of this Plan document, the
Committee may, in its discretion pay, or direct the trustee of the Trust to pay, to each such former Participant, in a single sum payment, the Actuarial Equivalent of the benefit the individual would
have been entitled to under the terms of the Plan as in effect on July 31, 1994, determined as if the individual terminated employment on such date (or such earlier date, if the former
Participant previously terminated employment), provided, however, that solely for purposes of determining such single sum amount, any individual who has less than five (5) Years of Credited
Service shall be entitled to a nonforfeitable benefit under this Section 5(a). Otherwise, such accrued benefits will be paid to such former Participant in accordance with the distribution
method specified in Section 5(c). 

6

  

	(b)
	Appendix A Participants. If a Participant is eligible to participate in the Plan under Section 4(a) of the Plan and such
Participant has at least five (5) Years of Credited Service, then the Participant shall be entitled to a Supplemental Benefit. Except as otherwise provided in Section 10, Participant's
Supplemental Benefit shall be paid at the same time and subject to the same actuarial reductions for early payout as the Participant's benefit under the Pension Plan, except in the following
circumstances:

	(i)
	if
upon termination of employment with the Company or participation in the Plan, the Actuarial Equivalent single sum present value of the Participant's Supplemental Benefit does not
exceed $25,000, then the Participant's Supplemental Benefit shall be distributed in a single sum to the Participant, as soon as reasonably practicable following such termination, or

	(ii)
	if
the Participant's Supplemental Benefit is not payable pursuant to paragraph (i) above, then the Actuarial Equivalent of his Supplemental Benefit shall be paid in the form
of a Joint and Contingent Benefit. 

        Except
as otherwise provided in Section 10, in the event a Participant terminates employment with the Company or an Affiliate prior to completing five (5) Years of Credited
Service, the Participant shall forfeit his Supplemental Benefit. 

	(c)
	Appendix C Participants. If a Participant is eligible to participate in the Plan under Section 4(b) of the Plan and such
Participant has at least five (5) Years of Credited Service, then the Participant shall be entitled to the benefit described in this Section 5(c). The benefit provided under this
Section 5(c) shall be an annual amount, payable in monthly installments to the Participant over his life commencing on the first day of the first month coincident with or next following the day
the Participant attains Normal Retirement Age, equal to (i) minus (ii), where:

	(i)
	is
equal to the Participant's normal retirement benefit under the Pension Plan and any employer-paid benefits accrued by or payable to or on behalf of the Participant
under a Prior Pension Program which relate to service with any employer by the Participant that is included in such participant's Years of Prior Service, hereunder, payable in the form of a single
life annuity, and determined: (A) without regard to any early retirement factors or benefit option elected, and (B) without regard to the limitations provided in Sections 401(a)(17) and
415(b) and (e) of the Code with respect to such normal retirement benefit, and (c) taking into account amounts that were contributed by such Participant to the Executive Deferred
Compensation Plan.

	(ii)
	is
equal to the normal retirement benefit computed in (i) above, but: (A) taking into account the limitations provided in Sections 401 (a)(17) and 415(b) and
(e) of the Code with respect to such benefit, and (B) without regard to amounts contributed by such Participant to the Executive Deferred Compensation Plan. 

        Except
as otherwise provided in Section 10, Participant's benefit under this Section 5(c) shall be paid at the same time and subject to the same actuarial reductions for
early payout as the Participant's benefit under the Pension Plan, except in the following circumstances: 

	(i)
	if
upon termination of employment with the Company or participation in the Plan, the Actuarial Equivalent single sum present value of the Participants benefit under this
Section 5(c) does not exceed $25,000, then the Participant's benefit shall be distributed in a single sum to the Participant, as soon as reasonably practicable following such termination, or 

7

 

	(ii)
	if
the Participant's benefit under this. Section 5(c) is not payable pursuant to paragraph (iii) above, then the Actuarial Equivalent of his benefit shall be paid in
the form of Joint and Contingent Benefit (determined by substituting the phrase "benefit under Section 5(c)" for "Supplemental Benefit" each place it appears in Section 2(l) of the
Plan). 

        Except
as otherwise provided in Section 10, in the event a Participant terminates employment with the Company or an Affiliate prior to completing five (5) Years of Credited
Service, the Participant shall forfeit his benefit under this Section 5(c). 

	(d)
	Effective
as of January 1, 2000, and notwithstanding any other provision of the Plan, the benefit for any Participant under this Section 5 shall be determined by
applying the terms of the Pension Plan and the Prior Pension Programs that implement the limitations of Section 415 by taking into account the repeal of Section 415(e). 

	6.
	Determination of the Company's Obligations

        The
Company or Affiliate may, but is not required to, pay to the Trust established pursuant to Section 7(c), within a reasonable time, those amounts necessary to fund the benefits
under Section 5 of this Plan. Those amounts attributable to Section 5(b) and 5(c) of the Plan shall be determined according to the actuarial assumptions computed and maintained in
accordance with this Plan and the
Pension Plan, as designated hereunder. Notwithstanding any distributions from the Trust to general creditors of the Company or Affiliate (not including the Participant), the Participant shall have a
contract right to benefits provided under Section 5 of the Plan. 

        All
benefits may be paid from the Trust assets; provided, however, that the liability of the Company or Affiliate to pay the benefits provided under this Plan shall not be relieved to
the extent the application of Trust assets fails to satisfy such liability. 

	7.
	Conditions and Other Matters

	(a)
	Any
amounts payable under the Plan shall not be subject in any way to alienation, sale, transfer, assignment, pledge, attachment, garnishment, execution or encumbrance of any kind;
and any attempt to accomplish same shall be void, except as provided for in subsection (c) below.

	(b)
	Participation
in the Plan does not give any person any reason to be retained in the service of the Company or Affiliate. The right and power of the Company or Affiliate to terminate
any Employee "at will" is expressly reserved.

	(c)
	The
Company has established an irrevocable trust fund (the Trust) through which assets to satisfy its obligations under this Plan may be set aside to aid in providing for benefit
payments to the Participants. Any assets or property held by the Trust shall continue to be subject to the claims of the general creditors of the Company or Affiliate only upon the insolvency or
bankruptcy of the Company or Affiliate as provided therein. No person other than the Company or Affiliate shall, by virtue of the provisions of this Plan, have any interest in such funds except to the
extent that any person, including the Participant, acquires the right to receive payments from the Plan, such right being no greater than the right of any unsecured general creditor of the Company or
Affiliate.

	(d)
	Any
amount deferred and/or payable under this Plan shall not be deemed salary or other compensation to the Participant for the purpose of computing benefits to which such Participant
may be entitled under any other plan or other arrangement of the Company or Affiliate for the benefit of Employees, except as may be otherwise specified in such plan or arrangement. 

8

 

	(e)
	No
Employee or other person shall have any claim or right to become a Participant under the Plan; nor shall any Participant have a right to receive payment of any amount under the
Plan in any form or manner other than as stated herein.

	(f)
	The
Company or Affiliate shall have the right to deduct from payment of any amount under the Plan any taxes required by law to be withheld from a Participant or Beneficiary with
respect to such payment.

	(g)
	Whenever
possible, each provision of this Plan shall be interpreted in such manner as to be effective and valid under applicable law (including the Code), but if any provision of this
Plan shall be held to be prohibited by or invalid under applicable law, then (i) such provision shall be deemed amended to, and to have contained from the outset such language as shall be
necessary to, accomplish the objectives of the provision as originally written to the fullest extent permitted by law, and (ii) any other provisions of this Plan shall remain in full force and
effect.

	(h)
	No
rule of strict construction shall be applied against the Company, an Affiliate, the Committee, the Board or any other person in the interpretation of any terms of this Plan or any
rule or procedure established by the Committee.

	(i)
	Whenever,
in the Committee's opinion, any person entitled to receive any payment is under a legal disability, or is incapacitated in any way, so as to be unable to manage his
financial affairs, the Company or Affiliate, at its discretion, may make such payment for the benefit of such person to his legal representative, or to a relative or friend of such person for his
benefit, or it may apply the payment for the benefit of such person in any manner it deems advisable. When the Company or Affiliate makes any payment pursuant to this subsection, it shall be
considered as a complete discharge of any liability for the making of such payments under the Plan.

	(j)
	The
Plan shall be construed according to the laws of the State of Missouri, except to the extent superseded by applicable federal laws.

	(k)
	All
notices to the Company or the Committee hereunder shall be delivered to the attention of the Secretary of the Committee. Any notice or filing required or permitted to be given to
the Committee or the Company under this Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Company or the Committee, as appropriate, at the
principal office of the Company. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or
certification.

	(l)
	Where
the context admits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular, and the singular shall include the
plural.

	(m)
	The
captions of Sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

	(n)
	Any
action required or permitted by the Company under the Plan shall be by resolution of its Board or any person or persons authorized by resolution of its Board.

	(o)
	The
provisions of the Plan shall bind and inure to the benefit of the Company and Affiliates and their successors and assigns. The term "successors" as used herein shall include any
corporation or other business entity which shall, by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Company or Affiliate and
successors of any such corporation or other business entity. 

9

 

	(p)
	Any
and all payments made to the Trust pursuant to the Plan shall be made only from the general assets of the Company. Any accounts maintained under the Plan shall be for bookkeeping
purposes only and shall not represent a claim against specific assets of the Company. Except as specifically provided with respect to the Trust, nothing contained in this Plan shall be deemed to
create a trust of any kind or create any fiduciary relationship.

	(q)
	It
is the intention of the Company that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. 

	8.
	Amendment and Termination

        The
Committee retains the right to modify or amend the Plan by means of a resolution duly adopted. The Company retains the right to terminate the Plan upon a resolution approved by the
Board. No modification, amendment or termination shall, without the consent of the Participant, adversely affect the rights of that Participant to the benefits that have accrued under this Plan before
such modification, amendment or termination. Termination of the Plan shall not result in an acceleration of the payment of benefits, which will be paid in accordance with the provisions of the Plan as
of the date of Plan termination. Notice of every such modification, amendment or termination shall be given in writing to each Participant. 

	9.
	Arbitration

        Any
dispute between a Participant and the Company as to the interpretation or application of the provisions of this Plan and the amounts payable hereunder shall be determined by binding
arbitration before a single arbitrator in St. Louis, Missouri in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court of competent jurisdiction. 

	10.
	Change in Control

	(a)
	Vesting. Notwithstanding any other provision of the Plan, upon a Change in Control a Participant will become 100% vested in his benefit
under the Plan.

	(b)
	Lump Sum Distribution. Notwithstanding any other provision of the Plan and subject to paragraph (e) of this Section 10,
within 30 days after a Change in Control, each Participant will complete an election with respect to the method of payment of his benefit under the Plan. Permissible methods of payment include
(i) a Joint and Contingent Benefit, (ii) a lump sum payment payable upon termination of employment, or (iii) a lump sum payment on a specified distribution date that is no earlier
than twelve (12) months after the date of the election. A Participant will be permitted to change any election made pursuant to this Section 10(b) at any time during active employment;
provided, however, that such subsequent election must be made no later than twelve (12) months before the date the Participant was previously scheduled to receive a distribution of his benefit
under the Plan. The newly specified distribution date must be a date no earlier than twelve (12) months after the date of such subsequent election. For purposes of this Section 10, a
lump sum payment will be calculated based on the applicable mortality table and the applicable interest rate described in this Section 10(b). The applicable interest rate shall mean the
applicable interest rate on 30-year Treasury securities for the most recent month preceding the date of distribution for which such rate has been reported by the Internal Revenue Service,
as that rate may be determined during an interim period consistent with Internal Revenue Service Notice 2002-26. Upon amendment of Code Section 417(e) to provide a replacement rate
for 30-year Treasury securities, the substitute rate, determined at the same time, will apply. The applicable mortality table shall mean the mortality table described in Code
Section 417(e)(3) as of the date of the distribution. 

10

 

	(c)
	Additional Credited Service. Notwithstanding any other provision of the Plan, upon a Change in Control, for purposes of calculating
benefits under the Plan and for purposes of determining eligibility for payment of benefits without actuarial reduction, the Chairman and Chief Executive Officer of the Company on October 10,
2001 shall be credited with the number of additional Years of Credited Service, if any, necessary to bring his total Years of Credited Service to twenty (20) and shall be treated as having
attained the greater of (i) age 62, or (ii) his actual age.

	(d)
	Separate Rabbi Trust for CEO. Upon a Change in Control, the Company will establish a separate irrevocable trust for the purpose of
providing to the Chairman and Chief Executive Officer of the Company as of October 10, 2001, the benefits accrued to him under the Plan. The assets of such trust shall remain subject to the
general creditors of the Company in the event of the Company's insolvency.

	(e)
	Limitation on Amount of Benefit Distributed Prior to Termination of Employment. If, pursuant to Section 10(b) of the Plan, a
Participant elects to receive his or her benefit under the Plan on a specified distribution date that occurs prior to his or her termination of employment, such Participant will be deemed to be fully
vested in his or her benefit under the Pension Plan for purposes of determining the amount of the benefit under the Plan to be distributed on such specified distribution date. Any additional benefit
under the Plan that may be due to the Participant upon his or her termination of employment will be paid in a lump payment within thirty (30) days after termination of employment. 

	11.
	Effective Date

        This
restated Plan is effective as of October 10, 2001. The Plan was originally effective as of June 1, 1987. To record the adoption of the restated Plan, the Company has
caused this document to be executed by its duly authorized officer as of this tenth day of October, 2001. 

        THIS
PLAN CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES. 

	 	 	 	RIGHTCHOICE MANAGED CARE, INC.
	Attest:	 	 	 
	 	 	 	 	 
	By:	/s/  ANGELA F. BRALY      
	 	By:	/s/  JOHN A. O'ROURKE      

	 	Angela F. Braly
 Secretary	 	 	John A. O'Rourke
 Chief Executive Officer

11

QuickLinks

Exhibit 10.06

RIGHTCHOICE MANAGED CARE, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN As Restated Effective October 10, 2001

TABLE OF CONTENTSExhibit 10.07  

 [WELLPOINT LETTERHEAD]  

February 4, 2002

John A. O'Rourke

Chairman of the Board and CEO

RightCHOICE, Managed Care, Inc.

Dear John, 

        On
behalf of WellPoint Health Networks Inc. ("WellPoint" or the "Company"), I am delighted to set forth your terms of employment as President, Central Region. You will report to
Leonard D. Schaeffer, Chairman and Chief Executive Officer, WellPoint Health Networks Inc. 

        There
are many challenges ahead if we are to achieve our goals and I hope you find these challenges exciting and the opportunity compelling. We are very enthusiastic about your joining
our team. 

        Your
start date will be the day following the merger date and your starting compensation and benefits for this position will be as follows (subject to the approval of the Compensation
Committee of the Board of Directors): 

	•
	You
will receive an annualized base salary of $645,750, paid bi-weekly, one week in arrears and your annualized base salary will not be reduced
during the term of your employment unless such a reduction is generally applicable to other officers subject to Insider status pursuant to Section 16 of the Securities Exchange Act of 1934. In
addition, you will be eligible for annual merit increases consistent with your performance and WellPoint guidelines used with respect to senior executives of WellPoint.

	•
	You
will be entitled to participate in the Executive Officer Annual Incentive Plan beginning in 2002 with a target bonus award of 55% of salary,
pro-rated for your length of service during the Plan year, and a maximum award of three times target bonus. Your target bonus percentage of 55% of your then
applicable base salary may not be reduced prior to 2005. Under the current program, amounts earned in excess of 150% of target bonus are increased by 15 percent, and are paid in the form of
restricted share rights vesting in three approximately equal annual installments to active participants and to participants who remain eligible as a result of their reason for termination.

	•
	You
will receive an option covering 35,663 shares of WellPoint Common Stock (40,000 less 4,337 representing the WellPoint share equivalent of your
January 2002 RIT grant) under the WellPoint Health Networks Inc. 1999 Stock Incentive Plan. This option will be granted on the same date or dates and under the same terms and conditions
as the stock option grants to our other executive officers for 2002.

	•
	This
option will have a 10 year term (assuming continued service), vest in six approximately equal semi-annual installments, with the
first vesting occurring six months after the grant date; and includes "reload" rights. The option exercise price will be 100% of the closing price of the Company's stock on the latest trading day
prior to the grant date.

	•
	The
option may be intended to qualify as an incentive stock option, up to the maximum allowable under the Internal Revenue Code, with the remainder as a
non-qualified stock option.

	•
	You
will receive a Notice of Grant and a Stock Option Agreement. At that time you will be asked to sign the Notice of Grant and return it within a specified
period of time. Your 

 

option
grant will be subject to the terms and conditions of the 1999 Stock Incentive Plan, the Notice of Grant and the Stock Option Agreement. 

	•
	You
will be eligible for additional stock option grants commensurate with your position in future years.

	•
	You
will be awarded restricted share rights on February 1, 2002 covering seventeen thousand seven hundred fifty-nine (17,759) shares of
WellPoint stock valued at $2,251,841.20 based on a closing market price of $126.80. These shares will vest in three approximately equal annual installments commencing one year from your hire date. If
your employment with WellPoint terminates for any reason prior to vesting, any remaining rights will vest on your termination date, notwithstanding anything to the contrary in the 1999 Stock Incentive
Plan and the Restricted Share Right Grant agreement. At the time of grant, your restricted share rights will be automatically deferred pursuant to WellPoint's
Comprehensive Executive NonQualified Retirement Plan and such shares shall be transferred to you at such time or times as provided in WellPoint's Comprehensive Executive Non-Qualified
Retirement Plan free of any restrictions imposed by the 1999 Stock Incentive Plan or (inclusively) the Restricted Share Right Grant agreement. 

Shortly
after the grant date, you will receive a Restricted Share Right Grant agreement (in the form of the draft agreement provided to you on January 30, 2002). At that time you will be asked
to sign the Grant agreement and return the document to WellPoint HR within a specified period of time. Except as set forth in this letter agreement, your restricted share right grant will be subject
to the terms and conditions of the 1999 Stock Incentive Plan, the Comprehensive Executive Non-Qualified Retirement Plan and the Restricted Share Right Grant agreement. 

	•
	You
will receive a stay-on bonus in the amount of $645,750 on the second anniversary of the merger. This award will be pro-rated if
your employment with WellPoint is terminated pursuant to an Involuntary Termination or Constructive Termination (as defined in WellPoint's Officer Severance Plan) prior to the second anniversary of
the merger and such pro-rated amount will be payable upon such termination.

	•
	February 1,
1985 (your original hire date with HEALTHLINK) will be recognized as your original hire date with WellPoint for vesting and eligibility
purposes for all of our plans and programs to the extent set forth in Section 5.6(b) of the Agreement and Plan of Merger dated as of October 17, 2001 provided however, you will be deemed
to have accrued 20 years of employment as of the merger date for purposes of the RightCHOICE SERP plan.

	•
	You
will be eligible for employee and executive benefits packages which currently include:

	•
	The
WellPoint FlexPoint program (a cafeteria style benefits program)

	•
	Three
times your total target compensation (salary plus target bonus) in executive life insurance

	•
	100%
salary continuation short-term disability benefits for disabilities of up to six months

	•
	A
long-term disability benefit that provides for 70% of salary plus target bonus

	•
	The
Company's 401(k) Plan that includes a match of 75% of your contributions of the first 6% of your eligible compensation, up to Internal Revenue Code
limits

	•
	The
Company's cash balance retirement plan

	•
	A
Deferred Compensation Program which provides for salary, bonus and company car allowance deferral, retirement plan "spillover" benefits, and 401(k)
"spillover" contributions 

2

 

	•
	Retiree
healthcare benefits, consistent with those set forth in Section 5.2(B)(ii) of your current RightCHOICE employment agreement dated
April 4, 2001 and subsequently amended on October 1, 2001 (the "Prior Employment Agreement"), including without limitation the retiree healthcare benefits made available therein to your
spouse

	•
	An
annual pre-tax car allowance of $9,600, paid bi-weekly with your paycheck

	•
	Executive
financial planning and tax preparation assistance provided by AYCO

	•
	First
class air travel if available

	•
	Dues
and membership at Greenbriar Country Club that will continue throughout your term of active service with WellPoint. WellPoint will transfer your capital
account at Greenbriar Country Club to you when your employment with WellPoint is terminated

	•
	An
annual executive physical valued at over $2,000

	•
	Premier
banking services provided by Bank of America

	•
	Pre-negotiated
car purchases as part of the Ford Supplier Recognition Program

	•
	Paid
Time Off (PTO) days with an accrual rate of 27 days per year

	•
	Ten
paid holidays each year, and

	•
	Reimbursement
of all ordinary and necessary business expenses incurred in the performance of your duties subject to your compliance with WellPoint's business
expense policies 

	•
	To
the extent that this is not already provided by RightCHOICE, WellPoint will reimburse your legal fees related to this employment offer.

	•
	You
will continue to accrue benefits and services pursuant to your current RightCHOICE SERP and, as indicated above, you will be deemed to have accrued
20 years of employment as of the merger date under that SERP.

	•
	If
you experience an employment termination that is (a) a Constructive Termination (as defined in WellPoint's present Officer Severance Plan), or
(b) an Involuntary Termination (as defined in WellPoint's present Officer Severance Plan), upon your execution of a general release, you shall be entitled to severance as follows: 

	Termination Date
 
	 	Severance
	 	Comments

	2/1/02—1/31/03	 	Two years salary

Two years bonus	 	Bonus will be greater of target or prior year actual

Eligible for all non-cash benefits per Officer Severance Plan
	2/1/03—1/31/04	 	Twenty months salary

Eighteen months bonus	 	Bonus will be greater of target or prior year actual

Eligible for all non-cash benefits per Officer Severance Plan
	After 1/31/04	 	Fifteen months salary

Twelve months bonus	 	All benefits per Officer Severance Plan

	•
	You
will not be eligible for these severance benefits if you experience an employment termination that is a "Termination for Cause" (as defined in the
Officer Severance Plan). This definition is as follows: "Termination for Cause" means (i) a commission by a Participant of any act of fraud, embezzlement or dishonesty against any member of the
Affiliated Group; (ii) the conviction of a Participant for any criminal offense involving fraud or dishonesty or any similar conduct that is injurious to the reputation of WellPoint or any
member of the Affiliated Group; 

3

 

or
(iii) willful engagement by a Participant in gross misconduct injurious to WellPoint or any member of the Affiliated Group. 

	•
	You
will also be eligible for change in control benefits pursuant to the Officer Change in Control Plan (including that plan's integration of benefits
provisions) at the EVP level, which provides for a basic benefit of 300% of your annual cash compensation, a tax gross-up provision, plus some additional benefits if you are involuntarily
or constructively terminated during the 36 month period subsequent to a change in control.

	•
	If
your employment with WellPoint terminates in a manner that entitles you to a severance or change in control benefit under the prior two paragraphs, you
shall be entitled to executive level outplacement services.

	•
	You
will be entitled to designate a beneficiary to receive any benefits to which you are entitled as of your death for which the Company generally allows
beneficiary designations; to the extent no such beneficiary has been designated, WellPoint will pay such benefits to the personal representative of your estate.

	•
	You
will be entitled to a full tax indemnity and gross-up payment, consistent with the detailed provisions set forth in Section 5.2(D) of
the Prior Employment Agreement (which are hereby incorporated herein by reference except that references therein to RightCHOICE shall include WellPoint and that Ernst and Young will be the "Accounting
Firm" that is to make any necessary calculations and determinations thereunder), in the event any excise taxes (under Sections 280G or 4999 of the Internal Revenue Code of 1986, as amended) are
assessed as a result of any award or payment to which you become entitled from RightCHOICE, WellPoint or an affiliate, successor or assign thereof in connection with the merger of RightCHOICE and
WellPoint. 

        Note
that the sections above are intended to describe the general provisions of the benefits program. Except with respect to the specific provisions relating to the annual bonus, stock
options, restricted share rights and enhanced severance benefits to which you are entitled pursuant to this letter agreement, if there is any discrepancy between this letter agreement and the plan
documents, the provisions of the plan documents will apply. Subject to the specific provisions relating to the stock option award granted in 2002, the restricted share rights awarded on your start
date and enhanced
severance benefits to which you are entitled pursuant to this letter agreement, WellPoint reserves the right to amend or cancel any of our plans in the future, in accordance with any conditions set
out in those plans; provided, however no such amendment or cancellation will be applicable to you if it is not generally applicable to other officers subject to Insider status pursuant to
Section 16 of the Securities Exchange Act of 1934. 

        The
benefits described above are summarized in the enclosures. 

        The
terms of your employment will also include: 

	•
	As
an officer of the Company, you also will be expected to own WellPoint Common Stock in accordance with the WellPoint Stock Ownership Guidelines. The
guidelines provide that, as a President, your guideline is to own at least the number of shares with a market value equivalent to 200 percent of your base salary at the end of five years of
service. The Company currently offers a variety of plans to assist you in meeting your ownership objectives. The restricted stock to which you are entitled to receive pursuant to this letter agreement
in accordance with the terms of the WellPoint Comprehensive Executive Non-Qualified Retirement Plan will qualify for purposes of your meeting these ownership guidelines.

	•
	As
a President, you will be considered an insider subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended. A member
of our Legal Department will provide you with additional information and assistance regarding the applicable filings and procedures. 

4

 

	•
	As
an officer of the Company, you will also be covered by our Insider Trading Policy. This policy generally limits your ability to buy or sell WellPoint
stock at times that are outside our window period. Currently, the window period opens on the third business day after the release of earnings each quarter, and lasts for thirty calendar days. 

        The
Company believes that the employment relationship is based upon the principle of mutual consent. Therefore, both you and the Company will be free to terminate your employment at any
time, with or without cause and with or without notice. While the Company reserves the right to change the other terms, policies, procedures and benefits affecting your employment unless otherwise
prohibited by this letter agreement this "at-will" understanding constitutes the entire agreement concerning this subject and can be altered only by an express written agreement signed by
you and the Compensation Committee of the Board of Directors. 

        Finally,
as an employee of WellPoint Health Networks Inc., you will be subject to the Company's binding arbitration policy, as more fully described in the enclosed Human Resources
Policy #613, Arbitration. 

        By
executing this letter agreement, you agree that this letter agreement, including all documents incorporated by reference herein, constitutes the entire understanding between the
parties with respect to your employment with RightCHOICE, WellPoint or an affiliate and compensation or benefits therefrom, superseding all prior agreements (including, but not limited to, the Prior
Employment Agreement and any other agreement, plans or arrangement under which severance or retention benefits might otherwise be payable to you, (collectively the "Prior Agreements")), written or
oral, concerning said employment, compensation or benefits that are not referenced herein and no representation or statements not incorporated or referred to in this offer letter will be binding on
either party; provided, however, nothing in this letter agreement will be treated as a waiver of your rights to benefits under the RightCHOICE Supplemental Executive Retirement Plan or any other
pension or retirement savings plan. You acknowledge and agree that the amounts payable under this letter agreement shall be in lieu of any payments to which you would have been entitled under the
Prior Agreements, and you expressly waive any entitlement to any payments under the Prior Agreements. 

        In
consideration of (i) your continuing employment and past and future access to confidential, proprietary documents and information of RightCHOICE, WellPoint or an affiliate, and
(ii) the severance and other benefits payable upon a termination of employment with RightCHOICE, WellPoint or an affiliate, you agree to continue to abide by and be bound by (A) the
covenants and agreements set forth in Sections 7-10 of the Prior Employment Agreement and (B) WellPoint's standard agreement of confidentiality; provided that (I) if you
remain employed throughout the two (2) year period following the date hereof, your obligation under (A) of this sentence shall cease at the end of such two (2) year period and
(II) if your employment terminates before the end of such two (2) year period, your obligations under (A) of this sentence shall cease on the later of (1) the date one year
after such termination of employment or (2) the end of the period, if any, for which you are entitled to severance benefits by reason of such termination. 

        This
letter agreement is made and entered into in the State of Missouri and will be construed under the laws of Missouri, without regard to its conflict of laws rules, to the extent not
preempted by Federal law. 

        As
mentioned above, the employment terms and conditions set forth in this letter agreement must be approved by the Compensation Committee of the Board of Directors. Your potential
employment has been discussed with the members of the Compensation Committee and they are eager to act quickly upon these matters and hope you will decide to join us. If the Compensation Committee has
not disapproved this letter agreement by February 15, 2002, the approval of the Compensation Committee will be deemed to have been given and the terms of this letter agreement shall become
operable retroactive to your start date. 

5

 

        If
you have any questions with regard to your position or the content of this letter, please feel free to contact me at (805) 557-5640. 

	Very truly yours,	 	 
	

/s/  J. THOMAS VAN BERKEM      	
 	

 
	

JTVB/pt

Enclosures	
 	

 
	

cc: Leonard D. Schaeffer	
 	

 
	

Agreed and consented to this 4th day of February, 2002:
	

 	

 	

 
	

/s/  JOHN A. O'ROURKE      
 John A. O'Rourke	
 	

 
	

 	
 	

 

6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}]]