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EXHIBIT 10.24
SPECIAL INCENTIVE COMPENSATION AGREEMENT
This Agreement is dated May 24, 1995, and is between Xxxxxx X. Xxxx,
who resides at 00 Xxxxxxxx Xx., Xxxx Xxxxxx XX 00000, (referred to as
"Executive") and CIGNA Corporation, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000, a Delaware corporation (referred to as "CIGNA").
Executive and CIGNA, intending to be legally bound and in consideration
of the promises in this Agreement, mutually agree as follows:
1. DEFINITIONS. The following definitions apply to terms used in this
Agreement:
(a) "ADEA" means the Age Discrimination in Employment Act of 1967, as
amended.
(b) *
(c) "CIGNA Company" and "CIGNA Companies" means CIGNA and/or one or
more of its majority-owned subsidiaries and affiliates.
(d) "CIGNA Severance Plan" means the CIGNA Severance Pay Plan and the CIGNA
Corporation Severance Benefits Plan for Members of the Executive Group.
(e) *
(f) *
(g) *
(h) "Company Information" means any knowledge, information or materials
about any Company products, services, know-how, customers, business
plans, or confidential information about financial, marketing, pricing,
compensation and other proprietary matters relating to a Company,
whether or not subject to trademark, copyright, trade secret or other
protection, whether or not
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*REPRESENTS CONFIDENTIAL INFORMATION THAT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
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developed, devised or otherwise created in whole or in part by the
efforts of the Executive, and whether or not a matter of public
knowledge (unless as a result of authorized disclosure).
(i) *
(j) "Effective Date" means the close of business on the date which is seven
(7) calendar days after the date Executive signs this Agreement.
(k) "INA" means the Insurance Company of North America.
*
(l) "PC Business" means CIGNA's Domestic Property and Casualty operations.
(m) "Phantom Share(s)" means one or more shares of phantom stock described
in the Special Incentive Compensation Program which is Attachment A to
this Agreement.
(n) "Releasees" means CIGNA, its successors, subsidiaries, affiliates,
incorporated and unincorporated, past and present, and each of them, as
well as its and their directors, officers, agents, servants and
employees, past and present, and each of them.
(o) *
(p) "SAR(s)" means one or more stock appreciation rights described in the
Special Incentive Compensation Program which is Attachment A to this
Agreement.
(q) "Suitable Employment" means a job that, solely in the opinion of the
Chief Executive Officer of CIGNA or his designee, is at a level and
breadth of responsibility similar to that of Executive's job with a
CIGNA Company * , without reduction in total compensation opportunity,
and at an office location that does not require the Executive to
relocate his primary residence in a manner that would meet the Internal
Revenue Code requirements for deductibility of moving expenses.
(r) *
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2. EXECUTIVE'S RESPONSIBILITIES.
(a) * Executive will devote his full efforts to:
(1) The responsibilities of his current position or, at the
discretion of the Chief Executive Officer of CIGNA, the
responsibilities of a different position; and
(2) Any additional responsibilities which the Chief Executive
Officer of CIGNA may assign to Executive *
(b) *
3. REGULAR COMPENSATION AND BENEFITS. * Executive will continue to:
(a) receive a base salary, in bi-weekly installments, at an annual rate of
no less than the rate in effect on the date of this Agreement;
(b) be eligible to participate in the regular incentive compensation
programs, such as the Management Incentive Plan, Strategic Performance
Plan and the CIGNA Long Term Incentive Plan, that apply to those
employees in Executive's Salary Grade, in accordance with the terms of
those plans, and to accrue benefits under the Supplemental Pension
Benefit arrangement described in and subject to the provisions of
Attachment B; and
(c) be eligible to participate in CIGNA employee benefit and deferred
compensation plans and fringe benefit programs in accordance with the
terms of those plans and on the same basis as employees of other CIGNA
Companies that participate in those plans, except as provided in
paragraphs 5 and 6 of this Agreement.
4. SPECIAL INCENTIVE COMPENSATION PROGRAM. Executive will be eligible to
participate in the Special Incentive Compensation Program described in
Attachment A to this Agreement.
5. CIGNA SEVERANCE PAY. Executive agrees that, * the benefits and payments under
the Special Incentive Compensation Program shall replace any severance pay
benefits to which Executive might otherwise become entitled under the CIGNA
Severance Plan should his employment with any CIGNA Company * be terminated * .
Accordingly, * , Executive shall have no right to any benefits to which he might
otherwise have become entitled under the CIGNA Severance Plan *.
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6. BENEFITS UPON TERMINATION OF EMPLOYMENT.
(a) Notwithstanding paragraph 5, if:
(1) *
(2) Executive remains employed by a CIGNA Company until * ;
(3) *
(4) Executive's employment with CIGNA Companies is terminated
because * ; and
(5) by signing a written release satisfactory to CIGNA, Executive
releases Releasees from liability for any claims arising, from
and after the date Executive signs this Agreement, out of
Executive's employment with CIGNA Companies and the
termination of that employment;
then CIGNA will provide Executive with the job elimination benefits
listed in subparagraph 6(b). *
(b) If Executive meets the conditions under subparagraph 6(a), CIGNA will
provide him with:
(1) continued Basic Life Insurance Plan coverage for one year
after his termination of employment date at the same rates, if
any, charged to active employees of CIGNA Companies that
participate in the plan;
(2) the opportunity to make a COBRA election for continued group
medical and group dental coverages, for Executive and his
eligible, covered dependents, under the Signature Benefits
program for a period of up to three (3) years following his
termination of employment, subject to the period of coverage
rules under ERISA section 602(2) and the Signature Benefits
program, at the same rates charged to active employees for one
year after Executive's termination of employment date and at
the same rates charged to other persons who have elected COBRA
coverage thereafter;
(3) severance pay in an amount, if any, equal to the excess of (A)
the amount of Basic and Supplemental Severance Pay Executive
would be entitled to receive under the CIGNA Severance Plan
for termination * over (B) the total value of payments and
benefits actually paid to Executive (before any applicable
withholding) under the Special Incentive Compensation Program;
and
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(4) advance payment, in accordance with subparagraph 6(d), of all
or part of the amounts due Executive under the Special
Incentive Compensation Program.
(c) The total value referred to in subparagraph 6(b)(3)(B) shall be the sum
of the Initial Payment, Second Payment, Final Payment, Vesting Date SAR
Values, Vested Option Spread and CSAR cash payments under the Special
Incentive Compensation Program.
(d) CIGNA will make the advance payments under subparagraph 6(b)(4) to
Executive in biweekly installments beginning immediately after the date
of Executive's termination of employment. Each installment payment will
equal Executive's annual base salary rate in effect immediately before
his termination of employment divided by twenty-six (26). These
biweekly payments shall continue until the earlier of (1) the date the
twenty-sixth (26th) installment payment has been made or (2) the date
the total accumulated installment payments equal one million five
hundred and twenty-two thousand and two hundred and fifty dollars
($1,522,250) (which is the value of 4,030 restricted shares plus 10,000
Phantom Shares at seventy-five dollars ($75.00) per share and 47,000
SARs at ten dollars ($10.00) per SAR). Any remaining amounts due
Executive under the Special Incentive Compensation Program and any
severance pay that might be due to Executive under subparagraph
6(b)(3), after the biweekly advances have been made under this
subparagraph 6(d), will be paid in a lump sum * .
7. PAYMENTS AFTER EXECUTIVE'S DEATH. If Executive dies after his termination of
employment, but before payment of all amounts due under subparagraphs 6(b)(3)
and (4), CIGNA will make any remaining payments to Executive's surviving spouse
or, if he has no surviving spouse, to his estate.
8. RELEASE AND WAIVER OF CLAIMS. Executive, for himself, his executors,
administrators, heirs and assigns:
(a) agrees that no charge, complaint, claim or lawsuit of any kind will be
filed against Releasees in connection with any claim released by this
Agreement; and
(b) acknowledges full and complete satisfaction of, and releases and
discharges Releasees from, any and all claims, demands and causes of
action of whatever kind or nature, whether known or unknown to or
suspected or unsuspected by Executive, which Executive now owns or
holds or has at any time owned
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or held against any Releasees arising out of or by reason of
Executive's employment with any CIGNA Company.
This release includes but is not limited to claims under ADEA. This release
shall not, however, preclude Executive's right to pursue any claims arising (1)
under this Agreement and the Special Incentive Compensation Program or (2) under
any employee benefit programs other than the CIGNA Severance Plan (which plan is
addressed by paragraph 5 of this Agreement).
9. NON-DISCLOSURE.
(a) Executive shall not use for his own benefit (or for the benefit of any
other person or entity unrelated to a CIGNA Company), and shall not,
without the advance, express, written consent of the Chief Executive
Officer of CIGNA or his designee, make known to any person, any
information about: * or the provisions of this Agreement.
(b) Executive shall not at any time during or after the term of his
employment with a Company (other than in the good faith performance of
the duties and responsibilities of his position with that Company)
reveal or make known to any person (other than the Company) or use for
his own benefit (or for the benefit of any other person or entity
unrelated to the Company) any Company Information made known (whether
or not with the knowledge and permission of the Company) to Executive
by reason of his employment by a Company; provided however, that after
such knowledge, information and materials have become public knowledge,
Executive shall have no further obligation under this paragraph 9(b)
with respect to such information so long as Executive was in no manner
responsible, directly or indirectly, for causing or permitting such
information to become public knowledge without the consent of the
Company.
(c) Executive shall retain all Company Information which he may acquire or
develop during the term of his employment with a Company in trust for
the sole benefit of that Company.
10. COVENANT TO REPORT. All written materials, records and documents made
by Executive or coming into his possession during the term of his employment
with a Company and concerning the business or affairs of any Company shall be
and remain the property of that Company and, upon the termination of Executive's
employment with the Company or upon the request of the Company, Executive shall
promptly deliver such materials to the requesting Company. Executive agrees to
render to the applicable Company such reports of the activities undertaken by
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Executive or conducted under Executive's direction during the term of his
employment as the Company may request.
11. COVENANT NOT TO COMPETE.
(a) Executive agrees that, from the date he signs this Agreement until * ,
he will not, within any part of the United States where any Company is
either engaged in the property and casualty insurance business and
related businesses or has, within the twelve (12) month period before *
, been actively planning to engage in such businesses:
(1) engage directly or indirectly, in any capacity (including but
not limited to owner, sole proprietor, partner, shareholder
(unless his holding is for investment purposes only and is
limited to less than 1% of the total combined voting power of
all shares), employee, agent, consultant, officer or director)
in any business which competes with the PC Business;
(2) solicit or attempt to solicit any customers of the PC Business
on behalf of such competing business, without prior written
consent of the Chief Executive Officer of CIGNA or his
designee * ; or
(3) employ, engage for hire, solicit the employment or engagement
for hire, or otherwise attempt to employ or engage for hire,
by or on behalf of any such competing business, without the
prior written consent of the Chief Executive Officer of CIGNA
or his designee * , any person who within the prior twelve
(12) month period has been an officer or employee of any
company engaged in the PC Business, unless such officer or
employee has been involuntarily terminated by that company.
(b) The provisions of subparagraph 11(a) will be of no force or effect if
Executive's employment is terminated and:
(1) The termination is a Termination upon a Change of Control, as
defined in the CIGNA Corporation Severance Benefits Plan for
Members of the Executive Group, and * ;
(2) * ; or
(3) The termination is initiated by CIGNA Companies * ; however,
this subparagraph 11(b)(3) shall not apply if the termination
is either (A) on account of the Executive's misconduct, as
described in published
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Company statements of policies governing employees' conduct,
or (B) pursuant to a written severance agreement that does not
explicitly terminate Executive's obligations under
subparagraph 11(a) of this Agreement.
12. JUDICIAL REMEDIES.
(a) Executive acknowledges that an affected Company will have no adequate
remedy at law if Executive violates the terms of paragraphs 9, 10 or
11. In such event, CIGNA, * shall have the right, in addition to any
other rights it may have, to obtain in any court of competent
jurisdiction injunctive relief to restrain any breach or threatened
breach of specific performance of this Agreement.
(b) If the scope of the restrictions on the Executive under paragraph 11
are found by a court of competent jurisdiction to be unreasonably broad
and unenforceable, it is the intent of the parties that the court not
void the restrictions but reformulate them so they are reasonable and
enforceable, while adhering as closely as possible to the original
scope of the restrictions.
13. RECOVERY. If the Executive violates any of the provisions of paragraphs
9, 10 or 11:
(a) CIGNA shall have no obligation to pay Executive (or Executive's
surviving spouse) any amounts described in the Special Incentive
Compensation Program or in paragraph 6 of the Agreement; and
(b) If Executive has already received any values, benefits or payments
under the Special Incentive Compensation Program or under paragraph 6
of the Agreement, Executive agrees that the amount of such values,
benefits or payments shall be repaid to CIGNA as follows:
(1) CIGNA shall immediately offset such amounts from any payments
which may still be owing to the Executive, including any
payments under any nonqualified deferred compensation or
supplemental pension arrangement; and
(2) If such offset is insufficient, Executive agrees to repay any
remaining amounts to CIGNA within thirty (30) days of receipt
of CIGNA's written demand for such repayment. If CIGNA must
commence any arbitration or other legal action to enforce
Executive's obligations under this
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subparagraph 13(b), Executive further agrees to pay CIGNA its
costs and attorneys' fees in such action.
14. LIMITED SCOPE. This Agreement is not a contract of employment for any
specified term, and nothing herein is intended to, nor shall be construed as,
changing the nature of Executive's employment from an at-will relationship. This
Agreement is limited to the terms and conditions set forth herein and does not
otherwise address any of the other rights of any CIGNA Company as Executive's
employer.
15. CHOICE OF LAW. The Agreement is made and entered into in the Commonwealth of
Pennsylvania, and at all times and for all purposes shall be interpreted,
enforced and governed under its laws.
16. ARBITRATION. Without in any way affecting the terms of paragraph 12 above,
it is agreed that any controversy or claim arising out of or relating to this
Agreement or the Special Incentive Compensation Program shall be settled
exclusively by arbitration in Philadelphia, Pennsylvania, in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof.
17. SEVERANCE PLAN. References in this Agreement to the CIGNA Severance Plan
shall mean such plan(s) as amended through the Effective Date of this Agreement,
and shall not mean any subsequent versions of such plan, or any successor plan,
unless the Executive agrees in writing that such subsequent version or successor
shall be applicable.
18. SUCCESSORS. CIGNA's rights and obligations under this Agreement will inure
to the benefit of and be binding upon CIGNA's successors and assigns. Executive
may not assign any rights or obligations under this Agreement.
19. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
Executive and CIGNA with respect to the matters addressed herein and fully
replaces and supersedes any and all prior agreements or understandings between
them related to such matters. Any amendment to this Agreement must be in writing
and signed by both CIGNA and Executive.
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20. EXECUTIVE'S ACKNOWLEDGMENT. By signing this Agreement, Executive admits that
he:
(a) has read this Agreement;
(b) understands it is a legally binding agreement and that he was advised
to review it with legal counsel of his choice;
(c) has had, or has had the opportunity to take, at least twenty-one (21)
days to discuss it with legal counsel of his choice before signing; and
that if he signs before the end of such period, he does so of his own
free will and with the full knowledge that he could have taken the full
period;
(d) realizes and understands that it applies to and covers all claims,
demands, and causes of action, including those under ADEA, against
CIGNA or Releasees or any of them, whether or not Executive knows or
suspects them to exist at the present time; and
(e) understands (1) the terms of this Agreement, (2) that it is not part of
an exit incentive or other employment termination program being offered
to a group or class of employees, and (3) that his/her signing this
Agreement is done voluntarily and with the full understanding of its
consequences and has not been forced or coerced in any way.
In addition, Executive understands and acknowledges * that Executive will not be
entitled to any payments or benefits under any CIGNA Company plans or programs
that become payable or available * .
21. CANCELLATION PERIOD. Executive shall have a period of seven (7) days from
the date he signs this Agreement to revoke and cancel it. Any revocation and
cancellation must be in writing, signed by Executive and received by Xxxxxxx
Xxxxxxx, Corporate Compensation, One Liberty Place OLP-53, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, before the close of business on the
seventh (7th) calendar day following the date Executive signs this Agreement.
Consequently, the Agreement shall have no force and effect until the Effective
Date.
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IN WITNESS WHEREOF, the persons named below have signed this Agreement
and Release on the dates shown below.
CIGNA Corporation
12-18-95 /s/ X.X. Xxxxxx
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Date By: Xxxxxx X. Xxxxxx
President and Chief Executive Officer
9-29-95 /s/ G.A. Xxxx
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Date Xxxxxx X. Xxxx
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ATTACHMENT A
SPECIAL INCENTIVE COMPENSATION PROGRAM
FOR XXXXXX X. XXXX
A. GENERAL. To the extent that the conditions described in your Special
Incentive Compensation Agreement (the "Agreement") are met, CIGNA will pay you
special incentive compensation, made up of several different parts, including
the Share Value (see paragraph B). The Share Value comes from Restricted Stock
granted to you * and Phantom Shares granted to you under this Program. See
paragraph G. See paragraphs H and I for other benefits available under the
Program.
The total amount of incentive compensation available under the Program has no
upper limit and is directly related to the value realized by CIGNA shareholders
over time. *
Therefore, if the conditions under the Agreement are met, CIGNA will provide,
as described below, a minimum Share Value of $75.00 per share, and a minimum SAR
value of $10.00 per SAR.
CIGNA will pay you the Share Value in three installments: *
See paragraphs C through F. Paragraph K contains some key definitions that
apply to the Program.
B. SHARE VALUE.
1. "Share Value" means the total value of:
a. All the shares of Restricted Stock which you own * ;
and
b. All the Phantom Shares granted to you under paragraph
G below.
2. " * Share Value" means the sum of:
(a) The number of shares of Restricted Stock which you
own * multiplied by the higher of (1) the Fair Market
Value * or (2) $75.00; and
(b) The number of Phantom Shares granted to you under
paragraph G multiplied by $75.00.
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C. PAYMENT TARGETS. The Share Value will be paid in three installments, and each
installment will approximate a target amount.
1. The "Initial Payment Target" will be 50% of the * Share Value.
2. The "Second Payment Target" will be:
(a) 25% of the * Share Value; plus
(b) 50% of the number of Phantom Shares granted to you
under paragraph G multiplied by any amount by which
the Market Closing Price * exceeds $75.00.
3. The "Final Payment Target" will be:
(a) 25% of the * Share Value; plus
(b) 50% of the number of Phantom Shares granted to you
under paragraph G multiplied by any amount by which
the Market Closing Price * exceeds $75.00.
D. INITIAL PAYMENT. If you * employed by a CIGNA Company * and meet the other
requirements of the Agreement, then CIGNA will give you the first installment of
Share Value. This Initial Payment will be equal to the Initial Payment Target
and will be made as follows.
1. Restricted Stock Vesting.
(a) Effective as of * a number (see paragraph D.1(c)) of
the shares of Restricted Stock that you then own will
become vested and nonforfeitable (that is, the shares
will vest early). These shares are "Vested Shares."
(b) To ensure that the per share value you receive from
the Vested Shares is no less than $75.00, * CIGNA
will make a cash payment to you equal to the number
of Vested Shares under paragraph D.1(a) multiplied by
any amount by which the Fair Market Value * is less
than $75.00.
(c) The number of shares of Restricted Stock that become
Vested Shares will be the highest number of shares
that you have so long as the * Vested Share Value
(see paragraph K.1) does not exceed the Initial
Payment Target.
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(d) If you have any shares of Restricted Stock that do
not become Vested Shares under paragraph D.1(a), they
will be forfeited * . However, you will immediately
receive one Class B Phantom Share (see paragraph G)
for each share of Restricted Stock which you forfeit.
2. Initial Target Shortfall.
(a) If there is an Initial Target Shortfall (see
paragraph K.3), some of your Phantom Shares will be
vest early. That is, a number (as calculated under
paragraph D.2(b)) of Phantom Shares granted to you
under paragraph G will vest * instead of a year or
two later. Within 60 days * CIGNA will pay you the
Vesting Date Share Value (see paragraph G.2) of these
early vesting Phantom Shares.
(b) The number of Phantom Shares that vest early under
paragraph D.2(a), if any, will be the highest
possible number so long as the total Vesting Date
Share Value of the early vesting Phantom Shares does
not exceed the Initial Target Shortfall.
E. SECOND PAYMENT. If you are continuously employed * from the date you sign the
Agreement until * and you continue to meet the other requirements of the
Agreement, then CIGNA will give you the second installment of Share Value. This
Second Payment will be equal to the Second Payment Target, will be made within
sixty (60) days after * and will be calculated as follows.
1. Phantom Shares.
(a) A number of the Phantom Shares granted to you under
paragraph G will become vested * and CIGNA will pay
you the Vesting Date Share Value (see paragraph G.2).
(b) The number of Phantom Shares that will vest under
paragraph E.1(a) will be the highest possible number,
up to 50% of the number of Phantom Shares that are
granted to you under paragraph G and that remain
after any early vesting and payment of Phantom Shares
under paragraph D.2(a), so long as the Vesting Date
Share Value of all the Phantom Shares that vest under
paragraph E.1(a) does not exceed the Second Payment
Target.
2. Class B Phantom Shares.
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(a) If the Vesting Date Share Value of the Phantom Shares
that vest under paragraph E.1(a) is less than the
Second Payment Target, then some or all of the Class
B Phantom Shares, if any, that you get under
paragraph D.1(d) will vest, and CIGNA will pay you
the Vesting Date Share Value of these vested Class B
Phantom Shares.
(b) The number of Class B Phantom Shares that will become
vested under paragraph E.2(a) will be the highest
possible number so long as the Vesting Date Share
Value of all the Phantom Shares that vest under
paragraph E.1(a) and Class B Phantom Shares that vest
under paragraph E.2(a) does not exceed the Second
Payment Target.
F. FINAL PAYMENT. If you are continuously employed * from the date you sign the
Agreement until * and you continue to meet the other requirements of the
Agreement, then CIGNA will give you the final installment of Share Value. This
Final Payment will be made within 60 days after * and will be made as follows:
1. Any remaining unvested Phantom Shares granted to you under
paragraph G and unvested Class B Phantom Shares, if any, that
you get under paragraph D.1(d) will become vested as of * .
2. CIGNA will pay you the Vesting Date Share Value of the Phantom
Shares and Class B Phantom Shares that become vested under
paragraph F.1.
G. PHANTOM SHARES; CLASS B PHANTOM SHARES.
1. As of the Effective Date of the Agreement, CIGNA will grant
you 10,000 Phantom Shares. You may receive Class B Phantom
Shares under paragraph D.1(d). Phantom Shares and Class B
Phantom Shares will become vested, and the Vesting Date Share
Value of Phantom Shares and Class B Phantom Shares will be
paid to you, under paragraphs D, E and F.
2. Subject to possible adjustments under paragraph G.3, the
Vesting Date Share Value of each Phantom Share and Class B
Phantom Share will be equal to the sum of:
(a) the greater of the Market Closing Price on the
applicable vesting date or $75.00;
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(b) the dividends actually declared and paid on one share
of CIGNA Common Stock from May 24, 1995 to the
applicable vesting date; and
(c) simple interest on the dividend amounts in paragraph
G.2(b) from the actual dividend payment date to the
applicable vesting date, such interest to be computed
and credited annually at the rate of return then in
effect for the Savings and Investment Plus Plan Fixed
Income Fund, or a successor fund.
3. *
(a) the amount in paragraph G.2(a) will be adjusted to
include the Market Closing Price on the applicable
vesting date of the number of shares of stock (or of
a fractional share) * ; and
(b) the amount in G.2(b) will include any dividends paid,
* to the applicable vesting date, on the number of
shares of stock (or of a fractional share) * .
H. STOCK APPRECIATION RIGHTS.
1. As of the Effective Date of the Agreement, CIGNA will grant
you 47,000 SARs.
2. If you are continuously employed * from the date of the
Agreement until * and you meet the other requirements of the
Agreement, then 50% of your SARs will vest on, and CIGNA will
pay you the Vesting Date SAR Value (see paragraph H.4) within
60 days after, * .
3. If you are continuously employed * from the date of the
Agreement until * and you meet the other requirements of the
Agreement, then the remaining 50% of your SARs will vest on,
and CIGNA will pay you the Vesting Date SAR Value within 60
days after * .
4. Subject to possible adjustment under paragraph H.5, the
Vesting Date SAR Value of each SAR will be equal to the
greater of (a) $10.00 or (b) the Market Closing Price on the
applicable vesting date minus $75.00.
5. *
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I. STOCK OPTIONS.
1. If you * employed by a CIGNA Company until * and meet the
other requirements of the Agreement, then, * any of your
Options (see paragraph K.5) that have not yet vested (not yet
become exercisable) will immediately vest * . These Options
will be referred to as "Vested Options."
2. If, within the 95-day period * , any Vested Options expire
under the terms of the applicable plan before you exercise
them, CIGNA will make a cash payment to you, * equal to the
Vested Option Spread (see paragraph K.9).
3. You shall have conditional stock appreciation rights
("CSARs"), as described in paragraph I.4, if you:
(A) * employed by a CIGNA Company * ;
(B) meet the other requirements of the Agreement;
(C) own any Options that vested * and expire within 90
days * without having been exercised; and
(D) could not have exercised those Options and then
immediately sold the acquired shares, solely because
of restrictions imposed on you by federal securities
law or CIGNA policy relating to transactions in CIGNA
securities.
4. You (or your surviving spouse or, if you have no surviving
spouse, your estate) may exercise CSARs at any time during the
period beginning * and ending * . CSARs will expire if you do
not exercise them during this period. Within 30 days after you
exercise a CSAR, you will receive a cash payment equal to (1)
the Fair Market Value on the exercise date of a share of CIGNA
Common Stock minus the exercise price of the expired Option
that was replaced by the CSAR, (2) multiplied by the number of
shares of CIGNA Common Stock for which the expired Option was
exercisable, (3) less applicable withholding.
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J. MISCELLANEOUS INCENTIVE COMPENSATION PROVISIONS.
1. The Phantom Shares, SARs, CSARs and all related rights will
expire and become void at the close of business on December
31, 1996, * . CIGNA retains the sole discretion to postpone
this expiration date by action of the CIGNA Board of Directors
or a committee of that Board.
2. You will immediately forfeit all of the Phantom Shares, SARs,
CSARs and related rights if, * your employment with CIGNA
Companies is terminated for reasons that, without regard to
paragraph 5 of the Agreement, would make you ineligible for
severance pay benefits under the CIGNA Severance Plan (reasons
that include but are not limited to voluntary resignation and
termination for misconduct).
3. You will immediately forfeit all remaining Phantom Shares,
SARs and CSARs if, * before a vesting date, your employment *
is terminated for reasons that * would result in a forfeiture
of the Phantom Shares, SARs and CSARs.
4. No Phantom Shares, SARs or CSARs may be transferred, assigned
or otherwise alienated by you, and any attempted transfer,
assignment or alienation of Phantom Shares, SARs or CSARs
shall be void.
5. If you die or become totally and permanently disabled * before
a vesting date, CIGNA's Chief Executive Officer shall, in his
sole and absolute discretion, determine whether to make any
payments for the Phantom Shares, SARs and CSARs that are
granted to you under this Program.
6. Any payments under this Program shall be subject to applicable
withholding. If you die before a payment that is due under
this Program is made, then the payment will be made to your
surviving spouse or, if you have no surviving spouse, to your
estate.
7. Except for the vesting of shares of Restricted Stock or the
realization of income upon exercise of an option to purchase
shares of CIGNA Common Stock, you may defer any payments under
this Program to a later date. To defer any payments, you must
make, and submit to CIGNA's Corporate Compensation Department
* a written election to defer payments. To be effective, the
election to defer must be in a form and upon terms and
conditions acceptable to CIGNA.
8. CIGNA Corporation will administer this Program, and it
reserves the sole right to interpret the provisions of the
Program, to determine what
A-7
19
payments you will receive and when, and to make any
determinations or findings of fact required to administer the
Program. Any decisions regarding the Program made by CIGNA
Corporation, through its Chief Executive Officer or his
designee, will be binding on you (and your spouse and estate).
K. DEFINITIONS. The following definitions, in addition to those in the Agreement
and elsewhere in this Program description, apply to the terms used in this
Program.
1. " * Vested Share Value" means the sum of:
(a) the Fair Market Value of all the Vested Shares under
paragraph D.1(a); and
(b) the cash payment under paragraph D.1(b).
2. "Fair Market Value" means the value of CIGNA Common Stock as
determined under Section 2.1 of the CIGNA Stock Plan.
3. "Initial Target Shortfall" means any amount by which the *
Vested Share Value is less than the Initial Payment Target.
4. "Market Closing Price" means the closing price quoted on the
New York Stock Exchange, as reported in the Wall Street
Journal, for one share of CIGNA Common Stock on an applicable
date. If the New York Stock Exchange is closed or no
transactions in CIGNA Common Stock occur on an applicable
date, then the applicable date shall become the next
immediately following date on which the New York Stock
Exchange is open and transactions in CIGNA Common Stock occur.
5. "Options" means any nonqualified options on shares of CIGNA
Common Stock which (1) were granted to you * under the CIGNA
Executive Stock Incentive Plan, the CIGNA Stock Plan or the
CIGNA Long-Term Incentive Plan, and (2) have not expired or
been exercised * .
6. "Restricted Stock" means shares of CIGNA Common Stock which
have been (or are) granted to you under the terms of the CIGNA
Executive Stock Incentive Plan, the CIGNA Stock Plan or the
CIGNA Long-Term Incentive Plan and which are (or will be)
subject to restrictions on sale or other transfer.
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20
7. "SAR(s)" means one or more stock appreciation rights described
in paragraph H.
8. *
9. "Vested Option Spread" means an amount equal to (a) the
highest Market Closing Price during the 12-week period *
multiplied by the number of the shares of CIGNA Common Stock
which may be purchased by exercise of the Vested Option minus
(b) the aggregate exercise price of the Vested Option (that
is, the cost to purchase all the shares of CIGNA Common Stock
represented by a Vested Option). In computing the Vested
Option Spread, the excess of the Market Closing Price in 9(a)
over the exercise price of any Vested Option in 9(b) will be
at least $10.00, regardless of the actual difference.
X-0
00
XXXXXXXXXX X
to SPECIAL INCENTIVE COMPENSATION AGREEMENT
SUPPLEMENTAL PENSION BENEFIT
for Xxxxxx X. Xxxx
CIGNA will pay you a Supplemental Pension Benefit ("SPB") as follows:
a. CIGNA will credit toward your SPB $100,000 for each Year of Credited
Service you accumulate under the CIGNA Pension Plan. The CIGNA Pension
Plan definition of, and rules for counting, Years of Credited Service
shall apply to this SPB.
b. Your right to the SPB will be fully vested and nonforfeitable. The SPB
will be paid in addition to any other pension benefits you may earn
under any other CIGNA retirement plan or program.
c. CIGNA will use your total accrued SPB amount as of the SPB start date
to purchase a single premium, immediate, guaranteed annuity from a life
insurance company that CIGNA will select. CIGNA will use the annuity
benefits to make periodic payments to you beginning on the SPB start
date. CIGNA will be the sole owner of any such annuity, and neither you
nor your surviving spouse shall have any rights under the annuity
contract.
d. The SPB start date will be the earlier of:
(1) The first of the month following your sixty-fifth (65th)
birthday; or
(2) The first of the month following the date you terminate
employment with CIGNA Companies *
e. If, as of the SPB start date, you have been married for at least twelve
(12) months, the SPB shall be in the form of actuarially reduced
monthly payments for your life in order to provide a contingent
surviving spouse benefit (equal to 50% of the level of monthly payments
made to you) for your surviving spouse (assuming you are married to the
same person on the SPB start date and the date you die). If you have
not been married for at least twelve (12) months on the SPB start date,
the SPB shall be in the form of a unreduced monthly payments for your
life.
f. If you die before the SPB start date, have been married for at least
twelve months before you die and are survived by your spouse, CIGNA
will use the total accrued SPB to make lifetime monthly payments to
your surviving spouse beginning as of the first of the month following
your death. If you die before the SPB start date and have not been
married for at least twelve months
22
before you die or are not survived by your spouse, CIGNA will pay the
accrued SPB in a lump sum to your estate.
g. Neither this SPB nor any related rights may be transferred, assigned or
otherwise alienated by the you, and any attempted transfer, assignment
or alienation of SPB rights shall be void. The SPB shall not be funded
in any way from the assets of any qualified retirement plan. CIGNA
shall pay the SPB annuity premium out of its general assets as of the
SPB start date. You, your surviving spouse and your estate shall be
general, unsecured creditors of CIGNA to the extent of any SPB
obligations.
