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EMPLOYMENT AGREEMENT
____________________
EMPLOYMENT AGREEMENT, dated as of January 29, 1996 by and
between Aetna Life and Casualty Company, a Connecticut
corporation (the "Company"), and Xxxxxx X. Xxxxxxx ("Executive").
W I T N E S S E T H:
_ _ _ _ _ _ _ _ _ _
WHEREAS, the Company is considering certain restructuring
alternatives that could result in significant changes in the
structure of its business, including, without limitation, dividing
the business of the Company into two or more separate publicly
traded companies or otherwise transferring a portion of the
business to a third party;
WHEREAS, the Company believes that Executive is a key
employee and that it is in the Company's best interests to retain
the services of Executive for the period during which such
restructuring alternatives are considered and, to the extent
applicable, implemented;
WHEREAS, the Company therefore desires to retain the
services of Executive and to enter into an agreement embodying the
terms of such employment (the "Agreement"); and
WHEREAS, Executive desires to accept such employment and
enter into such Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the Company and Executive hereby agree as
follows:
1. Employment. Except as provided in Paragraph 6(a),
__________
the Company shall continue to employ Executive and Executive
agrees to remain employed by the Company under the terms of this
Agreement for the period commencing on the date first written
above (the "Commencement Date") and ending on February 27, 1998.
The period during which Executive is employed pursuant to this
Agreement shall be referred to as the "Contract Employment
Period". Upon the expiration of the Contract Employment Period,
Executive's employment with the Company shall continue on an at-
will basis.
2. Position and Duties. During the Contract
___________________
Employment Period, Executive shall serve as the Chairman and
Chief Executive Officer of the Company. During the Contract
Employment Period, Executive shall have such duties,
responsibilities and obligations as the Board of Directors of the
Company (the "Board") shall specify from time to time. Executive
shall devote his full business time to the services required of
him hereunder, except for vacation time and reasonable periods of
absence due to sickness, personal injury or other disability, and
shall use his best efforts, judgment, skill and energy to perform
such services in a manner consistent with the duties of his
position and to improve and advance the business and interests of
the Company and its subsidiaries. Nothing contained herein shall
preclude Executive from (i) serving on the board of directors of
_
any business corporation on which he currently serves or, if the
Board consents to such service, on any other board of directors,
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(ii) serving on the board of, or working for, any charitable or
__
community organization or (iii) pursuing his personal, financial
___
and legal affairs, so long as such activities, individually or
collectively, do not interfere with the performance of Executive's
duties hereunder.
3. Cash Compensation.
_________________
a. Base Salary. During the Contract Employment
___________
Period, the Company shall pay Executive a base salary at the
annual rate of $810,000. The Board shall periodically review
Executive's base salary and the Company may, in its discretion,
increase such base salary by an amount it determines to be
appropriate. Any such increase shall not reduce or limit any
other obligation of the Company hereunder. Executive's annual
base salary payable hereunder, as it may be increased from time to
time and without reduction for any amounts deferred as described
above, is referred to herein as "Base Salary". Executive's Base
Salary, as in effect from time to time, may not be reduced by the
Company without Executive's consent, provided that the Base Salary
________ ____
payable under this paragraph shall be reduced to the extent
Executive elects to defer or reduce such salary under the terms of
any deferred compensation or savings plan or other employee
benefit arrangement maintained or established by the Company. The
Company shall pay Executive the portion of his Base Salary not
deferred in accordance with its customary periodic payroll
practices.
b. Incentive Compensation. During the term of the
______________________
Contract Employment Period, Executive shall remain eligible for
participation in the Company's existing and future annual and long
term incentive compensation programs at a level consistent with
his position at the Company and the Company's then current
policies and practices; provided that following any assignment of
________ ____
this Agreement in accordance with the provisions of Paragraph 9(c)
or a Change in Control of the Company (as defined in Paragraph
7(e)), the calculation of the amount payable as annual incentive
compensation and the conditions upon which such bonus shall be
payable shall be no less favorable to the Executive (taking into
account reasonable changes in the Company's goals and objectives)
than the annual bonus opportunity that had been made available to
the Executive for the fiscal year ended immediately prior to such
assignment or Change in Control. Without limiting the generality
of the foregoing, for each calendar year ending during the term
hereof, Executive shall receive the opportunity to receive an
annual bonus of at least 65% of his Base Salary (the "Minimum
Bonus Percentage"), subject to satisfaction of such performance
criteria as shall be established with respect to such year.
4. Stock Option Grant. Contingent upon the execution
__________________
of this Agreement by the Executive, the Company has granted
Executive an option, having a ten-year term, to purchase 100,000
shares of the Company's Common Stock at an exercise price per
share equal to $57 a share (the "Option"). Except to the extent
specified below, the terms of the Option shall be determined in
accordance with the terms of the 1994 Stock Incentive Plan (the
"1994 Plan") and shall be set forth in the separate agreement
embodying the grant of such Option (the "Option Agreement"), the
form of which is attached hereto as Exhibit A.
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5. Benefits, Perquisites and Expenses.
__________________________________
a. Benefits. During the Contract Employment Period,
________
Executive shall be eligible to participate in (i) each welfare
_
benefit plan sponsored or maintained by the Company, including,
without limitation, each group life, hospitalization, medical,
dental, health, accident or disability insurance or similar plan
or program of the Company, and (ii) each pension, profit sharing,
__
retirement, deferred compensation or savings plan sponsored or
maintained by the Company, in each case, whether now existing or
established hereafter, to the extent that Executive is eligible to
participate in any such plan under the generally applicable
provisions thereof. Nothing in this Paragraph 5(a) shall be
construed to limit the ability of the Company to amend or
terminate any particular plan, program or arrangements, provided
_________
that, following the occurrence of a Change in Control (as defined
____
in Paragraph 7(e)) or the assignment of this Agreement to a New
Entity (as defined in Paragraph 6(a)) pursuant to Paragraph 9(b),
the benefits made available to the Executive thereafter shall be
at least substantially comparable, in the aggregate, to the
benefits made available to the Executive immediately prior to such
Change in Control or assignment.
With respect to the pension or retirement benefits
payable to Executive, Executive's service credited for purposes of
determining Executive's benefits and vesting shall be determined
in accordance with the terms of the applicable plan or program or,
if applicable, pursuant to any written agreement between Executive
and the Company (whether now existing or hereafter adopted) that
provides Executive a more favorable method of crediting service
for any purpose thereunder.
b. Perquisites. During the Contract Employment
___________
Period, Executive shall be entitled to receive such perquisites as
are generally provided to the Chief Executive Officer of the
Company in accordance with the then current policies and practices
of the Company.
c. Business Expenses. During the Contract Employment
_________________
Period, the Company shall pay or reimburse Executive for all
reasonable expenses incurred or paid by Executive in the
performance of Executive's duties hereunder, upon presentation of
expense statements or vouchers and such other information as the
Company may require and in accordance with the generally
applicable policies and procedures of the Company.
6. Termination of Employment.
_________________________
a. Early Termination of the Contract Employment
_____________________________________________
Period. Notwithstanding Paragraph 1, the Contract Employment
______
Period shall end upon the earliest to occur of (i) a termination
_
of Executive's employment on account of Executive's death, (ii) a
__
Termination due to Disability, (iii) a Termination for Cause, (iv)
___ __
a Termination Without Cause, (v) a Termination for Good Reason or
_
(vi) a termination of Executive's employment by Executive other
__
than a Termination for Good Reason. For purposes of this
Agreement, a transfer of Executive's employment (i) to any other
_
entity controlled by or under common control with the Company
shall not be treated as a termination unless and until such entity
ceases to be controlled by or under common control with the
Company or (ii) as a result of the implementation of any
__
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restructuring of the Company (whether occurring by spin-off or
otherwise) shall not be treated as a termination of employment,
provided that, in either case, the successor employer (the "New
________ ____
Entity") expressly assumes and agrees to perform all of the
Company's obligations under this Agreement.
b. Benefits Payable Upon Termination. Following the
_________________________________
end of the Contract Employment Period pursuant to Paragraph 6(a),
Executive (or, in the event of his death, his surviving spouse, if
any, or his estate) shall be paid the type or types of
compensation determined to be payable in accordance with the
following table at the times established pursuant to Paragraph
6(c):
Earned Vested Accrued Severance
Salary Benefits Bonus Benefit
________ __________ ________ ________
Termination due Payable Payable Payable Not Payable
to death
Termination due to Payable Payable Payable Not Payable
Disability
Termination for Payable Payable Not Payable Not Payable
Cause
Termination Without Payable Payable Payable Payable
Cause
Termination for Payable Payable Payable Payable
Good Reason
Termination by Payable Payable Not Payable Not Payable
Executive other than
for Good Reason
c. Timing of Payments. Earned Salary and Accrued
__________________
Bonus shall be paid in a single lump sum as soon as practicable,
but in no event more than 30 days, following the end of the
Contract Employment Period. Vested Benefits shall be payable in
accordance with the terms of the plan, policy, practice, program,
contract or agreement under which such benefits have accrued.
Severance Benefits shall be paid in approximately equal
installments, at the same intervals at which Executive was
receiving his salary payments hereunder, for the greater of (i)
_
one year, (ii) the period over which such benefits would be
__
payable if paid to Executive under the Company's otherwise
applicable plans, policies or procedures as currently in effect or
(iii) the period over which such benefits would be payable if paid
___
to Executive under the Company's otherwise applicable plans,
policies or procedures, as in effect at the time of Executive's
termination of employment. Notwithstanding the foregoing,
Executive may elect, by written notice given to the Company prior
to the first periodic payment and within ten business days after
such termination, that, instead of periodic installments,
Severance Benefits shall be paid in either a single lump sum,
payable within ten business days of receipt by the Company of such
election, or in two equal installments, the first payable within
ten business days of receipt by the Company of such election, and
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the second payable on the first business day of the following
calendar year.
d. Definitions. For purposes of this Paragraph 6,
___________
capitalized terms have the following meanings:
"Accrued Bonus" means a pro-rated amount equal to the
product of (i) the annual incentive compensation Executive would
_
have been entitled to receive under Paragraph 3(b) for the
calendar year in which his active service for the Company
terminates pursuant to Paragraph 6(a) had he remained employed for
the entire year and assuming that all targets for such year had
been met, multiplied by (ii) a fraction, the numerator of which is
__
equal to the number of days in such calendar year occurring on or
prior to the termination of Executive's active service for the
Company and the denominator of which is 365.
"Earned Salary" means any Base Salary earned, but unpaid,
for services rendered to the Company on or prior to the date on
which the Contract Employment Period ends (other than Base Salary
deferred pursuant to Executive's election, as provided in
Paragraph 3(a) hereof).
"Severance Benefit" means an amount equal to the sum of
(i) and (ii) below, where (i) and (ii) are:
(i) the sum of
(A) the annual Base Salary payable to Executive
immediately prior to the end of the Contract
Employment Period; and
(B) an amount (the "Bonus Severance Amount") equal to
the product of Executive's Base Salary times the
greater of (1) the Minimum Bonus Percentage and
_
(2) the percentage of Base Salary that would have
_
been payable to Executive for the year of such
termination assuming achievement of target levels
of performance and Executive's continued
employment for the entire year, and
(ii) the amount otherwise payable to Executive under the
Company's otherwise applicable severance plans, policies
or programs as in effect on the date hereof (or, if more
favorable to Executive, as in effect on the date of
Executive's termination), assuming for purposes of
determining the amount payable thereunder that
Executive's employment was terminated as a result of the
elimination of his position, but calculated by including
the Bonus Severance Amount as part of Executive's
eligible compensation for purposes of calculating the
benefits payable under such plans, policies or programs;
except that, in the event that Executive becomes entitled to
receive Severance Benefits hereunder following a Change in
Control, the Severance Benefit payable to Executive shall be
determined under Paragraph 7(c). Additionally, while Executive is
receiving payment of Severance Benefits in periodic installments,
Executive shall also be eligible to continue to participate in the
welfare benefit plans and programs (excluding the long-term
disability plan, the sick-pay plan and vacation accruals)
PAGE 6
generally made available to employees of the Company and in which
he participated immediately prior to the termination of his
employment on the same terms and conditions as would have applied
had Executive continued to be employed. Upon an election to
receive Severance Benefits in either a single lump sum payment or
in two installments, Executive will forfeit any right to continue
to receive any coverage under the Company's welfare benefit plans,
other than COBRA coverage (determined from the original date of
termination) at Executive's expense as required by applicable law;
provided that, if Executive elects to receive Severance Benefits
________ ____
in two installments instead of periodic installments, the Company
shall pay one-half of the cost of Executive's COBRA coverage from
the date the first installment payment is made until the date the
second installment payment is made. Notwithstanding the
foregoing, receipt of a lump sum payment or two installment
payments hereunder shall not cause Executive to cease to be
eligible for any retiree benefit programs for which he is
otherwise eligible under the terms of the Company's employee
benefit plans, policies or programs.
"Termination for Cause" means a termination of
Executive's employment by the Company due to (i) the willful
_
failure by Executive to perform substantially Executive's duties
as an employee of the Company (other than due to physical or
mental illness) after reasonable notice to Executive of such
failure, (ii) Executive's engaging in serious misconduct that is
__
injurious to the Company or any subsidiary or any affiliate of the
Company, (iii) Executive's having been convicted of, or entered a
___
plea of nolo contendere to, a crime involving an act that is
____ __________
immoral or wrong in and of itself (e.g., burglary, larceny, murder
____
or arson) or a crime involving deceit, fraud, perjury or
embezzlement, (iv) the breach by Executive of any written covenant
__
or agreement not to compete with the Company or any subsidiary or
any affiliate or (v) the breach by Executive of his duty of
_
loyalty to the Company which shall include, without limitation,
(A) the disclosure by Executive of any confidential information
_
pertaining to the Company or any subsidiary or any affiliate of
the Company, other than (x) in the ordinary course of the
_
performance of his duties on behalf of the Company or (y) pursuant
_
to a judicial or administrative subpoena from a court or
governmental authority with jurisdiction over the matter in
question, (B) the harmful interference by Executive in the
_
business or operations of the Company or any subsidiary or any
affiliate of the Company, (C) any attempt by Executive directly or
_
indirectly to induce any employee, insurance agent, insurance
broker or broker-dealer of the Company or any subsidiary or any
affiliate to be employed or perform services elsewhere, (D) any
_
attempt by Executive directly or indirectly to solicit the trade
of any customer or supplier, or prospective customer or supplier,
of the Company on behalf of any person other than the Company or a
subsidiary thereof or (E) any breach or violation of the Company's
_
Code of Conduct, as amended from time to time. Notwithstanding
the foregoing, a breach of Executive's duty of loyalty to the
Company as described in subclause (A) or a breach of the Company's
Code of Conduct as described in subclause (E) of clause (v) of the
preceding sentence shall not be grounds for a Termination for
Cause unless such breach has had or could reasonably be expected
to have a significant adverse effect on the business or reputation
of the Company.
PAGE 7
"Termination due to Disability" means a termination of
Executive's employment by the Company because Executive has been
incapable of substantially fulfilling the positions, duties,
responsibilities and obligations set forth in this Agreement
because of physical, mental or emotional incapacity resulting from
injury, sickness or disease for a period of (i) at least four
_
consecutive months or (ii) more than six months in any twelve
__
month period. Any question as to the existence, extent or
potentiality of Executive's disability shall be made by a
qualified, independent physician selected by the chief or
assistant chief (or the equivalent position) of the department
which treats the disease giving rise to Executive's absence at a
nationally or regionally recognized teaching hospital chosen by
the Company. The determination of any such physician shall be
final and conclusive for all purposes of this Agreement.
Notwithstanding the foregoing, (i) a Termination for Disability
_
shall not affect Executive's right to receive any amount that
would otherwise have been payable to Executive under the Company's
plans, policies, practices or programs pertaining to short-term or
long-term disability had Executive's employment continued and (ii)
__
if it is determined, at the time Executive is first eligible to
receive long-term disability benefits under the Company's plans,
policies, practices or programs, that Executive is not entitled to
receive such long-term disability benefits (other than due to
Executive's failure to cooperate), Executive shall, for purposes
of this Paragraph 6, be deemed to have been terminated as of the
date of such determination pursuant to a Termination Without Cause
and to be entitled to receive any additional benefits payable
hereunder in respect of a Termination Without Cause.
"Termination for Good Reason" means a termination of
Executive's employment by Executive within 90 days following (i) a
_
reduction in Executive's annual Base Salary or incentive
compensation opportunity as provided under Paragraph 3(b), (ii) a
__
material reduction in Executive's positions, duties and
responsibilities from those described in Paragraph 2 hereof, (iii)
___
the relocation of Executive's principal place of employment to a
location more than 50 miles from the location at which he
performed his principal duties on the date immediately prior to
such relocation, (iv) a breach of the obligation to provide
__
Executive with the benefits required to be provided in accordance
with Paragraph 5(a), (v) a failure by the Company to pay any
_
amounts due and owing to Executive within 10 days following
written notice from Executive of such failure to pay, or (vi) any
__
other material breach of the Company's obligations to Executive
hereunder that significantly affects the compensation or benefits
payable to Executive or materially impairs Executive's ability to
perform the duties and responsibilities of his position.
Notwithstanding the foregoing, a termination shall not be treated
as a Termination for Good Reason (i) if Executive shall have
_
consented in writing to the occurrence of the event giving rise to
the claim of Termination for Good Reason or (ii) unless Executive
__
shall have delivered a written notice to the Board within 60 days
of his having actual knowledge of the occurrence of one of such
events stating that he intends to terminate his employment for
Good Reason and specifying the factual basis for such termination,
and such event shall not have been cured within 30 days of the
receipt of such notice.
"Termination Without Cause" means any termination of Executive's
employment by the Company other than (i) a Termination due to
_
Disability or (ii) a Termination for Cause.
__
PAGE 8
Subject to the Company's obligations to make the payments, if any,
required pursuant to this paragraph 6, nothing in this Agreement
shall be construed to limit the right of the Company to terminate
Executive's employment at any time for any reason or without
reason.
"Vested Benefits" means amounts which are vested or which
Executive is otherwise entitled to receive under the terms of or
in accordance with any plan, policy, practice or program of, or
any contract or agreement with, the Company or any of its
subsidiaries (including, without limitation, any supplemental
pension plan, supplemental savings plan or other deferred
compensation arrangement, the 1994 Plan and the Company's 1984
Stock Option Plan (the "1984 Plan")), at or subsequent to the date
of his termination without regard to the performance by Executive
of further services or the resolution of a contingency, provided
_________
that, at any time during which Executive is entitled to receive
____
the Severance Benefits hereunder, Executive shall not also be
entitled to receive any benefits under the Company's generally
applicable severance or other termination plans, policies or
programs.
e. Full Discharge of Company Obligations. Except to
_____________________________________
the extent provided in this Paragraph 6, the amounts payable to
Executive pursuant to this Paragraph 6 (including, without
limitation, under Paragraph 6(f)) following termination of his
employment shall be in full and complete satisfaction of
Executive's rights under this Agreement and any other claims he
may have in respect of his employment by the Company or any of its
subsidiaries. Such amounts shall constitute liquidated damages
with respect to any and all such rights and claims, shall not be
subject to any offset or mitigation, and, upon Executive's receipt
of such amounts, the Company shall be released and discharged from
any and all liability to Executive in connection with this
Agreement or otherwise in connection with Executive's employment
with the Company and its subsidiaries. Notwithstanding anything
else contained herein to the contrary, (i) the Company's
_
obligations under this Paragraph 6 are expressly conditioned upon
Executive's execution of a release and waiver, substantially in
the form attached hereto as Exhibit B (subject to, in the event of
any change of law occurring after the date hereof, to such
modifications as shall be necessary or appropriate to place the
Company in a substantially the same position as though no change
in law had occurred), of any claims he may have in connection with
the termination of, or arising out of, his employment with the
Company and (ii) nothing in this Section 6(e) shall be construed
__
to waive, release or otherwise limit any amounts required to be
paid hereunder or any benefits due and payable to Executive under
the terms of any employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended, or any other Vested Benefit.
f. Special Continuation of Certain Protection for the
___________________________________________________
Executive. Notwithstanding anything contained in this Agreement
_________
to the contrary, if, at the end of the Contract Employment Period,
(i) Executive remains an at-will employee of the Company and (ii)
_ __
within one year following the end of the Contract Employment
Period, the Company takes actions which, if they had occurred
within the Contract Employment Period, would have given Executive
the right to terminate his employment pursuant to a Termination
for Good Reason and Executive, after giving the Company timely
PAGE 9
written notice of the events permitting a Termination for Good
Reason and the opportunity to cure described in the definition of
a Termination for Good Reason, voluntarily terminates his
employment within 90 days of the date of such actions by the
Company, then in either case, Executive shall receive payment of
the Severance Benefits that would otherwise have been payable to
Executive hereunder had his termination of employment occurred
during the Contract Employment Period. Notwithstanding the
preceding sentence, this Section 6(f) shall not be applicable
unless Executive executes the waiver and release referred to in
Paragraph 6(e) above in connection with his termination of
employment pursuant to this Paragraph 6(f).
g. Outplacement Services. In addition to any other
_____________________
benefits described in this Paragraph 6, in the event Executive is
eligible to receive Severance Benefits, the Company shall also
provide to Executive, at its expense, individual outplacement
services from a qualified outplacement firm selected by the
Company. The outplacement services to be provided to Executive
shall be no less favorable to Executive than those made available
to other executives prior to the date hereof under the Company's
generally applicable policies, programs or arrangements.
7. Change in Control of the Company.
________________________________
a. Accelerated Vesting and Payment. Unless the Board
_______________________________
(or the appropriate committee thereof) shall otherwise determine
in the manner set forth in Paragraph 7(b), the Option shall become
fully exercisable upon the occurrence of a Change in Control (as
defined below) and shall remain exercisable for a period of one
year thereafter regardless of whether Executive continues to be
employed by the Company or, if longer, for the period during which
such Option would otherwise be exercisable in accordance with its
terms or the generally applicable provisions of the 1994 Plan. If
no Alternative Option is provided as set forth in Section 7(b)
below, and the Company does not survive as a publicly traded
corporation following a Change in Control, the Company shall pay
Executive, in full settlement of all rights with respect to the
Option, an aggregate amount in cash equal to the product of (i)
_
(A) the Fair Market Value of a Share of the Company's Common Stock
on the date the Change in Control occurs minus (B) the per share
exercise price for the Option times (ii) the number of shares as
__
to which such Option has not been exercised at the time of the
Change in Control. Any amount payable pursuant to the preceding
sentence shall be paid within 30 days following such Change in
Control.
b. Alternative Options. Notwithstanding
___________________
Paragraph 7(a), no acceleration of exercisability shall occur with
respect to any Option if the Board (or the appropriate committee
thereof) reasonably determines in good faith, prior to the
occurrence of a Change in Control, that such Option shall be
honored or assumed, or new rights substituted therefor (such
honored, assumed or substituted Option being hereinafter referred
to as an "Alternative Option") by the successor in interest to the
Company, provided that any such Alternative Option must:
________ ____
(i) provide Executive with rights and entitlements
substantially equivalent to or better than the rights,
terms and conditions applicable under the Option,
including, but not limited to, an identical or better
PAGE 11
exercise and vesting schedule and identical or better
timing and methods of payment;
(ii) have substantially equivalent economic value to such
Option (determined at the time of the Change in
Control); and
(iii) have terms and conditions which provide that, in the
event that Executive's employment is terminated by the
Company for any reason or is terminated by Executive
pursuant to a Termination for Good Reason within two
years following a change in Control, (A) any conditions
_
on Executive's rights under, or any restrictions on
exercisability applicable to, each such Alternative
Option shall be waived or shall lapse, as the case may
be and (B) the Alternative Option shall
_
remain exercisable until the second anniversary of the
Change in Control or, if longer, for the period during
which such Alternative Option would otherwise be
exercisable in accordance with its terms or the
provisions of the plan under which it is granted that
permit the longest post-termination exercise period for
involuntary terminations (other than due to death,
disability or retirement).
c. Enhanced Severance Payments. If Executive's
__________________________
employment is terminated following a Change in Control pursuant to
a Termination for Good Reason or a Termination Without Cause, the
Severance Benefit payable to Executive pursuant to Paragraph 6
shall be equal to three times the sum of Executive's annual Base
Salary and the Bonus Severance Amount.
d. Additional Payments by the Company.
__________________________________
(i) Application of Paragraph 7(d). In the event that any
______________________________
amount or benefit paid or distributed to Executive
pursuant to this Agreement, taken together with any
amounts or benefits otherwise paid or distributed to
Executive by the Company or any affiliated company
(collectively, the "Covered Payments"), would be an
"excess parachute payment" as defined in Section 280G of
the Code and would thereby subject Executive to the tax
(the "Excise Tax") imposed under Section 4999 of the
code (or any similar tax that may hereafter be
imposed), the provisions of this Section 7(d) shall
apply to determine the amounts payable to Executive
pursuant to this agreement.
(ii) Calculation of Benefits. Immediately following delivery
_______________________
of any Notice of Termination, the Company shall notify
Executive of the aggregate present value of all
termination benefits to which he would be entitled under
this Agreement and any other plan, program or
arrangement as of the projected date of termination,
together with the projected maximum payments, determined
as of such projected date of termination that could be
paid without Executive being subject to the Excise Tax.
PAGE 11
(iii) Imposition of Payment Cap. If the aggregate value of
_________________________
all compensation payments or benefits to be paid or
provided to Executive under this Agreement and any
other plan, agreement or arrangement with the Company
exceeds the amount which can be paid to Executive
without Executive incurring an Excise Tax by less than
105%, then the amounts payable to Executive under this
Agreement may, in the discretion of the Company, be
reduced (but not below zero) to the maximum amount
which may be paid hereunder without Executive becoming
subject to such an Excise Tax (such reduced payments
to be referred to as the "Payment Cap"). In the event
that Executive receives reduced payments and benefits
hereunder, Executive shall have the right to designate
which of the payments and benefits otherwise provided
for in this Agreement that he will receive in
connection with the application of the Payment Cap.
(iv) Further Payments by the Company. If the aggregate
_______________________________
value of all compensation payments or benefits to be
paid or provided to Executive under this Agreement and
any other plan, agreement or arrangement with the
Company exceeds the amount which can be paid to
Executive without Executive incurring an Excise Tax by
more than 105%, the Company shall pay to Executive
immediately following Executive's termination of
employment an additional amount (the "Tax
Reimbursement Payment") such that the net amount
retained by Executive with respect to such Covered
Payments, after deduction of any Excise Tax on the
Covered Payments and any Federal, state and local
income tax and Excise Tax on the Tax Reimbursement
Payment provided for by this Paragraph 7(d)(iv), but
before deduction for any Federal, state or local
income or employment tax withholding on such Covered
Payments, shall be equal to the amount of the Covered
Payments.
(v) Application of Section 280G. For purposes of
___________________________
determining whether any of the Covered Payments will
be subject to the Excise Tax and the amount of such
Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of
Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as
defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax,
unless, and except to the extent that, in the
good faith judgment of the Company's independent
certified public accountants appointed prior to
the Effective Date or tax counsel selected by
such Accountants (the "Accountants"), the Company
has a reasonable basis to conclude that such
Covered Payments (in whole or in part) either do
not constitute "parachute payments" or represent
reasonable compensation for personal services
actually rendered (within the meaning of Section
280G(b)(4)(B) of the Code) in excess of the "base
amount," or such "parachute payments" are
otherwise not subject to such Excise Tax, and
PAGE 12
(B) the value of any non-cash benefits or any
deferred payment or benefit shall be determined
by the Accountants in accordance with the
principles of Section 280G of the Code.
(vi) Applicable Tax Rates. For purposes of determining
___________________
whether Executive would receive a greater net after-
tax benefit were the amounts payable under this
Agreement reduced in accordance with Paragraph
7(d)(iii), Executive shall be deemed to pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the
calendar year in which the first amounts are to be
paid hereunder, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for such
calendar year, net of the maximum reduction in Federal
incomes taxes which could be obtained from the
deduction of such state or local taxes if paid in such
year;
provided, however, that Executive may request that such
determination be made based on his individual tax
circumstances, which shall govern such determination so long
as Executive provides to the Accountants such information
and documents as the Accountants shall reasonably request to
determine such individual circumstances.
(vii) Adjustments in Respect of the Payment Cap. If Executive
________________________________________
receives reduced payments and benefits under this
Paragraph 7(d) (or this Paragraph 7(d) is determined not
to be applicable to Executive because the Accountants
conclude that Executive is not subject to any Excise Tax)
and it is established pursuant to a final determination
of a court or an Internal Revenue Service proceeding (a
"Final Determination") that, notwithstanding the good
faith of Executive and the Company in applying the terms
of this Agreement, the aggregate "parachute payments"
within the meaning of Section 280G of the Code paid to
Executive or for his benefit are in an amount that would
result in Executive being subject an Excise Tax, then the
amount equal to such excess parachute payments shall be
deemed for all purposes to be a loan to Executive made on
the date of receipt of such excess payments, which
Executive shall have an obligation to repay to the
Company on demand, together with interest on such amount
at the applicable Federal rate (as defined in Section
1274(d) of the Code) from the date of the payment
hereunder to the date of repayment by Executive. If this
Paragraph 7(d) is not applied to reduce Executive's
entitlements under this Paragraph 7 because the
Accountants determine that Executive would not receive a
greater net-after tax benefit by applying this Paragraph
7(d) and it is established pursuant to a Final
Determination that, notwithstanding the good faith of
Executive and the Company in applying the terms of this
Agreement, Executive would have received a greater net
after tax benefit by subjecting his payments and benefits
hereunder to the Payment Cap, then the aggregate
PAGE 13
"parachute payments" paid to Executive or for his benefit
in excess of the Payment Cap shall be deemed for all
purposes a loan to Executive made on the date of receipt
of such excess payments, which Executive shall have an
obligation to repay to the Company on demand, together
with interest on such amount at the applicable Federal
rate (as defined in Section 1274(d) of the Code) from the
date of the payment hereunder to the date of repayment by
Executive. If Executive receives reduced payments and
benefits by reason of this Paragraph 7(d) and it is
established pursuant to a Final Determination that
Executive could have received a greater amount without
exceeding the Payment Cap, then the Company shall
promptly thereafter pay Executive the aggregate
additional amount which could have been paid without
exceeding the Payment Cap, together with interest on such
amount at the applicable Federal rate (as defined in
Section 1274(d) of the Code) from the original payment
due date to the date of actual payment by the Company.
(viii) Adjustments in Respect of the Tax Reimbursement Payments.
________________________________________________________
In the event that the Excise Tax is subsequently
determined by the Accountants or pursuant to any
proceeding or negotiations with the Internal Revenue
Service to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment
made, Executive shall repay to the Company, at the time
that the amount of such reduction in the Excise Tax is
finally determined, the portion of such prior Tax
Reimbursement Payment that would not have been paid if
such Excise Tax had been applied in initially calculating
such Tax Reimbursement Payment, plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax
Reimbursement Payment to be refunded to the Company has
been paid to any Federal, state or local tax authority,
repayment thereof shall not be required until actual
refund or credit of such portion has been made to
Executive, and interest payable to the Company shall not
exceed interest received or credited to Executive by such
tax authority for the period it held such portion.
Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of
allocating the expenses thereof) if Executive's good
faith claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to exceed
the amount taken into account hereunder at the time the
Tax Reimbursement Payment is made (including, but not
limited to, by reason of any payment the existence or
amount of which cannot be determined at the time of the
Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such
excess (plus any interest or penalty payable with respect
to such excess) at the time that the amount of such
excess is finally determined.
PAGE 14
(ix) Timing of Payment. Any Tax Reimbursement Payment (or
_________________
portion thereof) provided for in Paragraph 7(d)(iv) above
shall be paid to Executive not later than 10 business
days following the payment of the Covered Payments;
provided, however, that if the amount of such Tax
Reimbursement Payment (or portion thereof) cannot be
finally determined on or before the date on which payment
is due, the Company shall pay to Executive by such date
an amount estimated in good faith by the Accountants to
be the minimum amount of such Tax Reimbursement Payment
and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined, but in no event later than 45
calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated
Tax Reimbursement Payment exceeds the amount subsequently
determined to have been due, such excess shall constitute
a loan by the Company to Executive, payable on the fifth
business day after written demand by the Company for
payment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
e. Definition of "Change in Control". For purposes of
_________________________________
this Paragraph 7, a "Change in Control" means the happening of any
of the following:
(i) When any "person" as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of
the Exchange Act but excluding the Company and any subsidiary
thereof and any employee benefit plan sponsored or maintained
by the Company or any Subsidiary (including any trustee of
such plan acting as trustee), directly or indirectly, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act, as amended from time to time), of securities of
the Company representing 20 percent or more of the combined
voting power of the Company's then outstanding securities;
(ii) When, during any period of 24 consecutive months
after the Commencement Date, the individuals who, at the
beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than death
to constitute at least a majority thereof, provided that a
________ ____
director who was not a director at the beginning of such 24-
month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director
was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period)
or by prior operation of this Paragraph 7(e)(ii); or
(iii) The occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by an
entity other than the Company or a subsidiary through
purchase of assets, or by merger, or otherwise.
8. Noncompetition and Confidentiality.
_________________________________
a. Noncompetition. During the Contract Employment
______________
Period and for a period of one year following Executive's
termination of employment during the Contract Employment Period
other than due to a Termination Without Cause or a Termination for
Good Reason, Executive shall not become associated, whether as a
principal, partner, employee, consultant or shareholder (other
than as a holder of not in excess of 1% of the outstanding voting
shares of any publicly traded company), with any entity that is
actively engaged in any geographic area in any business which is
in substantial and direct competition with the business or
businesses of the Company for which Executive provides substantial
services or for which Executive has substantial responsibility,
provided that nothing in this Paragraph 8(a) shall preclude
________ ____
Executive from performing services solely and exclusively for a
division or subsidiary of such an entity that is engaged in a non-
competitive business.
b. Nondisclosure, Nonsolicitation and Cooperation.
______________________________________________
(i) Executive shall not (except to the extent required by
an order of a court having competent jurisdiction or under
subpoena from an appropriate government agency) disclose to any
third person, whether during or subsequent to the Executive's
employment with the Company, any trade secrets; customer lists;
product development and related information; marketing plans and
related information; sales plans and related information;
operating policies and manuals; business plans; financial records;
or other financial, commercial, business or technical information
related to the Company or any subsidiary or affiliate thereof
unless such information has been previously disclosed to the
public by the Company or has become public knowledge other than by
a breach of this Agreement; provided, however, that this
________ _______
limitation shall not apply to any such disclosure made while
Executive is employed by the Company, or any subsidiary or
affiliate thereof if such disclosure is reasonably intended to
benefit the Company, or any subsidiary or affiliate;
(ii) during the Contract Employment Period and for two
years after the termination of such Period, Executive shall not
attempt, directly or indirectly, to induce any employee or
Insurance Agent (as defined below) of the Company, or any
subsidiary or any affiliate thereof to be employed or perform
services elsewhere;
(iii) during the Contract Employment Period and for two
years after the termination of such Period, Executive shall not
attempt, directly or indirectly, to induce any insurance agent or
agency, insurance broker, broker-dealer or supplier of the
Company, or any subsidiary or affiliate thereof to cease providing
services to the Company, or any subsidiary or affiliate thereof;
(iv) during the Contract Employment Period and for two
years after the termination of such Period, Executive shall not
attempt, directly or indirectly, to solicit, on behalf of any
person or entity other than the Company or any of its subsidiaries,
the trade of any individual or entity which, at the time of the
solicitation, is a customer of the Company, or any subsidiary or
affiliate thereof, or which the Company, or any subsidiary or
affiliate thereof is undertaking reasonable steps to procure as a
customer at the time of or immediately preceding termination of
the Contract Employment Period; provided, however, that this
________ _______
PAGE 16
limitation shall only apply to (x) any product or service which is
_
in competition with a product or service of the Company or any
subsidiary or affiliate thereof and (y) with respect to any
_
customer or prospective customer with whom Executive has or had
(by virtue of Executive's position or otherwise) a personal
relationship; and
(v) following the termination of the Contract Employment
Period, Executive shall provide assistance to and shall cooperate
with the Company or any subsidiary or affiliate thereof, upon its
reasonable request, with respect to matters within the scope of
Executive's duties and responsibilities during the Contract
Employment Period. (The Company agrees and acknowledges that it
shall, to the maximum extent possible under the then prevailing
circumstances, coordinate (or cause a subsidiary or affiliate
thereof to coordinate) any such request with Executive's other
commitments and responsibilities to minimize the degree to which
such request interferes with such commitments and
responsibilities). The Company agrees that it will reimburse
Executive for reasonable travel expenses (i.e., travel, meals and
____
lodging) that Executive may incur in providing assistance to the
Company hereunder.
Solely for purposes of Paragraph 8(b)(ii) above, the term
"Insurance Agent" shall mean those insurance agents or agencies
representing the Company or any subsidiary or affiliate thereof,
that are exclusive or career agents or agencies of the Company or
any subsidiary or affiliate thereof, or any insurance agents or
agencies which derive 50% or more of their business revenue from
the Company or any subsidiary or affiliate thereof (calculated on
an aggregate basis for the 12-month period prior to the date of
determination or such other similar period for which such
information is more readily available).
c. Company Property. Promptly following Executive's
________________
termination of employment, Executive shall return to the Company
all property of the Company, and all copies thereof in Executive's
possession or under his control.
d. Intention of the Parties. If any provision of
________________________
Paragraph 8 is determined by an arbitrator (or a court of
competent jurisdiction asked to enforce the decision of the
arbitrator) not to be enforceable in the manner set forth in this
Agreement, the Company and Executive agree that it is the
intention of the parties that such provision should be enforceable
to the maximum extent possible under applicable law and that such
arbitrator (or court) shall reform such provision to make it
enforceable in accordance with the intent of the parties.
Executive acknowledges that a material part of the inducement for
the Company to provide the salary and benefits evidenced hereby is
Executive's covenants set forth in Paragraph 8(a), (b) and (c) and
that the covenants and obligations of Executive with respect to
nondisclosure and nonsolicitation relate to special, unique and
extraordinary matters and that a violation of any of the terms of
such covenants and obligations will cause the Company irreparable
injury for which adequate remedies are not available at law.
Therefore, Executive agrees that, if Executive shall breach any of
those covenants, the Company shall have no further obligation to
pay Executive any benefits otherwise payable hereunder and the
Company shall be entitled to an injunction, restraining order or
such other equitable relief (without the requirement to post a
PAGE 17
bond) restraining Executive from committing any violation of the
covenants and obligations contained in Paragraph 8(a), (b) and
(c). The remedies in the preceding sentence are cumulative and
are in addition to any other rights and remedies the Company may
have at law or in equity as an arbitrator (or court) shall
reasonably determine.
e. Waiver. Without limiting the generality of the
______
foregoing, upon request of Executive prior to engaging in any
conduct otherwise prohibited by this Paragraph 8, the Board may,
in its sole discretion, waive in writing, on such terms and
conditions as it may deem appropriate, any violation of this
Paragraph 8 which would otherwise occur due to such conduct.
9. Miscellaneous.
_____________
a. Survival. Paragraphs 7 (relating to a Change in
________
Control), 8 (relating to noncompetition, nonsolicitation and
confidentiality)and 9 (relating, among other things, to survival,
assignment and governing law) shall survive the termination
hereof, whether such termination shall be by expiration of the
Contract Employment Period or an early termination pursuant to
Paragraph 6 hereof. Paragraph 6((other than Paragraph 6(f))
(relating to early termination) shall survive the termination
hereof to the extent that, prior thereto, Executive (or his
beneficiary) has become entitled to receive any of the benefits
payable thereunder. Paragraph 6(f) (and to the extent applicable
to such Paragraph 6(f), 6(e)) shall survive for one year following
the termination hereof.
b. Binding Effect. This Agreement shall be binding on,
______________
and shall inure to the benefit of, the Company and any person or
entity that succeeds to the interest of the Company (regardless of
whether such succession does or does not occur by operation of
law) by reason of the sale of all or a portion of the Company's
stock, a merger, consolidation or reorganization involving the
Company or, unless the Company otherwise elects in writing, a sale
of the assets of the business of the Company (or portion thereof)
in which Executive performs a majority of his services. Any
successor in interest to the Company shall acknowledge in writing
to Executive that it has assumed this Agreement and is responsible
to Executive for the performance of the Company's obligations
under this Agreement. Without limiting the generality of the
foregoing, the Company shall have the right, without the consent
of Executive, to assign this Agreement and its obligations
hereunder to any New Entity or any subsidiary of any New Entity by
which Executive becomes employed, at the discretion of the
Company, by reason of the implementation of any restructuring of
the Company, and, following any such assignment, such New Entity
or subsidiary shall be treated as the Company for all purposes of
this Agreement. This Agreement shall also endure to the benefit
of Executive's heirs, executors, administrators and legal
representatives.
c. Assignment. Except as provided under Paragraph
__________
9(b), neither this Agreement nor any of the rights or obligations
hereunder shall be assigned or delegated by any party hereto
without the prior written consent of the other party. In the
event the Company assigns this Agreement pursuant to Section 9(b),
the Company shall guarantee payment to Executive of any amounts at
any time due and payable hereunder in the event (and only to the
PAGE 18
extent) that the assignee has become a debtor in bankruptcy, is
the subject of a receivership or similar preceding or has become
insolvent, provided that Executive shall be required to assign his
________ ____
rights against the assignee through subrogation as a condition of
receiving any payment under the Company's guarantee. In
consideration of such guarantee, Executive agrees that following
such assignment, the covenants of Executive in Paragraphs 8(b)(i)
and (v) shall continue to inure to the benefit of the Company, as
well as the assignee. The Company and Executive agree that
following any assignment all other covenants described herein in
favor of the Company shall, from and after the date of such
assignment, inure solely to the benefit of the assignee.
d. Entire Agreement. Except as expressly provided
________________
below, this Agreement, the Option Agreement, and the portion, if
any, of any other agreement relating to pension service or credits
referred to in Paragraph 5(a) shall constitute the entire
agreement between the parties hereto with respect to the matters
referred to herein and any other agreement or any portion of any
such other agreement not expressly preserved hereby shall cease to
be effective upon the execution hereof and shall not become
reinstated upon the expiration or other termination of this
Agreement. There are no promises, representations, inducements or
statements between the parties other than those that are expressly
contained herein. Executive acknowledges that he is entering into
this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it
and its legal consequences. Other than the provisions of
Paragraph 6 which limit Executive's eligibility to receive
severance benefits under the Company's generally applicable plans,
programs or agreements, nothing in this Agreement shall be
construed to limit or otherwise supersede Executive's rights or
entitlements under any compensatory plan, program or arrangement
made available generally to all employees or all officers of the
Company or under the 1994 Plan or the 1984 Plan and this Paragraph
9(d) shall not preclude reference to the documents governing any
such plan, program or arrangement to determine such rights and
entitlements.
e. Severability; Reformation. In the event that one or
_________________________
more of the provisions of this Agreement shall become invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not be affected thereby. In the event any of Paragraph
8(a), (b) or (c) is not enforceable in accordance with its terms,
Executive and the Company agree that such Paragraph shall be
reformed to make such Paragraph enforceable in a manner which
provides the Company the maximum rights permitted at law.
f. Waiver. Waiver by any party hereto of any breach
______
or default by the other party of any of the terms of this
Agreement shall not operate as a waiver of any other breach or
default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement
shall be implied from any course of dealing between the parties
hereto or from any failure by either party hereto to assert its or
his rights hereunder on any occasion or series of occasions.
PAGE 19
g. Notices. Any notice required or desired to be
_______
delivered under this Agreement shall be in writing and shall be
delivered personally, by courier service, by registered mail,
return receipt requested, or by telecopy and shall be effective
upon actual receipt by the party to which such notice shall be
directed, and shall be addressed as follows (or to such other
address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
If to the Company:
Aetna Life and Casualty Company
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Corporate Secretary
If to Executive:
Xxxxxx X. Xxxxxxx
00 Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
h. Arbitration. The Company and Executive agree that any
___________
claim, dispute or controversy arising under or in connection with
this Agreement, or otherwise in connection with Executive's
employment by the Company (including, without limitation, any such
claim, dispute or controversy arising under any federal, state or
local statute, regulation or ordinance or any of the Company's
employee benefit plans, policies or programs) shall be resolved
solely and exclusively by binding arbitration. The arbitration
shall be held in the city of Hartford, Connecticut (or at such
other location as shall be mutually agreed by the parties). The
arbitration shall be conducted in accordance with the Expedited
Employment Arbitration Rules (the "Rules") of the American
Arbitration Association (the "AAA") in effect at the time of the
arbitration, except that the arbitrator shall be selected by
alternatively striking from a list of five arbitrators supplied by
the AAA. All fees and expenses of the arbitration, including a
transcript if either requests, shall be borne equally by the
parties. If Executive prevails as to any material issue presented
to the arbitrator, the entire cost of such proceedings (including,
without limitation, Executive's reasonable attorneys fees) shall
be borne by the Company. If Executive does not prevail as to any
material issue, each party will pay for the fees and expenses of
its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs (unless the party
prevails on a claim for which attorney's fees are recoverable
under the Rules). Any action to enforce or vacate the
arbitrator's award shall be governed by the Federal Arbitration
Act, if applicable, and otherwise by applicable state law. If
either the Company or Executive pursues any claim, dispute or
controversy against the other in a proceeding other than the
arbitration provided for herein, the responding party shall be
entitled to dismissal or injunctive relief regarding such action
and recovery of all costs, losses and attorney's fees related to
such action.
PAGE 20
i. Amendments. This Agreement may not be altered,
__________
modified or amended except by a written instrument signed by each
of the parties hereto.
j. Headings. Headings to paragraphs in this Agreement
________
are for the convenience of the parties only and are not intended
to be part of or to affect the meaning or interpretation hereof.
k. Counterparts. This Agreement may be executed in
____________
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
l. Withholding. Any payments provided for herein shall
___________
be reduced by any amounts required to be withheld by the Company
from time to time under applicable Federal, State or local income
or employment tax laws or similar statutes or other provisions of
law then in effect.
m. Governing Law. This Agreement shall be governed by
_____________
the laws of the State of Connecticut, without reference to
principles of conflicts or choice of law under which the law of
any other jurisdiction would apply.
IN WITNESS WHEREOF, the Company has caused this Agreement
to be executed by its duly authorized officer and Executive has
hereunto set his hand as of the day and year first above written.
Aetna Life and Casualty Company
/s/ Xxxx Xxx Xxxxxxxx
________________________________
Xxxx Xxx Xxxxxxxx
Senior Vice President, Aetna
Human Resources
/s/ Xxxxxx X. Xxxxxxx
________________________________
Xxxxxx X. Xxxxxxx
