<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
____________________
Commission file number 1-11913
_________
Aetna Inc.
___________________________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut 02-0488491
___________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
___________________________________________________________________________
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (860) 273-0123
______________________
Not Applicable*
___________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
* Aetna Inc. became the parent corporation of each of
Aetna Services, Inc. (formerly Aetna Life and Casualty
Company - Commission File No. 1-5704; I.R.S. Employer
Identification No. 06-0843808) and U.S. Healthcare, Inc.
(Commission File No. 0-11531; I.R.S. Employer Identification
No. 23-2229683) as a result of a merger transaction
on July 19, 1996. Aetna Services, Inc. and U.S. Healthcare,
Inc. no longer file separate reports under the Securities
Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No _____
_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Shares Outstanding
Title of Class at September 30, 1996
________________ ______________________
Common Capital Stock
$.01 par value 150,920,893
<PAGE> 2
TABLE OF CONTENTS
_________________
Page
____
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Shareholders'
Equity 6
Consolidated Statements of Cash Flows 7
Condensed Notes to Financial Statements 8
Independent Auditors' Review Report 26
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 57
Item 4. Submission of Matters to a Vote of
Security Holders. 57
Item 5. Other Information. 59
Item 6. Exhibits and Reports on Form 8-K. 59
Signatures 65
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________________ __________________________
(Millions, except share and per share data) 1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenue:
Premiums..................................... $ 2,688.4 $ 1,830.4 $ 6,243.1 $ 5,535.0
Net investment income........................ 897.9 884.0 2,678.0 2,673.5
Fees and other income........................ 558.5 473.3 1,624.8 1,413.0
Net realized capital gains................... 7.5 3.3 73.9 6.0
____________ ____________ ____________ ____________
Total revenue............................ 4,152.3 3,191.0 10,619.8 9,627.5
____________ ____________ ____________ ____________
Benefits and expenses:
Current and future benefits.................. 2,860.7 2,203.6 7,157.0 6,735.5
Operating expenses........................... 913.7 774.1 2,499.2 2,271.7
Amortization of goodwill and other
intangible assets........................... 75.1 3.8 80.8 16.7
Amortization of deferred policy acquisition
costs....................................... 48.4 33.5 123.5 102.6
Reduction of loss on discontinued products... - - (170.0) -
Severance and facilities charges............. 49.0 - 441.7 -
____________ ____________ ____________ ____________
Total benefits and expenses.............. 3,946.9 3,015.0 10,132.2 9,126.5
____________ ____________ ____________ ____________
Income from continuing operations before income
taxes........................................ 205.4 176.0 487.6 501.0
Income taxes (benefits):
Current...................................... 76.7 79.0 201.5 172.0
Deferred..................................... 6.3 (15.6) (26.1) 2.9
____________ ____________ ____________ ____________
Total income taxes....................... 83.0 63.4 175.4 174.9
____________ ____________ ____________ ____________
Income from continuing operations.............. 122.4 112.6 312.2 326.1
Discontinued operations, net of tax:
Income (Loss) from operations................ - 99.5 182.2 (250.1)
Gain on sale................................. - - 263.7 -
____________ ____________ ____________ ____________
Net income .............................. $ 122.4 $ 212.1 $ 758.1 $ 76.0
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Net income applicable to
common ownership....................... $ 111.2 $ 212.1 $ 746.9 $ 76.0
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Results per common share:
Income from continuing operations.............. $ .77 $ .98 $ 2.39 $ 2.87
Discontinued operations, net of tax:
Income (Loss) from operations................ - .88 1.44 (2.20)
Gain on sale................................. - - 2.09 -
____________ ____________ ____________ ____________
Net income .................................. $ .77 $ 1.86 $ 5.92 $ .67
____________ ____________ ____________ _____________
____________ ____________ ____________ _____________
Dividends declared........................... $ .40 $ .69 $ 1.09 $ 2.07
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Weighted average common shares and common
share equivalents.......................... 145,149,973 114,370,702 126,138,464 113,522,029
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 4
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1996 1995
_____________ ____________
<S> <C> <C>
Assets:
Investments:
Debt securities available for sale,
at fair value (amortized cost
$30,504.9 and $29,962.5)......... $ 30,955.5 $ 31,860.3
Equity securities, at fair value
(cost $995.5 and $597.8)........... 1,234.8 659.7
Short-term investments................ 642.2 607.8
Mortgage loans........................ 7,171.6 8,327.2
Real estate........................... 1,101.1 1,277.3
Policy loans.......................... 670.0 629.4
Other................................. 660.2 688.6
___________ ___________
Total investments............... 42,435.4 44,050.3
Cash and cash equivalents............. 2,159.3 1,712.7
Accrued investment income............. 584.5 618.3
Premiums due and other receivables.... 1,361.3 1,080.9
Deferred income taxes................. - 271.5
Deferred policy acquisition costs..... 2,141.1 1,953.1
Goodwill and other intangible assets.. 8,517.4 147.3
Other assets.......................... 1,097.2 857.1
Separate Accounts assets.............. 33,243.8 29,699.7
Net assets of Discontinued
Operations........................... - 3,932.8
___________ ___________
Total assets.................... $ 91,540.0 $ 84,323.7
___________ ___________
___________ ___________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 5
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
September 30, December 31,
(Millions, except share and per share data) 1996 1995
_____________ ____________
<S> <C> <C>
Liabilities:
Future policy benefits........................ $ 18,339.5 $ 18,372.9
Unpaid claims and claim expenses.............. 1,946.6 1,563.1
Unearned premiums............................. 217.0 142.4
Policyholders' funds left with the company.... 20,482.9 22,898.7
__________ ___________
Total insurance liabilities............... 40,986.0 42,977.1
Dividends payable to shareholders............. 37.1 79.2
Short-term debt............................... 366.5 389.6
Long-term debt................................ 2,382.3 989.1
Current income taxes.......................... 127.8 154.0
Deferred taxes................................ 29.6 -
Other liabilities............................. 3,051.8 2,344.2
Participating policyholders' interests........ 192.2 204.8
Separate Accounts liabilities................. 33,180.1 29,637.9
__________ ___________
Total liabilities......................... 80,353.4 76,775.9
__________ ___________
Aetna-obligated mandatorily redeemable
preferred securities of subsidiary
limited liability company holding
primarily debentures guaranteed by Aetna..... 275.0 275.0
__________ ___________
Shareholders' Equity:
Class C Voting Mandatorily Convertible
Preferred Stock ($.01 par value; 15,000,000
shares authorized in 1996; 11,655,546 issued
and outstanding)............................. 865.4 -
Common Stock ($.01 par value and no par value;
500,000,000 and 250,000,000 shares authorized;
150,920,893 and 115,013,675 issued, and
150,920,893 and 114,727,093 outstanding)..... 4,104.0 1,448.2
Net unrealized capital gains.................. 139.7 641.1
Retained earnings............................. 5,802.5 5,195.6
Treasury stock, at cost (286,582 shares in 1995) - (12.1)
__________ ___________
Total shareholders' equity................ 10,911.6 7,272.8
__________ ___________
Total liabilities, minority interest and
shareholders' equity..................... $ 91,540.0 $ 84,323.7
__________ ___________
__________ ___________
Shareholders' equity per common share......... $ 66.57 $ 63.39
__________ ___________
__________ ___________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 6
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Millions, except share data)
Class C Voting
Mandatorily Net
Convertible Unrealized
Preferred Common Capital Retained Treasury
Nine Months Ended September 30, 1996 Total Stock Stock Gains (Losses) Earnings Stock
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $ 7,272.8 $ - $ 1,448.2 $ 641.1 $ 5,195.6 $ (12.1)
___________________________________________________________________________________________________________
Net income............................ 758.1 758.1
Change in net unrealized capital gains
and losses......................... (501.4) (501.4)
Class C Voting Mandatorily Convertible
Preferred stock issued for U.S.
Healthcare merger (11,655,546 shares) 865.4 865.4
Common shares issued for U.S.
Healthcare merger (34,988,615 shares) 2,580.1 2,580.1
Stock options issued for U.S. Healthcare
merger............................. 24.8 24.8
Common stock issued for benefit plans
(1,205,185 shares).................. 63.0 63.0
Common stock dividends................ (140.0) (140.0)
Preferred stock dividends............. (11.2) (11.2)
Treasury stock retired................ - (12.1) 12.1
__________________________________________________________________
Balances at September 30, 1996 $10,911.6 $ 865.4 $ 4,104.0 $ 139.7 $ 5,802.5 $ -
___________________________________________________________________________________________________________
__________________________________________________________________
Nine Months Ended September 30, 1995
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $ 5,503.0 $ - $ 1,419.2 $(1,071.5) $ 5,259.6 $(104.3)
___________________________________________________________________________________________________________
Net Income............................ 76.0 76.0
Change in net unrealized capital gains
and losses.......................... 1,472.9 1,472.9
Common stock issued for benefit plans
(1,657,048 shares).................. 78.9 78.9
Gain on issuance of treasury stock.... 6.4 6.4
Common stock dividends................ (236.2) (236.2)
__________________________________________________________________
Balances at September 30, 1995 $ 6,901.0 $ - $ 1,425.6 $ 401.4 $ 5,099.4 $ (25.4)
___________________________________________________________________________________________________________
__________________________________________________________________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 7
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
________________________
(Millions) 1996 1995
____ ____
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................................ $ 758.1 $ 76.0
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
(Income) loss from Discontinued Operations..................... (182.2) 250.1
Decrease (Increase) in accrued investment income............... 39.3 (2.0)
Increase in premiums due and other receivables................. (151.6) (39.3)
Increase in deferred policy acquisition costs.................. (186.7) (163.7)
Depreciation and amortization.................................. 206.9 133.5
(Decrease) Increase in income taxes............................ (177.1) 2.7
Net increase (decrease) in other assets and other liabilities.. 131.0 (251.4)
Decrease in insurance reserve liabilities...................... (1,208.1) (198.4)
Net realized capital gains..................................... (73.8) (6.0)
Net realized capital gains on sale of Discontinued Operations.. (263.7) -
Amortization of net investment discounts....................... (95.9) (98.5)
Other, net..................................................... 15.8 (23.1)
_________ _________
Net cash used for operating activities....................... (1,188.0) (320.1)
_________ _________
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale............................. 10,373.6 9,978.4
Equity securities.............................................. 405.0 600.1
Mortgage loans................................................. 104.7 99.1
Real estate.................................................... 387.7 178.8
Short-term investments......................................... 27,947.7 35,152.7
Sale of Discontinued Operations................................ 4,134.1 -
Investment maturities and repayments of:
Debt securities available for sale............................. 2,579.1 1,515.3
Debt securities held for investment............................ - 196.7
Mortgage loans................................................. 1,123.3 881.6
Cost of investments in:
Debt securities available for sale............................. (11,899.8) (11,768.0)
Debt securities held for investment............................ - (43.7)
Equity securities.............................................. (777.1) (421.0)
Mortgage loans................................................. (282.6) (148.2)
Real estate.................................................... (50.7) (104.5)
Short-term investments......................................... (27,905.1) (35,603.0)
U.S. Healthcare................................................ (5,243.9) -
Increase in property and equipment................................ (67.4) (118.5)
Net (decrease) increase in Separate Accounts...................... (2.0) 58.7
Other, net........................................................ 2.9 18.4
_________ _________
Net cash provided by investing activities.................... 829.5 472.9
_________ _________
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts........... 1,456.4 2,357.8
Withdrawals of investment contracts............................... (2,647.2) (2,829.9)
Issuance of long-term debt........................................ 1,389.3 6.8
Stock issued under benefit plans.................................. 56.5 85.3
Repayment of long-term debt....................................... - (1.6)
Net (decrease) increase in short-term debt........................ (23.4) 54.7
Dividends paid to shareholders.................................... (193.2) (236.2)
_________ _________
Net cash provided by (used for) financing activities......... 38.4 (563.1)
_________ _________
Effect of exchange rate changes on cash and cash
equivalents....................................................... .1 2.7
_________ _________
Net decrease in cash and cash equivalents............................ (320.0) (407.6)
Cash acquired from U.S. Healthcare................................... 766.6 -
Cash and cash equivalents, beginning of period....................... 1,712.7 2,277.2
_________ _________
Cash and cash equivalents, end of period............................. $ 2,159.3 $ 1,869.6
_________ _________
_________ _________
Supplemental Cash Flow Information:
Interest paid..................................................... $ 113.8 $ 101.7
_________ _________
_________ _________
Income taxes paid ................................................ $ 206.4 $ 81.7
_________ _________
_________ _________
<FN>
See Condensed Notes to Financial Statements.
</TABLE>
<PAGE> 8
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include Aetna Inc. and its
majority-owned subsidiaries (collectively, the "company"),
including Aetna Services, Inc. ("Aetna Services") (formerly Aetna
Life and Casualty Company), and, from July 19, 1996, U.S.
Healthcare, Inc. ("U.S. Healthcare"). Less than majority-owned
entities in which the company has at least a 20% interest are
reported on the equity basis. These consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1995 financial information to
conform to the 1996 presentation. These interim statements
necessarily rely heavily on estimates, including assumptions as to
annualized tax rates. In the opinion of management, all
adjustments necessary for a fair statement of results for the
interim periods have been made. All such adjustments are of a
normal, recurring nature. The accompanying condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements and related notes as presented
in Aetna Services' 1995 Annual Report. Certain financial
information that is normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles, but that is not required for interim
reporting purposes, has been condensed or omitted.
Goodwill and Other Intangible Assets
Goodwill, which represents the excess of cost over the fair value
of net assets of acquired subsidiaries and affiliates, is
amortized on a straight-line basis over periods not exceeding 40
years. Other intangible assets, which are primarily customer
lists, provider networks and computer systems are amortized on a
straight-line basis over various periods not exceeding 25 years.
The company regularly evaluates the recoverability of goodwill and
other intangible assets. The carrying value of goodwill and other
intangible assets would be reduced through a direct write-off if,
in management's judgment, it was probable that projected future
operating income (before amortization of goodwill and other
intangible assets) would not be sufficient on an undiscounted
basis to recover the carrying value of the goodwill and other
intangible assets. Operating earnings considered in such an
analysis are those of the entity acquired, if separately
identifiable, or the business segment that acquired the entity if
the entity's earnings are not separately identifiable.
<PAGE> 9
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
Prepaid Health Care Services
Medical costs related to the company's prepaid health care
services (primarily health maintenance organizations) consist
principally of medical claims and capitation costs, and are
included in current and future benefits in the company's
Consolidated Statements of Income. Medical claims include
estimates of payments to be made on claims reported and estimates
of health care services rendered but not reported to the company
as of the balance sheet date. Such estimates include the cost of
services which will continue to be rendered after the balance
sheet date if the company is obligated to pay for such services in
accordance with contract provisions or regulatory requirements.
Medical claims payable are included in unpaid claims and claim
expenses on the company's Consolidated Balance Sheets. Capitation
costs represent monthly fees to participating primary care
physicians and other medical providers for providing health care
services.
(2) Merger with U.S. Healthcare
The merger with U.S. Healthcare was consummated on July 19, 1996.
As a result of the merger, Aetna Services and U.S. Healthcare are
each direct, wholly-owned subsidiaries of Aetna Inc. Pursuant to
the merger, each outstanding share of Aetna Services common stock
(115,721,039 shares) became a share of common stock of Aetna Inc.
Each outstanding share of U.S. Healthcare common stock and Class B
Stock became a right to receive $34.20 in cash, 0.2246 shares of
Aetna Inc. common stock and 0.0749 shares of Aetna Inc. 6.25%
Class C Voting Preferred Stock ("Class C Stock") resulting in the
issuance of 34,951,077 shares of Aetna Inc. common stock and
11,655,546 shares of Class C Stock.
The merger has been accounted for as a purchase with total
consideration of approximately $8.9 billion which has been
allocated to the assets acquired and liabilities assumed based on
estimates of their fair values. Assets acquired totaled $1.8
billion and liabilities assumed were $.8 billion. A total of $7.9
billion, net of related deferred taxes, representing the excess of
the purchase price over the fair values of the net assets
acquired, has been allocated to goodwill and identifiable
intangible assets and is being amortized over a range of estimated
useful lives for goodwill at 40 years and for identifiable
intangible assets of 5 to 25 years.
The company's consolidated results of operations include U.S.
Healthcare's results from the date of the merger. The unaudited
pro forma information below presents combined results of
operations as if the merger (as well as the sale of Aetna's
property-casualty operations - see note 4) had occurred at the
beginning of 1995 and reflects adjustments which include interest
expense related to the assumed financing of a portion of the cash
consideration paid, interest income foregone related to the
balance of the cash consideration paid, amortization of goodwill
and identifiable intangible assets, and adjustments to conform
U.S. Healthcare's accounting policies with Aetna, and to remove
the effect of merger-related costs incurred by U.S. Healthcare
prior to the acquisition. No adjustment has been made to give
effect to any synergies which may be realized as a result of the
merger.
<PAGE> 10
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(2) Merger with U.S. Healthcare (Continued)
The unaudited pro forma information is not necessarily indicative
of the results of operations of the combined company had the
merger occurred at the beginning of 1995, nor is it necessarily
indicative of future results.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per share data) 1996 1995 1996 1995
___________________________________ _____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenue $4,356.0 $4,117.4 $12,985.1 $12,248.4
________ ________ _________ _________
________ ________ _________ _________
Realized investment gains
(losses) included in
revenue $ (.8) $ 3.3 $ 68.4 $ 12.6
________ ________ _________ _________
________ ________ _________ _________
Income before income taxes $ 183.7 $ 206.1 $ 503.5 $ 597.5
________ ________ _________ _________
Income taxes $ 78.6 $ 96.8 $ 222.5 $ 277.6
________ ________ _________ _________
Net income $ 105.1 $ 109.3 $ 281.0 $ 319.9
________ ________ _________ _________
________ ________ _________ _________
Net income per common share $ .60 $ .64 $ 1.58 $ 1.87
________ ________ _________ _________
________ ________ _________ _________
</TABLE>
<PAGE> 11
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 123, Accounting for
Stock-Based Compensation, is effective for 1996 reporting. This
statement addresses the accounting for the cost of stock-based
compensation, such as stock options. FAS No. 123 permits either
expensing the cost of stock-based compensation over the vesting
period or disclosing in the financial statement footnotes what
this expense would have been. This cost would be measured at the
grant date based upon estimated fair values, using option pricing
models. The company has selected the disclosure alternative which
requires that such disclosures be included in full year financial
statements only.
FAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities was issued in June 1996.
This statement provides accounting and reporting standards for
transfers of financial assets and extinguishments of liabilities.
Transactions covered by this statement would include
securitizations, sales of partial interests in assets, repurchase
agreements and securities lending. This statement requires that
after a transfer of financial assets, an entity would recognize on
the balance sheet any assets it controls and liabilities it has
incurred. Similarly, an entity would remove assets or liabilities
from its balance sheet when control of the assets has been
surrendered or the liabilities satisfied.
This statement is effective for 1997 financial statements and
early adoption or retroactive application of this statement is not
permitted. The company does not expect the adoption of this
statement will have a material effect on its financial position or
results of operations.
(4) Sales of Subsidiaries
On April 2, 1996, the company completed the sale of its property-
casualty operations to an affiliate of the Travelers Insurance
Group Inc. ("Travelers") for approximately $4.1 billion in cash.
The sale resulted in a gain of $263.7 million ($218.3 million
pretax).
The operating results of the property-casualty operations were
presented as discontinued operations through the sale date.
Operating results for the period from January 1 to April 2 were:
<TABLE>
<CAPTION>
(Millions) 1996
_____________________________________________________________
<S> <C>
Total revenue $1,539.3
____________________________________________________________
________
Income before taxes $ 262.7
Income taxes 80.5
________
Income from Discontinued Operations $ 182.2
____________________________________________________________
________
</TABLE>
<PAGE> 12
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) Sales of Subsidiaries (Continued)
As a result of the sale, the company retained no property-casualty
liabilities other than those associated with indemnifying
Travelers for a portion of certain potential liability exposures.
While there can be no assurances, management currently does not
believe that the aggregate ultimate loss arising from these
indemnifications, if any, will be material to the annual net
income, liquidity or financial condition of the company, although
it is reasonably possible.
(5) Severance and Facilities Charges
In the third quarter of 1996, the company recorded a $31.8 million
after tax ($49.0 million pretax) severance and facilities charge
for Aetna Retirement Services, primarily related to actions taken
or expected to be taken to improve its cost structure relative to
its competitors. The severance portion of the charge is based on
a plan to eliminate 723 positions (primarily customer service,
sales and information technology support staff). The facilities
portion of the charge is based on a plan to consolidate
sales/service field offices.
In the second quarter of 1996, in conjunction with the sale of the
company's property-casualty operations, Travelers subleased the
space that had been occupied by the company in the CityPlace
office facility in Hartford for eight years at current market
rates. The company recorded a charge of $190.0 million (after
tax) during the second quarter of 1996 representing the present
value of the difference between rent required to be paid by the
company under the lease and future rentals expected to be received
by the company. The company also recorded additional severance
and facilities charges of $45.5 million (after tax) during the
second quarter of 1996 due to actions taken or expected to be
taken to reduce the level of corporate expenses and other costs
previously absorbed by the property-casualty operations. The
severance portion of this charge includes the planned elimination
of 475 positions.
In the second quarter of 1996, a severance and facilities charge
of $19.5 million after tax ($30.0 million pretax) was taken by
Aetna U.S. Healthcare primarily related to actions taken or
expected to be taken to reduce information technology costs in the
health business and are not related to the U.S. Healthcare merger.
The severance portion of this charge is based on a plan to
eliminate 675 positions.
<PAGE> 13
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) Severance and Facilities Charges (Continued)
Severance and facilities charges for the nine months ended
September 30, 1996 included the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased
(Millions) Severance Write-Off Property Other Total
________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Aetna U.S. Healthcare $ 20.8 $ .9 $ 3.5 $ 4.8 $ 30.0
Aetna Retirement Services 42.8 1.5 1.9 2.8 49.0
Corporate: Other 28.5 18.0 313.2 (1) 3.0 362.7
_________________________________________________________
Total Company $ 92.1 $ 20.4 $318.6 $ 10.6 $441.7
________________________________________________________________________________________
_________________________________________________________
<FN>
(1) Includes $292.2 million related to the CityPlace lease.
</TABLE>
The activity for the nine months ended September 30, 1996 within
the severance and facilities reserve (pretax, in millions) and the
number of positions eliminated related to such actions were as
follows:
<TABLE>
<CAPTION>
Reserve Positions
_______________________________________________________________________________
<S> <C> <C>
Beginning of period $ - -
Severance and facilities charges 441.7 1,873
Actions taken (55.0) (1) (905)
______ _____
End of period $386.7 968
_______________________________________________________________________________
_____________________________
<FN>
(1) Includes $42.6 million of severance related actions.
</TABLE>
The 905 positions eliminated during the nine months ended
September 30, 1996 related to the following segments: 53% - Aetna
U.S. Healthcare, 15% - Aetna Retirement Services and 32% -
corporate. Termination of the remaining employees, under the
announced actions, and the vacating of the leased office space
(excluding the CityPlace lease) are expected to be substantially
completed within 15 to 18 months. The remaining lease payments
(net of expected subrentals) on such vacated facilities are
payable over approximately the next 3 years.
Aetna U.S. Healthcare will record a severance and facilities
charge of approximately $275.0 million after tax in the fourth
quarter of 1996 principally related to costs associated with the
integration of the health businesses of Aetna and U.S. Healthcare.
The severance and facilities charge is expected to consist of $167
million of severance costs, $40 million of facilities-related
costs and $68 million of asset write-offs and other related items.
The severance portion of this charge is based on a plan to
eliminate approximately 7,500 positions (primarily service center,
medical management, administrative and data center personnel).
Such actions are expected to be substantially completed by
December 31, 1998.
<PAGE> 14
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Discontinued Products
Under the company's accounting for its discontinued fully
guaranteed large case pension products (guaranteed investment
contracts ("GICs") and single-premium annuities ("SPAs")), the
respective reserves for anticipated future losses are reviewed by
management quarterly. Accordingly, as long as the reserves
represent management's then best estimates of expected future
losses, results of operations of the discontinued products,
including net realized capital gains and losses, are
credited/charged to the respective reserve and do not affect the
company's results of operations. As a result of management's
review in the second quarter, $170 million (pretax) of the reserve
related to GICs was released. The reserves at September 30, 1996
reflect management's best estimate of the anticipated future net
losses for GICs and SPAs. To the extent that actual future losses
are greater than anticipated future net losses, the company's
results of operations would be adversely affected. Conversely, if
actual future losses are less than anticipated future losses, the
company's results of operations would be favorably affected.
(Refer to Aetna Services' 1995 Annual Report for a more complete
discussion of the reserve for anticipated future losses on
discontinued products.)
<PAGE> 15
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Discontinued Products (Continued)
Results of discontinued products were as follows (pretax, in
millions):
<TABLE>
<CAPTION>
Charged
(Credited) to
Guaranteed Single- Reserve for
Investment Premium Future
Three months ended September 30, 1996 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net investment income $ 81.9 $ 106.7 $ 188.6 $ - $ 188.6
Net realized capital gains 10.5 1.6 12.1 (12.1) -
Interest earned on receivable
from continuing business 4.0 7.8 11.8 - 11.8
Other income 3.1 13.6 16.7 - 16.7
_____________________________________________________________
Total revenue 99.5 129.7 229.2 (12.1) 217.1
_____________________________________________________________
Current and future benefits 83.2 106.2 189.4 24.7 214.1
Operating expenses .7 2.3 3.0 - 3.0
_____________________________________________________________
Total benefits and expenses 83.9 108.5 192.4 24.7 217.1
_____________________________________________________________
Results of discontinued products $ 15.6 $ 21.2 $ 36.8 $ (36.8) $ -
_____________________________________________________________________________________________________
_____________________________________________________________
Charged
(Credited) to
Guaranteed Single- Reserve for
Investment Premium Future
Three months ended September 30, 1995 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net investment income $ 121.2 $ 111.6 $ 232.8 $ - $ 232.8
Net realized capital gains (12.4) 16.2 3.8 (3.8) -
Interest earned on receivable
from continuing business 5.0 7.7 12.7 - 12.7
Other income 2.1 3.0 5.1 - 5.1
_____________________________________________________________
Total revenue 115.9 138.5 254.4 (3.8) 250.6
_____________________________________________________________
Current and future benefits 138.1 108.9 247.0 1.7 248.7
Operating expenses (.4) 2.3 1.9 - 1.9
_____________________________________________________________
Total benefits and expenses 137.7 111.2 248.9 1.7 250.6
_____________________________________________________________
Results of discontinued products $ (21.8) $ 27.3 $ 5.5 $ (5.5) $ -
_____________________________________________________________________________________________________
_____________________________________________________________
<FN>
* Amounts are reflected in the 1996 and 1995 Consolidated Statements of Income, except for interest of
$11.8 million and $12.7 million for the three months ended September 30, 1996 and 1995, respectively,
earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>
<PAGE> 16
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Discontinued Products (Continued)
<TABLE>
<CAPTION>
Charged
(Credited)
Guaranteed Single- to Reserve
Investment Premium for Future
Nine months ended September 30, 1996 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net investment income $ 280.8 $ 331.6 $ 612.4 $ - $ 612.4
Net realized capital gains (losses) 36.2 (.1) 36.1 (36.1) -
Interest earned on receivable
from continuing business 14.6 23.4 38.0 - 38.0
Change in Accounting
Policy - FAS No. 121 (1) 5.4 2.9 8.3 - 8.3
Other income 8.0 20.5 28.5 - 28.5
_____________________________________________________________
Total revenue 345.0 378.3 723.3 (36.1) 687.2
_____________________________________________________________
Current and future benefits 285.8 312.2 598.0 74.8 672.8
Operating expenses 6.9 7.5 14.4 - 14.4
_____________________________________________________________
Total benefits and expenses 292.7 319.7 612.4 74.8 687.2
_____________________________________________________________
Results of discontinued products $ 52.3 $ 58.6 $ 110.9 $ (110.9) $ -
_____________________________________________________________________________________________________
_____________________________________________________________
(1) See note 7 for a discussion of FAS No. 121.
Charged
(Credited)
Guaranteed Single- to Reserve
Investment Premium for Future
Nine months ended September 30, 1995 Contracts Annuities Total Losses Net*
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net investment income $ 391.8 $ 333.9 $ 725.7 $ - $ 725.7
Net realized capital gains (losses) (43.5) 38.6 (4.9) 4.9 -
Interest earned on receivable
from continuing business 15.2 22.9 38.1 - 38.1
Other income 7.0 9.0 16.0 - 16.0
_____________________________________________________________
Total revenue 370.5 404.4 774.9 4.9 779.8
_____________________________________________________________
Current and future benefits 438.4 336.5 774.9 (4.1) 770.8
Operating expenses 1.2 7.8 9.0 - 9.0
_____________________________________________________________
Total benefits and expenses 439.6 344.3 783.9 (4.1) 779.8
_____________________________________________________________
Results of discontinued products $ (69.1) $ 60.1 $ (9.0) $ 9.0 $ -
_____________________________________________________________________________________________________
_____________________________________________________________
<FN>
* Amounts are reflected in the 1996 and 1995 Consolidated Statements of Income, except for interest of
$38.0 million and $38.1 million for the nine months ended September 30, 1996 and 1995, respectively,
earned on the receivable from continuing business which is eliminated in consolidation.
</TABLE>
<PAGE> 17
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Discontinued Products (Continued)
Assets and liabilities of discontinued products were as follows
(in millions):
<TABLE>
<CAPTION>
September 30, 1996
_______________________________________
Guaranteed Single-
Investment Premium
Contracts Annuities Total
_______________________________________
<S> <C> <C> <C>
Debt securities available for sale $ 1,689.5 $ 3,345.4 $ 5,034.9
Mortgage loans 1,590.5 1,385.4 2,975.9
Real estate 418.4 180.9 599.3
Short-term and other investments 112.0 195.9 307.9
_______________________________________
Total investments 3,810.4 5,107.6 8,918.0
Current and deferred income taxes 89.5 119.3 208.8
Receivable from continuing business - 517.0 517.0
_______________________________________
Total assets $ 3,899.9 $ 5,743.9 $ 9,643.8
______________________________________________________________________________
_______________________________________
Future policy benefits $ - $ 4,822.3 $ 4,822.3
Policyholders' funds left with
the company 3,679.5 - 3,679.5
Reserve for future losses on
discontinued products 103.7 796.0 899.7
Other 116.7 125.6 242.3
_______________________________________
Total liabilities $ 3,899.9 $ 5,743.9 $ 9,643.8
______________________________________________________________________________
_______________________________________
</TABLE>
Net unrealized capital gains as of September 30, 1996 on available
for sale debt securities are included above in other liabilities
and are not reflected in consolidated shareholders' equity. The
reserve for anticipated future losses on GICs is included in
policyholders' funds left with the company and the reserve for
anticipated future losses on SPAs is included in future policy
benefits on the Consolidated Balance Sheets.
The activity in the reserve for anticipated future losses on
discontinued products was as follows (pretax, in millions):
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
________________________________________
Guaranteed Single-
Investment Premium
Contracts Annuities Total
______________________________________________________________________________
<S> <C> <C> <C>
Reserve at beginning of period $ 221.4 $ 737.4 $ 958.8
Results of discontinued products 52.3 58.6 110.9
Release of reserve (170.0) - (170.0)
________________________________________
Reserve at end of period $ 103.7 $ 796.0 $ 899.7
______________________________________________________________________________
________________________________________
</TABLE>
<PAGE> 18
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Discontinued Products (Continued)
At the time of discontinuance, a receivable from Large Case
Pensions' continuing business was established for each
discontinued product equivalent to the net present value of the
anticipated cash flow shortfalls. Interest is accrued on the
receivables at the discount rate used to calculate the loss on
discontinuance. The offsetting payable, on which interest is
similarly accrued, is reflected in the continuing business. The
interest on such payable generally offsets the investment income
on the assets available to fund the shortfall. At September 30,
1996, the GIC receivable of $314.8 million, net of the related
deferred taxes payable on the accrued interest income of
$19.0 million, was funded from continuing operations to meet
liquidity needs from maturing GICs. At September 30, 1996, for
SPAs, the receivable from continuing business, net of the related
deferred taxes payable of $28.7 million on the accrued interest
income, was $488.3 million. As of September 30, 1996, no funding
of the SPA receivable had taken place. This amount is eliminated
in consolidation and is therefore not reflected on the
Consolidated Balance Sheets.
(7) Investments
Net investment income includes amounts allocable to experience
rated contractholders of $344.8 million and $363.4 million for the
three months ended September 30, 1996 and 1995, respectively, and
$1,041.5 million and $1,092.1 million for the nine months ended
September 30, 1996 and 1995, respectively. Interest credited to
contractholders is included in current and future benefits.
Net realized capital gains allocable to experience rated
contractholders of $30.0 million and $62.9 million for the three
months ended September 30, 1996 and 1995, respectively, and
$113.7 million and $74.2 million for the nine months ended
September 30, 1996 and 1995, respectively, were deducted from net
realized capital gains as reflected on the Consolidated Statements
of Income, and an offsetting amount is reflected on the
Consolidated Balance Sheets in policyholders' funds left with the
company.
<PAGE> 19
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(7) Investments (Continued)
The company applies the provisions of FAS No. 114, Accounting by
Creditors for Impairment of a Loan and FAS No. 118, Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures, individually to all loans in the portfolio and does
not aggregate smaller balance, homogeneous loans for separate
evaluation nor does it aggregate loans by major risk
classifications for the purpose of applying such provisions. In
accordance with these standards, a loan is considered impaired
when it is probable that the company will be unable to collect
amounts due according to the contractual terms of the loan
agreement (minimum delays (i.e., up to 60 days) will not result in
a loan being considered impaired). For impaired loans, the
measurement method used is to establish a specific impairment
reserve for the difference between the recorded investment in the
mortgage loan and the fair value of the collateral. The company
records full or partial charge-offs of loans at the time an event
occurs with the borrower affecting the legal status of the loan.
This typically occurs at the time of foreclosure (actual or in-
substance) or upon a loan modification giving rise to forgiveness
of debt.
General reserves are established for losses management believes
are likely to arise from loans in the portfolio other than those
which have been specifically reserved for, but cannot be
attributed to specific loans.
At September 30, 1996, the total recorded investment in loans that
are considered to be impaired (which include problem loans,
restructured loans and potential problem loans) under FAS No. 114
and related specific reserves are presented in the table below.
Included in the total recorded investment are impaired loans of
$417 million for which no specific reserves are considered
necessary. This includes $191 million related to one mortgage
loan where the borrower has declared bankruptcy. No specific
reserve has been established for this loan because the loan is
well secured, and the company does not anticipate any losses.
<TABLE>
<CAPTION>
Total
Recorded Specific
(Millions) Investment Reserves
________________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 746.5 $ 105.7
Supporting experience rated products 504.1 91.7
Supporting remaining products 237.4 24.8
___________________________
Total Impaired Loans $ 1,488.0 $ 222.2
_________________________________________________________________________
___________________________
</TABLE>
<PAGE> 20
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(7) Investments (Continued)
The activity in the specific and general reserves for the nine
months ended September 30, 1996 is summarized below:
<TABLE>
<CAPTION>
Charged Balance
Balance at to net Charged at
December 31, realized to other Principal September 30,
(Millions) 1995 loss (gain) accounts(1) Write-offs 1996
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Supporting discontinued
products $ 287.5 $ - $ - $ (127.5) $ 160.0
Supporting experience
rated products 228.3 - (39.4) (33.6) 155.3
Supporting remaining
products 89.1 (10.6) - (25.3) 53.2
________________________________________________________________
Total -
continuing operations $ 604.9 $ (10.6) $ (39.4) $ (186.4) $ 368.5
______________________________________________________________________________________________
________________________________________________________________
<FN>
(1) Reflects adjustments of reserves related to assets supporting experience rated products
and discontinued products.
</TABLE>
The company accrues interest income on impaired loans to the
extent it is deemed collectible and the loan continues to perform
under its original or restructured contractual terms. Interest
income on problem loans is generally recognized on a cash basis.
Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
Income earned (pretax) and received on the average recorded
investment in impaired loans for the three and nine months ended
September 30, 1996 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1996 September 30, 1996
__________________________ _____________________________
Average Average
Impaired Income Income Impaired Income Income
(Millions) Loans Earned Received Loans Earned Received
________________________________________________________________ ____________________________
<S> <C> <C> <C> <C> <C> <C>
Supporting discontinued products $ 744.9 $ 17.5 $ 16.8 $ 711.1 $ 47.5 $ 48.4
Supporting experience rated products 509.4 8.5 8.4 505.7 28.3 28.0
Supporting remaining products 219.6 4.5 4.4 222.1 14.2 14.1
_________________________ ____________________________
Total continuing operations $1,473.9 $ 30.5 $ 29.6 $1,438.9 $ 90.0 $ 90.5
_______________________________________________________________ ____________________________
_________________________ ____________________________
</TABLE>
<PAGE> 21
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(7) Investments (Continued)
As of January 1, 1996, the company adopted FAS No. 121, Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed Of. This statement requires long-lived assets to be
held and used to be written down to fair value when they are
considered impaired. Long-lived assets to be disposed of (e.g.,
real estate held for sale) are to be carried at the lower of cost
or fair value less estimated selling costs. In addition, this
statement does not allow long-lived assets to be disposed of to be
depreciated. As a result of the adoption of FAS No. 121,
valuation reserves at January 1, 1996 were increased by $52.9
million in connection with the reversal of previously recorded
accumulated depreciation related to properties held for sale. The
adoption of FAS No. 121 resulted in an immaterial impact on
results of operations.
(8) Debt and Guarantee of Debt Securities
Aetna Services has a revolving credit facility aggregating $2.5
billion with a worldwide group of banks that terminates in June
2001 (subsequent to September 30, 1996 the facility was reduced by
Aetna Services to approximately $1.5 billion). Various interest
rate options are available under the facility and any borrowings
mature on the expiration date of the applicable credit commitment.
Aetna Services pays facility fees ranging from .065% to .20% per
annum, depending upon the company's long-term senior unsecured
debt rating. Aetna Services is currently paying a facility fee of
.08%. The commitments require Aetna Inc. as a guarantor to the
credit facility to maintain shareholders' equity, excluding net
unrealized capital gains and losses, of at least $7.5 billion.
The facility also supports Aetna Services' commercial paper
borrowing program.
Aetna Inc. has fully and unconditionally guaranteed the payment of
all principal, premium, if any, and interest on all outstanding
debt securities of Aetna Services, including the $348,000,000
9 1/2% Subordinated Debentures due 2024 (the "Subordinated
Debentures") issued to Aetna Capital L.L.C., a wholly-owned
subsidiary of Aetna Services (collectively the "Aetna Services
debt"). Aetna Capital L.L.C. has issued $275,000,000 of
redeemable preferred stock and the Subordinated Debentures
represent primarily all of the assets of Aetna Capital L.L.C.
<PAGE> 22
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(8) Debt and Guarantee of Debt Securities (Continued)
Aetna Services issued the following debt on August 19, 1996 which
is fully and unconditionally guaranteed by Aetna Inc.:
$300,000,000 6.75% Notes due 2001; $350,000,000 7.125% Notes due
2006; $450,000,000 7.625% Debentures due 2026; and $300,000,000
6.97% Debentures due 2036 (putable at par in 2004). Pursuant to
shelf registration statements declared effective by the Securities
and Exchange Commission ("SEC"), Aetna Services may offer and sell
up to an additional $.6 billion of debt securities guaranteed by
Aetna Inc., and Aetna Capital L.L.C. may offer and sell up to an
additional $225 million of preferred securities guaranteed by
Aetna Inc.
Separate financial statements of Aetna Services have not been presented
herein or in any separate reports filed with the SEC because management
has determined that such financial statements would not be material to
holders of the Aetna Services debt. Summarized consolidated financial
information for Aetna Services was as follows (in millions):
Balance Sheet Information:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
_____________ _________
<S> <C> <C>
Total investments (excluding
Separate Accounts) $41,758.5 $44,050.3
_________ _________
_________ _________
Total assets $81,668.2 $84,323.7
_________ _________
_________ _________
Total insurance liabilities $40,335.3 $42,977.1
_________ _________
_________ _________
Total liabilities $78,835.7 $76,775.9
_________ _________
_________ _________
Total redeemable preferred stock $ 275.0 $ 275.0
_________ _________
_________ _________
Total shareholder's equity $ 2,557.6 $ 7,272.8
_________ _________
_________ _________
</TABLE>
<PAGE> 23
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(8) Debt and Guarantee of Debt Securities (Continued)
Statement of Income Information:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
_____ ____ ____ ____
<S> <C> <C> <C> <C>
Total revenue $3,216.9 $3,191.0 $9,684.4 $9,627.5
________ ________ ________ ________
________ ________ ________ ________
Total benefits and expenses $3,025.5 $3,015.0 $9,210.8 $9,126.5
________ ________ ________ ________
________ ________ ________ ________
Income from
continuing operations
before income taxes $ 191.4 $ 176.0 $ 473.6 $ 501.0
________ ________ ________ ________
________ ________ ________ ________
Income from
continuing operations $ 127.9 $ 112.6 $ 317.7 $ 326.1
________ ________ ________ ________
________ ________ ________ ________
Net income $ 127.9 $ 212.1 $ 763.6 $ 76.0
________ ________ ________ ________
________ ________ ________ ________
</TABLE>
The amount of dividends that may be paid to Aetna Services by its
domestic insurance subsidiaries from September 30, 1996 through
December 31, 1996 without prior approval by the Insurance
Commissioner of the State of Connecticut are limited to
approximately $226.1 million in the aggregate. There are no such
restrictions on distributions from Aetna Services to Aetna Inc.
(9) Capital Stock
In addition to the capital stock disclosed on the Consolidated
Balance Sheets, Aetna Inc. has the following authorized capital
stock: 15,000,000 shares of Class A Voting Preferred Stock, $.01
par value per share; 15,000,000 shares of Class B Voting Preferred
Stock, $.01 par value per share; and 15,000,000 shares of Class D
Non-Voting Preferred Stock, par value $.01 per share. Of these
additional shares authorized, no shares were issued or outstanding
at September 30, 1996.
Each share of Class C Stock is mandatorily convertible into one
share of common stock on July 19, 2000. Dividends accrue on a
daily basis at an annual rate of $4.7578 per share and are payable
upon declaration by the Board of Directors. The company may, at
its option, redeem the Class C Stock on or after July 19, 1999 but
prior to July 19, 2000 for shares of Aetna Inc. common stock based
on specified formulas. The number of shares of common stock to be
issued for each share of Class C Stock pursuant to this optional
redemption will be based on a ratio, calculated as the greater of:
(a) $76.125 (plus any accrued but unpaid dividends) divided by the
then current market price of the common stock determined two
trading days prior to the notice date of the intent to redeem; or
(b) .8197. Each share of Class C Stock is also convertible, in
whole or part, at the option of the holder, into .8197 shares of
common stock.
<PAGE> 24
AETNA INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(10) Off-Balance-Sheet and Other Financial Instruments
The company engages in hedging activities to manage interest rate,
price and currency risks. Such hedging activities have
principally consisted of using foreign exchange forward contracts,
futures and forward contracts and interest rate swap agreements.
(See General Account Investments - Use of Derivatives and Other
Investments on page 53 of the Management's Discussion and Analysis
of Financial Condition and Results of Operations and
Note 16 of the company's 1995 Annual Report for a description of
the company's hedging activities). The notional amounts, carrying
values and estimated fair values of the company's off-balance-
sheet and other financial instruments are as follows (in
millions):
<TABLE>
<CAPTION>
Carrying
Value
Notional Asset Fair
September 30, 1996 Amount (Liability) Value
______________________________________________________________________________
<S> <C> <C> <C>
Foreign exchange forward contracts - sell:
Related to net investments in foreign
affiliates $ 135.3 $ (.9) $ (.9)
Related to investments in nondollar
denominated assets 55.4 - -
Interest rate swaps 43.0 - 5.7
Futures contracts to purchase debt securities 225.3 2.4 2.4
Stock index futures 139.2 (9.1) (9.1)
Warrants to purchase debt securities 19.0 3.2 3.2
</TABLE>
At September 30, 1996, the company had commitments to purchase
investments for $2.3 million, the fair market value of which is
$2.5 million.
(11) Supplemental Cash Flow Information
Significant noncash investing and financing activities of
continuing operations include acquisition of real estate through
foreclosures (including in-substance foreclosures) of mortgage
loans amounting to $75.0 million and $184.5 million for the nine
months ended September 30, 1996 and 1995, respectively.
<PAGE> 25
AETNA, INC. AND SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Continued)
(12) Earnings Per Share
Earnings per share are computed using net income less preferred
dividends divided by the weighted average number of common shares
outstanding (including common share equivalents). In determining
earnings per share, the Class C Stock is not considered a common
stock equivalent for primary earnings purposes. It is considered
an equivalent for the company's fully diluted earnings per share
calculation and the weighted average number of Class C Stock
shares outstanding were 9.2 million and 3.1 million for the three
and nine months ended September 30, 1996, respectively. There is
no material difference between primary and fully diluted earnings
per share for the periods presented.
(13) Litigation
The company is involved in numerous lawsuits arising, for the most
part, in the ordinary course of its business operations, including
litigation in its health business concerning benefit plan coverage
and other decisions made by the company, and alleged medical
malpractice by participating providers. While the ultimate
outcome of litigation against the company cannot be determined at
this time, after consideration of the defenses available to the
company and any related reserves established, it is not expected
to result in liability for amounts material to the financial
condition of the company, although it may adversely affect results
of operations in future periods.
<PAGE> 26
Independent Auditors' Review Report
The Board of Directors
Aetna Inc.:
We have reviewed the accompanying condensed consolidated balance
sheet of Aetna Inc. and Subsidiaries as of September 30, 1996, and
the related condensed consolidated statements of income for the
three-month and nine-month periods ended September 30, 1996 and
1995, and the related condensed consolidated statements of
shareholders' equity and cash flows for the nine-month periods
ended September 30, 1996 and 1995. These condensed consolidated
financial statements are the responsibility of the company's
management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Aetna
Services, Inc. (formerly Aetna Life and Casualty Company) and
Subsidiaries as of December 31, 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated
February 6, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1995, is fairly presented, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/ KPMG PEAT MARWICK LLP
Hartford, Connecticut
October 23, 1996
<PAGE> 27
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated Results of Operations
__________________________________
<TABLE>
<CAPTION>
Operating Summary
(Millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
___________________________________ __________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 2,688.4 $ 1,830.4 46.9% $ 6,243.1 $ 5,535.0 12.8%
Net investment income............... 897.9 884.0 1.6 2,678.0 2,673.5 .2
Fees and other income............... 558.5 473.3 18.0 1,624.8 1,413.0 15.0
Net realized capital gains.......... 7.5 3.3 127.3 73.9 6.0 -
_________ __________ _________ __________
Total revenue................... 4,152.3 3,191.0 30.1 10,619.8 9,627.5 10.3
Current and future benefits......... 2,860.7 2,203.6 29.8 7,157.0 6,735.5 6.3
Operating expenses.................. 913.7 774.1 18.0 2,499.2 2,271.7 10.0
Amortization of goodwill and
other intangible assets............ 75.1 3.8 - 80.8 16.7 -
Amortization of deferred policy
acquisition costs.................. 48.4 33.5 44.5 123.5 102.6 20.4
Reduction of loss on discontinued
products........................... - - - (170.0) - -
Severance and facilities charges.... 49.0 - - 441.7 - -
_________ __________ _________ __________
Total benefits and expenses..... 3,946.9 3,015.0 30.9 10,132.2 9,126.5 11.0
_________ __________ _________ __________
Income from continuing operations
before income taxes................ 205.4 176.0 16.7 487.6 501.0 (2.7)
Income taxes........................ 83.0 63.4 30.9 175.4 174.9 .3
_________ __________ _________ __________
Income from continuing operations... 122.4 112.6 8.7 312.2 326.1 (4.3)
Discontinued operations, net of tax:
Income (loss) from operations...... - 99.5 (100.0) 182.2 (250.1) -
Gain on sale....................... - - - 263.7 - -
_________ __________ _________ __________
Net income...................... $ 122.4 $ 212.1 (42.3) $ 758.1 $ 76.0 -
_________ __________ _________ __________
_________ __________ _________ __________
Net income applicable
to common ownership........... $ 111.2 $ 212.1 (47.6) $ 746.9 $ 76.0 -
_________ __________ _________ __________
_________ __________ _________ __________
Net realized capital gains
from continuing operations, net of
tax (included above)............... $ 5.2 $ 1.5 - $ 49.2 $ .3 -
_________ __________ _________ __________
_________ __________ _________ __________
Results per common share:
Income from continuing operations... $ .77 $ .98 (21.4) $ 2.39 $ 2.87 (16.7)
Discontinued operations, net of tax:
Income (loss) from operations...... - .88 (100.0) 1.44 (2.20) -
Gain on sale....................... - - - 2.09 - -
_________ __________ _________ __________
Net income...................... $ .77 $ 1.86 (58.6) $ 5.92 $ .67 -
_________ __________ _________ __________
_________ __________ _________ __________
</TABLE>
Overview
________
Aetna Inc. (the "company") became the parent corporation of each of
Aetna Services, Inc. ("Aetna Services") (formerly Aetna Life and
Casualty Company) and U.S. Healthcare, Inc. ("U.S. Healthcare") as a
result of the merger transaction effected on July 19, 1996. The
merger has been accounted for as a purchase of U.S. Healthcare, and
the company's consolidated results of operations include the results
of Aetna Services and, from the date of the merger, the results of
U.S. Healthcare. (See Note 2 of Condensed Notes to Financial
Statements for additional information about the merger.)
<PAGE> 28
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview (Continued)
____________________
Income from Continuing Operations
The company reported income from continuing operations of
$122 million and $312 million for the three and nine months ended
September 30, 1996, respectively, compared with $113 million and
$326 million for the same periods a year ago. Income from
continuing operations, excluding net realized capital gains, for
the three and nine months ended September 30, 1996 increased $6
million and decreased $63 million, respectively, from the same
periods a year ago. The comparison of results of continuing
operations is affected by the merger with U.S. Healthcare and
other significant factors discussed below:
Factors Primarily Related to the Merger
Income from continuing operations reflects the inclusion
of U.S. Healthcare from July 19, 1996.
Approximately $7.9 billion of goodwill and other
intangible assets were created as a result of the merger.
Results of continuing operations for the three and nine
months ended September 30, 1996 reflected increases in
amortization of goodwill and other intangible assets of
$58 million and $51 million (after tax), respectively,
primarily related to the amortization of these intangible
assets for the period July 19, 1996 through September 30,
1996.
A portion of the consideration paid in connection with
the merger consisted of cash from the net proceeds
received from the sale of the company's property-casualty
operations. (See "Sale of Property-Casualty Operations"
on page 31.) Results of continuing operations for the
three and nine months ended September 30, 1996 included
$7 million and $37 million (after tax), respectively, of
interest income earned on such net proceeds from April 2,
1996, the date of the property-casualty sale, through
July 19, 1996, the closing date of the merger.
Results of continuing operations for the three and nine
months ended September 30, 1996 included an increase in
interest expense of $13 million related to borrowings
incurred in connection with the merger.
As a result of the merger, the company issued
approximately 35.0 million shares of common stock and
11.7 million shares of mandatorily convertible preferred
stock. The increase in the number of common shares
outstanding and the dividends on the mandatorily
convertible preferred stock affect the comparability of
per share amounts. See Note 12 of Condensed Notes to
Financial Statements for further discussion.
<PAGE> 29
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview (Continued)
____________________
Other Significant Factors
Results of continuing operations for the three and nine
months ended September 30, 1996 included severance and
facilities charges of $32 million (after tax) and $287
million (after tax), respectively. The third quarter 1996
severance and facilities charge principally related to
actions taken or expected to be taken by Aetna Retirement
Services to improve its cost structure relative to its
competitors. The remaining severance and facilities charges
of $255 million (after tax), recorded in the second quarter
of 1996, related to the CityPlace office facility lease,
actions taken or expected to be taken to reduce the level of
corporate expenses and other costs previously absorbed by
the property-casualty operations, and actions taken or
expected to be taken by Aetna U.S. Healthcare, primarily to
reduce information technology costs. (See "Severance and
Facilities Charges" on page 30 regarding these charges and
other severance and facilities charges to be recorded by the
company in the fourth quarter.)
Results of continuing operations for the nine months ended
September 30, 1996 included an $111 million benefit (after
tax) related to a reduction of the reserve for anticipated
future losses on discontinued products, primarily as a
result of continuing and recent favorable developments in
real estate markets. (See "Discontinued Products" on page
41.)
Net Realized Capital Gains and Losses
Net realized after-tax capital gains and losses from continuing
operations included in net income, allocable to experience rated
pension contractholders, and supporting discontinued products were
as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net realized capital gains from sales $ 5.2 $ 1.5 $ 54.7 $ 4.4
Net realized capital losses from changes
in reserves for mortgage loans and
real estate - - (5.5) (4.1)
_______ _______ _______ _______
Net realized capital gains from
continuing operations $ 5.2 $ 1.5 $ 49.2 $ .3
_______ _______ _______ _______
_______ _______ _______ _______
Net realized capital gains allocable
to experience rated pension contractholders
(excluded above) $ 19.5 $ 40.9 $ 73.9 $ 48.2
_______ _______ _______ _______
_______ _______ _______ _______
Net realized capital gains (losses) on
assets supporting discontinued products
(excluded above) $ 7.8 $ 2.3 $ 23.4 $ (3.3)
_______ _______ _______ _______
_______ _______ _______ _______
</TABLE>
Net realized capital gains from sales for the nine months ended
September 30, 1996 include a $25 million gain related to the sale
of Aetna Realty Investors ("ARI") to TA Associates and a $15
million gain from the sale of an HMO subsidiary.
<PAGE> 30
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Overview (Continued)
____________________
Severance and Facilities Charges
During 1996, the company has recorded the following severance and
facilities charges in connection with its strategic initiatives in
order to make its continuing businesses more competitive.
Aetna Retirement Services - In the third quarter, Aetna
Retirement Services recorded a $32 million (after tax)
severance and facilities charge principally related to
actions taken or expected to be taken to improve its
cost structure relative to its competitors. The
severance portion of this charge is based on a plan to
eliminate 723 positions (primarily customer service,
sales and information technology support staff).
Corporate - In conjunction with the sale of the
company's property-casualty operations (see "Sale of
Property-Casualty Operations" on page 31) an affiliate
of The Travelers Insurance Group Inc. ("Travelers")
subleased the space that had been occupied by the
company in the CityPlace office facility in Hartford for
eight years at current market rates. The company
recorded a charge of $190 million (after tax) during the
second quarter representing the present value of the
difference between rent required to be paid by the
company under the lease and future rentals expected to
be received by the company. The company also recorded
additional severance and facilities charges of
$45 million (after tax) during the second quarter due to
actions taken or expected to be taken to reduce the
level of corporate expenses and other costs previously
absorbed by the property-casualty operations. The
severance portion of this charge includes the planned
elimination of 475 positions.
Aetna U.S. Healthcare - Severance and facilities charges
of $20 million (after tax) were recorded by Aetna U.S.
Healthcare in the second quarter primarily related to
actions taken or expected to be taken to reduce
information technology costs and are not related to the
U.S. Healthcare merger. The severance portion of this
charge is based on a plan that includes the planned
elimination of 675 positions.
These severance and facilities charges for the nine months ended
September 30, 1996, included the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Write- Leased
(Millions) Severance Off Property Other Total
______________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Aetna U.S. Healthcare $ 20.8 $ .9 $ 3.5 $ 4.8 $ 30.0
Aetna Retirement Services 42.8 1.5 1.9 2.8 49.0
Corporate: Other 28.5 18.0 313.2 (1) 3.0 362.7
________ ________ ________ ________ ________
Total Company $ 92.1 $ 20.4 $ 318.6 $ 10.6 $ 441.7
________ ________ ________ ________ ________
________ ________ ________ ________ ________
<FN>
(1) Includes $292.2 million related to the CityPlace lease.
</TABLE>
<PAGE> 31
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Overview (Continued)
____________________
The Aetna Retirement Services severance actions are expected to be
completed by the end of the first quarter of 1998. The Aetna U.S.
Healthcare and Corporate severance actions and the vacating of the
leased office space (excluding the CityPlace office space) are
expected to be substantially completed by December 31, 1997. The
remaining lease payments (net of expected subrentals) on such
vacated facilities are payable over approximately the next three
years.
Aetna U.S. Healthcare will record a severance and facilities charge
of approximately $275 million (after tax) in the fourth quarter of
1996 principally related to costs associated with the integration of
the health businesses of Aetna Services and U.S. Healthcare. The
severance and facilities charge is expected to consist of
approximately $167 million of severance costs, $40 million of
facilities-related costs and $68 million of asset write-offs and
other related items. The severance portion of this charge is based
on a plan to eliminate approximately 7,500 positions (primarily
service center, medical management, administrative and data center
personnel). Such actions are expected to be substantially completed
by December 31, 1998.
Sale of Property-Casualty Operations
On April 2, 1996, the company completed the sale of its property-
casualty operations to Travelers for approximately $4.1 billion in
cash. The sale resulted in a gain of approximately $264 million
(after tax). (See Note 4 of Condensed Notes to Financial Statements
for a discussion of certain indemifications related to the sale.)
See "Severance and Facilities Charges" on page 30 for a discussion of
certain charges related to the sale.
Strategic Outlook
The company's merger with U.S. Healthcare represents a major step in
the company's previously announced strategic decision to focus its
resources on pursuing growth opportunities in its health care
business, as well as evaluating opportunities for growth and
development of its financial services and international operations.
<PAGE> 32
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna U.S. Healthcare
_____________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended September 30, Nine Months Ended September 30,
_________________________________ ________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 2,315.4 $ 1,501.3 54.2% $ 5,223.2 $ 4,457.8 17.2%
Net investment income............... 116.1 95.5 21.6 307.1 276.7 11.0
Fees and other income............... 387.8 318.0 21.9 1,125.0 961.6 17.0
Net realized capital gains (losses). (1.3) (5.0) 74.0 24.0 (15.1) -
_______ _________ _________ _________
Total revenue.................... 2,818.0 1,909.8 47.6 6,679.3 5,681.0 17.6
Current and future benefits......... 1,951.2 1,271.6 53.4 4,474.0 3,818.0 17.2
Operating expenses.................. 627.0 522.7 20.0 1,682.3 1,496.2 12.4
Amortization of goodwill and other
intangible assets.................. 74.1 2.4 - 78.3 12.8 -
Amortization of deferred policy
acquisition costs.................. 3.7 5.4 (31.5) 8.8 18.6 (52.7)
Severance and facilities charge..... - - - 30.0 - -
_________ _________ _________ _________
Total benefits and expenses...... 2,656.0 1,802.1 47.4 6,273.4 5,345.6 17.4
_________ _________ _________ _________
Income before income taxes.......... 162.0 107.7 50.4 405.9 335.4 21.0
Income taxes........................ 69.3 39.1 77.2 154.2 123.7 24.7
_________ _________ _________ _________
Net income.......................... $ 92.7 $ 68.6 35.1 $ 251.7 $ 211.7 18.9
_________ _________ _________ _________
_________ _________ _________ _________
Net realized capital gains (losses),
net of tax (included above)........ $ (.8) $ (3.3) 75.8 $ 16.8 $ (9.6) -
_________ _________ _________ _________
_________ _________ _________ _________
</TABLE>
Aetna U.S. Healthcare provides a full spectrum of managed care,
indemnity and group insurance products. Aetna U.S. Healthcare
consists of the Health Risk business and the Group Insurance and
Other Health business. Health products include health maintenance
organization (HMO), point-of-service (POS), preferred provider
organization (PPO) and indemnity. The Health Risk business
includes such health products where the company assumes all or a
significant level of health care cost and utilization risk. The
Group Insurance and Other Health business includes group life and
disability insurance, long-term care and all health products where
the customer, and not the company, assumes all or a significant
level of health care cost and utilization risk.
Actual Results
Aetna U.S. Healthcare's net income for the three and nine months
ended September 30, 1996 increased by $24 million and $40 million,
respectively, compared with the same periods a year ago. Included
in these results are severance and facilities charges (see
"Severance and Facilities Charges" on page 30), amortization of
goodwill and other intangibles ($61 million and $65 million after
tax, for the three and nine months ended September 30, 1996,
respectively, and $2 million and $13 million after tax, for the
three and nine months ended September 30, 1995, respectively) and
net realized capital gains and losses. Excluding these items,
results for the three and nine months ended September 30, 1996
increased $80 million and $86 million, respectively, from the same
periods a year ago, primarily reflecting the inclusion of U.S.
Healthcare from July 19, 1996. See Note 2 of Condensed Notes to
Financial Statements for a discussion of the U.S. Healthcare
merger.
Net realized capital gains for the nine months ended September 30,
1996 were primarily attributable to the sale of an HMO subsidiary.
The earnings of this subsidiary were not material to results.
<PAGE> 33
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna U.S. Healthcare (Continued)
_________________________________
Pro Forma Results
The remainder of the discussion related to Aetna U.S. Healthcare
is on a pro forma basis assuming that the merger had occurred at
the beginning of 1995.
<TABLE>
<CAPTION>
Pro Forma Operating Summary (1)
(Millions) Three Months Ended September 30, Nine Months Ended September 30,
_________________________________ ________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 2,529.5 $ 2,403.6 5.2% $ 7,554.6 $ 6,998.6 7.9%
Net investment income............... 119.7 105.8 13.1 333.8 310.1 7.6
Fees and other income............... 392.6 331.8 18.3 1,178.3 1,001.7 17.6
Net realized capital gains (losses). (9.6) (5.0) (92.0) 18.5 (8.5) -
_______ _________ _________ _________
Total revenue.................... 3,032.2 2,836.2 6.9 9,085.2 8,301.9 9.4
Current and future benefits......... 2,110.1 1,933.2 9.2 6,238.6 5,666.6 10.1
Operating expenses.................. 670.8 644.4 4.1 2,014.1 1,833.2 9.9
Amortization of goodwill and other
intangible assets.................. 91.3 91.4 (.1) 273.5 279.8 (2.3)
Amortization of deferred policy
acquisition costs.................. 3.7 5.4 (31.5) 8.8 18.6 (52.7)
Severance and facilities charges.... - - - 30.0 - -
_________ _________ _________ _________
Total benefits and expenses...... 2,875.9 2,674.4 7.5 8,565.0 7,798.2 9.8
_________ _________ _________ _________
Income before income taxes.......... 156.3 161.8 (3.4) 520.2 503.7 3.3
Income taxes........................ 70.5 80.9 (12.9) 234.1 251.5 (6.9)
_________ _________ _________ _________
Net income.......................... $ 85.8 $ 80.9 6.1 $ 286.1 $ 252.2 13.4
_________ _________ _________ _________
_________ _________ _________ _________
Net realized capital gains (losses),
net of tax (included above)........ $ (6.0) $ (3.3) (81.8) $ 13.3 $ (5.6) -
_________ _________ _________ _________
_________ _________ _________ _________
<FN>
(1) Represents financial information as though U.S. Healthcare had been acquired on
January 1, 1995, reflecting adjustments which include: (a) amortization of
goodwill and other intangible assets, (b) interest income foregone related to a $500
million dividend paid by U.S. Healthcare to the company and (c) adjustments to
conform U.S. Healthcare's accounting policies with Aetna's and to remove the effect
of merger-related costs incurred by U.S. Healthcare prior to the acquisition.
The pro forma operating summary and information derived from such summary is
not necessarily indicative of the results of operations of Aetna U.S. Healthcare had
the merger occurred at the beginning of 1995, nor is it necessarily indicative of
future results. The pro forma operating summary does not give effect to any
synergies which may be realized in future periods as a result of the merger nor does
it give effect to the costs of financing the merger (see "Corporate" on page 44 for
further discussion).
</TABLE>
Although Aetna U.S. Healthcare's pro forma net income for the three
and nine months ended September 30, 1996 increased by $5 million and
$34 million, respectively, excluding the 1996 severance and
facilities charge, amortization of goodwill and other intangibles and
net realized capital gains and losses, the segment's earnings reflect
a decrease in Health Risk earnings of $17 million and $12 million for
the three and nine months ended September 30, 1996, respectively,
compared with the same periods a year ago.
The table below sets forth earnings for the Health Risk and Group
Insurance and Other Health businesses, excluding the 1996 severance
and facilities charge, amortization of goodwill and other intangibles
and net realized capital gains and losses.
<PAGE> 34
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna U.S. Healthcare (Continued)
_________________________________
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1996 1995 1996 1995
________________________________ _______________________________
<S> <C> <C> <C> <C>
Health Risk $ 106.3 $ 123.2 $ 362.2 $ 373.8
Group Insurance and Other Health 60.8 36.5 155.8 116.1
_______ _______ ________ _______
Total Aetna U.S. Healthcare $ 167.1 $ 159.7 $ 518.0 $ 489.9
_______ _______ ________ ________
_______ _______ ________ ________
Health Risk Medical Loss Ratios 82.0% 78.4% 80.9% 78.7%
_______ _______ ________ _______
_______ _______ ________ _______
Health Risk SG&A Ratios 15.0% 14.8% 14.7% 14.4%
_______ _______ ________ _______
_______ _______ ________ _______
</TABLE>
The decrease in pro forma earnings for the three and nine months ended
September 30, 1996 in the Health Risk business resulted from lower
Commercial HMO premium per member per month and higher medical costs
per member per month for Commercial and Medicare HMO products. The
decrease in Commercial HMO premium per member per month resulted from
competitive pricing pressures and customers selecting lower premium
plans. The increase in Commercial medical costs on a per member per
month basis resulted from higher specialist, outpatient and pharmacy
costs. The increase in Medicare medical costs on a per member per
month basis resulted from higher utilization in certain markets and
pharmacy costs. See "Outlook" on page 35 for further discussions.
The increase in pro forma earnings for the three and nine months
ended September 30, 1996 for the Group Insurance and Other Health
business is primarily attributable to favorable group life mortality
experience, as well as increased Group Insurance sales and enrollment
in nonrisk health products. Third quarter 1996 results for the Group
Insurance and Other Health business also reflected lower operating
expenses per member for nonrisk health products.
The number of members enrolled in/covered by Aetna U.S. Healthcare's
products was as follows:
<TABLE>
<CAPTION>
September 30, 1996 September 30, 1995*
______________________________ _____________________________
(Thousands) Risk Nonrisk Total Risk Nonrisk Total
____________________________________________________________ _____________________________
<S> <C> <C> <C> <C> <C> <C>
HMO
Commercial (1) 3,290 527 3,817 2,898 340 3,238
Medicare 286 19 305 186 18 204
Medicaid 134 27 161 108 - 108
_____ _____ ______ _____ _____ ______
Total HMO 3,710 573 4,283 3,192 358 3,550
POS 308 2,312 2,620 213 1,845 2,058
PPO 780 3,051 3,831 845 3,066 3,911
CHAMPUS - - - 721 - 721
Indemnity 547 2,934 3,481 818 3,249 4,067
_____ _____ ______ _____ _____ ______
Total Health Care Enrollment 5,345 8,870 14,215 5,789 8,518 14,307
_____ _____ ______ _____ _____ ______
_____ _____ ______ _____ _____ ______
Group Insurance (2):
Group Life (3) 8,453 7,981
______ ______
______ ______
Disability 2,423 2,101
______ ______
______ ______
Long-Term Care 95 92
______ ______
______ ______
<FN>
* 1995 membership is presented on a basis consistent with 1996.
(1) Includes 784 thousand and 443 thousand POS members who utilize the HMO network at
September 30, 1996 and 1995, respectively.
(2) Many Group Insurance members participate in more than one type of coverage and are
counted in each.
(3) Group Life includes members with accident coverages.
</TABLE>
<PAGE> 35
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna U.S. Healthcare (Continued)
_________________________________
Total health care enrollment as of September 30, 1996, excluding the
loss of .7 million members resulting from the termination of the
CHAMPUS contract, increased by .6 million members, or 5% when
compared to September 30, 1995. Such increase is primarily
attributable to new Commercial HMO enrollment, as well as new
enrollment in and continued migration of indemnity members to the POS
product.
Revenue for Aetna U.S. Healthcare, excluding net realized capital
gains and losses, increased by $201 million or 7% and $756 million or
9% for the three and nine month periods ended September 30, 1996,
respectively, compared to the same periods a year ago, primarily due
to increases in the number of members enrolled in HMO products and
covered by Group Insurance, partially offset by the termination of
the CHAMPUS contract.
Operating expenses for Aetna U.S. Healthcare increased during the
nine months ended September 30, 1996 compared with the same period in
1995 due primarily to the continued migration of members from the
indemnity product to more resource-intensive POS products, as well as
from expenses related to operating physician practices.
Outlook
Premiums - Premiums in the Health Risk business are generally fixed
for one-year periods and, accordingly, cost levels in excess of those
reflected in pricing, such as those being experienced during 1996,
cannot be recovered in the year through higher premiums. Accordingly,
earnings in the Health Risk business for the remainder of 1996 are
expected to continue to be similarly adversely affected, as they were
this quarter. The company attempts, however, to the extent possible,
to address cost increases in its contracting with providers.
For 1997 and beyond, the company has targeted premium increases and
recontracting with providers to improve Health Risk profitability.
There can be no assurances, however, that premium increases and cost
savings achieved through recontracting will be sufficient to offset
increases in medical costs and other operating costs, as governmental
action (including downward adjustments to Medicare and other premium
rates), business conditions (including intensification of competition)
and other factors may adversely affect the company's ability to realize
such premium increases and cost savings.
Severance and Facilities Charge - On October 10, 1996, the company
announced that Aetna U.S. Healthcare will record a severance and
facilities charge of approximately $275 million (after tax) in the
fourth quarter of 1996 principally related to costs associated with
the integration of the health businesses of Aetna Services and U.S.
Healthcare. The charge is expected to consist of approximately $167
million of severance costs, $40 million of facilities-related costs
and $68 million of asset write-offs and other related items. See
"Severance and Facilities Charges" on page 31 for a further
discussion of the fourth quarter severance and facilities charge.
<PAGE> 36
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna U.S. Healthcare (Continued)
_________________________________
Health Legislation and Regulation - A variety of legislative and
regulatory proposals have been made at both the federal and state
government levels to address various aspects of the health care
system (including benefit mandates, insurance reforms, provider
contract limitations, restrictions on utilization management,
taxes and assessments to pay for uncompensated care and graduate
medical education, and reforms to Medicare and Medicaid programs).
Aetna U.S. Healthcare supports proposals which it believes are
consistent with the principles of managed care and expand access
to health care coverage through private sector competition.
Recently enacted federal legislation, the Health Insurance
Portability and Accountability Act of 1996 ("Kennedy-Kassebaum"),
will (i) ensure portability of coverage to individuals changing jobs
or moving to individual coverage by limiting preexisting condition
exclusions, (ii) guarantee availability of coverage to employees in
the small group market, and (iii) prevent exclusion of individuals
from coverage under group plans based on health status, effective
July 1, 1997. Other recently enacted federal legislation mandates
minimum hospital stays after childbirth and parity in applying
lifetime limits to mental health benefits.
New York and several other states have also enacted legislation or
regulation related to the operation of managed care plans. Such
legislation or regulation varies, but typically includes, among other
things, mandatory maternity length of stay, regulation of utilization
review, consumer disclosure, payment of emergency room services,
hearings on termination of physicians from health plan networks, and
provisions similar to those in the Kennedy-Kassebaum legislation.
In New York, the Health Care Reform Act of 1996, effective January 1,
1997, will allow all private health care payers to negotiate payment
rates for inpatient hospital services. The Act also provides for
direct funding of hospital bad debt and charity care and graduate
medical education by payments to State funding pools rather than
through surcharges on payments for hospital services. The Company
plans to have competitive arrangements with hospitals in its New
York networks, and to adjust the payments it makes to network
hospitals to reflect the changes required by the Act. However, there
can be no assurance that the Company will reach agreement on these
adjustments with all such hospitals or that agreements will be
reached by the effective date of the Act.
In California, two initiatives related to regulation of managed care
practices are on the November 1996 ballot. One or both of these
initiatives include, among other things, provisions to prohibit so-
called "gag clauses", restrict compensation arrangements with
providers, restrict utilization review, impose premium controls and
create a private right of action for enforcement.
At this time, the Company is unable to predict the impact of the
foregoing federal or state legislation or initiatives, or of any
future legislation or regulatory changes that may be enacted.
See "Forward Looking Information" on page 56 for information
regarding other important factors affecting certain of these matters.
<PAGE> 37
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna Retirement Services (formerly named Aetna Life Insurance &
_________________________
Annuity)
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended September 30, Nine Months Ended September 30,
___________________________________ __________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 25.3 $ 37.7 (32.9)% $ 80.8 $ 129.7 (37.7)%
Net investment income............... 272.5 259.5 5.0 804.4 763.1 5.4
Fees and other income............... 122.2 86.9 40.6 336.3 258.0 30.3
Net realized capital gains.......... .9 8.7 (89.7) 18.2 17.9 1.7
_________ _________ _________ _________
Total revenue.................... 420.9 392.8 7.2 1,239.7 1,168.7 6.1
Current and future benefits......... 242.4 241.0 .6 716.3 710.0 .9
Operating expenses.................. 86.4 73.4 17.7 254.0 225.3 12.7
Amortization of deferred policy
acquisition costs.................. 18.2 8.2 122.0 49.7 30.0 65.7
Severance and facilities charge..... 49.0 - - 49.0 - -
_________ _________ _________ _________
Total benefits and expenses...... 396.0 322.6 22.8 1,069.0 965.3 10.7
_________ _________ _________ _________
Income before income taxes.......... 24.9 70.2 (64.5) 170.7 203.4 (16.1)
Income taxes........................ 6.8 23.9 (71.5) 48.3 67.1 (28.0)
_________ _________ _________ _________
Net income.......................... $ 18.1 $ 46.3 (60.9) $ 122.4 $ 136.3 (10.2)
_________ _________ _________ _________
_________ _________ _________ _________
Net realized capital gains, net
of tax (included above)............ $ .6 $ 5.6 (89.3) $ 11.9 $ 11.6 2.6
_________ _________ _________ _________
_________ _________ _________ _________
Deposits not included in premiums
above.............................. $ 1,098.3 $ 828.3 32.6 $ 3,370.9 $ 2,397.0 40.6
_________ _________ _________ _________
_________ _________ _________ _________
Assets under management (1)(2)...... $29,935.7 $23,824.4 25.7
_________ _________
_________ _________
<FN>
(1) Excludes net unrealized capital gains of approximately $206 million and $459 million
at September 30, 1996 and 1995, respectively.
(2) Includes $4.3 billion and $1.9 billion at September 30, 1996 and 1995, respectively, of
assets held and managed by unaffiliated mutual funds.
</TABLE>
Aetna Retirement Services' net income for the three and nine months
ended September 30, 1996 decreased $28 million and $14 million,
respectively, from the same periods a year ago. Excluding net
realized capital gains, results for the three and nine months ended
September 30, 1996 decreased $23 million and $14 million,
respectively, from the same periods a year ago. Such decreases
reflected an after-tax severance and facilities charge of $32 million
in the third quarter of 1996 primarily related to actions taken or
expected to be taken to improve Aetna Retirement Services' cost
structure relative to its competitors. (See "Severance and
Facilities Charges" on page 30.) Excluding net realized capital
gains and the third quarter 1996 severance and facilities charge,
earnings for the three and nine months ended September 30, 1996
increased $9 million and $18 million, respectively, from the same
periods a year ago.
<PAGE> 38
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Aetna Retirement Services (Continued)
_____________________________________
Third quarter and year-to-date results in 1996 benefited from
increased fee income primarily due to the growth in assets under
management resulting from continued business growth and, for the
nine months ended September 30, 1996, from appreciation in the
stock market, as well as overall increased interest margins
primarily related to experience rated contracts. Partially
offsetting such favorable increases in fee income were increased
operating expenses associated with business growth and investments
in nontraditional distribution channels (e.g., broker/dealers and
banks).
The average annualized earned rate on investments supporting fully
guaranteed contracts was 7.8% and 8.0% and the average annualized
earned rate on investments supporting experience rated contracts was
8.1% and 8.2% for the nine months ended September 30, 1996 and 1995,
respectively. The average annualized credited rate on fully
guaranteed contracts was 5.9% and 6.0% and the average annualized
credited rate on experience rated contracts was 6.1% and 6.3% for the
nine months ended September 30, 1996 and 1995, respectively. The
resulting annualized interest margins on fully guaranteed contracts
were 1.9% and 2.0% and on experience rated contracts were 2.0% and
1.9% for the nine months ended September 30, 1996 and 1995,
respectively.
The duration of the investment portfolios supporting Aetna Retirement
Services' liabilities is regularly monitored and adjusted in order to
maintain an aggregate duration that is within 0.5 years of the
estimated duration of the underlying liabilities. For a complete
discussion of the company's asset/liability management practices, see
Aetna Services' 1995 Annual Report.
Premiums decreased 33% and 38% during the three and nine months
ended September 30, 1996, respectively, compared to the same
periods in 1995 primarily because Aetna Retirement Services ceased
writing structured settlement annuities in the fourth quarter of
1995. The cessation of writing this product did not and is not
expected to have a material effect on results of the segment.
<PAGE> 39
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
International
_____________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended September 30, Nine Months Ended September 30,
___________________________________ __________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 316.9 $ 275.0 15.2% $ 834.5 $ 747.9 11.6%
Net investment income............... 81.7 76.1 7.4 247.5 231.5 6.9
Fees and other income............... 30.1 35.2 (14.5) 92.0 90.9 1.2
Net realized capital gains (losses). 1.7 (1.8) - 3.0 (3.5) -
_________ _________ _________ ________
Total revenue.................... 430.4 384.5 11.9 1,177.0 1,066.8 10.3
Current and future benefits......... 265.7 241.3 10.1 715.9 657.5 8.9
Operating expenses.................. 94.4 87.6 7.8 269.8 265.6 1.6
Amortization of goodwill and
other intangible assets............ 1.0 1.4 (28.6) 2.4 3.8 (36.8)
Amortization of deferred policy
acquisition costs.................. 26.5 19.9 33.2 65.0 54.0 20.4
_________ _________ _________ ________
Total benefits and expenses...... 387.6 350.2 10.7 1,053.1 980.9 7.4
_________ _________ _________ ________
Income before income taxes.......... 42.8 34.3 24.8 123.9 85.9 44.2
Income taxes ....................... 14.2 11.8 20.3 43.3 25.7 68.5
_________ _________ _________ ________
Net income.......................... $ 28.6 $ 22.5 27.1 $ 80.6 $ 60.2 33.9
_________ _________ _________ ________
_________ _________ _________ ________
Net realized capital gains (losses),
net of tax (included above)........ $ 1.4 $ (1.5) - $ 2.2 $ (4.0) -
_________ _________ _________ ________
_________ _________ _________ ________
</TABLE>
International's net income for the three and nine months ended
September 30, 1996 increased by $6 million and $20 million,
respectively, compared with the same periods a year ago.
Excluding net realized capital gains and losses, results for the
three and nine months ended September 30, 1996 increased
$3 million and $14 million, respectively, from the same periods a
year ago. Results for the nine months ended September 30, 1996
reflected continued revenue growth in the Asia Pacific operations.
The improvement in year-to-date results also reflected increased
earnings in Chile primarily resulting from lower operating
expenses due to tighter controls over such costs and lower
interest expense.
The company continues to explore opportunities for additional
investments in emerging growth markets. In October, the company
entered into a definitive agreement with its Mexican partner to
acquire a 49.0% stake in a joint venture that will offer insurance
products through the partner's bank subsidiary. The company
agreed to invest $115 million in the joint venture initially and
up to an additional $63 million based on the performance of the
new company over the first five years of operations. The company
also agreed to increase its ownership in its current Mexican
insurance joint venture from 44.5% to 49.0% for an additional $20
million. Interest will be payable on certain of these amounts.
The company also agreed with its Mexican partner to acquire a
49.0% interest in a joint venture to manage pension monies
privatized under recent Mexican legislation for approximately $47
million. Completion of these transactions is subject, among other
matters, to regulatory approvals and the transactions are expected
to be completed by the end of 1996.
<PAGE> 40
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions
___________________
<TABLE>
<CAPTION>
Operating Summary
(Millions) Three Months Ended September 30, Nine Months Ended September 30,
___________________________________ __________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Premiums............................ $ 30.8 $ 16.4 87.8% $ 104.6 $ 199.6 (47.6)%
Net investment income............... 411.0 450.6 (8.8) 1,249.4 1,396.1 (10.5)
Fees and other income............... 15.5 32.7 (52.6) 68.0 100.8 (32.5)
Net realized capital gains (losses). (.2) 1.4 - 12.5 7.3 71.2
_________ _________ __________ __________
Total revenue.................... 457.1 501.1 (8.8) 1,434.5 1,703.8 (15.8)
Current and future benefits......... 401.4 449.7 (10.7) 1,250.8 1,550.0 (19.3)
Operating expenses.................. 8.7 18.7 (53.5) 51.9 61.8 (16.0)
Reduction of loss on discontinued
products........................... - - - (170.0) - -
_________ _________ __________ __________
Total benefits and expenses...... 410.1 468.4 (12.4) 1,132.7 1,611.8 (29.7)
_________ _________ __________ __________
Income before income taxes.......... 47.0 32.7 43.7 301.8 92.0 -
Income taxes........................ 17.3 10.9 58.7 107.4 30.2 -
_________ _________ __________ __________
Net income.......................... $ 29.7 $ 21.8 36.2 $ 194.4 $ 61.8 -
_________ _________ __________ __________
_________ _________ __________ __________
Net realized capital gains (losses),
net of tax (included above)....... $ (.2) $ .8 - $ 8.1 $ 4.6 76.1
_________ _________ __________ __________
_________ _________ __________ __________
Deposits not included in premiums
above............................. $ 418.5 $ 358.3 16.8 $ 1,340.9 $ 1,252.6 7.0
_________ _________ __________ __________
_________ _________ __________ __________
Assets under management (1)(2)...... $ 35,797.1 $ 46,557.1 (23.1)
__________ __________
__________ __________
<FN>
(1) Excludes net unrealized capital gains of approximately $166 million and $397 million at
September 30, 1996 and 1995, respectively.
(2) Includes assets related to discontinued products.
</TABLE>
Large Case Pensions' net income for the three and nine months
ended September 30, 1996 increased by $8 million and $133 million,
respectively, compared with the same periods a year ago.
Excluding net realized capital gains and losses and a benefit of
$111 million (after tax) for the nine months ended September 30,
1996 attributable to a reduction of the reserve for anticipated
future losses on discontinued products, results for the three and
nine months ended September 30, 1996 increased $9 million and $19
million, respectively, from the same periods a year ago,
reflecting an increase in net investment income from the assets
supporting the capital in Large Case Pensions. Results for the
nine months ended September 30, 1996 also reflected an increase in
net interest margins. (Please see "Discontinued Products" on page
41 for a discussion of the reserve reduction.)
After-tax net realized capital gains for the nine months ended
September 30, 1996 include a gain of $25 million related to the
sale of ARI to TA Associates, which was partially offset by net
realized capital losses related to bond sales.
The decreases in fees and other income and operating expenses for
the three and nine months ended September 30, 1996 when compared
to the same periods a year ago primarily resulted from the sale of
ARI. However, the earnings of ARI were not material to Large Case
Pensions' net income.
Year-to-date 1995 premiums reflect additional premiums from
existing contractholders and did not have a material effect on
earnings.
<PAGE> 41
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
Assets under management at September 30, 1996 were 23% lower than
a year earlier, primarily as a result of the sale of Insurance
Company Investment Management ("ICIM"), a specialized asset
manager which had been conducting business through the company's
Aeltus Investment Management subsidiary ("Aeltus"), in the first
quarter of 1996. ICIM was not a significant contributor to Large
Case Pensions' earnings in 1995 or in the first quarter of 1996.
Experience rated contractholder and participant withdrawals and
transfers were as follows (excluding contractholder transfers to
other company products) (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Scheduled contract maturities
and benefit payments (1) $ 259.8 $ 228.6 $ 867.7 $ 734.6
________ ________ ________ ________
________ ________ ________ ________
Contractholder withdrawals other
than scheduled contract maturities
and benefit payments $ 67.3 $ 55.8 $ 429.6 (2) $ 244.4
________ ________ ________ ________
________ ________ ________ ________
Participant withdrawals $ 34.6 $ 36.1 $ 135.7 $ 133.7
________ ________ ________ ________
________ ________ ________ ________
<FN>
(1) Includes payments made upon contract maturity and other amounts distributed in accordance
with contract schedules.
(2) Increase primarily relates to an unscheduled withdrawal by one contractholder in the first
quarter of 1996.
</TABLE>
Discontinued Products
Under the company's accounting for its discontinued fully guaranteed
large case pension products (guaranteed investment contracts ("GICs")
and single-premium annuities ("SPAs")), the respective reserves for
anticipated future losses are reviewed by management quarterly.
Accordingly, as long as the reserves represent management's then best
estimates of expected future losses, results of operations of the
discontinued products, including net realized capital gains and
losses, are credited/charged to the respective reserve and do not
affect the company's results of operations. As a result of
management's review in the second quarter, $170 million (pretax) of
the reserve related to GICs was released. The reserves at September
30, 1996 reflect management's best estimate of the anticipated future
net losses for GICs and SPAs. To the extent that actual future
losses are greater than anticipated future net losses, the company's
results of operations would be adversely affected. Conversely, if
actual future losses are less than anticipated future losses, the
company's results of operations would be favorably affected. (Refer
to Aetna Services' 1995 Annual Report for a more complete discussion
of the reserve for anticipated future losses on discontinued
products.)
<PAGE> 42
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
At the time of discontinuance, a receivable from Large Case
Pensions' continuing business was established for each
discontinued product equivalent to the net present value of the
anticipated cash flow shortfalls. Interest is accrued on the
receivables at the discount rate used to calculate the loss on
discontinuance. The offsetting payable, on which interest is
similarly accrued, is reflected in the continuing business. The
interest on such payable generally offsets the investment income
on the assets available to fund the shortfall. At September 30,
1996, the GIC receivable of $315 million, net of the related
deferred taxes payable on the accrued interest income of $19
million, was funded from continuing operations to meet liquidity
needs from maturing GICs. At September 30, 1996, for SPAs, the
receivable from continuing business, net of the related deferred
taxes payable of $29 million on the accrued interest income, was
$488 million. As of September 30, 1996, no funding of the SPA
receivable had taken place. This amount is eliminated in
consolidation and is therefore not reflected on the Consolidated
Balance Sheets.
Results of discontinued products were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1996 1996
________________________________ _______________________________
GICs SPAs Total GICs SPAs Total
____ ____ _____ ____ ____ _____
<S> <C> <C> <C> <C> <C> <C>
Interest margin (a) $ (.8) $ .3 $ (.5) $ (3.3) $ 12.6 $ 9.3
Net realized capital gains (losses) 6.8 1.0 7.8 23.5 (.1) 23.4
Interest earned on receivable from
continuing business 2.6 5.1 7.7 9.5 15.2 24.7
Other, net .6 7.7 8.3 1.5 11.9 13.4
________ ________ ________ ________ ________ _______
Results of discontinued products,
after tax $ 9.2 $ 14.1 $ 23.3 $ 31.2 $ 39.6 $ 70.8
________ ________ ________ ________ ________ _______
________ ________ ________ ________ ________ _______
Results of discontinued products,
pretax $ 15.6 $ 21.2 $ 36.8 $ 52.3 $ 58.6 $ 110.9
________ ________ ________ ________ ________ _______
________ ________ ________ ________ ________ _______
Net realized capital gains (losses)
from sales of bonds, after tax,
included above $ .7 $ (1.9) $ (1.2) $ 2.1 $ (5.9) $ (3.8)
________ ________ ________ ________ ________ _______
________ ________ ________ ________ ________ _______
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1995 1995
________________________________ _______________________________
GICs SPAs Total GICs SPAs Total
____ ____ _____ ____ ____ ______
<S> <C> <C> <C> <C> <C> <C>
Interest margin (a) $ (11.0) $ 1.8 $ (9.2) $ (30.3) $ (1.6) $ (31.9)
Net realized capital gains (losses) (8.2) 10.5 2.3 (28.4) 25.1 (3.3)
Interest earned on receivable from
continuing business 3.3 5.0 8.3 9.9 14.9 24.8
Other, net .8 .9 1.7 1.5 2.6 4.1
________ ________ ________ _______ _______ _______
Results of discontinued products,
after tax $ (15.1) $ 18.2 $ 3.1 $ (47.3) $ 41.0 $ (6.3)
________ ________ ________ _______ _______ _______
________ ________ ________ _______ _______ _______
Results of discontinued products,
pretax $ (21.8) $ 27.3 $ 5.5 $ (69.1) $ 60.1 $ (9.0)
________ ________ ________ _______ _______ _______
________ ________ ________ _______ _______ _______
Net realized capital gains (losses)
from sales of bonds, after tax,
included above $ 4.8 $ 10.2 $ 15.0 $ (4.2) $ 33.3 $ 29.1
________ ________ ________ _______ _______ _______
________ ________ ________ _______ _______ _______
<FN>
(a) Represents the amount by which interest credited to holders of fully guaranteed large case
pension contracts (exceeds) or is less than interest earned on invested assets supporting such contracts.
</TABLE>
<PAGE> 43
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Large Case Pensions (Continued)
_______________________________
The results of the discontinued products in the first nine months
of 1996 were favorably affected by and the respective reserves for
anticipated future losses were credited for nonrecurring items
including rental income received on a foreclosed property of $6
million (after tax) related to GICs and $3 million (after tax)
related to SPAs. Such rental income had previously not been
recognized due to uncertainties associated with its ultimate
collection. Additionally, the adoption of FAS No. 121 (see Note 7
of Condensed Notes to Financial Statements), favorably impacted
the results of GICs by $4 million (after tax) and SPAs by $2
million (after tax).
The activity in the reserve for anticipated future losses on
discontinued products was as follows (pretax, in millions):
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
____________________________________
GICs SPAs Total
____ ____ _____
<S> <C> <C> <C>
Reserve at December 31, 1995 $ 221.4 $ 737.4 $ 958.8
Results of discontinued products 52.3 58.6 110.9
Release of reserve (170.0) - (170.0)
________ ________ ________
Reserve at September 30, 1996 $ 103.7 $ 796.0 $ 899.7
________ ________ ________
________ ________ ________
</TABLE>
Distributions on GICs and SPAs were as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1996 1996
________________________________ _______________________________
GICs SPAs Total GICs SPAs Total
____ ____ _____ ____ ____ _____
<S> <C> <C> <C> <C> <C> <C>
Scheduled contract maturities,
GIC settlements and benefit
payments (1) $ 529.0 $ 123.7 $ 652.7 $1,627.1 $ 392.5 $2,019.6
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
Participant directed withdrawals $ 12.8 $ - $ 12.8 $ 43.2 $ - $ 43.2
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
Three Months Ended September 30, Nine Months Ended September 30,
________________________________ _______________________________
1995 1995
________________________________ _______________________________
GICs SPAs Total GICs SPAs Total
____ ____ _____ ____ ____ _____
<S> <C> <C> <C> <C> <C> <C>
Scheduled contract maturities,
GIC settlements and benefit
payments (1) $ 411.2 $ 135.7 $ 546.9 $1,670.5 $ 397.9 $2,068.4
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
Participant directed withdrawals $ 24.6 $ - $ 24.6 $ 73.9 $ - $ 73.9
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
<FN>
(1) Includes early contractual settlements of GIC liabilities of approximately $2 million and
$183 million for the three and nine months ended September 30, 1996, respectively, and
approximately $23 million and $111 million for the same periods a year ago.
</TABLE>
Cash required to meet the above payments was provided by earnings
on, sales of, and scheduled payments on, invested assets and, for
GICs, also from the funding of the receivable from continuing
business which was established at the time of discontinuance.
(See "General Account Investments" on page 45 for a discussion of
investments supporting discontinued products.)
<PAGE> 44
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Corporate
_________
<TABLE>
<CAPTION>
Operating Summary
(Millions, after tax) Three Months Ended September 30, Nine Months Ended September 30,
_________________________________ ________________________________
1996 1995 % Change 1996 1995 % Change
____ ____ ________ ____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
Interest expense.................... $ 31.4 $ 18.0 74.4% $ 68.3 $ 53.9 26.7%
Other expense, net (1).............. 15.3 28.6 (46.5) 268.6 90.0 198.4
<FN>
(1) Includes after-tax net realized capital gains of $4.2 million and $10.2 million for the
three and nine months ended September 30, 1996, respectively, and net realized capital
losses of $.1 million and $2.3 million for the three and nine months ended
September 30, 1995, respectively.
</TABLE>
The increase in interest expense of $13 million and $14 million
for the three and nine months ended September 30, 1996 compared to
the same periods a year ago principally resulted from borrowings
incurred in connection with the U.S. Healthcare merger. Excluding
net realized capital gains and losses, other expense decreased $9
million and increased $191 million for the three and nine months
ended September 30, 1996, respectively, compared with the same
periods a year ago. The increase for the nine months ended
September 30, 1996 resulted from the $235 million (after tax)
severance and facilities charge discussed below. A portion of the
consideration paid in connection with the merger consisted of cash
from the net proceeds received from the sale of the company's
property-casualty operations. Other expense for the three and
nine months ended September 30, 1996 included $7 million and $37
million (after tax), respectively, of interest income earned on
such net proceeds from April 2, 1996, the date of the property-
casualty sale, through July 19, 1996, the closing date of the
merger with U.S. Healthcare.
In conjunction with the sale of the company's property-casualty
operations, Travelers subleased the space that had been occupied
by the company in the CityPlace office facility in Hartford for
eight years at current market rates. The company recorded a
charge of $190 million (after tax) during the second quarter of
1996 representing the present value of the difference between rent
required to be paid by the company under the lease and future
rentals expected to be received by the company. The company also
recorded additional severance and facilities charges of $45
million (after tax) during the second quarter of 1996 due to
actions taken or expected to be taken to reduce the level of
corporate expenses and other costs previously absorbed by the
property-casualty operations.
<PAGE> 45
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments
___________________________
Overview
The company's invested assets were comprised of the following, net
of impairment reserves:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1996 1995
_________________________________________________________________________________
<S> <C> <C>
Debt securities:
Available for sale, at fair value
(amortized cost $30,504.9 and $29,962.5) $ 30,955.5 $ 31,860.3
Equity securities, at fair value
(cost $995.5 and $597.8) 1,234.8 659.7
Short-term investments 642.2 607.8
Mortgage loans 7,171.6 8,327.2
Real estate 1,101.1 1,277.3
Policy loans 670.0 629.4
Other 660.2 688.6
_______________________________________________________________________________
Total invested assets $ 42,435.4 $ 44,050.3
_______________________________________________________________________________
_____________________________
</TABLE>
Refer to Aetna Services' 1995 Annual Report for a description of the
company's investment objectives and policies.
The change in the invested assets portfolio from December 31, 1995 to
September 30, 1996 primarily reflected depreciation of debt
securities due to an increase in interest rates and a decrease in the
aggregate mortgage loan and real estate portfolios. Such decreases
were partially offset by the addition of approximately $655 million
of debt securities resulting from the U.S. Healthcare merger. Debt
securities reflected net unrealized capital gains of $451 million at
September 30, 1996, compared with $1.9 billion at December 31, 1995.
Of such net unrealized capital gains at September 30, 1996, $136
million and $202 million related to assets supporting discontinued
products and experience rated pension contractholders, respectively.
The decrease in the aggregate mortgage loan and real estate
portfolios of $1.3 billion principally reflected prepayments and
payments at maturity on mortgage loans and sales of foreclosed
properties.
The risks associated with investments supporting experience rated
pension and annuity products are assumed by those customers subject
to, among other things, certain minimum guarantees. The anticipated
future losses associated with investments supporting discontinued
fully guaranteed large case pension products are provided for in the
reserve for anticipated future losses. (See "Discontinued Products"
on page 41.)
<PAGE> 46
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Debt Securities
As of September 30, 1996 and December 31, 1995, the company's
investments in debt securities represented 73% and 72%,
respectively, of total general account invested assets and were as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1996 1995
_____________________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 5,034.9 $ 5,765.2
Supporting experience rated products 14,419.5 14,243.4
Supporting remaining products 11,501.1 11,851.7
__________________________________
Total debt securities $ 30,955.5 $ 31,860.3
__________________________________
__________________________________
</TABLE>
Below Investment Grade, Problem and Potential Problem Debt Securities
Included in the company's debt security balances were the following
categories of debt securities:
<TABLE>
<CAPTION>
(Millions) September 30, 1996
_______________________________________________________________________________________________________
"Below Investment "Problem" Debt "Potential Problem"
Grade" Securities Securities Debt Securities
_________________ ______________ ___________________
<S> <C> <C> <C>
Total $1,623.7 $ 62.6 $ 83.3
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 28.8% 20.1% 41.2%
Supporting experience rated products 45.6 9.6 28.3
Supporting remaining products 25.6 70.3 30.5
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
December 31, 1995
________________________________________________________________
"Below Investment "Problem" Debt "Potential Problem"
Grade" Securities Securities Debt Securities
_________________ ______________ ___________________
<S> <C> <C> <C>
Total $1,623.8 $ 81.0 $ 90.4
________ ________ ________
________ ________ ________
Percentage of total:
Supporting discontinued products 32.7% 36.9% 57.5%
Supporting experience rated products 42.6 12.5 24.1
Supporting remaining products 24.7 50.6 18.4
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
</TABLE>
"Below investment grade" securities (which include "problem" debt
securities and "potential problem" debt securities described
below) are defined to be securities that carry a rating below BBB-
/Baa3. Such debt securities have been written down for other than
temporary declines in value.
Management defines "problem" debt securities to be securities for
which payment is in default, securities of issuers which are
currently in bankruptcy or in out-of-court reorganizations, or
securities of issuers for which bankruptcy or reorganization
within six months is considered likely.
<PAGE> 47
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
"Potential problem" debt securities are currently performing debt
securities for which neither payment default nor debt
restructuring is anticipated within six months, but whose issuers
are experiencing significant financial difficulties. Identifying
such potential problem debt securities requires significant
judgment as to likely future market conditions and developments
specific to individual debt securities.
The company does not accrue interest on problem debt securities
when management believes the likelihood of collection of interest
is doubtful.
Collateralized Mortgage Obligations
Included in the company's total collateralized mortgage
obligations ("CMOs") balances were the following categories of
residential CMOs:
<TABLE>
<CAPTION>
(Millions) September 30, 1996 December 31, 1995
___________________________________________________________________ _______________________
Fair Amortized Fair Amortized
Value Cost Value Cost
_________ _________ _________ _________
<S> <C> <C> <C> <C>
Total CMOs (1) $ 2,691.5 $ 2,640.8 $ 3,073.9 $ 2,866.5
_________ _________ _________ _________
_________ _________ _________ _________
Percentage of total CMOs:
Sequential and planned
amortization class bonds 68.5% 75.9%
Z-tranches 17.5 15.8
Subordinated tranches 8.3 3.3
Interest-only strips and
principal-only strips 3.9 3.3
Other 1.8 1.7
_________ _________
100.0% 100.0%
_________ _________
_________ _________
<FN>
(1) At September 30, 1996 and December 31, 1995, approximately 71% and 70%, respectively,
of the company's CMO holdings were collateralized by residential mortgage loans,
on which the timely payment of principal and interest is backed by specified
government agencies (e.g., GNMA, FNMA, FHLMC).
</TABLE>
The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in
interest rates whereby the value of the CMOs would be subject to
variability based on the repayment of principal from the
underlying mortgages earlier or later than originally anticipated.
The various categories of CMOs are subject to different degrees of
risk from changes in interest rates and defaults (for non-agency-
backed bonds). Sequential and planned amortization class bonds
are subject to less prepayment and extension risk than other CMO
instruments. Interest-only strips ("IOs") receive payments of
interest and principal-only strips ("POs") receive payments of
principal on the underlying pool of residential mortgages. The
company has mitigated the risks associated with holding IOs and
POs by holding positions in both types of instruments such that
exposure from significant changes in interest rates is reduced.
Z-tranches receive principal payments from the underlying mortgage
pool only after all other priority classes have been fully or
substantially paid. Subordinated tranches are subject to more
credit risk, but less prepayment and extension risk than other CMO
tranches.
<PAGE> 48
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Mortgage Loans
During the first nine months of 1996, the mortgage loan portfolio
was reduced 14% to $7.2 billion, net of impairment reserves. The
company's total mortgage loan investments, net of impairment
reserves, supported the following types of business:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1996 1995
___________________________________________________________________________
<S> <C> <C>
Supporting discontinued products $ 2,975.9 $ 3,388.6
Supporting experience rated products 2,547.1 3,013.4
Supporting remaining products 1,648.6 1,925.2
__________________________________
Total mortgage loan investments $ 7,171.6 $ 8,327.2
__________________________________
__________________________________
</TABLE>
During the first nine months of 1996, the company continued to manage
its mortgage loan portfolio to reduce the balance in absolute terms
and relative to invested assets, and to reduce its overall risk. The
principal balance of mortgage loans decreased $1.4 billion since
December 31, 1995 primarily reflecting the effect of repayments of
maturing loans, loan prepayments and foreclosures.
Loans with a principal balance of $182 million and collateral with a
fair market value of $71 million were foreclosed upon in the first
nine months of 1996. Additional loans with a principal balance of
$125 million were in the process of foreclosure at September 30,
1996.
<PAGE> 49
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Problem, Restructured and Potential Problem Loans
Included in the company's total mortgage loan balances were the
following categories of mortgage loans:
<TABLE>
<CAPTION>
(Millions) September 30, 1996
_________________________________________________________________________________________________________
Restructured Potential
Problem Loans Loans Problem Loans Total
_____________ ____________ _____________ _____
<S> <C> <C> <C> <C>
Total $ 466.7 (1) $ 422.2 $ 584.6 $1,473.5
________ ________ ________ ________
________ ________ ________ ________
Percentage of total:
Supporting discontinued products 42.3% 59.4% 51.0%
Supporting experience rated products 40.0 23.3 35.8
Supporting remaining products 17.7 17.3 13.2
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
Specific impairment reserves on
loans (2) $ 222.2
________
________
Specific impairment reserves as a
percentage of total 15.1%
________
________
December 31, 1995
_________________________________________________________________________________________________________
Restructured Potential
Problem Loans Loans Problem Loans Total
_____________ ____________ _____________ _____
<S> <C> <C> <C> <C>
Total $ 160.3 $ 514.1 $ 839.1 $1,513.5
________ ________ ________ ________
________ ________ ________ ________
Percentage of total:
Supporting discontinued products 22.6% 50.9% 54.3%
Supporting experience rated products 51.8 35.5 29.1
Supporting remaining products 25.6 13.6 16.6
________ ________ ________
100.0% 100.0% 100.0%
________ ________ ________
________ ________ ________
Specific impairment reserves on
loans (2) $ 361.2
________
________
Specific impairment reserves as a
percentage of total 23.9%
________
________
<FN>
(1) The increase in problem loans from December 31, 1995 to September 30, 1996 includes
$191 million related to one mortgage loan where the borrower has declared bankruptcy.
No specific reserve has been established for this loan because the loan is well secured,
and the company does not anticipate any future losses.
(2) See Note 7 of Condensed Notes to Financial Statements for further disclosures related
to mortgage loan impairment reserves.
</TABLE>
"Problem loans" are defined to be loans with payments over 60 days
past due, loans on properties in the process of foreclosure, loans
on properties involved in bankruptcy proceedings and loans on
properties subject to redemption.
<PAGE> 50
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
"Restructured loans" are loans whose original contract terms have
been modified to grant concessions to the borrower and are
currently performing pursuant to such modified terms.
Restructured loans that have a market rate of interest at the time
of the restructure (which represents the interest rate the company
would charge for a new loan with comparable risk) and demonstrate
sustainable performance (as generally evidenced by six months of
pre- or post-restructuring payment performance in accordance with
the restructured terms) may be returned to performing status.
(See Aetna Services' 1995 Annual Report for a description of the
company's restructuring program.)
"Potential problem loans" include all loans which are performing
pursuant to existing terms and are considered likely to become
classified as problem or restructured loans. Such loans are
identified through the portfolio review process on the basis of
known information about the ability of borrowers to comply with
present loan terms. Identifying such potential problem loans
requires significant judgment as to likely future market
conditions and developments specific to individual properties and
borrowers. Provision for losses that management believes are
likely to arise from such potential problem loans is included in
the specific impairment reserves. (See Note 7 of Condensed Notes
to Financial Statements for a discussion of mortgage loan
impairment reserves.)
The company does not accrue interest on problem loans or
restructured loans when management believes the collection of
interest is unlikely. The amount of pretax investment income
required by the original terms of such problem and restructured
loans outstanding at September 30 and the portion thereof actually
recorded as income were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ __________________
(Millions) 1996 1995 1996 1995
_________________________________________________________ __________________
<S> <C> <C> <C> <C>
Income which would have been
recorded under original terms
of loans $ 23.4 $ 21.7 $ 70.4 $ 66.0
Income recorded 15.0 12.6 49.8 38.6
_______ _______ _______ _______
Lost investment income $ 8.4 $ 9.1 $ 20.6 $ 27.4
_______ _______ _______ _______
_______ _______ _______ _______
Lost investment income allocated to
investments supporting discontinued
products (included above) $ 2.8 $ 3.8 $ 9.6 $ 10.3
_______ _______ _______ _______
_______ _______ _______ _______
Lost investment income allocated to
investments supporting experience
rated pension products
(included above) $ 4.1 $ 3.5 $ 8.0 $ 11.5
_______ _______ _______ _______
_______ _______ _______ _______
Lost investment income allocated to
investments supporting remaining
products (included above) $ 1.5 $ 1.8 $ 3.0 $ 5.6
_______ _______ _______ _______
_______ _______ _______ _______
</TABLE>
<PAGE> 51
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Real Estate
The company's equity real estate balances, net of write-downs and
reserves, were as follows:
<TABLE>
<CAPTION>
(Millions) September 30, 1996
________________________________________________________________________________________________
Investment Properties Total Equity
Real Estate Held for Sale Real Estate
___________ _____________ ____________
<S> <C> <C> <C>
Total equity real estate $ 162.5 $ 938.6 (1) $ 1,101.1
________ ________ _________
________ ________ _________
Percentage of total equity real
estate:
Supporting discontinued products 22.9% 59.9%
Supporting experience rated products 8.3 23.2
Supporting remaining products 68.8 16.9
________ ________
100.0% 100.0%
________ ________
________ ________
December 31, 1995
_________________________________________________________
Investment Properties Total Equity
Real Estate Held for Sale Real Estate
___________ _____________ ____________
<S> <C> <C> <C>
Total equity real estate $ 153.0 $1,124.3 (1) $ 1,277.3
________ ________ _________
________ ________ _________
Percentage of total equity real
estate:
Supporting discontinued products 7.5% 55.5%
Supporting experience rated products 7.8 29.2
Supporting remaining products 84.7 15.3
________ ________
100.0% 100.0%
________ ________
________ ________
<FN>
(1) Includes $133.4 million and $190.4 million of in-substance foreclosures
at September 30, 1996 and December 31, 1995, respectively. (See Aetna
Services' 1995 Annual Report for further discussion of in-substance
foreclosures.)
</TABLE>
Real estate which the company has the intent to hold for the
production of income is classified as investment real estate.
Investment real estate is carried at depreciated cost plus capital
additions, net of impairment write downs.
All real estate acquired through foreclosure, including in-
substance foreclosures, is classified as properties held for sale.
The fair value at foreclosure is established as the new cost basis
for these assets, which are carried at the lower of cost or fair
value less estimated selling costs. As a result of adopting FAS
No. 121 on January 1, 1996, the company no longer depreciates
properties held for sale. Adjustments to the carrying value of
properties held for sale are recorded in a valuation reserve when
the fair value less estimated selling costs is below cost. Fair
value is generally determined using a discounted future cash flow
analysis in conjunction with comparable sales information.
Property valuations are reviewed regularly by investment
management. The company intends to sell a significant amount of
the properties held for sale over the next one to two years, real
estate and capital market conditions permitting.
<PAGE> 52
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Foreclosed real estate classified as properties held for sale was
carried at 63% and 61% of the company's cash investment (unpaid
mortgage balance plus capital additions) at September 30, 1996 and
December 31, 1995, respectively. Net investment income included
$33 million and $104 million (pretax) from the net operations of
properties held for sale for the three and nine months ended
September 30, 1996, respectively.
Real Estate Write-Downs and Valuation Reserves
Total real estate write-downs and valuation reserves on properties
included in the company's equity real estate balances were as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
(Millions) 1996 1995
___________________________________________________________________________
<S> <C> <C>
Allocable to discontinued products $ 341.3 $ 381.0
Allocable to experience rated products 124.5 208.2
Allocable to remaining products 111.5 96.8
________ ________
Total real estate write-downs and
valuation reserves $ 577.3 (*) $ 686.0
________ ________
________ ________
<FN>
(*) As a result of the adoption of FAS No. 121, valuation reserves at January 1, 1996
were increased by $52.9 million in connection with the reversal of previously recorded
accumulated depreciation related to properties held for sale. The adoption of
FAS No. 121 resulted in an immaterial impact on results of operations.
</TABLE>
For the periods shown below, total after-tax net realized capital
(gains) losses from real estate write-downs and changes in the
valuation reserves were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
___________________ ___________________
(Millions) 1996 1995 1996 1995
____________________________________________________________________________________________
<S> <C> <C> <C> <C>
Allocable to discontinued products (1) $ - $ 13.0 $ (3.0) $ 13.0
Allocable to experience rated products (2) - - .1 -
Allocable to remaining products - - 16.2 -
<FN>
(1) Write-downs and impairment expense allocable to discontinued products are charged
against the reserve for future losses and do not affect the company's results of
operations.
(2) Write-downs and impairment expense allocable to experience rated products do not
affect the company's results of operations.
</TABLE>
<PAGE> 53
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
General Account Investments (Continued)
_______________________________________
Use of Derivatives and Other Investments
The company's use of derivatives is limited to hedging activity and
has principally consisted of using foreign exchange forward
contracts, futures and forward contracts and interest rate swap
agreements to hedge interest rate, price and currency risks. These
instruments, viewed separately, subject the company to varying
degrees of market and credit risk. However, when used for hedging,
the expectation is that these instruments would reduce overall market
risk. Market risk is the possibility that future changes in market
prices may decrease the market value of one or all of these financial
instruments. Credit risk arises from the potential inability of
counterparties to perform under the terms of the contracts.
Management does not believe that its current hedging activity will
have a material effect on the company's liquidity or results of
operations. (See Note 10 of Condensed Notes to Financial Statements
for a discussion of the company's hedging activities.)
The company also had investments in certain debt instruments with
derivative characteristics, including those where market value is
at least partially determined by, among other things, levels of or
changes in domestic and/or foreign interest rates (short term or
long term), exchange rates, prepayment rates, equity markets or
credit ratings/spreads. The amortized cost and fair value of
these securities included in the debt securities portfolio as of
September 30, 1996 was as follows:
<TABLE>
<CAPTION>
Amortized Fair
(Millions) Cost Value
_____________________________________________________________________________
<S> <C> <C>
Collateralized mortgage obligations: $ 2,640.8 $ 2,691.5
Interest-only strips (included above) 37.2 50.4
Principal-only strips (included above) 46.1 54.7
Structured notes (1) 114.5 117.5
<FN>
(1) Represents nonleveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed-income securities and
interest rate swap agreements.
</TABLE>
<PAGE> 54
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources
_______________________________
Financings and Financing Capacity
Cash and cash equivalents at September 30, 1996 and December 31, 1995
were $2.2 billion and $1.7 billion, respectively.
The company's short-term and long-term borrowings and financings are
conducted through Aetna Services or other subsidiaries and are fully
and unconditionally guaranteed by Aetna Inc. See Note 8 of Condensed
Notes to Financial Statements.
Short-term borrowings are used from time to time to provide for
timing differences between receipts and disbursements. The maximum
amount of domestic short-term borrowings outstanding during the first
nine months of 1996 was $1.5 billion. In the third quarter of 1996,
the company utilized funds made available from the issuance of $1.4
billion of commercial paper to fund a portion of the cash
consideration paid in connection with the U.S. Healthcare merger.
On August 19, 1996, Aetna Services issued $300,000,000 of 6.75% Notes
due 2001; $350,000,000 of 7.125% Notes due 2006; $450,000,000 of
7.625% Debentures due 2026; and $300,000,000 of 6.97% Debentures due
2036 (putable at par in 2004). The company utilized the net proceeds
from these securities to re-finance its outstanding short-term
borrowings.
Subsequent to September 30, 1996, the company reduced from $2.5
billion to $1.5 billion, the aggregate amount of its revolving credit
facility with a worldwide group of banks. The facility terminates in
June 2001. No amounts are outstanding under the facility. (See Note
8 of Condensed Notes to Financial Statements.)
Pursuant to shelf registration statements declared effective by the
SEC, the company may offer and sell through Aetna Services up to an
additional $600 million of debt securities and up to an additional
$225 million of preferred securities of a subsidiary.
Restrictions on Certain Payments by the Company
The company's business operations are conducted through Aetna
Services and U.S. Healthcare and their respective subsidiaries (which
principally consist of HMO and insurance companies). In addition to
general state law restrictions on payment of dividends and other
distributions to shareholders applicable to all corporations, HMO and
insurance companies are subject to further state regulations that,
among other things, may require such companies to maintain certain
levels of equity, and restrict the amount of dividends and other
distributions to their parent corporations. These regulations are
not directly applicable to Aetna Services, U.S. Healthcare, or the
company, as none are an HMO or insurance company. The additional
regulations applicable to the company's indirect HMO and insurance
company subsidiaries are not expected to affect the ability of the
company to pay dividends, or the ability of any of the company's
subsidiaries to service their outstanding debt or preferred stock
obligations.
<PAGE> 55
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Liquidity and Capital Resources (Continued)
___________________________________________
Ratings
In July 1996, Standard & Poor's Corporation, Moody's Investors
Service, Inc. and Duff & Phelps Credit Rating Company affirmed the
senior debt and commercial paper ratings of the company and removed
the company's ratings from credit watch. Standard & Poor's
Corporation announced on July 16, 1996 that it had lowered the claims
paying rating of Aetna Life Insurance Company, a wholly-owned
subsidiary of the company, from A+ to A and had lowered the claims
paying rating of Aetna Life Insurance and Annuity Company, a wholly-
owned subsidiary of the company, from AA to AA-.
Dividends
On September 27, 1996, the Board of Directors of Aetna Inc. (the
"Board") declared a quarterly dividend of $.20 per share of common
stock and $1.18945 per share of 6.25% Class C Voting Preferred Stock
to shareholders of record at the close of business on October 25,
1996, payable November 15, 1996.
New Accounting Pronouncements
_____________________________
See Note 3 of Condensed Notes to Financial Statements for a
discussion of recently issued accounting pronouncements.
Federal Employee Benefit Regulation
___________________________________
The company provides a variety of products and services to employee
benefit plans that are covered by the Employee Retirement Income
Security Act of 1974 ("ERISA").
In December 1993, in a case involving an employee benefit plan and an
insurance company, the United States Supreme Court ruled that assets
in the insurance company's general account that were attributable to
the nonguaranteed portion of a group pension contract issued to the
plan were "plan assets" for purposes of ERISA and that the insurance
company was an ERISA fiduciary with respect to those assets. In
reaching its decision, the Court declined to follow a 1975 Department
of Labor ("DOL") interpretive bulletin that had suggested that
insurance company general account assets were not plan assets.
Congress recently enacted the Small Business Job Protection Act (the
"Act"), which, among other matters, created a framework for resolving
potential issues raised by the Supreme Court decision. The Act
provides that, absent criminal conduct, insurers generally will not
have liability with respect to general account assets held under
previously existing nonguaranteed contracts based on claims that
those assets are plan assets. The Act also requires the DOL to issue
regulations addressing ERISA's application to the general account
assets of insurers attributable to existing nonguaranteed contracts
and such contracts issued through the end of 1998 (insurers will have
eighteen months to comply with the regulations once they are issued).
The Act does not address how ERISA may apply to assets attributable
to the nonguaranteed portion of contracts issued after 1998, and the
company and other insurers continue to seek clarification from the
DOL of these matters. As a result, the company is not currently able
to predict how these matters may ultimately affect its businesses.
<PAGE> 56
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Forward-Looking Information
___________________________
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for forward-looking statements to
encourage companies to provide prospective information about their
companies, so long as those statements are identified as forward-
looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The
company desires to take advantage of the "safe harbor" provisions
of the Act. Certain information contained herein is forward
looking, particularly the information that appears under the
heading "Outlook" in the discussion of Aetna U.S. Healthcare
results. Those matters are subject to significant uncertainties
and contingencies, many of which are beyond the control of the
company and may be affected by, among other important factors: (i)
governmental action (including downward adjustments to Medicare
and other premium rates) or business conditions (including
intensification of competition) and other factors resulting in
premiums not increasing sufficiently to offset increases in
medical costs and other operating costs; (ii) termination of
provider contracts or renegotiation thereof at less cost-effective
rates or terms of payment; (iii) price increases in
pharmaceuticals, durable medical equipment and other covered
items; (iv) governmental regulation of premium increases or
prospective or retroactive reductions to premium rates for federal
employees; (v) the selection by employers and individuals of
higher copayment/deductable/coinsurance plans with relatively
lower premiums; and (vi) the impact upon medical loss ratio of
greater net enrollment in higher medical loss ratio lines of
business such as Medicare and Medicaid. For information regarding
additional factors that may affect the company's health and other
businesses see the company's Form S-4 registration statement
related to the merger with U.S. Healthcare, and the prior SEC
filings of Aetna Services and U.S. Healthcare, including their
1995 Form 10-Ks and Annual Reports.
<PAGE> 57
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The company is involved in numerous lawsuits arising, for the most
part, in the ordinary course of its business operations including
litigation in its health business concerning benefit plan coverage
and other decisions made by the company, and alleged medical
malpractice by participating providers. While the ultimate
outcome of litigation against the company cannot be determined at
this time, after consideration of the defenses available to the
company and any related reserves established, it is not expected
to result in liability for amounts material to the financial
condition of the company, although it may adversely affect results
of operations in future periods.
Item 4. Submission of Matters to a Vote of Security Holders.
Aetna Services, Inc. (formerly Aetna Life and Casualty Company):
(a) A Special Meeting of Shareholders of Aetna Services, Inc.
was held on Thursday, July 18, 1996.
(b) Directors Elected at the Meeting: None.
(c) Other matters voted upon:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstain Non-Votes
_____ _______ _______ _________
<S> <C> <C> <C> <C>
(1) Approval and adoption of an
Agreement and Plan of Merger,
dated as of March 30, 1996, as
amended, by and among Aetna Life
and Casualty Company, U.S.
Healthcare, Inc., Aetna Inc., New
Merger Corporation and Antelope
Sub., Inc. and the transactions
contemplated thereby. 85,409,279 10,030,420 465,730 0
(2) Approval and adoption of the
Aetna Inc. 1996 Stock
Incentive Plan. 77,896,570 15,838,003 2,170,856 0
(3) Approval and adoption of the
Aetna Inc. Annual Incentive Plan. 88,464,326 6,583,862 857,241 0
(4) Approval of the assumption by
Aetna Inc. of Aetna Life and
Casualty Company's Non-Employee
Director Deferred Stock and
Deferred Compensation Plan. 87,534,754 7,406,119 964,556 0
(5) Approval and adoption of a new
Aetna Life and Casualty
Company Certificate of
Incorporation in connection
with its reincorporation as a
general business corporation,
the surrender of its license as
an insurance company in Connecticut
and the related change of its name
to Aetna Services Inc., as well
as a change of the par value of
its Common Capital Stock to $.01. 91,734,302 3,509,139 661,988 0
</TABLE>
<PAGE> 58
Item 4. Submission of Matters to a Vote of Security Holders.
(Continued)
U.S. Healthcare, Inc:
(a) A Special Meeting of Shareholders of U.S. Healthcare, Inc.
was held on Thursday, July 18, 1996.
(b) Directors Elected at the Meeting:
<TABLE>
<CAPTION>
Votes Votes Broker
For Withheld Non-Votes
_____ ________ _________
<S> <C> <C> <C>
David B. Soll, M.D. 818,854,900 415,371 0
Timothy T. Weglicki 97,747,128 413,993 0
</TABLE>
Such persons and Leonard Abramson, Betsy Z. Cohen, Jerome S. Goodman,
and Allen Misher, Ph.D. continued as directors following the meeting
and until the merger on July 19, 1996 pursuant to which U.S.
Healthcare, Inc. became a wholly owned subsidiary of the company.
(c) Other Matters voted upon:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstain Non-Votes
_____ _______ _______ _________
<S> <C> <C> <C> <C>
(1) Approval and adoption of an
Agreement and Plan of Merger,
dated as of March 30, 1996, as
amended, by and among Aetna Life
and Casualty Company, U.S.
Healthcare, Inc., Aetna Inc., New
Merger Corporation and Antelope
Sub., Inc. and the transactions
contemplated thereby. 811,173,171 1,138,622 199,699 6,758,779
(2) Approval and adoption of
the Aetna Inc. 1996 Stock
Incentive Plan. 797,980,654 12,338,662 2,299,371 6,651,584
(3) Approval and adoption of the
Aetna Inc. Annual Incentive Plan. 808,896,321 1,411,716 2,310,549 6,651,585
(4) Approval of the assumption by
Aetna Inc. of Aetna Life and
Casualty Company's Non-Employee
Director Deferred Stock and
Deferred Compensation Plan. 808,425,919 1,624,736 2,568,031 6,651,585
</TABLE>
<PAGE> 59
Item 5. Other Information.
(a) Ratios of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
The following table sets forth the company's ratio of earnings to
fixed charges and ratio of earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended Years ended December 31,
____________________________________
September 30, 1996 1995 1994 1993 1992 1991
____________________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges 4.05 4.97 4.74 (a) 1.90 .54(b)
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends 3.66 4.97 4.74 (a) 1.90 .54(b)
<FN>
(a) The company reported a pretax loss from continuing operations in 1993 which
was inadequate to cover fixed charges by $1.0 billion.
(b) Earnings were inadequate to cover fixed charges by $92.0 million in 1991.
</TABLE>
For purposes of computing both the ratio of earnings to fixed
charges and the ratio of earnings to combined fixed charges and
preferred stock dividends, "earnings" represent consolidated
earnings from continuing operations before income taxes,
cumulative effect adjustments and extraordinary items plus fixed
charges and minority interest. "Fixed charges" consist of
interest (and the portion of rental expense deemed representative
of the interest factor) and includes the dividends paid to
preferred shareholders of a subsidiary. (See Note 11 of Notes to
Financial Statements in Aetna Services' 1995 Annual Report.) For
the years ended December 31, 1995, 1994, 1993, 1992 and 1991 there
was no preferred stock outstanding. As a result, the ratios of
earnings to combined fixed charges and preferred stock dividends
were the same as the ratios of earnings to fixed charges.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(3) Articles of Incorporation and By-Laws.
(3.1) Aetna Inc. Amended and Restated Certificate of
Incorporation, incorporated herein by reference to the
company's Registration Statement on Form S-4 (File No.
333-5791) filed on June 12, 1996.
(3.2) Aetna Inc. Bylaws, incorporated herein by reference to
the company's Registration Statement on Form S-4 (File
No. 333-5791) filed on June 12, 1996.
(4) Instruments defining the rights of Security Holders,
including indentures.
(4.1) Senior Indenture, dated July 1, 1996, between the
Company, Aetna Services, Inc. (formerly Aetna Life and
Casualty Company), and State Street Bank and Trust
Company of Connecticut, National Association, as
Trustee.
<PAGE> 60
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(4.2) Form of Subordinated Indenture between Aetna Services,
Inc., Aetna Inc. and State Street Bank and Trust
Company of Connecticut, National Association, as
Trustee (including the forms of Subordinated Debt
Securities and Subordinated Debt Guarantees),
incorporated herein by reference to the company's and
Aetna Services, Inc.'s Registration Statement on
Form S-3 (File No. 333-07167) filed on June 28, 1996.
(4.3) Designations, Rights and Preferences of 6.25% Class C
Voting Preferred Stock, incorporated herein by
reference to the company's 8-K filed on July 26, 1996.
(4.4) Aetna Inc. Rights Agreement, incorporated herein by
reference to the company's 8-K filed on July 26, 1996.
(4.5) Indenture, dated as of October 15, 1986, between Aetna
Services, Inc. and The First National Bank of Boston,
Trustee, incorporated herein by reference to Aetna
Services, Inc.'s 1992 Form 10-K.
(4.6) First Indenture Supplement, dated as of August 1,
1996, to Indenture, dated as of October 15, 1986,
between Aetna Services, Inc. and State Street Bank and
Trust Company, as Successor Trustee.
(4.7) Indenture, dated as of August 1, 1993, between Aetna
Services, Inc. and State Street Bank and Trust Company
of Connecticut, National Association, as Trustee,
incorporated herein by reference to Aetna Services,
Inc.'s Registration Statement on Form S-3 (File No. 33-
50427).
(4.8) First Indenture Supplement, dated as of August 1,
1996, to the Indenture dated as of August 1, 1993
between Aetna Services, Inc. and State Street Bank and
Trust Company of Connecticut, National Association, as
Trustee.
(4.9) Written Action, dated as of November 15, 1994,
establishing the terms of Series A Preferred
Securities of Aetna Capital L.L.C., incorporated
herein by reference to Aetna Services, Inc.'s Form
8-K filed on November 22, 1994.
(4.10) Subordinated Indenture, dated as of November 1, 1994,
between Aetna Services, Inc. and The First National
Bank of Chicago, as Trustee, incorporated herein by
reference to Aetna Services, Inc.'s Form 8-K filed on
November 22, 1994.
(4.11) First Indenture Supplement, dated as of August 1,
1996, to the Indenture, dated as of November 1, 1994,
between Aetna Services, Inc. and The First National
Bank of Chicago, as Trustee.
(4.12) Payment and Guarantee Agreement, dated November 22,
1994, of Aetna Services, Inc. with respect to Aetna
Capital L.L.C., incorporated herein by reference to
Aetna Services, Inc.'s Form 8-K filed on November 22,
1994.
<PAGE> 61
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(4.13) Payment and Guarantee Agreement, dated as of August 1,
1996, of Aetna Inc. with respect to Aetna Capital
L.L.C.
(4.14) Amendment No. 1, dated as of August 1, 1996, to the
Fiscal Agency Agreement, dated as of July 17, 1986,
between Aetna Services, Inc. and State Street Bank and
Trust Company, as successor Fiscal Agent.
(10) Material Contracts.
(10.1) Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Joseph
Sebastianelli.**
(10.2) Employment Agreement, dated as of March 30, 1996, by
and between U.S. Healthcare, Inc. and Michael
Cardillo.**
(10.3) Stock Purchase Agreement, dated as of November 28,
1995, between The Travelers Insurance Group Inc. and
Aetna Services, Inc. relating to the purchase and sale
of 100% of the Common Stock of The Aetna Casualty and
Surety Company and The Standard Fire Insurance
Company, incorporated herein by reference to Aetna
Services, Inc.'s 1995 Form 10-K.
(10.4) Letter Agreement, dated as of January 19, 1995,
between Aetna Services, Inc. and Richard L. Huber,
incorporated herein by reference to Aetna Services,
Inc.'s 1995 Form 10-K.**
(10.5) Employment Agreement, dated as of January 29, 1996,
between Aetna Services, Inc. and Ronald E. Compton,
incorporated herein by reference to Aetna Services,
Inc.'s 1995 Form 10-K.**
(10.6) Employment Agreement, dated as of December 19, 1995,
between Aetna Services, Inc. and Daniel P. Kearney,
incorporated herein by reference to Aetna Services,
Inc.'s 1995 Form 10-K.**
(10.7) Letter Agreement, dated as of January 31, 1996,
between Aetna Services, Inc. and The Travelers
Insurance Company Group Inc., incorporated herein by
reference to Aetna Services, Inc.'s Form 10-Q filed on
April 26, 1996.
(10.8) Amendment, dated as of April 2, 1996, to Stock
Purchase Agreement, dated as of November 28, 1995,
between Aetna Services, Inc. and The Travelers
Insurance Group Inc., incorporated herein by reference
to Aetna Services, Inc.'s Form 10-Q filed on April 26,
1996.
(10.9) Registration Rights Agreement, dated as of March 30,
1996, between the company and Leonard Abramson,
incorporated herein by reference to Aetna Services,
Inc.'s Form 10-Q filed on April 26, 1996.
<PAGE> 62
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(10.10) Amendment No. 1, dated as of May 30, 1996, to the
Registration Rights Agreement, dated as of March 30,
1996, between the company and Leonard Abramson,
incorporated herein by reference to the company's
Registration Statement on Form S-4 (Registration No.
333-5791) filed on June 12, 1996.
(10.11) Amended and Restated Agreement, dated as of May 30,
1996, between the company and Leonard Abramson,
incorporated herein by reference to the company's
Registration Statement on Form S-4 (Registration No.
333-5791) filed on June 12, 1996.
(10.12) The Aetna Inc. 1996 Stock Incentive Plan, incorporated
herein by reference to the company's Registration
Statement on Form S-4 (Registration No. 333-5791)
filed on June 12, 1996.
(10.13) The Aetna Inc. Annual Incentive Plan, incorporated
herein by reference to the company's Registration
Statement on Form S-4 (Registration No. 333-5791)
filed on June 12, 1996.
(10.14) The Aetna Inc. Non-Employee Director Deferred Stock
and Deferred Compensation Plan, incorporated herein by
reference to the company's Registration Statement on
Form S-4 (Registration No. 333-5791) filed on June 12,
1996.
(10.15) The Supplemental Incentive Savings Plan for Certain
Employees of Aetna Services, Inc.
(10.16) The Supplemental Pension Benefit Plan for Certain
Employees of Aetna Services, Inc.
(10.17) Amendment No. 1, dated March 1, 1996 to Letter
Agreement, dated January 19, 1995, between Aetna
Services, Inc. and Richard L. Huber, incorporated
herein by reference to the company's Registration
Statement on Form S-4 (Registration No. 333-5791)
filed on June 12, 1996.
(10.18) Amended and Restated U.S. Healthcare, Inc. Savings
Plan, incorporated herein by reference to U.S.
Healthcare, Inc.'s 1995 Form 10-K filed on March 25,
1996.
(10.19) Amended and Restated Pension Plan for Employees of
U.S. Healthcare, Inc., incorporated herein by
reference to U.S. Healthcare, Inc.'s 1995 Form 10-K
filed on March 25, 1996.
(10.20) Split Dollar Insurance Agreement, dated as of February
1, 1990, among Madlyn K. Abramson, Marcy A. Shoemaker
(formerly Marcy Abramson), Nancy Wolfson, Judith
Abramson and David B. Soll, and U.S. Healthcare, Inc.,
and the related Collateral Assignment Agreement, dated
as of February 1, 1990, among Madlyn K. Abramson,
Marcy A. Shoemaker (formerly Marcy Abramson), Nancy
Wolfson, Judith Abramson and David B. Soll, and U.S.
Healthcare, Inc., incorporated herein by reference to
U.S. Healthcare, Inc.'s 1995 Form 10-K filed on March
25, 1996.
<PAGE> 63
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(10.21) Split Dollar Insurance Agreement, dated as of January
21, 1991, among Marcy A. Shoemaker (formerly Marcy
Abramson), Nancy Wolfson, Judith Abramson, David B.
Soll, Jerome Goodman and Edward M. Glickman, and U.S.
Healthcare, Inc., and the related Collateral
Assignment Agreement, dated as of January 21, 1991,
among Marcy A. Shoemaker (formerly Marcy Abramson),
Nancy Wolfson, Judith Abramson, David B. Soll, Jerome
Goodman and Edward M. Glickman, and U.S. Healthcare,
Inc., incorporated herein by reference to U.S.
Healthcare, Inc.'s 1995 Form 10-K filed on March 25,
1996.
(10.22) Description of Deferred Compensation Plan,
incorporated herein by reference to U.S. Healthcare,
Inc.'s 1995 Form 10-K filed on March 25, 1996.
(10.23) Voting Agreement, dated as of March 30, 1996, among
Leonard Abramson, Aetna Life Insurance Company and
Aetna Life Insurance and Annuity Company, incorporated
herein by reference to Aetna Services, Inc.'s Form 10-Q
filed on April 26, 1996.
(10.24) Agreement and Plan of Merger, dated as of March 30,
1996, among Aetna Services, Inc, U.S. Healthcare,
Inc., the company, Antelope Sub, Inc. and New Merger
Corporation, incorporated herein by reference to Aetna
Services, Inc.'s Form 10-Q filed on April 26, 1996.
(10.25) Amendment No. 1, dated as of May 30, 1996, to the
Agreement and Plan of Merger, dated as of March 30,
1996, among Aetna Services, Inc., U.S. Healthcare,
Inc., the company, Antelope Sub. Inc. and New Merger
Corporation, incorporated herein by reference to the
company's Registration Statement on Form S-4
(Registration No. 333-5791) filed on June 12, 1996.
(10.26) Amendment No. 1, dated as of May 30, 1996, to the
Voting Agreement, dated as of March 30, 1996, among
Leonard Abramson, Aetna Life Insurance Company and
Aetna Life Insurance and Annuity Company, incorporated
herein by reference to the company's Registration
Statement on Form S-4 (Registration No. 333-5791)
filed on June 12, 1996.
(10.27) Aetna Services, Inc. $2.5 billion Credit Facility,
incorporated herein by reference to Aetna Services,
Inc.'s Report on Form 8-K filed on July 16, 1996.
Description of certain arrangements not embodied in formal
documents, as described under the heading "Management -
Compensation of Directors", incorporated by reference to the
company's Registration Statement on Form S-4 (Registration No.
333-5791) filed on June 12, 1996, and under the caption
"Executive Compensation," incorporated herein by reference to
the Aetna Services, Inc. 1996 Proxy Statement.
<PAGE> 64
Item 6. Exhibits and Reports on Form 8-K. (Continued)
(12) Statement Re Computation of Ratios.
(12.1) Computation of ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and
preferred stock dividends for the nine months ended
September 30, 1996 and for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991.
(15) Letter Re Unaudited Interim Financial Information.
(15.1) Letter from KPMG Peat Marwick LLP acknowledging
awareness of the use of a report on unaudited interim
financial information, dated October 23, 1996.
(27) Financial Data Schedule.
(99) Additional Exhibits.
(99.1) Consent of Leonard Abramson.
**Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
Aetna Life and Casualty Company filed a report on Form 8-K on
July 16, 1996, relating to changes in certain of its subsidiaries'
ratings and a $2.5 billion Credit Agreement, dated as of
June 28, 1996, among Aetna Life and Casualty Company, as Borrower,
Aetna Inc., as Guarantor, The Banks listed therein and Morgan
Guaranty Trust Company of New York, as Administrative Agent.
The company filed a report on Form 8-K on July 26, 1996, relating
to the merger with U.S. Healthcare, Inc. including certain financial
statements of Aetna Services, Inc. and U.S. Healthcare, Inc., an
unaudited consolidated balance sheet at June 30, 1996 of Aetna Inc.,
and unaudited condensed consolidated pro forma financial statements
of Aetna Inc. for the six and twelve months ended June 30, 1996
and December 31, 1995, respectively.
The company filed a report on Form 8-K on August 12, 1996, relating
to the consent of Leonard Abramson, dated August 8, 1996.
The company filed a report on Form 8-K on August 15, 1996, relating
to the Pricing Agreement, dated August 14, 1996, to issue and sell
certain debt securities.
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Aetna Inc.
_______________________
(Registrant)
Date October 25, 1996 By /s/ Robert J. Price
______________________________
(Signature)
Robert J. Price
Vice President
and Corporate Controller
(Chief Accounting Officer)
Exhibit 4.1
AETNA LIFE AND CASUALTY COMPANY
(To Be Renamed Aetna Services, Inc.)
ISSUER
AETNA INC.,
GUARANTOR
AND
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION,
TRUSTEE
__________
INDENTURE
Dated as of July 1, 1996
__________
Senior Debt Securities
Reconciliation and tie between certain Sections of
this Indenture, dated as of July 1, 1996, and
Sections 310 through 318, inclusive, of
the Trust Indenture Act of 1939:
Trust Indenture
Act Section Indenture Section
310(a)(1) .......................... 609
(a)(2) .......................... 609
(a)(3) .......................... Not Applicable
(a)(4) .......................... Not Applicable
(b) .......................... 608
.......................... 610
311(a) .......................... 613
(b) .......................... 613
312(a) .......................... 701
.......................... 702(a)
(b) .......................... 702(b)
(c) .......................... 702(c)
313(a) .......................... 703(a)
(b) .......................... 703(a)
(c) .......................... 703(a)
(d) .......................... 703(b)
314(a) .......................... 704
(a)(4) .......................... 101
.......................... 1004
(b) .......................... Not Applicable
(c)(1) .......................... 102
(c)(2) .......................... 102
(c)(3) .......................... Not Applicable
(d) .......................... Not Applicable
(e) .......................... 102
315(a) .......................... 601
(b) .......................... 602
(c) .......................... 601
(d) .......................... 601
(e) .......................... 514
316(a) .......................... 101
(a)(1)(A).......................... 502
.......................... 512
(a)(1)(B).......................... 513
(a)(2) .......................... Not Applicable
(b) .......................... 508
(c) .......................... 104(c)
317(a)(1) .......................... 503
(a)(2) .......................... 504
(b) .......................... 1003
318(a) .......................... 107
___________________
NOTE: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
-2-
TABLE OF CONTENTS
__________
Page
____
PARTIES............................................... 1
RECITALS.............................................. 1
ARTICLE ONE
___________
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions:.......................... 2
Act................................... 2
Authenticating Agent.................. 2
Board of Directors.................... 3
Board Resolution...................... 3
Business Day.......................... 3
Commission............................ 3
Common Stock.......................... 3
Company............................... 4
Company Request; Company Order........ 4
Corporate Trust Office................ 4
corporation........................... 4
Covenant Defeasance................... 4
Defaulted Interest.................... 4
Defeasance............................ 4
Depositary............................ 4
Event of Default...................... 4
Exchange Act.......................... 4
Floating or Adjustable Rate Provision. 4
Floating or Adjustable Rate Security.. 5
Foreign Government Obligations........ 5
Global Security....................... 5
Guarantee............................. 5
Guaranteed Obligations................ 5
Guarantor............................. 5
Holder................................ 5
Indenture............................. 5
interest.............................. 6
Interest Payment Date................. 6
Maturity.............................. 6
Non-Recourse Debt..................... 6
Notice of Default..................... 6
Officers' Certificate................. 6
Opinion of Counsel.................... 6
Original Issue Discount Security...... 6
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-i-
Page
____
Outstanding........................... 7
Paying Agent.......................... 8
Person................................ 8
Place of Payment...................... 8
Predecessor Security.................. 8
Principal Subsidiary.................. 8
Redemption Date....................... 9
Redemption Price...................... 9
Regular Record Date................... 9
Responsible Officer................... 9
Securities............................ 9
Security Register and Security
Registrar............................ 9
Special Record Date................... 10
Stated Maturity....................... 10
Subsidiary............................ 10
Trustee............................... 10
Trust Indenture Act................... 10
U.S. Government Obligations........... 10
Vice President........................ 10
Section 102. Compliance Certificates and Opinions.. 10
Section 103. Form of Documents Delivered to Trustee 11
Section 104. Acts of Holders; Record Dates......... 12
Section 105. Notices, Etc., to Trustee, Company
and Guarantor........................ 14
Section 106. Notice to Holders; Waiver............. 15
Section 107. Conflict with Trust Indenture Act..... 15
Section 108. Effect of Headings and
Table of Contents.................... 16
Section 109. Successors and Assigns................ 16
Section 110. Separability Clause................... 16
Section 111. Benefits of Indenture................. 16
Section 112. Governing Law......................... 16
Section 113. Legal Holidays........................ 16
Section 114. Personal Immunity from Liability for
Incorporators, Stockholders, Etc. ... 17
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-ii-
Page
____
ARTICLE TWO
___________
SECURITY FORMS
Section 201. Forms Generally....................... 17
Section 202. Form of Face of Security.............. 18
Section 203. Form of Reverse of Security........... 21
Section 204. Form of Legend for Global Securities.. 26
Section 205. Form of Trustee's Certificate of
Authentication....................... 27
Section 206. Form of Guarantee..................... 27
ARTICLE THREE
_____________
THE SECURITIES
Section 301. Amount Unlimited; Issuable in Series.. 30
Section 302. Denominations......................... 34
Section 303. Execution, Authentication, Delivery
and Dating........................... 34
Section 304. Temporary Securities.................. 37
Section 305. Registration, Registration of Transfer
and Exchange......................... 38
Section 306. Mutilated, Destroyed, Lost and Stolen
Securities........................... 40
Section 307. Payment of Interest; Interest Rights
Preserved............................ 41
Section 308. Persons Deemed Owners................. 43
Section 309. Cancellation.......................... 43
Section 310. Computation of Interest............... 44
ARTICLE FOUR
____________
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture 44
Section 402. Application of Trust Fund............. 46
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-iii-
Page
____
ARTICLE FIVE
____________
REMEDIES
Section 501. Events of Default..................... 47
Section 502. Acceleration of Maturity; Rescission
and Annulment........................ 50
Section 503. Collection of Indebtedness and Suits
for Enforcement by Trustee........... 52
Section 504. Trustee May File Proofs of Claim...... 54
Section 505. Trustee May Enforce Claims Without
Possession of Securities............. 55
Section 506. Application of Money Collected........ 55
Section 507. Limitation on Suits................... 55
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and
Interest............................. 56
Section 509. Restoration of Rights and Remedies.... 57
Section 510. Rights and Remedies Cumulative........ 57
Section 511. Delay or Omission Not Waiver.......... 57
Section 512. Control by Holders.................... 58
Section 513. Waiver of Past Defaults............... 58
Section 514. Undertaking for Costs................. 59
ARTICLE SIX
___________
THE TRUSTEE
Section 601. Certain Duties and Responsibilities... 60
Section 602. Notice of Defaults.................... 60
Section 603. Certain Rights of Trustee............. 60
Section 604. Not Responsible for Recitals or
Issuance of Securities............... 62
Section 605. May Hold Securities................... 62
Section 606. Money Held in Trust................... 62
Section 607. Compensation and Reimbursement........ 63
Section 608. Disqualification; Conflicting
Interests............................ 63
Section 609. Corporate Trustee Required;
Eligibility.......................... 64
Section 610. Resignation and Removal; Appointment of
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-iv-
Page
____
Successor............................ 64
Section 611. Acceptance of Appointment by
Successor............................ 66
Section 612. Merger, Conversion, Consolidation or
Succession to Business............... 68
Section 613. Preferential Collection of Claims
Against Company or Guarantor......... 68
Section 614. Appointment of Authenticating Agent... 68
ARTICLE SEVEN
_____________
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY
AND GUARANTOR
Section 701. Company and Guarantor to Furnish Trustee
Names and Addresses of Holders....... 70
Section 702. Preservation of Information;
Communications to Holders............ 71
Section 703. Reports by Trustee.................... 71
Section 704. Reports by Company and Guarantor...... 72
ARTICLE EIGHT
_____________
CONSOLIDATION, MERGER, OR SALE OF ASSETS
Section 801. Company or Guarantor May Consolidate,
Etc., Only on Certain Terms.......... 72
Section 802. Successor Substituted................. 73
Section 803. Assumption by Guarantor or Subsidiary of
Company's Obligations................ 74
ARTICLE NINE
____________
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent
of Holders........................... 75
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-v-
Page
____
Section 902. Supplemental Indentures with Consent of
Holders.............................. 77
Section 903. Execution of Supplemental Indentures.. 79
Section 904. Effect of Supplemental Indentures..... 79
Section 905. Conformity with Trust Indenture Act... 80
Section 906. Reference in Securities to Supplemental
Indentures........................... 80
Section 907. Waiver of Compliance by Holders....... 80
ARTICLE TEN
___________
COVENANTS
Section 1001. Payment of Principal, Premium and
Interest............................ 80
Section 1002. Maintenance of Office or Agency
by Company and Guarantor............ 81
Section 1003. Money for Securities Payments to Be
Held in Trust....................... 82
Section 1004. Statement by Officers as to Default.. 83
Section 1005. Limitations on Liens on Common Stock of
Principal Subsidiaries.............. 84
ARTICLE ELEVEN
______________
REDEMPTION OF SECURITIES
Section 1101. Applicability of Article............. 84
Section 1102. Election to Redeem; Notice to Trustee 84
Section 1103. Selection by Trustee of Securities to
Be Redeemed......................... 85
Section 1104. Notice of Redemption................. 85
Section 1105. Deposit of Redemption Price.......... 86
Section 1106. Securities Payable on Redemption Date 86
Section 1107. Securities Redeemed in Part.......... 87
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-vi-
Page
____
ARTICLE TWELVE
______________
DEFEASANCE AND COVENANT DEFEASANCE
Section 1201. Company's Option to Effect
Defeasance or Covenant Defeasance... 87
Section 1202. Defeasance and Discharge............. 87
Section 1203. Covenant Defeasance.................. 88
Section 1204. Conditions to Defeasance or
Covenant Defeasance................. 89
Section 1205. Deposited Money and U.S. Government
Obligations or Foreign Government
Obligations to be Held In Trust;
Other Miscellaneous Provisions...... 92
Section 1206. Reinstatement........................ 93
ARTICLE THIRTEEN
________________
SINKING FUNDS
Section 1301. Applicability of Article............. 93
Section 1302. Satisfaction of Sinking Fund Payments
with Securities..................... 94
Section 1303. Redemption of Securities for Sinking
Fund................................ 94
ARTICLE FOURTEEN
________________
GUARANTEE OF SECURITIES
Section 1401. Guarantee............................ 95
Section 1402. Subrogation.......................... 96
Section 1043. Reinstatement........................ 96
Section 1404. Execution and Delivery of Guarantees. 96
TESTIMONIUM........................................... 97
SIGNATURES AND SEALS.................................. 97
ACKNOWLEDGMENTS....................................... 98
___________________
NOTE: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
-vii-
INDENTURE, dated as of July 1, 1996, among AETNA
LIFE AND CASUALTY COMPANY (to be renamed Aetna Services,
Inc.), a corporation duly organized and validly existing
under the laws of the State of Connecticut (herein called
the "Company"), having its principal office at 151
Farmington Avenue, Hartford, Connecticut 06156, AETNA INC.,
a corporation duly organized and existing under the laws of
the State of Connecticut (herein called the "Guarantor"),
having its principal office at 151 Farmington Avenue,
Hartford, Connecticut 06156 and STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national
association duly organized and existing under the laws of
the United States of America, as Trustee (herein called the
"Trustee").
RECITALS
The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance from
time to time of its debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued
in one or more series as in this Indenture provided.
The Guarantor has duly authorized the
unconditional guarantee of the Securities on the terms
hereinafter set forth and the execution and delivery of the
Indenture.
All things necessary to make this Indenture a
valid agreement of the Company and the Guarantor, in
accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is
mutually agreed, for the equal and proportionate benefit of
all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
___________
For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise
requires:
(1) the terms defined in this Article
have the meanings assigned to them in this
Article and include the plural as well as the
singular;
(2) all other terms used herein which
are defined in the Trust Indenture Act or the
Securities Act of 1933, as amended, either
directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise
defined herein have the meanings assigned to
them in accordance with generally accepted
accounting principles, and, except as
otherwise herein expressly provided, the term
"generally accepted accounting principles"
with respect to any computation required or
permitted hereunder shall mean such
accounting principles as are generally
accepted at the date of such computation;
(4) the words "Article" and "Section"
refer to an Article and Section,
respectively, of this Indenture; and
(5) the words "herein", "hereof" and
"hereunder" and other words of similar import
refer to this Indenture as a whole and not to
any particular Article, Section or other
subdivision.
"Act", when used with respect to any Holder, has
the meaning specified in Section 104.
"Authenticating Agent" means any Person authorized
by the Trustee pursuant to Section 614 to act on behalf of
the Trustee to authenticate Securities of one or more
series.
"Board of Directors", when used with reference to
either the Company or the Guarantor, means either (i) the
Board of Directors of the Company or the Guarantor, as the
case may be, the Executive Committee of such Board of
Directors or any other duly authorized committee of
directors and/or officers appointed by such Board of
Directors or Executive Committee, or (ii) one or more duly
authorized officers of the Company or the Guarantor, as the
case may be, to whom the Board of Directors of the Company
or the Guarantor or a committee thereof has delegated the
authority to act with respect to the matters contemplated by
this Indenture.
-2-
"Board Resolution", when used with reference to
either the Company or the Guarantor, means (i) a copy of a
resolution certified by the Corporate Secretary or an
Assistant Corporate Secretary of the Company or the
Guarantor, as the case may be, to have been duly adopted by
the Board of Directors or a committee thereof and to be in
full force and effect on the date of such certification or
(ii) a certificate signed by the authorized officer or
officers of the Company or the Guarantor, as the case may
be, to whom the Board of Directors of the Company or the
Guarantor or a committee thereof has delegated its authority
(as described in the definition of Board of Directors), and
in each case, delivered to the Trustee.
"Business Day", when used with respect to any
Place of Payment, means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking
institutions in that Place of Payment are authorized or
obligated by law or executive order to close.
"Commission" means the Securities and Exchange
Commission, as from time to time constituted, created under
the Exchange Act, or, if at any time after the execution of
this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such
time.
"Common Stock" means with respect to any Principal
Subsidiary, stock of any class, however designated, except
stock which is non-participating beyond fixed dividend and
liquidation preferences and the holders of which have either
no voting rights or limited voting rights entitling them,
only in the case of certain contingencies, to elect less
than a majority of the directors (or persons performing
similar functions) of such Principal Subsidiary, and shall
include securities of any class, however designated, which
are convertible into such Common Stock.
"Company" means the Person named as the "Company"
in the first paragraph of this instrument until a successor
Person shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.
"Company Request" or "Company Order", when used
with reference to the Company or the Guarantor, means a
written request or order signed in the name of the Company
or of the Guarantor, as the case may be, by (i) any two of
the following individuals: the Chairman, the President, a
Vice Chairman or a Vice President, or (ii) by one of the
foregoing individuals and by any other Vice President, the
Treasurer, an Assistant Treasurer, the Corporate Secretary
-3-
or an Assistant Corporate Secretary or any other individual
authorized by the Board of Directors for such purpose, and
delivered to the Trustee.
"Corporate Trust Office" means the principal
office of the Trustee located at 750 Main Street, Suite
1114, Hartford, Connecticut 06103 at which at any particular
time its corporate trust business shall be administered.
"corporation" means a corporation, association,
company, joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in
Section 1203.
"Defaulted Interest" has the meaning specified in
Section 307.
"Defeasance" has the meaning specified in Section 1202.
"Depositary" means, with respect to Securities of
any series issuable in whole or in part in the form of one
or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as
Depositary for such Securities as contemplated by Section
301.
"Event of Default" has the meaning specified in
Section 501.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended from time to time, and any successor
statute thereto.
"Floating or Adjustable Rate Provision" means a
formula or provision, specified in or pursuant to a Board
Resolution or an indenture supplemental hereto, providing
for the determination, whether pursuant to objective factors
or pursuant to the sole discretion of any Person (including
the Company), and periodic adjustment of the interest rate
borne by a Floating or Adjustable Rate Security.
"Floating or Adjustable Rate Security" means any
Security which provides for interest thereon at a periodic
rate that may vary from time to time over the term thereof
in accordance with a Floating or Adjustable Rate Provision.
"Foreign Government Obligations" has the meaning
specified in Section 1204.
"Global Security" means a Security that evidences
all or part of the Securities of any series and is
-4-
authenticated and delivered to, and registered in the name
of, the Depositary for such Securities or a nominee thereof.
"Guarantee" means any guarantee of the Guarantor
endorsed on a Security authenticated and delivered pursuant
to this Indenture and shall include the guarantee set forth
in Section 1401.
"Guaranteed Obligations" shall have the meaning
set forth in Section 1401.
"Guarantor" means the Person named as the
"Guarantor" in the first paragraph of this instrument until
a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter
"Guarantor" shall mean such successor Person.
"Holder" means a Person in whose name a Security
is registered in the Security Register.
"Indenture" means this instrument as originally
executed or as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such
supplemental indenture, the provisions of the Trust
Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the
terms of particular series of Securities established as
contemplated by Section 301.
"interest", when used with respect to an Original
Issue Discount Security which by its terms bears interest
only after Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to
any Security, means the Stated Maturity of an installment of
interest on such Security.
"Maturity", when used with respect to any
Security, means the date on which the principal of such
Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Non-Recourse Debt" means any indebtedness for
money borrowed as to which the liability of the Guarantor,
the Company or the Principal Subsidiaries is limited solely
to specific assets.
-5-
"Notice of Default" means a written notice of the
kind specified in Section 501(4).
"Officers' Certificate", when used with respect to
the Company or the Guarantor, means a certificate signed by
(i) any two of the following individuals: the Chairman, the
President, a Vice Chairman or a Vice President, or (ii) by
one of the foregoing individuals and by any other Vice
President, the Treasurer, an Assistant Treasurer, the
Corporate Secretary or an Assistant Corporate Secretary, of
the Company or the Guarantor, as the case may be, or any
other individual authorized by the Board of Directors of the
Company or the Guarantor, as the case may be, for such
purpose, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to
Section 1004 shall be the principal executive, financial or
accounting officer of the Company or the Guarantor, as the
case may be.
"Opinion of Counsel" means a written opinion of
counsel, who may be an employee of or counsel to the Company
or the Guarantor, as the case may be, or who may be other
counsel reasonably satisfactory to the Trustee. Each such
opinion shall include the statements required by Section
314(e) of the Trust Indenture Act, if applicable.
"Original Issue Discount Security" means any
Security which provides for an amount less than the
principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant
to Section 502.
"Outstanding", when used with respect to
Securities, means, as of the date of determination, all
Securities theretofore authenticated and delivered under
this Indenture, except:
______
(i) Securities theretofore cancelled by
the Trustee or delivered to the Trustee for
cancellation;
(ii) Securities for whose payment or
redemption money in the necessary amount has
been theretofore deposited with the Trustee
or any Paying Agent (other than the Company
or the Guarantor) in trust or set aside and
segregated in trust by the Company or the
Guarantor (if the Company or the Guarantor
shall act as Paying Agent) for the Holders of
such Securities; provided that, if such
________
Securities are to be redeemed, notice of such
redemption has been duly given pursuant to
-6-
this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities as to which Defeasance
has been effected pursuant to Section 1202;
and
(iv) Securities which have been paid
pursuant to Section 306 or in exchange for or
in lieu of which other Securities have been
authenticated and delivered pursuant to this
Indenture, other than any such Securities in
respect of which there shall have been
presented to the Trustee proof satisfactory
to it that such Securities are held by a bona
fide purchaser in whose hands such Securities
are valid obligations of the Company;
provided, however, that in determining whether the Holders
________ _______
of the requisite principal amount of the Outstanding
Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, (A) the
principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the
date of such determination upon acceleration of the Maturity
thereof pursuant to Section 502, (B) the principal amount of
a Security denominated in one or more foreign currencies or
currency units shall be the U.S. dollar equivalent,
determined in the manner provided as contemplated by
Section 301 on the date of original issuance of such
Security, of the principal amount (or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent
on the date of original issuance of such Security of the
amount determined as provided in (A) above) of such
Security, and (C) Securities owned by the Company, the
Guarantor or any other obligor upon the Securities or any
Subsidiary of the Company or the Guarantor or of such other
obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be
so disregarded. Securities so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Securities and that the
pledgee is not the Company, the Guarantor or any other
obligor upon the Securities or any Subsidiary of the
Company, the Guarantor or of such other obligor.
-7-
"Paying Agent" means any Person authorized by the
Company to pay the principal of or any premium or interest
on any Securities on behalf of the Company.
"Person" means any individual, corporation,
partnership, limited liability company, joint venture,
trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Payment", when used with respect to the
Securities of any series, means the place or places where
the principal of and any premium and interest on the
Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security
means every previous Security evidencing all or a portion of
the same debt as that evidenced by such particular Security;
and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange
for or in lieu of a mutilated, destroyed, lost or stolen
Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.
"Principal Subsidiary" means only Aetna Life
Insurance Company, Aetna Life Insurance and Annuity Company
and U.S. Healthcare, Inc., and any other Subsidiary of the
Guarantor which shall hereafter succeed by merger or
otherwise to a major part of the business of one or more of
the Principal Subsidiaries. The decision as to whether a
Subsidiary shall have succeeded to a major part of the
business of one or more of the Principal Subsidiaries shall
be made in good faith by the Board of Directors of the
Guarantor or a committee thereof by the adoption of a
resolution so stating, and the Guarantor shall within 30
days of the date of the adoption of such resolution deliver
to the Trustee a copy thereof, certified by the Corporate
Secretary or an Assistant Corporate Secretary of the
Guarantor.
"Redemption Date", when used with respect to any
Security to be redeemed, means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any
Security to be redeemed, means the price at which it is to
be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on
any Interest Payment Date on the Securities of any series
means the date specified for that purpose as contemplated by
Section 301.
-8-
"Responsible Officer", when used with respect to
the Trustee, means the chairman or any vice-chairman of the
board of directors, the chairman or any vice-chairman of the
executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president,
the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or
any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed
by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or
her knowledge of and familiarity with the particular
subject.
"Securities" has the meaning stated in the first
recital of this Indenture and more particularly means any
Securities authenticated and delivered under this Indenture.
"Security Register" and "Security Registrar" have
the respective meanings specified in Section 305.
"Special Record Date" for the payment of any
Defaulted Interest means a date fixed by the Trustee
pursuant to Section 307.
"Stated Maturity", when used with respect to any
Security or any instalment of principal thereof or interest
thereon, means the date specified in such Security as the
fixed date on which the principal of such Security or such
instalment of principal or interest is due and payable.
"Subsidiary" of any Person means a corporation
more than 50% of the voting power of which is controlled,
directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person, or by such Person and one
or more other Subsidiaries of such Person. For the purposes
of this definition, "voting power" means the power to vote
for the election of directors, whether at all times or only
so long as no senior class of stock has such voting power by
reason of any contingency.
"Trustee" means the Person named as the "Trustee"
in the first paragraph of this instrument until a successor
Trustee shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of
that series.
-9-
"Trust Indenture Act" means the Trust Indenture
Act of 1939 as in force at the date as of which this
instrument was executed; provided, however, that in the
________ _______
event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so
amended.
"U.S. Government Obligations" has the meaning
specified in Section 1204.
"Vice President", when used with respect to the
Company, the Guarantor or the Trustee, means any vice
president, whether or not designated by a number or a word
or words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions.
____________________________________
Upon any application or request by the Company or
the Guarantor to the Trustee to take any action under any
provision of this Indenture, the Company or the Guarantor,
as the case may be, shall furnish to the Trustee such
certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be
given in the form of an Officers' Certificate, if to be
given by an officer of the Company or the Guarantor, or an
Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and
any other requirements set forth in this Indenture.
Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this
Indenture (excluding certificates provided for in Section
1004) shall include
(1) a statement that each individual
signing such certificate or opinion has read
such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature
and scope of the examination or investigation
upon which the statements or opinions
contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of
each such individual, such individual has
made such examination or investigation as is
necessary to enable such individual to
express an informed opinion as to whether or
-10-
not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the
opinion of each such individual, such
condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
______________________________________
In any case where several matters are required to
be certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the
Company or the Guarantor may be based, insofar as it relates
to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to
the matters upon which its certificate or opinion is based
are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an
officer or officers of the Company or the Guarantor, as the
case may be, stating that the information with respect to
such factual matters is in the possession of the Company or
the Guarantor, as the case may be, unless such counsel
knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with
respect to such matters are erroneous.
Any certificate, statement or opinion of an
officer of the Company or the Guarantor or of counsel may be
based, insofar as it relates to accounting matters, upon a
certificate, opinion or representation by an accountant or
firm of accountants in the employ of the Company or the
Guarantor, as the case may be, unless such officer or
counsel, as the case may be, knows, or in the exercise of
reasonable care should know, that the certificate, opinion
or representation with respect to such accounting matters
upon which its certificate, statement or opinion may be
based is erroneous.
Where any Person is required to make, give or
execute two or more applications, requests, consents,
-11-
certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be
consolidated and form one instrument.
Section 104. Acts of Holders; Record Dates.
_____________________________
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided
or permitted by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company and the Guarantor.
Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee, the Company
and the Guarantor, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any
Person of any such instrument or writing may be proved by
the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged
to him or her the execution thereof. Where such execution
is by a signer acting in a capacity other than such signer's
individual capacity, such certificate or affidavit shall
also constitute sufficient proof of such signer's authority.
The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee
deems sufficient.
(c) The Company or the Guarantor may, in the
circumstances permitted by the Trust Indenture Act, fix any
day as the record date for the purpose of determining the
Holders of Outstanding Securities of any series entitled to
give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any
action, authorized or permitted to be given or taken by
Holders of Outstanding Securities of such series. If not
set by the Company or the Guarantor prior to the first
solicitation of a Holder of Securities of such series made
by any Person in respect of any such action, or, in the case
-12-
of any such vote, prior to such vote, the record date for
any such action or vote shall be the 30th day (or, if later,
the date of the most recent list of Holders required to be
provided pursuant to Section 701) prior to such first
solicitation or vote, as the case may be. With regard to
any record date for action to be taken by the Holders of one
or more series of Securities, only the Holders of Securities
of such series on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Securities shall be proved
by the Security Register or by a certificate of the Security
Registrar.
(e) Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the
Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor
or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee, the Company or the
Guarantor in reliance thereon, whether or not notation of
such action is made upon such Security.
(f) Without limiting the foregoing, a Holder
entitled hereunder to give or take any action hereunder with
regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or
by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any
different part of such principal amount.
Section 105. Notices, Etc., to Trustee, Company and
______________________________________
Guarantor.
_________
Any request, demand, authorization, direction,
notice, consent, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon,
given or furnished to, or filed with,
(1) the Trustee by any Holder or by the
Company or by the Guarantor shall be
sufficient for every purpose hereunder if
made, given, furnished or filed in writing to
or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust
Department, or
(2) the Company or the Guarantor by the
Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise
-13-
herein expressly provided) if in writing and
mailed, in the case of the Company,
first-class postage prepaid, to the Company
addressed to it at the address of its
principal office specified in the first
paragraph of this instrument, Attention:
Treasurer, or at any other address previously
furnished in writing to the Trustee by the
Company, with a copy to the Guarantor, and,
in the case of the Guarantor, first-class
postage prepaid and addressed to it at the
address of its principal office specified in
the first paragraph of this instrument,
Attention: Treasurer, or at any other
address previously furnished in writing to
the Trustee by the Guarantor, with a copy to
the Company.
Section 106. Notice to Holders; Waiver.
_________________________
Where this Indenture provides for notice to
Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at its address as it appears
in the Security Register, not later than the latest date (if
any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice; provided, however,
that the Company, the Guarantor or the Trustee, upon a good
faith determination that mailing is in the circumstances
impractical, may give such notice by any other method which,
in the reasonable belief of the Company or the Guarantor or,
in the case of the Trustee, of the Company, the Guarantor
and the Trustee, is likely to be received by the Holders.
In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other
Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the
event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance
upon such waiver.
In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be
impracticable to give such notice by mail, then such
notification as shall be made with the approval of the
Trustee
-14-
shall constitute a sufficient notification for every
purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
_________________________________
If any provision hereof limits, qualifies or
conflicts with a provision of the Trust Indenture Act that
is required under such Act to be a part of and govern this
Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified
or excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or to be excluded, as the
case may be.
Section 108. Effect of Headings and Table of Contents.
_______________________________________
The Article and Section headings herein and the
Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 109. Successors and Assigns.
______________________
All covenants and agreements in this Indenture by
the Company or the Guarantor shall bind their successors and
assigns, whether so expressed or not.
Section 110. Separability Clause.
___________________
In case any provision in this Indenture or in the
Securities or in the Guarantees shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby.
Section 111. Benefits of Indenture.
_____________________
Nothing in this Indenture or in the Securities or
in the Guarantees, express or implied, shall give to any
Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 112. Governing Law.
_____________
This Indenture and the Securities and the
Guarantees shall be governed by and construed in accordance
with the laws of the State of New York, but without regard
to principles of conflicts of laws.
-15-
Section 113. Legal Holidays.
______________
In any case where any Interest Payment Date,
Redemption Date or Stated Maturity of any Security shall not
be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of
the Securities (other than a provision of the Securities of
any series which specifically states that such provision
shall apply in lieu of this Section)) payment of interest or
principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated Maturity, provided
________
that no interest shall accrue with respect to such payment
for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be,
except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and
effect as if made on such Interest Payment Date or
Redemption Date, or at the Stated Maturity, as the case may
be.
Section 114. Personal Immunity from Liability for
____________________________________
Incorporators, Stockholders, Etc.
________________________________
No recourse shall be had for the payment of the
principal of or premium, if any, or interest, if any, on any
Security, or for any claim based thereon, or otherwise in
respect of any Security or of the Guarantees, or based on or
in respect of this Indenture or any indenture supplemental
hereto, against any incorporator, or against any past,
present or future stockholder, director or officer, as such,
of the Company or of any successor corporation, or of the
Guarantor or of any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all
such liability being expressly waived and released as a
condition of, and as consideration for, the execution of
this Indenture and the issue of the Securities and the
Guarantees.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
_______________
The Securities of each series shall be in
substantially the form set forth in this Article, or in such
-16-
other form as shall be established by or pursuant to a Board
Resolution of the Company or in one or more indentures
supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange
or as may, consistent herewith, be determined by the
officers executing such Securities, as evidenced by their
execution of the Securities. If the form of Securities of
any series is established by action taken pursuant to a
Board Resolution of the Company, a copy of an appropriate
record of such action shall be certified by the Corporate
Secretary or an Assistant Corporate Secretary of the Company
and delivered to the Trustee at or prior to the delivery of
the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
The Guarantees by the Guarantor to be endorsed on
the Securities of each series shall be substantially in such
form set forth in Section 206, or in such other form as
shall be established by or pursuant to a Board Resolution of
the Guarantor, or in one or more indentures supplemental
hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to
comply with the rules of any securities exchange or as may,
consistent herewith, be determined by the officers executing
such Guarantees, all as evidenced by such execution. If the
form of Guarantees to be endorsed on the Securities of any
series is established by action taken pursuant to a Board
Resolution of the Guarantor, a copy of an appropriate record
of such action shall be certified by the Corporate Secretary
or an Assistant Corporate Secretary of the Guarantor and
delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
The definitive Securities and the Guarantees shall
be printed, lithographed or engraved on steel engraved
borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Section 202. Form of Face of Security.
________________________
[Insert any legend required by the Internal
___________________________________________
Revenue Code and the regulations thereunder.]
____________________________________________
-17-
[AETNA LIFE AND CASUALTY COMPANY]
[AETNA SERVICES, INC.]
[...%] GUARANTEED [ZERO COUPON] [NOTE] [DEBENTURE] DUE...
No. ......... $ ........
[AETNA LIFE AND CASUALTY COMPANY] [AETNA SERVICES,
INC.], a Connecticut corporation (herein called the
"Company", which term includes any successor Person under
the Indenture hereinafter referred to), for value received,
hereby promises to pay to
.............................................., or
registered assigns, the principal sum of ................
................... [Dollars] [if other than Dollars,
_______________________
substitute other currency or currency units] [if the
____________________________________________ _______
Security is to bear interest prior to Maturity, insert -- ,
______________________________________________________
and to pay interest thereon from ............. or from the
most recent Interest Payment Date to which interest has been
paid or duly provided for, [semi-annually on ............
and ............ in each year] [If other than semi-annual
__________________________
payments, insert frequency of payments and payment dates],
________
commencing ........., at [If the Security is to bear
___________________________
interest at a fixed rate, insert -- the rate of ....% per
________________________ ______
annum [If the Security is a Floating or Adjustable Rate
_________________________________________________
Security, insert -- a rate per annum [computed-determined]
________________
in accordance with the [insert defined name of Floating or
Adjustable Rate Provision] set forth below] [If the security
________________
is to bear interest at a rate determined with reference to
___________________________________________________________
an index, refer to description of index below] until the
________
principal hereof is paid or made available for payment [if
___
applicable, insert -- , and (to the extent that the payment
__________________
of such interest shall be legally enforceable) at the rate
of ....% per annum on any overdue principal and premium and
on any overdue instalment of interest]. The interest so
payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which
shall be the ....... or ....... (whether or not a Business
Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to
the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not
-18-
inconsistent with the requirements of any securities
exchange on which the Securities of this series may be
listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture].
[If the Securities are Floating or Adjustable Rate
____________________________
Securities with respect to which the principal of or any
_________________________________________________________
premium or interest may be determined with reference to an
___________________________________________________________
index, insert the text of the Floating or Adjustable Rate
_____
Provision.]
[If the Security is not to bear interest prior to
_________________________________________________
Maturity, insert -- The principal of this Security shall not
________________
bear interest except in the case of a default in payment of
principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this
Security shall bear interest at the rate of ....% per annum
(to the extent that the payment of such interest shall be
legally enforceable), which shall accrue from the date of
such default in payment to the date payment of such
principal has been made or duly provided for. Interest on
any overdue principal shall be payable on demand. Any such
interest on any overdue principal that is not so paid on
demand shall bear interest at the rate of ......% per annum
(to the extent that the payment of such interest shall be
legally enforceable), which shall accrue from the date of such
demand for payment to the date payment of such interest
has been made or duly provided for, and such interest shall
also be payable on demand.]
Payment of the principal of (and premium, if any)
and [if applicable, insert -- any such] interest on this
_____________________
Security will be made at the office or agency of the Company
maintained for that purpose in ............, in such coin or
currency [of the United States of America] [if the Security
________________
is denominated in a currency other than U.S. dollars,
____________________________________________________
specify other currency or currency unit in which payment of
the principal of and any premium or interest may be made] as
at the time of payment is legal tender for payment of public
and private debts [if applicable, insert -- ; provided,
_____________________ ________
however, that at the option of the Company payment of
_______
interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the
Security Register].
Reference is hereby made to the further provisions
of this Security set forth on the reverse hereof, which
further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the reverse
-19-
hereof by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed under its corporate seal.
Dated:
[AETNA LIFE AND CASUALTY COMPANY]
[AETNA SERVICES, INC.]
By_____________________________
[Seal]
Attest:
...........................
Section 203. Form of Reverse of Security.
___________________________
This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"),
issued and to be issued in one or more series under an
Indenture, dated as of July 1, 1996 (herein called the
"Indenture"), among the Company, as Issuer, Aetna Inc., as
Guarantor (herein called the "Guarantor") and
..................., as Trustee (herein called the
"Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the
Guarantor, the Trustee and the Holders of the Securities and
of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the
series designated on the face hereof[, limited in aggregate
principal amount to [$]...........].
[If applicable, insert -- The Securities of this
_____________________
series are subject to redemption upon not less than 30 days'
nor more than 60 days' notice by mail, [if applicable,
_______________
insert -- (1) on ........... in any year commencing with the
______
year ...... and ending with the year ...... through
operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and
(2)] at any time [on or after ................], as a whole
or in part, at the election of the Company, at the following
-20-
Redemption Prices (expressed as percentages of the principal
amount): If redeemed [on or before ..............., ...%,
and if redeemed] during the 12-month period beginning
............. of the years indicated,
Redemption Redemption
Year Price Year Price
____ _____ ____ _____
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such
redemption [if applicable, insert -- (whether through
_____________________
operation of the sinking fund or otherwise)] with accrued
interest to the Redemption Date, but interest installments
whose Stated Maturity is on or prior to such Redemption Date
will be payable to the Holders of such Securities, or one or
more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the
face hereof, all as provided in the Indenture.]
[If applicable, insert -- The Securities of this
_____________________
series are subject to redemption upon not less than 30 days'
nor more than 60 days' notice by mail, (1) on ............
in any year commencing with the year .... and ending with
the year .... through operation of the sinking fund for this
series at the Redemption Prices for redemption through
operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and
(2) at any time [on or after ............], as a whole or in
part, at the election of the Company, at the Redemption
Prices for redemption otherwise than through operation of
the sinking fund (expressed as percentages of the principal
amount) set forth in the table below: If redeemed during
the 12-month period beginning ............ of the years
indicated,
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Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
____ _________________ ______________________
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such
redemption (whether through operation of the sinking fund or
otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of
such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the
Indenture.]
[The sinking fund for this series provides for the
redemption on ............ in each year beginning with the
year ....... and ending with the year ...... of [not less
than] [$].......... [("mandatory sinking fund") and not more
than [$].........] aggregate principal amount of Securities
of this series. Securities of this series acquired or
redeemed by the Company otherwise than through [mandatory]
sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be
made [in the inverse order in which they become due].]
[If the Security is subject to redemption,
__________________________________________
insert -- In the event of redemption of this Security in
______
part only, a new Security or Securities of this series and
of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the
cancellation hereof.]
The Indenture contains provisions for defeasance
at any time of (1) the entire indebtedness of this Security
or (2) certain restrictive covenants and Events of Default
-22-
with respect to this Security, in each case upon compliance
with certain conditions set forth in the Indenture.
[If the Security is not an Original Issue Discount
__________________________________________________
Security, insert -- If an Event of Default with respect to
________________
Securities of this series shall occur and be continuing, the
principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided
in the Indenture.]
[If the Security is an Original Issue Discount
______________________________________________
Security, insert -- If an Event of Default with respect to
________________
Securities of this series shall occur and be continuing, an
amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect
provided in the Indenture. Such amount shall be equal
to -- insert formula for determining the amount. Upon
_________________________________________
payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all
of the Company's obligations in respect of the payment of
the principal of and interest, if any, on the Securities of
this series shall terminate.]
The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification
of the rights and obligations of the Company and the
Guarantor and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time
by the Company, the Guarantor and the Trustee with the
consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be
affected. The Indenture also contains provisions permitting
the Holders of specified percentages in principal amount of
the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to
waive compliance by the Company or the Guarantor or both,
with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any
such consent or waiver by the Holder of this Security shall
be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange
hereof or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter
or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and any premium
and interest on this Security at the times, place and
-23-
[rate-rates], and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registerable in the Security Register, upon
surrender of this Security for registration of transfer at
the office or agency of the Company in any place where the
principal of and any premium and interest on this Security
are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company
and the Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of
like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities of this series are issuable only in
registered form without coupons in denominations of
[$]....... and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Guarantor, the
Trustee and any agent of the Company, the Guarantor or the
Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or
not this Security is overdue, and neither the Company, the
Guarantor, the Trustee nor any such agent shall be affected
by notice to the contrary.
The Indenture provides that the Company and the
Guarantor, at the Company's option, (a) will be discharged
from any and all obligations in respect of the Securities
(except for certain obligations to register the transfer or
exchange of Securities, replace stolen, lost or mutilated
Securities, maintain paying agencies and hold moneys for
payment in trust) or (b) need not comply with certain
restrictive covenants of the Indenture, in each case if the
Company or the Guarantor deposits, in trust, with the
Trustee money or U.S. Government Obligations (or Foreign
Government Obligations if the Securities are denominated in
-24-
a foreign currency or currencies) which through the payment
of interest thereon and principal thereof in accordance with
their terms will provide money, in an amount sufficient to
pay all the principal (including any mandatory sinking fund
payments) of, and (premium, if any) and interest on, the
Securities on the dates such payments are due in accordance
with the terms of such Securities and Guarantees, and
certain other conditions are satisfied.
No recourse shall be had for the payment of the
principal of (and premium, if any) or interest on this
Security, or for any claim based hereon, or otherwise in
respect hereof or of the Guarantee endorsed hereon, or based
on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder,
officer or director, as such, past, present or future, of
the Company or of any successor corporation, or of the
Guarantor or of any successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part
of the consideration for the issue hereof, expressly waived
and released.
All terms used in this Security which are defined
in the Indenture shall have the meanings assigned to them in
the Indenture.
Section 204. Form of Legend for Global Securities.
____________________________________
Every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following
form or such other legends as may be required:
This Security is a Global Security within the
meaning of the Indenture hereinafter referred to
and is registered in the name of a Depositary or a
nominee thereof. This Security may not be
transferred to, or registered or exchanged for
Securities registered in the name of, any Person
other than the Depositary or a nominee thereof and
no such transfer may be registered, except in the
limited circumstances described in the Indenture.
Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or
in lieu of, this Security shall be a Global
Security subject to the foregoing, except in such
limited circumstances.
-25-
Section 205. Form of Trustee's Certificate of
Authentication.
The Trustee's certificate of authentication shall
be in substantially the following form:
This is one of the Securities of the series
designated herein referred to in the within-mentioned
Indenture.
.............................,
As Trustee
By...........................
Authorized Officer
Section 206. Form of Guarantee.
_________________
Guarantees to be endorsed on the Securities shall,
subject to Section 201, be in substantially the form set
forth below; words enclosed in brackets shall be inserted,
if applicable:
GUARANTEE
OF
AETNA INC.
Aetna Inc., a Connecticut corporation (herein
called the "Guarantor", which term includes any successor
corporation under the Indenture referred to in the Security
upon which this Guarantee is endorsed), for value received,
hereby unconditionally guarantees to the Holder of the
Security upon which this Guarantee is endorsed the due and
punctual payment of the principal of, premium, if any, and
interest on said Security [and the due and punctual payment
of the sinking fund payments provided for herein], when and
as the same shall become due and payable, whether at the
Stated Maturity or upon declaration of acceleration, call
for redemption or otherwise, according to the terms thereof
and of the Indenture referred to therein. In case of the
failure of [Aetna Life and Casualty Company] [Aetna
Services, Inc.], a Connecticut corporation (herein called
the "Company", which term includes any successor corporation
under such Indenture) punctually to make any such payment of
principal, premium or interest [or sinking fund payment],
the Guarantor hereby agrees to pay or to cause any such
payment to be made punctually when and as the same shall
become due and payable, whether at Stated Maturity or upon
declaration of acceleration, call for redemption or
otherwise, and as if such payment were made by the Company.
-26-
The Guarantor hereby agrees that its obligations hereunder
shall be as if it were principal debtor and not merely
surety, and shall be absolute and unconditional,
irrespective of, and shall be unaffected by, the validity,
legality or enforceability of said Security or the
Indenture, or the absence of any action to enforce the same,
or any waiver, modification, indulgence or consent granted
to the Company with respect thereto, by the Holder of said
Security or by the Trustee, the recovery of any judgment
against the Company or any action to enforce the same or any
other circumstance that might otherwise constitute a legal
or equitable discharge or defense of a surety or guarantor;
provided, however, that notwithstanding the foregoing, no
________ _______
such waiver, modification or indulgence shall, without the
consent of the Guarantor, increase the principal amount of
said Security or the interest rate thereon or increase any
premium payable upon redemption thereof. The Guarantor
hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of bankruptcy of
the Company, any right of set-off or to counterclaim, any
right to require a proceeding first against the Company,
protest or notice with respect to said Security or the
indebtedness evidenced thereby [or with respect to any
sinking fund payment required under said Security] and all
demands whatsoever, and covenants that this Guarantee will
not be discharged except by payment in full of the principal
of, and premium, if any, and interest on said Security.
The Guarantor shall be subrogated to all rights of
the Holder against the Company in respect of any amounts
paid to such Holder by the Guarantor pursuant to the
provisions of this Guarantee; provided, however, that the
________ _______
Guarantor shall not, without the consent of all Holders of
all outstanding Securities of this series issued under the
Indenture, be entitled to enforce, or to receive, any
payments arising out of or based upon such right of
subrogation until the principal of, premium, if any, and
interest then due and payable on all Securities of the same
series issued under the Indenture shall have been
irrevocably paid in full in accordance with the terms of
such Securities.
This Guarantee is a guarantee of payment when due
and not of collection. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, in respect
of said Security if at any time payment, or any part
thereof, of said Security is rescinded or must otherwise be
restored or returned by the Holder of said Security or any
trustee for said Holder upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or
any other entity, or upon or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or
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similar officer for, the Company or any other entity or any
substantial part of their respective property, or otherwise,
all as though such payments had not been made.
No reference herein to such Indenture and no
provision of this Guarantee or of such Indenture shall alter
or impair the guarantee of the Guarantor, which is absolute
and unconditional, of the due and punctual payment of the
principal of, and premium, if any, and interest on the
Security upon which this Guarantee is endorsed at the times,
place and rate, and in the cash or currency prescribed
herein.
This Guarantee shall be governed by and construed
in accordance with the laws of the State of New York, but
without regard to principles of conflicts of laws.
This Guarantee shall not be valid or become
obligatory for any purpose until the certificate of
authentication on said Security shall have been manually
signed by or on behalf of the Trustee under such Indenture.
All terms used in this Guarantee which are defined
in such Indenture shall have the meanings assigned to them
in such Indenture.
IN WITNESS WHEREOF, Aetna Inc. has caused the
execution hereof in its corporate name by its duly
authorized officers.
AETNA INC.
By___________________
[Seal]
Attest:
_______________________________
[Assistant] Corporate Secretary
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ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
____________________________________
The aggregate principal amount of Securities which
may be authenticated and delivered under this Indenture is
unlimited.
The Securities may be issued in one or more
series. There shall be established in or pursuant to Board
Resolutions of the Company and the Guarantor, as
appropriate, and set forth in Officers' Certificates of the
Company and the Guarantor, as appropriate, or established in
one or more indentures supplemental hereto, prior to the
issuance of Securities of any series,
(1) the title of the Securities of the
series (which shall distinguish the
Securities of the series from Securities of
any other series);
(2) any limit upon the aggregate
principal amount of the Securities of the
series which may be authenticated and
delivered under this Indenture (except for
Securities authenticated and delivered upon
registration of transfer of, or in exchange
for, or in lieu of, other Securities of the
series pursuant to Sections 304, 305, 306,
906 or 1107 and except for any Securities
which, pursuant to Section 303, are deemed
never to have been authenticated and
delivered hereunder);
(3) the Person to whom any interest on
a Security of the series shall be payable, if
other than the Person in whose name that
Security (or one or more Predecessor
Securities) is registered at the close of
business on the Regular Record Date for such
interest;
(4) the date or dates on which the
principal of the Securities of the series is
payable;
(5) the rate or rates at which the
Securities of the series shall bear interest,
if any, or the Floating or Adjustable Rate
Provision pursuant to which such rates shall
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be determined, the date or dates from which
such interest shall accrue, the Interest
Payment Dates on which any such interest
shall be payable and the Regular Record Date
for any interest payable on any Interest
Payment Date;
(6) whether the Securities of the
series would be secured pursuant to
Section 901(6);
(7) the place or places where the
principal of and any premium and interest on
Securities of the series shall be payable;
(8) if applicable, the period or
periods within which, the price or prices at
which (including premium, if any) and the
terms and conditions upon which Securities of
the series may or are required to be redeemed
or prepaid, in whole or in part, at the
option of the Company or the Guarantor
pursuant to a sinking fund or otherwise;
(9) the obligation, if any, of the
Company to redeem or purchase Securities of
the series pursuant to any sinking fund or
analogous provisions or at the option of a
Holder thereof and the period or periods
within which, the price or prices at which
and the terms and conditions upon which
Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to
such obligation;
(10) if other than denominations of
$1,000 and any integral multiple thereof, the
denominations in which Securities of the
series shall be issuable;
(11) if other than such coin or
currency of the United States of America as
at the time is legal tender for payment of
public or private debts, the currency or
currencies, including composite currencies,
or currency units in which payment of the
principal of and any premium and interest on
any Securities of the series shall be payable
and the manner of determining the equivalent
thereof in the currency of the United States
of America for purposes of the definition of
"Outstanding" in Section 101;
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(12) if the amount of payments of
principal of or any premium or interest on
any Securities of the series may be
determined with reference to one or more
indices, the manner in which such amounts
shall be determined;
(13) if the principal of or any premium
or interest on any Securities of the series
is to be payable, at the election of the
Company or a Holder thereof, in one or more
currencies, including composite currencies,
or currency units other than that or those in
which the Securities are stated to be
payable, the currency, currencies, including
composite currencies, or currency units in
which payment of the principal of and any
premium and interest on Securities of such
series as to which such election is made
shall be payable, and the periods within
which and the terms and conditions upon which
such election is to be made;
(14) if other than the principal amount
thereof, the portion of the principal amount
of Securities of the series which shall be
payable upon declaration of acceleration of
the Maturity thereof pursuant to Section 502
or provable under any applicable federal or
state bankruptcy or similar law pursuant to
Section 503;
(15) if applicable, that the Securities
of the series shall be issuable in whole or
in part in the form of one or more Global
Securities and, in such case, the Depositary
or Depositaries for such Global Security or
Global Securities and any circumstance other
than those set forth in Section 305 in which
any such Global Security may be transferred
to, and registered and exchanged for
Securities registered in the name of, a
Person other than the Depositary for such
Global Security or a nominee thereof and in
which any such transfer may be registered;
(16) any other event or events of
default applicable with respect to the
Securities of the series in addition to those
provided in Section 501(1) through (7);
-31-
(17) any other covenant or warranty
included for the benefit of Securities of the
series in addition to (and not inconsistent
with) those included in this Indenture for
the benefit of Securities of all series, or
any other covenant or warranty included for
the benefit of Securities of the series in
lieu of any covenant or warranty included in
this Indenture for the benefit of Securities
of all series, or any provision that any
covenant or warranty included in this
Indenture for the benefit of Securities of
all series shall not be for the benefit of
Securities of the series, or any combination
of such covenants, warranties or provisions;
(18) if other than as set forth in
Section 206, the Guarantee of the Securities
of such series pursuant to Article Fourteen
hereof;
(19) any restriction or condition
on the transferability of the Securities
of the series;
(20) any authenticating or paying
agents, registrars or any other agents
with respect to the Securities of the
series; and
(21) any other terms of the series
(which terms shall not be inconsistent with
the provisions of this Indenture, except as
permitted by Section 901(5)).
All Securities of any one series shall be
substantially identical except as to denomination and number
and except as may otherwise be provided in or pursuant to
the Board Resolutions referred to above and set forth in
such Officers' Certificate or in any such indenture
supplemental hereto.
If any of the terms of the series are established
by action taken pursuant to a Board Resolution of the
Company or the Guarantor, a copy of such action shall be
delivered to the Trustee.
Section 302. Denominations.
_____________
The Securities of each series shall be issuable in
registered form without coupons in such denominations as
shall be specified as contemplated by Section 301. In the
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absence of any such provisions with respect to the
Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any
integral multiple thereof.
Section 303. Execution, Authentication, Delivery and
_______________________________________
Dating.
______
The Securities shall be executed on behalf of the
Company by its Chairman, its President, a Vice Chairman, any
Vice President, its Treasurer or Assistant Treasurer, under
its corporate seal reproduced thereon attested by its
Corporate Secretary or one of its Assistant Corporate
Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile.
The Guarantees shall be executed on behalf of the
Guarantor by its Chairman, its President, a Vice Chairman,
any Vice President, its Treasurer or Assistant Treasurer,
under its corporate seal reproduced thereon and attested by
its Corporate Secretary or one of its Assistant Corporate
Secretaries. The signature of any of these officers on the
Guarantees may be manual or facsimile.
The seal of the Company or the Guarantor, as the
case may be, may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced
on the Securities. Securities bearing the manual or
facsimile signatures of individuals who were at any time the
proper officers of the Company or of the Guarantor shall
bind the Company or the Guarantor, as the case may be,
notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at
the date of such Securities. Minor typographical and other
minor errors in the text of any Security or the Guarantee
endorsed thereon or minor defects in the seal or facsimile
signature on any Security or the Guarantee endorsed thereon
shall not affect the validity or enforceability of such
Security or such Guaranty if such Security has been duly
authenticated and delivered by the Trustee.
At any time and from time to time after the
execution and delivery of this Indenture, the Company may
deliver Securities of any series executed by the Company and
having endorsed thereon Guarantees executed by the Guarantor
to the Trustee for authentication, together with a Company
Order of the Company for the authentication and delivery of
such Securities, and the Trustee in accordance with such
Company Order shall authenticate and deliver such Securities
having such Guarantees endorsed thereon. If the form or
terms of the Securities of the series or the form of
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Guarantees endorsed thereon have been established in or
pursuant to one or more Board Resolutions as permitted by
Sections 201 and 301, in authenticating such Securities, and
accepting the additional responsibilities under this
Indenture in relation to such Securities and Guarantees
endorsed thereon, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(a) if the form or forms of such
Securities and the applicable Guarantees have
been established by or pursuant to Board
Resolution as permitted by Section 201, that
such form or forms have been established in
conformity with the provisions of this
Indenture;
(b) if the terms of such Securities and
the applicable Guarantees have been
established by or pursuant to Board
Resolution as permitted by Section 301, that
such terms have been established in
conformity with the provisions of this
Indenture;
(c) that such Securities, when
authenticated and delivered by the Trustee
and issued by the Company in the manner and
subject to any conditions specified in such
Opinion of Counsel, will constitute valid and
legally binding obligations of the Company
enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and
similar laws of general applicability
relating to or affecting creditors' rights
generally or the rights of creditors of
insurance companies generally and to general
equity principles; and
(d) that such Guarantees, when the
Securities on which such Guarantees are
endorsed are authenticated and delivered by
the Trustee and issued by the Company in the
manner and subject to any conditions
specified in such Opinion of Counsel, will
constitute valid and legally binding
obligations of the Guarantor, enforceable in
accordance with their terms, subject to
bankruptcy, insolvency, reorganization and
other laws of general applicability relating
-34-
to or affecting the enforcement of creditors'
rights and to general equity principles.
The Trustee shall have the right to decline to
authenticate and deliver any Securities under this Section
if the Trustee, being advised by counsel, determines that
such action may not lawfully be taken or if the Trustee in
good faith by its board of directors, executive committee,
or a trust committee of directors or responsible officers of
the Trustee shall determine that such action would expose
the Trustee to personal liability to existing Holders of
Securities.
Notwithstanding the provisions of Section 301 and
of the preceding paragraph, if all Securities of a series
are not to be originally issued at one time, it shall not be
necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and
Opinion of Counsel otherwise required pursuant to such
preceding paragraph at or prior to the time of
authentication of each Security of such series if such
documents are delivered at or prior to the authentication
upon original issuance of the first Security of such series
to be issued.
Each Security and the applicable Guarantee shall
be dated the date of its authentication.
No Security or Guarantee endorsed thereon shall be
entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in
the form provided for herein executed by the Trustee by
manual signature, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that
such Security has been duly authenticated and delivered
hereunder and that such Security or Guarantee is entitled to
the benefits of this Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and
delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the
Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security and the Guarantee
endorsed thereon shall be deemed never to have been
authenticated and delivered hereunder and shall never be
entitled to the benefits of this Indenture.
Section 304. Temporary Securities.
____________________
Pending the preparation of definitive Securities
of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary
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Securities substantially of the tenor of the definitive
Securities in lieu of which they are issued and having
endorsed thereon Guarantees of the Guarantor substantially
of the tenor of definitive Guarantees, which Securities and
Guarantees may be printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized
denomination and with such appropriate insertions,
omissions, substitutions and other variations as the
officers executing such Securities or such Guarantees may
determine, as evidenced by their execution of such
Securities and such Guarantees.
If temporary Securities of any series are issued,
the Company will cause definitive Securities of that series
to be prepared without unreasonable delay. After the
preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable
for definitive Securities of such series upon surrender of
the temporary Securities of such series at the office or
agency of the Company in a Place of Payment for that series,
without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any
series, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and
tenor which have endorsed thereon Guarantees duly executed
by the Guarantor. Until so exchanged the temporary
Securities of any series shall in all respects be entitled
to the same benefits under this Indenture as definitive
Securities of such series and tenor.
Section 305. Registration, Registration of
_____________________________
Transfer and Exchange.
_____________________
The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the
register maintained in such office and in any other office
or agency of the Company in a Place of Payment being herein
sometimes collectively referred to as the "Security
Register") in which, subject to such reasonable regulations
as it or the Trustee may prescribe, the Company shall
provide for the registration of Securities and of transfers
of Securities. The Trustee is hereby appointed "Security
Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any
Security of any series at the office or agency in a Place of
Payment for that series, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new
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Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and
tenor which have endorsed thereon a Guarantee duly executed
by the Guarantor.
At the option of the Holder, Securities of any
series may be exchanged for other Securities of the same
series, of any authorized denominations and of a like
aggregate principal amount and tenor, each such Security
having endorsed thereon a Guarantee duly executed by the
Guarantor upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of
transfer or exchange of Securities shall be the valid
obligations of the Company and the Guarantor, evidencing the
same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such
registration of transfer or exchange.
Every Security presented or surrendered for
registration of transfer, exchange, redemption or payment
shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the
Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any
registration of transfer or exchange of Securities, but the
Company or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge
that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906 or 1107 not involving any
transfer.
Unless otherwise required by the rules of any
stock exchange on which the Securities are listed or of any
quotation system through which the Securities are traded,
neither the Company nor the Trustee shall be required (i) to
issue, register the transfer of or exchange Securities of
any series during a period beginning at the opening of
business 15 days before the day of the mailing of a notice
of redemption of Securities of that series selected for
redemption under Section 1103 and ending at the close of
business on the day of such mailing, or (ii) to register the
transfer of or exchange any Security so selected for
-37-
redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Notwithstanding any other provision in this
Indenture, no Global Security may be transferred to, or
registered or exchanged for Securities registered in the
name of, any Person other than the Depositary for such
Global Security or any nominee thereof, and no such transfer
may be registered, unless (1) such Depositary (A) notifies
the Company and the Trustee that it is unwilling or unable
to continue as Depositary for such Global Security or (B)
ceases to be a clearing agency registered under the Exchange
Act, (2) the Company executes and delivers to the Trustee a
Company Order that such Global Security shall be so
transferable, registrable and exchangeable, and such
transfers shall be registrable, (3) there shall have
occurred and be continuing an Event of Default with respect
to the Securities evidenced by such Global Security or (4)
there shall exist such other circumstances, if any, as have
been specified for this purpose as contemplated by Section
301. Notwithstanding any other provision in this Indenture,
a Global Security to which the restriction set forth in the
preceding sentence shall have ceased to apply may be
transferred only to, and may be registered and exchanged for
Securities registered only in the name or names of, such
Person or Persons as the Depositary for such Global Security
shall have directed and no transfer thereof other than such
a transfer may be registered.
Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu
of, a Global Security to which the restriction set forth in
the first sentence of the preceding paragraph shall apply,
whether pursuant to this Section, Section 304, 306, 906 or
1107 or otherwise, shall be authenticated and delivered in
the form of, and shall be, a Global Security.
Section 306. Mutilated, Destroyed, Lost and Stolen
______________________________________
Securities.
__________
If there shall be delivered to the Company and the
Trustee (i) a mutilated Security, or (ii) evidence to their
satisfaction of the destruction, loss or theft of any
Security and in either case such security or indemnity as
may be required by either of them to save each of them and
any agent of either of them harmless, then, in the absence
of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company
shall execute and the Trustee shall authenticate and
deliver, in lieu of any such mutilated, destroyed, lost or
stolen Security, a new Security of the same series and of
like tenor and principal amount having endorsed thereon a
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Guarantee duly executed by the Guarantor, and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due and
payable, the Company in its discretion may, instead of
issuing a new Security, pay such Security.
Upon the issuance of any new Security under this
Section, the Company or the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee)
connected therewith.
Every new Security of any series issued pursuant
to this Section in lieu of any destroyed, lost or stolen
Security shall constitute an original additional contractual
obligation of the Company and the Guarantor, whether or not
the destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued
hereunder.
The provisions of this Section are exclusive and
shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights
____________________________________
Preserved.
_________
Except as otherwise provided as contemplated by
Section 301 with respect to any series of Securities,
interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date
shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such
interest.
Any interest on any Security of any series which
is payable, but is not punctually paid or duly provided for,
on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in
Clause (1) or (2) below:
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(1) The Company may elect to make
payment of any Defaulted Interest to the
Persons in whose names the Securities of such
series (or their respective Predecessor
Securities) are registered at the close of
business on a Special Record Date for the
payment of such Defaulted Interest, which
shall be fixed in the following manner. The
Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed
to be paid on each Security of such series
and the date of the proposed payment, and at
the same time the Company shall deposit with
the Trustee an amount of money equal to the
aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee
for such deposit prior to the date of the
proposed payment, such money when deposited
to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest
as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which
shall be not more than 15 days and not less
than 10 days prior to the date of the
proposed payment and not less than 15 days
after the receipt by the Trustee of the
notice of the proposed payment. The Trustee
shall promptly notify the Company of such
Special Record Date and, in the name and at
the expense of the Company, shall cause
notice of the proposed payment of such
Defaulted Interest and the Special Record
Date therefor to be mailed, first-class
postage prepaid, to each Holder of Securities
of such series at its address as it appears
in the Security Register, not less than
10 days prior to such Special Record Date.
Notice of the proposed payment of such
Defaulted Interest and the Special Record
Date therefor having been so mailed, such
Defaulted Interest shall be paid to the
Persons in whose names the Securities of such
series (or their respective Predecessor
Securities) are registered at the close of
business on such Special Record Date and
shall no longer be payable pursuant to the
following Clause (2).
(2) The Company may make payment of any
Defaulted Interest on the Securities of any
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series in any other lawful manner not
inconsistent with the requirements of any
securities exchange on which such Securities
may be listed, and upon such notice as may be
required by such exchange, if, after notice
given by the Company to the Trustee of the
proposed payment pursuant to this Clause,
such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this
Section, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by
such other Security.
Section 308. Persons Deemed Owners.
_____________________
Prior to due presentment of a Security for
registration of transfer, the Company, the Guarantor, the
Trustee and any agent of the Company, the Guarantor or the
Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and
for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the Guarantor,
the Trustee nor any agent of the Company, the Guarantor or
the Trustee shall be affected by notice to the contrary.
No holder of any beneficial interest in any Global
Security held on its behalf by a Depositary shall have any
rights under this Indenture with respect to such Global
Security, and such Depositary may be treated by the Company,
the Guarantor, the Trustee, and any agent of the Company,
the Guarantor or the Trustee as the owner of such Global
Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall impair, as between a
Depositary and such holders of beneficial interests, the
operation of customary practices governing the exercise of
the rights of the Depositary as Holder of any Security.
Section 309. Cancellation.
____________
All Securities surrendered for payment,
redemption, registration of transfer or exchange or for
credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by
it. The Company or the Guarantor may at any time deliver to
the Trustee for cancellation any Securities previously
-41-
authenticated and delivered hereunder which the Company or
the Guarantor may have acquired in any manner whatsoever,
and may deliver to the Trustee (or to any other Person for
delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not
issued and sold, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held
by the Trustee shall be disposed of as directed by a Company
Order. Acquisition by the Company or the Guarantor of any
Security shall not operate as a redemption or satisfaction
of the indebtedness represented by such Security unless and
until the same is delivered to the Trustee for cancellation.
Section 310. Computation of Interest.
_______________________
Except as otherwise specified as contemplated by
Section 301 for Securities of any series, interest on the
Securities of each series shall be computed on the basis of
a 360-day year of twelve 30-day months and, for any period
shorter than a full monthly period, shall be computed on the
basis of the actual number of days elapsed in such period.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of
_____________________________
Indenture.
_________
This Indenture shall upon Company Request cease to
be of further effect (except as to any surviving rights of
registration of transfer or exchange of Securities of a
series herein expressly provided for) with respect to
Securities of any series and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to
a series, when
(1) either
(A) all Securities of such series
theretofore authenticated and delivered
(other than (i) Securities which have been
destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306
and (ii) Securities of such series for whose
payment money has theretofore been deposited
in trust or segregated and held in trust by
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the Company or the Guarantor and thereafter
repaid to the Company or the Guarantor or
discharged from such trust, as provided in
Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Securities of such series
not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable,
or
(ii) will become due and payable at
their Stated Maturity within one year,
or
(iii) are to be called for
redemption within one year under
arrangements satisfactory to the Trustee
for the giving of notice of redemption
by the Trustee in the name, and at the
expense, of the Company,
and the Company or the Guarantor, in the case
of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee in
trust for the purpose (A) money (either in
United States dollars or such other currency
or currency unit in which the Securities of
any series may be payable) in an amount, or
(B) U.S. Government Obligations (or Foreign
Government Obligations if the Securities are
denominated in a foreign currency or
currencies) that through the scheduled
payment of principal and interest in respect
thereof in accordance with their terms will
provide, not later than one day before the
due date of any payment, money in an amount,
or (C) a combination thereof, sufficient to
pay and discharge the entire indebtedness on
such Securities of such series not
theretofore delivered to the Trustee for
cancellation, for principal of (and premium,
if any) and interest to the date of such
deposit (in the case of Securities of such
series which have become due and payable) or
to the Stated Maturity or Redemption Date, as
the case may be;
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(2) the Company or the Guarantor has
paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the
Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all
conditions precedent herein provided for
relating to the satisfaction and discharge of
this Indenture with respect to such series
have been complied with.
In the event there are Securities of two or more
series outstanding hereunder, the Trustee shall be required
to execute an instrument acknowledging satisfaction and
discharge of this Indenture only if requested to do so with
respect to Securities of a particular series as to which it
is Trustee and if the other conditions thereto are met. In
the event that there are two or more Trustees hereunder,
then the effectiveness of any such instrument shall be
conditioned upon receipt of such instruments from all
Trustees hereunder.
Notwithstanding the satisfaction and discharge of
this Indenture with respect to a particular series, the
obligations of the Company and the Guarantor to the Trustee
under Section 607, the obligations of the Trustee to any
Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations
of the Trustee under Section 402 and the last paragraph of
Section 1003 shall survive until there are no Securities
Outstanding with respect to a particular series and the
obligations of the Company, the Guarantor and the Trustee
with respect to all other series of Securities shall
survive.
Section 402. Application of Trust Fund.
_________________________
Subject to provisions of the last paragraph of
Section 1003, all amounts deposited with the Trustee
pursuant to Section 401 shall be held in trust and applied
by it, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company or the
Guarantor acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal
and any premium and interest for whose payment such funds
have been deposited with the Trustee.
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ARTICLE FIVE
Remedies
Section 501. Events of Default.
_________________
"Event of Default" whenever used with respect to
Securities of a series means any one of the following events
and such other events as may be established with respect to
the Securities of such series as contemplated by Section 301
hereof:
(1) Default in the payment of any instalment
of interest upon any of the Securities of such
series as and when the same shall become due and
payable, and continuance of such default for a
period of 30 days; or
(2) Default in the payment of the principal
of or premium, if any, on any of the Securities of
such series as and when the same shall become due
and payable either at maturity, upon redemption,
by declaration or otherwise; or
(3) Default in the making of any sinking
fund payment, whether mandatory or optional, as
and when the same shall become due and payable by
the terms of the Securities of such series; or
(4) Failure on the part of the Company or
the Guarantor duly to observe or perform in any
material respect any other of the covenants or
agreements on the part of the Company or the
Guarantor contained in this Indenture (other than
those set forth exclusively in the terms of any
other particular series of Securities established
as contemplated by this Indenture for the benefit
of such other series) and written notice of such
failure, stating that such notice is a "Notice of
Default" hereunder, and requiring the Company or
the Guarantor, as the case may be, to remedy the
same, shall have been given by registered or
certified mail, return receipt requested, to the
Company and the Guarantor by the Trustee, or to
the Company, the Guarantor and the Trustee by the
holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that
series, and such failure shall have continued
unremedied for a period of 90 days after the date
of the Company's and the Guarantor's receipt of
such Notice of Default; or
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(5) An event of default, as defined in any
indenture or instrument evidencing or under which
the Company, the Guarantor or any Principal
Subsidiary shall have outstanding indebtedness for
borrowed money in a principal amount in excess of
$50,000,000, shall happen and be continuing and
such indebtedness shall have been accelerated so
that the same shall be or become due and payable
prior to the date on which the same would
otherwise have become due and payable (other than
acceleration of Non-Recourse Debt which does not
exceed in the aggregate 4% of the Guarantor's
total shareholders' equity, as set forth in the
most recently published audited consolidated
balance sheet of the Guarantor) or the Company,
the Guarantor or any Principal Subsidiary shall
default in the payment at final maturity of
outstanding indebtedness for borrowed money in a
principal amount in excess of $50,000,000 (other
than default in payment at final maturity of
Non-Recourse Debt which does not exceed in the
aggregate 4% of the Guarantor's total
shareholders' equity as set forth in the most
recently published audited consolidated balance
sheet of the Guarantor), and such acceleration or
default at maturity shall not be waived, rescinded
or annulled within 30 days after written notice
thereof, stating that such notice is a "Notice of
Default" hereunder, shall have been given to the
Company and the Guarantor by the Trustee (if such
event be known to it), or to the Company, the
Guarantor and the Trustee by the holders of at
least 25% in aggregate principal amount of the
Outstanding Securities of that series; provided,
__________
however, that if such acceleration under such
_______
indenture or instrument or default at maturity
shall be remedied or cured by the Company, the
Guarantor or Principal Subsidiary, or waived,
rescinded or annulled by the requisite holders of
such indebtedness, then the Event of Default
hereunder by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or
waived without further action upon the part of
either the Trustee or any of the Holders; and
___
provided further, that, subject to the provisions
________ _______
of Sections 601 and 602, the Trustee shall not be
charged with knowledge of any such default unless
written notice thereof shall have been given to
the Trustee by the Company or the Guarantor, as
the case may be, by the holder of any such
indebtedness or an agent of the holder of any such
indebtedness, by the trustee then acting under any
-46-
such indenture or other instrument under which
such default shall have occurred, or by the
holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that
series; or
(6) A decree or order by a court having
jurisdiction in the premises shall have been
entered adjudging the Company or the Guarantor a
bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization,
arrangement, adjustment or composition of the
Company or the Guarantor under any applicable
Federal or State bankruptcy or similar law, and
such decree or order shall have continued
undischarged and unstayed for a period of 90 days;
or a decree or order of a court having
jurisdiction in the premises for the appointment
of a receiver, liquidator, trustee, assignee,
sequestrator or similar official in bankruptcy or
insolvency of the Company or the Guarantor or of
all or substantially all of the Company's or the
Guarantor's property, or for the winding up or
liquidation of the Company's or the Guarantor's
affairs, shall have been entered, and such decree
or order shall have continued undischarged and
unstayed for a period of 90 days; or
(7) The Company or the Guarantor shall
institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall
file a petition or answer or consent seeking
reorganization, arrangement, adjustment or
composition under any applicable Federal or State
bankruptcy or similar law, or shall consent to the
filing of any such petition, or shall consent to
the appointment of a receiver, liquidator,
trustee, assignee, sequestrator or similar
official in bankruptcy or insolvency of the
Company or the Guarantor or of all or
substantially all of the Company's or the
Guarantor's property, or shall make an assignment
for the benefit of creditors, or either the
Company or the Guarantor shall admit in writing
its inability to pay its debts generally as they
become due and its willingness to be adjudged a
bankrupt, or corporate action shall be taken by
the Company or the Guarantor in furtherance of any
of the aforesaid purposes.
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Upon receipt by the Trustee of any Notice of
Default pursuant to this Section 501 with respect to
Securities of any series, a record date shall automatically
and without any other action by any Person be set for the
purpose of determining the holders of Outstanding Securities
of such series entitled to join in such Notice of Default,
which record date shall be the close of business on the day
the Trustee receives such Notice of Default. The Holders of
Outstanding Securities of such series on such record date
(or their duly appointed agents), and only such Persons,
shall be entitled to join in such Notice of Default, whether
or not such Holders remain Holders after such record date;
provided that, unless such Notice of Default shall have
________
become effective by virtue of Holders of at least 25% in
principal amount of Outstanding Securities of such series on
such record date (or their duly appointed agents) having
joined therein on or prior to the 90th day after such record
date, such Notice of Default shall automatically and without
any action by any Person be cancelled and of no further
effect. Nothing in this paragraph shall prevent a Holder
(or a duly appointed agent thereof) from giving, before or
after the expiration of such 90-day period, a Notice of
Default contrary to or different from, or, after the
expiration of such period, identical to, a Notice of Default
that has been cancelled pursuant to the proviso to the
preceding sentence, in which event a new record date in
respect thereof shall be set pursuant to this paragraph.
Section 502. Acceleration of Maturity; Rescission
____________________________________
and Annulment.
_____________
If an Event of Default with respect to Securities
of any series at the time Outstanding occurs and is
continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the
principal amount (or, if any of the Securities of that
series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be
specified in the terms thereof) of all of the Securities of
that series to be due and payable immediately, by a notice
in writing to the Company and the Guarantor (and to the
Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) and all accrued
interest thereon shall become immediately due and payable.
At any time after such a declaration of
acceleration with respect to Securities of any series has
been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in
principal amount of the Outstanding Securities of that
-48-
series, by written notice to the Company, the Guarantor and
the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company or the Guarantor has
paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all
Securities of that series,
(B) the principal of (and premium,
if any, on) any Securities of that
series which have become due otherwise
than by such declaration of acceleration
and any interest thereon at the rate or
rates prescribed therefor in such
Securities,
(C) to the extent that payment of
such interest is lawful, interest upon
overdue interest at the rate or rates
prescribed therefor in such Securities,
and
(D) all sums paid or advanced by
the Trustee hereunder and the reasonable
compensation, expenses, disbursements
and advances of the Trustee, its agents
and counsel except such costs and
expenses as are a result of negligence
or bad faith on the part of the Trustee;
and
(2) all Events of Default with respect
to Securities of that series, other than the
non-payment of the principal of and interest,
if any, on the Securities of that series
which have become due solely by such
declaration of acceleration, have been cured
or waived as provided in Section 513.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
Upon receipt by the Trustee of any declaration of
acceleration, or any rescission and annulment of any such
declaration, pursuant to this Section 502 with respect to
Securities of any series, a record date shall automatically
and without any other action by any Person be set for the
purpose of determining the Holders of Outstanding Securities
-49-
of such series entitled to join in such declaration, or
rescission and annulment, as the case may be, which record
date shall be the close of business on the day the Trustee
receives such declaration, or rescission and annulment, as
the case may be. The Holders of Outstanding Securities of
such series on such record date (or their duly appointed
agents), and only such Persons, shall be entitled to join in
such declaration, or rescission and annulment, as the case
may be, whether or not such Holders remain Holders after
such record date; provided that, unless such declaration, or
________
rescission and annulment, as the case may be, shall have
become effective by virtue of Holders of at least 25%, in
the case of any declaration of acceleration, or a majority,
in the case of any rescission or annulment, in principal
amount of Outstanding Securities of such series on such
record date (or their duly appointed agents) having joined
therein on or prior to the 90th day after such record date,
such declaration, or rescission and annulment, as the case
may be, shall automatically and without any action by any
Person be cancelled and of no further effect. Nothing in
this paragraph shall prevent a Holder (or a duly appointed
agent thereof) from giving, before or after the expiration
of such 90-day period, a declaration of acceleration, or a
rescission and annulment of any such declaration, contrary
to or different from, or, after the expiration of such
period, identical to, a declaration, or rescission and
annulment, as the case may be, that has been cancelled
pursuant to the proviso to the preceding sentence, in which
event a new record date in respect thereof shall be set
pursuant to this paragraph.
Section 503. Collection of Indebtedness and Suits
____________________________________
for Enforcement by Trustee.
___________________________
The Company covenants that if
(1) default is made in the payment of
any interest on any Security when such
interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of
the principal of (or premium, if any, on) any
Security at the Maturity thereof,
the Company will, upon written demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the
whole amount then due and payable on such Securities for
principal and any premium and interest and, to the extent
that payment of such interest shall be legally enforceable,
interest on any overdue principal and premium and on any
-50-
overdue interest, at the rate or rates prescribed therefor
in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel except such costs and
expenses, as are a result of negligence or bad faith on the
part of the Trustee. Until such demand is made by the
Trustee, the Company may pay the principal of and premium,
if any, and interest, if any, on the Securities of any
series to the Holders thereof, whether or not the Securities
of such series are overdue.
If the Company fails to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a judicial
proceeding for the collection of the sums so due and unpaid,
may prosecute such proceeding to judgment or final decree
and may enforce the same against the Company, the Guarantor
or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company, the
Guarantor or any other obligor upon such Securities,
wherever situated.
If an Event of Default with respect to Securities
of any series occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and
the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
________________________________
In case of any judicial proceeding relative to the
Company, the Guarantor or any other obligor upon the
Securities or the property of the Company, the Guarantor or
such other obligor or their creditors, the Trustee shall be
entitled and empowered, by intervention in such proceeding
or otherwise, to take any and all actions authorized under
the Trust Indenture Act in order to have claims of the
Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized
(i) to file and prove a claim for the whole
amount of principal (and premium, if any) and interest
owing and unpaid in respect of the Securities in
accordance with the terms thereof and to file such
other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee
-51-
(including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Holders allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and
to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 607 except such
costs and expenses, as are a result of negligence or bad
faith on the part of the Trustee.
No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the
________ _______
Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a
member of a creditors' or other similar committee.
Section 505. Trustee May Enforce Claims Without
__________________________________
Possession of Securities.
________________________
All rights of action and claims under this
Indenture or the Securities may be prosecuted and enforced
by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its
agents and counsel except such costs and expenses, as are a
result of negligence or bad faith on the part of the
Trustee, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been
recovered.
-52-
Section 506. Application of Money Collected.
______________________________
Any money collected by the Trustee pursuant to
this Article shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal or any
premium or interest, upon presentation of the Securities and
the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts
due the Trustee under Section 607;
SECOND: To the payment of the amounts
then due and unpaid for principal of and any
premium and interest on the Securities in
respect of which or for the benefit of which
such money has been collected, ratably,
without preference or priority of any kind,
according to the amounts due and payable on
such Securities for principal and any premium
and interest, respectively; and
THIRD: To the payment of the
remainder, if any, to the Company or any
other Person lawfully entitled thereto.
Section 507. Limitation on Suits.
___________________
No Holder of any Security of any series shall have
any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture or for the
appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given
written notice to the Trustee of a continuing
Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25% in
principal amount of the Outstanding
Securities of that series shall have made
written request to the Trustee to institute
proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered
to the Trustee indemnity reasonably
satisfactory in form and substance to the
Trustee against the costs, expenses and
-53-
liabilities to be incurred in compliance with
such request;
(4) the Trustee for 60 days after its
receipt of such notice, request and offer of
indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such
written request has been given to the Trustee
during such 60-day period by the Holders of a
majority in principal amount of the
Outstanding Securities of that series;
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any
other of such Holders, or to obtain or to seek to obtain
priority or preference over any other of such Holders or to
enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all
of such Holders.
Section 508. Unconditional Right of Holders to Receive
__________________________________________
Principal, Premium and Interest.
_______________________________
Notwithstanding any other provision in this
Indenture, the Holder of any Security shall have the right,
which is absolute and unconditional, to receive payment of
the principal of and any premium and (subject to
Section 307) any interest on such Security on the Stated
Maturity or Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and
such rights shall not be impaired without the consent of
such Holder.
Section 509. Restoration of Rights and Remedies.
__________________________________
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the
Company, the Guarantor, the Trustee and the Holders shall be
restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies
of the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
-54-
Section 510. Rights and Remedies Cumulative.
______________________________
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or
stolen Securities in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
____________________________
No delay or omission of the Trustee or of any
Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Subject to Section 507,
every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
__________________
The Holders of a majority in principal amount of
the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that
________
(1) such direction shall not be in
conflict with any rule of law or with this
Indenture, and
(2) the Trustee may take any other
action deemed proper by the Trustee which is
not inconsistent with such direction.
Upon receipt by the Trustee of any such direction
with respect to Securities of any series, a record date
shall be set for determining the Holders of Outstanding
Securities of such series entitled to join in such
direction, which record date shall be the close of business
on the day the Trustee receives such direction. The Holders
of Outstanding Securities of such series on such record date
(or their duly appointed agents), and only such Persons,
-55-
shall be entitled to join in such direction, whether or not
such Holders remain Holders after such record date; provided
________
that, unless such direction shall have become effective by
virtue of Holders of at least a majority in principal amount
of Outstanding Securities of such series on such record date
(or their duly appointed agents) having joined therein on or
prior to the 90th day after such record date, such direction
shall automatically and without any action by any Person be
cancelled and of no further effect. Nothing in this
paragraph shall prevent a Holder (or a duly appointed agent
thereof) from giving, before or after the expiration of such
90-day period, a direction contrary to or different from,
or, after the expiration of such period, identical to, a
direction that has been cancelled pursuant to the proviso to
the preceding sentence, in which event a new record date in
respect thereof shall be set pursuant to this paragraph.
Section 513. Waiver of Past Defaults.
_______________________
The Holders of not less than a majority in
principal amount of the Outstanding Securities of any series
may on behalf of the Holders of all the Securities of such
series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of
or any premium or interest on any Security of
such series, or
(2) in respect of a covenant or
provision hereof which under Article Nine
cannot be modified or amended without the
consent of the Holder of each Outstanding
Security of such series affected.
With respect to any series of Securities, the
Company or the Guarantor may, but shall not be obligated to,
establish a record date for the purpose of determining the
Persons entitled to waive any past default hereunder. If a
record date is fixed, the Holders on such record date, or
their duly designated proxies, and only such Persons, shall
be entitled to waive any default hereunder, whether or not
such Holders remain Holders after such record date;
provided, however, that unless such Holders of not less than
a majority in principal amount of the Outstanding Securities
of such series shall have waived such default prior to the
date which is 90 days after such record date, any such
waiver previously given shall automatically and without
further action by any Holder be cancelled and of no effect.
Upon any such waiver, such default shall cease to
exist, and any Event of Default arising therefrom shall be
-56-
deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent
or other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
_____________________
In any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the
Trustee for any action taken, suffered or omitted by it as
Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and
may assess costs against any such party litigant, in the
manner and to the extent provided in the Trust Indenture
Act; provided that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to
require such an undertaking or to make such an assessment in
any suit instituted by the Company or the Guarantor.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
___________________________________
The duties and responsibilities of the Trustee
shall be as provided by the Trust Indenture Act.
Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the
provisions of this Section.
Section 602. Notice of Defaults.
__________________
If a default occurs hereunder with respect to
Securities of any series, the Trustee shall give the Holders
of Securities of such series notice of such default as and
to the extent provided by the Trust Indenture Act; provided,
________
however, that in the case of any default of the character
_______
specified in Section 501(4) with respect to Securities of
such series, no such notice to Holders shall be given until
at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would
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become, an Event of Default with respect to Securities of
such series.
Section 603. Certain Rights of Trustee.
_________________________
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be
protected in acting or refraining from
acting upon any resolution, certificate,
statement, instrument, opinion, report,
notice, request, direction, consent, order,
bond, debenture, note, other evidence of
indebtedness or other paper or document
believed by it to be genuine and to have
been signed or presented by the proper party
or parties;
(b) any request or direction of the
Company or the Guarantor mentioned herein
shall be sufficiently evidenced by a Company
Request or Company Order and any resolution
of the Board of Directors of the Company or
the Guarantor may be sufficiently evidenced
by a Board Resolution;
(c) whenever in the administration of
this Indenture the Trustee shall deem it
desirable that a matter be proved or
established prior to taking, suffering or
omitting any action hereunder, the Trustee
(unless other evidence be herein
specifically prescribed) may, in the absence
of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with
counsel and the written advice of such
counsel or any Opinion of Counsel shall be
full and complete authorization and
protection in respect of any action taken,
suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no
obligation to exercise any of the rights or
powers vested in it by this Indenture at the
request or direction of any of the Holders
pursuant to this Indenture, unless such
Holders shall have offered to the Trustee
security or indemnity reasonably
satisfactory in form and substance to the
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Trustee against the costs, expenses and
liabilities which might be incurred by it in
compliance with such request or direction;
(f) prior to the occurrence of an
Event of Default and after the remedy or
waiver of all Events of Default, the Trustee
shall not be bound to make any investigation
into the facts or matters stated in any
resolution, certificate, statement,
instrument, opinion, report, notice,
request, direction, consent, order, bond,
debenture, note, other evidence of
indebtedness or other paper or document, but
the Trustee, in its discretion, may make
such further inquiry or investigation into
such facts or matters as it may see fit,
and, if the Trustee shall determine to make
such further inquiry or investigation, it
shall upon reasonable notice to the Company
and the Guarantor be entitled to examine the
books, records and premises of the Company
and the Guarantor, personally or by agent or
attorney at a time and place acceptable to
the Company or the Guarantor, as the case
may be; and
(g) the Trustee may execute any of the
trusts or powers hereunder or perform any
duties hereunder either directly or by or
through agents or attorneys and the Trustee
shall not be responsible for any misconduct
or negligence on the part of any agent or
attorney appointed with due care by it hereunder.
Section 604. Not Responsible for Recitals or
_______________________________
Issuance of Securities.
______________________
The recitals contained herein and in the
Securities, except the Trustee's certificates of
authentication, shall be taken as the statements of the
Company or the Guarantor, as the case may be, and the
Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this
Indenture or of the Securities or of the Guarantees. The
Trustee or any Authenticating Agent shall not be accountable
for the use or application by the Company of Securities or
the proceeds thereof.
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Section 605. May Hold Securities.
___________________
The Trustee, any Authenticating Agent, any Paying
Agent, any Security Registrar or any other agent of the
Company or the Guarantor, in its individual or any other
capacity, may become the owner or pledgee of Securities and,
subject to Sections 608 and 613, may otherwise deal with the
Company or the Guarantor with the same rights it would have
if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
Section 606. Money Held in Trust.
___________________
Money held by the Trustee in trust hereunder need
not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as
otherwise agreed with the Company or the Guarantor, as the
case may be.
Section 607. Compensation and Reimbursement.
______________________________
The Company and the Guarantor agree
(1) to pay to the Trustee from time to
time reasonable compensation for all services
rendered by it hereunder (which compensation
shall not be limited by any provision of law
in regard to the compensation of a trustee of
an express trust);
(2) except as otherwise expressly
provided herein, to reimburse the Trustee
upon its written request for all reasonable
expenses, disbursements and advances incurred
or made by the Trustee in accordance with any
provision of this Indenture (including the
reasonable compensation, and reasonable
expenses and disbursements of its agents and
outside counsel), except any such expense,
disbursement or advance as may be
attributable to its negligence or bad faith;
and
(3) to indemnify the Trustee for, and
to hold it harmless against, any loss,
liability or expense incurred without
negligence or bad faith on its part, arising
out of or in connection with the acceptance
or administration of the trust or trusts
hereunder, including the reasonable costs and
expenses of defending itself against any
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claim or liability in connection with the
exercise or performance of any of its powers
or duties hereunder.
Section 608. Disqualification; Conflicting
_____________________________
Interests.
_________
If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the
Trustee shall either eliminate such interest or resign, to
the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required;
__________________________
Eligibility.
___________
There shall at all times be a Trustee hereunder
which shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined
capital and surplus of at least $50,000,000 or is a
subsidiary of a corporation which shall be a Person that has
a combined capital and surplus of at least $50,000,000 and
which unconditionally guarantees the obligations of the
Trustee hereunder. If such Person publishes reports of
condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority,
then for the purposes of this Section, the combined capital
and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this
Article.
Section 610. Resignation and Removal;
_______________________
Appointment of Successor.
________________________
(a) No resignation or removal of the Trustee and
no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with
respect to the Securities of one or more series by giving
written notice thereof to the Company and the Guarantor. If
the instrument of acceptance by a successor Trustee required
by Section 611 shall not have been delivered to the Trustee
within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
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competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with
respect to the Securities of any series by Act of the
Holders of a majority in principal amount of the Outstanding
Securities of such series, delivered to the Trustee and to
the Company and the Guarantor.
(d) If at any time:
(1) the Trustee shall fail to comply
with Section 608 after written request
therefor by the Company or the Guarantor or
by any Holder who has been a bona fide Holder
of a Security for at least six months, or
(2) the Trustee shall cease to be
eligible under Section 609 and shall fail to
resign after written request therefor by the
Company or the Guarantor or by any such Holder, or
(3) the Trustee shall become incapable
of acting or shall be adjudged a bankrupt or
insolvent or a receiver of the Trustee or of
its property shall be appointed or any public
officer shall take charge or control of the
Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee with respect to all
Securities, or (ii) subject to Section 514, any Holder who
has been a bona fide Holder of a Security for at least six
months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for
the removal of the Trustee with respect to all Securities
and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in
the office of Trustee for any cause, with respect to the
Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those
series (it being understood that any such successor Trustee
may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall
be only one Trustee with respect to the Securities of any
particular series) and shall comply with the applicable
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requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee with respect to the
Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Company and the
Guarantor and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements
of Section 611, become the successor Trustee with respect to
the Securities of such series and to that extent supersede
the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company or the
Holders and accepted appointment in the manner required by
Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on
behalf of itself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each
resignation and each removal of the Trustee with respect to
the Securities of any series and each appointment of a
successor Trustee with respect to the Securities of any
series to all Holders of Securities of such series in the
manner provided in Section 106. Each notice shall include
the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate
Trust Office.
Section 611. Acceptance of Appointment by
____________________________
Successor.
_________
(a) In case of the appointment hereunder of a
successor Trustee with respect to all Securities, every such
successor Trustee so appointed shall execute, acknowledge
and deliver to the Company, to the Guarantor and to the
retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on the request of the Company, the
Guarantor or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee
hereunder.
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(b) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or
more (but not all) series, the Company, the Guarantor, the
retiring Trustee and each successor Trustee with respect to
the Securities of such series shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee
shall accept such appointment and which (1) shall contain
such provisions as shall be necessary or desirable to
transfer the rights, powers, trust and duties of the
retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor
Trustee relates, (2) if the retiring Trustee is not retiring
with respect to all Securities, shall contain such
provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of
the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring
Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall
constitute such Trustee co-trustees of the same trust and
that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts
hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on
request of the Company and the Guarantor or any successor
Trustee, such retiring Trustee shall duly assign, transfer
and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment
of such successor Trustee relates.
(c) Upon request of any such successor Trustee,
the Company and the Guarantor shall execute any and all
instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers
and trusts referred to in paragraphs (a) and (b) of this
Section, as the case may be.
(d) No successor shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
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Section 612. Merger, Conversion, Consolidation or
____________________________________
Succession to Business.
______________________
Any corporation into which the Trustee may be
merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the
corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper
or any further act on the part of any of the parties hereto.
In case any Securities shall have been authenticated, but
not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such
Securities.
Section 613. Preferential Collection of Claims
__________________________________
Against Company or Guarantor.
____________________________
If and when the Trustee shall be or become a
creditor of the Company, the Guarantor or any other obligor
upon the Securities, the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the
collection of claims against the Company, the Guarantor or
any such other obligor.
Section 614. Appointment of Authenticating Agent.
___________________________________
The Trustee may with the consent of the Company
appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized
to act on behalf of the Trustee to authenticate Securities
of such series issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or
pursuant to Section 306, and Securities so authenticated
shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference
is made in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating
Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized
and doing business under the laws of the United States of
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America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by
Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section,
the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall
cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in
this Section.
Any corporation into which an Authenticating Agent
may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger,
conversion or consolidation to which such Authenticating
Agent shall be a party, or any corporation succeeding to the
corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and to the
Company. The Trustee or the Company may at any time
terminate the agency of an Authenticating Agent by giving
written notice thereof to such Authenticating Agent and to
the Company or the Trustee, as the case may be. Upon
receiving such a notice of resignation or upon such a
termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to
the Company and shall mail written notice of such
appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which
such Authenticating Agent will serve, as their names and
addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless
eligible under the provisions of this Section.
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The Trustee agrees to pay to each Authenticating
Agent from time to time reasonable compensation for its
services under this Section, and the Trustee shall be
entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more
series is made pursuant to this Section, the Securities of
such series may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series
designated therein referred to in the within-mentioned Indenture.
........................,
As Trustee
By.......................,
As Authenticating Agent
By........................
Authorized Officer
ARTICLE SEVEN
Holders' Lists and Reports by Trustee, Company and Guarantor
Section 701. Company and Guarantor to Furnish Trustee
________________________________________
Names and Addresses of Holders.
______________________________
The Company and the Guarantor will furnish or cause to
be furnished to the Trustee
(a) semi-annually, not later than 10 days
after each Regular Record Date in each year, a
list for each series of Securities, in such form
as the Trustee may reasonably require, of the
names and addresses of the Holders of Securities
of such series as of the preceding Regular Record
Date, and
(b) at such other times as the Trustee may
request in writing, within 30 days after the
receipt by the Company or the Guarantor of any
such request, a list of similar form and content
as of a date not more than 15 days prior to the
time such list is furnished;
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excluding from any such list names and addresses received by
_________
the Trustee in its capacity as Security Registrar.
Section 702. Preservation of Information;
___________________________
Communications to Holders.
_________________________
(a) The Trustee shall preserve, in as current a
form as is reasonably practicable, the names and addresses
of Holders contained in the most recent list furnished to
the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity
as Security Registrar. The Trustee may destroy any list
furnished to it as provided in Section 701 upon receipt of a
new list so furnished.
(b) The rights of the Holders to communicate with
other Holders with respect to their rights under this
Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided
by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Company, the Guarantor and
the Trustee that none of the Company, the Guarantor, the
Trustee or any agent of any of them shall be held
accountable by reason of any disclosure of information as to
names and addresses of Holders made pursuant to the Trust
Indenture Act.
Section 703. Reports by Trustee.
__________________
(a) The Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant
thereto. To the extent that any such report is required by
the Trust Indenture Act with respect to any 12 month period,
such report shall cover the 12 month period ending July 15
and shall be transmitted by the next succeeding September
15.
(b) A copy of each such report shall, at the time
of such transmission to Holders, be filed by the Trustee
with each stock exchange upon which any Securities are
listed, with the Commission and with the Company and the
Guarantor. The Company will notify the Trustee when any
Securities are listed on any stock exchange.
Section 704. Reports by Company and Guarantor.
________________________________
The Company and the Guarantor shall file with the
Trustee and the Commission, and transmit to Holders, such
information, documents and other reports, and such summaries
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thereof, as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant to such
Act; provided that any such information, documents or
________
reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is so required to
be filed with the Commission.
ARTICLE EIGHT
Consolidation, Merger, or Sale of Assets
Section 801. Company or Guarantor May Consolidate, Etc.,
___________________________________________
Only on Certain Terms.
_____________________
Neither the Company nor the Guarantor shall
consolidate with or merge into any other Person or sell its
properties and assets as, or substantially as, an entirety
to any Person, and neither the Company nor the Guarantor
shall permit any Person to consolidate with or merge into
the Company or the Guarantor, as the case may be, unless:
(1) in case the Company or the
Guarantor, as the case may be, shall
consolidate with or merge into another Person
(including, without limitation, the Guarantor
or the Company, as the case may be), or sell
its properties and assets as, or
substantially as, an entirety to any Person
(including, without limitation, the Guarantor
or the Company, as the case may be), the
Person formed by such consolidation or into
which the Company or the Guarantor, as the
case may be, is merged or the Person which
purchases the properties and assets of the
Company or the Guarantor, as the case may be,
as, or substantially, as an entirety shall be
a corporation, partnership or trust, shall be
organized and validly existing under the laws
of the United States of America, any State
thereof or the District of Columbia and shall
expressly assume, by an indenture
supplemental hereto, in the case of any such
transaction involving the Company, the due
and punctual payment of the principal of and
any premium and interest on all the
Securities and the performance or observance
of every covenant of this Indenture on the
part of the Company to be performed or
observed, and, in the case of any such
transaction involving the Guarantor, the due
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and punctual performance of the Guarantees
and the performance or observance of every
covenant of this Indenture on the part of the
Guarantor to be performed or observed, in
each case by supplemental indenture
satisfactory in form to the Trustee, executed
and delivered to the Trustee, by the Person
(if other than the Company or the Guarantor,
as the case may be) formed by such
consolidation or into which the Company or
the Guarantor, as the case may be, shall have
been merged or by the corporation which shall
have acquired the assets of the Company or
the Guarantor, as the case may be;
(2) immediately after giving effect to
such transaction, no Event of Default shall
have happened and be continuing; and
(3) the Company or the Guarantor, as
the case may be, has delivered to the Trustee
an Officers' Certificate and an Opinion of
Counsel, each stating that such
consolidation, merger, or sale and, if a
supplemental indenture is required in
connection with such transaction, such
supplemental indenture comply with this
Article and that all conditions precedent
herein provided for relating to such
transaction have been complied with.
Section 802. Successor Substituted.
______________________
Upon any consolidation of the Company or the
Guarantor, as the case may be, with, or merger of the
Company or the Guarantor, as the case may be, into, any
other Person or any sale of the properties and assets of the
Company or the Guarantor, as the case may be, as, or
substantially as, an entirety in accordance with Section
801, the successor Person formed by such consolidation or
into which the Company or the Guarantor, as the case may be,
is merged or to which such sale is made shall succeed to,
and be substituted for, and may exercise every right and
power of, the Company or the Guarantor, as the case may be,
under this Indenture with the same effect as if such
successor Person had been named as the Company or the
Guarantor, as the case may be, herein, and thereafter the
predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities or the
Guarantees, as the case may be.
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Section 803. Assumption by Guarantor or Subsidiary of
________________________________________
Company's Obligations
_____________________
The Guarantor or any Subsidiary of the Guarantor
may, where permitted by law, assume the obligations of the
Company (or any Person which shall have previously assumed
the obligations of the Company) for the due and punctual
payment of the principal of (and any premium), interest on
and any other payments with respect to the Securities and
the performance of every covenant of this Indenture and the
Securities on the part of the Company (or such other Person)
to be performed or observed, provided that:
(1) the Guarantor or such Subsidiary, as the case
may be, shall expressly assume such obligations by an
indenture supplemental hereto, in form reasonably
satisfactory to the Trustee, executed and delivered to
the Trustee and if such Subsidiary assumed such
obligations, the Guarantor shall, by such supplemental
indenture, confirm that its Guarantees shall apply to
such Subsidiary's obligations under the Securities and
this Indenture, as modified by such supplemental
indenture;
(2) immediately after giving effect to such
transaction, no Event of Default shall have occurred
and be continuing;
(3) the Guarantor or such Subsidiary, as the case
may be, shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such assumption and such supplemental
indenture comply with this Article and that all
conditions precedent herein provided for relating to
such transaction have been complied with;
(4) such assumption shall not result in adverse
tax consequences to any Holder; and
(5) the Guarantor and/or such Subsidiary shall
have delivered to the Trustee an Opinion of Counsel to the
effect that (1) the Securities are legal, valid and binding
obligations of the assuming corporation enforceable against
the assuming corporation in accordance with their terms
subject to (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws now
or hereafter in effect relating to or affecting creditors
rights generally and the rights of creditors of insurance
companies generally and (b) general principles of equity
(regardless of whether considered in a proceeding at law or
in equity) and (2) if a Subsidiary of the Guarantor is the
assuming corporation, the Guarantees continue to be the
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legal, valid and binding obligations of the Guarantor
enforceable against the Guarantor in accordance with their
terms subject to (a) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws now
or hereafter in effect relating to or affecting creditors
rights generally and the rights of creditors of insurance
companies generally and (b) general principles of equity
(regardless of whether considered in a proceeding at law or
in equity).
Upon any such assumption, the Guarantor or such
Subsidiary shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this
Indenture with the same effect as if the Guarantor or such
Subsidiary, as the case may be, had been named as the
"Company" in herein, and the Person named as the "Company" in
the first paragraph of this instrument or any successor
Person which shall theretofore have become such in the
manner prescribed in this Article shall be released from its
liability as obligor upon the Securities.
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without
_______________________________
Consent of Holders.
__________________
Without the consent of any Holders, the Company
and the Guarantor, when authorized by a Board Resolution,
and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of
another Person to the Company or the
Guarantor and the assumption by any such
successor of the covenants of the Company or
the Guarantor herein and in the Securities or
Guarantees; or
(2) to add to the covenants of the
Company or the Guarantor for the benefit of
the Holders of all or any series of
Securities (and if such covenants are to be
for the benefit of less than all series of
Securities, stating that such covenants are
expressly being included solely for the
benefit of such series) or to surrender any
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right or power herein conferred upon the
Company or the Guarantor; or
(3) to add any additional Events of
Default; or
(4) to add to or change any of the
provisions of this Indenture to such extent
as shall be necessary to permit or facilitate
the issuance of Securities in bearer form,
registrable or not registrable as to
principal, and with or without interest
coupons, or to permit or facilitate the
issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any
of the provisions of this Indenture in
respect of one or more series of Securities,
including, without limitation, with respect
to any of the provisions in Article Fourteen,
provided that any such addition, change or
________
elimination (i) shall neither (A) apply to
any Security of any series created prior to
the execution of such supplemental indenture
and entitled to the benefit of such provision
nor (B) modify the rights of the Holder of
any such Security with respect to such
provision or (ii) shall become effective only
when there is no such Security Outstanding;
or
(6) to secure the Securities pursuant
to the requirements of Section 1005, or to
otherwise secure the Securities of any series
or the Guarantees; or
(7) to establish the form or terms of
Securities of any series or the form of
Guarantees as permitted by Sections 201 and
301; or
(8) to evidence and provide for the
acceptance of appointment hereunder by a
successor Trustee with respect to the
Securities of one or more series and to add
to or change any of the provisions of this
Indenture as shall be necessary to provide
for or facilitate the administration of the
trusts hereunder by more than one Trustee,
pursuant to the requirements of
Section 611(b); or
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(9) to cure any ambiguity, to correct
or supplement any provision herein which may
be inconsistent with any other provision
herein, or to make any other provisions with
respect to matters or questions arising under
this Indenture, provided that such action
________
pursuant to this clause (9) shall not
adversely affect the interests of the Holders
of Securities of any series in any material
respect; or
(10) to conform to any mandatory
provisions of law.
Section 902. Supplemental Indentures with Consent
____________________________________
of Holders.
__________
With the consent of the Holders of not less than a
majority of principal amount of the Outstanding Securities
of each series affected by such supplemental indenture, by
Act of said Holders delivered to the Company, the Guarantor
and the Trustee, the Company and the Guarantor, when
authorized by a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture;
provided, however, that no such supplemental indenture
________ _______
shall, without the consent of the Holder of each Outstanding
Security affected thereby,
(1) change the Stated Maturity of the
principal of, or any installment of principal
of or interest on, any Security, or reduce
the principal amount thereof or the rate of
interest thereon (including any change in the
Floating or Adjustable Rate Provision
pursuant to which such rate is determined
that would reduce such rate for any period)
or any premium payable upon the redemption
thereof, or reduce the amount of the
principal of an Original Issue Discount
Security that would be due and payable upon a
declaration of acceleration of the Maturity
thereof pursuant to Section 502, or change
any Place of Payment where, or the coin or
currency in which, any Security or any
premium or interest thereon is payable, or
impair the right to institute suit for the
enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case
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of redemption, on or after the Redemption
Date), or
(2) reduce the percentage in principal
amount of the Outstanding Securities of any
series, the consent of whose Holders is
required for any such supplemental indenture,
or the consent of whose Holders is required
for any waiver (of compliance with certain
provisions of this Indenture or certain
defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of
this Section, Section 513 or Section 907,
except to increase any such percentage or to
provide that certain other provisions of this
Indenture cannot be modified or waived
without the consent of the Holder of each
Outstanding Security affected thereby,
provided, however, that this clause shall not
________ _______
be deemed to require the consent of any
Holder with respect to changes in the
references to "the Trustee" and concomitant
changes in this Section and Section 907, or
the deletion of this proviso, in accordance
with the requirements of Sections 611(b) and
901(8), or
(4) modify or affect in any manner
adverse to the interests of the Holders of
any Securities the terms and conditions of
the obligations of the Guarantor in respect
of the due and punctual payment of the
principal thereof, premium, if any, and
interest, if any, thereon or any sinking fund
payments provided in respect thereof.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has
expressly been included solely for the benefit of one or
more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with
respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders
of Securities of any other series.
It shall not be necessary for any Act of Holders
under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient
if such Act shall approve the substance thereof.
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Section 903. Execution of Supplemental Indentures.
____________________________________
In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this
Article or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
_________________________________
Upon the execution of any supplemental indenture
under this Article, this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
___________________________________
Every supplemental indenture executed pursuant to
this Article shall conform to the requirements of the Trust
Indenture Act.
Section 906. Reference in Securities to
__________________________
Supplemental Indentures.
_______________________
Securities of any series authenticated and
delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture.
If the Company and the Guarantor shall so determine, new
Securities of any series so modified as to conform, in the
opinion of the Trustee, the Company and the Guarantor, to
any such supplemental indenture may be prepared and executed
by the Company, the Guarantees endorsed thereon may be
executed by the Guarantor and such Securities may be
authenticated and delivered by the Trustee in exchange for
Outstanding Securities of such series.
Section 907. Waiver of Compliance by Holders.
_______________________________
Anything in this Indenture to the contrary
notwithstanding, any of the acts which the Company or the
Guarantor is required to do, or is prohibited from doing, by
any of the provisions of this Indenture may, to the extent
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that such provisions might be changed or eliminated by a
supplemental indenture pursuant to Section 902 upon consent
of holders of not less than a majority in aggregate
principal amount of the then Outstanding Securities of the
series affected, be omitted or done by the Company or the
Guarantor, as the case may be, if there is obtained the
prior consent or waiver of the holders of at least a
majority in aggregate principal amount of the then
Outstanding Securities of such series.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
__________________________________________
The Company covenants and agrees for the benefit
of each series of Securities that it will duly and
punctually pay or cause to be paid the principal of and any
premium and interest on the Securities of that series in
accordance with the terms of the Securities and this
Indenture.
Section 1002. Maintenance of Office or Agency by Company
__________________________________________
and Guarantor.
_____________
(a) So long as any Securities are Outstanding,
the Company will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of
that series may be presented or surrendered for payment,
where Securities of that series may be surrendered for
registration of transfer or exchange, and where notices and
demands to or upon the Company in respect of the Securities
of that series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office
or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to
receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate
one or more other offices or agencies where the Securities
of one or more series may be presented or surrendered for
any or all such purposes and may from time to time rescind
such designations; provided, however, that no such
________ _______
designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in
each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to
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the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
(b) So long as any Securities are Outstanding,
the Guarantor will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of
that series may be presented or surrendered for payment
under the Guarantees endorsed thereon and where notices and
demands to or upon the Guarantor in respect of the
Guarantees endorsed on the Securities of that series and
this Indenture may be served. The Guarantor will give
prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at
any time the Guarantor shall fail to maintain any such
required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Guarantor
hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Guarantor may also from time to time designate
one or more other offices or agencies where the Securities
of one or more series may be presented or surrendered for
such purpose or where such notices or demands may be served
and may from time to time rescind such designations;
provided, however, that no such designation or rescission
________ _______
shall in any manner relieve the Guarantor of its obligation
to maintain an office or agency in each Place of Payment for
Securities of any series for such purposes. The Guarantor
will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location
of any such other office or agency.
Section 1003. Money for Securities Payments to
________________________________
Be Held in Trust.
________________
If the Company or the Guarantor shall at any time
act as its own Paying Agent with respect to any series of
Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the
Securities of that series, segregate and hold in trust for
the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying
Agents for any series of Securities, it will, prior to each
due date of the principal of or any premium or interest on
any Securities of that series, deposit with a Paying Agent a
sum sufficient to pay such amount, such sum to be held as
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provided by the Trust Indenture Act, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any
series of Securities other than the Trustee to execute and
deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will
(i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other
obligor upon the Securities of that series) in the making of
any payment in respect of the Securities of that series, and
upon the written request of the Trustee, forthwith pay to
the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture
or for any other purpose, pay, or by Company Order direct
any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be
held by the Trustee upon the same trusts as those upon which
such sums were held by the Company or such Paying Agent;
and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company or the Guarantor, in
trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining
unclaimed for two years after such principal, premium or
interest has become due and payable shall be paid to the
Company or the Guarantor, as the case may be, on Company
Request, or (if then held by the Company or the Guarantor)
shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor,
look only to the Company or the Guarantor for payment
thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of
the Company or the Guarantor as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such
________ _______
Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be
published once, in a newspaper published in the English
language, customarily published on each Business Day and of
general circulation in the Borough of Manhattan, the City of
New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the
Company or the Guarantor, as the case may be.
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Section 1004. Statement by Officers as to Default.
___________________________________
The Company and the Guarantor will each deliver to
the Trustee within 120 days after the end of each fiscal
year of the Guarantor ending after the date hereof, a
certificate signed by the Company's or the Guarantor's, as
the case may be, principal executive officer, principal
financial officer or principal accounting officer stating
whether or not to the best knowledge of the signer thereof
the Company or the Guarantor, as the case may be, is in
compliance with all terms, conditions and covenants of this
Indenture (without regard to any period of grace or
requirement of notice provided hereunder) and if the signer
has obtained knowledge of any continuing default by the
Company or the Guarantor in the performance, observation or
fulfillment of any such term, condition or covenant,
specifying each such default and the nature thereof.
Section 1005. Limitations on Liens on Common Stock of
_______________________________________
Principal Subsidiaries.
______________________
As long as any of the Securities remains
outstanding, the Guarantor will not, and will not permit any
Principal Subsidiary to, issue, assume, incur or guarantee
any indebtedness for borrowed money secured by a mortgage,
pledge, lien or other encumbrance, directly or indirectly,
on any of the Common Stock of a Principal Subsidiary, which
Common Stock is owned by the Guarantor, by the Company or by
any Principal Subsidiary, unless the obligations of the
Company under the Securities and, if the Company or the
Guarantor so elects, any other indebtedness of the Company
or the Guarantor ranking on a parity with or prior to the
Securities or the Guarantor's obligations under the
Guarantees, as the case may be, shall be secured equally and
ratably with, or prior to, such secured indebtedness for
borrowed money so long as it is outstanding and is so
secured.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
________________________
Securities of any series which are redeemable
before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of
any series) in accordance with this Article.
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Section 1102. Election to Redeem; Notice to Trustee.
_____________________________________
In case of any redemption at the election of the
Company of less than all the Securities of any series, the
Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of
such series to be redeemed and, if applicable, of the tenor
of the Securities to be redeemed. In the case of any
redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
Section 1103. Selection by Trustee of Securities
__________________________________
to Be Redeemed.
______________
If less than all the Securities of any series are
to be redeemed (unless all of the Securities of such series
and of a specified tenor are to be redeemed), the particular
Securities to be redeemed shall be selected not more than
45 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall
deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum
authorized denomination for Securities of that series or any
integral multiple thereof) of the principal amount of
Securities of such series of a denomination larger than the
minimum authorized denomination for Securities of that
series. If less than all of the Securities of such series
and of a specified tenor are to be redeemed, the particular
Securities to be redeemed shall be selected not more than
45 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities of such series and specified
tenor not previously called for redemption in accordance
with the preceding sentence.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in
the case of any Securities selected for partial redemption,
the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the
context otherwise requires, all provisions relating to the
redemption of Securities shall relate, in the case of any
Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has
been or is to be redeemed.
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Section 1104. Notice of Redemption.
____________________
Notice of redemption shall be given by first-class
mail, postage prepaid, mailed not less than 30 nor more than
60 days prior to the Redemption Date, to each Holder of
Securities to be redeemed, at its address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding
Securities of any series are to be redeemed,
the identification (and, in the case of
partial redemption of any Securities, the
principal amounts) of the particular
Securities to be redeemed,
(4) that on the Redemption Date the
Redemption Price will become due and payable
upon each such Security to be redeemed and,
if applicable, that interest thereon will
cease to accrue on and after said date,
(5) the place or places where such
Securities are to be surrendered for payment
of the Redemption Price, and
(6) that the redemption is for a
sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed
at the election of the Company shall be given by the Company
or, at the Company's request, by the Trustee in the name and
at the expense of the Company.
Section 1105. Deposit of Redemption Price.
___________________________
Prior to any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be
redeemed on that date.
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Section 1106. Securities Payable on Redemption Date.
_____________________________________
Notice of redemption having been given as
aforesaid, the Securities so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption
Price therein specified, and from and after such date
(unless the Company shall default in the payment of the
Redemption Price and accrued interest) such Securities shall
cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date;
provided, however, that, unless otherwise specified as
________ _______
contemplated by Section 301, installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be
so paid upon surrender thereof for redemption, the principal
and any premium shall, until paid, bear interest from the
Redemption Date at the rate prescribed therefor in the
Security.
Section 1107. Securities Redeemed in Part.
___________________________
Any Security which is to be redeemed only in part
shall be surrendered at a Place of Payment therefor (with,
if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate
and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and
of like tenor, of any authorized denomination as requested
by such Holder, in aggregate principal amount equal to and
in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
Section 1201. Company's Option to Effect Defeasance or
________________________________________
Covenant Defeasance.
___________________
The Company may elect, at any time, to have either
Section 1202 or Section 1203 applied to the Outstanding
Securities of any series and the Guarantees endorsed
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thereon, upon compliance with the conditions set forth below
in this Article Twelve.
Section 1202. Defeasance and Discharge.
________________________
Upon the Company's exercise of the option provided
in Section 1201 to have this Section 1202 applied to the
Outstanding Securities of any series and the Guarantees
endorsed thereon, the Company and the Guarantor shall each
be deemed to have been discharged from its obligations with
respect to the Outstanding Securities of such series and the
Guarantees endorsed thereon as provided in this Section on
and after the date the conditions set forth in Section 1204
are satisfied (hereinafter called "Defeasance"). For this
purpose, such Defeasance means that the Company and the
Guarantor shall be deemed to have paid and discharged the
entire indebtedness represented by the Outstanding
Securities of such series and the Guarantees endorsed
thereon and to have satisfied all their other obligations
under the Securities of such series, the Guarantees endorsed
thereon and this Indenture insofar as the Securities of such
series and the Guarantees endorsed thereon are concerned
(and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), subject
to the following which shall survive until otherwise
terminated or discharged hereunder: (1) the rights of
Holders of Securities of such series to receive, solely from
the trust fund described in Section 1204 and as more fully
set forth in such Section, payments in respect of the
principal of and any premium and interest on such Securities
of such series when payments are due, (2) the Company's or
the Guarantor's obligations, as the case may be, with
respect to the Securities of such series under Sections 304,
305, 306, 1002 and 1003, (3) the rights, powers, trusts,
duties and immunities of the Trustee hereunder, including,
without limitation, its rights under Section 607 and (4)
this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option provided
in Section 1201 to have this Section 1202 applied to the
Outstanding Securities of any series and the Guarantees
endorsed thereon notwithstanding the prior exercise of its
option provided in Section 1201 to have Section 1203 applied
to the Outstanding Securities of such series and the
Guarantees endorsed thereon.
Section 1203. Covenant Defeasance.
___________________
Upon the Company's exercise of the option provided
in Section 1201 to have this Section 1203 applied to the
Outstanding Securities of any series and the Guarantees
endorsed thereon, (1) the Guarantor shall be released from
its obligations under Section 1005 and the Company and the
Guarantor shall be released from their obligations under
Section 801 and (2) the occurrence of any event specified in
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Sections 501(3), 501(4) (with respect to Section 1005 and
Section 801) and 501(5) shall be deemed not to be or result
in an Event of Default, in each case with respect to the
Outstanding Securities of such series as provided in this
Section on and after the date the conditions set forth in
Section 1204 are satisfied (hereinafter called "Covenant
Defeasance"). For this purpose, such Covenant Defeasance
means that the Company and the Guarantor may omit to comply
with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified
Section (to the extent so specified in the case of Section
501(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason
of any reference in any such Section to any other provision
herein or in any other document, but the remainder of this
Indenture and the Securities of such series shall be
unaffected thereby.
Section 1204. Conditions to Defeasance or Covenant
____________________________________
Defeasance.
__________
The following shall be the conditions to
application of either Section 1202 or Section 1203 to the
Outstanding Securities of any series:
(1) The Company or the Guarantor shall
irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee that satisfies the
requirements contemplated by Section 609 and agrees to
comply with the provisions of this Article Twelve
applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the
benefit of the Holders of Outstanding Securities of
such series, (A) in the case of Securities of such
series denominated in U.S. dollars, (i) money in an
amount, or (ii) U.S. Government Obligations that
through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will
provide, not later than one day before the due date of
any payment, money in an amount, or (iii) a combination
thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public
accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or any such
other qualifying trustee) to pay and discharge, the
principal of and any premium and interest on the
Securities of such series on the respective Stated
Maturities, in accordance with the terms of this
Indenture and the Securities of such series or (B) in
the case of Securities of such series denominated in a
currency other than the U.S. dollar, (i) money in such
currency in an amount, or (ii) Foreign Government
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Obligations that through the scheduled payment of
principal and interest in respect thereof in accordance
with their terms will provide, not later than one day
before the due date of any payment, money in such
currency in an amount, or (iii) a combination thereof,
in each case sufficient, in the opinion of a nationally
recognized firm of independent public accountants
expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or any such other qualifying
trustee) to pay and discharge, the principal of and any
premium and interest on the Securities of such series
on the respective Stated Maturities, in accordance with
the terms of this Indenture and the Securities of such
series. As used herein, (1) "U.S. Government
Obligation" means (x) any security that is (i) a direct
obligation of the United States of America for the
payment of which full faith and credit of the United
States of America is pledged or (ii) an obligation of a
Person controlled or supervised by and acting as an
agency or instrumentality for the United States of
America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or
(ii), is not callable or redeemable at the option of
the issuer thereof, and (y) any depositary receipt
issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with
respect to any specific payment of principal of or
interest on any such U.S. Government Obligation
specified in Clause (x) and held by such custodian for
the account of the holder of such depositary receipt,
or with respect to any specific payment of principal of
or interest on any such U.S. Government Obligation,
provided that (except as required by law) such
________
custodian is not authorized to make any deduction from
the amount payable to the Holder of such depositary
receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the
specific payment of principal or interest evidenced by
such depositary receipt and (2) "Foreign Government
Obligation" means (x) any security that is (i) a direct
obligation of the government that issued such currency
for the payment of which full faith and credit of such
government is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or
instrumentality for such government the payment of
which is unconditionally guaranteed as a full faith and
credit obligation by such government, which, in either
case (i) or (ii), is not callable or redeemable at the
option of the issuer thereof, and (y) any depositary
receipt issued by a bank (as defined in Section 3(a)(2)
of the Securities Act of 1933, as amended) as custodian
with respect to any specific payment of principal of or
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interest on any such Foreign Government Obligation
specified in Clause (x) and held by such custodian for
the account of the holder of such depositary receipt,
or with respect to any specific payment of principal of
or interest on any such Foreign Government Obligation,
provided that (except as required by law) such
________
custodian is not authorized to make any deduction from
the amount payable to the Holder of such depositary
receipt from any amount received by the custodian in
respect of the Foreign Government Obligation or the
specific payment of principal or interest evidenced by
such depositary receipt.
(2) In the case of an election under Section
1202, the Company shall have delivered to the Trustee
an Opinion of Counsel stating that the Holders of the
Outstanding Securities of such series will not
recognize gain or loss for Federal income tax purposes
as a result of the deposit, Defeasance and discharge to
be effected with respect to the Securities of such
series and will be subject to Federal income tax on the
same amount, in the same manner and at the same times
as would be the case if such deposit, Defeasance and
discharge were not to occur.
(3) In the case of an election under Section
1203, the Company shall have delivered to the Trustee
an Opinion of Counsel to the effect that the Holder of
the Outstanding Securities of such series will not
recognize gain or loss for Federal income tax purposes
as result of the deposit and Covenant Defeasance to be
effected with respect to the Securities of such series
and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as
would be the case if such deposit and Covenant
Defeasance were not to occur.
(4) The Company shall have delivered to the
Trustee an Officers' Certificate to the effect that the
Securities of such series, if then listed on any
securities exchange, will not be delisted as a result
of such deposit.
(5) No Event of Default or event that (after
notice or lapse of time or both) would become an Event
of Default shall have occurred and be continuing at the
time of such deposit or, with regard to any Event of
Default or any such event specified in Sections 501(6)
and 501(7), at any time on or prior to the 90th day
after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until
after such 90th day).
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(6) The Company shall have delivered to the
Trustee an Officer's Certificate and an Opinion of
Counsel, each stating that all conditions precedent
with respect to such Defeasance or Covenant Defeasance
have been complied with.
(7) Such Defeasance or Covenant Defeasance shall
not result in the trust arising from such deposit
constituting an investment company within the meaning
of the Investment Company Act of 1940, as amended,
unless such trust shall be qualified under such Act or
exempt from regulation thereunder.
Section 1205 Deposited Money and U.S. Government Obligations or
___________________________________________________
Foreign Government Obligations to be Held In Trust; Other
__________________________________________________________
Miscellaneous Provisions.
_________________________
Subject to the provisions of the last paragraph of
Section 1003, all money and U.S. Government Obligations or
Foreign Government Obligations (including the proceeds
thereof) deposited with the Trustee or other qualifying
trustee (solely for purposes of this Section and Section
1206, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1204 in
respect of the Securities of any series shall be held in
trust and applied by the Trustee, in accordance with the
provisions of the Securities of such series and this
Indenture, to the payment, either directly or through any
such Paying Agent (including the Company or the Guarantor
acting as its own Paying Agent) as the Trustee may
determine, to the Holders of Securities of such series, of
all sums due and to become due thereon in respect of
principal and any premium and interest, but money so held in
trust need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations or Foreign
Government Obligations deposited pursuant to Section 1204 or
the principal and interest received in respect thereof other
than any such tax, fee or other charge that by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the
Company or the Guarantor, as the case may be, from time to
time upon Company Request any money or U.S. Government
Obligations or Foreign Government Obligations held by it as
provided in Section 1204 with respect to Securities of any
series that, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in
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excess of the amount thereof that would then be required to
be deposited to effect an equivalent Defeasance or Covenant
Defeasance with respect to the Securities of such series and
the Guarantees endorsed thereon.
Section 1206. Reinstatement.
_____________
If the Trustee or the Paying Agent is unable to
apply any money in accordance with this Article Twelve with
respect to the Securities of any series by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantor's
obligations under this Indenture and the Securities of such
series and the Guarantees endorsed thereon shall be revived
and reinstated as though no deposit had occurred pursuant to
this Article Twelve with respect to Securities of such
series until such time as the Trustee or Paying Agent is
permitted to apply all money held in trust pursuant to
Section 1205 with respect to Securities of such series in
accordance with this Article Twelve; provided, however, that
________ _______
if the Company makes any payment of principal of or any
premium or interest on any Security of such series following
the reinstatement of its obligations or if the Guarantor
makes any payment in respect thereof pursuant to its
Guarantee of such Securities of such series, the Company or
the Guarantor, as the case may be, shall be subrogated to
the rights of the Holders of Securities of such series to
receive such payment from the money so held in trust.
ARTICLE THIRTEEN
Sinking Funds
Section 1301. Applicability of Article.
________________________
The provisions of this Article shall be applicable
to any sinking fund for the retirement of Securities of a
series except as otherwise specified as contemplated by
Section 301 for Securities of such series.
The minimum amount of any sinking fund payment
provided for by the terms of Securities of any series is
herein referred to as a "mandatory sinking fund payment",
and any payment in excess of such minimum amount provided
for by the terms of Securities of any series is herein
referred to as an "optional sinking fund payment". If
provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to
reduction as provided in Section 1302. Each sinking fund
payment shall be applied to the redemption of Securities of
any series as provided for by the terms of Securities of
such series.
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Section 1302. Satisfaction of Sinking Fund Payments
_____________________________________
with Securities.
_______________
The Company (1) may deliver Outstanding Securities
of a series (other than any previously called for
redemption) and (2) may apply as a credit Securities of a
series which have been acquired or redeemed either at the
election of the Company pursuant to the terms of such
Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such
Securities or otherwise, in each case in satisfaction of all
or any part of any sinking fund payment with respect to the
Securities of such series required to be made pursuant to
the terms of such Securities as provided for by the terms of
such series; provided that such Securities have not been
________
previously so credited. Such Securities shall be received
and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such
sinking fund payment shall be reduced accordingly.
Section 1303. Redemption of Securities for Sinking Fund.
_________________________________________
Not less than 45 days prior to each sinking fund
payment date for any series of Securities, the Company will
deliver to the Trustee an Officers' Certificate specifying
the amount of the next ensuing sinking fund payment for that
series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash
and the portion thereof, if any, which is to be satisfied by
delivering and crediting Securities of that series pursuant
to Section 1302 and will also deliver to the Trustee any
Securities to be so delivered. Not less than 15 nor more
than 45 days before each such sinking fund payment date the
Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in
Section 1103 and cause notice of the redemption thereof to
be given in the name of and at the expense of the Company in
the manner provided in Section 1104. Such notice having
been duly given, the redemption of such Securities shall be
made upon the terms and in the manner stated in
Sections 1106 and 1107.
ARTICLE FOURTEEN
Guarantee of Securities
SECTION 1401. Guarantee.
_________
The Guarantor hereby unconditionally guarantees to
each Holder of a Security of each series of the Company
authenticated and delivered by the Trustee or an
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Authenticating Agent the due and punctual payment of the
principal of (premium, if any) and interest on such Security
and the due and punctual payment of any sinking fund
payments provided for pursuant to the terms of such
Security, when and as the same shall become due and payable,
whether at Stated Maturity, by declaration of acceleration,
call for redemption or otherwise according to the terms of
such Security and of this Indenture (the "Guaranteed
Obligations"). In case of default by the Company in the
payment of any such principal, premium, interest or sinking
fund payment, the Guarantor agrees duly and punctually to
make any such payment when and as the same shall become due
and payable, whether at the Stated Maturity, by declaration
of acceleration, call for redemption or otherwise, and as if
such payment were made by the Company. The Guarantor hereby
agrees that its obligations hereunder shall be as if it were
principal debtor and not merely surety, and shall be
absolute and unconditional irrespective of, and shall be
unaffected by, the validity, legality or enforceability of
any Security of any series or this Indenture, the absence of
any action to enforce the same or any waiver, modification
or indulgence or consent granted to the Company with respect
thereto by the Holder of any Security of any series or the
Trustee, the recovery of any judgment against the Company or
any action to enforce the same, or any other circumstances
which may otherwise constitute a legal or equitable
discharge of a surety or guarantor; provided, however, that
________ _______
notwithstanding the foregoing, no such waiver, modification
or indulgence shall, without the consent of the Guarantor,
increase the principal amount of a Security or the interest
rate thereon or increase any premium payable upon redemption
thereof. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a
court in the event of merger or bankruptcy of the Company,
any right of set-off or counterclaim, any right to require a
proceeding first against the Company, protect or notice with
respect to any Security or the indebtedness evidenced
thereby or with respect to any sinking fund payment required
pursuant to the terms of a Security issued under this
Indenture and all demands whatsoever, and covenants that
this Guarantee will not be discharged as to any Security
except by payment in full of the principal of (premium, if
any) and interest on such Security.
SECTION 1402. Subrogation.
___________
The Guarantor shall be subrogated to all rights of
the Holder of a Security against the Company in respect of
any amounts paid to such Holder by the Guarantor pursuant to
the provisions of this Guarantee; provided, however, that
________ _______
the Guarantor shall not, without the consent of all Holders
of Securities of such series, be entitled to enforce, or to
receive, any payments arising out of or based upon, such
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right of subrogation until the principal of (and premium, if
any) and interest then due and payable on all Securities of
the relevant series shall have been irrevocably paid in full
in accordance with the terms of such Securities.
SECTION 1403. Reinstatement.
_____________
The Guarantee of the Guarantor is a guarantee of
payment when due and not of collection. The Guarantee shall
continue to be effective, or be reinstated, as the case may
be, in respect of any Security if at any time payment, or
any part thereof, of such Security is rescinded or must
otherwise be restored or returned by the Holder of such
Security or any trustee for said Holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of
the Company or any other entity, or upon or as a result of
the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Company or any other
entity or any substantial part of their respective property,
or otherwise, all as though such payments had not been made.
SECTION 1404. Execution and Delivery of Guarantees.
____________________________________
To evidence its guarantee set forth in Section
1401, the Guarantor hereby agrees to execute, subject to
Section 201, the Guarantee in a form established pursuant to
Section 206, to be endorsed on each Security authenticated
and delivered by the Trustee. Each such Guarantee shall be
executed by the Guarantor as provided in Section 303.
The delivery of any Security by the Trustee, after
the authentication thereof hereunder, shall constitute due
delivery of the Guarantee endorsed thereon on behalf of the
Guarantor.
* * * *
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to
be an original, but all such counterparts shall together
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, all as
of the day and year first above written.
AETNA LIFE AND CASUALTY COMPANY
By /s/ Alfred P. Quirk, Jr.
________________________
Name: Alfred P. Quirk, Jr.
Title: Vice President,
Corporate Finance
[Seal]
Attest:
/s/ Paige L. Falasco
_______________________
AETNA INC.
By /s/ Alfred P. Quirk, Jr.
________________________
Name: Alfred P. Quirk, Jr.
Title: Vice President,
Corporate Finance
[Seal]
Attest:
/s/ Paige L. Falasco
_______________________
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
By /S/ Jill Olson
_______________________
Name: Jill Olson
Title: Assistant Vice President
[Seal]
Attest:
/s/ Andrew M. Sinasky
_______________________
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STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On the 15th day of August, 1996, before me
personally came Alfred P. Quirk, Jr., to me known, who, being
by me duly sworn, did depose and say that he is the
Vice President, Corporate Finance of AETNA LIFE AND CASUALTY
COMPANY, one of the corporations described in and which executed
the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation, and that he signed his name
thereto by like authority.
/s/ James W. Francoline
_______________________
Notary Public
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STATE OF CONNECTICUT )
) ss.:
COUNTY OF HARTFORD )
On the 15th day of August, 1996, before me personally
came Alfred P. Quirk, Jr., to me known, who, being by me duly
sworn, did depose and say that he is Vice President, Corporate
Finance of AETNA INC., one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation, and that he signed his name
thereto by like authority.
/s/ James W. Francoline
_______________________
Notary Public
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COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On the 15th day of August, 1996, before me personally
came Jill Olson, to me known, who, being by me duly sworn, did
depose and say that she is Assistant Vice President of STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, one of the corporations described in and which
executed the foregoing instrument; that she knows the seal of said
corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board
of Directors of said corporation, and that she signed her name
thereto by like authority.
/s/ Cecil A. Gilbert
____________________
Notary Public
-96-
Exhibit 4.6
__________________________________________
__________________________________________
AETNA SERVICES, INC.
(formerly Aetna Life and Casualty Company)
AETNA INC.
AND
STATE STREET BANK AND TRUST COMPANY,
AS SUCCESSOR TRUSTEE
_______
FIRST INDENTURE SUPPLEMENT
Dated as of August 1, 1996
to
INDENTURE
Dated as of October 15, 1986
Between
Aetna Services, Inc.
(formerly Aetna Life and Casualty Company)
and
State Street Bank and Trust Company,
as successor Trustee
_____________________________________
_____________________________________
FIRST INDENTURE SUPPLEMENT
FIRST INDENTURE SUPPLEMENT, dated as of August 1, 1996, among AETNA
SERVICES, INC. (formerly Aetna Life and Casualty Company), a
corporation duly organized and validly existing under the laws of the
State of Connecticut (the "Company"), AETNA INC., a corporation duly
organized and validly existing under the laws of the State of
Connecticut (the "Guarantor"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, as successor trustee (the
"Trustee").
RECITALS OF THE COMPANY AND THE GUARANTOR
The Company and the Trustee have heretofore executed and
delivered an Indenture dated as of October 15, 1986 (the
"Indenture"), which provides for the issuance from time to time by
the Company of its unsecured debentures, notes or other evidences
of indebtedness in one or more series ("Securities", as more fully
defined in the Indenture).
Pursuant to an Agreement and Plan of Merger dated as of
March 30, 1996, as amended by Amendment No. 1 thereto dated as of
May 30, 1996 among the Company, the Guarantor, U.S. Healthcare,
Inc., Antelope Sub, Inc., a wholly owned subsidiary of the
Guarantor ("Aetna Sub"), and New Merger Corporation, a wholly
owned subsidiary of the Guarantor, on July 19, 1996 Aetna Sub was
merged with and into the Company with the result that the Company
is as of the date of this First Indenture Supplement a direct
wholly-owned subsidiary of the Guarantor. In connection with such
merger the Company's Certificate of Incorporation was amended to
change its name to Aetna Services, Inc.
As of the date of this First Indenture Supplement, the
only Securities of the Company that have been issued and remain
outstanding under the Indenture consist of $100 million original
principal amount of 8 5/8% Notes due March 1, 1998 (the "8 5/8%
Notes") and $200 million original principal amount of 8%
Debentures due January 15, 2017 (the "8% Debentures").
This First Indenture Supplement amends the Indenture,
pursuant to Section 11.01 thereof: (i) to provide for the full and
unconditional guarantee by the Guarantor of the due and punctual
payment of the principal of, premium, if any, and interest on the
8 5/8% Notes and the 8% Debentures previously issued under the
Indenture, (ii) to set forth certain provisions that are deemed to
have been made part of the Indenture by operation of law pursuant
to the Trust Indenture Reform Act of 1990 and (iii) to make
certain other changes to the terms of the Indenture.
All acts and proceedings required by law, by the
Indenture and by the certificates of incorporation and bylaws of
the Company and the Guarantor necessary to constitute this First
Indenture Supplement a valid and binding agreement for the uses
and purpose herein set forth in accordance with its terms have
been done and
performed, and the execution and delivery of this First Indenture
Supplement have in all respects been duly authorized.
NOW, THEREFORE, in consideration of the foregoing and
other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each party agrees as follows for the
benefit of the other parties and for the equal and ratable benefit
of the holders of the Securities.
ARTICLE 1
AMENDMENTS
SECTION 1.01. The Guarantor is hereby made a party to
the Indenture.
SECTION 1.02. Section 1.01 of the Indenture is hereby
amended to add to the definitions set forth in such Section the
following additional definitions in the appropriate alphabetical
order:
First Indenture Supplement:
The term "First Indenture Supplement" shall mean
the First Indenture Supplement dated as of August 1, 1996
to this Indenture.
Guarantee:
The term "Guarantee" shall mean the guarantee set
forth in Section 15.01 hereof, including any evidence of
such guarantee by endorsement on any Guaranteed Security
pursuant to Section 15.02 hereof. The Guarantee shall be
deemed part of the Guaranteed Securities.
Guaranteed Securities:
The term "Guaranteed Securities" shall mean,
collectively, the $100 million in original principal amount
of 8 5/8% Notes due March 1, 1998 and the $200 million in
original principal amount of 8% Debentures due January 15,
2017, issued under the Indenture prior to the date of the
First Indenture Supplement and remaining outstanding as of
such date and "Guaranteed Security" means any of such
Securities.
Guarantor:
The term "Guarantor" shall mean AETNA INC., a Connecticut
corporation, and, subject to the provisions of Section 15.06,
shall also include its successors and assigns.
2
SECTION 1.03. (a) The definition of "Board of
Directors" set forth in Section 1.01 of the Indenture is hereby
amended by inserting the words "or of the Guarantor, as the case
may be" immediately after the words "the Company" therein.
(b) The definition of "Corporate Trust Office" set forth
in Section 1.01 of the Indenture is hereby amended by replacing
the address set forth therein with "750 Main Street, Suite 1114,
Hartford, Connecticut 06103."
(c) The definition of "Officers' Certificate" set forth
in Section 1.01 of the Indenture is hereby amended by inserting
the words "or of the Guarantor, as the case may be" immediately
after the words "the Company" in the first sentence thereof.
(d) The definition of "Opinion of Counsel" set forth in
Section 1.01 of the Indenture is hereby amended by inserting the
words ", the Guarantor, as the case may be," immediately after the
words "the Company" in the first sentence thereof.
SECTION 1.04. A new Article Fifteen is added to the
Indenture to read in its entirety as follows:
ARTICLE FIFTEEN
Guarantee
SECTION 15.01. Guarantee. The Guarantor hereby
unconditionally guarantees to each holder of a Guaranteed
Security authenticated and delivered by or on behalf of
the Trustee the due and punctual payment of the principal
of, premium, if any, and interest on such Guaranteed
Security, when and as the same shall become due and
payable, whether at maturity, by declaration of
acceleration, call for redemption or otherwise, according
to the terms of such Guaranteed Securities and of the
Indenture. In case of default by the Company in the
payment of any such principal, premium or interest, the
Guarantor hereby agrees duly and punctually to make any
such payment when and as the same shall become due and
payable, whether at maturity, by declaration of
acceleration, call for redemption or otherwise, and as if
such payment was made by the Company. The Guarantor
hereby agrees that its obligations hereunder shall be as
if it were principal debtor and not merely surety, and
shall be absolute and unconditional, irrespective of, and
shall be unaffected by, the validity, legality or
enforceability of any such Guaranteed Security or the
Indenture, the absence of any action to enforce the same,
or any waiver, modification, indulgence or consent
granted to the Company with respect thereto by the holder
of any Guaranteed Security of any series or by the
Trustee, the recovery of any judgment against the Company
or any action to enforce the same, or any other
circumstance that
3
might otherwise constitute a legal or equitable discharge
or defense of a surety or guarantor; provided, however,
that notwithstanding the foregoing, no such waiver,
modification or indulgence shall, without the consent of
the Guarantor, increase the principal amount of a
Guaranteed Security or the interest rate thereon or
increase any premium payable upon redemption thereof.
The Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the
event of merger or bankruptcy of the Company, any right
of set-off or counterclaim, any right to require a
proceeding first against the Company, protest or notice
with respect to any Guaranteed Security or the
indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be
discharged as to any Guaranteed Security except by
payment in full of the principal of (premium, if any) and
interest on such Guaranteed Security.
The Guarantor shall be subrogated to all rights
against the Company of any person in whose name any
Guaranteed Security is registered in respect of any
amounts paid to such person by the Guarantor pursuant to
the provisions of the Guarantee; provided, however, that
the Guarantor shall not, without the consent of the
holders in whose names all the Guaranteed Securities of
such series then outstanding are registered, be entitled
to enforce, or to receive, any payments arising out of or
based upon such right of subrogation until the principal
of, premium, if any, and interest then due and payable on
all Guaranteed Securities of the relevant series shall
have been irrevocably paid in full in accordance with the
terms of such Guaranteed Securities.
The Guarantee is a guarantee of payment when due and
not of collection. The Guarantee shall continue to be
effective, or be reinstated, as the case may be, in
respect of any Guaranteed Securities if at any time
payment, or any part thereof, of such Guaranteed Security
is rescinded or must otherwise be restored or returned by
said holder of said Guaranteed Security or any trustee
for such holder upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company
or any other entity, or upon or as a result of the
appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Company or any
other entity or any substantial part of their respective
property, or otherwise, all as though such payments had
not been made.
SECTION 15.02. Execution of Guarantees. At the
time that any Guaranteed Security is authenticated and
delivered by the Trustee after the date of the First
Indenture Supplement in connection with the registration
of transfer, exchange or replacement of a Guaranteed
Security pursuant to Section 2.06, 2.07 or 2.09 of this
Indenture, as evidence of the Guarantee set forth in
Section 15.01 hereof, the
4
Guarantor hereby agrees that notation of such Guarantee
shall be endorsed on the reverse of such Guaranteed
Security in the form set forth in Section 15.03 hereof.
The Guarantee shall be executed on behalf of the
Guarantor by its chairman, a vice chairman, its
president, or any vice president and by any other vice
president, its treasurer, any assistant treasurer, its
corporate secretary or any assistant corporate
secretary under its corporate seal. The signatures of any
or all of these officers on the Guarantees may be manual
or by facsimile and may be imprinted or otherwise
reproduced on the Guaranteed Security. The seal of the
Guarantor may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise
reproduced on the Guaranteed Securities.
Guarantees bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Guarantor shall bind the Guarantor
notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication
and delivery of the Guaranteed Securities on which such
Guarantees were endorsed or did not hold such offices at
the date of such Guaranteed Securities.
The Guarantor hereby agrees that the Guarantee set
forth in Section 15.01 hereof shall remain in full force
and effect and shall apply to each Guaranteed Security
executed, authenticated, issued and delivered under this
Indenture, whether or not a notation of the Guarantee is
endorsed on such Guaranteed Security.
The execution and delivery by the Company and the
Guarantor of the First Indenture Supplement to the
Trustee shall constitute due delivery of the Guarantee
set forth herein on behalf of the Guarantor with respect
to all outstanding Guaranteed Securities. However, the
Guarantee shall not be valid or become obligatory for any
purpose with respect to any specific Guaranteed Security
unless the Certificate of Authentication on such
Guaranteed Security provided for in Section 2.05 of this
Indenture shall have been signed by the Trustee.
SECTION 15.03. Form of Notation of Guarantee. The
Guarantee shall be endorsed on the Guaranteed Securities
pursuant to Section 15.02 hereof in the following form:
[Form of Notation of Guarantee]
GUARANTEE
OF
AETNA INC.
5
Aetna Inc., a Connecticut corporation (herein called
the "Guarantor", which term includes any successor
corporation under the Indenture referred to in the
Security upon which this Guarantee is endorsed), for
value received, hereby unconditionally guarantees to the
person in whose name is registered the Security upon
which this Guarantee is endorsed the due and punctual
payment of the principal of, premium, if any, and
interest on said Security, when and as the same shall
become due and payable, whether at maturity or upon
declaration of acceleration, call for redemption or
otherwise, according to the terms thereof and of the
Indenture dated as of October 15, 1986, as amended
(herein called the "Indenture"), between Aetna Services,
Inc. (herein called the "Company") and State Street Bank
and Trust Company, as successor Trustee, and to which the
Guarantor became a party pursuant to a First Indenture
Supplement dated as of August 1, 1996. In case of the
failure of the Company punctually to make any such
payment of principal, premium or interest, the Guarantor
hereby agrees to pay or to cause any such payment to be
made punctually when and as the same shall become due and
payable, whether at maturity, by declaration of
acceleration, call for redemption or otherwise, and as if
such payment were made by the Company. The Guarantor
hereby agrees that its obligations hereunder shall be as
if it were principal debtor and not merely surety, and
shall be absolute and unconditional, irrespective of, and
shall be unaffected by, the validity, legality or
enforceability of said Security or the Indenture, or the
absence of any action to enforce the same, or any waiver,
modification, indulgence or consent granted to the
Company with respect thereto by the holder of said
Security or by the Trustee, the recovery of any judgment
against the Company or any action to enforce the same or
any other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a surety or
guarantor; provided, however, that notwithstanding the
foregoing, no such waiver, modification or indulgence
shall, without the consent of the Guarantor, increase the
principal amount of said Security or the interest rate
thereon or increase any premium payable upon redemption
thereof. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a
court in the event of bankruptcy of the Company, any
right of set-off or to counterclaim, any right to require
a proceeding first against the Company, protest or notice
with respect to said Security or the indebtedness
evidenced thereby and all demands whatsoever, and
covenants that this Guarantee will not be discharged
except by payment in full of the principal of, and
premium, if any, and interest on said Security.
The Guarantor shall be subrogated to all rights
against the Company of the person in whose name said
Security is registered in respect of any amounts paid to
such person by the Guarantor pursuant to the provisions
of this Guarantee with respect to said Security,
6
provided, however, that the Guarantor shall not, without
the consent of all persons in whose names all outstanding
Securities of the same series issued under the Indenture
that have been guaranteed by the Guarantor are
registered, be entitled to enforce, or to receive, any
payments arising out of, or based upon, such right of
subrogation until the principal of, premium, if any, and
interest then due and payable on all such Securities of
such series issued under the Indenture shall have been
irrevocably paid in full in accordance with the terms of
such Securities.
This Guarantee is a guarantee of payment when due
and not of collection. This Guarantee shall continue to
be effective, or be reinstated, as the case may be, in
respect of said Security if at any time payment, or any
part thereof, of said Security is rescinded or must
otherwise be restored or returned by the holder of said
Security or any trustee for said holder upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any other entity, or
upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar
officer for, the Company or any other entity or any
substantial part of their respective property, or
otherwise, all as though such payments had not been made.
No reference herein to such Indenture and no
provision of this Guarantee or of such Indenture shall
alter or impair the guarantee of the Guarantor, which is
absolute and unconditional, of the due and punctual
payment of the principal of, and premium, if any, and
interest on the Security upon which this Guarantee is
endorsed at the times, place and rate, and in the cash or
currency prescribed herein.
This Guarantee shall be deemed to be a contract made
under the laws of the State of New York and shall be
construed for all purposes in accordance with the laws of
said State, except to the extent, if any, that
Connecticut law applies under mandatory provisions of
such law.
This Guarantee shall not be valid or become
obligatory for any purpose with respect to any Security
unless the certificate of authentication on said Security
shall have been manually signed by or on behalf of the
Trustee under the Indenture.
7
IN WITNESS WHEREOF, Aetna Inc. has caused the
execution hereof in its corporate name by its duly
authorized officers.
Aetna Inc.
By___________________
[Seal]
Attest:
______________________________________
[Assistant] Corporate Secretary
SECTION 15.04. Reports by the Guarantor. The
Guarantor covenants:
(1) to file with the Trustee, within 15 days after
the Guarantor is required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission
may from time to time by rules and regulations prescribe)
which the Guarantor is required to file with the
Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, or, if the Guarantor is
not required to file information, documents or reports
pursuant to either of said sections, then to file with
the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic
information, documents and reports which may be required
pursuant to Section 13 of the Securities and Exchange
Act of 1934, in respect of a security listed and
registered on a national securities exchange, as may be
prescribed from time to time in such rules and
regulations;
(2) to file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from
time to time by the Commission, such additional
information, documents and reports with respect to
compliance by the Guarantor with the conditions and
covenants of the Indenture as may be required from time
to time by such rules and regulations; and
(3) to transmit by mail to all holders of
Guaranteed Securities, as their names and addresses
appear on the register for each series of such Guaranteed
Securities, within 30 days after the filing thereof with
the Trustee, in the manner and to the extent provided in
paragraph (c) of Section 6.04 with
8
respect to reports pursuant to paragraph (a) of Section
6.04, such summaries of any information, documents and
reports required to be filed by the Guarantor pursuant to
subsections (1) and (2) of this Section 15.04 as may be
required by rules and regulations prescribed from time to
time by the Commission.
SECTION 15.05. Guarantor's Statement as to
Compliance; Notice of Certain Events of Default. The
Guarantor will, on or before May 1 in each year,
commencing with the year 1997, file with the Trustee a
certificate (which need not comply with Section 14.04) of
the principal executive officer, the principal financial
officer or the principal accounting officer of the
Guarantor as to his or her knowledge of the Guarantor's
compliance with all conditions and covenants on its part
contained in this Indenture, and, if the signer has
obtained knowledge of any continuing default by the
Guarantor in the performance, observance or fulfillment
of any such condition or covenant, specifying each such
default and the nature thereof. For the purpose of this
Section 15.05, compliance shall be determined without
regard to any grace period or requirement of notice
provided pursuant to the terms of this Indenture.
SECTION 15.06. Guarantor May Consolidate, Merge or
Sell on Certain Terms. Nothing contained in this
Indenture, in the Guaranteed Securities or in the
Guarantee shall be deemed to prevent the consolidation or
merger of the Guarantor with or into any other
corporation organized under the laws of the United
States, any State thereof or the District of Columbia
(including, without limitation, the Company), or the
merger into the Guarantor of any other corporation,
(including, without limitation, the Company), or the sale
by the Guarantor to any corporation organized under the
laws of the United States, any State thereof or the
District of Columbia (including, without limitation, the
Company), of its property and assets as, or substantially
as, an entirety, or otherwise; provided, however, (a)
that, in case of any such consolidation or merger, the
corporation resulting from such consolidation or any
corporation other than the Guarantor into which such
merger shall be made shall succeed to and be substituted
for the Guarantor with the same effect as if it had been
named herein as a party hereto and shall become liable
and be bound for, and shall expressly assume, by a
supplemental indenture hereto, executed and delivered to
the Trustee, the due and punctual performance of the
obligations of the Guarantor under the Guarantee of the
Guaranteed Securities then outstanding and the
performance and observance of each and every covenant and
condition of this Indenture on the part of the Guarantor
to be performed or observed and (b) that, as a condition
of any such sale of the property and assets of the
Guarantor as, or substantially as, an entirety, the
corporation to which such property and assets shall be
sold shall (i) expressly assume, as a
9
part of the purchase price thereof, the due and punctual
performance of the obligations of the Guarantor under the
Guarantee of the Guaranteed Securities then outstanding
and the performance and observance of all the covenants
and conditions of this Indenture on the part of the
Guarantor to be performed or observed, and (ii)
simultaneously with the delivery to it of the conveyances
or instruments of transfer of such property and assets,
execute and deliver to the Trustee a supplemental
indenture hereto, in form satisfactory to the Trustee,
whereby such purchasing corporation shall so assume the
due and punctual performance of the obligations of the
Guarantor under the Guarantee of the Guaranteed
Securities then outstanding and of the performance and
observance of each and every covenant and condition of
this Indenture on the part of the Guarantor to be
performed or observed, to the same extent that the
Guarantor is bound and liable.
The Guarantor shall not consolidate with any other
corporation or accept a merger of any other corporation
into the Guarantor or permit the Guarantor to be merged
into any other corporation, or sell its properties and
assets as, or substantially as, an entirety, except upon
the terms and conditions set forth in this Section. Upon
any consolidation or merger, or any sale of the
properties and assets of the Guarantor as, or
substantially as, an entirety in accordance with the
provisions of this Section, the corporation formed by
such consolidation or into which the Guarantor shall have
been merged or to which such sale shall have been made
shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein a
party hereto and thereafter from time to time such
successor corporation may exercise each and every right
and power of the Guarantor under this Indenture, in the
name of the Guarantor or in its own name; and any act or
proceeding by any provision of this Indenture required or
permitted to be done by the Board of Directors or any
officer of the Guarantor may be done with like force and
effect by the like board or officer of any corporation
that shall at the time be the successor of the Guarantor
hereunder. In the event of the sale by the Guarantor of
its properties and assets as, or substantially as, an
entirety upon the terms and conditions of this Section,
the Guarantor shall be released from all its liabilities
and obligations hereunder and under the Guarantee of the
Guaranteed Securities.
SECTION 15.07. Officers' Certificate and Opinion of
Counsel To Be Given to Trustee. The Trustee, subject to
the provisions of Section 8.01, may receive an Officers'
Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger or sale, and
any such assumption, complies with the provisions of this
Article Fifteen.
10
SECTION 15.08. Personal Immunity from Liability of
Incorporators, Stockholders, Etc. No recourse shall be
had for the payment of any obligations of the Guarantor
with respect to the Guaranteed Securities, the Guarantee
or this Indenture or any indenture supplemental hereto,
against any incorporator, or against any past, present or
future stockholder, director or officer, as such, of the
Guarantor or of any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or
otherwise, all such liability being expressly waived and
released as a condition of, and as consideration for, the
execution of the First Indenture Supplement by the
Guarantor and the issue of the Guarantee.
SECTION 1.05. Section 5.06 of the Indenture is
hereby deleted and replaced in its entirety by the following:
"Section 5.06. Statement as to Compliance; Notice
of Certain Events of Default. The Company will, on or
before May 1 in each year, commencing with the year 1997,
file with the Trustee a certificate (which need not
comply with Section 14.04) of the principal executive
officer, the principal financial officer or the principal
accounting officer of the Company as to his or her
knowledge of the Company's compliance with all conditions
and covenants on its part contained in this Indenture,
and, if the signer has obtained knowledge of any
continuing default by the Company in the performance,
observance or fulfillment of any such condition or
covenant, specifying each such default and the nature
thereof. For the purpose of this Section 5.06,
compliance shall be determined without regard to any
grace period or requirement of notice provided pursuant
to the terms of this Indenture."
SECTION 1.06. Paragraph (a) of Section 6.03 of the
Indenture is hereby deleted and replaced in its entirety by the
following:
"(a) to file with the Trustee, within 15 days after
the Company is required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission
may from time to time by rules and regulations prescribe)
which the Company is required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, or, if the Company is not required
to file information, documents or reports pursuant to
either of such sections, then to file with the Trustee
and the Commission, in accordance with rules and
regulations prescribed from time to time by the
Commission, such of the supplementary and periodic
information, documents and reports, if any, which may be
required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a guaranteed security
listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and
regulations
11
(including without limitation Commission Staff Accounting
Bulletin No. 53 or any successor thereto);".
SECTION 1.07. Section 7.05 of the Indenture is
hereby amended (i) by inserting the words ", the Guarantor" after
the words "the Company" in the fifth line thereof and (ii) by
inserting the words "the Guarantor" after the words "the Company,"
in the seventh line thereof.
SECTION 1.08. Section 7.09 of the Indenture is
hereby amended by inserting the words "the Guarantor" after the
words "the Company," in the last sentence of such section.
SECTION 1.09. Section 8.02 of the Indenture is
hereby amended by inserting the words "or of the Guarantor, as the
case may be" after the words "the Company" both times such words
appear in paragraph (b) of such section.
SECTION 1.10. Section 8.04 of the Indenture is
hereby amended by inserting the words "or the Guarantor" after the
SECTION 1.11. Section 8.06 of the Indenture is
hereby amended as follows:
(a) The words "Company covenants and agrees"
are replaced with the words "Company and the Guarantor,
jointly and severally, covenant and agree" both times
they appear in the first sentence thereof.
(b) The words "Company also covenants" in the
second sentence thereof are replaced with the words
"Company and the Guarantor, jointly and severally, also
covenant."
(c) The words "and the Guarantor" are inserted
after the word "Company" in the third sentence thereof.
SECTION 1.12. (a) Paragraph (a) of Section 8.10 of
the Indenture is hereby amended by inserting the words "and the
Guarantor" after the words "the Company" each time such words
appear in such paragraph.
(b) Paragraph (b) of Section 8.10 of the Indenture
is hereby amended as follows:
(i) The words "or the Guarantor" are
inserted after the words "the Company" in
subclause (1) and (2) of such paragraph.
12
(ii) The words "and the Guarantor" are
inserted after the words "the Company" in the
first and fifth lines immediately following
subclause (3) of such paragraph.
(c) Paragraph (c) of Section 8.10 of the
Indenture is hereby amended by inserting the words "and the
Guarantor" after the words "the Company" in such section.
SECTION 1.13. Section 8.11 of the Indenture is
hereby amended (i) by inserting the words "and the Guarantor"
after the words "the Company" each time such words appear in the
first paragraph of such section, and (ii) by inserting the words
"the Guarantor," after the words "the Company," in the third
paragraph of such section.
SECTION 1.14. Section 9.03 of the Indenture is
hereby amended by inserting (i) the words "the Guarantor," after
the word "Company" in the third line thereof and (ii) the words
"nor the Guarantor" after the words "the Company" in the eleventh
line thereof.
SECTION 1.15. Section 10.01 of the Indenture
is hereby amended by inserting the words "or to the Guarantor"
after the words "the Company" in paragraph (a) of such section.
SECTION 1.16. Section 10.03 of the Indenture
is hereby amended (i) by inserting the words "or the Guarantor,
pursuant to a resolution of its Board of Directors," after the
words "Board of Directors," in the first sentence of such section
and (ii) by inserting the words ", the Guarantor" after the words
"the Company" in the third sentence of such paragraph.
SECTION 1.17. Section 10.04 of the Indenture
is hereby amended by inserting the words "and any representative
of the Guarantor and its counsel" after the words "its counsel" in
the last line thereof.
SECTION 1.18. Section 10.05 of the Indenture
is hereby amended by inserting the words ", the Guarantor" after
the words "the Company" each time such words appear in the first
sentence of the second paragraph of such section.
SECTION 1.19. Section 11.01 of the Indenture
is hereby amended as follows:
(a) The words "the Guarantor, when authorized
by a resolution of its Board of Directors," are
inserted after the words "Board of Directors," in
the third line of such section.
13
(b) The words "or the Guarantor" are inserted
after the words "the Company" each time such words
appear in paragraphs (a), (b) and (c) of such
section.
(c) The words "and Article Fifteen,
respectively" are inserted after the words "Article
Twelve" in paragraph (b) of such section.
SECTION 1.20. Section 11.02 of the Indenture
is hereby amended as follows:
(a) The words "the Guarantor, when authorized
by a resolution of its Board of Directors," are inserted
after the words "Board of Directors," in the sixth line
of the first paragraph of such section.
(b) The words "and the Guarantor" are inserted
after the words "the Company" each time such words appear
in the second paragraph of such section.
(c) The words ", the Guarantor" are inserted
after the words "the Company" in the first line of the
last paragraph of such section.
SECTION 1.21. Section 11.03 of the Indenture
is hereby amended by inserting the words ", the Guarantor" after
the words "the Company" in the sixth line thereof.
SECTION 1.22. Section 11.06 of the Indenture
is hereby amended by inserting the words "or the Guarantor" after
the words "the Company" each time such words appear such section.
SECTION 1.23. Section 13.01 of the Indenture
is hereby amended as follows:
(a) The words "(or, in the case of the
Guaranteed Securities, the Company or the Guarantor)" are
inserted after the words "the Company" in the thirteenth
and nineteenth lines of the first sentence thereof.
(b) The words ", and any related Guarantee of
such Securities" are inserted after the words "Securities
of such series" in the 22nd and 34th lines of the first
sentence thereof.
(c) The words "or the Guarantor" are inserted
after the words "the Company" in the 30th line of the
first sentence thereof.
(d) The words "and the Guarantor" are inserted
after the words "the Company" in the 32nd line of the
first sentence thereof.
14
(e) The words "The Company agrees" in the
second sentence of Section 13.01 are deleted and replaced
with the words "The Company and the Guarantor jointly and
severally agree".
SECTION 1.24. Section 13.02 of the Indenture
is hereby amended by inserting the words "and any related
Guarantee of such Securities" after the words "Securities of a
series" in the third line thereof.
SECTION 1.25. (a) The first nine lines of
Section 13.05 of the Indenture are hereby deleted and replaced by
the following:
"Defeasance Upon Deposit of Moneys or U.S.
Government Obligations. At the Company's
option, either (a) the Company and the
Guarantor shall be deemed to have been
Discharged (as defined below) from their
respective obligations with respect to any
series of Securities and any related Guarantee
of such Securities on the 91st day after the
applicable conditions set forth below have been
satisfied or (b) the Company and the Guarantor
shall cease to be under any obligation to
comply with any term, provision or condition
set forth in Section 5.05, 12.01, 15.01 and
15.06 with respect to any series of Securities
at any time after the applicable conditions set
forth below have been satisfied:"
(b) The words "(or, in the case of the
Guaranteed Securities, the Company or the Guarantor)" are inserted
after the words "the Company" in clause (1) of such Section 13.05.
(c) The definition of "Discharged" in Section
13.05 of the Indenture is hereby amended by inserting the words
"and the Guarantor" after the words "the Company" in the first and
fifth lines thereof and the words "and any related Guarantee of
such Securities" after the words "Securities of such series" in
the fourth line thereof.
SECTION 1.26. Section 14.02 of the Indenture
is hereby amended by adding the words "or the Guarantor" after the
words "the Company".
SECTION 1.27. Section 14.03 of the Indenture
is hereby amended as follows:
(a) The words "or the Guarantor" are inserted
after the words "the Company" each time such words
appear in the first paragraph thereof.
(b) The words "or to Aetna Inc., 151
Farmington Avenue, Hartford, Connecticut 06156, and
marked for the attention of the Treasurer" are
inserted after the word "Treasurer" in the first
paragraph thereof.
15
(c) The words ", the Guarantor" are inserted
after the words "the Company" each time such words
appear in the second and third paragraphs of such
section.
The Trustee hereby agrees that, substantially simultaneously with
its furnishing to the Company any notice or communication under
the Indenture, as amended hereby, the Trustee shall furnish a copy
thereof to the Guarantor. The Company hereby agrees that, upon
receiving or furnishing any notice or communication under the
Indenture, as amended hereby, the Company promptly will provide a
copy thereof to the Guarantor.
SECTION 1.28. The second paragraphs of Sections
5.02 and 14.03 are hereby amended to change the name and address
of the Trustee's agency office in New York, New York to "State
Street Bank and Trust Company, 61 Broadway, Corporate Trust
Window, Concourse Level, New York, New York 10006.
SECTION 1.29. Section 14.04 of the Indenture is
hereby amended by inserting the words "(other than a certificate
delivered pursuant to Section 5.06 or 15.05 hereof)" after the
words "this Indenture" in the fourth line of such section.
ARTICLE 2
MISCELLANEOUS
SECTION 2.01. Effectiveness. This First Indenture
Supplement shall take effect as of the date hereof.
SECTION 2.02. Indenture Ratified. Except as herein
expressly provided, the Indenture is in all respects ratified and
confirmed by the Company and the Trustee and all the terms,
provisions and conditions thereof are and will remain in full
force and effect.
SECTION 2.03. Execution by the Trustee. The Trustee has
executed this First Indenture Supplement only upon the terms and
conditions set forth in the Indenture. Without limiting the
generality of the foregoing, the Trustee shall not be responsible
for the correctness of the recitals herein contained, which shall
be taken as the statements of the Company and the Guarantor, and
the Trustee makes no representation and shall have no
responsibility for, and in respect of, the validity or sufficiency
of this First Indenture Supplement or the execution thereof by the
Company or the Guarantor.
SECTION 2.04. Governing Law. This First Indenture
Supplement shall be deemed to be a contract made under the laws of
the State of New York and shall be construed for all purposes in
accordance with the laws of said State, except to
16
the extent, if any, that Connecticut law applies under mandatory
provision of such law.
SECTION 2.05. Execution in Counterparts. This First
Indenture Supplement may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one instrument.
17
IN WITNESS WHEREOF, the parties hereto have caused this
First Indenture Supplement to be duly executed, and their
respective corporate seals to be hereunto duly affixed and
attested, all as of the day and year first above written.
AETNA SERVICES, INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
____________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
_______________________
AETNA INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
____________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
_______________________
STATE STREET BANK AND TRUST
COMPANY, as Trustee
[Seal]
By /s/ James E. Mogavero
____________________________
Attest:
/s/ Andrew M. Sinasky
______________________
18
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally came
Alfred P. Quirk, Jr., to me known, who, being by me duly sworn, did
depose and say that [he] resides at 44 Stonegate, Farmington, CT
06032, that [he] is the Vice President, Corporate Finance of Aetna
Services, Inc., one of the corporations described in and which
executed the above instrument; that [he] knows the corporate seal of
said corporation; that the seal affixed to the said instrument is
such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that [he] signed [his]
name thereto by like authority.
/s/ Joanne R. Jensen
_________________________
Notary Public
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally came
Alfred P. Quirk, Jr., to me known, who, being by me duly sworn, did
depose and say that [he] resides at 44 Stonegate, Farmington, CT
06032, that [he] is the Vice President, Corporate Finance of Aetna
Inc., one of the corporations described in and which executed the
above instrument; that [he] knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that [he] signed [his] name
thereto by like authority.
/s/ Joanne R. Jensen
_________________________
Notary Public
19
Commonwealth of Massachusetts
County of Suffolk ss:
On the 1st day of August, 1996, before me personally came
James E. Mogavero, to me known, who, being by me duly sworn, did
depose and say that [he] resides at 6 Adele Circle, Wakefield, MA
01880, that [he] is an Assistant Vice President of State Street
Bank and Trust Company, one of the corporations described in and
which executed the above instrument; that [he] knows the corporate
seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
[he] signed [his] name thereto by like authority.
s/ Laura L. Shepherd
_______________________________
Notary Public
20
??
Exhibit 4.8
__________________________________________
__________________________________________
AETNA SERVICES, INC.
(formerly Aetna Life and Casualty Company)
AETNA INC.
AND
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, AS TRUSTEE
_______
FIRST INDENTURE SUPPLEMENT
Dated as of August 1, 1996
to
INDENTURE
Dated as of August 1, 1993
Between
Aetna Services, Inc.
(formerly Aetna Life and Casualty Company)
and
State Street Bank and Trust Company of Connecticut,
National Association, as Trustee
_________________________________
_________________________________
FIRST INDENTURE SUPPLEMENT
FIRST INDENTURE SUPPLEMENT, dated as of August 1, 1996, among
AETNA SERVICES, INC. (formerly Aetna Life and Casualty Company), a
corporation duly organized and validly existing under the laws of
the State of Connecticut (the "Company"), AETNA INC., a
corporation duly organized and validly existing under the laws of
the State of Connecticut (the "Guarantor"), and STATE STREET BANK
AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as trustee
(the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTOR
The Company and the Trustee have heretofore executed and
delivered an Indenture dated as of August 1, 1993 (the
"Indenture"), which provides for the issuance from time to time by
the Company of its unsecured debentures, notes or other evidences
of indebtedness in one or more series ("Securities", as more fully
defined in the Indenture).
Pursuant to an Agreement and Plan of Merger dated as of
March 30, 1996, as amended by Amendment No. 1 thereto dated as of
May 30, 1996 among the Company, the Guarantor, U.S. Healthcare,
Inc., Antelope Sub, Inc., a wholly owned subsidiary of the
Guarantor ("Aetna Sub"), and New Merger Corporation, a wholly
owned subsidiary of the Guarantor, on July 19, 1996 Aetna Sub was
merged with and into the Company with the result that the Company
is as of the date of this First Indenture Supplement a direct
wholly-owned subsidiary of the Guarantor. In connection with such
merger the Company's Certificate of Incorporation was amended to
change its name to Aetna Services, Inc.
As of the date of this First Indenture Supplement, the
only Securities of the Company that have been issued and remain
outstanding under the Indenture consist of $200 million original
principal amount of 6 3/8% Notes due August 15, 2003 (the "6 3/8%
Notes"), $200 million original principal amount of 6 3/4%
Debentures due September 15, 2013 (the "6 3/4% Debentures") and
$200 million original principal amount of 7 1/4% Debentures due
August 15, 2023 (the "7 1/4% Debentures").
This First Indenture Supplement amends the Indenture,
pursuant to Section 901 thereof: (i) to provide for the full and
unconditional guarantee by the Guarantor of the due and punctual
payment of the principal of, premium, if any, and interest on the
6 3/8% Notes, the 6 3/4% Debentures and the 7 1/4% Debentures
previously issued under the Indenture and (ii) to make certain
other changes to the terms of the Indenture.
All acts and proceedings required by law, by the
Indenture and by the certificates of incorporation and bylaws of
the Company and the Guarantor necessary to constitute this First
Indenture Supplement a valid and binding agreement for the
uses and purpose herein set forth in accordance with its terms
have been done and performed, and the execution and delivery of
this First Indenture Supplement have in all respects been duly
authorized.
NOW, THEREFORE, in consideration of the foregoing and
other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each party agrees as follows for the
benefit of the other parties and for the equal and ratable benefit
of the holders of the Securities.
ARTICLE 1
AMENDMENTS
SECTION 101. The Guarantor is hereby made a party to the
Indenture.
SECTION 102. Section 101 of the Indenture is hereby
amended to add to the definitions set forth in such Section the
following additional definitions in the appropriate alphabetical
order:
First Indenture Supplement:
The term "First Indenture Supplement" shall mean the
First Indenture Supplement dated as of August 1, 1996 to
this Indenture.
Guarantee:
The term "Guarantee" shall mean the guarantee set forth
in Section 1501 hereof, including any evidence of such
guarantee by endorsement on any Guaranteed Security pursuant
to Section 1502 hereof. The Guarantee shall be deemed part of
the Guaranteed Securities.
Guaranteed Securities:
The term "Guaranteed Securities" shall mean,
collectively, the $200 million in original principal amount of
the $200 million in original principal amount of 6 3/8% Notes
due August 15, 2003, 6 3/4% Debentures due September 15, 2013,
and the $200 million in original principal amount of 7 1/4%
Debentures due August 15, 2023 issued under the Indenture
prior to the date of the First Indenture Supplement and
remaining outstanding as of such date and "Guaranteed
Security" means any of such Securities.
Guarantor:
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The term "Guarantor" shall mean AETNA INC., a Connecticut
corporation, and, subject to the provisions of Section 1506,
shall also include its successors and assigns.
SECTION 103. (a) The definition of "Board of Directors"
set forth in Section 101 of the Indenture is hereby amended by
inserting the words "or of the Guarantor, as the case may be"
immediately after the words "the Company" appearing therein.
(b) The definitions of "Board Resolution", "Officers'
Certificate" and "Company Request" or "Company Order" set forth in
Section 101 of the Indenture are hereby amended by inserting the
words "or of the Guarantor, as the case may be" immediately after
the words "the Company" appearing therein.
(c) The definition of "Opinion of Counsel" set forth in
Section 101 of the Indenture is hereby amended by inserting the
words ", or the Guarantor", immediately after the words "the
Company" therein.
SECTION 104. A new Article Fifteen is added to the
Indenture to read in its entirety as follows:
ARTICLE FIFTEEN
Guarantee
SECTION 1501. Guarantee. The Guarantor hereby
unconditionally guarantees to each Holder of a
Guaranteed Security authenticated and delivered by or
on behalf of the Trustee the due and punctual payment
of the principal of, premium, if any, and interest on
such Guaranteed Security, when and as the same shall
become due and payable, whether at Stated Maturity, by
declaration of acceleration, call for redemption or
otherwise, according to the terms of such Guaranteed
Securities and of the Indenture. In case of default
by the Company in the payment of any such principal,
premium or interest, the Guarantor hereby agrees duly
and punctually to make any such payment when and as
the same shall become due and payable, whether at
Stated Maturity, by declaration of acceleration, call
for redemption or otherwise, and as if such payment
was made by the Company. The Guarantor hereby agrees
that its obligations hereunder shall be as if it were
principal debtor and not merely surety, and shall be
absolute and unconditional, irrespective of, and shall
be unaffected by, the validity, legality or
enforceability of any such Guaranteed Security or the
Indenture, the absence of any action to enforce the
same, or any waiver, modification, indulgence or
consent granted to the Company with respect thereto by
the Holder of any Guaranteed Security of any series or
by the Trustee, the recovery of any judgment against
the
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Company or any action to enforce the same, or any
other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a surety or
guarantor; provided, however, that notwithstanding the
foregoing, no such waiver, modification or indulgence
shall, without the consent of the Guarantor, increase
the principal amount of a Guaranteed Security or the
interest rate thereon or increase any premium payable
upon redemption thereof. The Guarantor hereby waives
diligence, presentment, demand of payment, filing of
claims with a court in the event of merger or
bankruptcy of the Company, any right of set-off or
counterclaim, any right to require a proceeding first
against the Company, protest or notice with respect to
any Guaranteed Security or the indebtedness evidenced
thereby and all demands whatsoever, and covenants that
this Guarantee will not be discharged as to any
Guaranteed Security except by payment in full of the
principal of (premium, if any) and interest on such
Guaranteed Security.
The Guarantor shall be subrogated to all rights
of a Holder of a Guaranteed Security against the
Company in respect of any amounts paid to such Holder
by the Guarantor pursuant to the provisions of the
Guarantee; provided, however, that the Guarantor shall
not, without the consent of all Holders of Guaranteed
Securities of such series be entitled to enforce, or
to receive, any payments arising out of or based upon
such right of subrogation until the principal of,
premium, if any, and interest then due and payable on
all Guaranteed Securities of the relevant series shall
have been irrevocably paid in full in accordance with
the terms of such Guaranteed Securities.
The Guarantee is a guarantee of payment when
due and not of collection. The Guarantee shall
continue to be effective, or be reinstated, as the
case may be, in respect of any Guaranteed Securities
if at any time payment, or any part thereof, of such
Guaranteed Security is rescinded or must otherwise be
restored or returned by the Holder of such Guaranteed
Security or any trustee for such Holder upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any other entity, or
upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar
officer for, the Company or any other entity or any
substantial part of their respective property, or
otherwise, all as though such payments had not been
made.
SECTION 1502. Execution of Guarantees. At the
time that any Guaranteed Security is authenticated and
delivered by the Trustee after the date of the First
Indenture Supplement in connection with the
registration of transfer, exchange or replacement of a
Guaranteed Security pursuant to Section 304, 305 or
306 of this Indenture, as evidence of the Guarantee
set forth in Section 1501 hereof, the Guarantor hereby
agrees that notation of such Guarantee shall be
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endorsed on the reverse of such Guaranteed Security in
the form set forth in Section 1503 hereof. The
Guarantee shall be executed on behalf of the Guarantor
by its Chairman, a Vice Chairman, its President, any
Vice President, its Treasurer or Assistant Treasurer
under its corporate seal attested by its Corporate
Secretary or one of its Assistant Corporate
Secretaries. The signatures of any or all of these
officers on the Guarantees may be manual or by
facsimile and may be imprinted or otherwise reproduced
on the Guaranteed Security. The seal of the Guarantor
may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced
on the Guaranteed Securities.
Guarantees bearing the manual or facsimile
signatures of individuals who were at any time the
proper officers of the Guarantor shall bind the
Guarantor notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the
authentication and delivery of the Guaranteed
Securities on which such Guarantees were endorsed or
did not hold such offices at the date of such
Guaranteed Securities.
The Guarantor hereby agrees that the Guarantee
set forth in Section 1501 hereof shall remain in full
force and effect and shall apply to each Guaranteed
Security executed, authenticated, issued and delivered
under this Indenture, whether or not a notation of the
Guarantee is endorsed on such Guaranteed Security.
The execution and delivery by the Company and
the Guarantor of the First Indenture Supplement to the
Trustee shall constitute due delivery of the Guarantee
set forth herein on behalf of the Guarantor with
respect to all outstanding Guaranteed Securities.
However, the Guarantee shall not be valid or become
obligatory for any purpose with respect to any
specific Guaranteed Security unless the Certificate of
Authentication on such Guaranteed Security provided
for in Section 205 of this Indenture shall have been
signed by the Trustee.
SECTION 1503. Form of Notation of Guarantee.
The Guarantee shall be endorsed on the Guaranteed
Securities pursuant to Section 1502 hereof in the
following form:
[Form of Notation of Guarantee]
GUARANTEE
OF
AETNA INC.
Aetna Inc., a Connecticut corporation (herein
called the "Guarantor", which term includes any
successor corporation under the
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Indenture referred to in the Security upon which this
Guarantee is endorsed), for value received, hereby
unconditionally guarantees to the Holder of the
Security upon which this Guarantee is endorsed the due
and punctual payment of the principal of, premium, if
any, and interest on said Security, when and as the
same shall become due and payable, whether at Stated
Maturity or upon declaration of acceleration, call for
redemption or otherwise, according to the terms
thereof and of the Indenture dated as of August 1,
1993, as amended (herein called the "Indenture"),
between Aetna Services, Inc. (herein called the
"Company") and State Street Bank and Trust Company of
Connecticut, National Association, as Trustee and to
which the Guarantor became a party pursuant to a First
Indenture Supplement dated as of August 1, 1996. In
case of the failure of the Company punctually to make
any such payment of principal, premium or interest,
the Guarantor hereby agrees to pay or to cause any
such payment to be made punctually when and as the
same shall become due and payable, whether at Stated
Maturity, by declaration of acceleration, call for
redemption or otherwise, and as if such payment were
made by the Company. The Guarantor hereby agrees that
its obligations hereunder shall be as if it were
principal debtor and not merely surety, and shall be
absolute and unconditional, irrespective of, and shall
be unaffected by, the validity, legality or
enforceability of said Security or the Indenture, or
the absence of any action to enforce the same, or any
waiver, modification, indulgence or consent granted to
the Company with respect thereto by the Holder of said
Security or by the Trustee, the recovery of any
judgment against the Company or any action to enforce
the same or any other circumstance that might
otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor; provided, however,
that notwithstanding the foregoing, no such waiver,
modification or indulgence shall, without the consent
of the Guarantor, increase the principal amount of
said Security or the interest rate thereon or increase
any premium payable upon redemption thereof. The
Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event
of bankruptcy of the Company, any right of set-off or
to counterclaim, any right to require a proceeding
first against the Company, protest or notice with
respect to said Security or the indebtedness evidenced
thereby and all demands whatsoever, and covenants that
this Guarantee will not be discharged except by
payment in full of the principal of, and premium, if
any, and interest on said Security.
The Guarantor shall be subrogated to all rights
of the Holder against the Company in respect of any
amounts paid to such Holder by the Guarantor pursuant
to the provisions of this Guarantee, provided,
however, that the Guarantor shall not, without the
consent of all Holders of all outstanding Securities
of the same series issued under the Indenture, be
entitled to enforce, or to receive, any payments
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arising out of, or based upon, such right of
subrogation until the principal of, premium, if any,
and interest then due and payable on all Securities of
the same series issued under the Indenture shall have
been irrevocably paid in full in accordance with the
terms of such Securities.
This Guarantee is a guarantee of payment when
due and not of collection. This Guarantee shall
continue to be effective, or be reinstated, as the
case may be, in respect of said Security if at any
time payment, or any part thereof, of said Security is
rescinded or must otherwise be restored or returned by
the Holder of said Security or any trustee for said
Holder upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any
other entity, or upon or as a result of the
appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or
any other entity or any substantial part of their
respective property, or otherwise, all as though such
payments had not been made.
No reference herein to such Indenture and no
provision of this Guarantee or of such Indenture shall
alter or impair the guarantee of the Guarantor, which
is absolute and unconditional, of the due and punctual
payment of the principal of, and premium, if any, and
interest on the Security upon which this Guarantee is
endorsed at the times, place and rate, and in the cash
or currency prescribed herein.
This Guarantee shall be governed by and
construed in accordance with the laws of the State of
New York, but without regard to principles of
conflicts of laws.
This Guarantee shall not be valid or become
obligatory for any purpose with respect to any
Security unless the certificate of authentication on
said Security shall have been manually signed by or on
behalf of the Trustee under the Indenture.
All terms used in this Guarantee which are
defined in such Indenture shall have the meanings
assigned to them in such Indenture.
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IN WITNESS WHEREOF, Aetna Inc. has caused the
execution hereof in its corporate name by its duly
authorized officers.
Aetna Inc.
By___________________
[Seal]
Attest:
______________________________________
[Assistant] Corporate Secretary
SECTION 1504. Reports by the Guarantor. The
Guarantor shall file with the Trustee and the
Commission, and transmit to Holders, such information,
documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such
________
information, documents or reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act shall be filed with the Trustee
within 15 days after the same is so required to be
filed with the Commission.
SECTION 1505. Guarantor's Statement as to
Compliance; Notice of Certain Events of Default. The
Guarantor will deliver to the Trustee within 120 days
after the end of each fiscal year of the Guarantor
ending after the date of this First Indenture
Supplement, a certificate signed by the Guarantor's
principal executive officer, the principal financial
officer or the principal accounting officer stating
whether or not to the best knowledge of the signer
thereof the Guarantor is in compliance with all terms,
conditions and covenants of the Indenture (without
regard to any period of grace or requirement of notice
provided thereunder) and, if the signer has obtained
knowledge of any continuing default by the Guarantor
in the performance, observance or fulfillment of any
such term, condition or covenant, specifying each such
default and the nature thereof.
SECTION 1506. Guarantor May Consolidate, Etc.,
Only on Certain Terms. The Guarantor shall not
consolidate with or merge into any other Person or
sell its properties and assets as, or substantially
as, an entirety to any Person, and the Guarantor shall
not permit any Person to consolidate with or merge
into the Guarantor, unless:
8
(1) in the case the Guarantor shall
consolidate with or merge into another Person
(including, without limitation, the Company) or sell
its properties and assets as, or substantially as, an
entirety to any Person (including, without limitation,
the Company), the Person formed by such consolidation
or into which the Guarantor is merged or the Person
which purchases the properties and assets of the
Guarantor as, or substantially, as an entirety shall
be a corporation, partnership or trust, shall be
organized and validly existing under the laws of the
United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered
to the Trustee, in form satisfactory to the Trustee,
the due and punctual performance of the obligations of
the Guarantor under the Guarantee of the Guaranteed
Securities then outstanding and the performance or
observance of every covenant of this Indenture on the
part of the Guarantor to be performed or observed, by
supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the
Person (if other than the Guarantor) formed by such
consolidation or into which the Guarantor shall have
been merged or by the corporation which shall have
acquired the Guarantor's assets;
(2) immediately after giving effect to such
transaction, no Event of Default shall have happened
and be continuing; and
(3) the Guarantor has delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, or sale
and, if a supplemental indenture is required in
connection with such transaction, such supplemental
indenture comply with this Section 1506 and that all
conditions precedent herein provided for relating to
such transaction have been complied with.
Upon any consolidation of the Guarantor with,
or merger of the Guarantor into, any Person or any
sale of the properties and assets of the Guarantor as,
or substantially as, an entirety in accordance with
this Section 1506, the successor Person formed by such
consolidation or into which the Guarantor is merged or
to which such sale is made shall succeed to, and be
substituted for, and may exercise every right and
power of, the Guarantor under this Indenture with the
same effect as if such successor Person had been named
as the Guarantor herein, and thereafter, the
predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the
Guaranteed Securities.
SECTION 1507. Personal Immunity from Liability of
Incorporators, Stockholders, Etc. No recourse shall be
had for the payment of any obligations of the Guarantor
with respect to the Guaranteed Securities, the Guarantee
or this Indenture or any indenture supplemental hereto,
against any incorporator, or against any past, present or
future stockholder, director or officer, as such, of the
Guarantor or of any successor corporation, whether by
9
virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise,
all such liability being expressly waived and released
as a condition of, and as consideration for, the
execution of the First Indenture Supplement by the
Guarantor and the issue of the Guarantee.
SECTION 105. Section 102 of the Indenture is hereby
amended by inserting the words "and Section 1505" after the words
"Section 1004" in the second paragraph of such section.
SECTION 106. Section 105 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" each time such words appear in subparagraphs (1) and
(2) thereof. The Trustee hereby agrees that, substantially
simultaneously with its furnishing to the Company any notice or
communication under the Indenture, as amended hereby, the Trustee
shall furnish a copy thereof to the Guarantor. The Company hereby
agrees that, substantially with its receiving or furnishing any
notice or communication under the Indenture, as amended hereby,
the Company will provide a copy thereof to the Guarantor.
SECTION 107. Section 106 of the Indenture is hereby
amended as follows:
(a) The words ", the Guarantor" are inserted after the
word "Company" in the ninth line and after the second reference to
"the Company" in the twelfth line of the first paragraph thereof.
(b) The words "and the Guarantor" are inserted after
the first reference to the words "the Company" in the twelfth line
of the first paragraph thereof.
SECTION 108. Section 109 of the Indenture is hereby
amended by adding the words "or the Guarantor" after the words
"the Company".
SECTION 109. Section 308 of the Indenture is hereby
amended by inserting (i) the words "the Guarantor," after the word
"Company" in the second, third and eighth lines thereof and (ii)
the words "or the Guarantor" after the words "the Company" in the
ninth line thereof.
SECTION 110. Section 401 of the Indenture is hereby
amended (i) by adding the words "and the Guarantor" after the
words "the Company" in the last paragraph of such Section and (ii)
by adding the following as a new penultimate paragraph of such
Section:
"In the event the Company exercises its rights under
this Section 401 with respect to a series of Guaranteed
Securities, upon satisfaction by the Company of the
conditions set forth in this Section 401 with respect to such
series, the Guarantor's obligations under its Guarantees with
respect to such
10
series of Guaranteed Securities shall likewise be satisfied
and discharged and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to
such series of Guaranteed Securities."
SECTION 111. Section 402 of the Indenture is hereby
amended by inserting the words "(and, in respect of the Guaranteed
Securities, the Guarantee)" after the words "Securities" in the
fourth line thereof.
SECTION 112. Section 509 of the Indenture is hereby
amended by inserting the words" the Guarantor," after the words
"the Company," therein.
SECTION 113. Section 603 of the Indenture is hereby
amended by inserting the words "or of the Guarantor, as the case
may be" after the words "the Company" in paragraph (b) of such
section.
SECTION 114. Section 605 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" in such section.
SECTION 115. Section 607 of the Indenture is hereby
amended by replacing the words "The Company agrees" with "The
Company and the Guarantor, jointly and severally, agree" in the
first line thereof.
SECTION 116. (a) Paragraph (b) of Section 610 of the
Indenture is hereby amended by inserting the words "and the
Guarantor" after the words "the Company" in the first sentence
thereof.
(b) Paragraph (c) of Section 610 of the Indenture is
hereby amended by inserting the words "and to the Guarantor" after
the words "the Company" in such section.
(c) Paragraph (d) of Section 610 of the Indenture is
hereby amended as follows:
(i) The words "or the Guarantor" are inserted
after the words "the Company" in subclause (1) and (2)
of such paragraph.
(ii) The words "and the Guarantor" are inserted
after the words "the Company" in the first line
immediately following subclause (3) of such paragraph.
(d) Paragraph (e) of Section 610 of the Indenture is
hereby amended by inserting the words "and the Guarantor" after
the words "the Company" each time such words appear in such
paragraph.
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SECTION 117. Section 611 of the Indenture is hereby
amended (i) by inserting the words "and the Guarantor" after the
words "the Company" each time such words appear in paragraphs (a)
and (c) of such section, and (ii) by inserting the words ",the
Guarantor" after the words "the Company" each time such words
appear in paragraph (b) of such section.
SECTION 118. Section 901 of the Indenture is hereby
amended as follows:
(a) The words "the Guarantor, when authorized by a
Board Resolution," are inserted after the words "Board
Resolution," in the second line of such section.
(b) The words "or the Guarantor" are inserted after
the words "the Company" each time such words appear in
paragraphs (1) and (2) of such section.
SECTION 119. Section 902 of the Indenture is hereby
amended by inserting the words "the Guarantor, when authorized by
a Board Resolution" after the words "Board Resolution," in the
fifth line of the first paragraph of such section.
SECTION 120. Section 907 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" each time such words appear in such section.
SECTION 121. Article Thirteen of the Indenture is
hereby amended as follows:
(a) The words "and, in the case such option is
exercised with respect to a series of Guaranteed Securities,
the Guarantor shall be deemed to have been discharged from
its obligations with respect to the Outstanding Guaranteed
Securities of such series and its Guarantee in respect
thereof, all" are inserted after the words "of such
series"in the fifth line of Section 1302.
(b) The words "and, in the case such option is
exercised with respect to a series of Guaranteed Securities,
the Guarantor" are inserted after the words "the Company" in
the ninth line of Section 1302.
(c) The words "and, if applicable, the Guarantee of
the Guarantor in respect thereof" are inserted after the
words "of such series" in the eleventh, twelfth and
thirteenth lines of Section 1302.
(d) The word "its" in the eleventh line of Section
1302 is hereby replaced with the word "their".
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(e) The words (i) "and, if such option is exercised
with respect to the Guaranteed Securities, the Guarantor
shall be released from its obligations under Section 1506"
are inserted after the words "Section 801" in the fifth line
of Section 1303 and (ii) "and the Guarantor" are inserted
after the words "the Company" in the thirteenth line of
Section 1303.
(f) The words "(or, in the case of the Guaranteed
Securities, the Company or the Guarantor)" are inserted
after the words "The Company" in the first line of clause
(1) of such Section 1304.
(g) The words (i) "or the Guarantor" are inserted
after the words "the Company" in the twelfth line of the
first paragraph of Section 1305, (ii) "or the Guarantor, as
the case may be," are inserted after the word "Company" in
the third line of the third paragraph of Section 1305 and
(iii) "and, if applicable, any related Guarantee of such
Securities" are inserted after the words "of such series" in
the last line of the third paragraph of Section 1305.
(h) The words (i) "and, if applicable, the
Guarantor's" are inserted after the words "the Company's" in
the sixth line of Section 1306, (ii) "and, if applicable,
any related Guarantee of the Guarantor" are inserted after
the words "of such series" in the seventh line of Section
1306, (iii) "or, in the case of a series of Guaranteed
Securities, if the Guarantor makes any payment in respect
thereof pursuant to its Guarantee of such Guaranteed
Securities" are inserted after the words "of its
obligations" in the sixteenth line of Section 1306 and (iv)
"or the Guarantor, as the case may be," are inserted after
the words "the Company" in the sixteenth line of Section
1306.
ARTICLE 2
MISCELLANEOUS
SECTION 201. Effectiveness. This First Indenture
Supplement shall take effect as of the date hereof.
SECTION 202. Indenture Ratified. Except as herein
expressly provided, the Indenture is in all respects ratified and
confirmed by the Company and the Trustee and all the terms,
provisions and conditions thereof are and will remain in full
force and effect.
SECTION 203. Execution by the Trustee. The Trustee
has executed this First Indenture Supplement only upon the terms
and conditions set forth in the Indenture. Without limiting the
generality of the foregoing, the Trustee shall not be responsible
for the correctness of the recitals herein contained, which shall
be taken
13
as the statements of the Company and the Guarantor, and
the Trustee makes no representation and shall have no
responsibility for, and in respect of, the validity or sufficiency
of this First Indenture Supplement or the execution thereof by the
Company or the Guarantor.
SECTION 204. Governing Law. This First Indenture
Supplement shall be governed by and construed in accordance with
the laws of the State of New York, but without regard to
principles of conflicts of laws.
SECTION 205. Execution in Counterparts. This First
Indenture Supplement may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one instrument.
14
IN WITNESS WHEREOF, the parties hereto have caused
this First Indenture Supplement to be duly executed, and their
respective corporate seals to be hereunto duly affixed and
attested, all as of the day and year first above written.
AETNA SERVICES, INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
____________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
_______________________
AETNA INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
____________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
____________________
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, as Trustee
[Seal]
By /s/ James E. Mogavero
____________________________
Attest:
/s/ Andrew M. Sinasky
_____________________
15
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally
came Alfred P. Quirk, Jr., to me known, who, being by me duly
sworn, did depose and say that [he] [she] resides at 44 Stonegate,
Farmington, CT 06032, that [he] [she] is the Vice President,
Corporate Finance of Aetna Services, Inc., one of the corporations
described in and which executed the above instrument; that [he]
[she] knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said
corporation, and that [he] [she] signed [his] [her] name thereto by
like authority.
/s/ Joanne R. Jensen 9-1-99
_____________________________
Notary Public
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally
came Alfred P. Quirk, Jr., to me known, who, being by me duly
sworn, did depose and say that [he] [she] resides at 44 Stonegate,
Farmington, CT 06032, that [he] [she] is the Vice President,
Corporate Finance of Aetna Inc., one of the corporations described
in and which executed the above instrument; that [he] [she] knows
the corporate seal of said corporation; that the seal affixed to
the said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and
that [he] [she] signed [his] [her] name thereto by like authority.
/s/ Joanne R. Jensen 9-1-99
______________________________
Notary Public
16
Commonwealth of Massachusetts
County of Suffolk ss:
On the 1st day of August, 1996, before me personally
came James E. Mogavero, to me known, who, being by me duly sworn,
did depose and say that [he] [she] resides at 6 Adele Circle,
Wakefield, MA 01880, that [he] [she] is an Assistant Vice
President of State Street Bank and Trust Company of Connecticut,
National Association, one of the corporations described in and
which executed the above instrument; that [he] [she] knows the
corporate seal of said corporation; that the seal affixed to the
said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
[he] [she] signed [his] [her] name thereto by like authority.
/s/ Laura L. Shepherd
________________________________
Notary Public
17
Exhibit 4.11
_________________________________________
_________________________________________
AETNA SERVICES, INC.
(formerly Aetna Life and Casualty Company)
AETNA INC.
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
_______
FIRST INDENTURE SUPPLEMENT
Dated as of August 1, 1996
to
INDENTURE
Dated as of November 1, 1994
Between
Aetna Services, Inc.
(formerly Aetna Life and Casualty Company)
and
The First National Bank of Chicago,
as Trustee
___________________________________
___________________________________
FIRST INDENTURE SUPPLEMENT
FIRST INDENTURE SUPPLEMENT, dated as of August 1, 1996, among
AETNA SERVICES, INC. (formerly Aetna Life and Casualty Company),
a corporation duly organized and validly existing under the laws
of the State of Connecticut (the "Company"), AETNA INC., a
corporation duly organized and validly existing under the laws of
the State of Connecticut (the "Guarantor"), and THE FIRST NATIONAL
BANK OF CHICAGO, as trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTOR
The Company and the Trustee have heretofore executed and
delivered an Indenture dated as of November 1, 1994 (the
"Indenture"), which provides for the issuance from time to time by
the Company of its unsecured debentures, notes or other evidences
of indebtedness in one or more series ("Debentures", as more fully
defined in the Indenture).
Pursuant to an Agreement and Plan of Merger dated as of
March 30, 1996, as amended by Amendment No. 1 thereto dated as of
May 30, 1996 among the Company, the Guarantor, U.S. Healthcare,
Inc., Antelope Sub, Inc., a wholly owned subsidiary of the
Guarantor ("Aetna Sub"), and New Merger Corporation, a wholly
owned subsidiary of the Guarantor, on July 19, 1996 Aetna Sub was
merged with and into the Company with the result that the Company
is as of the date of this First Indenture Supplement a direct
wholly-owned subsidiary of the Guarantor. In connection with such
merger the Company's Certificate of Incorporation was amended to
change its name to Aetna Services, Inc.
As of the date of this First Indenture Supplement, the
only Debentures of the Company that have been issued and remain
outstanding under the Indenture consist of $275,000,000 original
principal amount of 9 1/2% Series A Subordinated Debentures Due
November 22, 2024 (the "9 1/2% Debentures").
This First Indenture Supplement amends the Indenture,
pursuant to Section 901 thereof: (i) to provide for the full and
unconditional guarantee by the Guarantor of the due and punctual
payment of the principal of, premium, if any, and interest on the
9 1/2% Debentures previously issued under the Indenture and (ii)
to make certain other changes to the terms of the Indenture.
All acts and proceedings required by law, by the
Indenture and by the certificates of incorporation and bylaws of
the Company and the Guarantor necessary to constitute this First
Indenture Supplement a valid and binding agreement for the uses
and purpose herein set forth in accordance with its terms have
been done and performed, and the execution and delivery of this
First Indenture Supplement have in all respects been duly
authorized.
NOW, THEREFORE, in consideration of the foregoing and
other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each party agrees as follows for the
benefit of the other parties and for the equal and ratable benefit
of the holders of the Debentures.
ARTICLE 1
AMENDMENTS
SECTION 101. The Guarantor is hereby made a party to the
Indenture.
SECTION 102. Section 101 of the Indenture is hereby
amended to add to the definitions set forth in such Section the
following additional definitions in the appropriate alphabetical
order:
First Indenture Supplement:
The term "First Indenture Supplement" shall mean the
First Indenture Supplement dated as of August 1, 1996 to this
Indenture.
Guarantee:
The term "Guarantee" shall mean the guarantee set forth
in Section 1601 hereof, including any evidence of such
guarantee by endorsement on any Guaranteed Security pursuant
to Section 1602 hereof. The Guarantee shall be deemed part of
the Guaranteed Securities.
Guaranteed Securities:
The term "Guaranteed Securities" shall mean, the
$275,000,000 original principal amount of 9 1/2% Series A
Subordinated Debentures Due November 22, 2024, issued under
the Indenture prior to the date of the First Indenture
Supplement and remaining outstanding as of such date and
"Guaranteed Security" means any of such Securities.
Guarantor:
The term "Guarantor" shall mean AETNA INC., a Connecticut
corporation, and, subject to the provisions of Section 1606,
shall also include its successors and assigns.
Guarantor Senior Debt:
2
The term "Guarantor Senior Debt" means the principal of
(and premium, if any) and interest, if any (including interest
accruing on or after the filing of any petition in bankruptcy
or for reorganization relating to the Guarantor to the extent
that such claim for post-petition interest is allowed in such
proceeding) on Debt of the Guarantor, whether incurred on or
prior to the date of the First Indenture Supplement or
thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not
superior in right of payment to the Guarantee or to other Debt
of the Guarantor which is pari passu with, or subordinated to
____ _____
the Guarantee or to other securities of the Guarantor which
are junior to the Guarantee; provided, however, that Senior
________ _______
Debt shall not be deemed to include the Guarantee.
SECTION 103. (a) The definition of "Board of Directors"
set forth in Section 101 of the Indenture is hereby amended by
inserting the words "or of the Guarantor, as the case may be"
immediately after the words "the Company" therein.
(b) The definitions of "Board Resolution", "Officers'
Certificate" and "Company Request" or "Company Order" set forth in
Section 101 of the Indenture are hereby amended by inserting the
words "or of the Guarantor, as the case may be" immediately after
the words "the Company" appearing therein.
(c) The definition of "Opinion of Counsel" set forth in
Section 101 of the Indenture is hereby amended by inserting the
words" or the Guarantor", immediately after the words "the
Company," therein.
SECTION 104. A new Article Sixteen and Article Seventeen
are added to the Indenture to read in their entirety as follows:
ARTICLE SIXTEEN
Guarantee
SECTION 1601. Guarantee. The Guarantor hereby
unconditionally guarantees to each Holder of a
Guaranteed Security authenticated and delivered by or
on behalf of the Trustee the due and punctual payment
of the principal of, premium, if any, and interest on
such Guaranteed Security, when and as the same shall
become due and payable, whether at Stated Maturity, by
declaration of acceleration, call for redemption or
otherwise, according to the terms of such Guaranteed
Securities and of the Indenture. In case of default
by the Company in the payment of any such principal,
premium or interest, the Guarantor hereby agrees duly
and punctually to make any such payment when and as
the same shall become due and payable, whether at
Stated Maturity, by declaration of acceleration, call
for redemption
3
or otherwise, and as if such payment was made by the
Company. The Guarantor hereby agrees that its
obligations hereunder shall be as if it were principal
debtor and not merely surety, and shall be absolute
and unconditional, irrespective of, and shall be
unaffected by, the validity, legality or
enforceability of any such Guaranteed Security or the
Indenture, the absence of any action to enforce the
same, or any waiver, modification, indulgence or
consent granted to the Company with respect thereto by
the Holder of any Guaranteed Security of any series or
by the Trustee, the recovery of any judgment against
the Company or any action to enforce the same, or any
other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a surety or
guarantor; provided, however, that notwithstanding the
foregoing, no such waiver, modification or indulgence
shall, without the consent of the Guarantor, increase
the principal amount of a Guaranteed Security or the
interest rate thereon or increase any premium payable
upon redemption thereof. The Guarantor hereby waives
diligence, presentment, demand of payment, filing of
claims with a court in the event of merger or
bankruptcy of the Company, any right of set-off or
counterclaim, any right to require a proceeding first
against the Company, protest or notice with respect to
any Guaranteed Security or the indebtedness evidenced
thereby and all demands whatsoever, and covenants that
this Guarantee will not be discharged as to any
Guaranteed Security except by payment in full of the
principal of (premium, if any) and interest on such
Guaranteed Security.
The Guarantor shall be subrogated to all rights of a
Holder of a Guaranteed Security against the Company in
respect of any amounts paid to such Holder by the
Guarantor pursuant to the provisions of the Guarantee;
provided, however, that the Guarantor shall not, without
the consent of all Holders of Guaranteed Securities of
such series be entitled to enforce, or to receive, any
payments arising out of or based upon such right of
subrogation until the principal of, premium, if any, and
interest then due and payable on all Guaranteed
Securities of the relevant series shall have been
irrevocably paid in full in accordance with the terms of
such Guaranteed Securities.
The Guarantee is a guarantee of payment when due and
not of collection. The Guarantee shall continue to be
effective, or be reinstated, as the case may be, in
respect of any Guaranteed Securities if at any time
payment, or any part thereof, of such Guaranteed Security
is rescinded or must otherwise be restored or returned by
the Holder of such Guaranteed Security or any trustee for
such Holder upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any other
entity, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or
similar officer for, the Company or any other entity or
4
any substantial part of their respective property, or
otherwise, all as though such payments had not been made.
SECTION 1602. Execution of Guarantees. At the time
that any Guaranteed Security is authenticated and
delivered by the Trustee after the date of the First
Indenture Supplement in connection with the registration
of transfer, exchange or replacement of a Guaranteed
Security pursuant to Section 304, 305 or 306 of this
Indenture, as evidence of the Guarantee set forth in
Section 1601 hereof, the Guarantor hereby agrees that
notation of such Guarantee shall be endorsed on the
reverse of such Guaranteed Security in the form set forth
in Section 1603 hereof. The Guarantee shall be executed
on behalf of the Guarantor by its Chairman, a Vice
Chairman, its President, any Vice President, its
Treasurer or Assistant Treasurer under its corporate seal
attested by its Corporate Secretary or one of its
Assistant Corporate Secretaries. The signatures of any
or all of these officers on the Guarantees may be manual
or by facsimile and may be imprinted or otherwise
reproduced on the Guaranteed Security. The seal of the
Guarantor may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise
reproduced on the Guaranteed Securities.
Guarantees bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Guarantor shall bind the Guarantor
notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication
and delivery of the Guaranteed Securities on which such
Guarantees were endorsed or did not hold such offices at
the date of such Guaranteed Securities.
The Guarantor hereby agrees that the Guarantee set
forth in Section 1601 hereof shall remain in full force
and effect and shall apply to each Guaranteed Security
executed, authenticated, issued and delivered under this
Indenture, whether or not a notation of the Guarantee is
endorsed on such Guaranteed Security.
The execution and delivery by the Company and the
Guarantor of the First Indenture Supplement to the
Trustee shall constitute due delivery of the Guarantee
set forth herein on behalf of the Guarantor with respect
to all outstanding Guaranteed Securities. However, the
Guarantee shall not be valid or become obligatory for any
purpose with respect to any specific Guaranteed Security
unless the Certificate of Authentication on such
Guaranteed Security provided for in Section 205 of this
Indenture shall have been signed by the Trustee.
SECTION 1603. Form of Notation of Guarantee. The
Guarantee shall be endorsed on the Guaranteed Securities
pursuant to Section 1602 hereof in the following form:
5
[Form of Notation of Guarantee]
GUARANTEE
OF
AETNA INC.
Aetna Inc., a Connecticut corporation (herein called
the "Guarantor", which term includes any successor
corporation under the Indenture referred to in the
Debenture upon which this Guarantee is endorsed), for
value received, hereby unconditionally guarantees to the
Holder of the Debenture upon which this Guarantee is
endorsed the due and punctual payment of the principal
of, premium, if any, and interest on said Debenture, when
and as the same shall become due and payable, whether at
Stated Maturity, by declaration of acceleration, call for
redemption or otherwise, according to the terms thereof
and of the Indenture dated as of November 1, 1994, as
amended (herein called the "Indenture"), between Aetna
Services, Inc. (herein called the "Company") and The
First National Bank of Chicago, as Trustee. In case of
the failure of the Company punctually to make any such
payment of principal, premium or interest, the Guarantor
hereby agrees to pay or to cause any such payment to be
made punctually when and as the same shall become due and
payable, whether at Stated Maturity, by declaration of
acceleration, call for redemption or otherwise, and as if
such payment were made by the Company. The Guarantor
hereby agrees that its obligations hereunder shall be as
if it were principal debtor and not merely surety, and
shall be absolute and unconditional, irrespective of, and
shall be unaffected by, the validity, legality or
enforceability of said Debenture or the Indenture, or the
absence of any action to enforce the same, or any waiver,
modification, indulgence or consent granted to the
Company with respect thereto by the Holder of said
Debenture or by the Trustee, the recovery of any judgment
against the Company or any action to enforce the same or
any other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a surety or
guarantor; provided, however, that notwithstanding the
foregoing, no such waiver, modification or indulgence
shall, without the consent of the Guarantor, increase the
principal amount of said Debenture or the interest rate
thereon or increase any premium payable upon redemption
thereof. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a
court in the event of bankruptcy of the Company, any
right of set-off or to counterclaim, any right to require
a proceeding first against the Company, protest or notice
with respect to said Debenture or the indebtedness
evidenced thereby and all demands whatsoever, and
covenants that this Guarantee will not be discharged
except by payment in full of the principal of, and
premium, if any, and interest on said Debenture.
6
The obligations of the Guarantor under this
Guarantee are, to the extent provided in the Indenture,
subordinate and subject in right of payment to the prior
payment in full of all Guarantor Senior Debt, and this
Guarantee is issued subject to the provisions of the
Indenture with respect thereto. Each Holder of the
Debenture on which this Guarantee is endorsed, by
accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided
and (c) appoints the Trustee his attorney-in-fact for any
and all such purposes.
The Guarantor shall be subrogated to all rights of
the Holder against the Company in respect of any amounts
paid to such Holder by the Guarantor pursuant to the
provisions of this Guarantee, provided, however, that the
Guarantor shall not, without the consent of all Holders
of all outstanding Debentures of the same series issued
under the Indenture, be entitled to enforce, or to
receive, any payments arising out of, or based upon, such
right of subrogation until the principal of, premium, if
any, and interest then due and payable on all Debentures
of the same series issued under the Indenture shall have
been irrevocably paid in full in accordance with the
terms of such Debentures.
This Guarantee is a guarantee of payment when due
and not of collection. This Guarantee shall continue to
be effective, or be reinstated, as the case may be, in
respect of said Debenture if at any time payment, or any
part thereof, of said Debenture is rescinded or must
otherwise be restored or returned by the Holder of said
Debenture or any trustee for said Holder upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any other entity, or
upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar
officer for, the Company or any other entity or any
substantial part of their respective property, or
otherwise, all as though such payments had not been made.
No reference herein to such Indenture and no
provision of this Guarantee or of such Indenture shall
alter or impair the guarantee of the Guarantor, which is
absolute and unconditional, of the due and punctual
payment of the principal of, and premium, if any, and
interest on the Debenture upon which this Guarantee is
endorsed at the times, place and rate, and in the cash or
currency prescribed herein.
This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York, but
without regard to principles of conflicts of laws.
This Guarantee shall not be valid or become
obligatory for any purpose with respect to any Debenture
unless the certificate of
7
authentication on said Debenture shall have been manually
signed by or on behalf of the Trustee under the
Indenture.
All terms used in this Guarantee which are defined
in such Indenture shall have the meanings assigned to
them in such Indenture.
IN WITNESS WHEREOF, Aetna Inc. has caused the
execution hereof in its corporate name by its duly
authorized officers.
Aetna Inc.
By___________________
[Seal]
Attest:
______________________________________
[Assistant] Corporate Secretary
SECTION 1604. Reports by the Guarantor. The
Guarantor shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and
other reports, and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant to such Act; provided
________
that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or
15(d) of the Exchange Act shall be filed with the Trustee
within 15 days after the same is so required to be filed
with the Commission.
SECTION 1605. Guarantor's Statement as to
Compliance; Notice of Certain Events of Default. The
Guarantor will deliver to the Trustee within 120 days
after the end of each fiscal year of the Guarantor ending
after the date of this First Indenture Supplement, a
certificate signed by the Guarantor's principal executive
officer, the principal financial officer or the principal
accounting officer stating whether or not to the best
knowledge of the signer thereof the Guarantor is in
compliance with all terms, conditions and covenants of
the Indenture (without regard to any period of grace or
requirement of notice provided thereunder) and, if the
signer has obtained knowledge of any continuing default
by the Guarantor in the performance, observance or
fulfillment of any such term, condition or covenant,
specifying each such default and the nature thereof.
8
SECTION 1606. Guarantor May Consolidate, Etc., Only
on Certain Terms. The Guarantor shall not consolidate
with or merge into any other Person or sell its
properties and assets as, or substantially as, an
entirety to any Person, and the Guarantor shall not
permit any Person to consolidate with or merge into the
Guarantor, unless:
(1) in the case the Guarantor shall consolidate
with or merge into another Person (including, without
limitation, the Company) or sell its properties and
assets as, or substantially as, an entirety to any Person
(including, without limitation, the Company), the Person
formed by such consolidation or into which the Guarantor
is merged or the Person which purchases the properties
and assets of the Guarantor as, or substantially, as an
entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of
the United States of America, any State thereof or the
District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due
and punctual performance of the obligations of the
Guarantor under the Guarantee of the Guaranteed
Securities then outstanding and the performance or
observance of every covenant of this Indenture on the
part of the Guarantor to be performed or observed, by
supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee, by the
Person (if other than the Guarantor) formed by such
consolidation or into which the Guarantor shall have been
merged or by the corporation which shall have acquired
the Guarantor's assets;
(2) immediately after giving effect to such
transaction, no Event of Default shall have happened and
be continuing; and
(3) the Guarantor has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, or sale and, if
a supplemental indenture is required in connection with
such transaction, such supplemental indenture comply with
this Section 1606 and that all conditions precedent
herein provided for relating to such transaction have
been complied with.
Upon any consolidation of the Guarantor with, or
merger of the Guarantor into, any Person or any sale of
the properties and assets of the Guarantor as, or
substantially as, an entirety in accordance with this
Section 1606, the successor Person formed by such
consolidation or into which the Guarantor is merged or to
which such sale is made shall succeed to, and be
substituted for, and may exercise every right and power
of, the Guarantor under this Indenture with the same
effect as if such successor Person had been named as the
Guarantor herein, and thereafter, the predecessor Person
shall be relieved of all obligations and covenants under
this Indenture and the Guaranteed Securities.
9
SECTION 1607. Personal Immunity from Liability of
Incorporators, Stockholders, Etc. No recourse shall be
had for the payment of any obligations of the Guarantor
with respect to the Guaranteed Securities, the Guarantee
or this Indenture or any indenture supplemental hereto,
against any incorporator, or against any past, present or
future stockholder, director or officer, as such, of the
Guarantor or of any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by
the enforcement of any assessment or penalty or
otherwise, all such liability being expressly waived and
released as a condition of, and as consideration for, the
execution of the First Indenture Supplement by the
Guarantor and the issue of the Guarantee.
ARTICLE SEVENTEEN
Subordination of Guarantees
SECTION 1701. Guarantee Subordinate to Guarantor
Senior Debt. The Guarantor covenants and agrees, and
each Holder of a Guaranteed Security by its acceptance of
the Guaranteed Securities, likewise covenants and
agrees, that, to the extent and in the manner hereinafter
set forth in this Article (subject to the provisions of
Article Four and Article Twelve), all obligations of the
Guarantor under the Guarantee are hereby expressly made
subordinate and subject in right of payment to the prior
payment in full of all amounts then due and payable in
respect of all Guarantor Senior Debt.
SECTION 1702. Payment Over of Proceeds Upon
Dissolution, Etc., of the Guarantor. In the event of (a)
any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization,
debt restructuring or other similar case or proceeding in
connection with any insolvency or bankruptcy proceeding,
relative to the Guarantor or to its assets, or (b) any
liquidation, dissolution or other winding up of the
Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Guarantor,
then and in any such event specified in (a), (b) or (c)
above (each such event, if any, herein sometimes referred
to as a "Guarantor Proceeding") the holders of Guarantor
Senior Debt shall be entitled to receive payment in full
of all amounts due or to become due on or in respect of
all Guarantor Senior Debt, or provision shall be made for
such payment in cash or cash equivalents or otherwise in
a manner satisfactory to the holders of Guarantor Senior
Debt, before the Holders of the Guaranteed Securities are
entitled to receive any payment or distribution of any
kind or character, whether in cash, property or
securities (including any payment or distribution which
may be payable or deliverable by reason of the payment of
any other Debt of the Guarantor subordinated to the
payment of the Guarantee, such payment or distribution
being hereinafter referred to as "Guarantor Junior
Subordinated Payment"), pursuant to the
10
Guarantee of the Guarantor on account of principal of (or
premium, if any) or interest on the Guaranteed Securities
or on account of the purchase or other acquisition of
Guaranteed Securities by the Guarantor or any Subsidiary
of the Guarantor and to that end the holders of Guarantor
Senior Debt shall be entitled to receive, for application
to the payment thereof, any payment or distribution of
any kind or character, whether in cash, property or
securities, including any Guarantor Junior Subordinated
Payment, which may be payable or deliverable pursuant to
the Guarantee of the Guarantor in respect of the
Guaranteed Securities in any such Guarantor Proceeding.
In the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of
any Guaranteed Security shall have received on account of
the Guaranteed Securities or the Guarantee of the
Guarantor any payment or distribution of assets of the
Guarantor of any kind or character, whether in cash,
property or securities, including any Guarantor Junior
Subordinated Payment, before all Guarantor Senior Debt is
paid in full or payment thereof is provided for in cash
or cash equivalents or otherwise in a manner
satisfactory to the holders of Guarantor Senior Debt, and
if such fact shall, at or prior to the time of such
payment or distribution, have been made known to the
Trustee or, as the case may be, such Holder, then and in
such event such payment or distribution shall be paid
over or deliv ered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or
distribution of assets of the Guarantor for application
to the payment of all Guarantor Senior Debt remaining
unpaid, to the extent necessary to pay all Guarantor
Senior Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders
of Guarantor Senior Debt. Any taxes that have been
withheld or deducted from any payment or distribution in
respect of the Guaranteed Securities or the Guarantees,
or any taxes that ought to have been withheld or deducted
from any such payment or distribution that have been
remitted to the relevant taxing authority, shall not be
considered to be an amount that the Trustee or the Holder
of any Guaranteed Security receives for purposes of this
Section.
For purposes of this Article only, the words "any
payment or distribution of any kind or character, whether
in cash, property or securities" shall not be deemed to
include shares of stock of the Guarantor as reorganized
or readjusted, or securities of the Guarantor or any
other corporation provided for by a plan of
reorganization or readjustment which securities are
subordinated in right of payment to all then outstanding
Guarantor Senior Debt to substantially the same extent as
the Guarantee is so subordinated as provided in this
Article. The consolidation of the Guarantor with, or the
merger of the Guarantor into, another Person or the
liquidation or dissolution of the Guarantor following the
sale of all or substantially all of its properties and
assets as an entirety to another Person or the
liquidation or dissolution of the Guarantor following the
sale of all or substantially all of its properties and
assets as an entirety to another Person upon the terms
11
and conditions set forth in Section 1606 shall not be
deemed a Guarantor Proceeding for the purposes of this
Section if the Person formed by such consolidation or
into which the Guarantor is merged or the Person which
acquires by sale such properties and assets as an
entirety, as the case may be, shall, as a part of such
consolidation, merger, or sale comply with the conditions
set forth in Section 1606.
SECTION 1703. Prior Payment to Guarantor Senior
Debt Upon Acceleration of Guaranteed Securities. In the
event that the Guaranteed Securities are declared due and
payable before their Stated Maturity, then and in such
event the holders of the Guarantor Senior Debt
outstanding at the time the Guaranteed Securities so
become due and payable shall be entitled to receive
payment in full of all amounts due on or in respect of
such Guarantor Senior Debt, or provision shall be made
for such payment in cash or cash equivalents or otherwise
in a manner satisfactory to the holders of Guarantor
Senior Debt, before the Holders of the Guaranteed
Securities are entitled to receive any payment (including
any payment which may be payable by reason of the payment
of any other indebtedness of the Guarantor being
subordinated to the payment of the Guarantee) pursuant to
the Guarantee of the Guarantor on account of the
principal of (or premium, if any) or interest on the
Guaranteed Securities or on account of the purchase or
other acquisition of Guaranteed Securities by the
Guarantor or any Subsidiary of the Guarantor; provided,
________
however, that nothing in this Section shall prevent the
_______
satisfaction of any sinking fund payment in accordance
with Article Thirteen by delivering and crediting
pursuant to Section 1302 Guaranteed Securities which have
been acquired (upon redemption or otherwise) prior to
such declaration of acceleration.
In the event that, notwithstanding the foregoing,
the Guarantor shall make any payment to the Trustee or
the Holder of any Guaranteed Security prohibited by the
foregoing provisions of this Section, and if such fact
shall, at or prior to the time of such payment, have been
made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Guarantor.
The provisions of this Section shall not apply to
any payment with respect to which Section 1702 would be
applicable.
12
SECTION 1704. No Payment When Guarantor Senior Debt
in Default. (a) In the event and during the
continuation of any default in the payment of principal
of (or premium, if any) or interest on any Guarantor
Senior Debt, or in the event that any event of default
with respect to any Guarantor Senior Debt shall have
occurred and be continuing and shall have resulted in
such Guarantor Senior Debt becoming or being declared due
and payable prior to the date on which it would otherwise
have become due and payable, unless and until such event
of default shall have been cured or waived or shall have
ceased to exist and such acceleration shall have been
rescinded or annulled, or (b) in the event any judicial
proceeding shall be pending with respect to any such
default in payment or such event of default, then no
payment (including any payment which may be payable by
reason of the payment of any other indebtedness of the
Guarantor being subordinated to the payment of the
Guarantees) shall be made by the Guarantor pursuant to
the Guarantee on account of principal of (or premium, if
any) or interest on the Guaranteed Securities or on
account of the purchase or other acquisition of
Guaranteed Securities by the Guarantor or any Subsidiary
of the Guarantor; provided, however, that nothing in this
________ _______
Section shall prevent the satisfaction of any sinking
fund payment in accordance with Article Thirteen by
delivering and crediting pursuant to Section 1302
Guaranteed Securities which have been acquired (upon
redemption or otherwise) prior to such default in payment
or event of default.
In the event that, notwithstanding the foregoing,
the Guarantor shall make any payment to the Trustee or
the Holder of any Guaranteed Security prohibited by the
foregoing provisions of this Section, and if such fact
shall, at or prior to the time of such payment, have been
made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Guarantor.
The provisions of this Section shall not apply to
any payment with respect to which Section 1702 would be
applicable.
SECTION 1705. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Guaranteed Securities or the
Guarantee shall prevent (a) the Guarantor, at any time
except during the pendency of any Guarantor Proceeding
referred to in Section 1702 or under the conditions
described in Sections 1703 and 1704, from making payments
at any time pursuant to the Guarantee of the Guarantor of
principal of (and premium, if any) or interest on the
Guaranteed Securities, or (b) the application by the
Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and
premium, if any) or interest on the Guaranteed Securities
or the retention of such payment by the Holders, if, at
the time of such application by the Trustee, it did not
have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 1706. Subrogation to Rights of Holders of
Guarantor Senior Debt. Subject to the payment in full of
13
all Guarantor Senior Debt, or the provision for such
payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Guarantor Senior
Debt, the Holders of the Guaranteed Securities shall be
subrogated to the extent of the payments or distributions
made to the holders of such Guarantor Senior Debt
pursuant to the provisions of this Article (equally and
ratably with the holders of all other indebtedness of the
Guarantor which by its express terms is subordinated to
indebtedness of the Guarantor to substantially the same
extent as the Guarantee is subordinated to the Guarantor
Senior Debt and is entitled to like rights of subrogation
by reason of any payments or distributions made to
holders of such Guarantor Senior Debt) to the rights of
the holders of such Guarantor Senior Debt to receive
payments and distributions of cash, property and
securities of the Guarantor applicable to the Guarantor
Senior Debt until the principal of (and premium, if any)
and interest on the Guaranteed Securities shall be paid
in full. If the Trustee or the Holders of the Guaranteed
Securities are not for any reason entitled to be
subrogated to the rights of holders of Guarantor Senior
Debt in respect of such payment or distribution, then the
Trustee or the Holders of the Guaranteed Securities may
require each holder of Guarantor Senior Debt to whom any
such payment or distribution is made as a condition to
such payment or distribution to assign its Guarantor
Senior Debt to the extent of such payment or distribution
and all rights with respect thereto to the Trustee on
behalf of the Holders. Such assignment shall not be
effective until such time as all Guarantor Senior Debt
has been paid in full or payment thereof provided for.
For purposes of such subrogation or assignment, no
payments or distributions to the holders of the Guarantor
Senior Debt of any cash, property or securities to which
the Holders of the Guaranteed Securities or the Trustee
would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions
of this Article to the holders of Guarantor Senior Debt
by Holders of the Guaranteed Securities or the Trustee,
shall, as among the Guarantor, its creditors other than
holders of Guarantor Senior Debt, and the Holders of the
Guaranteed Securities, be deemed to be a payment or
distribution by the Guarantor to or on account of the
Guarantor Senior Debt.
SECTION 1707. Provisions Solely to Define Relative
Rights. The provisions of this Article are and are
intended solely for the purpose of defining the relative
rights of the Holders of the Guaranteed Securities on the
one hand and the holders of Guarantor Senior Debt on the
other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Guaranteed
Securities or in the Guarantee is intended to or shall
(a) impair, as among the Guarantor, its creditors other
than holders of Guarantor Senior Debt, and the Holders of
the Guaranteed Securities, the obligations of the
Guarantor, which are absolute and unconditional (and
which, subject to the rights under this Article of the
holders of Guarantor Senior Debt, are intended to rank
equally with all other general unsecured obligations of
the Guarantor), to pay to the Holders of the Guaranteed
Securities pursuant to and in accordance with the
Guarantee the principal of (and premium, if any) and
14
interest on the Guaranteed Securities as and when the
same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against
the Guarantor of the Holders of the Guaranteed Securities
and creditors of the Guarantor other than the holders of
Guarantor Senior Debt; or (c) prevent the Trustee or the
Holder of any Guaranteed Security from exercising all
remedies otherwise permitted by applicable law upon
default under this Indenture including, without
limitation, filing and voting claims in any Guarantor
Proceeding, subject to the rights, if any, under this
Article of the holders of Guarantor Senior Debt to
receive cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder.
Without limiting the generality of the foregoing,
nothing contained in this Article will restrict the right
of the Trustee or the Holders of the Guaranteed
Securities to take any action to declare the Guaranteed
Securities to be due and payable prior to their stated
maturity pursuant to Section 502 or to pursue any rights
or remedies hereunder.
SECTION 1708. Trustee to Effectuate Subordination.
Each Holder of a Guaranteed Security by his or her
acceptance thereof authorizes and directs the Trustee on
his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate
the subordination provided in this Article and appoints
the Trustee his or her attorney-in-fact for any and all
such purposes.
SECTION 1709. No Waiver of Subordination
Provisions. No right of any present or future holder of
any Guarantor Senior Debt to enforce subordination as
herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on
the part of the Guarantor or by any act or failure to
act, in good faith, by any such holder, or by any
noncompliance by the Guarantor with the terms, provisions
and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Guarantor Senior Debt
may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the
Guaranteed Securities, without incurring responsibility
to the Holders of the Guaranteed Securities, and without
impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of
the Guaranteed Securities, to the holders of Guarantor
Senior Debt, do any one or more of the following: (i)
change the manner, place or terms of payment or extend
the time of payment of, or renew or alter or increase,
Guarantor Senior Debt, or otherwise amend or supplement
in any manner the Guarantor Senior Debt or any
instrument evidencing the same or any agreement under
which Guarantor Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Guarantor Senior
15
Debt; (iii) release any Person liable in any manner for
the collection of Guarantor Senior Debt; and (iv)
exercise or refrain from exercising any rights against
the Company and any other Person.
SECTION 1710. Notice to Trustee. The Guarantor
shall give prompt written notice to the Trustee of any
fact known to the Guarantor which would prohibit the
making of any payment to or by the Trustee in respect of
the Guarantee. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of
any payment to or by the Trustee in respect of the
Guarantee, unless and until the Trustee shall have
received written notice thereof from the Guarantor or a
holder of Guarantor Senior Debt or from any trustee,
agent or representative therefor; and, prior to the
receipt of any such written notice, the Trustee, subject
to the provisions of Section 601, shall be entitled in
all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have
________ _______
received the notice provided for in this Section at least
two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the
principal of (and premium, if any) or interest on any
Guaranteed Security), then, anything herein contained to
the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply
the same to the purpose for which such money was received
and shall not be affected by any notice to the contrary
which may be received by it within two Business Days
prior to such date.
Subject to the provisions of Section 601, the
Trustee shall be entitled to rely on the delivery to it
of a written notice by a Person representing himself or
herself to be a holder of Guarantor Senior Debt (or a
trustee, agent or representative therefor) to establish
that such notice has been given by a holder of Guarantor
Senior Debt (or a trustee, agent or representative
therefor). In the event that the Trustee determines in
good faith that further evidence is required with respect
to the right of any Person as a holder of Guarantor
Senior Debt to participate in any payment or distribution
pursuant to this Article, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction
of the Trustee as to the amount of Guarantor Senior Debt
held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of
such Person to receive such payment.
SECTION 1711. Reliance on Judicial Order or
Certificate of Liquidating Agent. Upon any payment or
distribution of assets of the Guarantor referred to in
this Article, the Trustee, subject to the provisions of
Section 601, and the Holders of the Guaranteed Securities
shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which
16
such Guarantor Proceeding is pending, or a certificate of
the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent
or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Guaranteed
Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution,
the holders of the Guarantor Senior Debt and other
indebtedness of the Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto
or to this Article.
SECTION 1712. Trustee Not Fiduciary For Holders of
Guarantor Senior Debt. The Trustee, in its capacity as
trustee under this Indenture, shall not be deemed to owe
any fiduciary duty to the holders of Guarantor Senior
Debt and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to
Holders of Guaranteed Securities or to the Guarantor or
to any other Person cash, property or securities to which
any holders of Guarantor Senior Debt shall be entitled by
virtue of this Article or otherwise.
SECTION 1713. Rights of Trustee as Holder of
Guarantor Senior Debt; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled
to all the rights set forth in this Article with respect
to any Guarantor Senior Debt which may at any time be
held by it, to the same extent as any other holder of
Guarantor Senior Debt, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such
holder.
Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section
607.
SECTION 1714. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Guarantor and
be then acting hereunder, the term "Trustee" as used in
this Article shall in such case (unless the context
otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully
for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of
the Trustee.
SECTION 1715. Defeasance of This Article Seventeen.
The subordination of the Guarantee provided by this
Article Seventeen is expressly made subject to the
provisions for defeasance or covenant defeasance in
Article Twelve and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such
defeasance or covenant defeasance with respect to the
Guaranteed Securities, the Guarantee of the Guarantor
with respect to the Guaranteed Securities shall
thereupon cease to be subordinated pursuant to this
Article Seventeen.
SECTION 105. Section 102 of the Indenture is hereby
amended by inserting the words "and Section 1605" after the words
"Section 1004" in the second paragraph of such section.
17
SECTION 106. Section 105 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" each time such words appear in subparagraphs (1) and
(2) thereof. The Trustee hereby agrees that, substantially
simultaneously with its furnishing to the Company any notice or
communication under the Indenture, as amended hereby, the Trustee
shall furnish a copy thereof to the Guarantor. The Company hereby
agrees that, substantially with its receiving or furnishing any
notice or communication under the Indenture, as amended hereby,
the Company will provide a copy thereof to the Guarantor.
SECTION 107. Section 106 of the Indenture is hereby
amended as follows:
(a) The words ", the Guarantor" are inserted after
the word "Company" in the ninth and thirteenth lines of the first
paragraph thereof.
(b) The words "and the Guarantor" are inserted after
the words "the Company" in the twelfth line of the first paragraph
thereof.
SECTION 108. Section 109 of the Indenture is hereby
amended by adding the words "or the Guarantor" after the words
"the Company".
SECTION 109. Section 308 of the Indenture is hereby
amended by inserting (i) the words "the Guarantor," after the word
"Company," in the second, third and eighth lines thereof and (ii)
the words "or the Guarantor" after the words "the Company" in the
ninth line thereof.
SECTION 110. Section 401 of the Indenture is hereby
amended (i) by adding the words "and the Guarantor" after the
words "the Company" in the last paragraph of such Section and (ii)
by adding the following as a new penultimate paragraph of such
Section:
"In the event the Company exercises its rights under
this Section 401 with respect to the Guaranteed
Securities, upon satisfaction by the Company of the
conditions set forth in this Section 401 with respect to
such series, the Guarantor's obligations under its
Guarantee with respect to such Guaranteed Securities
shall likewise be satisfied and discharged and the
Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to such
Guaranteed Securities."
SECTION 111. Section 402 of the Indenture is hereby
amended (i) by inserting the words "(and, in respect of the
Guaranteed Securities, the Guarantee)" after the words
"Debentures" in the fourth line thereof and (ii) by inserting the
words "or of holders of Guarantor Senior Debt under Article
Seventeen" after the words "Article Fourteen" is the last line of
such Section.
SECTION 112. Section 509 of the Indenture is hereby
amended by inserting the words" the Guarantor," after the words
"the Company," therein.
18
SECTION 113. Section 603 of the Indenture is hereby
amended by inserting the words "or of the Guarantor, as the case
may be" after the words "the Company" in paragraph (b) of such
section.
SECTION 114. Section 605 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" in such section.
SECTION 115. Section 607 of the Indenture is hereby
amended by replacing the words "The Company agrees" with "The
Company and the Guarantor, jointly and severally, agree" in the
first line thereof.
SECTION 116. (a) Paragraph (b) of Section 610 of
the Indenture is hereby amended by inserting the words "and the
Guarantor" after the words "the Company" in the first sentence
thereof.
(b) Paragraph (c) of Section 610 of the Indenture
is hereby amended by inserting the words "and to the Guarantor"
after the words "the Company" in such section.
(c) Paragraph (d) of Section 610 of the Indenture
is hereby amended as follows:
(i) The words "or the Guarantor" are inserted
after the words "the Company" in subclause (1) and
(2) of such paragraph.
(ii) The words "and the Guarantor" are
inserted after the words "the Company" in the first
line immediately following subclause (3) of such
paragraph.
(d) Paragraph (e) of Section 610 of the Indenture
is hereby amended by inserting the words "and the Guarantor" after
the words "the Company" each time such words appear in such
paragraph.
SECTION 117. Section 611 of the Indenture is hereby
amended (i) by inserting the words "and the Guarantor" after the
words "the Company" each time such words appear in paragraphs (a)
and (c) of such section, and (ii) by inserting the words ",the
Guarantor" after the words "the Company" each time such words
appear in paragraph (b) of such section.
SECTION 118. Section 901 of the Indenture is hereby
amended as follows:
(a) The words "the Guarantor, when authorized by a
Board Resolution," are inserted after the words "Board
Resolution," in the second line of such section.
(b) The words "or the Guarantor" are inserted after
the words "the Company" each time such words appear in
paragraphs (1) and (2) of such section.
19
SECTION 119. Section 902 of the Indenture is hereby
amended by inserting the words "the Guarantor, when authorized by
a Board Resolution" after the words "Board Resolution," in the
fifth line of the first paragraph of such section.
SECTION 120. Section 907 of the Indenture is hereby
amended by inserting the words "or the Guarantor" after the words
"the Company" each time such words appear such section.
SECTION 121. Article Twelve of the Indenture is
hereby amended as follows:
(a) The words "and, in the case such option is
exercised with respect to the Guaranteed Securities, the
Guarantor shall be deemed to have been discharged from
its obligations, and the provisions of Article Seventeen
shall cease to be effective, with respect to the
Outstanding Guaranteed Securities and its Guarantee in
respect thereof, all" are inserted after the words "of
such series"in the sixth line of Section 1202.
(b) The words "and, in the case such option is
exercised with respect to the Guaranteed Securities, the
Guarantor" are inserted after the words "the Company" in
the tenth line of Section 1202.
(c) The words "and, if applicable, the Guarantee of
the Guarantor in respect thereof" are inserted after the
words "such series" in the twelfth, fourteenth and
fifteenth lines of Section 1202.
(d) The word "its" in the thirteenth line of
Section 1202 is hereby replaced with the word "their".
(e) The words (i) "and, if such option is exercised
with respect to the Guaranteed Securities, the Guarantor
shall be released from its obligations under Section
1606" are inserted after the words "Section 801" in the
fifth line of Section 1203, (ii) "and, if such option is
exercised with respect to the Guaranteed Securities, the
provisions of Article Seventeen shall cease to be
effective" are inserted after the word "effective" in the
ninth line of Section 1203 and (iii) "and the Guarantor"
are inserted after the words "the Company" in the
fourteenth line of Section 1203.
(f) The words (i) "(or, in the case of the
Guaranteed Securities, the Company or the Guarantor)" are
inserted after the words "The Company" in the first line
of clause (1) of Section 1204 and (ii) "or Guarantor
Senior Debt" are inserted after the words "Senior Debt"
each time such words appear in clause (8) of Section
1204.
20
(g) The words (i) "or the Guarantor" are inserted
after the words "the Company" in the eleventh line of the
first paragraph of Section 1205, (ii) "or the Guarantor,
as the case may be," are inserted after the word
"Company" in the third line of the third paragraph of
Section 1205 and (iii) "and, if applicable, any related
Guarantee of such Debentures" are inserted after the
words "of such series" in the last line of the third
paragraph of Section 1205.
(h) The words (i) "and, if applicable, the
Guarantor's" are inserted after the words "the Company's"
in the sixth line of Section 1206, (ii) "and, if
applicable, any related Guarantee of the Guarantor" are
inserted after the words "of such series" in the seventh
line of Section 1206, (iii) "or, in the case of the
Guaranteed Securities, if the Guarantor makes any payment
in respect thereof pursuant to its Guarantee of such
Guaranteed Securities" are inserted after the words "of
its obligations" in the sixteenth line of Section 1206
and (iv) "or the Guarantor, as the case may be," are
inserted after the words "the Company" in the sixteenth
line of Section 1206.
ARTICLE 2
MISCELLANEOUS
SECTION 201. Effectiveness. This First Indenture
Supplement shall take effect as of the date hereof.
SECTION 202. Indenture Ratified. Except as herein
expressly provided, the Indenture is in all respects ratified and
confirmed by the Company and the Trustee and all the terms,
provisions and conditions thereof are and will remain in full
force and effect.
SECTION 203. Execution by the Trustee. The Trustee
has executed this First Indenture Supplement only upon the terms
and conditions set forth in the Indenture. Without limiting the
generality of the foregoing, the Trustee shall not be responsible
for the correctness of the recitals herein contained, which shall
be taken as the statements of the Company and the Guarantor, and
the Trustee makes no representation and shall have no
responsibility for, and in respect of, the validity or sufficiency
of this First Indenture Supplement or the execution thereof by the
Company or the Guarantor.
SECTION 204. Governing Law. This First Indenture
Supplement shall be governed by and construed in accordance with
the laws of the State of New York, but without regard to
principles of conflicts of laws.
21
SECTION 205. Execution in Counterparts. This First
Indenture Supplement may be executed in any number of
counterparts, each of which shall be an original, but such
counterparts shall together constitute but one instrument.
22
IN WITNESS WHEREOF, the parties hereto have caused
this First Indenture Supplement to be duly executed, and their
respective corporate seals to be hereunto duly affixed and
attested, all as of the day and year first above written.
AETNA SERVICES, INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
_________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
_________________________
AETNA INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
_____________________________
Alfred P. Quirk, Jr.
Vice President-Corporate Finance
Attest:
/s/ Paige L. Falasco
_________________________
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
[Seal]
By /s/ John R. Prendiville
_____________________________
Attest:
/s/ Amy Movitz
__________________________
23
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally
came Alfred P. Quirk, Jr., to me known, who, being by me duly
sworn, did depose and say that [he] [she] resides at 44 Stonegate,
Farmington, CT 06032, that [he] [she] is the Vice President, Corporate
Finance of Aetna Services, Inc., one of the corporations described
in and which executed the above instrument; that [he] [she] knows the
corporate seal of said corporation; that the seal affixed to the
said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
[he] [she] signed [his] [her] name thereto by like authority.
/s/ Joanne R. Jensen
__________________________
Notary Public
State of Connecticut
County of Hartford ss:
On the 1st day of August, 1996, before me personally
came Alfred P. Quirk, Jr., to me known, who, being by me duly
sworn, did depose and say that [he] [she] resides at 44 Stonegate,
Farmington, CT 06032, that [he] [she] is the Vice President, Corporate
Finance of Aetna Inc., one of the corporations described in and
which executed the above instrument; that [he] [she] knows the corporate
seal of said corporation; that the seal affixed to the said
instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that
[he] [she] signed [his] [her] name thereto by like authority.
/s/ Joanne R. Jensen
_________________________
Notary Public
24
State of Illinois
County of Cook ss:
On the 1st day of August, 1996, before me personally
came John R. Prendiville, to me known, who, being by me duly sworn,
did depose and say that [he] [she] resides at
, that [he] [she] is a Vice President of The First National Bank of
Chicago, one of the corporations described in and which executed the
above instrument; that [he] [she] knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that [he] [she] signed [his] [her]
name thereto by like authority.
/s/ Somsri Helmer
__________________________
Notary Public
25
Exhibit 4.13
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT (the
"Guarantee"), dated as of August 1, 1996, is executed and
delivered by Aetna Inc., a Connecticut corporation ("Aetna"), for
the benefit of the Holders (as defined below) from time to time of
the Preferred Securities (as defined below) of Aetna Capital
L.L.C., a Delaware limited liability company (the "Issuer").
WHEREAS, the Issuer has issued its common limited
liability company interests (the "Common Securities") to and has
received related capital contributions (the "Common Securities
Payments") from Aetna Services, Inc. (formerly Aetna Life and
Casualty Company) ("Aetna Services") and Aetna Capital Holdings,
Inc. ("Aetna Capital"), each a Connecticut corporation and a
wholly owned subsidiary of Aetna, and has issued preferred limited
liability company interests designated its 9 1/2% Cumulative Monthly
Income Preferred Securities, Series A (the "Preferred Securities")
with the powers, preferences and special rights and limitations
and restrictions as are set forth in a written action or actions
dated November 15, 1994 (the "Actions") of the Managing Members
(as defined below) providing for the issue of such Preferred
Securities;
WHEREAS, the Issuer has purchased the Debentures (as
defined below) issued pursuant to the Subordinated Indenture (as
defined below) with the proceeds from the issuance and sale of the
Preferred Securities and the Common Securities Payments; and
WHEREAS, pursuant to a Payment and Guarantee
Agreement dated as of November 22, 1994 executed by Aetna Services
(the "Aetna Services Guarantee Agreement"), Aetna Services has
irrevocably and unconditionally agreed to the extent set forth
therein to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined in the Aetna Services Guarantee
Agreement) on the terms and conditions set forth therein.
WHEREAS, pursuant to an Agreement and Plan of Merger
dated as of March 30, 1996, as amended by Amendment No. 1 thereto
dated as of May 30, 1996, among Aetna Services, Aetna, U.S.
Healthcare, Inc., Antelope Sub, Inc., a wholly owned subsidiary of
Aetna ("Aetna Sub"), and New Merger Corporation, a wholly owned
subsidiary of Aetna, on July 19, 1996 Aetna Sub was merged with
and into Aetna Services with the result that Aetna Services is as
of the date of this Payment and Guarantee Agreement a direct
wholly owned subsidiary of Aetna.
WHEREAS, Aetna desires hereby to irrevocably and
unconditionally agree to the extent set forth herein to pay to the
Holders the Guarantee Payments (as defined below) on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing
and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Aetna executes and delivers this
Guarantee for the benefit of the Holders of the Preferred
Securities.
ARTICLE I
As used in this Guarantee, the terms set forth below
shall have the following meanings:
"Additional Amounts" shall mean, with respect to the
Preferred Securities, any additional amounts that the Issuer is
required to pay as dividends to Holders of the Preferred
Securities pursuant to the Actions establishing the Preferred
Securities in the event that the Issuer is required by law to
withhold or deduct for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever
nature imposed or levied upon or as a result of any payments by
the Issuer in respect of the Preferred Securities by or on behalf
of the United States of America, any state thereof or any other
jurisdiction through which or from which such payment is made, or
any authority therein or thereof having power to tax.
"Debentures" shall mean the $348,101,266 original
principal amount of 9 1/2% Series A Subordinated Debentures Due
November 22, 2024, issued by Aetna Services to the Issuer pursuant
to the Subordinated Indenture that evidence the loan made by the
Issuer to Aetna Services of the proceeds received by the Issuer
from the issuance and sale of the Preferred Securities and the
Common Securities Payments.
"Event of Default" shall have the meaning set forth
in the Subordinated Indenture.
"Guarantee Additional Amounts" shall have the
meaning specified in Article IV.
"Guarantee Payments" shall mean, with respect to the
Preferred Securities, the following payments, without duplication,
to the extent not paid by the Issuer: (i) any accumulated and
unpaid dividends (including Additional Amounts payable by the
Issuer) that have been theretofore declared on the Preferred
Securities, payable out of funds legally available therefor, (ii)
the Redemption Price
2
payable out of funds legally available therefor with respect to
any Preferred Securities called for redemption by the Issuer and
(iii) upon the liquidation of the Issuer other than in connection
with the exchange of the Preferred Securities outstanding for the
Debentures, the lesser of (a) the Liquidation Distribution (as
defined below) with respect to Preferred Securities and (b) the
amount of assets of the Issuer legally available for distribution
to Holders of the Preferred Securities in liquidation.
"Holder" shall mean any member of the Issuer from
time to time holding any Preferred Securities; provided, however,
that in determining whether the Holders of the requisite
percentage of Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include Aetna,
Aetna Services or any entity owned 50% or more by Aetna, either
directly or indirectly.
"Liquidation Distribution" shall mean, with respect
to the Preferred Securities, the aggregate of the stated
liquidation preference of such Preferred Securities and all
accumulated and unpaid dividends (whether or not declared) with
respect to the Preferred Securities to the date of payment.
"L.L.C. Agreement" shall mean the Issuer's Amended
and Restated Limited Liability Company Agreement dated as of
November 15, 1994, as amended from time to time.
"Managing Members" shall mean Aetna Services and
Aetna Capital, in their capacity as the members of the Issuer that
own all of the Issuer's outstanding Common Securities.
"Redemption Price" shall mean, with respect to the
Preferred Securities, the aggregate stated liquidation preference
of all Preferred Securities plus accumulated and unpaid dividends
(whether or not declared) with respect to the Preferred Securities
to the date fixed for redemption.
"Subordinated Indenture" shall mean the subordinated
indenture dated as of November 1, 1994 between Aetna Services and
The First National Bank of Chicago, as trustee, as amended by the
First Indenture Supplement thereto dated August 1, 1996 among
Aetna Services, Aetna and The First National Bank of Chicago, as
trustee, as the same may be further amended or supplemented from
time to time.
ARTICLE II
Section 2.01. Aetna irrevocably and unconditionally
agrees, to the extent set forth herein, to pay in
3
full to the Holders of the Preferred Securities the Guarantee
Payments with respect to the Preferred Securities, as and when due
(except to the extent paid by the Issuer or paid by Aetna Services
to any trustee appointed by such Holders pursuant to Article VIII
of the L.L.C. Agreement), regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. This
Guarantee is continuing, irrevocable, unconditional and
absolute.
Section 2.02. Aetna hereby waives notice of
acceptance of this Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, protest,
notice of nonpayment, notice of dishonor, notice of redemption and
all other notices and demands.
Section 2.03. The obligations, covenants,
agreements and duties of Aetna under this Guarantee shall in no
way be affected or impaired by reason of the happening from time
to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by (i) the
Issuer of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities to
be performed or observed by the Issuer or (ii) Aetna
Services of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities in
the Aetna Services Guarantee Agreement to be performed or
observed by Aetna Services;
(b) the extension of time for the payment by the
Issuer or Aetna Services of all or any portion of the
dividends, Redemption Price, Liquidation Distributions or
any other sums payable under the terms of the Preferred
Securities or the Aetna Services Guarantee Agreement or
the extension of time for the performance of any other
obligation under, arising out of, or in connection with,
the Preferred Securities or such Agreement;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders of the Preferred
Securities to enforce, assert or exercise any right,
privilege, power or remedy conferred on such Holders
pursuant to the terms of the Preferred Securities or the
Aetna Services Guarantee Agreement, or any action on the
part of the Issuer or Aetna Services granting indulgence
or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
4
readjustment of debt of, or other similar proceedings
affecting, the Issuer or Aetna Services or any of the
assets of the Issuer or Aetna Services;
(e) any invalidity of, or defect or deficiency in,
any of the Preferred Securities or the Aetna Services
Guarantee Agreement; or
(f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, Aetna with respect to the happening of any of
the foregoing.
Section 2.04. This is a guarantee of payment and
not of collection. A Holder may enforce this Guarantee directly
against Aetna, and Aetna waives any right or remedy to require
that any action be brought against the Issuer or any other person
or entity (including, without limitation, Aetna Services pursuant
to the Aetna Services Guarantee Agreement) before proceeding
against Aetna. Subject to Section 2.05 hereof, all waivers herein
contained shall be without prejudice to the Holders' right at the
Holders' option to proceed against the Issuer or Aetna Services
pursuant to the Aetna Services Guarantee Agreement, whether by
separate action or by joinder.
Section 2.05. Aetna shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any
amounts paid to the Holders by Aetna under this Guarantee and
shall have the right to waive payment of any amount of dividends
in respect of which payment has been made to the Holders by Aetna
pursuant to Section 2.01 hereof; provided, however, that Aetna
shall not (except to the extent required by mandatory provisions
of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in
all cases as a result of a payment under this Guarantee, if, at
the time of any such payment, any amounts are due and unpaid under
this Guarantee. If any amount shall be paid to Aetna in violation
of the preceding sentence, Aetna agrees to pay over such amount to
the Holders.
Section 2.06. Aetna acknowledges that its
obligations hereunder are independent of the obligations of the
Issuer with respect to the Preferred Securities and the
obligations of Aetna Services pursuant to the Aetna Services
Guarantee Agreement with respect to the Preferred Securities, and
that Aetna shall be liable as principal and sole debtor hereunder
to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence
5
of any event referred to in subsections (a) through (f),
inclusive, of Section 2.03 hereof.
ARTICLE III
Section 3.01. So long as any Preferred Securities
remain outstanding, Aetna shall not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock or make any guarantee
payments with respect to the foregoing (other than (i) payments
under this Guarantee, (ii) acquisitions of shares of Aetna's
common stock in connection with the satisfaction by Aetna of its
obligations under any employee benefit plans and (iii) redemptions
of any share purchase rights issued by Aetna pursuant to Aetna's
Share Purchase Rights Plan adopted by Aetna on June 6, 1996, as
amended from time to time or the declaration of a dividend of
similar share purchase rights in the future), if at such time
Aetna shall be in default with respect to its payment obligations
hereunder or if there shall have occurred and be continuing an
Event of Default with respect to the Debentures.
Section 3.02. So long as any Preferred Securities
of any series remain outstanding, Aetna shall: (i) not cause or
permit any Common Securities to be transferred; (ii) maintain
direct or indirect 100% ownership of all outstanding securities of
the Issuer other than (x) the preferred limited liability company
interests of any series (including the Preferred Securities) of
the Issuer and (y) any other securities issued by the Issuer
(other than the Common Securities) so long as the issuance thereof
to persons other than Aetna or any of its subsidiaries would not
cause the Issuer to become an "investment company" required to be
registered under the Investment Company Act of 1940, as amended;
(iii) cause at least 21% of the total value of the Issuer and at
least 21% of all interests in the capital, income, gain, loss,
deduction and credit of the Issuer to be represented by Common
Securities; (iv) not voluntarily dissolve, wind up or liquidate
the Issuer (other than in connection with the exchange of all
series of preferred limited liability company interests of the
Issuer outstanding for the related series of debentures issued
under the Subordinated Indenture) or either of the Managing
Members; (v) cause Aetna Services and Aetna Capital to remain the
Managing Members of the Issuer and timely perform all of their
respective duties as Managing Members (including the duty to
declare and pay dividends on the Preferred Securities); and (vi)
use reasonable efforts to cause the Issuer to remain a limited
liability company and otherwise continue to be treated as a
partnership for United States federal income tax purposes;
provided that Aetna may
6
permit the Issuer to consolidate or merge with or into or convey,
transfer or lease its properties and assets substantially as an
entirety to another entity upon the terms and subject to the
conditions set forth in the L.L.C. Agreement.
Section 3.03. The Guarantee will constitute an
unsecured obligation of Aetna and will rank (i) subordinate and
junior in right of payment to all other liabilities of Aetna, (ii)
pari passu with the most senior preferred stock now or hereafter
issued by Aetna and with any guarantee now or hereafter entered
into by Aetna in respect of any preferred or preference stock or
interest of any affiliate of Aetna and (iii) senior to Aetna's
common stock.
ARTICLE IV
All Guarantee Payments shall be made without
withholding or deduction for or on account of any present or
future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States of America, any state
thereof or any other jurisdiction through which or from which such
payment is made, or any authority therein or thereof having power
to tax, unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. In that
event, Aetna will pay such additional amounts as may be necessary
in order that the net amounts received by the Holders of the
Preferred Securities after such withholding or deduction will
equal the amount which would have been receivable in respect of
such Preferred Securities in the absence of such withholding or
deduction ("Guarantee Additional Amounts"), except that no such
Guarantee Additional Amounts will be payable with respect to
Preferred Securities:
(i) if the Holder or beneficial owner thereof is
liable for such taxes, duties assessments or governmental
charges in respect of such Preferred Securities by reason
of such Holder's or owner's having some connection with
the United States, any state thereof or any other
jurisdiction through which or from which such payment is
made (including, without limitation, actual or
constructive ownership, past or present, of 10% or more
of the total combined voting power of all classes of
stock entitled to vote of Aetna), other than being a
holder or beneficial owner of such Preferred Securities,
or
(ii) if the Issuer or Aetna has notified such
Holder of the obligation to withhold taxes and requested
but not received from such Holder or
7
beneficial owner a declaration of non-residence, a valid
taxpayer identification number or other claim for
exemption (or information or certification required to
support such claim), and such withholding or deduction
would not have been required had such declaration,
taxpayer identification number or claim been received.
ARTICLE V
This Guarantee shall terminate and be of no further
force and effect as to the Preferred Securities upon full payment
of the Redemption Price of all Preferred Securities or upon the
exchange of all Preferred Securities for Debentures and shall
terminate completely upon full payment of the amounts payable to
Holders upon liquidation of the Issuer; provided, however, that
this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder must
restore payment of any sums paid under the Preferred Securities or
under this Guarantee for any reason whatsoever.
ARTICLE VI
Section 6.01. All guarantees and agreements
contained in this Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of Aetna and shall inure
to the benefit of the Holders. Except in connection with a
consolidation, merger or sale involving Aetna that is permitted
under the Subordinated Indenture, Aetna shall not assign its
obligations hereunder without the prior approval of Holders of not
less than a majority in stated liquidation preference of all
Preferred Securities then outstanding voting as a single class.
Section 6.02. Except with respect to any changes
which do not adversely affect the rights of Holders (in which case
no vote will be required), this Guarantee may only be amended by
an instrument in writing signed by Aetna with the prior approval
of the Holders of not less than a majority in stated liquidation
preference of all Preferred Securities then outstanding voting as
a single class. Such approval shall be obtained in the manner set
forth in Article VIII of the L.L.C. Agreement.
Section 6.03. Any notice, request or other
communication required or permitted to be given hereunder to Aetna
shall be given in writing by delivering the same against receipt
therefor by facsimile transmission (confirmed by mail), telex or
by registered or certified mail, addressed to Aetna, as follows
(and if so given, shall
8
be deemed given when mailed or upon receipt of an answer-back, if
sent by telex), to wit:
Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile No.: (203) 275-2661
Attention: Treasurer
(with a copy to the attention of the General
Counsel (203) 273-8340)
Any notice, request or other communication required
or permitted to be given hereunder to the Holders shall be given
by Aetna in the same manner as notices sent by the Issuer to the
Holders.
Section 6.04. The masculine and neuter genders used
herein shall include the masculine, feminine and neuter genders.
Section 6.05. This Guarantee is solely for the
benefit of the Holders and is not separately transferable from the
Preferred Securities.
Section 6.06. THIS GUARANTEE SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
9
THIS GUARANTEE is executed as of the day and year
first above written.
Aetna Inc.
By /s/ Alfred P. Quirk, Jr.
________________________
Name: Alfred P. Quirk, Jr.
Title: Vice President, Corporate Finance
10
Exhibit 4.14
________________________________________
________________________________________
AETNA SERVICES, INC
(formerly Aetna Life and Casualty Company)
AETNA INC.
AND
STATE STREET BANK AND TRUST COMPANY, AS SUCCESSOR FISCAL AGENT
_______
AMENDMENT NO. 1
Dated as of August 1, 1996
to
FISCAL AGENCY AGREEMENT
Dated as of July 17, 1986
Between
Aetna Services, Inc.
(formerly Aetna Life and Casualty Company)
and
State Street Bank and Trust Company, as successor Fiscal Agent
____________________________________
____________________________________
AMENDMENT
AMENDMENT NO. 1, dated as of August 1, 1996, among AETNA SERVICES,
INC. (formerly Aetna Life and Casualty Company), a corporation
duly organized and validly existing under the laws of the State of
Connecticut (the "Company"), AETNA INC., a corporation duly
organized and validly existing under the laws of the State of
Connecticut (the "Guarantor"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, as successor Fiscal Agent
(the "Fiscal Agent").
RECITALS OF THE COMPANY AND THE GUARANTOR
The Company and the Fiscal Agent have heretofore executed
and delivered the Fiscal Agency Agreement dated as of July 17,
1986 (the "Fiscal Agency Agreement") and the Company has issued
$200 million principal amount of its 7 3/4% Notes Due 2016 (the
"Securities") thereunder.
Pursuant to an Agreement and Plan of Merger dated as of
March 30, 1996, as amended by Amendment No. 1 thereto dated as of
May 30, 1996 among the Company, the Guarantor, U.S. Healthcare,
Inc., Antelope Sub, Inc., a wholly owned subsidiary of the
Guarantor ("Aetna Sub"), and New Merger Corporation, a wholly
owned subsidiary of the Guarantor, on July 19, 1996 Aetna Sub was
merged with and into the Company with the result that the Company
is as of the date of this Amendment No. 1 a direct wholly-owned
subsidiary of the Guarantor. In connection with such merger the
Company's Certificate of Incorporation was amended to change its
name to Aetna Services, Inc.
This Amendment No. 1 amends the Fiscal Agency Agreement
pursuant to Section 13 thereof: (i) to provide for the full and
unconditional guarantee by the Guarantor of the due and punctual
payment of the principal of, premium, if any, and interest
(including Additional Amounts as defined in the Terms and
Conditions of the Securities) on the Securities and (ii) to make
certain other changes to the Fiscal Agency Agreement.
All acts and proceedings required by law, by the Fiscal
Agency Agreement and by the certificates of incorporation and
bylaws of the Company and the Guarantor necessary to constitute
this Amendment No. 1 a valid and binding agreement for the uses
and purpose herein set forth in accordance with its terms have
been done and performed, and the execution and delivery of this
Amendment No. 1 have in all respects been duly authorized.
NOW, THEREFORE, in consideration of the foregoing and
other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each party agrees as follows for the
benefit of the other parties and for the equal and ratable benefit
of the holders of the Securities and any coupons appertaining
thereto.
SECTION 1. Certain Definitions. Unless otherwise
defined in this Amendment No. 1, terms defined in the Fiscal
Agency Agreement or the Securities are used herein as therein
defined. As used in this Amendment No. 1, the following terms
have the meanings set forth below:
(a) The term "Guarantee" shall mean the guarantee set
forth in Section 3 hereof, including any evidence of such
guarantee by endorsement on any Security pursuant to Section
5 hereof. The Guarantee shall be deemed part of the
Securities.
(b) The term "Guarantor" shall mean AETNA INC., a
Connecticut corporation, and, subject to the provisions of
Section 6, shall also include its successors and assigns.
SECTION 2. General. The Guarantor is hereby made a
party to the Fiscal Agency Agreement. The Guarantor hereby
appoints the Fiscal Agent as its fiscal agent in respect of the
Guarantee upon the terms and subject to conditions in the Fiscal
Agency Agreement, as amended hereby, and in the Securities and the
Guarantee set forth. From and after the date of this Amendment
No. 1 all references in the Fiscal Agency Agreement to "the
Agreement", "hereunder" or "herein" or words of a similar nature
shall mean the Fiscal Agency Agreement as amended by this
Amendment No. 1.
SECTION 3. Guarantee. The Guarantor hereby
unconditionally guarantees to each Holder of a Security
authenticated and delivered by or on behalf of the Fiscal Agent
and to each Holder of any interest coupon appertaining thereto the
due and punctual payment of the principal of, premium, if any, and
interest on such Security or interest coupon, and Additional
Amounts, if any, payable pursuant to the terms of the Securities,
where, when and as the same shall become due and payable, whether
at maturity, by declaration of acceleration, call for redemption or
otherwise, according to the terms of such Securities and
interest coupons. In case of default by the Company in the
payment of any such principal, premium, interest or Additional
Amounts, the Guarantor hereby agrees duly and punctually to make
any such payment where, when and as the same shall become due and
payable, whether at maturity, by declaration of acceleration, call
for redemption or otherwise, and as if such payment was made by
the Company. The Guarantor hereby agrees that its obligations
hereunder shall be as if it were principal debtor and not merely
surety, and shall be absolute and unconditional, irrespective of,
and shall be unaffected by, the validity, legality or
enforceability of any such Security or any interest coupon
appertaining thereto or the Fiscal Agency Agreement, the absence
of any action to enforce the same, or any waiver, modification,
indulgence or consent granted to the Company with respect thereto
by the Holder of any Security or any such interest coupon, the
recovery of any judgment against the Company or any action to
enforce the same, or any other circumstance that might otherwise
constitute a legal or equitable discharge or defense of a surety
or guarantor; provided, however, that notwithstanding the
2
foregoing, no such waiver, modification or indulgence shall,
without the consent of the Guarantor, increase the principal
amount of a Security or the interest rate thereon or increase any
premium payable upon redemption thereof. The Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims
with a court in the event of merger or bankruptcy of the Company,
any right of set-off or counterclaim, any right to require a
proceeding first against the Company, protest or notice with
respect to any Security or interest coupon or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that
this Guarantee will not be discharged as to any Security except by
payment in full of the principal of (premium, if any) and interest
on such Security and the interest coupons appertaining thereto.
The Guarantor shall be subrogated to all rights of a Holder of
a Security and to the rights of a Holder of any interest coupon
appertaining thereto against the Company in respect of any amounts
paid to such Holder by the Guarantor pursuant to the provisions of
the Guarantee; provided, however, that the Guarantor shall not,
without the consent of all Holders of Securities be entitled to
enforce, or to receive, any payments arising out of or based upon
such right of subrogation until the principal of, premium, if any,
interest and Additional Amounts, if any, then due and payable on
all Securities shall have been irrevocably paid in full in
accordance with the terms of such Securities and interest coupons.
The Guarantee is a guarantee of payment when due and not of
collection. The Guarantee shall continue to be effective, or be
reinstated, as the case may be, in respect of any Securities and
any interest coupons appertaining thereto if at any time payment, or
any part thereof, of such Security or interest coupon is
rescinded or must otherwise be restored or returned by the Holder
of such Security or interest coupon or any trustee for such Holder
upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any other entity, or upon or as a
result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or any other
entity or any substantial part of their respective property, or
otherwise, all as though such payments had not been made.
SECTION 4. Execution of Guarantees. At the time that
any Security is authenticated and delivered by or on behalf of the
Fiscal Agent after the date of this Amendment No. 1 in connection
with the registration of transfer, exchange or replacement of a
Security or any interest coupon appertaining thereto as evidence
of the Guarantee set forth in Section 3 hereof, the Guarantor
hereby agrees that notation of such Guarantee shall be endorsed on
such Security in the form set forth in Section 5 hereof. The
Guarantee shall be executed on behalf of the Guarantor by its
Chairman, a Vice Chairman, its President, any Vice President, its
Treasurer or Assistant Treasurer under its corporate seal attested
by its Corporate Secretary or one of its Assistant Corporate
Secretaries. The signatures of any or all of these officers on
the Guarantees may be manual or by facsimile and may be imprinted
or otherwise reproduced on the Security. The seal of the
Guarantor may be in the form of a
3
facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Securities.
Guarantees bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Guarantor shall bind the Guarantor notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of the Securities on which such
Guarantees were endorsed or did not hold such offices at the date
of such Securities.
The Guarantor hereby agrees that the Guarantee set forth in
Section 3 hereof shall remain in full force and effect and shall
apply to each Security and each interest coupon appertaining
thereto executed, authenticated, issued and delivered under the
Fiscal Agency Agreement as amended hereby, whether or not a
notation of the Guarantee is endorsed on such Security.
The execution and delivery by the Company and the Guarantor of
this Amendment No. 1 shall constitute due delivery of the
Guarantee set forth herein on behalf of the Guarantor with respect
to all outstanding Securities and interest coupons appertaining
thereto. However, the Guarantee shall not be valid or become
obligatory for any purpose with respect to any specific Security
or interest coupon unless the Certificate of Authentication on
such Security provided for in the Fiscal Agency Agreement shall
have been signed by or on behalf of the Fiscal Agent.
SECTION 5. Form of Notation of Guarantee. The Guarantee
shall be endorsed on the Securities pursuant to Section 4 hereof
in the following form:
[Form of Notation of Guarantee]
GUARANTEE
OF
AETNA INC.
Aetna Inc., a Connecticut corporation (herein
called the "Guarantor", which term includes any
successor corporation under the Fiscal Agency
Agreement referred to in the Security upon which this
Guarantee is endorsed), for value received, hereby
unconditionally guarantees to the Holder of the
Security upon which this Guarantee is endorsed and to
each Holder of any interest coupon appertaining
thereto the due and punctual payment of the principal
of, premium, if any, and interest on said Security or
interest coupon, and Additional Amounts (as defined in
the Terms and Conditions of the Securities), if any,
payable pursuant to the terms of the Securities,
where, when and as the same shall become due and
payable, whether at
4
maturity, by declaration of acceleration, call for
redemption or otherwise, according to the terms
thereof. In case of the failure of the Company
punctually to make any such payment of principal,
premium, interest or Additional Amounts the Guarantor
hereby agrees to pay or to cause any such payment to
be made punctually where, when and as the same shall
become due and payable, whether at maturity, by
declaration of acceleration, call for redemption or
otherwise, and as if such payment were made by the
Company. The Guarantor hereby agrees that its
obligations hereunder shall be as if it were principal
debtor and not merely surety, and shall be absolute
and unconditional, irrespective of, and shall be
unaffected by, the validity, legality or
enforceability of said Security or any interest coupon
appertaining thereto or the Fiscal Agency Agreement
dated as of July 17, 1986, as amended, among Aetna
Services Inc. (herein called the "Company"), the
Guarantor and State Street Bank and Trust Company, as
successor Fiscal Agent or the absence of any action to
enforce the same, or any waiver, modification, indul-
gence or consent granted to the Company with respect
thereto by the Holder of said Security or any interest
coupon appertaining thereto, the recovery of any
judgment against the Company or any action to enforce
the same or any other circumstance that might
otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor; provided, however,
that notwithstanding the foregoing, no such waiver,
modification or indulgence shall, without the consent
of the Guarantor, increase the principal amount of
said Security or the interest rate thereon or increase
any premium payable upon redemption thereof. The
Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event
of bankruptcy of the Company, any right of set-off or
to counterclaim, any right to require a proceeding
first against the Company, protest or notice with
respect to said Security or interest coupon or the
indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not
be discharged except by payment in full of the
principal of, and premium, if any, and interest on
said Security or interest coupon.
The Guarantor shall be subrogated to all rights
of the Holder of a Security and to the rights of a
Holder of any interest coupon appertaining thereto
against the Company in respect of any amounts paid to
such Holder by the Guarantor pursuant to the
provisions of this Guarantee, provided, however, that
the Guarantor shall not, without the consent of all
Holders of all
5
outstanding Securities, be entitled to enforce, or to
receive, any payments arising out of, or based upon,
such right of subrogation until the principal of,
premium, if any, interest and Additional Amounts then
due and payable on all Securities shall have been
irrevocably paid in full in accordance with the terms
of such Securities and interest coupons.
This Guarantee is a guarantee of payment when
due and not of collection. This Guarantee shall
continue to be effective, or be reinstated, as the
case may be, in respect of said Security and any
interest coupon appertaining thereto if at any time
payment, or any part thereof, of said Security or
interest coupon is rescinded or must otherwise be
restored or returned by the Holder of said Security or
interest coupon or any trustee for said Holder upon
the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Company or any other entity,
or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or
similar officer for, the Company or any other entity
or any substantial part of their respective property,
or otherwise, all as though such payments had not been
made.
No reference herein to such Fiscal Agency
Agreement and no provision of this Guarantee or of
such Fiscal Agency Agreement shall alter or impair the
guarantee of the Guarantor, which is absolute and
unconditional, of the due and punctual payment of the
principal of, and premium, if any, interest and
Additional Amounts, if any, on the Security upon which
this Guarantee is endorsed at the times, place and
rate, and in the cash or currency prescribed herein.
This Guarantee shall be governed by and
construed in accordance with the laws of the State of
New York, but without regard to principles of
conflicts of laws.
This Guarantee shall not be valid or become
obligatory for any purpose with respect to any
Security or interest coupon appertaining thereto
unless the certificate of authentication on said
Security shall have been manually signed by or on
behalf of the Fiscal Agent under the Fiscal Agency
Agreement.
All terms used in this Guarantee which are
defined in the Securities shall have the meanings
assigned to them in the Securities.
6
IN WITNESS WHEREOF, Aetna Inc. has caused the
execution hereof in its corporate name by its duly
authorized officers.
Aetna Inc.
By___________________
[Seal]
Attest:
______________________________________
[Assistant] Corporate Secretary
SECTION 6. Guarantor May Consolidate, Etc., Only on Certain
Terms. (a) The Guarantor shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless:
(i) the corporation formed by such
consolidation or into which the Guarantor is merged
(including, without limitation, the Company) or the person
(including, without limitation, the Company) which acquires
by conveyance or transfer the properties and assets of the
Guarantor substantially as an entirety shall be a
corporation organized and existing under the laws of the
United States of America, any State thereof or the District
of Columbia (the "Successor Corporation") and shall
expressly assume, by amendment to the Fiscal Agency
Agreement, as amended hereby, signed by the Guarantor and
such Successor Corporation and delivered to the Fiscal
Agent, the due and punctual performance of the obligations
of the Guarantor under the Guarantee of the Securities then
outstanding and interest coupons appertaining thereto and
the performance or observance of every covenant of the
Fiscal Agency Agreement, as amended hereby, on the part of
the Guarantor to be performed or observed;
(ii) immediately after giving effect to such
transaction, no event of default (as set forth in Paragraph
7 of the Terms and Conditions of the Securities), and no
event which, with notice or lapse of time or both, would
become such an event of default, shall have happened and be
continuing; and
(iii) the Guarantor has delivered to the
Fiscal Agent a certificate signed by an executive officer of
the Guarantor and a written opinion of
7
counsel satisfactory to the Fiscal Agent (who may be counsel
to the Company or the Guarantor), each stating that such
transaction and such amendment to the Fiscal Agency
Agreement comply with this Section 6 and that all condi-
tions precedent herein provided for relating to such
transaction have been complied with.
(b) Upon any such consolidation or merger, or any
conveyance or transfer of the properties and assets of the
Guarantor substantially as an entirety in accordance with Section
6(a) hereof, the Successor Corporation shall succeed to, and be
substituted for, and may exercise every right and power of, the
Guarantor under the Fiscal Agency Agreement, as amended hereby,
and the Guarantee with the same effect as if such Successor
Corporation had been named as the Guarantor herein, and
thereafter, the predecessor person shall be relieved of all
obligations and covenants under the Fiscal Agency Agreement and the
Guarantee.
SECTION 7. Section 2 of the Fiscal Agency Agreement is
hereby amended (i) by inserting the words "and the Guarantor"
after the words "the Company" each time such words appear in the
third and fourth sentences thereof and (ii) by replacing the first
two sentences thereof with "The Company hereby appoints State
Street Bank and Trust Company, at present having its principal
office ("Principal Office") at Two International Place, 4th Floor,
Boston, Massachusetts 02110, as its fiscal agent in respect of the
Securities upon the terms and subject to the conditions herein set
forth. (State Street Bank and Trust Company and its successor or
successors in accordance with Section 8 hereof are herein called
the "Fiscal Agent").
SECTION 8. Section 7 of the Fiscal Agency Agreement is
hereby amended as follows:
(a) Section 7(a) is amended (i) by replacing the words
"the Company agrees" in the fourth line thereof with the words
"the Company and the Guarantor, jointly and severally, agree" (ii)
by replacing the words "The Company also agrees" in the tenth line
thereof with the words "The Company and the Guarantor, jointly and
severally, also agree" and (iii) by inserting the words "and the
Guarantor" after the words "the Company" in the twenty-first line
thereof.
(b) Section 7(b) is amended by inserting the words (i)
"and the Guarantee" after the word "Securities" in the second line
thereof, (ii) "and the Guarantor" after the words "the Company" in
the fourth line thereof, (iii) "or the Guarantor" after the words
"the Company" in the fourteenth line thereof and (iv) "or the
Guarantor, as the case may be" after the words "the Company" in the
twentieth line thereof.
8
(c) Section 7(c) is amended by inserting the words "or
the Guarantor" after the words "the Company" in the third line
thereof.
(d) Section 7(d) is amended by inserting the word
"Guarantee," after the word "coupon," therein.
(e) Section 7(e) is amended by inserting the words "or
the Guarantor" after the words "the Company" in the ninth and
twelfth lines thereof.
(f) Section 7(f) is amended by inserting the words (i)
"or of the Guarantee" after the words "Securities" therein and
(ii) "or the Guarantor, as the case may be" after the words "the
Company" in the last line thereof.
(g) Section 7(h) is amended by inserting the words (i)
"and the Guarantee" after the word "Securities" in the fourth line
thereof and (ii) "or the Guarantee" after the word "Securities" in
the sixth line thereof.
(h) Section 7(i) is amended by inserting the words (i)
"or the Guarantee" after the words "Securities" therein and (ii)
"or the Guarantor" after the word "Company" therein.
SECTION 9. The recitals contained herein and in the
Guarantee shall be taken as the statements of the Company and the
Guarantor; the Fiscal Agent and the other agents of the Company
(including the Principal Paying Agent and the Security Registrar)
assume no responsibility for their correctness. The Fiscal Agent
and such other agents make no representation as to the validity of
sufficiency of this Amendment No. 1 or the Guarantee, except for
the Fiscal Agent's due authorization to execute and deliver this
Amendment No. 1; provided, however, that the Fiscal Agent shall
________ _______
not be relieved of its duty to authenticate Securities, acting
itself or through an appointed Authenticating Agent, as authorized
by this Fiscal Agency Agreement, as amended hereby.
SECTION 10. The Company and the Guarantor will pay,
jointly and severally, all stamp taxes and other duties, if any,
which may be imposed by the United States, the United Kingdom or
any political subdivision or taxing authority of or in the
foregoing, with respect to the execution and delivery of the
Amendment No. 1.
SECTION 11. Section 11 of the Fiscal Agency Agreement is
hereby amended by (i) replacing the word "either" in the fifth
line thereof with the word "any" and (ii) inserting the following
as the address of the Guarantor:
The Guarantor.......... Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
9
Attention: Vice President--
Finance and Treasurer
The Fiscal Agent hereby agrees that, substantially simultaneously
with its furnishing to the Company any notice or communication
under the Fiscal Agency Agreement, as amended hereby, the Fiscal
Agent shall furnish a copy thereof to the Guarantor. The Company
hereby agrees that, substantially with its receiving or furnishing
any notice or communication under the Fiscal Agency Agreement, as
amended hereby, the Company will provide a copy thereof to the Guarantor.
SECTION 12. Effectiveness. This Amendment No. 1 shall
take effect as of the date hereof.
SECTION 13. Fiscal Agency Agreement Ratified. Except as
herein expressly provided, the Fiscal Agency Agreement is in all
respects ratified and confirmed by the Company and the Trustee and
all the terms, provisions and conditions thereof are and will
remain in full force and effect.
SECTION 14. Governing Law. This Amendment No. 1 shall be
governed by and construed in accordance with the laws of the State
of New York, but without regard to principles of conflicts of
laws.
SECTION 15. Execution in Counterparts. This Amendment
No. 1 may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together
constitute but one instrument.
10
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to be duly executed, and their respective
corporate seals to be hereunto duly affixed and attested, all as
of the day and year first above written.
AETNA SERVICES, INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
__________________________
Alfred P. Quirk, Jr.
Vice President, Corporate Finance
Attest:
/s/ Paige L. Falasco
______________________
AETNA INC.
[Seal]
By /s/ Alfred P. Quirk, Jr.
___________________________
Alfred P. Quirk, Jr.
Vice President, Corporate Finance
Attest:
/s/ Paige L. Falasco
______________________
STATE STREET BANK AND TRUST
COMPANY, AS FISCAL AGENT
[Seal]
By /s/ James E. Mogavero
___________________________
Attest:
/s/ Eric J. Donaghey
____________________
11
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 30, 1996, by and
between Joseph Sebastianelli (the "Executive") and U.S.
Healthcare, Inc., a Pennsylvania corporation ("U.S.
Healthcare" or the "Company").
WHEREAS, the Board of Directors of the Company
(the "Board") and the Executive each desires that the
Executive continue to furnish services to the Company on the
terms and conditions hereinafter set forth; and
WHEREAS, the parties desire to enter into this
agreement setting forth the terms and conditions of the
continued employment of the Executive with the Company;
NOW, THEREFORE, in consideration of the premises
and the mutual agreements set forth below, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to
__________
employ the Executive, and the Executive hereby accepts such
employment, on the terms and conditions hereinafter set
forth.
2. Term; Parties. (a) Term. The term of this
_____________ ____
Agreement (as extended from time to time, the "Term") shall
commence on the date (the "Effective Date") of execution of
the Agreement and Plan of Merger (the "Merger Agreement"),
dated March 30, 1996, by and among the Company, Aetna Life
and Casualty Company ("Aetna") and Butterfly, Inc.
("Parent"), and shall end on the fifth anniversary of the
consummation of the merger contemplated by the Merger
Agreement (the "Merger Date") or, if such merger is not
consummated, the Effective Date, unless further extended as
provided in this Section 2 or sooner terminated in the event
that Executive's employment is terminated pursuant to
Section 6. Commencing on the fifth anniversary of the
Merger Date (or, if there is no Merger Date, on the fifth
anniversary of the Effective Date) and on each such
subsequent anniversary, the Term shall automatically be
extended for one additional year unless, not later than 180
days prior to such anniversary, the Company or the Executive
shall have given notice not to extend the Term. The giving
by the Company of a notice not to extend the Term shall not
constitute a termination without Cause or a termination for
Good Reason (each as defined in Section 6).
(b) Parties. On and after the Merger Date, this
_______
Agreement shall be assigned to and assumed by Parent and all
references herein to the Company shall mean Parent. On and
after the Merger Date, to the extent that the Executive's
employment is with U.S. Healthcare or Aetna, the obligation
of the Company hereunder shall include the obligation to
cause U.S. Healthcare or Aetna to act in accordance with the
terms hereof.
3. Position and Duties. Prior to the Merger
___________________
Date, the Executive shall serve as an employee of U.S.
Healthcare with the title of Co-President and Chief Medical
Administrative Officer of U.S. Healthcare, shall report
directly to the Chief Executive Officer and shall be
responsible, together with Mr. Cardillo (referred to herein,
collectively, as the "Co-Presidents"), for all of the lines
of business and operations of U.S. Healthcare (including but
not limited to all HMO, POS, indemnity health insurance and
other lines of business and operations, the "Business").
From and after the Merger Date, the Business shall also
include all of the domestic (U.S.) lines of business and
operations of Aetna Health Plans (including but not limited
to all Health, Specialty Health and Group Insurance lines of
business and operations) and the Executive shall assume the
position of Co-President of the Business. The Executive
shall report directly and exclusively to the Chief Executive
Officer of the Company, and the individuals who serve as the
Chief Financial Officer, Chief Medical Officer, Senior Sales
Officer and Chief Legal Officer of U.S. Healthcare as of the
Effective Date shall report directly and exclusively to the
Co-Presidents. The Co-Presidents shall also select and
appoint those other senior officers who will be reporting
directly to the Co-Presidents and will be responsible for
other areas of responsibility for the Business (including
but not limited to Group Insurance, Information Technology,
Operations, Sales, National Accounts, Behavioral Health,
Dental, Pharmacy, Health Education and Human Resources),
provided, however, that such appointments shall be made only
in consultation with and with the approval of the Chief
Executive Officer of the Company. The Executive shall have
such additional duties and responsibilities with respect to
the Business as may be assigned to him by the Chief
Executive Officer, provided that such duties and
responsibilities are consistent with the Executive's
position as Co-President and Chief Medical Administrative
Officer of U.S. Healthcare. During the Term, the Executive
agrees to devote substantially all his full working time,
attention and energies during normal business hours to the
performance of his duties for the Company, provided that the
Executive may continue to participate and engage in
2
activities not associated with the Company consistent with
the Executive's past practices at U.S. Healthcare.
4. Place of Performance. The principal place of
____________________
employment and office of the Executive shall be in Blue
Bell, Pennsylvania, or such other location as may be agreed
to in writing by the Executive.
5. Compensation and Related Matters.
________________________________
(a) Base Salary. As compensation for the
___________
performance by the Executive of his duties hereunder, the
Company shall pay the Executive a base salary at an annual
rate that is no less than the Executive's annual salary rate
for 1996, including any deferred compensation and interest
or earnings on such year's deferred compensation under the
Company's current deferred compensation program (such
amount, as from time to time in effect, hereinafter referred
to as "Base Salary"). Base Salary shall be payable in
accordance with U.S. Healthcare's normal payroll practices,
shall be reviewed annually and may be increased upon such
review. Base Salary, once increased, may not be decreased.
(b) Annual Bonus. The Executive shall be
____________
entitled to an annual bonus upon the attainment by the
Company, U.S. Healthcare and/or the Business of reasonable
performance goals, established in accordance with the past
practice of U.S. Healthcare. The Executive's target bonus
shall be equal to 80% of Base Salary, with appropriate
increases or decreases upon the attainment of specified
levels of Company, U.S. Healthcare and/or Business
performance (such bonus hereinafter referred to as the
"Annual Bonus"); provided, however, that with respect to
________ _______
fiscal year 1997, in no event shall the Annual Bonus be less
than 100% of target. If the Merger Date occurs during the
fiscal year commencing in 1996, the Company shall pay to the
Executive for such 1996 fiscal year 100% of the bonus which
he would have received for the entire 1996 fiscal year as
determined by U.S. Healthcare.
(c) Sign-On Bonus. Upon the Merger Date, the
_____________
Company shall pay the Executive, in cash, an amount equal to
the sum of (i) the Executive's then-current base salary
(including deferred compensation and interest or earnings on
such year's deferred compensation) and (ii) the aggregate
value of the annual bonus paid or awarded (in cash and in
shares of U.S. Healthcare common stock) to the Executive in
respect of 1995, or, if the Merger Date is subsequent to
December 31, 1996 and if the aggregate value of the annual
bonus so paid or awarded to the Executive in respect of 1996
3
is higher, such 1996 annual bonus (the sum of such amounts
hereinafter referred to as the "Sign-On Bonus").
(d) Stay Bonus. The Executive shall be granted,
__________
as of the Merger Date, that number of restricted shares of
common stock of Parent ("Parent Stock") which, when
multiplied by the average closing price per share of Parent
Stock on the ten trading dates immediately following the
Merger Date, shall be equal in amount to the Sign-On Bonus
(the "Restricted Stock Award"). The Restricted Stock Award
shall be granted pursuant to a plan (i) that meets the
requirements of Rule 16b-3 promulgated under Section 16 of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) the terms of which are acceptable to
U.S. Healthcare and (iii) the shares of Company Stock
reserved for issuance under which shall be registered in a
timely manner on a Form S-8 (the "Plan"). Notwithstanding
any provision of this Agreement to the contrary, the
Restricted Stock Award shall become vested (i.e., all
____
restrictions with respect thereto shall lapse) on the
earliest to occur of (x) the second anniversary of the
Merger Date, (y) a "change in control of Parent" (as defined
in the Plan) following the Merger Date, or (z) upon
termination of the Executive's employment by reason of death
or Disability (as defined in Section 6 hereof), by the
Company other than for Cause (as defined in Section 6
hereof) or by the Executive for Good Reason (as defined in
Section 6 hereof). If the Executive's employment is
terminated by the Executive without Good Reason or by the
Company for Cause prior to the second anniversary of the
Merger Date, the Restricted Stock Award shall be forfeited
in full. The Restricted Stock Award shall be subject to all
other terms and conditions of the Plan, the rules and
regulations thereunder, the applicable provisions of this
Agreement and the document evidencing its terms and
conditions reasonably acceptable to Executive. The
Restricted Stock Award is in addition to any other equity
award made to the Executive under paragraph (e) of this
Section 5 and shall not be offset against or reduce such
award or any other award, benefit or amount due under this
Agreement.
(e) Future Equity Grants. In addition to the
____________________
Restricted Stock Award made pursuant to subsection (d) of
this Section 6, the Executive shall from time to time be
granted stock options and shares of restricted stock or
other equity-based awards (collectively, "Equity Grants") on
a basis no less favorable than such grants are made to
similarly situated senior officers of the Company. Without
limiting the generality of the foregoing, if the Merger Date
occurs after Parent has granted awards in respect of
4
calendar year 1997, the Executive shall be entitled to
receive an Equity Grant in respect of 1997.
(f) Expenses. The Company shall reimburse the
________
Executive for all reasonable business expenses, subject to
the applicable policies and procedures of the Company then
in force.
(g) Vacation. The Executive shall be entitled to
________
20 vacation days and that number of personal days and
holidays as is consistent with U.S. Healthcare's current
practices (including, with respect to up to the greater of
25 days or the number of days the Executive has accrued at
the Effective Date, cash compensation in lieu thereof upon
termination or expiration of this Agreement) or, if more
favorable to the Executive, in accordance with the policies
applicable generally to senior executives of the Company or
any of its subsidiaries.
(h) Services Furnished. The Company shall
__________________
furnish the Executive with appropriate office space and such
other facilities and services as shall be suitable to the
Executive's position and adequate for the performance of his
duties as set forth in Section 3 hereof and on a basis at
least as favorable as in effect immediately prior to the
Merger Date, such office space and other facilities and
services to be furnished at the location set forth in
Section 4 hereof.
(i) Other Benefits. The Company shall provide to
______________
the Executive such employee benefit plans and arrangements
as are generally available to senior officers of the Company
and its subsidiaries, including but not limited to
retirement benefits, group life insurance, medical and
dental insurance, and accident and disability insurance,
which shall be provided on a basis reasonably comparable in
the aggregate to those provided to him immediately prior to
the Merger Date or, if more favorable to the Executive in
the aggregate, to those provided to other senior officers of
the Company and its subsidiaries.
(j) Restrictions on Sale of Securities; Payment
___________________________________________
of Taxes. From the date hereof to the earlier of the Merger
________
Date or the date on which the transaction contemplated by
the Merger Agreement is abandoned, the Executive agrees that
he will not sell or otherwise dispose of any shares of the
common stock of U.S. Healthcare ("U.S. Healthcare Stock"),
including shares subject to option, except for the partial
cash-out of such shares and options in connection with the
transaction contemplated by the Merger Agreement. During
the one-year period following the Merger Date, the Executive
5
agrees that, so long as he remains employed by the Company
or any of its subsidiaries, he will not sell or otherwise
dispose of any shares or option shares of Parent Stock.
Nothing herein shall prohibit the Executive from
transferring any shares of U.S. Healthcare Stock or Parent
Stock to a "Permitted Transferee," as defined in Article
5A.III of the U.S. Healthcare Articles of Incorporation. In
consideration of the Executive's agreement under this
Section 5, the Company shall promptly reimburse the
Executive for any and all income, wage and employment taxes
(and any and all income and employment taxes on the
reimbursement amount), payable by the Executive as the
result of the acceleration of the vesting of restricted
shares of U.S. Healthcare Stock on the Effective Date or as
the result of the partial cash-out of shares of U.S.
Healthcare Stock still subject to option on the Merger Date.
In no event shall Executive be reimbursed for any income,
wage or employment taxes that result from the exercise of
any options.
6. Termination. The Executive's employment
___________
hereunder may be terminated as follows:
(a) Death. The Executive's employment shall
_____
terminate upon his death, and the date of his death shall be
the Date of Termination.
(b) Disability. If, as a result of the
__________
Executive's incapacity due to physical or mental illness (as
determined by a medical doctor mutually agreed to by the
Executive or his legal representative and the Company), the
Executive shall have been absent from his duties hereunder
on a full-time basis for the entire period of six
consecutive months and, within thirty (30) days after
written Notice of Termination (as defined in subsection (f)
of this Section 6) is given, shall not have returned to the
performance of his duties hereunder on a full-time basis
("Disability"), the Company may terminate the Executive's
employment hereunder. In this event, the Date of
Termination shall be thirty (30) days after Notice of
Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-
time basis during such thirty (30) day period).
(c) Cause. The Company may terminate the
_____
Executive's employment in the event there occurs one or more
of the following events that has not been cured (if curable)
within thirty (30) days after written notice thereof has
been given by the Company to the Executive ("Cause");
provided that the Company shall have delivered a written
notice to the Executive within 120 days of its having actual
6
knowledge of the occurrence of any of such events stating
that the Company intends to terminate the Executive's
employment for Cause and specifying the factual basis for
such termination:
(i) the willful failure by the Executive to
perform substantially the Executive's duties as an
employee of the Company (other than due to physical or
mental illness or after the delivery of a Notice of
Termination for Good Reason by the Executive pursuant
to subsection (f) of this Section 6);
(ii) the Executive's engaging in misconduct
that is materially injurious to the Company or any
subsidiary or any affiliate of the Company;
(iii) the Executive's having been convicted
of, or entered a plea of nolo contendere to, a crime
____ __________
that constitutes a felony;
(iv) the material breach by the Executive of
any written covenant or agreement not to compete with
the Company or any subsidiary or any affiliate; or
(v) the breach by the Executive of his duty
of loyalty to the Company which shall include, without
limitation (A) the disclosure by the 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 the
Executive in the business or operations of the Company
or any subsidiary or any affiliate of the Company, (C)
any attempt by the Executive 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, other than
actions taken by the Executive that are intended to
benefit the Company or any subsidiary or affiliate and
do not benefit the Executive financially other than as
an employee or stockholder of the Company, (D) any
attempt by the Executive 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, other than
actions taken by the Executive that are intended to
benefit the Company or any subsidiary or affiliate and
do not benefit the Executive financially other than as
7
an employee or stockholder of the Company, provided,
________
however, that this provision shall only apply to any
_______
product or service which is in competition with a
product or service of the Company or any subsidiary or
affiliate thereof or (E) following the Merger Date, any
breach or violation of the Company's Code of Conduct,
as amended from time to time sufficient to warrant a
for Cause termination consistent with the Company's
past practice, consistently applied.
Notwithstanding the foregoing, (x) the failure of the
Executive, the Company, U.S. Healthcare or the Business to
achieve any particular level of performance shall not, in
and of itself, constitute Cause hereunder, (y) neither a
breach of the Executive's duty of loyalty to the Company as
described in subclause (A) nor a breach of the Company's
Code of Conduct as described in subclause (E) shall
constitute Cause hereunder unless such breach has had or
could reasonably be expected to have a significant adverse
effect on the business or reputation of the Company and (z)
the occurrence of any of the events described above, if done
inadvertently or of de minimis effect, shall not constitute
"Cause".
(d) Good Reason. The Executive may terminate his
___________
employment in the event there occurs one or more of the
following events, without the written consent of the
Executive, that has not been cured (if curable) within
thirty (30) days after written notice thereof has been given
by the Executive to the Company ("Good Reason"); provided
that the Executive shall have delivered a written notice to
the Chief Executive Officer of the Company within 120 days
of his having actual knowledge of the occurrence of the
event or events constituting Good Reason stating that he
intends to terminate his employment for Good Reason and
specifying the factual basis for such termination:
(i) a reduction in the Executive's annual
Base Salary or incentive compensation opportunity as
provided under Sections 5(a) and (b);
(ii) a reduction in the Executive's
positions, an adverse change in the Executive's
reporting relationship or a material reduction in the
Executive's duties and responsibilities, in each case
from those described in Section 3 hereof;
(iii) the relocation of the Executive's
principal place of employment to a location more than
20 miles from the location at which he performed his
principal duties on the date immediately prior to such
8
relocation, or requiring the Executive to perform the
principal portion of his duties in the greater
Hartford, Connecticut area;
(iv) a breach of the obligation to provide
the Executive with the benefits required to be provided
in accordance with Section 5(i);
(v) a failure by the Company to pay any
amounts due and owing to the Executive within 10 days
following written notice from the Executive of such
failure to pay;
(vi) any other material breach of the
Company's obligations to the Executive hereunder that
materially affects the compensation or benefits payable
to Executive or materially impairs the Executive's
ability to perform the duties and responsibilities of
his position;
(vii) the failure of the Company to obtain
the assumption and agreement in writing of its
obligation to perform this Agreement in accordance with
Section 12(a) hereof (A) by Parent on the Merger Date
and (B) following the Merger Date, by any successor to
Parent on the effective date of such succession; or
(viii) a breach of Section 7.11(c) of the
Merger Agreement.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder. In
the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of
Termination, which shall be no more than thirty (30) days
after the Notice of Termination.
(e) Other Terminations. If the Executive's
__________________
employment is terminated hereunder for any reason other than
as set forth in subsections (a) through (d) of this Section
6, the date on which a Notice of Termination is given or any
later date (within 30 days) set forth in such Notice of
Termination shall be the Date of Termination.
(f) Notice of Termination. Any purported
_____________________
termination of the Executive's employment (other than
termination pursuant to subsection (a) of this Section 6)
shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof.
For purposes of this Agreement, a "Notice of Termination"
9
shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
In addition, prior to the second anniversary of the Merger
Date, a Notice of Termination is required to include a copy
of a resolution duly adopted by the affirmative vote of not
less than two-thirds of the entire membership of the Board,
(which two-thirds must include Leonard Abramson or a U.S.
Healthcare designee) at a meeting of such Board which was
called and held for the purpose of considering such
termination.
(g) Dispute Concerning Termination. If within
______________________________
fifteen (15) days after any Notice of Termination (other
than with respect to a termination of the Executive's
employment by the Company without Cause) is given, or, if
later, prior to the Date of Termination (as determined
without regard to this Section 6(g)), the party receiving
such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the
date on which the Term ends or (ii) the date on which the
dispute is finally resolved, either by mutual written
agreement of the parties or by binding arbitration;
provided, however, that the Date of Termination shall be
________ _______
extended by a notice of dispute given by the Executive only
if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable diligence.
(h) Compensation During Dispute. If the Date of
___________________________
Termination is extended in accordance with subsection (g) of
this Section 6, the Company shall continue to pay the
Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not
limited to, Base Salary and Annual Bonus) and continue the
Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating
when the notice giving rise to the dispute was given, until
the Date of Termination, as determined in accordance with
subsection (g) of this Section 6. Amounts paid under this
Section 6(h) shall not be offset against or reduce any other
amounts due under Section 7 of this Agreement.
7. Compensation During Disability or Upon
_______________________________________
Termination.
___________
(a) Disability Period. During any period that
_________________
the Executive fails to perform his duties hereunder as a
10
result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to (i)
receive his full Base Salary, (ii) remain eligible to
receive an Annual Bonus under Section 5(b) hereof, and (iii)
participate in the programs described in Section 5(i) hereof
(except to the extent such participation is not permitted
under the terms of such programs). Such payments made to
the Executive during the Disability Period shall be reduced
by the sum of the amounts, if any, payable to the Executive
at or prior to the time of any such payment under disability
benefit plans of the Company or under the Social Security
disability insurance program, and which amounts were not
previously applied to reduce any such payment.
(b) Death. If the Executive's employment
_____
hereunder is terminated as a result of death, then:
(i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as
practicable after the Date of Termination, (A) any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time) and (B) for a period of one
year following the Date of Termination, such Base
Salary and Annual Bonus as the Executive would have
received during such period had he remained in the
employ of the Company;
(ii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(c) Disability. If the Executive's employment
__________
hereunder is terminated as a result of Disability, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, (A)
any amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
11
(including accrued deferred compensation and unused
vacation and personal time) and (B) for a period of one
year following the Date of Termination, such Base
Salary and Annual Bonus as the Executive would have
received during such period had he remained in the
employ of the Company, offset by any amounts received
by the Executive pursuant to subsection (ii) of this
Section 7(c);
(ii) the Executive shall receive, until the
date the Executive reaches age 65 or, if earlier, until
his death, the salary-related disability benefits
provided in accordance with, and subject to the
conditions of, the long-term disability program then in
effect for senior executives of the Company;
(iii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iv) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(d) Termination by Company for Cause or By
_______________________________________
Executive other than for Good Reason. If the Executive's
____________________________________
employment hereunder is terminated by the Company for Cause or by
the Executive (other than for Good Reason), then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time);
(ii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
12
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(e) Termination by Company without Cause or by
___________________________________________
the Executive with Good Reason. If the Executive's
______________________________
employment hereunder is terminated by the Company (other
than for Cause or Disability) or by the Executive for Good
Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time);
(ii) notwithstanding any provision of any
annual bonus plan to the contrary, the Company shall
pay to the Executive, as soon as practicable after the
Date of Termination, a lump sum amount, in cash, equal
to the sum of (A) any annual bonus which has been
allocated or awarded to the Executive for a completed
fiscal year preceding the Date of Termination under any
such plan and which, as of the Date of Termination, is
contingent only upon the continued employment of the
Executive to a subsequent date, and (B) a pro rata
portion to the Date of Termination of the aggregate
value of all contingent annual bonus awards to the
Executive for all then uncompleted fiscal years (other
than the fiscal year commencing in 1996) under any such
plan, calculated as to each such award by multiplying
the award that the Executive would have earned for the
entire performance award period, assuming the
achievement, at the target level, of the individual and
corporate performance goals established with respect to
such award, by the fraction (the "Fraction") obtained
by dividing the number of full months and any
fractional portion of a month during such performance
award period through the Date of Termination by the
total number of months contained in such performance
award period; provided, however, that, in the event
________ _______
that the Executive's actual award (the "Actual Award")
would have exceeded the target award had he remained in
the employ of the Company until the end of any such
performance award period, then the Company shall pay
the Executive, as soon as practicable following the end
13
of such period, an amount equal to the product of the
Fraction and the excess of the Actual Award over the
target award; and
(iii) the Company shall pay to the Executive a
severance payment in cash, 50% of which is payable in a
lump sum on the Date of Termination and, subject to the
Executive's continued compliance with the applicable
provisions of Section 10 hereof (provided that the
Executive be given an opportunity to cure (if curable)
any breach of such Section 10 in accordance with
Section 10(d) hereof), the remaining 50% of which is
payable in a lump sum on the first anniversary of the
Date of Termination, equal to three times the sum of
(A) the higher of the Executive's Base Salary as in
effect immediately prior to the occurrence of the event
or circumstance upon which the Notice of Termination is
based and the Executive's annual base salary (including
amounts deferred and any interest accrued thereon) in
effect immediately prior to the Merger Date, and (B)
the then current target annual bonus;
(iv) (A) the exercisability of all then
outstanding equity-based awards granted under the U.S.
Healthcare incentive plans prior to the Merger Date
shall be governed in accordance with the terms of such
U.S. Healthcare incentive plans, (B) the vesting of
restricted stock awards granted pursuant to Section
5(d) shall be governed in accordance with the terms of
such Section and (C) all then outstanding equity-based
awards granted under the Parent incentive plans shall
continue to vest over the one year period following the
Date of Termination and be exercisable through the 90
day period following such one year period;
(v) for the thirty-six (36) month period
immediately following the Date of Termination, the
Company shall arrange to provide the Executive with
life, disability, accident and health insurance
benefits ("Insurance Benefits") and with pension plan
benefits substantially similar, and on substantially
similar terms, to those which the Executive is
receiving immediately prior to the Notice of
Termination or the economic equivalent thereof, which
provision of Insurance Benefits shall satisfy all of
the conditions necessary to avoid the imposition of any
tax under section 4980B of the Code. Insurance
Benefits otherwise receivable by the Executive pursuant
to this Section 7(e)(v) shall be reduced to the extent
comparable benefits are actually received by, or made
available to, the Executive without cost during the
14
thirty-six (36) month period following the Executive's
termination of employment (and any such benefits
actually received by or made available to the Executive
shall be reported to the Company by the Executive);
(vi) if the Executive would have become
entitled to benefits under the Company's postretirement
health care or life insurance plans, as in effect
immediately prior to the Effective Date (or, if there
is a Merger Date, immediately prior to the Merger Date)
or the Date of Termination (whichever is more favorable
to the Executive), had the Executive's employment
terminated on the date which is thirty-six (36) months
after the Date of Termination, the Company shall
provide such postretirement health care or life
insurance benefits to the Executive and the Executive's
dependents commencing on the later of (A) the date on
which such coverage would have first become available
(disregarding for these purposes the thirty-six (36)
month period referred to above) and (B) the date on
which benefits described in subsection (v) of this
Section 7(e) shall terminate; and
(vii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
8. Gross-Up for Excise Tax. (a) Whether or not
_______________________
the Executive becomes entitled to any payments under Section
7 hereof, if any payments or benefits received or to be
received by the Executive (whether pursuant to Section 5
hereof or any other provision of this Agreement or any other
plan, arrangement or agreement with the Company or, with
respect to his employment by the Company, with any other
person (such payments or benefits, excluding the Gross-Up
Payment described herein, being hereinafter referred to as
the "Total Payments") will be subject to any excise tax
imposed under section 4999 of the Internal Revenue Code of
1986, as amended (the "Excise Tax"), the Company shall pay
to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments.
(b) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) all of the Total Payments
shall be treated as "parachute payments" (within the meaning
15
of section 280G(b)(2) of the Code) unless, in the opinion of
Tax Counsel, a reasonable basis exists for determining that
such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, a reasonable basis
exists for determining that such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the "base amount"
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
8), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and
local taxes.
(c) In the event that the Excise Tax is finally
determined to be less than the amount taken into account
hereunder in calculating the Gross-Up Payment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at 120% of the
rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any
16
interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
9. Mitigation. The Executive shall not be
__________
required to mitigate amounts payable pursuant to Section 7
hereof by seeking other employment or otherwise, nor, except
as provided in Section 7(e)(v), shall there be any offset
against such payments on account of (a) any remuneration
attributable to any subsequent employment that he may obtain
or (b) any claims the Company may have against the
Executive.
10. Noncompetition and Confidentiality.
__________________________________
(a) Noncompetition. Prior to, and for a period
______________
of one year following, termination of the Executive's
employment during the Term other than by the Company without
Cause or by the Executive for Good Reason, the 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; provided, however, nothing in this Section 10(a)
shall preclude the Executive from performing services solely
and exclusively for a division or subsidiary of such an
entity that is engaged in a noncompetitive business.
(b) Nondisclosure, Nonsolicitation and
__________________________________
Cooperation.
___________
(i) the 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
17
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 the
Executive is employed by the Company, or any subsidiary
or affiliate thereof in the ordinary course of the
performance of the Executive's duties;
(ii) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to induce any
employee or Insurance Agent (as defined below) employed
by or performing services for the Business to be
employed or perform services elsewhere, provided that
this covenant shall not preclude the Executive from
taking any actions during the Term that (x) are
intended to benefit the Company or any subsidiary or
affiliate and (y) do not benefit the Executive
financially other than as an employee or stockholder of
the Company;
(iii) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to induce any
insurance agent or agency, insurance broker, broker-
dealer or supplier of the Business to cease providing
services to the Business, provided that this covenant
shall not preclude the Executive from taking any
actions during the Term that (x) are intended to
benefit the Company or any subsidiary or affiliate and
(y) do not benefit the Executive financially other than
as an employee or stockholder of the Company; and
(iv) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to solicit, on
behalf of any person or entity other than the Business,
the trade of any individual or entity which, at the
time of the solicitation, is a customer of the
Business, or which the Business is undertaking
reasonable steps to procure as a customer at the time
of or immediately preceding termination of the Term;
provided, however, that this limitation shall only
________ _______
apply to (x) any product or service which is in
competition with a product or service of the Business
and (y) with respect to any customer with whom the
Executive has or had (by virtue of the Executive's
position or otherwise) a personal relationship.
Solely for purposes of subsection (b)(ii) of this Section
10, the term "Insurance Agent" shall mean those insurance
agents or agencies representing the Company or any
18
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 the
________________
Executive's termination of the Executive's employment, the
Executive shall return to the Company all property of the
Company, and all copies thereof in the Executive's
possession or under his control.
(d) Intention of the Parties. If any provision
________________________
of Section 10 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 Section 10(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 materially breach any of those covenants
following termination of employment and such breach is not
cured (if curable) within ten (10) days following receipt of
written notification thereof that specifies the manner in
which the Company believes the Executive has breached such
covenants, the Company shall have no further obligation to
pay Executive any benefits otherwise payable under Sections
7(e)(iii), (v) and (vi) and the Company shall be entitled to
an injunction, restraining order or such other equitable
relief (without the requirement to post a bond) restraining
Executive from committing any violation of the covenants and
obligations contained in Section 10(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.
19
(e) Waiver. Without limiting the generality of
______
the foregoing, upon request of the Executive prior to
engaging in any conduct otherwise prohibited by this Section
10, the Company may, in its sole discretion, waive in
writing, on such terms and conditions as it may deem
appropriate, any violation of this Section 10 which would
otherwise occur due to such conduct.
11. Indemnification; Attorneys' Fees. The
________________________________
Company shall indemnify the Executive to the full extent
authorized by law and the Charter and By-Laws of the
Company, as applicable, for all expenses, costs, liabilities
and legal fees which the Executive may incur in the
discharge or course of his duties hereunder. The Executive
shall be insured under the Company's Directors' and
Officers' Liability Insurance Policy as in effect from time
to time. The Executive shall be deemed a third party
beneficiary with respect to Section 7.6 of the Merger
Agreement and, as such, shall have the right to enforce such
provisions as if he were party to the Merger Agreement. In
connection with any dispute or proceeding arising under this
Agreement where the Executive is ultimately the
substantially prevailing party, the Company shall promptly
reimburse Executive for all costs, including without
limitation the reasonable attorneys' fees of any attorney of
the Executive's choosing, incurred by the Executive in any
such dispute or proceeding arising under this Agreement.
Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation
of this Section 11.
12. Successors; Binding Agreement.
_____________________________
(a) Company's Successors. The Company shall
____________________
require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in
this Section 12 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
This Agreement shall not otherwise be assignable by the
Company.
(b) Executive's Successors. This Agreement shall
______________________
not be assignable by the Executive. This Agreement and all
20
rights of the Executive hereunder shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. Upon the
Executive's death, all amounts to which he is entitled
hereunder, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there
be no such designee, to the Executive's estate.
13. Notices. For the purpose of this Agreement,
_______
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or received by facsimile or
three (3) days after mailing by United States certified
mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the
Executive's signature on the final page hereof and, if to
the Company, to the attention of the General Counsel except
where this Agreement provides otherwise. Notice of change
of address or addressee shall be effective only upon actual
receipt.
14. Disputes. This Agreement shall be construed
________
in accordance with and governed by the law of the
Commonwealth of Pennsylvania (without regard to principles
of conflict of laws). All claims and controversies related
to or stemming from this Agreement or the Executive's
employment with the Company, except actions for equitable
relief pending an arbitration award, shall be submitted to
binding arbitration in Blue Bell, Pennsylvania by a panel of
three neutral arbitrators under the Commercial Arbitration
Rules of the American Arbitration Association. Judgment
upon an award of the arbitrators may be entered and enforced
in any court having jurisdiction.
15. Miscellaneous. No provision of this
_____________
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition
or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Subject to the
provisions of Section 5(j) and 8 hereof, payments provided
for hereunder shall be paid net of any applicable
21
withholding required under federal, state or local law and
any additional withholding to which the Executive has
agreed. The obligations of the Company and the Executive
under this Agreement which by their nature may require
either partial or total performance after the expiration of
the Term shall survive such expiration. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
16. Counterparts. This Agreement may be executed
____________
in one or more counterparts, each of which shall be deemed
to be an original but all of which together will constitute
one and the same instrument.
17. Entire Agreement. This Agreement between the
________________
Company and the Executive sets forth the entire agreement of
the parties hereto in respect of the subject matter
contained herein and supersedes, as of the Effective Date,
all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral
or written, by the parties hereto in respect of the subject
matter contained herein; and any prior agreement of the
parties hereto in respect of the subject matter contained
herein shall be terminated and canceled as of the Effective
Date.
22
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on March 30, 1996 to be effective as of the
Effective Date.
U.S. Healthcare
By:_____________________
Name:
Title:
__________________________
Joseph Sebastianelli
__________________________
__________________________
__________________________
Address of Executive
23
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 30, 1996, by and
between Michael Cardillo (the "Executive") and U.S.
Healthcare, Inc., a Pennsylvania corporation ("U.S.
Healthcare" or the "Company").
WHEREAS, the Board of Directors of the Company
(the "Board") and the Executive each desires that the
Executive continue to furnish services to the Company on the
terms and conditions hereinafter set forth; and
WHEREAS, the parties desire to enter into this
agreement setting forth the terms and conditions of the
continued employment of the Executive with the Company;
NOW, THEREFORE, in consideration of the premises
and the mutual agreements set forth below, and intending to
be legally bound hereby, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to
__________
employ the Executive, and the Executive hereby accepts such
employment, on the terms and conditions hereinafter set
forth.
2. Term; Parties. (a) Term. The term of this
_____________ ____
Agreement (as extended from time to time, the "Term") shall
commence on the date (the "Effective Date") of execution of
the Agreement and Plan of Merger (the "Merger Agreement"),
dated March 30, 1996, by and among the Company, Aetna Life
and Casualty Company ("Aetna") and Butterfly, Inc.
("Parent"), and shall end on the fifth anniversary of the
consummation of the merger contemplated by the Merger
Agreement (the "Merger Date") or, if such merger is not
consummated, the Effective Date, unless further extended as
provided in this Section 2 or sooner terminated in the event
that Executive's employment is terminated pursuant to
Section 6. Commencing on the fifth anniversary of the
Merger Date (or, if there is no Merger Date, on the fifth
anniversary of the Effective Date) and on each such
subsequent anniversary, the Term shall automatically be
extended for one additional year unless, not later than 180
days prior to such anniversary, the Company or the Executive
shall have given notice not to extend the Term. The giving
by the Company of a notice not to extend the Term shall not
constitute a termination without Cause or a termination for
Good Reason (each as defined in Section 6).
(b) Parties. On and after the Merger Date, this
_______
Agreement shall be assigned to and assumed by Parent and all
references herein to the Company shall mean Parent. On and
after the Merger Date, to the extent that the Executive's
employment is with U.S. Healthcare or Aetna, the obligation
of the Company hereunder shall include the obligation to
cause U.S. Healthcare or Aetna to act in accordance with the
terms hereof.
3. Position and Duties. Prior to the Merger
___________________
Date, the Executive shall serve as an employee of U.S.
Healthcare with the title of Co-President and Chief
Marketing Officer of U.S. Healthcare, shall report directly
to the Chairman and shall be responsible, together with Mr.
Sebastianelli (referred to herein, collectively, as the "Co-
Presidents"), for all of the lines of business and
operations of U.S. Healthcare (including but not limited to
all HMO, POS, indemnity health insurance and other lines of
business and operations, the "Business").
From and after the Merger Date, the Business shall
also include all of the domestic (U.S.) lines of business
and operations of Aetna Health Plans (including but not
limited to all Health, Specialty Health and Group Insurance
lines of business and operations), and the Executive shall
assume the position of Co-President of the Business. The
Executive shall report directly and exclusively to the Chief
Executive Officer of the Company, and the individuals who
serve as the Chief Financial Officer, Chief Medical Officer,
Senior Sales Officer and Chief Legal Officer of U.S.
Healthcare as of the Effective Date shall report directly
and exclusively to the Co-Presidents. The Co-Presidents
shall also select and appoint those other senior officers
who will be reporting directly to the Co-Presidents and will
be responsible for other areas of responsibility for the
Business (including but not limited to Group Insurance,
Information Technology, Operations, Sales, National
Accounts, Behavioral Health, Dental, Pharmacy, Health
Education and Human Resources), provided, however, that such
appointments shall be made only in consultation with and
with the approval of the Chief Executive Officer of the
Company.
During the Term, the Executive shall have such
additional duties and responsibilities with respect to the
Business as may be assigned to him by the Chief Executive
Officer, provided that such duties and responsibilities are
consistent with the Executive's position as Co-President and
Chief Marketing Officer. The Executive agrees to devote
substantially all his full working time, attention and
energies during normal business hours to the performance of
2
his duties for the Company, provided that the Executive may
continue to participate and engage in activities not
associated with the Company consistent with the Executive's
past practices at U.S. Healthcare.
4. Place of Performance. The principal place of
____________________
employment and office of the Executive shall be in Blue
Bell, Pennsylvania, or such other location as may be agreed
to in writing by the Executive.
5. Compensation and Related Matters.
________________________________
(a) Base Salary. As compensation for the
___________
performance by the Executive of his duties hereunder, the
Company shall pay the Executive a base salary at an annual
rate that is no less than the Executive's annual salary rate
for 1996, including any deferred compensation and interest
or earnings on such year's deferred compensation under the
Company's current deferred compensation program (such
amount, as from time to time in effect, hereinafter referred
to as "Base Salary"). Base Salary shall be payable in
accordance with U.S. Healthcare's normal payroll practices,
shall be reviewed annually and may be increased upon such
review. Base Salary, once increased, may not be decreased.
(b) Annual Bonus. The Executive shall be
____________
entitled to an annual bonus upon the attainment by the
Company, U.S. Healthcare and/or the Business of reasonable
performance goals, established in accordance with the past
practice of U.S. Healthcare. The Executive's target bonus
shall be equal to 80% of Base Salary, with appropriate
increases or decreases upon the attainment of specified
levels of Company, U.S. Healthcare and/or Business
performance (such bonus hereinafter referred to as the
"Annual Bonus"); provided, however, that with respect to
________ _______
fiscal year 1997, in no event shall the Annual Bonus be less
than 100% of target. If the Merger Date occurs during the
fiscal year commencing in 1996, the Company shall pay to the
Executive for such 1996 fiscal year 100% of the bonus which
he would have received for the entire 1996 fiscal year as
determined by U.S. Healthcare.
(c) Sign-On Bonus. Upon the Merger Date, the
_____________
Company shall pay the Executive, in cash, an amount equal to
the sum of (i) the Executive's then-current base salary
(including deferred compensation and interest or earnings on
such year's deferred compensation) and (ii) the aggregate
value of the annual bonus paid or awarded (in cash and in
shares of U.S. Healthcare common stock) to the Executive in
respect of 1995, or, if the Merger Date is subsequent to
December 31, 1996 and if the aggregate value of the annual
3
bonus so paid or awarded to the Executive in respect of 1996
is higher, such 1996 annual bonus (the sum of such amounts
hereinafter referred to as the "Sign-On Bonus").
(d) Stay Bonus. The Executive shall be granted,
__________
as of the Merger Date, that number of restricted shares of
common stock of Parent ("Parent Stock") which, when
multiplied by the average closing price per share of Parent
Stock on the ten trading dates immediately following the
Merger Date, shall be equal in amount to the Sign-On Bonus
(the "Restricted Stock Award"). The Restricted Stock Award
shall be granted pursuant to a plan (i) that meets the
requirements of Rule 16b-3 promulgated under Section 16 of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) the terms of which are acceptable to
U.S. Healthcare and (iii) the shares of Company Stock
reserved for issuance under which shall be registered in a
timely manner on a Form S-8 (the "Plan"). Notwithstanding
any provision of this Agreement to the contrary, the
Restricted Stock Award shall become vested (i.e., all
____
restrictions with respect thereto shall lapse) on the
earliest to occur of (x) the second anniversary of the
Merger Date, (y) a "change in control of Parent" (as defined
in the Plan) following the Merger Date, or (z) upon
termination of the Executive's employment by reason of death
or Disability (as defined in Section 6 hereof), by the
Company other than for Cause (as defined in Section 6
hereof) or by the Executive for Good Reason (as defined in
Section 6 hereof). If the Executive's employment is
terminated by the Executive without Good Reason or by the
Company for Cause prior to the second anniversary of the
Merger Date, the Restricted Stock Award shall be forfeited
in full. The Restricted Stock Award shall be subject to all
other terms and conditions of the Plan, the rules and
regulations thereunder, the applicable provisions of this
Agreement and the document evidencing its terms and
conditions reasonably acceptable to Executive. The
Restricted Stock Award is in addition to any other equity
award made to the Executive under paragraph (e) of this
Section 5 and shall not be offset against or reduce such
award or any other award, benefit or amount due under this
Agreement.
(e) Future Equity Grants. In addition to the
____________________
Restricted Stock Award made pursuant to subsection (d) of
this Section 6, the Executive shall from time to time be
granted stock options and shares of restricted stock or
other equity-based awards (collectively, "Equity Grants") on
a basis no less favorable than such grants are made to
similarly situated senior officers of the Company. Without
limiting the generality of the foregoing, if the Merger Date
4
occurs after Parent has granted awards in respect of
calendar year 1997, the Executive shall be entitled to
receive an Equity Grant in respect of 1997.
(f) Expenses. The Company shall reimburse the
________
Executive for all reasonable business expenses, subject to
the applicable policies and procedures of the Company then
in force.
(g) Vacation. The Executive shall be entitled to
________
20 vacation days and that number of personal days and
holidays as is consistent with U.S. Healthcare's current
practices (including, with respect to up to the greater of
25 days or the number of days the Executive has accrued at
the Effective Date, cash compensation in lieu thereof upon
termination or expiration of this Agreement) or, if more
favorable to the Executive, in accordance with the policies
applicable generally to senior executives of the Company or
any of its subsidiaries.
(h) Services Furnished. The Company shall
__________________
furnish the Executive with appropriate office space and such
other facilities and services as shall be suitable to the
Executive's position and adequate for the performance of his
duties as set forth in Section 3 hereof and on a basis at
least as favorable as in effect immediately prior to the
Merger Date, such office space and other facilities and
services to be furnished at the location set forth in
Section 4 hereof.
(i) Other Benefits. The Company shall provide to
______________
the Executive such employee benefit plans and arrangements
as are generally available to senior officers of the Company
and its subsidiaries, including but not limited to
retirement benefits, group life insurance, medical and
dental insurance, and accident and disability insurance,
which shall be provided on a basis reasonably comparable in
the aggregate to those provided to him immediately prior to
the Merger Date or, if more favorable to the Executive in
the aggregate, to those provided to other senior officers of
the Company and its subsidiaries.
(j) Restrictions on Sale of Securities; Payment
____________________________________________
of Taxes. From the date hereof to the earlier of the Merger
________
Date or the date on which the transaction contemplated by
the Merger Agreement is abandoned, the Executive agrees that
he will not sell or otherwise dispose of any shares of the
common stock of U.S. Healthcare ("U.S. Healthcare Stock"),
including shares subject to option, except for the partial
cash-out of such shares and options in connection with the
transaction contemplated by the Merger Agreement. During
5
the one-year period following the Merger Date, the Executive
agrees that, so long as he remains employed by the Company
or any of its subsidiaries, he will not sell or otherwise
dispose of any shares or option shares of Parent Stock.
Nothing herein shall prohibit the Executive from
transferring any shares of U.S. Healthcare Stock or Parent
Stock to a "Permitted Transferee," as defined in Article
5A.III of the U.S. Healthcare Articles of Incorporation. In
consideration of the Executive's agreement under this
Section 5, the Company shall promptly reimburse the
Executive for any and all income, wage and employment taxes
(and any and all income and employment taxes on the
reimbursement amount), payable by the Executive as the
result of the acceleration of the vesting of restricted
shares of U.S. Healthcare Stock on the Effective Date or as
the result of the partial cash-out of shares of U.S.
Healthcare Stock still subject to option on the Merger Date.
In no event shall Executive be reimbursed for any income,
wage or employment taxes that result from the exercise of
any options.
6. Termination. The Executive's employment
___________
hereunder may be terminated as follows:
(a) Death. The Executive's employment shall
_____
terminate upon his death, and the date of his death shall be
the Date of Termination.
(b) Disability. If, as a result of the
__________
Executive's incapacity due to physical or mental illness (as
determined by a medical doctor mutually agreed to by the
Executive or his legal representative and the Company), the
Executive shall have been absent from his duties hereunder
on a full-time basis for the entire period of six
consecutive months and, within thirty (30) days after
written Notice of Termination (as defined in subsection (f)
of this Section 6) is given, shall not have returned to the
performance of his duties hereunder on a full-time basis
("Disability"), the Company may terminate the Executive's
employment hereunder. In this event, the Date of
Termination shall be thirty (30) days after Notice of
Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a full-
time basis during such thirty (30) day period).
(c) Cause. The Company may terminate the
_____
Executive's employment in the event there occurs one or more
of the following events that has not been cured (if curable)
within thirty (30) days after written notice thereof has
been given by the Company to the Executive ("Cause");
provided that the Company shall have delivered a written
6
notice to the Executive within 120 days of its having actual
knowledge of the occurrence of any of such events stating
that the Company intends to terminate the Executive's
employment for Cause and specifying the factual basis for
such termination:
(i) the willful failure by the Executive to
perform substantially the Executive's duties as an
employee of the Company (other than due to physical or
mental illness or after the delivery of a Notice of
Termination for Good Reason by the Executive pursuant
to subsection (f) of this Section 6);
(ii) the Executive's engaging in misconduct
that is materially injurious to the Company or any
subsidiary or any affiliate of the Company;
(iii) the Executive's having been convicted
of, or entered a plea of nolo contendere to, a crime
____ __________
that constitutes a felony;
(iv) the material breach by the Executive of
any written covenant or agreement not to compete with
the Company or any subsidiary or any affiliate; or
(v) the breach by the Executive of his duty
of loyalty to the Company which shall include, without
limitation (A) the disclosure by the 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 the
Executive in the business or operations of the Company
or any subsidiary or any affiliate of the Company, (C)
any attempt by the Executive 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, other than
actions taken by the Executive that are intended to
benefit the Company or any subsidiary or affiliate and
do not benefit the Executive financially other than as
an employee or stockholder of the Company, (D) any
attempt by the Executive 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, other than
actions taken by the Executive that are intended to
benefit the Company or any subsidiary or affiliate and
7
do not benefit the Executive financially other than as
an employee or stockholder of the Company, provided,
________
however, that this provision shall only apply to any
_______
product or service which is in competition with a
product or service of the Company or any subsidiary or
affiliate thereof or (E) following the Merger Date, any
breach or violation of the Company's Code of Conduct,
as amended from time to time sufficient to warrant a
for Cause termination consistent with the Company's
past practice, consistently applied.
Notwithstanding the foregoing, (x) the failure of the
Executive, the Company, U.S. Healthcare or the Business to
achieve any particular level of performance shall not, in
and of itself, constitute Cause hereunder, (y) neither a
breach of the Executive's duty of loyalty to the Company as
described in subclause (A) nor a breach of the Company's
Code of Conduct as described in subclause (E) shall
constitute Cause hereunder unless such breach has had or
could reasonably be expected to have a significant adverse
effect on the business or reputation of the Company and (z)
the occurrence of any of the events described above, if done
inadvertently or of de minimis effect, shall not constitute
"Cause".
d) Good Reason. The Executive may terminate his
___________
employment in the event there occurs one or more of the
following events, without the written consent of the
Executive, that has not been cured (if curable) within
thirty (30) days after written notice thereof has been given
by the Executive to the Company ("Good Reason"); provided
that the Executive shall have delivered a written notice to
the Chief Executive Officer of the Company within 120 days
of his having actual knowledge of the occurrence of the
event or events constituting Good Reason stating that he
intends to terminate his employment for Good Reason and
specifying the factual basis for such termination:
(i) a reduction in the Executive's annual
Base Salary or incentive compensation opportunity as
provided under Sections 5(a) and (b);
(ii) a reduction in the Executive's
positions, an adverse change in the Executive's
reporting relationship or a material reduction in the
Executive's duties and responsibilities, in each case
from those described in Section 3 hereof;
(iii) the relocation of the Executive's
principal place of employment to a location more than
20 miles from the location at which he performed his
8
principal duties on the date immediately prior to such
relocation, or requiring the Executive to perform the
principal portion of his duties in the greater
Hartford, Connecticut area;
(iv) a breach of the obligation to provide
the Executive with the benefits required to be provided
in accordance with Section 5(i);
(v) a failure by the Company to pay any
amounts due and owing to the Executive within 10 days
following written notice from the Executive of such
failure to pay;
(vi) any other material breach of the
Company's obligations to the Executive hereunder that
materially affects the compensation or benefits payable
to Executive or materially impairs the Executive's
ability to perform the duties and responsibilities of
his position;
(vii) the failure of the Company to obtain
the assumption and agreement in writing of its
obligation to perform this Agreement in accordance with
Section 12(a) hereof (A) by Parent on the Merger Date
and (B) following the Merger Date, by any successor to
Parent on the effective date of such succession; or
(viii) a breach of Section 7.11(c) of the
Merger Agreement.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder. In
the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of
Termination, which shall be no more than thirty (30) days
after the Notice of Termination.
(e) Other Terminations. If the Executive's
__________________
employment is terminated hereunder for any reason other than
as set forth in subsections (a) through (d) of this Section
6, the date on which a Notice of Termination is given or any
later date (within 30 days) set forth in such Notice of
Termination shall be the Date of Termination.
(f) Notice of Termination. Any purported
_____________________
termination of the Executive's employment (other than
termination pursuant to subsection (a) of this Section 6)
shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 13 hereof.
9
For purposes of this Agreement, a "Notice of Termination"
shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
In addition, prior to the second anniversary of the Merger
Date, a Notice of Termination is required to include a copy
of a resolution duly adopted by the affirmative vote of not
less than two-thirds of the entire membership of the Board,
(which two-thirds must include Leonard Abramson or a U.S.
Healthcare designee) at a meeting of such Board which was
called and held for the purpose of considering such
termination.
(g) Dispute Concerning Termination. If within
______________________________
fifteen (15) days after any Notice of Termination (other
than with respect to a termination of the Executive's
employment by the Company without Cause) is given, or, if
later, prior to the Date of Termination (as determined
without regard to this Section 6(g)), the party receiving
such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the
date on which the Term ends or (ii) the date on which the
dispute is finally resolved, either by mutual written
agreement of the parties or by binding arbitration;
provided, however, that the Date of Termination shall be
________ _______
extended by a notice of dispute given by the Executive only
if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable
diligence.
(h) Compensation During Dispute. If the Date of
___________________________
Termination is extended in accordance with subsection (g) of
this Section 6, the Company shall continue to pay the
Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not
limited to, Base Salary and Annual Bonus) and continue the
Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating
when the notice giving rise to the dispute was given, until
the Date of Termination, as determined in accordance with
subsection (g) of this Section 6. Amounts paid under this
Section 6(h) shall not be offset against or reduce any other
amounts due under Section 7 of this Agreement.
10
7. Compensation During Disability or Upon
_______________________________________
Termination.
___________
(a) Disability Period. During any period the
_________________
Executive fails to perform his duties hereunder as a result
of incapacity due to physical or mental illness ("Disability
Period"), the Executive shall continue to (i) receive his
full Base Salary, (ii) remain eligible to receive an Annual
Bonus under Section 5(b) hereof, and (iii) participate in
the programs described in Section 5(i) hereof (except to the
extent such participation is not permitted under the terms
of such programs). Such payments made to the Executive
during the Disability Period shall be reduced by the sum of
the amounts, if any, payable to the Executive at or prior to
the time of any such payment under disability benefit plans
of the Company or under the Social Security disability
insurance program, and which amounts were not previously
applied to reduce any such payment.
(b) Death. If the Executive's employment
_____
hereunder is terminated as a result of death, then:
(i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as
practicable after the Date of Termination, (A) any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time) and (B) for a period of one
year following the Date of Termination, such Base
Salary and Annual Bonus as the Executive would have
received during such period had he remained in the
employ of the Company;
(ii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(c) Disability. If the Executive's employment
__________
hereunder is terminated as a result of Disability, then:
11
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, (A)
any amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time) and (B) for a period of one
year following the Date of Termination, such Base
Salary and Annual Bonus as the Executive would have
received during such period had he remained in the
employ of the Company, offset by any amounts received
by the Executive pursuant to subsection (ii) of this
Section 7(c);
(ii) the Executive shall receive, until the
date the Executive reaches age 65 or, if earlier, until
his death, the salary-related disability benefits
provided in accordance with, and subject to the
conditions of, the long-term disability program then in
effect for senior executives of the Company;
(iii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iv) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(d) Termination by Company for Cause or By
_______________________________________
Executive other than for Good Reason. If the Executive's
____________________________________
employment hereunder is terminated by the Company for Cause
or by the Executive (other than for Good Reason), then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time);
(ii) the vesting and exercisability of all
then outstanding equity-based awards shall be governed,
as applicable, in accordance with Section 5(d) of this
Agreement or the terms of the U.S. Healthcare or Aetna,
12
as the case may be, document under which they were
initially granted (except that the vesting of awards
granted under the U.S. Healthcare incentive plans prior
to the Effective Date shall be governed by Section 1.7
of the Merger Agreement); and
(iii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
(e) Termination by Company without Cause or by
___________________________________________
the Executive with Good Reason. If the Executive's
______________________________
employment hereunder is terminated by the Company (other
than for Cause or Disability) or by the Executive for Good
Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any
amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termination
(including accrued deferred compensation and unused
vacation and personal time);
(ii) notwithstanding any provision of any
annual bonus plan to the contrary, the Company shall
pay to the Executive, as soon as practicable after the
Date of Termination, a lump sum amount, in cash, equal
to the sum of (A) any annual bonus which has been
allocated or awarded to the Executive for a completed
fiscal year preceding the Date of Termination under any
such plan and which, as of the Date of Termination, is
contingent only upon the continued employment of the
Executive to a subsequent date, and (B) a pro rata
portion to the Date of Termination of the aggregate
value of all contingent annual bonus awards to the
Executive for all then uncompleted fiscal years (other
than the fiscal year commencing in 1996) under any such
plan, calculated as to each such award by multiplying
the award that the Executive would have earned for the
entire performance award period, assuming the
achievement, at the target level, of the individual and
corporate performance goals established with respect to
such award, by the fraction (the "Fraction") obtained
by dividing the number of full months and any
fractional portion of a month during such performance
award period through the Date of Termination by the
total number of months contained in such performance
award period; provided, however, that, in the event
________ _______
that the Executive's actual award (the "Actual Award")
would have exceeded the target award had he remained in
13
the employ of the Company until the end of any such
performance award period, then the Company shall pay
the Executive, as soon as practicable following the end
of such period, an amount equal to the product of the
Fraction and the excess of the Actual Award over the
target award; and
(iii) the Company shall pay to the Executive a
severance payment in cash, 50% of which is payable in a
lump sum on the Date of Termination and, subject to the
Executive's continued compliance with the applicable
provisions of Section 10 hereof (provided that the
Executive be given an opportunity to cure (if curable)
any breach of such Section 10 in accordance with
Section 10(d) hereof), the remaining 50% of which is
payable in a lump sum on the first anniversary of the
Date of Termination, equal to three times the sum of
(A) the higher of the Executive's Base Salary as in
effect immediately prior to the occurrence of the event
or circumstance upon which the Notice of Termination is
based and the Executive's annual base salary (including
amounts deferred and any interest accrued thereon) in
effect immediately prior to the Merger Date, and (B)
the then current target annual bonus;
(iv) (A) the exercisability of all then
outstanding equity-based awards granted under the U.S.
Healthcare incentive plans prior to the Merger Date
shall be governed in accordance with the terms of such
U.S. Healthcare incentive plans, (B) the vesting of
restricted stock awards granted pursuant to Section
5(d) shall be governed in accordance with the terms of
such Section and (C) all then outstanding equity-based
awards granted under the Parent incentive plans shall
continue to vest over the one year period following the
Date of Termination and be exercisable through the 90
day period following such one year period;
(v) for the thirty-six (36) month period
immediately following the Date of Termination, the
Company shall arrange to provide the Executive with
life, disability, accident and health insurance
benefits ("Insurance Benefits") and with pension plan
benefits substantially similar, and on substantially
similar terms, to those which the Executive is
receiving immediately prior to the Notice of
Termination or the economic equivalent thereof, which
provision of Insurance Benefits shall satisfy all of
the conditions necessary to avoid the imposition of any
tax under section 4980B of the Code. Insurance
Benefits otherwise receivable by the Executive pursuant
14
to this Section 7(e)(v) shall be reduced to the extent
comparable benefits are actually received by, or made
available to, the Executive without cost during the
thirty-six (36) month period following the Executive's
termination of employment (and any such benefits
actually received by or made available to the Executive
shall be reported to the Company by the Executive);
(vi) if the Executive would have become
entitled to benefits under the Company's postretirement
health care or life insurance plans, as in effect
immediately prior to the Effective Date (or, if there
is a Merger Date, immediately prior to the Merger Date)
or the Date of Termination (whichever is more favorable
to the Executive), had the Executive's employment
terminated on the date which is thirty-six (36) months
after the Date of Termination, the Company shall
provide such postretirement health care or life
insurance benefits to the Executive and the Executive's
dependents commencing on the later of (A) the date on
which such coverage would have first become available
(disregarding for these purposes the thirty-six (36)
month period referred to above) and (B) the date on
which benefits described in subsection (v) of this
Section 7(e) shall terminate; and
(vii) the Company shall have no additional
obligations to the Executive under this Agreement
except to the extent otherwise provided in the
applicable plans and programs of the Company.
8. Gross-Up for Excise Tax. (a) Whether or not
_______________________
the Executive becomes entitled to any payments under Section
7 hereof, if any payments or benefits received or to be
received by the Executive (whether pursuant to Section 5
hereof or any other provision of this Agreement or any other
Plan, arrangement or agreement with the Company or, with
respect to his employment by the Company, with any other
person (such payments or benefits, excluding the Gross-Up
Payment described herein, being hereinafter referred to as
the "Total Payments") will be subject to any excise tax
imposed under section 4999 of the Internal Revenue Code of
1986, as amended (the "Excise Tax"), the Company shall pay
to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments.
15
(b) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) all of the Total Payments
shall be treated as "parachute payments" (within the meaning
of section 280G(b)(2) of the Code) unless, in the opinion of
Tax Counsel, a reasonable basis exists for determining that
such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, a reasonable basis
exists for determining that such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section
280G(b)(4)(B) of the Code) in excess of the "base amount"
(within the meaning of section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the
Executive's residence on the Date of Termination (or if
there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section
8), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and
local taxes.
(c) In the event that the Excise Tax is finally
determined to be less than the amount taken into account
hereunder in calculating the Gross-Up Payment, the Executive
shall repay to the Company, at the time that the amount of
such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive to the extent that such
repayment results in a reduction in Excise Tax and/or a
federal, state or local income or employment tax deduction)
plus interest on the amount of such repayment at 120% of the
rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up
16
Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of
such excess is finally determined. The Executive and the
Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
9. Mitigation. The Executive shall not be
__________
required to mitigate amounts payable pursuant to Section 7
hereof by seeking other employment or otherwise, nor, except
as provided in Section 7(e)(v), shall there be any offset
against such payments on account of (a) any remuneration
attributable to any subsequent employment that he may obtain
or (b) any claims the Company may have against the
Executive.
10. Noncompetition and Confidentiality.
__________________________________
(a) Noncompetition. Prior to, and for a period
______________
of one year following, termination of the Executive's
employment during the Term other than by the Company without
Cause or by the Executive for Good Reason, the 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; provided, however, nothing in this Section 10(a)
shall preclude the Executive from performing services solely
and exclusively for a division or subsidiary of such an
entity that is engaged in a noncompetitive business.
(b) Nondisclosure, Nonsolicitation and
___________________________________
Cooperation.
___________
(i) the 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
17
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 the
Executive is employed by the Company, or any subsidiary
or affiliate thereof in the ordinary course of the
performance of the Executive's duties;
(ii) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to induce any
employee or Insurance Agent (as defined below) employed
by or performing services for the Business to be
employed or perform services elsewhere, provided that
this covenant shall not preclude the Executive from
taking any actions during the Term that (x) are
intended to benefit the Company or any subsidiary or
affiliate and (y) do not benefit the Executive
financially other than as an employee or stockholder of
the Company;
(iii) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to induce any
insurance agent or agency, insurance broker, broker-
dealer or supplier of the Business to cease providing
services to the Business, provided that this covenant
shall not preclude the Executive from taking any
actions during the Term that (x) are intended to
benefit the Company or any subsidiary or affiliate and
(y) do not benefit the Executive financially other than
as an employee or stockholder of the Company; and
(iv) prior to, and for two years following,
termination of the Executive's employment during the
Term, the Executive shall not attempt to solicit, on
behalf of any person or entity other than the Business,
the trade of any individual or entity which, at the
time of the solicitation, is a customer of the
Business, or which the Business is undertaking
reasonable steps to procure as a customer at the time
of or immediately preceding termination of the Term;
provided, however, that this limitation shall only
________ _______
apply to (x) any product or service which is in
competition with a product or service of the Business
and (y) with respect to any customer with whom the
Executive has or had (by virtue of the Executive's
position or otherwise) a personal relationship.
18
Solely for purposes of subsection (b)(ii) of this Section
10, 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 the
________________
Executive's termination of the Executive's employment, the
Executive shall return to the Company all property of the
Company, and all copies thereof in the Executive's
possession or under his control.
(d) Intention of the Parties. If any provision
________________________
of Section 10 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 Section 10(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 materially breach any of those covenants
following termination of employment and such breach is not
cured (if curable) within ten (10) days following receipt of
written notification thereof that specifies the manner in
which the Company believes the Executive has breached such
covenants, the Company shall have no further obligation to
pay Executive any benefits otherwise payable under Sections
7(e)(iii), (v) and (vi) and the Company shall be entitled to
an injunction, restraining order or such other equitable
relief (without the requirement to post a bond) restraining
Executive from committing any violation of the covenants and
obligations contained in Section 10(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
19
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 the Executive prior to
engaging in any conduct otherwise prohibited by this Section
10, the Company may, in its sole discretion, waive in
writing, on such terms and conditions as it may deem
appropriate, any violation of this Section 10 which would
otherwise occur due to such conduct.
11. Indemnification; Attorneys' Fees. The
________________________________
Company shall indemnify the Executive to the full extent
authorized by law and the Charter and By-Laws of the
Company, as applicable, for all expenses, costs, liabilities
and legal fees which the Executive may incur in the
discharge or course of his duties hereunder. The Executive
shall be insured under the Company's Directors' and
Officers' Liability Insurance Policy as in effect from time
to time. The Executive shall be deemed a third party
beneficiary with respect to Section 7.6 of the Merger
Agreement and, as such, shall have the right to enforce such
provisions as if he were party to the Merger Agreement. In
connection with any dispute or proceeding arising under this
Agreement where the Executive is ultimately the
substantially prevailing party, the Company shall promptly
reimburse Executive for all costs, including without
limitation the reasonable attorneys' fees of any attorney of
the Executive's choosing, incurred by the Executive in any
such dispute or proceeding arising under this Agreement.
Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation
of this Section 11.
12. Successors; Binding Agreement.
_____________________________
(a) Company's Successors. The Company shall
____________________
require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in
this Section 12 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
This Agreement shall not otherwise be assignable by the
Company.
20
(b) Executive's Successors. This Agreement shall
______________________
not be assignable by the Executive. This Agreement and all
rights of the Executive hereunder shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. Upon the
Executive's death, all amounts to which he is entitled
hereunder, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there
be no such designee, to the Executive's estate.
13. Notices. For the purpose of this Agreement,
_______
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or received by facsimile or
three (3) days after mailing by United States certified
mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the
Executive's signature on the final page hereof and, if to
the Company, to the attention of the General Counsel except
where this Agreement provides otherwise. Notice of change
of address or addressee shall be effective only upon actual
receipt.
14. Disputes. This Agreement shall be construed
________
in accordance with and governed by the law of the
Commonwealth of Pennsylvania (without regard to principles
of conflict of laws). All claims and controversies related
to or stemming from this Agreement or the Executive's
employment with the Company, except actions for equitable
relief pending an arbitration award, shall be submitted to
binding arbitration in Blue Bell, Pennsylvania by a panel of
three neutral arbitrators under the Commercial Arbitration
Rules of the American Arbitration Association. Judgment
upon an award of the arbitrators may be entered and enforced
in any court having jurisdiction.
15. Miscellaneous. No provision of this
_____________
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition
or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Subject to the
21
provisions of Section 5(j) and 8 hereof, payments provided
for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and
any additional withholding to which the Executive has
agreed. The obligations of the Company and the Executive
under this Agreement which by their nature may require
either partial or total performance after the expiration of
the Term shall survive such expiration. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
16. Counterparts. This Agreement may be executed
____________
in one or more counterparts, each of which shall be deemed
to be an original but all of which together will constitute
one and the same instrument.
17. Entire Agreement. This Agreement between the
________________
Company and the Executive sets forth the entire agreement of
the parties hereto in respect of the subject matter
contained herein and supersedes, as of the Effective Date,
all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral
or written, by the parties hereto in respect of the subject
matter contained herein; and any prior agreement of the
parties hereto in respect of the subject matter contained
herein shall be terminated and canceled as of the Effective
Date.
22
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on March 30, 1996 to be effective as of
the Effective Date.
U.S. Healthcare
By:_______________________
Name:
Title:
__________________________
Michael Cardillo
__________________________
__________________________
__________________________
Address of Executive
23
Exhibit 10.15
The Supplemental Incentive Savings Plan
for Certain Employees of
Aetna Services, Inc.
TABLE OF CONTENTS
_________________
Article Page
_______ ____
I. DEFINITIONS AND CONSTRUCTION....................... 3
II. DEFERRAL OF PAY AND EMPLOYER CONTRIBUTIONS......... 7
III. PAYMENT OF DEFERRED AMOUNTS........................ 10
IV. MANAGEMENT OF THE PLAN............................. 13
V. AMENDMENT AND TERMINATION.......................... 15
VI. ADOPTION BY AFFILIATE.............................. 16
VII. MISCELLANEOUS...................................... 17
Appendix
________
A. LIST OF PHYSICIAN GROUPS
B. LIST OF PARTICIPATING COMPANIES
Aetna Inc. (the "Company") hereby amends and restates,
as its plan and its obligation, The Supplemental Incentive
Savings Plan for Certain Employees of Aetna Services, Inc.,
formerly Aetna Life and Casualty Company, (the "Employer")
established by the Employer effective August 30, 1984. This
Plan is intended to provide benefits which supplement the
benefits provided under The Aetna Life and Casualty Company
Incentive Savings Plan (the "ISP"): (1) benefits in excess of
those permitted to be provided after application of one or
more limits applicable to the ISP under the Internal Revenue
Code of 1986 (the "Code"); (2) benefits for the period prior
to eligibility for participation under the ISP; and
(3) benefits provided at the direction of the Board of
Directors of the Company or the Board of Directors of
Employer but which are not provided under the ISP.
This document constitutes two separate plans, one of
which (the "Mirror Plan") provides certain benefits, as more
specifically set forth in Section 2.1(a) hereof, that are
attributable solely to the benefits, during the period of
eligibility to participate under the ISP, that would be
provided under the ISP but for the application of sections
401(a)(17) or 402(g) of the Code, and one of which (the
"Supplemental Plan") provides benefits, as more specifically
set forth in Sections 2.1(b) and (c) hereof, for the period
prior to eligibility for participation under the ISP and such
additional benefits as are provided at the direction of the
Board of Directors of the Company or the Employer but which
- 2 -
are not provided under the ISP. The Mirror Plan and
Supplemental Plan shall constitute separate plans for
(without limitation) the purposes of Public Law 104-95
governing state taxation of deferred compensation. The two
plans shall be referred to herein in the aggregate as the
Plan.
This instrument sets forth provisions which constitute
the Plan as amended and restated effective July 1, 1996.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 "Account" means, for any Participant, the account
established for the Participant under Section 2.3. Each
Account will consist of two sub-accounts, the Mirror Sub-
Account and the Supplemental Sub-Account.
1.2 "Account Balance" means, for any Participant as of
any date, the aggregate amount reflected in the Participant's
Mirror Sub-Account and the Participant's Supplemental Sub-
Account.
1.3 "Affiliate" means any entity which, with the
Company, constitutes a group of trades or businesses under
common control, a controlled group of corporations, an
affiliated service group, or a group of corporations
otherwise required to be aggregated, as provided in sections
414(b), (c), (m), and (o) of the Code, respectively.
1.4 "Beneficiary" means the person or persons
designated from time to time in writing by a Participant to
receive payment under the Plan after the death of such
- 3 -
Participant or, in the absence of such designation or in the
event that such designated person or persons predeceases the
Participant, the Participant's estate.
1.5 "Board" means the Board of Directors of the
Company.
1.6 "Code" means the Internal Revenue Code of 1986, as
amended.
1.7 "Company" means Aetna Inc. or any successor by
merger, consolidation, purchase or otherwise.
1.8 "Effective Date" means the effective date of this
amended and restated Plan, July 1, 1996.
1.9 "Eligible Employee" means, for any Plan Year, an
Employee who satisfies either of the following:
(a) an employee whose benefit under the ISP for the Plan
Year is limited by the application of section 401(a)(17) or
402(g) of the Code as set forth in Section 2.1(a) hereof; or
(b) an employee whose terms of employment, as set forth
in a written agreement between the Employee and the Employer
or a Participating Company, allow the Employee to defer Pay
under this Plan prior to the time the Employee would be
eligible to participate under the ISP or provide explicitly
for a specified benefit to be provided under this Plan.
Notwithstanding the foregoing, no employee of a Physician
Group shall be an Eligible Employee.
1.10 "Employee" means any person who is actively
employed by the Employer or a Participating Company, other
than as a general agent, a broker, an independent contractor,
- 4 -
or a leased employee (within the meaning of Section 414(n)(2)
of the Code).
1.11 "Employer" means Aetna Services, Inc., formerly
Aetna Life and Casualty Company.
1.12 "ISP" means the Aetna Life and Casualty Company
Incentive Savings Plan.
1.13 "Mirror Sub-Account" means that portion of a
Participant's Account that is credited with benefits provided
by Section 2.1(a) hereof.
1.14 "Participant" means an Eligible Employee or former
Eligible Employee who has an Account Balance.
1.15 "Participating Company" means any Affiliate which
either (a) is listed in Appendix B on the Effective Date, or
(b) after the Effective Date, adopts the Plan in accordance
with the provisions of Article VI hereof. If the Plan is
only adopted by a Participating Company with regard to
certain divisions, only those divisions shall be deemed the
Participating Company and the other divisions of such
Participating Company shall not be deemed to be Participating
Companies hereunder. Notwithstanding the foregoing, no
Physician Group shall be eligible to become a Participating
Company. On the date that a Participating Company ceases to
be an Affiliate, it shall also cease to be a Participating
Company.
1.16 "Pay" means, for any Eligible Employee for any Plan
Year, the amount determined using the definition of "Pay" set
forth in the ISP.
- 5 -
1.17 "Physician Group" means any Affiliate, other than
Aetna Physician Management Corporation ("APMC"), which
employs primarily licensed physicians, physician assistants
or nurse practitioners, including but not limited to those
entities set forth in Appendix A.
1.18 "Plan" means the Aetna Inc. Supplemental Incentive
Savings Plan, as set forth herein and as amended from time to
time.
1.19 "Plan Year" means the calendar year.
1.20 "Supplemental Sub-Account" means that portion of a
Participant's Account that is credited with benefits provided
by Sections 2.1(b) and (c) hereof.
1.21 "Valuation Date" means the last business day of
each calendar month.
1.22 Construction. The masculine gender, where
____________
appearing in the Plan, shall be deemed to include the
feminine gender, unless the context clearly indicates to the
contrary. Where appropriate, words used in the singular
include the plural and words used in the plural include the
singular. The words "hereof," "herein," "hereunder" and
other similar compounds of the word "here" shall mean and
refer to this entire Plan, not to any particular provision or
section. Capitalized terms used herein and not defined above
shall have the meanings set forth in the ISP.
- 6 -
ARTICLE II
DEFERRAL OF PAY
2.1 Deferral of Pay and Incentive Contributions.
___________________________________________
(a) During any Plan Year, each individual who is an
Eligible Employee for the Plan Year shall have credited to
the Mirror Sub-Account of the Eligible Employee's Account the
difference between (1) the amount that would have been
credited to the Eligible Employee's Deferral Account and
Incentive Contribution Account pursuant to the Eligible
Employee's Compensation Deferral Agreement but for (i) the
application of Section 401(a)(17) of the Code, or (ii) the
imposition of the cap provided under Section 402(g) of the
Code for the Plan Year on contributions to the Eligible
Employee's Deferral Account, and (2) the amount that actually
was credited to the Eligible Employee's Deferral Account and
Incentive Contribution Account during the Plan Year.
(b) Each individual who is an Eligible Employee for a
Plan Year and who is not yet eligible to participate under
the ISP for the Plan Year shall be entitled to make an
election regarding deferral of pay on a form and in the
manner prescribed by the Company for this purpose. The
election shall be made after the date on which the individual
becomes an Eligible Employee. The election shall designate
the amount by which the Eligible Employee's Pay for the
portion of the Plan Year that the Eligible Employee is not
___
eligible to participate under the ISP shall be prospectively
reduced for contribution to the Plan. Such amount shall be
credited to the Supplemental Sub-Account of the Eligible
- 7 -
Employee's Account in accordance with the procedures
established by the Company. In addition, the corresponding
amount that would have been credited to the Eligible
Employee's Incentive Contribution Account if the Eligible
Employee's deferral of pay had been made pursuant to the ISP
shall be credited to the Eligible Employee's Supplemental
Sub-Account under this Plan.
(c) In addition to the amounts determined in accordance
with Subsections 2.1(a) and (b) to be contributed to a
Participant's Mirror Sub-Account and Supplemental Sub-
Account, respectively, there shall be credited to a
Participant's Supplemental Sub-Account for any Plan Year such
other amount as may be determined by the Board to be
contributed to the Participant's Supplemental Sub-Account for
such Plan Year. Any corresponding reductions to or
deductions from the compensation otherwise payable to the
Participant shall be made as specified by the Board and as
agreed to by the Participant.
2.2 Payment of FICA and Other Taxes. The compensation
_______________________________
currently payable to an Eligible Employee during any period
shall be reduced by an amount equal to the FICA and other
taxes required to be withheld by the Employer or the
applicable Participating Company during that period with
respect to the amount deferred pursuant to Section 2.1.
2.3 Account; Credits and Debits; Earnings. The Company
_____________________________________
shall establish on its books an Account for each Participant.
Each Account shall consist of a Mirror Sub-Account and a
- 8 -
Supplemental Sub-Account. Amounts deferred on behalf of a
Participant, or allocated to a Participant, pursuant to
Section 2.1 shall be credited to the Participant's
appropriate sub-account on the date on which such amounts
would have been credited to the Participant's Deferral
Account and Incentive Contribution Account under the ISP had
such amounts been payable under the ISP. In addition, as of
each Valuation Date, each Participant's Account shall be
credited with an incremental amount equal to the amount that
would have been earned had the amounts credited to the
Participant's Account been invested in an investment option
offered by the Company. At the present time, the sole
investment option offered by the Company for this Plan is the
Stable Value Option (formerly known as the Interest
Accumulation Account). The Company reserves the right to
amend the investment options in the future and, if
appropriate, to provide a method for Participants to elect
investment options that is consistent with the method
provided under the ISP. Any payments made to or on behalf of
the Participant and/or a Beneficiary shall be debited from
the Participant's Account.
2.4 Funded Nature of Account. No assets shall be
________________________
segregated or earmarked with respect to any Account, and no
Participant or Beneficiary shall have any right to assign,
transfer, pledge or hypothecate an interest or any portion
thereof in the Participant's Account. The Plan and the
crediting of Accounts hereunder shall not constitute a trust
- 9 -
or a funded arrangement of any sort and shall be merely for
the purpose of recording an unsecured contractual obligation
of each obligated party; provided, however, that the Employer
and the Company reserve the right to meet the obligations
created under the Plan through one or more trusts or other
agreements.
2.5 Reduction of Benefit. If a Participant breaches an
____________________
obligation to the Company, the Employer or a Participating
Company with respect to the payment of a specific sum
of money, the Company, the Employer or the applicable
Participating Company may reduce any benefits payable to such
Participant under this Plan, in the manner of setoff or
otherwise, to the extent of such obligation and any costs
incurred with respect thereto.
In addition, the Company, the Employer and the
Participating Companies do not waive any rights to reduce
benefits, including but not limited to setoff rights, which
such entities may have under applicable law or a prior
written agreement between all or any of them and an Employee,
all of which rights are enforceable independent of the terms
of this Plan.
ARTICLE III
PAYMENT OF DEFERRED AMOUNTS
3.1 Election as to Time of Payment. Each Participant
______________________________
who is an Employee on the date this restated Plan is executed
and each individual who thereafter becomes an Eligible
Employee shall make an election, on a form and in the manner
- 10 -
prescribed by the Company for this purpose, specifying the
time at which the Participant's Account Balance is to be paid.
Such election shall be made: (i) with respect to a
Participant who is an Employee on the date this restated Plan
is executed, by October 1, 1996; and (ii) with respect to an
individual who becomes an Eligible Employee after the date
this restated Plan is executed, not more than 90 days after
the date on which the individual becomes an Eligible
Employee. Any election which does not comply with these time
limits will be deemed an election pursuant to Section 3.2 and
will be effective only if it complies with the rules set
forth therein.
Except as otherwise provided in Section 3.2 and Section
3.4, payment of a Participant's Account Balance shall be made
to the Participant or the Participant's Beneficiary in a lump
sum as soon as practicable after the Valuation Date on or
next following the time specified for payment in the election
made by the Participant under this Section 3.1.
In the absence of an election which complies with either
Section 3.1 or Section 3.2, a Participant's Account Balance
shall be paid in a lump sum as soon as practicable after the
Valuation Date on or next following the Participant's 65th
birthday.
3.2 Ability to Change Election. Notwithstanding any
__________________________
election that may have been made by a Participant pursuant to
Section 3.1, a Participant may elect to receive payment of
the Account Balance at a date other than that specified by
- 11 -
the Participant in the election made pursuant to Section 3.1;
provided however that:
(a) an election made under this Section 3.2 shall apply
to Participant's entire Account Balance notwithstanding any
prior elections; and
(b) if the Participant's Termination from Service
occurs within one year and a day after the date on which the
election to change the time of payment is made, the election
shall not be honored and the Participant's Account Balance
shall be distributed in accordance with Section 3.1.
3.3 Form and Time of Payment-- Certain Terminated
_____________________________________________
Participants.
____________
This Section 3.3 applies to Participants who cease to be
Employees prior to October 1, 1996 without having made an
election pursuant to Section 3.1 hereof. Payment of the
Account Balance of any such Participant shall be made in a
lump sum at the same time as payment of the Participant's
benefits begins under the ISP, unless the Participant has
otherwise elected, prior to termination of employment, to
receive payment at a later date. To the extent that the
payment of a Participant's benefit under the ISP is suspended
pursuant to the provisions of the ISP, benefits under this
Plan shall be suspended as well.
3.4 Payment in the Event of Participant's Death.
___________________________________________
Notwithstanding any election that may have been made by a
Participant pursuant to Section 3.1 or 3.2, any Account
Balance that has not been paid to the Participant as of the
date of the Participant's death shall be paid to the
- 12 -
Participant's Beneficiary in a lump sum as soon as
practicable after the Valuation Date on or next following the
date on which the Company receives notification of the
Participant's death.
3.5 Acceleration of Payment. Notwithstanding any other
_______________________
provision of this Plan to the contrary, the Company in its
sole discretion may accelerate the payment of Account
Balances: (a) to all or any group of similarly situated
Participants, whether before or after the Participants'
termination of service, in response to changes in the tax
laws or accounting principles; (b) to any Participant in the
event of an extreme hardship of such Participant that cannot
be relieved from any other financial resources of such
Participant; or (c) to any Participant in the event of other
compelling circumstances.
ARTICLE IV
MANAGEMENT OF THE PLAN
4.1 Administrator. The Employer shall be the
_____________
Administrator with the sole responsibility for the
administration of the Plan. The Administrator may delegate
to any person or entity any powers or duties of the
Administrator under the Plan. To the extent of any such
delegation, the delegatee shall become responsible for
administration of the Plan, and references to the
Administrator shall apply instead to the delegatee. Any
action by the Employer assigning any of its responsibilities
as Administrator to specific persons who are directors,
- 13 -
officers, or employees of the Employer, the Company, or the
Participating Companies shall not constitute delegation of
the Administrator's responsibilities but rather shall be
treated as the manner in which the Employer has determined
internally to discharge such responsibility.
4.2 Powers and Duties of the Administrator. The
______________________________________
Administrator shall have such duties and powers as may be
necessary to discharge its duties hereunder, including, but
not by way of limitation, the following:
(a) to construe and interpret the Plan, decide all
questions of eligibility, determine the status and rights of
Participants, and determine the amount, manner and time of
payment of any benefits hereunder;
(b) to receive from the Participating Companies and
from Participants such information as shall be necessary for
the proper administration of the Plan;
(c) to furnish the Participating Companies, upon
request, such annual reports with respect to the
administration of the Plan as are reasonable and appropriate;
(d) to appoint or employ individuals to assist in the
administration of the Plan and any other agents it deems
advisable, including legal and actuarial counsel;
(e) to defend and initiate any lawsuit on behalf of the
Plan or the Eligible Employees if the Administrator deems it
reasonably necessary to protect the Plan or the Participants.
If there shall arise any misunderstanding or ambiguity
concerning the meaning of any of the provisions of the Plan
- 14 -
arising out of the administration thereof, the Administrator
shall have the sole right to construe such provisions.
Subject to the limitations of the Plan and applicable law,
the Administrator may make such rules and regulations as it
deems necessary or proper for the administration of the Plan
and the transaction of business thereunder.
The decisions of the Administrator with respect to any
matter it is empowered to act on shall be made by it in its
sole discretion based on the Plan documents and shall be
final, conclusive and binding on all persons.
ARTICLE V
AMENDMENT AND TERMINATION
5.1 Amendments. The Company reserves the right to
__________
amend this Plan from time to time in any respect, including
without limitation a prospective reduction in accrual of
benefits. See Section 5.4 regarding prohibition of
retroactive reduction of benefits accrued under this Plan.
5.2 Action by Company. Any amendments to this Plan by
_________________
the Company shall be made in writing and executed by the
Senior Vice President, Aetna Human Resources or other officer
holding such position, or by the President or Chief Executive
Officer of the Company. Neither the consent of any Employee
nor that of any payee is required for any amendment to the
Plan.
5.3 Termination by Company. The Plan may be terminated
______________________
in whole or in part by the Company at any time. The Plan as
a whole shall be terminated only pursuant to a resolution of
- 15 -
the Board of Directors of the Company. The Plan may be
terminated in part in the same manner as is prescribed for
the adoption of amendments. Neither the consent of any
Employee nor that of any payee is required for any
termination of the Plan.
5.4 Effect of Amendment or Termination by Company. Any
_____________________________________________
amendment or termination of this Plan by the Company shall be
effective prospectively and shall not serve to retroactively
reduce any right to a benefit accrued under this Plan up to
the date of such amendment or termination.
ARTICLE VI
ADOPTION BY AFFILIATE
6.1 Adoption by Affiliate. Any Affiliate, other than a
_____________________
Physician Group, may, with the consent of the Company, become
a Participating Company under the Plan by a resolution of the
Board of Directors of the Affiliate under which:
(a) The Affiliate shall agree to be bound by all the
provisions of the Plan in the manner set forth herein and any
amendments hereto; and
(b) The Affiliate shall agree to pay its share of
expenses of the Plan as they may be determined by the Company
from time to time.
6.2 Termination by a Participating Company. Any
______________________________________
Participating Company may at any time elect to terminate its
participation under the Plan with respect to all or any group
of the Participating Company's Employees. Notwithstanding
the provisions of Article V, a Participating Company shall
terminate its participation under the Plan by resolution of
the Board of Directors of the Participating Company. The
termination of participation by a Participating Company shall
- 16 -
not relieve the Participating Company of its liabilities
under this Plan, including but not limited to those
liabilities imposed under Section 7.2 hereof.
ARTICLE VII
MISCELLANEOUS
7.1 Exclusive Benefit. The Plan is maintained for the
_________________
exclusive benefit of Participants.
7.2 Source of Payment. All benefits under the Plan
_________________
shall be paid exclusively by the Employer or the applicable
Participating Company from its general assets, provided that
the Company shall be liable for all benefits under the Plan.
7.3 Rights of Employees. Nothing contained herein
___________________
shall be deemed to give any Employee the right to be retained
in the service of the Employer or the applicable
Participating Company or to interfere with the right of the
Employer or the applicable Participating Company to discharge
such Employee at any time, nor shall it be deemed to give the
Employer or the applicable Participating Company the right to
require the Employee to remain in its service, nor shall it
interfere with the right of the Employer or the applicable
Participating Company to terminate service at any time.
7.4 Headings. The headings of the Plan are inserted
________
for convenience of reference only and shall have no effect
upon the meaning of the provisions hereof.
- 17 -
7.5 Severability. If any provision of this Plan is
____________
held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision, and
this Plan shall be construed and enforced as if such
provision were omitted.
7.6 Alienation of Benefits. Except as otherwise
______________________
provided by law, and consistent with Section 2.4 hereof, no
benefit under this Plan may be voluntarily or involuntarily
assigned or alienated.
7.7 Lost Distributees. Any benefit payable hereunder
_________________
shall be deemed forfeited if the distributee to whom payment
is due cannot be located, provided that such benefit shall be
reinstated if a claim is made by the distributee for the
forfeited benefit within two years of the date the forfeited
benefit was payable pursuant to Sections 3.1, 3.2 and 3.3.
7.8 Governing Law. This Plan shall be construed
_____________
according to the laws of the State of Connecticut to the
extent not pre-empted by Federal law.
- 18 -
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its duly authorized officer this 22nd day of August,
1996.
AETNA INC.
By:/s/ Mary A. Champlin
____________________
Mary Ann Champlin
Senior Vice President
Aetna Human Resources
Attest:
\s\ Michele G. Kostin
_____________________
- 19 -
Appendix A
LIST OF PHYSICIAN GROUPS
Airport Managed Care, Inc.
Gateway Medical Group I, Inc.
Gateway Women's Health Center, A Medical Group, Inc.
Gateway Medical Group XI, Inc.
Concord Medical Group, Inc.
Gateway Medical Group IV, Inc.
Gateway Orthopedic Medical Group, Inc.
GMG-LAX Medical Group, Inc.
Rancho Medical Group, Incorporated
Las Posas Family Practice Medical Group, A Professional
Corporation
Ventura Private Practice Group, Inc.
Lombard Medical Group, Inc.
Santa Clarita Medical Group, Inc.
a/k/a Henry Mayo Newhall Family Medical Center
North Texas Dental Care Associates, P.A.
Ohio Primary Care Associates, P.A., Inc.
Pennsylvania Primary Care Associates, P.C.
Mid Atlantic Primary Care Associates, P.C.
North Carolina Primary Care Associates, P.C.
New Jersey Primary Care Associates, Inc.
Wheaton Clinic, S.C.
Chicago Medical Associates, S.C.
Atlanta Primary Care Associates
North Texas Primary Care
- 20 -
Appendix B
LIST OF PARTICIPATING COMPANIES
A. B. C.
Tax
Identification
Schedule of Participating Number of End of
Companies Employer Year
Aetna Service, Inc.** 06-0843808 12/31
The Aetna Casualty and 06-6033504 12/31
Surety Company*
Aetna Life Insurance
Company 06-6033492 12/31
The Standard Fire 06-6033509 12/31
Insurance Company*
Aetna Life Insurance and
Annuity Company 71-0294708 12/31
Human Affairs
International, Incorporated 87-0300539 12/31
*Coverage ceased effective April 2, 1996. Travelers/Aetna
Property Casualty Corporation ("TAPCO") has assumed liabilities
of, and agreed to make all payments to, employees of this
Participating Company.
**Formerly Aetna Life and Casualty Company.
- 21 -
Exhibit 10.16
The Supplemental Pension Benefit Plan
for Certain Employees of
Aetna Services, Inc.
TABLE OF CONTENTS
_________________
Article Page
_______ ____
I. DEFINITIONS AND CONSTRUCTION.................. 3
II. BENEFITS...................................... 8
III. MANAGEMENT OF THE PLAN........................ 12
IV. AMENDMENT AND TERMINATION..................... 14
V. ADOPTION BY AFFILIATE......................... 15
VI. MISCELLANEOUS................................. 16
Appendix
________
A. LIST OF PHYSICIAN GROUPS
B. LIST OF HIGHLY LEVERAGED EMPLOYEES
C. LIST OF PARTICIPATING COMPANIES
Aetna Inc. (the "Company") hereby amends and restates,
as its plan and its obligation, The Supplemental Pension
Benefit Plan for Certain Employees of Aetna Services, Inc.,
formerly Aetna Life and Casualty Company, (the "Employer")
established by the Employer effective August 30, 1984. This
Plan is intended to provide benefits which supplement the
benefits provided under The Retirement Plan for Employees of
Aetna Life and Casualty Company (the "Retirement Plan"): (1)
benefits in excess of those permitted to be provided after
application of one or more limits applicable to the
Retirement Plan under the Internal Revenue Code of 1986 (the
"Code"); (2) benefits attributable to certain elements of the
employee's compensation not taken into account in determining
the employee's pension under the Retirement Plan; and (3)
benefits provided at the direction of the Board of Directors
of the Company or the Board of Directors of Employer. That
portion of the Plan that provides benefits that are
attributable solely to the benefits that would be provided
under the Retirement Plan but for the application of the
limitations of Section 415 of the Code shall be treated as a
separate plan which is an excess benefit plan within the
meaning of Section 3(36) of the Employee Retirement Income
Security Act of 1974, as amended. This instrument sets forth
provisions which constitute the Plan as amended and restated
effective July 1, 1996.
- 2 -
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 "Affiliate" means any entity which, with the
Company, constitutes a group of trades or businesses under
common control, a controlled group of corporations, an
affiliated service group, or a group of corporations
otherwise required to be aggregated, as provided in Sections
414(b), (c), (m), and (o) of the Code, respectively.
1.2 "Beneficiary" means the person or persons
designated from time to time in writing by a Participant as a
beneficiary under the Retirement Plan.
1.3 "Board" means the Board of Directors of the
Company.
1.4 "Code" means the Internal Revenue Code of 1986, as
amended.
1.5 "Company" means Aetna Inc. or any successor by
merger, consolidation, purchase or otherwise.
1.6 "Earnings" shall be as defined in the Retirement
Plan, except without regard to the cap imposed therein
pursuant to Section 401(a)(17) of the Code, and provided
further that:
(a) With respect to any awards made to a
Participant under the Company's Management Incentive Plan,
the following shall apply:
(1) an award paid in cash and not deferred by
the Participant shall be included in Earnings when paid; and
- 3 -
(2) an award deferred by the Participant
shall never be included in Earnings (either when earned or
when paid), unless the Participant's Earnings for the year in
which the award was earned, without regard to such award,
exceed the limit established by Section 401(a)(17) of the
Code, in which case the award shall be allocated to the
Participant's Earnings over the twelve month performance year
prior to the earliest date on which the award would have been
payable if the Participant had so elected; and
(b) With respect to Highly Leveraged Employees, the
following adjustment shall be made:
(1) For the period July 1, 1996 through June 30,
1997, the Earnings of any Participant taken into account
under the Plan shall not exceed $400,000;
(2) For the period July 1, 1997 through December
31, 1997, the Earnings of any Participant taken into account
under the Plan shall not exceed an amount equal to the limit
on compensation imposed on qualified plans by Section
401(a)(17) of the Code for 1997;
(3) For 1998 and subsequent Plan Years, the
Earnings of any Participant taken into account under the Plan
shall not exceed an amount equal to twice the limit on
compensation imposed on qualified plans by Section 401(a)(17)
of the Code for that Plan Year.
Earnings shall be determined as if no elective
salary reduction had been made pursuant to Sections 125 and
401(k) of the Code.
- 4 -
1.7 "Effective Date" means the effective date of this
amended and restated Plan, July 1, 1996.
1.8 "Eligible Employee" means, for any Plan Year, an
individual who is actively employed by the Employer or a
Participating Company and an Eligible Employee under the
Retirement Plan, and: (1) whose benefit under the Retirement
Plan is limited by the application of Section 401(a)(17) or
415 of the Code, (2) who earns or has earned awards under the
Employer's Management Incentive Plan or plans of similar
nature providing for performance bonuses to employees at mid-
level management and above which are not taken into account
in determining the Employee's pension under the Retirement
Plan and which are included in the definition of Earnings in
this Plan, or (3) who has entered into an agreement with the
Employer or a Participating Company that is ratified by the
Employer prior to July 19, 1996 or by the Company thereafter
and that provides for an award to the Employee of additional
years of service, compensation or other amounts for the
purpose of determining a pension benefit but which is not
taken into account in determining that benefit under the
Retirement Plan. Notwithstanding the foregoing, no employee
of a Physician Group shall be an Eligible Employee.
1.9 "Employer" means Aetna Services, Inc., formerly
Aetna Life and Casualty Company.
1.10 "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
- 5 -
1.11 "Excess Benefit Plan" means an excess benefit plan
within the meaning of Section 3(36) of ERISA.
1.12 "Highly Leveraged Employees" means employees whose
compensation is highly leveraged by virtue of the material
emphasis by the Employer or a Participating Company, as the
case may be, on variable or incentive pay, and who fall
within one of the following groups: (a) Aeltus Investment
Management investment and sales employees; (b) Portfolio
Management Group investment employees (excluding real estate
employees whose incentive targets are based on a company-wide
bonus plan); (c) Aetna Retirement Services sales management
and sales employees. Appendix B contains a non-exclusive
list of Highly Leveraged Employees, but although it is the
intention of the Company to update Appendix B from time to
time, the failure to list an employee designated as a Highly
Leveraged Employee will not prevent the inclusion of such
employee as a Highly Leveraged Employee.
1.13 "Participant" means an Eligible Employee or former
Eligible Employee.
1.14 "Participating Company" means any Affiliate which
either (a) is listed in Appendix C on the Effective Date, or
(b) after the Effective Date, adopts the Plan in accordance
with the provisions of Article V hereof. If the Plan is only
adopted by a Participating Company with regard to certain
divisions, only those divisions shall be deemed the
Participating Company and the other divisions of such
Participating Company shall not be deemed to be Participating
- 6 -
Companies hereunder. Notwithstanding the foregoing, no
Physician Group shall be eligible to become a Participating
Company. On the date that a Participating Company ceases to
be an Affiliate, it shall also cease to be a Participating
Company.
1.15 "Physician Group" means any Affiliate, other than
Aetna Physician Management Corporation ("APMC"), which
employs primarily licensed physicians, physician assistants
or nurse practitioners, including but not limited to those
entities set forth in Appendix A.
1.16 "Plan" means the Aetna Inc. Supplemental Pension
Benefit Plan, as set forth herein and as amended from time to
time. To the extent that Supplemental Benefits are provided
to Participants solely as a result of the application of the
limitations of Section 415 of the Code in the determination
of such Participants' benefits under the Retirement Plan, the
Plan shall be an Excess Benefit Plan which shall be a
separate plan hereunder but shall be included in the
definition of "Plan."
1.17 "Plan Year" means the calendar year.
1.18 "Retirement Plan" means The Retirement Plan for
Employees of Aetna Life and Casualty Company.
1.19 "Supplemental Benefit" means the benefit provided
under this Plan.
1.20 Construction. The masculine gender, where
____________
appearing in the Plan, shall be deemed to include the
feminine gender, unless the context clearly indicates to the
- 7 -
contrary. Where appropriate, words used in the singular
include the plural and words used in the plural include the
singular. The words "hereof," "herein," "hereunder" and
other similar compounds of the word "here" shall mean and
refer to this entire Plan, not to any particular provision or
Section. Capitalized terms used herein and not defined above
shall have the meanings set forth in the Retirement Plan.
ARTICLE II
BENEFITS
2.1 Payment of Benefits. At the same time and in the
___________________
same manner as any monthly pension benefit is paid from the
Retirement Plan to or on behalf of a Participant, a
Supplemental Benefit in an amount determined in accordance
with Section 2.2 shall be paid from this Plan to the
Participant or the Participant's Beneficiary, as applicable.
The Supplemental Benefit shall be paid only at the same time
and in the same manner as a Participant's benefit is paid
under the Retirement Plan. To the extent that the payment of
a Participant's benefit under the Retirement Plan is
suspended pursuant to the provisions of the Retirement Plan,
Supplemental Benefits shall be suspended as well.
2.2 Amount of Benefits.
__________________
(a) The amount of any monthly Supplemental Benefit shall
equal the difference between:
(1) the benefit that would have been paid from the
Retirement Plan during that month (after application of the
- 8 -
cost-of-living adjustment under the Retirement Plan) to or on
behalf of the Participant if:
(A) Sections 401(a)(17) and 415 of the Code
did not apply to the calculation,
(B) Earnings as defined herein were used in the
calculation, and
(C) any awards of additional years of
service, compensation or other amounts that were made to the
Participant for the purpose of determining a pension benefit
were taken into account, provided, however, that any such
award must be made in a written contract or plan between the
Participant and the Participant's employer and ratified by
the Employer prior to July 19, 1996 or by the Company
thereafter; and
(2) the benefit that is paid from the Retirement
Plan during that month (after application of the cost-of-
living adjustment under the Retirement Plan) to or on behalf
of the Participant.
(b) The amount of any Supplemental Benefit payable to a
Participant under the portion of the Plan that is an Excess
Benefit Plan shall be determined taking into account any
actuarial adjustments to the limits applicable under Section
415 of the Code and the terms of the Retirement Plan on the
basis of the form and time of payment of the Participant's
benefit under the Retirement Plan.
2.3 Payment of FICA and Other Taxes.
_______________________________
- 9 -
(a) If, under applicable law and regulations, FICA and
other taxes are required to be withheld by the Employer or
the applicable Participating Company with respect to a
Supplemental Benefit earned by a Participant during any
period that Supplemental Benefits are not currently being
paid to the Participant, then the compensation otherwise
currently payable to a Participant from an Employer during
such period shall be reduced by an amount equal to such FICA
and other taxes. To the extent that the compensation
currently payable to a Participant during any such period is
insufficient to permit an amount equal to the FICA and other
taxes required to be withheld by the Employer during that
period to be withheld from such current compensation, the
Participant shall be notified by the Company and shall
provide the Company with a check in an amount equal to the
difference between the amount of FICA and other taxes
required to be withheld on behalf of the Participant during
the period and the amount the Employer was otherwise able to
withhold during the period.
(b) If, under applicable law and regulations, FICA and
other taxes are required to be withheld by the Employer for
any period with respect to a Supplemental Benefit earned by
the Participant during any period that Supplemental Benefits
are currently being paid to the Participant, then the
Supplemental Benefit otherwise currently payable to a
Participant during such period shall be reduced by an amount
equal to such FICA and other taxes.
- 10 -
2.4 Excess Benefit Plan. All Supplemental Benefits
___________________
payable solely by reason of the application of the
limitations of Section 415 of the Code to a Participant's
benefit under the Retirement Plan shall be provided from the
separate plan created herein that is an Excess Benefit Plan.
2.5 Unfunded Nature of Benefit. No assets shall be
__________________________
segregated or earmarked with respect to any Participant and
no Participant or Beneficiary shall have any right to assign,
transfer, pledge or hypothecate an interest or any portion
thereof in any benefit payable hereunder. The Plan shall not
constitute a trust or a funded arrangement of any sort and
shall be merely for the purpose of recording an unsecured
contractual obligation of each obligated party; provided,
however, that the Employer and the Company reserve the right
to meet the obligations created under the Plan through one or
more trusts or other agreements.
2.6 Reduction of Benefit. If a Participant breaches an
____________________
obligation to the Company, the Employer or a Participating
Company with respect to the payment of a specific sum of
money, the Company, the Employer or the applicable
Participating Company may reduce any benefits payable to such
Participant under this Plan, in the manner of setoff or
otherwise, to the extent of such obligation and any costs
incurred with respect thereto.
In addition, the Company, the Employer and the
Participating Companies do not waive any rights to reduce
benefits, including but not limited to setoff rights, which
- 11 -
such entities may have under applicable law or a prior
written agreement between all or any of them and an Employee,
all of which rights are enforceable independent of the terms
of this Plan.
ARTICLE III
MANAGEMENT OF THE PLAN
3.1 Administrator. The Employer shall be the
_____________
Administrator with the sole responsibility for the
administration of the Plan. The Administrator may delegate
to any person or entity any powers or duties of the
Administrator under the Plan. To the extent of any such
delegation, the delegatee shall become responsible for
administration of the Plan, and references to the
Administrator shall apply instead to the delegatee. Any
action by the Employer assigning any of its responsibilities
as Administrator to specific persons who are all directors,
officers, or employees of the Employer, the Company, or the
Participating Companies shall not constitute delegation of
the Administrator's responsibilities but rather shall be
treated as the manner in which the Employer has determined
internally to discharge such responsibility. The
Administrator shall not be a fiduciary (within the meaning of
Section 3(21) of ERISA) with respect to the portion of the
Plan that is an Excess Benefit Plan.
3.2 Powers and Duties of the Administrator. The
______________________________________
Administrator shall have such duties and powers as may be
- 12 -
necessary to discharge its duties hereunder, including, but
not by way of limitation, the following:
(a) to construe and interpret the Plan, decide all
questions of eligibility, determine the status and rights of
Participants, and determine the amount, manner and time of
payment of any benefits hereunder;
(b) to receive from the Participating Companies
and from Participants such information as shall be necessary
for the proper administration of the Plan;
(c) to furnish the Participating Companies, upon
request, such annual reports with respect to the
administration of the Plan as are reasonable and appropriate;
(d) to appoint or employ individuals to assist in
the administration of the Plan and any other agents it deems
advisable, including legal and actuarial counsel;
(e) to defend and initiate any lawsuit on behalf
of the Plan or the Eligible Employees if the Administrator deems
it reasonably necessary to protect the Plan or the Participants.
If there shall arise any misunderstanding or ambiguity
concerning the meaning of any of the provisions of the Plan
arising out of the administration thereof, the Administrator
shall have the sole right to construe such provisions.
Subject to the limitations of the Plan and applicable law,
the Administrator may make such rules and regulations as it
deems necessary or proper for the administration of the Plan
and the transaction of business thereunder.
- 13 -
The decisions of the Administrator with respect to any
matter it is empowered to act on shall be made by it in its
sole discretion based on the Plan documents and shall be
final, conclusive and binding on all persons.
ARTICLE IV
AMENDMENT AND TERMINATION
4.1 Amendment. The Company reserves the right to amend
_________
this Plan from time to time in any respect, including without
limitation a prospective reduction in accrual of benefits.
See Section 4.4 regarding prohibition of retroactive
reduction of benefits accrued under this Plan.
4.2 Action by Company. Any amendments to this Plan by
_________________
the Company shall be made in writing and executed by the
Senior Vice President, Aetna Human Resources or other Company
officer holding such position, or by the President or Chief
Executive Officer of the Company. Neither the consent of any
Employee nor that of any payee is required for any amendment
to the Plan.
4.3 Termination by Company. The Plan may be terminated
______________________
in whole or in part by the Company at any time. The Plan as
a whole shall be terminated only pursuant to a resolution of
the Board of Directors of the Company. The Plan may be
terminated in part in the same manner as is prescribed for
the adoption of amendments. Neither the consent of any
Employee nor that of any payee is required for any
termination of the Plan. The termination of participation by
a Participating Company shall not relieve the Participating
- 14 -
Company of its liabilities under this Plan, including but not
limited to those liabilities imposed under Section 6.2 hereof.
4.4 Effect of Amendment or Termination by Company. Any
_____________________________________________
amendment or termination of this Plan by the Company shall be
effective prospectively and shall not serve to retroactively
reduce any right to a benefit accrued under this Plan up to
the date of such amendment or termination.
ARTICLE V
ADOPTION BY AFFILIATE
5.1 Adoption by Affiliate. Any Affiliate, other than a
_____________________
Physician Group, may, with the consent of the Company, become
a Participating Company under the Plan by a resolution of the
Board of Directors of the Affiliate under which:
(a) The Affiliate shall agree to be bound by all
the provisions of the Plan in the manner set forth herein and
any amendments hereto; and
(b) The Affiliate shall agree to pay its share of
expenses of the Plan as they may be determined by the Company
from time to time.
5.2 Termination by a Participating Company. Any
______________________________________
Participating Company may at any time elect to terminate its
participation under the Plan with respect to all or any group
of the Participating Company's Employees. Notwithstanding
the provisions of Article IV, a Participating Company shall
terminate its participation under the Plan by resolution of
the Board of Directors of the Participating Company.
- 15 -
ARTICLE VI
MISCELLANEOUS
6.1 Exclusive Benefit. The Plan is maintained for the
_________________
exclusive benefit of Participants.
6.2 Source of Payment. All benefits under the Plan
_________________
shall be paid exclusively by the Employer or the applicable
Participating Company from its general assets, provided that
the Company shall be liable for all benefits under the Plan.
6.3 Rights of Employees. Nothing contained herein
___________________
shall be deemed to give any Employee the right to be retained
in the service of the Employer or the applicable
Participating Company or to interfere with the right of the
Employer or the applicable Participating Company to discharge
such Employee at any time, nor shall it be deemed to give the
Employer or the applicable Participating Company the right to
require the Employee to remain in its service, nor shall it
interfere with the right of the Employer or the applicable
Participating Company to terminate service at any time.
6.4 Headings. The headings of the Plan are inserted
________
for convenience of reference only and shall have no effect
upon the meaning of the provisions hereof.
6.5 Severability. If any provision of this Plan is
____________
held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision, and
this Plan shall be construed and enforced as if such
provision were omitted.
- 16 -
6.6 Alienation of Benefits. Except as otherwise provided by
______________________
law, and consistent with Section 2.5 hereof, no benefit under this
Plan may be voluntarily or involuntarily assigned or alienated.
6.7 Lost Distributees. Any benefit payable hereunder shall
_________________
be deemed forfeited if the distributee to whom payment is due
cannot be located, provided that such benefit shall be reinstated
if a claim is made by the distributee for the forfeited benefit
within two years of the date the forfeited benefit was originally
payable pursuant to the provisions of Article II.
6.8 Governing Law. This Plan shall be construed according
_____________
to the laws of the State of Connecticut to the extent not pre-
empted by Federal law.
- 17 -
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its duly authorized officer this 22nd day of August,
1996.
AETNA INC.
By:/s/ Mary A. Champlin
____________________
Mary Ann Champlin
Senior Vice President
Aetna Human Resources
Attest:
/s/ Michele G. Kostin
_____________________
- 18 -
Appendix A
LIST OF PHYSICIAN GROUPS
Airport Managed Care, Inc.
Gateway Medical Group I, Inc.
Gateway Women's Health Center, A Medical Group, Inc.
Gateway Medical Group XI, Inc.
Concord Medical Group, Inc.
Gateway Medical Group IV, Inc.
Gateway Orthopedic Medical Group, Inc.
GMG-LAX Medical Group, Inc.
Rancho Medical Group, Incorporated
Las Posas Family Practice Medical Group, A Professional
Corporation
Ventura Private Practice Group, Inc.
Lombard Medical Group, Inc.
Santa Clarita Medical Group, Inc.
a/k/a Henry Mayo Newhall Family Medical Center
North Texas Dental Care Associates, P.A.
Ohio Primary Care Associates, P.A., Inc.
Pennsylvania Primary Care Associates, P.C.
Mid Atlantic Primary Care Associates, P.C.
North Carolina Primary Care Associates, P.C.
New Jersey Primary Care Associates, Inc.
Wheaton Clinic, S.C.
Chicago Medical Associates, S.C.
Atlanta Primary Care Associates
- 19 -
North Texas Primary Care
- 20 -
Appendix B
LIST OF HIGHLY LEVERAGED EMPLOYEES
Aeltus Investment Management
____________________________
John Kim Len Carlson
Peter Canoni Jean Wong-Boehm
Kevin Means Tom DiBella
Neil Kochen Steve Huber
Ken Bragdon Geoff Brod
Drew Lawten David Canuel
Scott Fox Hugh Whelan
Ron Clarke
Portfolio Management Group
__________________________
Leandra Knes
Ron Thelin
Tim Corbett
Aetna Retirement Services
_________________________
Mike Gilotti
David Sanderford
Jim Lehan
[It is recognized that this Listing is incomplete]
- 21 -
Appendix C
LIST OF PARTICIPATING COMPANIES
A. B. C.
Tax
Schedule of Participating Identification
Companies Number of End
Employer of
Year
Aetna Services, Inc.** 06-0843808 12/31
The Aetna Casualty and 06-6033504 12/31
Surety Company*
Aetna Life Insurance
Company 06-6033492 12/31
The Standard Fire 06-6033509 12/31
Insurance Company*
Aetna Life Insurance and
Annuity Company 71-0294708 12/31
Human Affairs
International, 87-0300539 12/31
Incorporated
*Coverage ceased effective April 2, 1996. Travelers/Aetna
Property Casualty Corporation ("TAPCO") has assumed liabilities
of, and agreed to make all payments to, employees of this
Participating Company.
**Formerly Aetna Life and Casualty Company.
- 22 -
<PAGE> 1
Exhibit 12
AETNA INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Nine Months Ended Years Ended December 31,
___________________________________________________
(Millions) September 30, 1996 1995 1994 1993 1992 1991
__________________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations........... $ 487.6 $ 726.2 $ 627.5 $(1,014.7) $ 145.5 $ (97.9)
Add back fixed charges........... 163.3 187.0 170.8 154.7 171.5 200.5
Minority interest................ 11.0 16.1 11.4 7.0 8.6 5.9
________ _______ _______ ________ _______ _______
Income (loss) as adjusted..... $ 661.9 $ 929.3 809.7 $ (853.0) $ 325.6 $ 108.5
________ _______ _______ _________ _______ _______
________ _______ _______ _________ _______ _______
Fixed charges:
Interest on indebtedness....... $ 111.1(1) $ 115.9(1) $ 98.6(1) $ 77.4 $ 81.4 $ 110.9
Portion of rents representative
of interest factor............ 52.2 71.1 72.2 77.3 90.1 89.6
________ _______ _______ _________ _______ _______
Total fixed charges........... $ 163.3 $ 187.0 $ 170.8 $ 154.7 $ 171.5 $ 200.5
________ _______ _______ _________ _______ _______
________ _______ _______ _________ _______ _______
Preferred stock dividend
requirements.................... 17.6 - - - - -
________ _______ _______ _________ _______ _______
Total combined fixed charges
and preferred stock dividend
requirements.................... $ 180.9 $ 187.0 $ 170.8 $ 154.7 $ 171.5 $ 200.5
________ _______ _______ _________ _______ _______
________ _______ _______ _________ _______ _______
Ratio of earnings to fixed
charges......................... 4.05 4.97 4.74 (5.51) 1.90 .54
________ _______ _______ _________ _______ _______
________ _______ _______ _________ _______ _______
Ratio of earnings to combined
fixed charges and preferred
stock dividends................. 3.66 4.97 4.74 (5.51) 1.90 .54
________ _______ _______ _________ _______ _______
________ _______ _______ _________ _______ _______
<FN>
(1) Includes the dividends paid to preferred shareholders of a subsidiary.
(See Note 11 of Notes to Financial Statements in Aetna Services' 1995
Annual Report.)
</TABLE>
CONFIDENTIAL DRAFT
<PAGE> 1
Letter Re: Unaudited Interim Financial Information
___________________________________________________
Aetna Inc.
Hartford, Connecticut
Gentlemen:
Re: Registration Statements No. 33-52819, 33-52819-01, 333-
07167,
333-07169, 333-08427, 333-08429 and 333-08431
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report
dated October 23, 1996 related to our review of interim
financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933,
such report is not considered a part of a registration
statement prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of
Sections 7 and 11 of the Act.
By /s/ KPMG PEAT MARWICK LLP
____________________________
(Signature)
KPMG Peat Marwick LLP
Hartford, Connecticut
October 23, 1996
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period
ended September 30, 1996 for Aetna Inc. and is qualified in its entirety
by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 30,956
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,235
<MORTGAGE> 7,172
<REAL-ESTATE> 1,101
<TOTAL-INVEST> 42,435
<CASH> 2,159
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 2,141
<TOTAL-ASSETS> 91,540
<POLICY-LOSSES> 18,340
<UNEARNED-PREMIUMS> 217
<POLICY-OTHER> 1,947
<POLICY-HOLDER-FUNDS> 20,483
<NOTES-PAYABLE> 2,382
865
0
<COMMON> 4,104
<OTHER-SE> 5,943
<TOTAL-LIABILITY-AND-EQUITY> 91,540
6,243
<INVESTMENT-INCOME> 2,678
<INVESTMENT-GAINS> 74
<OTHER-INCOME> 1,625
<BENEFITS> 7,157
<UNDERWRITING-AMORTIZATION> 124
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 487
<INCOME-TAX> 175
<INCOME-CONTINUING> 312
<DISCONTINUED> 446
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 758
<EPS-PRIMARY> 5.92
<EPS-DILUTED> 0<F1>
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>There is no material difference between primary
and fully diluted earnings per share for the period
presented.
</FN>
</TABLE>
Exhibit 99.1
CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS
Pursuant to Rule 438 under the Securities Act of
1933, as amended, the undersigned hereby consents to being
named in the Current Report on Form 8-K of Aetna Services,
Inc., formerly Aetna Life and Casualty Company, dated April
1, 1996 and incorporated by reference in Aetna Inc.'s
Registration Statements on Form S-8 (Registration Nos. 333-
08429, 333-08431 and 333-08427).
Blue Bell, Pennsylvania
Sept. 13, 1996
/s/ Leonard Abramson
____________________
Leonard Abramson
