<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
AETNA INC.
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(Name of Registrant as Specified in Its Charter)
AETNA INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $-0- per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
1998 Aetna Proxy Statement
Notice of Annual Meeting
[AETNA LOGO]
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TABLE OF CONTENTS
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<TABLE>
<C> <S> <C>
General Information................................................ 1
I. Election of Directors....................................... 1
Nominees for Directorships.................................. 2
Director Compensation in 1997............................... 9
Other Information Regarding Directors....................... 10
Committees of the Board..................................... 10
Certain Transactions and Relationships...................... 11
Security Ownership of Certain Beneficial Owners, Directors,
Nominees and Executive Officers............................. 12
Summary Compensation Table.................................. 16
Stock Option Grants Table................................... 18
Stock Option Exercises and December 31, 1997 Stock Option
Value Table................................................. 19
Long-Term Incentive Awards Table............................ 20
Pension Plan................................................ 21
Other Agreements............................................ 22
Report of the Committee on Compensation and Organization.... 23
Corporate Performance Graph................................. 27
II. Appointment of Auditors..................................... 28
III. Shareholder Proposal to Rotate Location of Annual Meeting... 28
IV. Other Information and 1999 Shareholder Proposals............ 28
Annual Report............................................... 29
</TABLE>
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[AETNA LOGO]
<TABLE>
<S> <C> <C>
AETNA INC. RICHARD L. HUBER
151 Farmington Avenue Chairman and
Hartford, Connecticut 06156 Chief Executive Officer
</TABLE>
To Our Shareholders:
The 1998 Annual Meeting of Shareholders will be held on Friday, April 24, 1998,
at 9:30 a.m. at our Company Headquarters in Hartford, Connecticut and I hope you
will attend.
The matters expected to be acted on at the meeting are described in detail in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement. In
addition to specific agenda items, we will discuss generally the operations of
Aetna. We welcome any questions you have concerning Aetna and will provide time
during the meeting for questions from shareholders.
If you are unable to attend the Annual Meeting, it is still important that your
shares be represented. Please complete and date the enclosed Proxy Card and
return it as soon as possible in the envelope provided.
[Richard L. Huber signature]
Richard L. Huber
Chairman and Chief Executive Officer
March 20, 1998
<PAGE> 5
<TABLE>
<S> <C> <C>
LOGO AETNA INC. LUCILLE M. NICKERSON
151 Farmington Avenue Vice President,
Hartford, Connecticut 06156 Corporate Governance
and
Corporate Secretary
</TABLE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Aetna Inc.
will be held at the Company's Headquarters, 151 Farmington Avenue, Hartford,
Connecticut, on Friday, April 24, 1998, at 9:30 a.m. for the following purposes:
1. To elect a Board of Directors for the coming year;
2. To approve the appointment of KPMG Peat Marwick LLP as independent auditors
for the current calendar year;
3. To act on a shareholder proposal, if properly presented, to rotate the
location of the Annual Meeting; and
4. To transact any other business that may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 27, 1998 as
the record date for determination of the shareholders entitled to vote at the
meeting or any adjournment thereof.
The Annual Meeting of Shareholders is open to all shareholders or their
authorized representatives. In order to attend the Annual Meeting of
Shareholders, you must present an admission ticket. If you hold shares of Aetna
Common Stock or 6.25% Class C Voting Preferred Stock in your own name or through
the Aetna Incentive Savings Plan or the U.S. Healthcare Savings Plan, please
complete and return the enclosed prepaid reservation card directly to Aetna. An
admission ticket will then be mailed to you. If your shares are held of record
by a broker or other nominee in street name or the name of another person and
you wish to attend the meeting, your broker or nominee must give written notice
to Aetna that you are its authorized representative for those shares. An
admission ticket will then be issued to you.
Whether or not you expect to attend the Annual Meeting of Shareholders, please
fill in, date and sign the accompanying Proxy Card and mail it promptly in the
enclosed prepaid return envelope. If you attend the Annual Meeting of
Shareholders, you may vote in person if you wish, even if you have previously
returned your proxy card.
By order of the Board of Directors,
/s/ Lucille M. Nickerson
Lucille M. Nickerson
Vice President, Corporate Governance and Corporate Secretary
March 20, 1998
<PAGE> 6
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of Proxies
by the Board of Directors of Aetna Inc. (the Company) for the Annual Meeting of
Shareholders to be held at the Company's Headquarters on April 24, 1998. This
Proxy Statement and the enclosed Proxy Card are being mailed to shareholders on
or about March 20, 1998.
Shareholders of record of the Company's Common Stock, par value $.01 per
share, (Common Stock) and 6.25% Class C Voting Preferred Stock, par value $.01
per share, (Preferred Stock) at the close of business on February 27, 1998 will
be entitled to vote at the meeting. On that date, 145,515,770 shares of Common
Stock and 11,655,206 shares of Preferred Stock were outstanding. Each share of
Common Stock is entitled to cast one vote. Each share of Preferred Stock is
entitled to cast 4/5 of a vote. With respect to the matters outlined in the
Notice of Annual Meeting, the Common Stock and the Preferred Stock vote together
as a single voting group.
At this time, the Directors are not aware of any matters that may be
properly presented for consideration at the Annual Meeting, other than those
outlined in the Notice of Annual Meeting. If other matters are properly
presented for consideration, the persons named on the Proxy will vote on those
matters according to their best judgment.
The giving of a Proxy does not affect a shareholder's right to vote in
person at the meeting since the Proxy may be revoked at any time before it is
voted. A properly executed Proxy that is not revoked will be voted according to
the instructions on the Proxy. If no instruction is given for any matter to be
voted upon, the shares represented by the Proxy will be voted on that matter in
the manner described on the following pages.
Any full shares of Aetna Common Stock held for you under the DirectSERVICE
Investment Program have been included in the shares shown on the enclosed Proxy.
Only full shares are entitled to vote as the Company does not issue fractional
shares.
Participants in the Aetna Incentive Savings Plan and the U.S. Healthcare
Savings Plan who receive this Proxy Statement in their capacity as a participant
in either plan will receive a voting instruction card in lieu of a Proxy, which
serves to direct the trustees of those plans how to vote the shares. Shares held
in the Aetna Incentive Savings Plan for which no directions are received are
voted by the trustee in the same percentage as the shares for which directions
are received. Shares held in the U.S. Healthcare Savings Plan are not voted
unless the instruction card is completed and returned to the trustee.
Votes are counted by tellers of the Company's Transfer Agent. The tellers
will canvass the shareholders present in person at the Annual Meeting, count
their votes and count the votes cast by proxies presented. The presence at the
Annual Meeting, in person or by proxy, of at least a majority of the votes
entitled to be cast at the meeting constitutes a quorum. Under Connecticut
corporation law, the approval of any corporate action taken at a shareholder
meeting is based on votes cast. "Votes cast" means votes actually cast "for" or
"against" a particular proposal, whether by proxy or in person. Abstentions and
broker nonvotes are not considered "votes cast." Broker nonvotes occur when a
broker nominee (which has voted on one or more matters at the meeting) does not
vote on one or more other matters at the meeting because it has not received
instructions from the beneficial owner to so vote and does not have
discretionary authority to do so. Directors are elected by a plurality of votes
cast; shareholder approval of each other proposal to be considered at the Annual
Meeting occurs if the votes cast in favor of the proposal exceed the votes cast
against the proposal.
I. ELECTION OF DIRECTORS
Thirteen individuals will be nominated for election as Directors at the Annual
Meeting. However, in the event any Nominee becomes unavailable for election, the
Board of Directors will reduce the number of Nominees prior to the meeting. The
terms of office for all elected Directors will run until the next Annual Meeting
and until their successors are duly elected and qualified. The 13 individuals
(or such lesser number if the Board has decreased the number of Nominees as
provided above) receiving the greatest number of votes cast at the meeting will
be elected Directors. UNLESS DIRECTED TO THE CONTRARY, THE SHARES REPRESENTED BY
THE ENCLOSED PROXY WILL BE VOTED FOR THE ELECTION OF THE 13 NOMINEES LISTED ON
THE FOLLOWING PAGES (the Nominees). If the number of Nominees is reduced as
provided above, the shares represented by the enclosed Proxy will be voted for
the remaining Nominees.
1
<PAGE> 7
All Nominees are currently Directors of the Company. Ronald E. Compton, a
Director since 1988, retired as Chairman and as a Director on March 1, 1998
pursuant to the Company's retirement policy.
The following pages list the names and ages of the Nominees as of the date
of the Annual Meeting, the year each first became a Director of the Company, the
principal occupation and principal business directorships of each as of February
27, 1998, a brief description of the business experience of each for at least
the last five years, and the Board Committees of which each Nominee is a member.
On July 19, 1996, Aetna Life and Casualty Company (AL&C) and U.S.
Healthcare, Inc. (USHC) consummated a transaction pursuant to which each became
a wholly-owned subsidiary of the Company (the Merger). After the Merger, AL&C
changed its name to Aetna Services, Inc. and U.S. Healthcare changed its name to
Aetna U.S. Healthcare Inc. (AUSHC). The information presented includes a
Director's prior service with AL&C or USHC, as appropriate.
NOMINEES FOR DIRECTORSHIPS
ABRAMSON PHOTO
LEONARD ABRAMSON, 65
(Director since 1996)
(Director of USHC from 1982 to 1996)
Mr. Abramson retired on July 19, 1996 as a director, Chairman and Chief
Executive Officer of U.S. Healthcare, Inc. (managed health care company),
positions he had held since 1982. Mr. Abramson is the founder of U.S.
Healthcare, Inc. which became a wholly-owned subsidiary of the Company on July
19, 1996, and is now known as Aetna U.S. Healthcare Inc. Mr. Abramson currently
is self-employed as a consultant and private investor and is Chairman of The
Maine Merchant Bank, LLC. He is the author of Healing our Health Care System.
Mr. Abramson is a member of the Finance Committee.
COHEN PHOTO
Betsy Z. Cohen, 56
(Director since 1996)
(Director of USHC from 1994 to 1996)
Mrs. Cohen has been Chairman and Chief Executive Officer of JeffBanks, Inc.
(bank holding company) since its inception in 1981 and also is a director of its
subsidiaries, Jefferson Bank, which she founded in 1974, and Jefferson Bank New
Jersey, which she founded in 1987. Mrs. Cohen also is Chairman, Chief Executive
Officer and trustee of Resource Asset Investment Trust (real estate investment
trust). From 1985 until 1993, Mrs. Cohen was a director of First Union Corp. of
Virginia (bank holding company) and its predecessor, Dominion Bankshares, Inc.
In 1969, Mrs. Cohen co-founded a commercial law firm and served as a Senior
Partner until 1984. Mrs. Cohen is a director of Life Technologies, Inc.
(biomedical products), Litmus Concepts, Inc. (health care diagnostic products)
and The Maine Merchant Bank, LLC. She is a member of the Committee on
Compensation and Organization and the Investment Committee.
2
<PAGE> 8
DONALDSON PHOTO
William H. Donaldson, 66
(Director since 1996)
(Director of AL&C since 1977)
Mr. Donaldson is co-founder and Senior Advisor of Donaldson Lufkin & Jenrette,
Inc. (investment banking) and Chairman of Donaldson Enterprises Incorporated
(private investing firm). He served as Chairman and Chief Executive Officer and
a director of the New York Stock Exchange, Inc. from 1991 to June 1995, and was
formerly Chairman and Chief Executive Officer of Donaldson Lufkin & Jenrette,
Inc. and a co-founder of its subsidiary, Alliance Capital Management Corp.
(investment management). Mr. Donaldson is a director of Bright Horizons, Inc.
(family support services), Honeywell Inc. (electronic automation and control
systems) and Philip Morris Companies Inc. (consumer products). A former Dean and
Professor of Management of the Yale School of Management, he also served as U.S.
Under Secretary of State and Counsel to the Vice President of the United States.
Mr. Donaldson is a director of the Lincoln Center for the Performing Arts and
The New York City Police Foundation, a trustee of the Carnegie Endowment for
International Peace, the Marine Corps University Foundation and the Foreign
Policy Association, and Chairman of the Yale School of Management Advisory
Board. Mr. Donaldson is Chairman of the Nominating and Corporate Governance
Committee and a member of the Executive Committee and the Investment Committee.
FRANKLIN PHOTO
Barbara Hackman Franklin, 58
(Director since 1996)
(Director of AL&C from 1979 to 1992, and since 1993)
Miss Franklin is President and Chief Executive Officer of Barbara Franklin
Enterprises (private investment and international trade consulting firm). From
1992 to 1993, she served as the 29th U.S. Secretary of Commerce. Before her
appointment, Miss Franklin was President and Chief Executive Officer of Franklin
Associates (management consulting firm), which she founded in 1984. Miss
Franklin also served four terms on the Advisory Committee for Trade Policy and
Negotiations; as Alternate Representative to the 44th Session of the United
Nations General Assembly; as a public member of the Board of the American
Institute of Certified Public Accountants and the Auditing Standards Board
Planning Committee; and as an advisor to the Comptroller General of the United
States. Miss Franklin also has been a Senior Fellow of The Wharton School of the
University of Pennsylvania and an original Commissioner of the U.S. Consumer
Product Safety Commission. Miss Franklin chairs the American Trader Initiative
Advisory Council for the Heritage Foundation; is active in numerous
international organizations; and also is a director of AMP Incorporated
(electrical and electronic connection devices), Cincinnati Milacron Inc.
(plastics machinery, machine tools and industrial products), The Dow Chemical
Company (chemicals and chemical products) and MedImmune, Inc. (biotechnology
company). Miss Franklin is Chairman of the Audit Committee and is a member of
the Finance Committee and the Nominating and Corporate Governance Committee.
3
<PAGE> 9
GOODMAN PHOTO
Jerome S. Goodman, 63
(Director since 1996)
(Director of USHC from 1988 to 1996)
Mr. Goodman has been Chairman of Travel One (commercial travel agency) since
1971 and was the sole stockholder of Travel One from 1971 to 1994. Mr. Goodman
was a member of the New Jersey Sports and Exposition Authority from 1991 to 1994
and its Chairman from 1992 to 1994. He also served as Chairman, President and
Chief Executive Officer of First Peoples Financial Corporation (bank holding
company) from 1987 to 1992 and President and Chief Executive Officer of First
Peoples Bank of NJ from 1983 to 1987. He was a member of the Board of Directors
of GBC Technologies, Inc. from 1992 to 1995. Mr. Goodman is a director of The
Maine Merchant Bank, LLC and a trustee of Resource Asset Investment Trust (real
estate investment trust). He also is a member of the Board of Trustees of the
Philadelphia College of Pharmacy and Science and served as Chairman of the
College from 1988 to 1991. Mr. Goodman is a member of the Audit Committee, the
Finance Committee and the Nominating and Corporate Governance Committee.
GRAVES PHOTO
Earl G. Graves, 63
(Director since 1996)
(Director of AL&C since 1994)
Mr. Graves is Chairman and Chief Executive Officer of Earl G. Graves, Ltd. (a
multifaceted communications company) and is the Publisher of Black Enterprise
magazine which he founded in 1970. Additionally, since 1990, Mr. Graves has
served as Chairman and Chief Executive Officer of Pepsi-Cola of Washington,
D.C., L.P. (a PepsiCo bottling franchise). Mr. Graves is a director of AMR
Corporation and its subsidiary, American Airlines, Inc., Chrysler Corporation
(automotive manufacturer), Federated Department Stores Inc. (retailer) and Rohm
and Haas Company (specialty chemicals and plastics). Mr. Graves also is a
trustee of Howard University and is on the Executive Board and Executive
Committee of the National Office of the Boy Scouts of America serving as Vice
President of Relationships and Marketing. He is a member of the Audit Committee,
the Executive Committee and the Investment Committee. He also serves on the
Board of Directors of Aetna Foundation, Inc.
4
<PAGE> 10
GREENWALD PHOTO
Gerald Greenwald, 62
(Director since 1996)
(Director of AL&C since 1993)
Mr. Greenwald is Chairman and Chief Executive Officer of UAL Corporation, the
parent company of United Airlines (UAL), a position he assumed in July 1994.
From 1979 to 1990, Mr. Greenwald held various executive positions with Chrysler
Corporation (automotive manufacturer), serving as Vice Chairman of the Board
from 1989 to May 1990 and as Chairman of Chrysler Motors from 1985 to 1988. In
1990, Mr. Greenwald was selected to serve as Chief Executive Officer of United
Employee Acquisition Corporation in connection with the proposed 1990 employee
acquisition of UAL. From 1991 to 1992, he was a Managing Director of Dillon Read
& Co., Inc. (investment banking) and, from 1992 to 1993, he was President and
Deputy Chief Executive Officer of Olympia & York Developments Ltd. (Canadian
real estate company). Mr. Greenwald then served as Chairman and Managing
Director of Tatra Truck Company (truck manufacturer in the Czech Republic) from
1993 to 1994. Mr. Greenwald is a director of Time Warner Inc. (media and
entertainment). He also is a trustee of the Aspen Institute and a director of
the Chicago Civic Committee and the Air Transport Association. Mr. Greenwald is
a member of the Committee on Compensation and Organization, the Finance
Committee and the Nominating and Corporate Governance Committee.
HANCOCK PHOTO
Ellen M. Hancock, 55
(Director since 1996)
(Director of AL&C since 1995)
Mrs. Hancock is President of Exodus Communications, Inc. (Internet system and
network management services), a position she assumed on March 10, 1998. She also
is a director of Exodus Communications. Mrs. Hancock held various staff,
managerial and executive positions at International Business Machines
Corporation (information-handling systems, equipment and services) from 1966 to
1995. She became a Vice President of IBM in 1985 and served as President,
Communication Products Division, from 1986 to 1988 when she was named General
Manager, Networking Systems. Mrs. Hancock was elected an IBM Senior Vice
President in November 1992 and in 1993 was appointed Senior Vice President and
Group Executive, which position she held until February 1995. Mrs. Hancock
served as an Executive Vice President and Chief Operating Officer of National
Semiconductor Corporation (semiconductors) from September 1995 to May 1996 and
served as Executive Vice President for Research and Development and Chief
Technology Officer of Apple Computer, Inc. (personal computers) from July 1996
to July 1997. Mrs. Hancock is a director of Colgate-Palmolive Company (consumer
products) and Siemens Business Communication Systems, Inc. (telecommunications).
She is a member of the Audit Committee and the Finance Committee.
5
<PAGE> 11
HUBER PHOTO
Richard L. Huber, 61
(Director since 1996)
Mr. Huber is Chairman, Chief Executive Officer and President of Aetna. Mr. Huber
joined Aetna on February 4, 1995 and served as Vice Chairman for Strategy and
Finance until July 28, 1997 when he became Chief Executive Officer and
President. He assumed the additional position of Chairman on March 1, 1998.
Before joining Aetna, Mr. Huber served as President and Chief Operating Officer
of Grupo Wasserstein Perella (investment banking), which he joined in Sep-
tember 1994. From 1990 to August 1994, Mr. Huber served as Vice Chairman of
Continental Bank. He was Executive Vice President and Head of the Capital
Markets and Foreign Exchange Sector of Chase Manhattan Bank from 1988 to 1990.
Before that, Mr. Huber held various positions of increasing responsibility with
Citibank, N.A. (1973-1987) and First National Bank of Boston (1960-1973). Mr.
Huber is a director of Capital Re Corporation (insurance holding company). He is
Chairman of the Executive Committee.
JORDAN PHOTO
Michael H. Jordan, 61
(Director since 1996)
(Director of AL&C since 1992)
Mr. Jordan is Chairman and Chief Executive Officer of CBS Corporation (media
company) and served as Chairman and Chief Executive Officer of its predecessor
company -- Westinghouse Electric Corporation -- since 1993. From 1992 to 1993,
he was a principal in Clayton, Dubilier & Rice, Inc. (private investing firm).
Mr. Jordan retired in July 1992 as Chairman and Chief Executive Officer of the
PepsiCo International Foods and Beverages Division of PepsiCo, Inc. (snack foods
and beverages), having held various positions with PepsiCo since 1974. Mr.
Jordan is a director of Dell Computer Corporation (personal computers). He is
Chairman of the Finance Committee and is a member of the Committee on
Compensation and Organization and the Nominating and Corporate Governance
Committee.
6
<PAGE> 12
KEUHLER PHOTO
Jack D. Kuehler, 65
(Director since 1996)
(Director of AL&C since 1990)
Mr. Kuehler retired in August 1993 as Vice Chairman and a director of
International Business Machines Corporation (information-handling systems,
equipment and services), having held various positions with IBM since joining
that company in 1958. Prior to his appointment as Vice Chairman of IBM in
January 1993, Mr. Kuehler served as President from 1989 to 1993, as Vice
Chairman from 1988 to 1989 and as Executive Vice President from 1987 to 1988.
Mr. Kuehler is a director of Olin Corporation (chemical and metal products) and
The Parsons Corporation (heavy construction and engineering services). He also
is a member of the National Academy of Engineering and a fellow of the Institute
of Electrical and Electronics Engineers, Inc. Mr. Kuehler is Chairman of the
Investment Committee and is a member of the Committee on Compensation and
Organization and the Nominating and Corporate Governance Committee.
OKEEFE PHOTO
Frank R. O'Keefe, Jr., 68
(Director since 1996)
(Director of AL&C since 1989)
Mr. O'Keefe retired in 1988 as Chairman, President and Chief Executive Officer
of Armtek Corporation (producer of automotive materials, components and
systems), having assumed that position in 1986. Prior to that, he served as
President and Chief Operating Officer of Armstrong Rubber Company from 1980 to
1986. Following his retirement from Armtek, Mr. O'Keefe served as President of
Long Wharf Capital Partners, Inc. (business investments) from 1988 to 1990. He
was an independent business consultant from 1990 to 1995. Mr. O'Keefe is a
director of Southern New England Telecommunications Corporation and The United
Illuminating Company. He is Chairman of the Committee on Compensation and
Organization and is a member of the Executive Committee and the Investment
Committee.
7
<PAGE> 13
RODIN PHOTO
Judith Rodin, 53
(Director since 1996)
(Director of AL&C since 1995)
Dr. Rodin became President of the University of Pennsylvania in July 1994. Prior
to assuming her current position, Dr. Rodin had served as Provost of Yale
University since 1992. Dr. Rodin joined the Yale faculty in 1972, and held
teaching and research positions of increasing responsibility in the Department
of Psychology. She became a Professor of Medicine and Psychology in 1985 and
served as Chair of the Department of Psychology from 1989 to 1991 and Dean of
the Graduate School of Arts and Sciences from 1991 to 1992 when she became
Provost. Dr. Rodin is a director of AMR Corporation and its subsidiary, American
Airlines, Inc., Electronic Data Systems Corporation (computer services) and is a
trustee of the Brookings Institution. She is a member of the Investment
Committee and the Nominating and Corporate Governance Committee.
8
<PAGE> 14
DIRECTOR COMPENSATION IN 1997
Compensation for outside Directors is reviewed annually by the Nominating and
Corporate Governance Committee (the Committee). The Committee's goal of
attracting and retaining qualified Directors is supported through a competitive
compensation program that provides remuneration for Directors' contributions
while offering stock-based compensation alternatives which strengthen the
mutuality of interests with other shareholders. The following table sets forth
the cash and stock-based compensation paid to each outside Director of the
Company in 1997.
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<TABLE>
<CAPTION>
CASH COMPENSATION(1) STOCK UNITS
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ANNUAL RETAINER MEETING NUMBER OF UNITS
NAME FEES($)(2) FEES($)(3) GRANTED(4)
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<S> <C> <C> <C>
Leonard Abramson $31,667 $44,000 350
Betsy Z. Cohen 31,667 15,000 350
William H. Donaldson 44,000 55,000 350
Barbara Hackman Franklin 44,000 53,000 350
Jerome S. Goodman 34,334 18,000 350
Earl G. Graves 41,000 20,000 350
Gerald Greenwald 37,000 51,000 350
Ellen M. Hancock 33,000 17,000 350
Michael H. Jordan 44,000 45,000 350
Jack D. Kuehler 44,000 74,000 350
Frank R. O'Keefe, Jr. 47,000 83,000 350
Judith Rodin 38,333 52,000 350
</TABLE>
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NOTES TO DIRECTOR COMPENSATION TABLE
(1) Under the Aetna Inc. Non-Employee Director Deferred Stock and Deferred
Compensation Plan (the Director Plan), non-employee Directors may defer
payment of some or all of their annual retainer, meeting fees and dividend
equivalents paid on stock units, to a stock unit or interest account until
after they have resigned or retired (as defined in the Director Plan) from
the Board. During the period of deferral, amounts deferred to the stock unit
account track the value of the Company's Common Stock and earn dividend
equivalents. Amounts deferred to the interest account accrue interest
pursuant to a formula equal to the rate of interest paid from time to time
under a fixed interest rate fund option of the Company's Incentive Savings
Plan for employees (currently yielding 6.6% a year). In 1997, nine Directors
deferred all or a portion of their Director compensation to a stock unit
account. The table above includes cash compensation that was deferred by
Directors during 1997.
(2) The Company currently pays a retainer fee of $25,000 a year to outside
Directors for Board membership. The Company also pays a $4,000 retainer to
such Directors for membership on Committees of the Board ($7,000 in the case
of the chairperson of a Committee). Directors who are officers of the
Company receive no additional compensation for membership on the Board or
any of its Committees.
(3) The Company currently pays $1,000 to outside Directors for attendance at
each Board or Committee meeting. The amounts shown also include a one-time
payment to Miss Franklin, Dr. Rodin and Messrs. Abramson, Donaldson,
Greenwald, Jordan, Kuehler and O'Keefe for services on a special management
succession committee.
(4) Pursuant to the Director Plan, non-employee Directors, upon their initial
election to the Board, receive a one-time grant of units convertible upon
retirement from Board service into 1,500 shares of Common Stock (Initial
Units). Additionally, on the date of each Annual Meeting during the term of
the Director Plan, each non-employee Director will receive units convertible
upon retirement from Board service into 350 shares of Common Stock (Annual
Units). Generally, to become fully vested in the units a Director must
complete, in the case of the Initial Units, three years of service and, in
the case of the Annual Units, one year of service following the grant of the
units. If, however, service is sooner terminated by reason of death,
disability, retirement or acceptance of a position in government service, a
Director is entitled to receive the full grant provided the Director has
completed a minimum of six consecutive months of service as a Director since
such grant. A Director's right with respect to unvested units also will vest
upon a change-in-control (as defined in the Director Plan). Otherwise, if a
Director terminates Board service prior to completion of one year or three
years of service, as applicable, from the grant date of any units, the
Director will be entitled to receive a pro-rata portion of the award.
Although Directors receive dividend equivalents, they have no voting rights
with respect to the shares that are subject to the grant. The units granted
are not transferable.
9
<PAGE> 15
OTHER INFORMATION REGARDING DIRECTORS
The Company provides $150,000 of group life insurance for its outside Directors.
Optional medical and long-term care coverage for outside Directors and their
eligible dependents is available to Directors at a cost similar to that charged
to Company employees.
In connection with the Merger, the Company entered into an agreement with
Mr. Abramson (the Agreement), the former Chairman and Chief Executive Officer of
USHC. Pursuant to the Agreement, which has a term of five years commencing on
the Merger date, Mr. Abramson has agreed to advise the Chairman of the Company
on strategic business activities, marketing strategies and public relations
efforts of the Company and its health operations and has agreed generally not to
compete with the Company's health operations. In return, the Company paid Mr.
Abramson ten million dollars on the Merger date (75% in cash and 25% in shares
of Common Stock), and will pay during the term of the Agreement, three million
dollars per year. A final lump sum payment of ten million dollars (payable in
shares of Common Stock) will be paid on the later of Mr. Abramson's resignation
as a Director of the Company or the termination or expiration of the Agreement.
In addition, pursuant to the Agreement, the Company has agreed to provide Mr.
Abramson with life, disability, accident and health insurance benefits
substantially similar to those he received from USHC, and transferred to Mr.
Abramson ownership of a certain aircraft owned by a subsidiary of USHC. During
the term of the Agreement, the Company has agreed to pay the operating costs of
such aircraft, on an after-tax basis, up to a maximum amount of two million
dollars. The Agreement provides for a payment, if necessary, intended to make
Mr. Abramson whole for any excise tax imposed under Section 4999 of the Internal
Revenue Code with respect to any payment or benefits that he may receive under
the Agreement.
In connection with the Merger, the Company appointed Messrs. Abramson and
Goodman and Mrs. Cohen to the Board (the USHC Designees). If, prior to July 19,
1998, any of the USHC Designees (with the exception of Mr. Abramson) is unable
or unwilling to serve on the Board, the Board has agreed to elect the
successor(s) selected by Mr. Abramson. The Company has agreed that the USHC
Designees (including, if applicable, any successor(s) selected by Mr. Abramson)
will be included as nominees for election to the Board of the Company for the
two-year period following the Merger.
The Board of the Company met ten times in 1997. Except for Mr. Jordan, each
Director of the Company attended 75% or more of the combined aggregate meetings
of the Board and the Committees of the Company on which he or she served.
COMMITTEES OF THE BOARD
The functions and responsibilities of the standing Committees of the Company's
Board are described below.
- Audit Committee. Composed entirely of outside Directors, this Committee
met four times in 1997. The Committee recommends the independent auditors that
the full Board nominates for shareholder approval at the Annual Meeting, reviews
with the auditors the scope and results of the audit, reviews the Company's
financial statements and other financial disclosures, and monitors developments
in accounting principles and methods used in presenting financial results. The
Committee also consults with internal audit staff and the Company's independent
accountants, and discusses with management internal accounting control
procedures and other internal compliance programs. The following Directors are
members of this Committee: Franklin (Chairman), Goodman, Graves and Hancock.
- Committee on Compensation and Organization. Composed entirely of outside
Directors, this Committee met eight times in 1997. The Committee administers the
1996 Stock Incentive Plan and the Annual Incentive Plan, and reviews and makes
recommendations to the Board with respect to the compensation of certain senior
executives. The Committee also reviews the Company's overall compensation policy
and makes recommendations with respect thereto. Periodically, the Committee
reviews senior management succession plans and related matters. The following
Directors are members of this Committee: O'Keefe (Chairman), Cohen, Greenwald,
Jordan and Kuehler.
10
<PAGE> 16
- Executive Committee. This Committee met twice in 1997. The Committee is
authorized to act on behalf of the full Board between regular Board meetings,
usually when timing is critical. The following Directors are members of this
Committee: Huber (Chairman), Donaldson, Graves and O'Keefe.
- Finance Committee. This Committee met three times in 1997. The Committee
periodically considers and makes recommendations to the Board concerning matters
of corporate finance. The following Directors are members of this Committee:
Jordan (Chairman), Abramson, Franklin, Goodman, Greenwald and Hancock.
- Investment Committee. This Committee met four times in 1997. The
Committee oversees the management of the Company's investment portfolios and
reviews current investment policy and strategy. The following Directors are
members of this Committee: Kuehler (Chairman), Cohen, Donaldson, Graves, O'Keefe
and Rodin.
- Nominating and Corporate Governance Committee. This Committee, which is
composed entirely of outside Directors, met three times in 1997. The Committee
reviews the qualifications of all candidates for membership on the Board and the
Board Committees. It makes recommendations to the full Board on Director
nominees, on the structure, composition and function of Board Committees, on
Director compensation and on the Director retirement policy. It reviews
conflicts of interest that may affect Directors, as well as each substantial
change in any Director's circumstances (e.g., change of employment). The
Committee also advises the Board on all other matters concerning corporate
governance to the extent specific matters are not the responsibility of other
Committees.
In recommending Director nominees to the Board, this Committee solicits
candidate recommendations from its own members, other Directors of the Company
and management. Although the Committee does not specifically solicit suggestions
for possible candidates from shareholders, the Committee will consider
candidates meeting the criteria described below. (Suggestions, together with a
description of the proposed nominee's qualifications, other relevant
biographical information and an indication of the willingness of the proposed
nominee to serve, should be sent to the Committee Chairman, in care of the
Corporate Secretary, Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut
06156.)
Nominees are selected through a process based on criteria set with the
concurrence of the full Board and reevaluated periodically. The criteria
include: the relevance of the candidate's experience to the business of the
Company and its affiliates, enhancing diversity, independence from commercial
relationships with the Company, and the ability of the candidate to attend
meetings regularly and devote an appropriate amount of time in preparation for
those meetings. The following Directors are members of this Committee: Donaldson
(Chairman), Franklin, Goodman, Greenwald, Jordan, Kuehler and Rodin.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Subsidiaries of the Company entered into reinsurance arrangements with Lloyd's
of London. Mr. Huber is an investor in several Lloyd's syndicates. As an
investor in a Lloyd's syndicate, he does not exercise control over the
syndicate.
A subsidiary of the Company paid $371,954 in salary and cash bonus, awarded
1,875 stock options, 625 shares of restricted stock, 1,450 incentive units for
the performance period 1996-1998 and 3,000 incentive units for the performance
period 1997-2000 for services rendered in 1997 by Mr. Richard Wolfson, a
son-in-law of Mr. Abramson, and paid $99,097 in salary for services rendered in
1997 by Ms. Nancy Wolfson, a daughter of Mr. Abramson.
On March 7, 1997, AUSHC entered into a stock redemption agreement with
Criterion Communications, Inc. ("Criterion") pursuant to which Criterion
redeemed from AUSHC all of Criterion's voting securities owned by AUSHC. Prior
to the stock redemption, AUSHC indirectly owned 51% and Ms. Marcy Shoemaker (a
daughter of Mr. Abramson) owned 49% of the outstanding voting securities of
Criterion. In consideration of the stock redemption, AUSHC's line of credit with
Criterion was terminated (with the outstanding debt of $2,250,000 to be repaid
over five years), service agreements between AUSHC and Criterion were terminated
and replaced with an agreement with a shorter term and a reduced financial
obligation on the part of AUSHC, and AUSHC's guaranty of Criterion's lease was
terminated. The stock redemption was completed on March 31, 1997. Wasserstein
Perella & Co., Inc., an independent investment
11
<PAGE> 17
advisor, delivered a written opinion to the Board of Directors of AUSHC to the
effect that, as of the date of the opinion, the consideration to be received by
AUSHC pursuant to the stock redemption was fair, from a financial point of view,
to AUSHC. During 1997, the Company and its subsidiaries paid $5,003,814 to
Criterion.
The Board has authorized the Company to provide Mr. Compton with such
office space and administrative support as he may reasonably request to
accommodate his transition needs during the first year following his retirement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table presents, as of December 31, 1997, the names of persons
known to the Company to be the beneficial owners of more than 5% of the
outstanding shares of its Common or Preferred Stock, respectively. (The
information set forth below and in the related footnotes has been furnished by
the respective persons.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AND ADDRESS OF CLASS OF AMOUNT AND NATURE
BENEFICIAL OWNER STOCK(1) OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sanford C. Bernstein & Co., Inc. Common 10,939,580 shares(2) 7.5%
767 Fifth Avenue Preferred 0 shares
New York, New York 10153
The Capital Group Companies, Inc. Common 8,422,630 shares(3) 5.7%
333 South Hope Street Preferred 991,500 shares(3) 8.5%
Los Angeles, California 90071
Leonard Abramson Common 1,097,922 shares(4) *
376 Regatta Drive Preferred 1,080,350 shares(4) 9.3%
Jupiter, Florida 33477
- ----------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) The number of Common Stock shares shown assumes the holder had converted
each share of Preferred Stock into Common Stock as of December 31, 1997.
Each share of Preferred Stock is convertible at any time at the option of
the holder into .8197 shares of Common Stock (subject to adjustment). The
Company may redeem the Preferred Stock at any time after July 19, 1999 for
shares of Common Stock based on specified formulas. On July 19, 2000, each
outstanding share of Preferred Stock will convert automatically into one
share of Common Stock.
(2) Of the reported shares, Sanford C. Bernstein & Co., Inc. reports that it has
sole voting power with respect to 5,866,101 shares and shared voting power
with respect to 1,348,506 shares.
(3) Of the reported shares, 8,347,630 shares of Common Stock (which amount
includes 737,730 shares of Common Stock resulting from the assumed
conversion of 900,000 shares of Preferred Stock) are beneficially owned by
Capital Research and Management Company, a registered investment adviser
that manages The American Funds Group of mutual funds, and 75,002 shares of
Common Stock (which shares assume that 91,500 shares of Preferred Stock have
been converted) are beneficially owned by Capital Guardian Trust Company, a
California state-chartered trust company that acts as investment manager to
large institutional accounts (primarily pension funds). Capital Research and
Management Company and Capital Guardian Trust Company have sole dispositive
power with respect to the reported shares.
(4) Of the reported shares, 930,787 shares of Common Stock (which amount
includes 884,829 shares of Common Stock resulting from the assumed
conversion of 1,079,455 shares of Preferred Stock) are held by LEMA
Associates, L.P., of which Mr. Abramson is the sole general partner and a
98% limited partner. Reported shares also include 3,417 shares of Common
Stock (which amount includes 733 shares of Common Stock resulting from the
assumed conversion of 895 shares of Preferred Stock) held jointly with Mrs.
Abramson, and 163,718 shares of Common Stock which Mr. Abramson has the
right to acquire within 60 days of December 31, 1997 upon exercise of stock
options.
12
<PAGE> 18
The following table presents, as of January 31, 1998, the beneficial ownership
of, and other interests in, shares of Common Stock and Preferred Stock of each
current Director and Nominee, each executive officer named in the Summary
Compensation Table on page 16, and Directors and executive officers of the
Company, as a group. (The information set forth below and in the related
footnotes on the next page has been furnished by respective persons.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
NAME OF BENEFICIAL COMMON PERCENT PREFERRED PERCENT COMMON STOCK
OWNER AND POSITION SHARES(1) OF CLASS SHARES OF CLASS EQUIVALENTS(2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leonard Abramson 1,097,922(3) * 1,080,350(4) 9.3% 2,338
(current Director and Nominee)
Betsy Z. Cohen 1,571 * 149(5) * 1,850
(current Director and Nominee)
Ronald E. Compton 161,202(6) * *
(retired Director and named
executive)
William H. Donaldson 750 * * 2,600
(current Director and Nominee)
Barbara Hackman Franklin 3,355 * * 2,600
(current Director and Nominee)
Jerome S. Goodman 23,708(7) * 6,208(8) * 2,515
(current Director and Nominee)
Earl G. Graves 500 * * 4,389
(current Director and Nominee)
Gerald Greenwald 3,000(9) * * 5,482
(current Director and Nominee)
Ellen M. Hancock 2,000(10) * * 3,617
(current Director and Nominee)
Richard L. Huber 262,900(11) * *
(current Director, Nominee and named
executive)
Michael H. Jordan 3,000 * * 4,499
(current Director and Nominee)
Jack D. Kuehler 1,910(12) * * 6,848
(current Director and Nominee)
Frank R. O'Keefe, Jr. 850(13) * * 6,848
(current Director and Nominee)
Judith Rodin 100 * * 4,698
(current Director and Nominee)
Michael J. Cardillo 89,034(14) * 4,324 *
(named executive)
Frederick C. Copeland, Jr. 40,664(15) * *
(named executive)
Thomas J. McInerney 50,716(16) * *
(named executive)
Directors and executive officers as 1,803,886(17) 1.2% 1,091,031 9.4% 48,284
a group (19 persons)
</TABLE>
- --------------------------------------------------------------------------------
* Less than 1%
Unless otherwise noted in the footnotes, each person currently has sole voting
and investment powers over the shares set forth above.
13
<PAGE> 19
NOTES TO BENEFICIAL OWNERSHIP TABLE
- --------------------------------------------------------------------------------
(1) The number of Common Stock shares shown assumes the holder had converted
each share of Preferred Stock into Common Stock as of January 31, 1998.
Each share of Preferred Stock is convertible at any time at the option of
the holder into .8197 shares of Common Stock (subject to adjustment). The
Company may redeem the Preferred Stock at any time after July 19, 1999 for
shares of Common Stock based on specified formulas. On July 19, 2000, each
outstanding share of Preferred Stock will convert automatically into one
share of Common Stock.
(2) Represents stock units issued under the Non-Employee Director Deferred
Stock and Deferred Compensation Plan or its predecessor plan, accrued stock
units resulting from deferral of retainer and attendance fees and stock
units credited to certain Directors in 1996 in connection with the
elimination of the Director retirement plan. Stock units, which do not have
voting rights, track the value of the Company's Common Stock and earn
dividend equivalents.
(3) Includes 930,787 shares held by LEMA Associates, L.P., of which Mr.
Abramson is the sole general partner. Mr. Abramson also is a limited
partner with a 98% partner's interest. Mrs. Abramson is a limited partner
with a 1% partner's interest. Also includes 3,417 shares held jointly with
Mrs. Abramson and 163,718 shares that Mr. Abramson has the right to acquire
within 60 days of January 31, 1997 upon exercise of stock options. Excludes
3,361 shares held in a grandchild's trust of which Mr. Abramson is
co-trustee and 32,628 shares held by children and grandchildren's trusts of
which Mrs. Abramson is co-trustee. Mr. Abramson disclaims beneficial
ownership of the trust shares.
(4) Includes 1,079,455 shares (convertible into 884,829 shares of Common Stock)
held by LEMA Associates, L.P., of which Mr. Abramson is the sole general
partner. Mr. Abramson also is a limited partner with a 98% partner's
interest. Mrs. Abramson is a limited partner with a 1% partner's interest.
Also includes 895 shares (convertible into 733 shares of Common Stock) held
jointly with Mrs. Abramson. Excludes 880 shares held in a grandchild's
trust of which Mr. Abramson is co-trustee and 34,604 shares held by
children and grandchildren's trusts of which Mrs. Abramson is co-trustee,
which trust shares are convertible into an aggregate of 29,081 shares of
Common Stock. Mr. Abramson disclaims beneficial ownership of the trust
shares.
(5) The Preferred Stock is convertible into 122 shares of Common Stock.
(6) Includes 86,001 shares that Mr. Compton has the right to acquire within 60
days of January 31, 1998 upon exercise of stock options.
(7) Includes 18,734 shares held by Wellington Limited Partnership, of which Mr.
Goodman is a general partner. Excludes 50 shares held by Mrs. Goodman as to
which Mr. Goodman disclaims beneficial ownership.
(8) Includes 4,906 shares (convertible into 4,021 shares of Common Stock) held
by Wellington Limited Partnership, of which Mr. Goodman is a general
partner. Excludes 13 shares (convertible into 10 shares of Common Stock)
held by Mrs. Goodman as to which Mr. Goodman disclaims beneficial
ownership.
(9) Represents shares held by Mrs. Greenwald.
(10) Held jointly with her spouse, as to which Mrs. Hancock shares voting and
investment powers.
(11) Includes 1,000 shares held jointly with his spouse, 15,000 shares held by a
revocable living trust of which Mr. Huber is trustee and beneficiary and
35,211 shares held by Huber Associates Limited Partnership, a family
limited partnership, of which Mr. Huber and his spouse are the sole general
partners. Also includes 75,500 shares that Mr. Huber has the right to
acquire upon exercise of stock options and 85,501 shares that Huber
Associates Limited Partnership has the right to acquire upon exercise of
stock options, in each case within 60 days of January 31, 1998.
(12) Held jointly with his spouse, as to which Mr. Kuehler shares voting and
investment powers.
(13) Includes 750 shares held by a revocable living trust of which Mr. O'Keefe
is trustee and beneficiary. Excludes 150 shares held by a revocable living
trust of which Mrs. O'Keefe is trustee and beneficiary, and as to which Mr.
O'Keefe disclaims beneficial ownership.
(14) Includes 22,825 shares of restricted stock that vest on July 19, 1998. Also
includes 1,000 shares of restricted stock that vest in three annual
installments on February 28, 1998, February 28, 1999 and February 28, 2000,
and 48,652 shares that Mr. Cardillo has the right to acquire within 60 days
of January 31, 1998 upon exercise of stock options.
14
<PAGE> 20
(15) Includes 40,501 shares that Mr. Copeland has the right to acquire within 60
days of January 31, 1998 upon exercise of stock options.
(16) Includes 42,868 shares that Mr. McInerney has the right to acquire within
60 days of January 31, 1998 upon exercise of stock options.
(17) Directors and executive officers as a group have sole voting and investment
powers over 212,998 shares of Common Stock and 1,090,113 shares of
Preferred Stock (convertible into 893,564 shares of Common Stock) and share
voting and investment powers with respect to 97,860 shares of Common Stock
and 895 shares of Preferred Stock (convertible into 733 shares of Common
Stock). Included in the number of shares shown in the table are 4,021
shares of Common Stock and 23 shares of Preferred Stock (convertible into
18 shares of Common Stock) held under the Company's ISP or USHC's Savings
Plan and beneficially owned by executive officers, and 591,692 shares of
Common Stock that Directors and executive officers have the right to
acquire within 60 days of January 31, 1998 upon the exercise of stock
options.
15
<PAGE> 21
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the periods indicated certain compensation of
Mr. Huber, who served as Chief Executive Officer and President (CEO) on December
31, 1997, Mr. Compton who served as Chief Executive Officer for part of 1997 and
Chairman for the entire year, and each of the Company's three other most highly
compensated executive officers (other than Messrs. Huber and Compton) in 1997.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------- ------------------------ ----------
SECURITIES LONG-TERM
OTHER UNDERLYING INCENTIVE
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK PLAN
POSITION YEAR SALARY BONUS COMPENSATION STOCK OPTIONS(8) PAYOUTS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Huber 1997 $631,731 $0(4) 0 0 157,225(9) $0
Chairman, Chief 1996 532,885 1,000,000 0 0 62,000 3,125,196
Executive Officer 1995 451,923 800,000 0 0 142,500 0
and President(1)
Ronald E. Compton 1997 $850,000 $700,000(4) $64,206(6) 0 0 $0
former Chairman and 1996 839,231 1,750,000 0 0 175,000 3,182,565
Chief Executive 1995 800,577 1,300,000 0 0 133,000 1,108,000
Officer(1)
Michael J. Cardillo 1997 $668,506 $270,000(5) $0 $83,125(7) 28,751(9) 0
Executive Vice President, 1996 611,742 610,000 1,468,137 1,400,884 40,000 0
Aetna U.S. Healthcare 1995 575,100 221,460 15,839 499,968 55,595 0
Frederick C. Copeland, Jr. 1997 $386,538 $260,000(4) 0 0 33,352(9) 0
Executive Vice President, 1996 336,539 305,000 0 0 38,000 0
International(2)
Thomas J. McInerney 1997 $450,000 $180,000(4) 0 0 35,751(9) 0
Executive Vice President, Aetna
Retirement Services(3)
<CAPTION>
ALL
NAME AND PRINCIPAL OTHER
POSITION COMPENSATION
- ---------------------------------------- ---------------------
<S> <C> <C>
Richard L. Huber $31,587 (10)
Chairman, Chief 23,760
Executive Officer 222,596
and President(1)
Ronald E. Compton $59,977 (10)(11)
former Chairman and 59,842
Chief Executive 43,036
Officer(1)
Michael J. Cardillo $20,143 (12)
Executive Vice President, 1,685,980
Aetna U.S. Healthcare 20,062
Frederick C. Copeland, Jr. $19,327 (10)
Executive Vice President, 14,808
International(2)
Thomas J. McInerney $22,500 (10)
Executive Vice President, Aetna
Retirement Services(3)
</TABLE>
- --------------------------------------------------------------------------------
Notes to Summary Compensation Table
(1) On July 28, 1997, Mr. Huber became Chief Executive Officer and President of
the Company. Prior to that date, Mr. Compton was Chairman, President and
Chief Executive Officer. Mr. Compton retained the position of Chairman
until his retirement on March 1, 1998.
(2) Mr. Copeland was not an executive officer at any time in 1995.
(3) Mr. McInerney was not an executive officer at any time in 1995 or 1996.
(4) Represents amounts earned under the Company's Annual Incentive Plan. Annual
incentive bonuses are intended to reward executive officers for achieving
financial and strategic results. The Committee on Compensation and
Organization administers the Annual Incentive Plan and determines the
amount of each award to be granted. Amounts shown do not include the amount
of bonus foregone at the election of the executive in exchange for a stock
option grant (see note 9).
(5) Represents the bonus amount paid pursuant to Mr. Cardillo's employment
agreement.
(6) Represents personal use of Company aircraft and automobile.
(7) The value of the restricted stock was determined using the closing price of
the Company's Common Stock on February 28, 1997, the date of the grant.
Dividends are paid on the shares. The restricted shares vest in three
annual installments on February 28, 1998, February 28, 1999 and February
28, 2000. Mr. Cardillo holds an aggregate of 23,825 shares of restricted
stock with a value of $1,681,151 as of December 31, 1997.
(8) Represents stock options granted under the Company's 1996 Stock Incentive
Plan.
(9) Includes a stock option grant on February 27, 1998 for 57,225, 25,752,
13,353, and 25,752 shares to Messrs. Huber, Cardillo, Copeland and
McInerney, respectively, in lieu of payment of all or a portion of the
executive's 1997 bonus award pursuant to the election of such executive
officer.
16
<PAGE> 22
(10) Includes $31,587, $42,500, $19,327 and $22,500 of matching contributions
made by the Company under the Company's Incentive Savings Plan (ISP) and
the Supplemental ISP for Messrs. Huber, Compton, Copeland and McInerney,
respectively. ISP is a profit-sharing thrift plan qualified under the
Internal Revenue Code of 1986, as amended (the Code). The Company matches,
dollar for dollar, amounts deferred by employees under ISP up to 5% of
annual salary. Twenty-five percent of the matching contributions made under
ISP on behalf of certain employees of the Company is automatically invested
in Common Stock. The Company has established the Supplemental ISP to
provide the deferred and matching benefits that would have been credited to
ISP but for limits imposed by the Employee Retirement Income Security Act
(ERISA) and the Code. The Supplemental ISP also is used to provide other
benefits not otherwise payable under ISP, as provided from time to time by
the Company's Board.
(11) Includes $17,477 representing the actuarially determined value of the
benefit to Mr. Compton of life insurance premiums paid by the Company under
a split dollar universal life insurance policy.
(12) Represents a contribution of $16,976 made by AUSHC to the Pension Plan for
Employees of USHC (the Pension Plan) and $3,167 made by AUSHC to the USHC
Savings Plan (the Savings Plan). Under the Pension Plan, AUSHC contributes
for each eligible employee an amount equal to 8% of the employee's
compensation plus 5.7% of the employee's annual compensation in excess of
the social security taxable wage base, subject to a maximum limitation on
the AUSHC contribution per employee as specified in the Pension Plan. Under
the Savings Plan, AUSHC matches 33% of the amounts deferred by employees,
up to 2% of annual compensation.
17
<PAGE> 23
STOCK OPTION GRANTS TABLE
The following table sets forth certain information concerning stock options
granted during 1997 by the Company to the CEO and each of the four most highly
compensated executive officers of the Company (other than the CEO) in 1997. The
hypothetical grant date present values of stock options granted in 1997 shown
below are presented pursuant to SEC rules and are calculated under the modified
Black-Scholes Model for pricing options.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1)
NUMBER OF PERCENT OF
SECURITIES TOTAL STOCK
UNDERLYING OPTIONS EXERCISE
STOCK GRANTED TO PRICE GRANT DATE
OPTIONS EMPLOYEES PER EXPIRATION PRESENT
NAME GRANTED IN 1997 SHARE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Huber 100,000(2) 25.97% $112.625 July 25, 2007 $3,501,000(5)
Ronald E. Compton 0 -- -- -- --
Michael J. Cardillo 3,000(3) .78% 83.125 February 28, 2007 76,920(6)
Frederick C. Copeland, Jr. 20,000(4) 5.19% 90.50 September 26, 2007 551,200(7)
Thomas J. McInerney 10,000(4) 2.6% 90.50 September 26, 2007 275,600(7)
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Granted under the Company's 1996 Stock Incentive Plan (the Plan). The Plan
permits participants to use shares of the Company's Common Stock to exercise
options. The Plan provides that the option price shall not be less than 100%
of the fair market value of the Common Stock on the date the option is
granted. Under the Plan, options may be granted until April 30, 2006. The
table does not include stock options granted in February 1998 to certain
executive officers in lieu of 1997 bonus awards (see page 24).
(2) Date of grant was July 25, 1997; initial exercise date is November 2, 2000;
option vests in installments over a period of two years.
(3) Date of grant was February 28, 1997; initial exercise date is February 28,
1998; option vests in installments over a period of three years.
(4) Date of grant was September 26, 1997; initial exercise date is September 26,
1998; option vests in installments over a period of three years.
(5) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted July 25, 1997 were as follows: (i)
a volatility factor of 30.0%, representing the implied volatility of Aetna's
long-term call options, adjusted to reflect a four-year horizon; (ii) a
risk-free rate of return of 6.08%, representing the five-year U.S. Treasury
bond rate in effect on the date of the option grant; (iii) a dividend yield
of 0.7%, representing the Company's then current annual dividend, divided by
the Common Stock price on the date of the option grant; and (iv) a four-year
option term, representing the historical average life of the options
granted. No further discount to the option value calculated was taken to
give effect to the fact that the options are not freely transferable or to
the exercise or lapse of the options after the vesting period but prior to
the end of the ten-year option period.
(6) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted February 28, 1997 were as follows:
(i) a volatility factor of 30.0%, representing the implied volatility of
Aetna's long-term call options, adjusted to reflect a four-year horizon;
(ii) a risk-free rate of return of 6.39%, representing the five-year U.S.
Treasury bond rate in effect on the date of the option grant; (iii) a
dividend yield of 1.0%, representing the Company's then current annual
dividend, divided by the Common Stock price on the date of the option grant;
and (iv) a four-year option term, representing the historical average life
of the options granted. No further discount to the option value calculated
was taken to give effect to the fact that the options are not freely
transferable or to the exercise or lapse of the options after the vesting
period but prior to the end of the ten-year option period.
18
<PAGE> 24
(7) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted September 26, 1997 were as
follows: (i) a volatility factor of 30.0%, representing the implied
volatility of Aetna's long-term call options, adjusted to reflect a
four-year horizon; (ii) a risk-free rate of return of 5.99%, representing
the five-year U.S. Treasury bond rate in effect on the date of the option
grant; (iii) a dividend yield of 0.9%, representing the Company's then
current annual dividend, divided by the Common Stock price on the date of
the option grant; and (iv) a four-year option term, representing the
historical average life of the options granted. No further discount to the
option value calculated was taken to give effect to the fact that the
options are not freely transferable or to the exercise or lapse of the
options after the vesting period but prior to the end of the ten-year option
period.
There is no assurance that the hypothetical present values of stock options
presented in the preceding table represent the actual values of such
options. The hypothetical values shown should not be construed as
predictions by the Company as to the future value of its Common Stock.
STOCK OPTION/SAR EXERCISES AND DECEMBER 31, 1997
STOCK OPTION/SAR VALUE TABLE
The following table sets forth certain information concerning stock options and
stock appreciation rights (SARs) exercised during 1997 by the CEO and each of
the four most highly compensated executive officers of the Company (other than
the CEO) in 1997 and the number and value of specified options at December 31,
1997. The values of unexercised in-the-money stock options at December 31, 1997
shown below are presented pursuant to SEC rules. There is no assurance that the
values of unexercised in-the-money stock options reflected in this table will be
realized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES VALUE UNEXERCISED OPTIONS/SARS AT OPTIONS AT
ACQUIRED REALIZED DECEMBER 31, 1997 DECEMBER 31, 1997(1)
UPON UPON ------------------------------ -------------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Huber(3) 4,500 $ 218,250 106,169 188,831 $1,433,696 $820,866
Ronald E. Compton 90,780 3,708,965 58,334 177,666 18,229 902,271
Michael J. Cardillo 0 0 47,652 29,666 1,234,642 11,666
Frederick C. Copeland 0 0 35,501 65,499 41,692 25,870
Thomas J. McInerney 1,000 28,250 37,869 83,231 532,181 249,288
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the December 31, 1997 closing stock price of $70.5625.
(2) Represents stock options that are not vested.
(3) Includes stock options held by Huber Associates Limited Partnership, a
family limited partnership, of which Mr. Huber and his spouse are sole
general partners.
19
<PAGE> 25
LONG-TERM INCENTIVE AWARDS TABLE
The following table sets forth certain information concerning long-term
incentive awards granted to the CEO and each of the four mostly highly
compensated executive officers of the Company (other than the CEO) in 1997 under
the Company's 1996 Stock Incentive Plan.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE OR (IN SHARES) UNDER
UNITS OTHER PERIOD NON-STOCK PRICE BASED PLANS
GRANTED UNTIL MATURITY ----------------------------
NAME IN 1997 OR PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Huber 40,000(1) 1997-2000 20,000 40,000 70,000
Ronald E. Compton 40,000(1) 1997-2000 20,000 40,000 70,000
Michael J. Cardillo 6,200(2) 1995-1998 3,100 6,200 10,850
17,500(1) 1997-2000 8,750 17,500 30,625
Frederick C. Copeland, Jr. 5,500(2) 1995-1998 2,750 5,500 9,625
12,000(1) 1997-2000 6,000 12,000 21,000
Thomas J. McInerney 10,000(1) 1997-2000 5,000 10,000 17,500
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The incentive units will vest and shares will become payable only to the
extent the Company's total return to shareholders over a four-year
measurement period (1997-2000) meets or exceeds each of two separate
performance objectives. First, the Company's total return to shareholders
over the measurement period must at least equal a threshold risk-free rate
of return (the Return Threshold), which for these incentive units is based
on the annual rate of return available on a four-year Treasury note
compounded annually. If the Return Threshold is not met, no incentive units
will vest. Second, the Company's total return to shareholders over the
measurement period must compare favorably to that of the other companies in
the Morgan Stanley Healthcare Payor Index (weighted 70%) and the Morgan
Stanley Life Insurance Index (weighted 30%) (together, the Composite Index)
for the same period. For the incentive units to become fully vested, the
Company must achieve at least the median level of total shareholder return
for the companies in the Composite Index (Target Performance). If the
Committee on Compensation and Organization determines that the Company's
performance does not at least equal the 33rd percentile of the companies in
the Composite Index (the Performance Threshold), no portion of the incentive
units will vest regardless of whether the Return Threshold is satisfied. If
the Company's performance is in the 90th percentile of companies in the
Composite Index (Maximum Performance), up to 175% of the incentive units
will vest.
For purposes of determining the total return to shareholders over the
measurement period, the change in the price of the Company's Common Stock
and of the price of the common stock of each of the companies in the
Composite Index is calculated by comparing the average of the closing stock
price of the Company and each other company on the last business day of each
week in the 13-week period both preceding the start and the end of the
measurement period.
(2) The incentive units will vest and shares will become payable only to the
extent the Company's total return to shareholders over a four-year
measurement period (1995-1998) meets or exceeds each of two separate
performance objectives. First, the Company's total return to shareholders
over the measurement period must at least equal a threshold risk-free rate
of return (the Return Threshold), which for these incentive units is based
on the annual rate of return available on a four-year Treasury note
compounded annually. If the Return Threshold is not met, no incentive units
will vest. Second, the Company's total return to shareholders over the
measurement period must compare favorably to that of the other companies in
the Dow Jones Insurance Industry Index for the period January 1, 1995
through September 29, 1996 and to that of companies in the Morgan Stanley
Healthcare Payor Index (weighted 70%) and Morgan Stanley Life Insurance
Index (weighted 30%) for the period September 30, 1996 through December 31,
1998. For the incentive units to become fully vested, the Company must
achieve at least the median level of total shareholder return (Target
Performance). If the Committee on Compensation and Organization determines
that the Company's performance does not at least equal the 33rd percentile
(the Performance Threshold), no portion of the incentive units will vest
regardless of whether the Return Threshold is satisfied. If the Company's
performance is in the 90th percentile (Maximum Performance), up to 175% of
the incentive units will vest.
For purposes of determining the total return to shareholders over the
measurement period, the change in the price of the Company's Common Stock
and of the price of the common stock of each of the companies in the index
is calculated by comparing the average of the closing stock price of the
Company and each other company on the last business day of each week in the
13-week period both preceding the start and the end of the measurement
period.
20
<PAGE> 26
PENSION PLAN
The Company provides for certain of its employees a noncontributory, defined
benefit pension plan (the Pension Plan). Retirement benefits are calculated on
the basis of (i) the number of years of credited service (maximum credit is 35
years), and (ii) the employee's average annual earnings during the 60
consecutive months out of the last 120 months of service that yield the highest
annual compensation. Employees receive service credit for actual years of
employment with the Company. Under certain circumstances, determined on a
case-by-case basis, additional service credit may be given for employment with
affiliated and nonaffiliated companies and, as determined by the Company's
Board, for the purposes of inducing employment of senior officers or rewarding
past service.
The table below shows the estimated maximum annual retirement benefits
payable under the Pension Plan, at selected earnings levels and after selected
periods of credited service, to employees with at least 15 years of credited
service who retire at age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
AVERAGE
ANNUAL CREDITED YEARS OF SERVICE
EARNINGS 15 20 25 30 35
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 500,000 $113,000 $150,000 $188,000 $225,000 $263,000
700,000 158,000 210,000 263,000 315,000 368,000
900,000 203,000 270,000 338,000 405,000 473,000
1,100,000 248,000 330,000 413,000 495,000 578,000
1,300,000 293,000 390,000 488,000 585,000 683,000
1,500,000 338,000 450,000 563,000 675,000 788,000
1,800,000 405,000 540,000 675,000 810,000 945,000
- -----------------------------------------------------------------
</TABLE>
The term "earnings," as used in the retirement benefits table above,
includes annual salaries and annual bonuses paid under the Annual Incentive Plan
set forth in the relevant columns of the Summary Compensation Table on page 16.
At December 31, 1997, "average annual earnings" for pension plan purposes for
Messrs. Huber, Compton, Copeland and McInerney were $1,037,794, $1,512,362,
$522,617 and $530,405, respectively. Mr. Cardillo is not currently eligible for
parti-
cipation in the Pension Plan.
The credited years of service on December 31, 1997 for the persons named in
the Summary Compensation Table are as follows: Mr. Huber-2.9 years, Mr.
Compton-35 years, Mr. Copeland-3.4 years and Mr. McInerney-17.8 years.
The benefits set forth in the above table do not take into account any
reduction for joint and survivorship payments or any offset for Social Security
benefits to be received by the employee. After retirement, benefits are subject
to cost-of-living adjustments of not more than 3% per year, but cannot be
reduced below the amount payable at the time of the individual's retirement.
ERISA limits the maximum annual benefit that may be accrued under and paid
from a tax-qualified plan. As a result, the Company has established a
supplemental plan to provide benefits (included in the foregoing table) that
would exceed the ERISA limit. The supplemental plan also is used to pay other
pension benefits not otherwise payable under the tax-qualified plan, including
certain benefits attributable to management incentive and performance unit
awards, additional years of credited service beyond years actually served,
additional years of age, and covered compensation in excess of that permitted
under the tax-qualified plan.
21
<PAGE> 27
OTHER AGREEMENTS
The Company administers a Severance and Salary Continuation Benefits Plan
(Severance Plan) under which employees, including the Company's executive
officers, terminated by the Company without cause may receive up to two weeks of
continuing salary for every credited full year of employment to a maximum of one
year's salary. In addition, when an employee's job is eliminated due to
reengineering, reorganization or staff reduction efforts, employees, including
the Company's executive officers, are eligible for an additional 13 weeks of
salary continuation and outplacement assistance. Under certain circumstances,
determined on a case-by-case basis, additional severance pay benefits may be
granted for the purposes of inducing employment of senior officers or rewarding
past service. Certain benefits continue during the severance pay and salary
continuation periods.
The Company has entered into employment agreements with Messrs. Copeland
and McInerney. The agreements provide that, if the executive's employment is
terminated by the Company without "cause" or by the executive for "good reason"
(as defined in the agreements), in lieu of participation in the Company's
Severance Plan, the executive will be entitled to a special termination payment
equal to the greater of (i) the aggregate of the executive's base salary and
target bonus, and a pro-rata portion of the executive's annual bonus for the
then uncompleted fiscal year or (ii) the amount otherwise payable under the
Severance Plan for a job elimination including for purposes of such calculation
the executive's target bonus. This special termination payment will be made
available as salary continuation (with continuation of medical and welfare
benefits) or, at the election of the executive, in a lump sum (without
continuation of medical and welfare benefits). Upon a change-in-control of the
Company (as defined), the special termination payment is increased to two times
base salary and target bonus. During his employment Mr. Compton also had an
employment agreement with terms as described above, except the special
termination payment equalled two times base salary and target bonus, increasing
to three times base salary and target bonus upon a change-in-control of the
Company. Upon his retirement, Mr. Compton's employment agreement terminated.
In connection with the Merger, the Company assumed USHC's employment
agreement with Mr. Cardillo. The agreement has a five-year term, expiring in
2001, unless renewed. The agreement provides that, if Mr. Cardillo's employment
is terminated by the Company other than for "cause" or "disability" or by the
executive for "good reason" (as defined in the agreement), in lieu of
participation in the Company's Severance Plan, Mr. Cardillo will be entitled to
a special termination payment equal to the aggregate of three times base salary
and target bonus, and a pro-rata portion of his annual bonus for the then
uncompleted fiscal year. For 36 months following the date of such termination,
he is eligible for continuation of welfare and pension benefits. The agreement
also provides that, in the event of such a termination, all outstanding
equity-based awards will continue to vest for one year and will remain
exercisable for a period of 90 days thereafter. Prior to July 19, 1998, the
termination of Mr. Cardillo's employment requires a vote of two-thirds of the
Board of Directors.
Under the terms of the employment agreements described above, an executive
will generally be reimbursed by the Company for any applicable excise taxes
(including tax gross-up) incurred as a result of payments made under the
agreements.
Upon commencement of his employment, Mr. Huber entered into an agreement
with the Company which provides that if his employment is involuntarily
terminated under circumstances that would call for severance pay benefits, he
will receive payment for not less than 52 weeks of base salary. In the event of
a change-in-control of the Company (as defined), Mr. Huber's severance benefit
would increase to 156 weeks of base salary.
The Board of Directors has approved provisions to protect certain benefits
of Company employees in the event of a change-in-control of the Company (as
defined). The provisions provide that the Severance Plan shall become non-
cancelable for a period of one year following a change-in-control. Also, all
previously granted stock options that have not yet vested will become vested and
immediately exercisable. In the event of a change-in-control, bonuses payable
under the Company's annual bonus program will become
22
<PAGE> 28
payable based on the target award for participants. Also, long-term incentive
awards granted under the Company's 1996 Stock Incentive Plan will vest and a
pro-rated award will be paid equal to the greater of target or actual
performance through the date of the change-in-control. Provision has been made
to permit funding of a trust to protect supplemental retirement benefits
(pension and 401(k)) and deferred compensation upon a change-in-control or
potential change-in-control (each as defined) of the Company.
REPORT OF THE COMMITTEE ON
COMPENSATION AND ORGANIZATION
The following report is presented by the Company's Committee on Compensation and
Organization. This Committee consists entirely of outside Directors.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Committee administers the Company's compensation plans for executives. It
also reviews and makes recommendations to the Board on executive compensation
policies.
The Company's executive compensation program is designed to:
- - attract and retain high-performing executives;
- - focus executives on increasing shareholder value by awarding them stock-based
compensation directly linked to improvements in shareholder return;
- - compensate executives based on the Company's performance relative to its
competitors and improvements in the Company's performance over time; and
- - create a performance-oriented environment in which executives can earn
increased levels of compensation by achieving superior annual and long-term
business results.
The Company's compensation program for executive officers consists of four
principal elements: salaries, annual incentive bonuses, stock options and
long-term incentive awards. The compensation program is designed to set total
compensation opportunity (salary, annual bonus, stock options and long-term
incentive award) at a level relative to the median level of total compensation
paid to similarly positioned executives at companies in a comparison group
selected for each position (the Comparison Group). The Comparison Group for each
position is selected from among 61 companies believed to be major competitors
for executive talent and includes health, financial services, insurance and
other companies. Of these companies, ten were included in either the Dow Jones
Insurance Industry Index or Morgan Stanley Healthcare Payor Index in 1997. The
specific companies selected for an executive's Comparison Group depends on the
executive's area of responsibility. An executive's total compensation relative
to the median depends upon the executive's experience, level and scope of
responsibility within the Company, and individual, as well as Company,
performance. Executive officers are also eligible for other employee benefits as
set forth in the Summary Compensation Table (see page 16).
1. Salaries. The Committee reviews salaries annually. Salaries for executive
officers are based on the competitive marketplace for comparable jobs.
Individual salaries are determined by the executive's experience, level and
scope of responsibility within the Company, and individual performance. As
described above, salaries are established as one element to set an executive's
total compensation opportunity relative to the median level of total
compensation paid to similarly-positioned executives at companies in the
Comparison Group.
2. Annual Incentive Bonuses. Annual incentive bonuses are designed to reward
executive officers for achieving specific financial and strategic goals.
Annual Incentive Plan. The Company's Annual Incentive Plan (the Plan)
applies to executives named in the Company's Proxy Statement, other than certain
executives of USHC, as described below. Under this Plan, specific financial
goals are established at the beginning of each performance year and bonuses are
linked directly to their achievement. Under this Plan, if 100% of the financial
goal is met, the maximum award permitted under the Plan may be paid. If less
than 100% of the financial goal is met, the maximum bonus payable is
proportionately reduced. The Committee has the discretion to pay less than the
maximum amount permitted by the Plan. For 1997, the financial goal established
by the Committee for the Chief Executive Officer was measured by corporate net
income (adjusted by the Committee to exclude unplanned capital gains and losses,
as well as certain items identified at the start of the performance year and
determined to be unusual, nonrecurring or beyond manage-
23
<PAGE> 29
ment's control). The financial goal established for lead business unit
executives was based 75% on the business unit's operating earnings, measured by
income from continuing operations before realized capital gains and losses, and
25% on corporate net income (adjusted as described above). The financial goal
established for certain other line of business executives was based 85% on the
business unit's operating earnings and 15% on corporate net income (as
adjusted). The Committee determined that the performance goals for 1997 were met
at less than a maximum level and awarded bonuses in accordance with this
performance.
Management Incentive Plan. Executive officers who do not participate in
the Annual Incentive Plan participate in the Company's Management Incentive Plan
(MIP). Under MIP, the Committee sets the amount of an executive officer's bonus
based on various levels of financial and strategic performance for each business
unit or staff area. Seventy-five percent of a business unit head's bonus depends
on the unit's operating earnings and 25% depends on corporate net income
(adjusted as described above). Fifteen to 40% of a staff unit head's bonus
depends on corporate net income (as adjusted) and 60 to 85% depends on the
unit's own financial performance, measured by actual expense level versus
budget, and by achievement of other relevant performance objectives. Examples of
these performance objectives include measurable improvements in the quality of
customer service, diversity and effective resolution of legal, regulatory or
other important issues affecting the Company.
Under MIP, if 100% of the goal is met, up to 100% of the target bonus
amount is payable. If 80% of the goal is met, up to 50% of the target bonus
amount is payable. If the goal is exceeded, up to 200% of the target bonus
amount is payable. At the Committee's discretion, the amount of a bonus may be
adjusted upward or downward by up to 20% to take into account strategic results
achieved by the business or staff unit. The principal criteria used by the
Committee in assessing strategic results are positioning of the Company's
businesses, "quality" of (or sources of) the unit's earnings, expense
management, customer service, new product development, management of human
resources, and use of technology.
In 1997, the financial performance of the business and staff units varied;
some achieved or exceeded their goal and some did not. The Company's corporate
net income (after the adjustment as described below) was determined by the
Committee to be at 88.5% of the established goal. The bonuses paid to executive
officers reflected this performance.
Certain USHC Executives. In connection with the Merger, the Company
assumed employment agreements that had been entered into between USHC and
certain USHC executives. These agreements provide that for 1997 an executive's
bonus shall not be less than the amount of the executive's target bonus. Certain
executives received bonus amounts consistent with the requirements of the
employment agreements.
3. Stock Options. The Company awards stock options to better align the
interests of its executive officers with those of its shareholders in increasing
shareholder value. Stock options are granted at not less than 100% of the fair
market value of the underlying Common Stock on the date of grant. Stock options
normally vest over a three-year period.
Annual Option Grant. Stock options are typically granted annually to set
total compensation at a level relative to the median level of total compensation
paid to similarly positioned executives at companies in the executive's
Comparison Group. The value of the stock option component of an executive
officer's compensation opportunity is converted into a specific number of shares
subject to option by assigning each option an estimated realizable value (based
on an independent compensation consultant's analysis of the value realized upon
exercise of stock options by executives at a diverse and large number of major
corporations). The annual grant of stock options was not made in 1997 because
the Company advanced that grant to September 1996 in order to recognize the
efforts of executives involved in the Merger, as well as to increase retention
of USHC executives.
Bonus Exchange Program. The Company permitted executive officers to elect
to forego all or a portion of their 1997 annual bonus in exchange for stock
option grants. The options, which were immediately vested, were granted in
February 1998 at 100% of the fair market value of the Company's Common Stock on
the date of
24
<PAGE> 30
grant. Participation in this program was voluntary.
The number of shares subject to options granted to any individual executive
varied depending on the amount of bonus foregone by the executive.
Other Option Grants. From time to time the Company also grants stock
options in connection with hiring, promotions or other situations where the
Committee believes the circumstances warrant a stock option grant. The amount
granted in these instances is determined by the Committee based on the
individual circumstances.
4. Long-Term Incentive Awards. In 1997, executive officers were granted
incentive units under the Company's Stock Incentive Plan. Incentive units
encourage executives to increase the total shareholder return relative to total
returns achieved by other companies in the Morgan Stanley Healthcare Payor Index
and the Morgan Stanley Life Insurance Index. Incentive units vest only to the
extent the Company's total return to shareholders over a four-year measurement
period (1997-2000) meets or exceeds each of two established performance
objectives (described on page 20). If the Company determines that performance
objectives have not been met, no units vest.
The number of incentive units granted to each executive officer in 1997 was
determined by the Committee, working with an outside compensation consultant, to
set, at target performance levels, the total compensation opportunity at a
median level relative to similarly positioned executives in the executive
officer's Comparison Group. The incentive unit grants are intended to deliver
below median compensation for below median performance and above median
compensation for above median performance.
5. Other. In 1994, a change in the Internal Revenue Code -- Section
162(m) -- eliminated tax deductibility for executive compensation over $1
million, except in certain circumstances. Pursuant to sec.162(m), compensation
over $1 million is deductible if it is awarded according to a
shareholder-approved, performance-based formula and performance is objectively
measured by independent "outside directors" (as defined in Section 162(m)). The
Committee and its outside compensation consultant believe that performance-
based pay over $1 million is sometimes required to attract and retain executives
in a competitive marketplace. Stock options and incentive units granted under
the Stock Incentive Plan and annual bonuses paid under the Annual Incentive Plan
are designed so that the compensation paid will be tax deductible by the
Company. The Committee believes that there are circumstances under which it is
appropriate for the Committee to elect to forego deductibility to maintain
flexibility or to continue to pay competitive compensation.
BASIS FOR THE COMPENSATION OF THE
CHIEF EXECUTIVE OFFICER
The following are details of the compensation earned by Mr. Huber for 1997.
1. Salary. In connection with his appointment as Chief Executive Officer, Mr.
Huber received an increase in salary in 1997 of $205,000. This increase was
awarded to bring Mr. Huber's total compensation opportunity (salary, annual
bonus, stock options and long-term incentive award) to a competitive median
level for his new position.
2. Annual Incentive Bonus. Mr. Huber's annual bonus for 1997 depended on the
Company's adjusted net income. In 1997, the Committee adjusted net income
downward to exclude the positive effect of the reduction in pre-established
reserves relating to severance and facilities charges and discontinued
operations, and, to a lesser extent, upward to exclude the negative effect of a
capital loss related to the write-down of certain properties that the Company
has classified as held for sale. As a result, the Committee determined that the
financial goal was met at a level of 88.5%. This financial performance was the
basis for the Committee's decision to award Mr. Huber a bonus of $600,000. As
noted below, Mr. Huber elected to forego his entire bonus in exchange for a
grant of a stock option for shares of the Company's Common Stock.
3. Stock Options. In connection with his appointment as Chief Executive
Officer, Mr. Huber was granted a stock option for 100,000 shares of the
Company's Common Stock. The amount of the grant was determined to bring Mr.
Huber's total compensation opportunity to a competitive median level. In
addition, Mr. Huber elected to forego all of his 1997 bonus and, in exchange, he
was granted a stock option for 57,225 shares on February 27, 1998.
25
<PAGE> 31
4. Long-Term Incentive Award. In 1997, Mr. Huber was granted 40,000 incentive
units under the 1996 Stock Incentive Plan. These units will vest and shares will
be payable only if established performance objectives are met over a four-year
measurement period (1997-2000). The number of incentive units granted was
determined by the Committee in the manner described elsewhere in this report.
The Committee on Compensation
and Organization
Frank R. O'Keefe, Jr.
(Chairman)
Betsy Z. Cohen
Gerald Greenwald
Michael H. Jordan
Jack D. Kuehler
26
<PAGE> 32
CORPORATE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock (assuming reinvestment of dividends) with the cumulative
total return on the published Standard & Poor's 500 Stock Index (S&P 500), the
cumulative total return on the published Dow Jones Insurance Industry Index
(currently 27 insurance companies) (DJIII) and the cumulative total return on
the published Morgan Stanley Healthcare Payor Index (currently 12 companies)
(MSHPI) over the preceding five-year period. The graph assumes a $100 investment
in shares of Aetna Common Stock on December 31, 1992. As a result of the Merger,
the Company has changed its comparative group from the DJIII to the MSHPI
because the Company believes the MSHPI is a more appropriate index for measuring
the future performance of the Company.
FIVE-YEAR CUMULATIVE TOTAL RETURN
AETNA, S&P 500, DOW JONES INSURANCE INDUSTRY INDEX
AND MORGAN STANLEY HEALTHCARE PAYOR INDEX
<TABLE>
<CAPTION>
DOW JONES MORGAN
INSURANCE STANLEY
MEASUREMENT PERIOD INDUSTRY HEALTHCARE
(FISCAL YEAR COVERED) AETNA S&P 500 INDEX PAYOR INDEX
<S> <C> <C> <C> <C>
12/31/92 100.00 100.00 100.00 100.00
12/31/93 136.52 110.08 104.31 129.22
12/31/94 112.26 111.53 103.40 145.91
12/31/95 172.92 153.44 147.58 210.97
12/31/96 204.96 188.52 182.03 208.92
12/31/97 182.52 251.44 265.45 206.03
</TABLE>
*The MSHPI was created in January 1996. In order to report performance back to
December 31, 1992, as required by SEC rules, the Company used the companies
currently included in the MSHPI (as of December 31, 1997) as its peer group.
The companies included are: Aetna Inc., CIGNA Corporation, Coventry
Corporation, First Health Group Corp., Foundation Health Systems, Inc., Humana
Inc., Mid Atlantic Medical Services, Inc., Oxford Health Plans, Inc.,
Pacificare Health Systems, Inc., Trigon Healthcare, Inc., United Healthcare
Corporation and Wellpoint Health Networks Inc. SNL Securities LC provided
cumulative total return calculations.
27
<PAGE> 33
II. APPOINTMENT OF AUDITORS
Following the recommendation of its Audit Committee, the Company's Board of
Directors has appointed and recommends shareholder approval of KPMG Peat Marwick
LLP as the Company's independent auditors for the current calendar year. The
firm has acted in this capacity since 1972. It is expected that representatives
of the firm will be available at the Annual Meeting of Shareholders to make a
statement if the firm desires and to respond to appropriate questions.
The affirmative vote of a majority of the votes cast is required for
approval of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors.
The Board recommends a vote FOR the approval of KPMG Peat Marwick LLP as
the Company's independent auditors for the current calendar year. Unless
directed to the contrary, the shares represented by the enclosed Proxy will be
voted FOR the appointment of KPMG Peat Marwick LLP as independent auditors for
the current calendar year.
III. SHAREHOLDER PROPOSAL TO ROTATE
LOCATION OF ANNUAL MEETING
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave. N.W., Suite 215,
Washington, D.C. 20037 (owner of 50 shares of Common Stock), has advised the
Company that she plans to present the following proposal at the Annual Meeting.
The proposal is included pursuant to rules of the Securities and Exchange
Commission.
"RESOLVED: That the stockholders recommend that the Board take the
necessary steps to have the meeting rotated each year to cities such as Dallas,
New York, Atlanta, Tampa, and Philadelphia where Aetna either has major
facilities and/or has a large concentration of shareholders.
"While many major corporations such as GE, A.T.T., Xerox, IBM,
Westinghouse, AMR, UAL, and many others are rotating on a regular basis, Aetna
keeps meeting only in Hartford.
"In recent years, GM, Ford and Chrysler have ALL adopted OUR resolution to
rotate the annual meeting.
"Owners in other parts of the country (outside of Hartford) should also
have the opportunity to meet directors and management.
"Last year the owners of 5,252,312 shares, representing approximately 4.1%
of shares voting, voted for this proposal.
"If you AGREE, please mark your proxy FOR this proposal."
The affirmative vote of a majority of the votes cast is required for
approval of the foregoing proposal.
The Board of Directors will OPPOSE this proposal if it is introduced at the
1998 Annual Meeting and recommends a vote against this proposal.
Under the Company's By-Laws, the Board of Directors has the discretion to
determine the location of the Company's Annual Meeting. Historically, the
Company's Annual Meetings have been held in Hartford, Connecticut, because it is
the Company's headquarters and is close to a large concentration of
stockholders, employees and retirees. The Board believes that it may be
appropriate from time to time to hold the Annual Meeting in locations other than
Hartford where the Company has significant operations or a large stockholder
presence. The Board's objection to the proposal, however, is that it would
commit the Company to a plan of mandatory rotation. The Board believes that it
should continue to have flexibility to determine the location of its Annual
Meetings and that mandatory rotation would undermine the Board's ability to
balance all the relevant factors, including convenience to stockholders,
employees, Directors and officers, cost, and security considerations.
Unless directed to the contrary, the shares represented by the enclosed
Proxy will be voted AGAINST the proposal.
IV. OTHER INFORMATION AND
1999 SHAREHOLDER PROPOSALS
The Company will bear the cost of soliciting Proxies. In addition to the use of
the mails, solicitations may be made by personal interview, telegram or
telephone by Directors, officers and employees of the Company and its
subsidiaries.
28
<PAGE> 34
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation material to beneficial owners,
and the Company will reimburse them for reasonable out-of-pocket expenses
incurred in doing so. To assist in the solicitation of Proxies, the Company has
engaged Kissel-Blake Inc., New York, New York, for a fee of $15,000 plus
reasonable out-of-pocket expenses.
To be included in the 1999 Proxy Statement and on the Proxy Card, shareholder
proposals must be received by the Company not later than November 20, 1998. Such
proposals must comply with all applicable SEC rules and regulations. Proposals
should be forwarded to the Corporate Secretary, Aetna Inc., 151 Farmington
Avenue, Hartford, Connecticut 06156.
The Company's By-Laws require that notice of nominations of persons for election
to the Board of Directors, other than those made by or at the direction of the
Board of Directors, must be received no later than 90 days before the Annual
Meeting. The notice must present certain information concerning the nominee and
the shareholder making the nomination. The notice also must include the
nominee's written consent to being a nominee and to serving if elected. Notices
should be sent to the Corporate Secretary, Aetna Inc., 151 Farmington Avenue,
Hartford, Connecticut 06156.
ANNUAL REPORT
The Company's 1997 Annual Report to Shareholders was mailed to shareholders on
or about March 13, 1998.
By order of the Board of Directors,
/s/ Lucille M. Nickerson
Lucille M. Nickerson
Vice President, Corporate Governance and
Corporate Secretary
March 20, 1998
29
<PAGE> 35
151 Farmington Avenue
Hartford, Connecticut 06156
Cat. 2000960800
Printed on recycled paper.
<PAGE> 36
/X/ Please mark your votes as in this example.
This Proxy, when properly executed, will be voted in the manner directed herein
by the shareholder. If no direction is made, this Proxy will be voted FOR Items
1 and 2 and AGAINST Item 3.
The Board of Directors recommends a vote FOR Items 1 and 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approval of KPMG
Directors / / / / Peat Marwick LLP / / / / / /
(See as independent
reverse Auditors
side)
For, except vote withheld from the following nominee(s):
________________________________________________________________________________
The Board of Directors recommends a vote AGAINST Item 3.
FOR AGAINST ABSTAIN
3. Shareholder proposal on / / / / / /
rotating annual meeting
location
The signer hereby revokes all proxies heretofore given by the signer to vote
at said meeting or any adjournment or postponement thereof. NOTE: Please sign
name(s) exactly as printed hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, or for a
corporation, please give your title.
________________________________, 1998
________________________________, 1998
SIGNATURE(S) DATE
AETNA INC.
P The undersigned hereby appoints William H. Donaldson, Barbara Hackman
R Franklin and Frank R. O'Keefe, Jr., and each of them, the proxies of the
O undersigned with full power of substitution, to vote the shares of the
X undersigned at the Annual Meeting of Shareholders of Aetna Inc. to be held
Y April 24, 1998 and at any adjournment or postponement thereof, and directs
said proxies to vote as specified herein on the matters set forth in the
Notice of the meeting, and in their discretion on any other matters that
may properly come before the meeting or any adjournment or postponement
thereof.
NOMINEES: Leonard Abramson, Betsy Z. Cohen, William H. Donaldson,
Barbara Hackman Franklin, Jerome S. Goodman, Earl G. Graves,
Gerald Greenwald, Ellen M. Hancock, Richard L. Huber, Michael H.
Jordan, Jack D. Kuehler, Frank R. O'Keefe, Jr., Judith Rodin
THIS PROXY IS SOLICITED ON BEHALF OF AETNA'S BOARD OF DIRECTORS.
Please vote, sign and date this Proxy and return it promptly in the enclosed
envelope.
See Reverse Side
<PAGE> 37
AETNA INC.
TO: PARTICIPANTS IN THE AETNA INCENTIVE SAVINGS PLAN
Mellon Bank, N.A., the Trustee under the Aetna Incentive Savings Plan (the
Plan), has been instructed to solicit your instructions on how to vote the
shares of Aetna Common Stock held by the Trustee on your behalf in accordance
with the terms of the Plan and to vote those shares in accordance with your
instructions at the Annual Meeting of Shareholders of Aetna Inc. to be held on
April 24, 1998 and at any adjournment or postponement thereof. Please indicate,
by checking the appropriate box, how you want these shares voted by the Trustee
and return this card to the Trustee by April 17, 1998 in the envelope provided.
We would like to remind you that your individual voting instructions are held
in strictest confidence and will not be disclosed to the Corporation. In the
event you fail to indicate your voting instructions, fail to sign the card, or
the card is not received by the Trustee by April 17, your shares will be voted
by the Trustee in the same manner and proportion as those shares for which the
Trustee receives proper and timely instructions.
(continued on reverse side)
- FOLD AND DETACH HERE -
-------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
-------------
- -------------------------------------------
BUSINESS REPLY MAIL
FIRST-CLASS MAIL PERMIT NO. 165 HARTFORD CT
- -------------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE
CORPORATE SECRETARY-5936
AETNA INC
PO BOX 2883
HARTFORD CT 06101-8346
<PAGE> 38
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1) Election of Directors 3) Shareholder proposal on rotating annual meeting location
(Mark only one)
Nominees: Leonard Abramson, Betsy Z. FOR WITHHELD FOR AGAINST ABSTAIN
Cohan, William H. Donaldson, Barbara
Hackman Franklin, Jerome S. Goodman,
Earl G. Graves, Gerald Greenwald,
Ellen M. Hancock, Richard L. Huber,
Michael H. Jordan, Jack D. Kuahlar,
Frank R. O'Keefe, Jr., Judith Rodin
(INSTRUCTIONS: To withhold authority
to vote for particular nominees,
write those nominees' names in the
space provided here.)
- ------------------------------------- FOR AGAINST ABSTAIN
2) Approval of KPMG Peat Marwick, LLP
as Independent Auditors
- ------------------------------------------------------------------------------------------------------------------------------------
__
| THIS INSTRUCTION CARD IS SOLICITED ON BEHALF
IF AETNA'S BOARD OF DIRECTORS
Signature(s) Signature(s) Date
--------------------------------------------- ------------------------------------------ ---------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
- FOLD AND DETACH HERE -
</TABLE>
IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE POSTAGE-PAID
RESERVATION CARD BELOW DIRECTLY TO THE COMPANY. AN ADMISSION CARD WILL THEN BE
MAILED TO YOU.
- FOLD AND DETACH HERE -
AETNA INC.
RESERVATION
I EXPECT TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS. PLEASE SEND
ME AN ADMISSION CARD.
NAME OF SHAREHOLDER
-----------------------------------------------
(Please type or print clearly)
HOME ADDRESS
------------------------------------------------------
CITY, STATE AND ZIP CODE
------------------------------------------
TELEPHONE NO. ( )
-----------------------------------------------
(TO BE RETURNED ONLY IF YOU PLAN TO ATTEND)
<PAGE> 39
IF YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE AND RETURN THE ENCLOSED POSTAGE-PAID
RESERVATION CARD DIRECTLY TO THE COMPANY.
AN ADMISSION CARD WILL THEN BE MAILED TO YOU.
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING -
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX(ES) BELOW.
- --------------------------------------------------------------------------------
This Trustee Instruction Card when properly executed will be voted in the
manner directed herein by the shareholder. If no direction is made, the Trustee
will not vote the shares credited to your account.
- --------------------------------------------------------------------------------
1. Election of Directors
NOMINEES: Leonard Abramson, Betsy Z. Cohen, William H. Donaldson, Barbara
Hackman Franklin, Jerome S. Goodman, Earl G. Graves, Gerald Greenwald,
Ellen M. Hancock, Richard L. Huber, Michael H. Jordan, Jack D. Kuehler,
Frank R. O'Keefe, Jr., Judith Rodin.
FOR WITHHELD FROM
ALL nominees
/ / / / 1.
- --------------------------------------------------
2. Approval of KPMG Peat, Marwick LLP as Independent Auditors
FOR AGAINST ABSTAIN
/ / / / / / 2.
3. Shareholder proposal on rotating annual meeting location
FOR AGAINST ABSTAIN
/ / / / / / 3.
<PAGE> 40
AETNA INC. ------------
FIDELITY INSTITUTIONAL RETIREMENT SERVICES CO. BULK RATE
P.O. BOX 9107 U.S. POSTAGE
HINGHAM, MA 02043-9107 PAID
PROXY
TABULATOR
------------
- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING -
AETNA INC.
TO: Participants in the U.S. Healthcare, Inc. Savings Plan
Fidelity Management Trust Company, the Trustee under the U.S. Healthcare, Inc.
Savings Plan (the Plan), has been instructed to solicit your instructions on
how to vote the shares of Aetna Common Stock and/or Aetna 6.25% Class C Voting
Preferred Stock held by the Trustee on your behalf in accordance with the terms
of the Plan and to vote those shares in accordance with your instructions at
the Annual Meeting of Shareholders of Aetna Inc. to be held on April 24, 1998
and at any adjournment or postponement thereof. Please indicate, by checking
the appropriate box, how you want these shares voted by the Trustee and return
this card to the Trustee in the envelope provided. We would like to remind you
that your individual voting instructions are held in strictest confidence and
will not be disclosed to the Corporation. This Instruction Card, when properly
executed, will be voted in the manner directed herein; if NO direction is
given, if you fail to sign the card, or your card is not received by April 17,
1998, the Trustee will not vote the shares credited to your account.
PLEASE VOTE, SIGN AND DATE THIS INSTRUCTION CARD AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. YOUR SHARES WILL NOT BE VOTED BY THE TRUSTEE IF YOU DO NOT
RETURN THIS CARD.
Date
------------------------
THIS TRUSTEE INSTRUCTION CARD IS SOLICITED
ON BEHALF OF FIDELITY MANAGEMENT TRUST
COMPANY
------------------------------------------
------------------------------------------
(Signature(s))
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such.
