As filed with the Securities and Exchange Commission on March 25, 1994
Registration No. 33-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
AETNA CAPITAL L.L.C. AETNA LIFE AND CASUALTY COMPANY
(Exact name of Registrant as (Exact name of Registrant as
specified in its charter) specified in its charter)
Delaware Connecticut
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
Applied for 06-0843808
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
c/o Jean M. Waggett Jean M. Waggett
Vice President and Corporate Secretary Vice President and Corporate Secretary
Aetna Life and Casualty Company Aetna Life and Casualty Company
151 Farmington Avenue 151 Farmington Avenue
Hartford, Connecticut 06156 Hartford, Connecticut 06156
(203) 273-0123 (203) 273-0123
(Address, including zip code, and (Address, including zip code, and
telephone number, including area telephone number, including area
code, of Registrant's principal code, of Registrant's principal
executive offices and agent for executive offices and agent for
service) service)
----------
Copy of Correspondence to:
Kirk P. Wickman Robert S. Risoleo Richard J. Sandler
Counsel Sullivan & Cromwell Davis Polk & Wardwell
Aetna Life and Casualty 125 Broad Street 450 Lexington Avenue
Company New York, New York 10004 New York, New York 10017
151 Farmington Avenue (212) 558-4000 (212) 450-4000
Hartford, Connecticut 06156
(203) 273-0123
----------
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: /X/
----------
CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed Proposed
maximum maximum Amount
Title of each class Amount offering aggregate of
of securities to to be price per offering registration
be registered registered security (1) price (1) fee
- ------------------------------------------------------------------------------
Preferred Securities... 20,000,000 $25.00 $500,000,000 $172,415
Securities
- ------------------------------------------------------------------------------
Backup Undertakings
by Aetna Life and
Casualty Company (2).. (2) (2) (2) None
==============================================================================
- ----------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Backup Undertakings consist of certain obligations which may be
incurred by Aetna Life and Casualty Company in connection with the
Preferred Securities, including subordinated debentures of Aetna Life and
Casualty Company and a guarantee by Aetna Life and Casualty Company. The
consideration for the Backup Undertakings is included in the "Proposed
maximum aggregate offering price".
----------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 25, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1994
[LOGO]
12,000,000 Securities
Aetna Capital L.L.C.
% Cumulative Monthly Income
Preferred Securities ("MIPS"*), Series A
(liquidation preference $25 per security)
guaranteed to the extent set forth herein by
Aetna Life and Casualty Company
----------
The % Cumulative Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities") offered hereby are being issued by Aetna
Capital L.L.C., a Delaware limited liability company (the "Company"). All
of the common limited liability company interests of the Company are owned
directly or indirectly by Aetna Life and Casualty Company, a Connecticut
insurance corporation ("AL&C").
The payment of dividends, if and to the extent declared out of funds
held by the Company and legally available therefor, and payments on
liquidation or redemption with respect to the Series A Preferred Securities
are guaranteed by AL&C to the extent described in the accompanying
Prospectus. The Series A Preferred Securities will entitle holders to
receive cumulative preferential cash dividends, at an annual rate of % of
the liquidation preference of $25 per security, accruing from ,
1994 and payable monthly in arrears on the last day of each calendar month
of each year, commencing , 1994.
The Series A Preferred Securities are redeemable, at the option of the
Company with AL&C's consent, in whole or in part, from time to time, on or
after , 1999, at $25 per security plus accumulated and unpaid dividends
to the date fixed for redemption (the "Redemption Price") and will be redeemed
at such price from the proceeds of any repayment of the Series A Debentures
evidencing the loan of the proceeds of the offering described herein to
AL&C. In addition, AL&C may cause the Company at any time to redeem the
Series A Preferred Securities or to exchange the Series A Preferred
Securities for Series A Debentures having an aggregate principal amount and
accrued and unpaid interest equal to the Redemption Price and having an
interest rate equal to the dividend rate on the Series A Preferred
Securities if AL&C and the Company have been advised by legal counsel
(which counsel is not an employee of AL&C or the Company) that, as a result
of any change after the date of this Prospectus Supplement in any
applicable income tax laws or regulations or interpretations thereof
(including the enactment or imminent enactment of any legislation, the
publication of any judicial decisions, regulatory rulings, regulatory
procedures or notices or announcements (including notices or announcements
of intent to adopt such procedures or regulations), or a change in the
official position or in the interpretation of law or regulations by any
legislative body, court, governmental authority or regulatory body), there
exists more than an insubstantial risk that (i) the Company will be subject
to income tax with respect to the interest received on the Series A
Debentures or (ii) AL&C will be precluded from deducting the interest paid
on the Series A Debentures for income tax purposes. See "Description of
the Preferred Securities -- Redemption or Exchange" in the accompanying
Prospectus.
In the event of a liquidation of the Company, holders of Series A
Preferred Securities will be entitled to receive for each Series A
Preferred Security a liquidation preference of $25 plus accumulated and
unpaid dividends (whether or not declared) to the date of payment, subject
to certain limitations. See "Certain Terms of the Series A Preferred
Securities -- Liquidation Preference" herein and "Description of the
Preferred Securities -- Liquidation Distribution" in the accompanying
Prospectus.
For a description of various contractual backup undertakings of AL&C
relating to the Series A Preferred Securities, see "Description of the
Guarantee" and "Description of the Debentures and the Subordinated
Indenture" in the accompanying Prospectus.
Application will be made to list the Series A Preferred Securities on
the New York Stock Exchange.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------
Initial Public Underwriting Proceeds to
Offering Price(1) Commission(2) Company(1)(3)(4)
----------------- ------------- ----------------
Per Series A Preferred
Security................ $25 (3) $25
Total(4)(5)........... $300,000,000 (3) $300,000,000
___________
(1) Plus accrued dividends, if any, from , 1994.
(2) The Company and AL&C have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting" herein.
(3) In view of the fact that the proceeds of the sale of the Series A
Preferred Securities will be loaned to AL&C, under the Underwriting
Agreement AL&C has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their services $ per Series
A Preferred Security (or $ in the aggregate). See "Underwriting"
herein.
(4) Expenses of the offering, which are payable by AL&C, are estimated to
be $720,000.
(5) The Company has granted to the Underwriters a 30-day option to
purchase, on the same terms set forth above, up to 1,800,000 additional
Series A Preferred Securities at the Initial Public Offering Price (with
additional Underwriters' Compensation) solely to cover over-allotments,
if any. If the option is exercised in full, the total Initial Public
Offering Price, Underwriters' Compensation and Proceeds to Company will
be $345,000,000, $ and $ , respectively. See
"Underwriting" herein.
----------
The Series A Preferred Securities offered hereby are offered by the
several Underwriters, as specified herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole
or in part. It is expected that delivery of the Series A Preferred
Securities will be made only in book-entry form through the facilities of
The Depository Trust Company on or about , 1994.
____________
* An application has been filed by Goldman, Sachs & Co. with the United
States Patent and Trademark Office for the registration of the MIPS
servicemark.
----------
Goldman, Sachs & Co.
----------
The date of this Prospectus Supplement is , 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
_____________________
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE FOR THE STATE
OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS.
_______________
AETNA LIFE AND CASUALTY COMPANY
AL&C and its subsidiaries ("Aetna") constitute one of the nation's
largest insurance/financial services organizations based on its assets at
December 31, 1992. Based on 1992 premium rankings, Aetna also is one of
the nation's largest stock insurers of property-casualty lines and one of
the largest writers of group health and managed care products, and group
life, annuity and pension products.
AETNA CAPITAL L.L.C.
The Company is a limited liability company formed under the laws of
Delaware. AL&C owns directly or indirectly all of the common limited
liability company interests (the "Common Securities") in the Company, which
Common Securities are nontransferable. The Company's principal executive
offices are located at 151 Farmington Avenue, Hartford, Connecticut 06156,
telephone: (203) 273-0123. The principal executive offices of the
Managing Members (as defined below) of the Company are located at 151
Farmington Avenue, Hartford, Connecticut 06156, telephone: (203) 273-0123.
The Company exists solely for the purpose of issuing preferred limited
liability company interests ("Preferred Securities") and Common Securities
and lending the proceeds from the issuance thereof and related capital
contributions to AL&C.
Each holder of Series A Preferred Securities will be furnished
annually with unaudited financial statements of the Company as soon as
available after the end of the Company's fiscal year.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should
carefully review the information contained elsewhere in this Prospectus
Supplement and in the Prospectus and should particularly consider the
following matters:
AL&C's obligations under the Guarantee are subordinate and junior in
right of payment to all other liabilities of AL&C and its obligations under
the Subordinated Indenture are subordinate and junior in right of payment
to all Senior Debt of AL&C. As of December 31, 1993, AL&C had
approximately $ million of Senior Debt outstanding. See "Description of
the Guarantee -- Status of the Guarantee" and "Description of the
Debentures and the Subordinated Indenture -- Subordination" in the
Prospectus.
AL&C has the right under the Series A Debentures to extend interest
payment periods for up to 60 months (which right may be exercised from time
to time), and, as a consequence, monthly dividends on the Series A
Preferred Securities can be deferred (but will continue to accumulate) by
the Company during any such extended interest payment period. In the event
that AL&C exercises this right, AL&C will not be permitted to declare
dividends on any shares of its preferred or common stock, and therefore,
the possibility of an extension of a payment period is, in the view of the
Company and AL&C, remote. See "Description of the Debentures and the
Subordinated Indenture -- Interest" in the Prospectus.
Should an extended interest payment period occur, beneficial owners of
Series A Preferred Securities will be required to include interest accruing
on the Series A Debentures in gross income for U.S. federal income tax
purposes in advance of the receipt of cash, and any beneficial owners who
dispose of Series A Preferred Securities prior to the record date for
payment of dividends following such period will not receive such dividends
from the Company or AL&C. See "Taxation -- Potential Extension of Payment
Period" in the Prospectus.
USE OF PROCEEDS
Based on the offering price of $25 per Series A Preferred Security,
the proceeds from this offering (prior to deducting Underwriters'
Compensation and estimated expenses) will be $300 million ($345 million if
the Underwriters' over-allotment option is exercised in full). The
proceeds from the sale of the Series A Preferred Securities will be loaned
to AL&C to be used for general corporate purposes, including the repayment
of indebtedness.
CAPITALIZATION
The following table sets forth the total consolidated capitalization
of Aetna at December 31, 1993 and as adjusted to give effect to the sale of
the Series A Preferred Securities offered hereby and the application of the
proceeds therefrom as described under "Use of Proceeds" herein.
As of December 31, 1993
-----------------------------
Actual As Adjusted
---------- ---------------
(Millions, except share data)
Short-term debt.................................. $ 35.7 $
========= =========
Long-term debt................................... 1,160.0
Preferred securities of consolidated subsidiary.. --
Shareholders' equity:
Preferred Stock (no par value:
40,000,000 shares authorized; no shares
issued or outstanding)......................... -- --
Common Capital Stock (no par value: 250,000,000
shares authorized; 114,939,275 issued and
112,200,567 outstanding)....................... 1,422.0 1,422.0
Net unrealized capital gains................... 648.2 648.2
Retained earnings.............................. 5,103.3 5,103.3
Treasury Stock, at cost (2,738,708 shares)..... (130.4) (130.4)
--------- --------
Total shareholders' equity................... $ 7,043.1 $7,043.1
--------- --------
Total short-term debt and capitalization... $ 8,238.8 $
========= =========
- -----------
For further information, see Notes 8, 9, 11 and 16 of Notes to Financial
Statements in AL&C's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
SUMMARY FINANCIAL INFORMATION OF AETNA
The following summary financial information for the years ended and as
of December 31, 1993, 1992, 1991, 1990 and 1989 has been derived from
previously published audited consolidated financial statements of Aetna, as
adjusted, which have been examined and reported upon by KPMG Peat Marwick,
independent auditors. The summary financial information should be read in
conjunction with, and is qualified in its entirety by reference to, the
consolidated financial statements from which it has been derived and the
accompanying notes thereto incorporated by reference in the Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1993(1)(2) 1992(1) 1991 1990 1989
----------- ---------- ---------- --------- -----------
(millions)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue:
Premiums.......................... $10,574.9 $10,793.9 $11,444.6 $11,923.1 $12,432.6
Net Investment Income............. 4,919.0 5,069.0 5,514.5 5,608.1 5,360.8
Fees and Other Income............. 1,534.0 1,519.4 1,365.5 1,290.5 1,169.3
Net Realized Capital Gains
(Losses)........................ 89.8 114.9 (282.1) (122.5) 250.0
Total Revenue................... 17,117.7 17,497.2 18,042.5 18,699.2 19,212.7
Benefits and Expenses:
Benefits and Expenses (other
than Loss on Discontinuance of
Products and Severance and
Facilities Charges)............. 16,687.1 17,473.6 17,799.0 18,149.6 18,548.9
Loss on Discontinuance of Products 1,270.0 --- --- --- ---
Severance and Facilities Charge... 308.0 145.0 --- 90.0 ---
Income (Loss) from Continuing
Operations before Extraordinary
Item and Cumulative Effect
Adjustments..................... (615.3) (5.3) 366.4 480.6 512.8
Income from Discontinued Operations,
Net of Tax(3)..................... 27.0 173.8 138.8 133.5 126.6
Extraordinary loss on debenture
redemption, net of tax.......... (4.7) --- --- --- ---
Cumulative effect adjustments,
net of tax:
Discounting of workers'
compensation life table
indemnity claims................ 250.0 --- --- --- ---
Change in accounting for
postemployment benefits......... (48.5) --- --- --- ---
Change in accounting for
retrospectively rated
reinsurance contracts........... 26.3 --- --- --- ---
Change in accounting for debt
and equity securities........... ( .7) --- --- --- ---
Change in accounting for income
taxes........................... --- 272.5 --- --- ---
Change in accounting for
postretirement benefits other
than pensions................... --- (385.0) --- --- ---
Net Income (Loss)................... $ (365.9) $ 56.0 $ 505.2 $ 614.1 $ 676.4
Net Realized Capital Gains (Losses),
Net of Tax (included above)....... 59.0 78.6 (187.4) (79.2) 111.7
Balance Sheet Data:
Total Assets(4).....................$100,036.7 $94,519.6 $91,987.6 $89,300.7 $87,099.0
Total Investments................... 61,455.8 58,796.5 58,456.9 60,766.2 58,704.8
Total Long-Term Debt................ 1,160.0 955.6 1,019.6 1,010.3 1,037.7
Total Shareholders' Equity.......... 7,043.1 7,238.3 7,384.5 7,072.4 6,936.7
Business Segment Earnings Data:
Income (Loss) from Continuing Opera-
tions before Extraordinary Item
and Cumulative Effect Adjustments:
Health and Life Insurance
and Services................. $288.1 $280.6 $386.0 $280.3 $241.7
Financial Services............. (808.8) (17.2) (156.9) 28.4 106.9
Commercial Property-Casualty
Insurance and Services....... (115.9) (245.4) 139.5 199.5 232.0
Personal Property-Casualty..... (3.3) (36.2) (28.6) 24.8 (104.6)
International.................. 24.6 12.9 26.4 (52.4) (17.2)
<FN>
___________
1 See AL&C's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 for a discussion of the effects of accounting changes adopted
with respect to 1993 and 1992 and for a discussion of the discontinuance
of Aetna's fully guaranteed large case pension products in 1993.
2 In August 1993, the Omnibus Budget Reconciliation Act of 1993 ("OBRA")
was enacted which resulted in an increase in the federal corporate tax
rate from 34% to 35%. The enactment of OBRA resulted in a net benefit of
$21.8 million to continuing operations before extraordinary item and
cumulative effect adjustments. The net benefit resulted from an increase
in Aetna's deferred tax asset partially offset by an increase in current
taxes.
3 In 1992, Aetna sold American Re-Insurance Company, formerly a wholly
owned subsidiary. As a result of the sale, the Reinsurance and Related
Services segment, provided through American Re-Insurance Company, is
presented as a discontinued operation. All prior year financial data has
been restated to reflect the change.
4 Total assets in 1993 include $15.0 billion of assets attributable to
discontinued products.
</TABLE>
RECENT DEVELOPMENTS
Actions Announced in January 1994
In January 1994, Aetna announced a number of actions to improve the
profitability of its operations. The announced actions resulted in an
after-tax charge to 1993 operating earnings (income from continuing
operations, excluding capital gains and losses) of $1.28 billion. The
announced actions included the following:
o Aetna discontinued the sale of fully guaranteed large case pension
products. These products principally consist of guaranteed
investment contracts and single-premium annuities. Results in
1993 included an after-tax charge for anticipated future losses on
these products of $825 million.
o Aetna increased its workers' compensation reserves for prior
accident years by $574 million (pre-tax). Aetna also elected,
retroactive to January 1, 1993, to begin discounting a portion of
those reserves consistent with industry practice. After tax and
after the current year effect of discounting, reserves increased
by $259 million.
o Aetna announced expense reduction measures, including the
elimination of 4,000 positions and the abandonment of certain
facilities. Results in 1993 included an after-tax severance and
facilities charge of $200 million related to these measures.
These cost-reduction measures are expected to be substantially
completed in 1994 and are expected to produce annual after-tax
savings in excess of $200 million by 1995, including savings
resulting from a modification of Aetna's post-retirement health
care plan.
1993 Results
Aetna reported a 1993 net loss of $366 million, compared to net income
of $56 million and $505 million in 1992 and 1991, respectively. The 1993
net loss reflected the charges detailed above, as well as income from
discontinued operations of $27 million (compared with $174 million in 1992
and $139 million in 1991) and a net benefit of $227 million for cumulative
effect adjustments for accounting changes (compared with a net charge of
$113 million for such adjustments in 1992).
Excluding the $1.28 billion charge announced in January, 1994,
operating earnings improved to $610 million in 1993 from $192 million in
1992. Results in 1993 benefitted from a $173 million after-tax reduction
in operating expenses as well as improved underwriting and lower
catastrophe losses in the property/casualty businesses.
Adverse conditions in commercial real estate markets have negatively
impacted earnings in recent years and may continue to negatively impact
future results of operations. However, Aetna has reduced its commercial
real estate exposure as a percentage of general account invested assets
from 38% at year-end 1991 ($22.2 billion of real estate and mortgage loans)
to 26% at year-end 1993 ($16.2 billion of real estate and mortgage loans).
In addition, as part of the discontinuance of its fully guaranteed large
case pension products, Aetna took a charge for all anticipated future
capital losses on the $6 billion of real estate and mortgage loans
supporting these products.
For a more complete description of Aetna's financial condition at
December 31, 1993 and 1992 and operating results for the years ended
December 31, 1993, 1992 and 1991, reference is made to AL&C's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
Recent Catastrophe Losses
Aetna expects that claim costs from the Los Angeles earthquake and the
January and February 1994 winter storms will reduce first quarter 1994
results by approximately $120 million, after reinsurance and taxes.
SUMMARY BUSINESS DESCRIPTION
The business of Aetna is conducted through five reportable segments:
Health and Life Insurance and Services; Financial Services; Commercial
Property-Casualty Insurance and Services; Personal Property-Casualty; and
International.
Health and Life Insurance and Services
Group health and life insurance products and services, including
managed health care products and services, are marketed through units of
the Health and Life Insurance and Services segment, primarily to employers
and employer-sponsored groups. These products and services are provided to
employees or other individuals covered under benefit plans sponsored by
those organizations. Individual life insurance products also are included
in Health and Life. Group life insurance consists chiefly of renewable
term coverage, the amounts of which frequently are linked to individual
employee wage levels. Aetna also offers group universal life and sponsored
universal and whole life products. Group health and disability insurance
includes coverage for medical and dental care expenses and for disabled
employees' income replacement benefits.
Health coverage is provided under both traditional indemnity and
prepaid arrangements, whereby Aetna assumes the full insurance risk, and
under alternative risk-sharing plans, whereby employers assume all or a
significant portion of the insurance risk. Managed care products, which
may be sold on a stand-alone basis or in combination with traditional
indemnity products, vary from traditional indemnity products primarily
through the use of health care networks (physicians and hospitals) and the
implementation of medical management procedures designed to enhance the
quality and reduce the cost of medical services provided. Aetna's managed
care products include health maintenance organizations, preferred provider
organizations and point-of-service plans. At year end 1993, Aetna operated
various types of managed care networks in approximately 211 Standard
Metropolitan Statistical Areas, with enrollment of approximately 5 million.
The number of members covered under all arrangements, including traditional
health plans, was approximately 15 million at December 31, 1993.
Both the Clinton Administration and a number of states have proposed
significant health care reform legislation. Aetna is supportive of
initiatives that expand access to and control costs of health care through
expanded reliance on managed care and preserve a strong private sector role
in the financing and delivery of health care. Management currently is not
able to predict the outcome of the various federal and state legislative
initiatives or what effect the resulting legislation, if any, will have on
Aetna's health businesses.
Financial Services
The business units in the Financial Services segment market a variety
of retirement and other savings and investment products (including pension
and annuity products) and services to businesses, government units,
associations, collectively bargained welfare trusts, hospitals, educational
institutions and individuals. Some pension and annuity products provide a
variety of investment guarantees, funding and benefit payment distribution
options and other services. Certain products are tailored for marketing to
pension plans that qualify under Internal Revenue Code of 1986, as amended
(the "Code") Section 401 for tax deferral. Other products qualify for
similar tax status under Code Sections 401, 403, 408 and 457. As of
December 31, 1993, the Financial Services segment, including Separate
Accounts, had $67.1 billion in assets under management (including assets
supporting discontinued products of $14.7 billion).
In January 1994, Aetna announced its decision to discontinue the sale
of its fully guaranteed large case pension products. Fully guaranteed
large case pension products consist of guaranteed investment contracts and
single-premium annuities that generally were offered to larger employers.
See "Recent Developments -- Actions Announced in January 1994".
Commercial Property-Casualty Insurance and Services
The business units in the Commercial Property-Casualty Insurance and
Services segment provide most types of property-casualty insurance, bonds,
and insurance-related services for businesses, government units and
associations. Commercial coverages accounted for 67% of Aetna's 1993
property-casualty net written premiums. These coverages are sold for risks
of all sizes and include fire and allied lines, multiple peril, marine,
workers' compensation, general liability (including product liability),
commercial automobile, certain professional liability, and fidelity and
surety bonds.
Personal Property-Casualty
The business units in the Personal Property-Casualty segment provide
primarily personal automobile insurance and homeowners insurance. Personal
coverages accounted for 33% of Aetna's 1993 property-casualty net written
premiums. Aetna has in recent years withdrawn from or reduced exposure to
personal automobile insurance in certain states in which management has
concluded that it is not in Aetna's interest to continue selling personal
automobile insurance. Management will continue to evaluate market
conditions and maintain or increase Aetna's presence in those states that
offer acceptable returns.
International
The International segment, through subsidiaries and joint venture
operations, sells primarily life insurance and financial services products
in non-U.S. markets including Canada, Malaysia, Taiwan, Chile, Mexico, the
United Kingdom, Hong Kong, Korea and New Zealand. The International
segment's strategy is to invest resources in areas outside the U.S. that
have the potential for attractive returns, with emphasis on the emerging
insurance and financial services markets of newly industrialized countries.
This long-term strategy requires significant up-front investment and a
willingness to accept negative or low returns in the initial years of such
operations.
A more complete description of Aetna's business operations is
contained in "Item 1 -- Business" of AL&C's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
General
The following summary of certain terms and provisions of the Series A
Preferred Securities supplements the description of certain terms and
provisions of the Preferred Securities of any series set forth in the
accompanying Prospectus under the heading "Description of the Preferred
Securities", to which description reference is hereby made. Capitalized
terms used and not defined in this Prospectus Supplement shall have the
meanings ascribed to them in the Prospectus. The Series A Preferred
Securities constitute a series of Preferred Securities of the Company,
which Preferred Securities may be issued from time to time in one or more
series with such designations, dividend rights, liquidation preference per
security, redemption or exchange provisions, voting rights and other
rights, preferences, privileges, limitations and restrictions as are
established by the Amended and Restated Limited Liability Company Agreement
of the Company (the "L.L.C. Agreement"), the Delaware Limited Liability
Company Act (the "L.L.C. Act") and the resolutions (the "Resolutions")
adopted, or to be adopted, pursuant to the L.L.C. Agreement and the L.L.C.
Act by AL&C and Aetna Capital Holdings, Inc., in their capacity as the
members of the Company that hold all of the Company's Common Securities
(the "Managing Members"). The summary of certain terms and provisions of
the Series A Preferred Securities set forth below does not purport to be
complete and is subject to, and qualified in its entirety by reference to
the L.L.C. Agreement and the Resolutions establishing the rights,
preferences, privileges, limitations and restrictions relating to the
Series A Preferred Securities. A copy of the Resolutions relating to the
Series A Preferred Securities will be included as an exhibit to a Current
Report on Form 8-K to be filed by AL&C at or prior to the closing of the
sale of the Series A Preferred Securities offered hereby.
Dividends
Dividends on the Series A Preferred Securities will be cumulative,
will accrue from , 1994 and will be payable monthly in arrears on the
last day of each calendar month of each year, commencing , 1994, when,
as and if declared by the Managing Members, except as otherwise
described under "Description of the Preferred Securities -- Dividends"
in the accompanying Prospectus, to holders of record on the Business
Day immediately preceding the relevant payment date. The Company may
only pay dividends on the Series A Preferred Securities to the extent
it has funds legally available therefor. See "Description of the
Preferred Securities -- Dividends" in the accompanying Prospectus.
The dividend payable on each Series A Preferred Security will be fixed
at a rate per annum of % of the stated liquidation preference thereof.
Liquidation Preference
The stated liquidation preference of the Series A Preferred Securities
is $25 per security.
Redemption or Exchange
The Series A Preferred Securities are redeemable or exchangeable for
Series A Debentures as described in the accompanying Prospectus. In
addition, the Series A Preferred Securities are redeemable, at the option
of the Company and subject to the prior consent of AL&C, in whole or in
part, from time to time, on or after , 1999, upon not less than 30
nor more than 60 days' notice, at the redemption price of $25 per security,
plus accumulated and unpaid dividends (whether or not declared) to the date
fixed for redemption.
CERTAIN TERMS OF THE SERIES A DEBENTURES
General
The following summary of certain terms and provisions of the
Debentures relating to the Series A Preferred Securities (the "Series A
Debentures") supplements the description of certain terms and provisions of
the Debentures set forth in the accompanying Prospectus under the heading
"Description of the Debentures and the Subordinated Indenture", to which
description reference is hereby made. Pursuant to the Subordinated
Indenture, AL&C will issue Series A Debentures to the Company in an
aggregate principal amount equal to $300 million, such amount being the sum
of the aggregate stated liquidation preference of the Series A Preferred
Securities issued and sold by the Company and the proceeds from the
issuance of Common Securities to the Managing Members and related capital
contributions (the "Common Securities Payments"). In the event that the
Underwriters' over-allotment option is exercised, AL&C will issue
additional Series A Debentures to the Company pursuant to the Subordinated
Indenture equal to the aggregate stated liquidation preference of the
Series A Preferred Securities so sold plus the related Common Securities
Payments. If the Underwriters' over-allotment option is exercised in full,
such additional Series A Debentures will have an aggregate principal amount
equal to $345 million.
The entire principal amount of the Series A Debentures will become due
and payable, together with any accrued and unpaid interest thereon,
including Additional Interest, if any, on the earlier of , 2024
(subject to AL&C's right to exchange the Series A Debentures for new
Debentures or reborrow the proceeds from the repayment of the Series A
Debentures upon the terms and subject to the conditions set forth under
"Description of the Debentures and Subordinated Indenture -- Exchanges and
Reborrowings" in the accompanying Prospectus) and the date upon which the
Company is dissolved, wound up, liquidated or terminated or either Managing
Member is liquidated, bankrupt or insolvent or withdraws, resigns or is
expelled from the Company.
Prepayment
The Series A Debentures may not be prepaid by AL&C except as described
below or in the accompanying Prospectus. The Series A Debentures may be
prepaid at the option of AL&C, without premium or penalty, in whole or in
part (together with accrued but unpaid interest, including Additional
Interest, if any, on the portion being prepaid) at any time on or after ,
1999, upon not less than 30 nor more than 60 days' notice.
Interest
The Series A Debentures will bear interest at an annual rate equal to
% from the date they are issued until maturity. Such interest will be
payable on the last day of each calendar month of each year, commencing ,
1994.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters, for whom Goldman, Sachs & Co., ,
and are acting as Representatives, has severally agreed to
purchase, the number of Series A Preferred Securities set forth opposite
its name below:
Number of
Series A
Underwriters Preferred Securities
------------- --------------------
Goldman, Sachs & Co. ......................
----------
Total.................................... 12,000,000
==========
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in
part directly to the public at the initial public offering price set forth
on the cover page of this Prospectus Supplement and in part to certain
securities dealers at such price less a concession of $. per Series A
Preferred Security. The Underwriters may allow and such dealers may
reallow a concession not in excess of $. per Series A Preferred Security to
certain brokers and dealers. After the Series A Preferred Securities are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
In view of the fact that the proceeds of the sale of the Series A
Preferred Securities will be loaned to AL&C, under the Underwriting
Agreement AL&C has agreed to pay as compensation for the services of the
Underwriters in New York Clearing House (next day) funds $. per Series A
Preferred Security for the accounts of the several Underwriters.
The Company has granted the Underwriters an option exercisable for 30
days after the date of this Prospectus Supplement to purchase up to
1,800,000 additional Series A Preferred Securities to cover over-
allotments, if any, at the initial public offering price (with additional
Underwriters' Compensation), as set forth on the cover page of this
Prospectus Supplement. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of Series A Preferred Securities to be purchased by each of them, as
shown in the foregoing table, bears to the number of Series A Preferred
Securities initially offered hereby.
Prior to this offering, there has been no market for the Series A
Preferred Securities. In order to meet one of the requirements for listing
the Series A Preferred Securities on the New York Stock Exchange, the
Underwriters will undertake to sell lots of 100 or more Series A Preferred
Securities to a minimum of 400 beneficial holders.
The Company and AL&C have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended.
Certain of the Underwriters from time to time provide investment
banking services to Aetna.
Information contained herein is subject to
completion or amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be accepted prior to
the time the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH 25, 1994
Aetna Capital L.L.C.
Preferred Securities
guaranteed to the extent set forth herein by
Aetna Life and Casualty Company
__________
Aetna Capital L.L.C., a Delaware limited liability company (the
"Company"), may offer from time to time, in one or more series, its
authorized but unissued Preferred Limited Liability Company Interests (the
"Preferred Securities"). All of the Common Limited Liability Company
Interests (the "Common Securities") of the Company are owned directly or
indirectly by Aetna Life and Casualty Company, a Connecticut insurance
corporation ("AL&C"). The payment of dividends, if and to the extent
declared out of funds held by the Company and legally available therefor,
and payments on liquidation or redemption with respect to the Preferred
Securities are guaranteed (the "Guarantee") by AL&C to the extent set forth
herein. No portion of the dividends received by a holder of the Preferred
Securities will be eligible for the dividends received deduction for
federal income tax purposes. The Guarantee will rank subordinate and
junior in right of payment to all other liabilities of AL&C and pari passu
with the most senior preferred stock issued by AL&C. See "Aetna Capital
L.L.C.", "Description of the Guarantee" and "Description of the Debentures
and the Subordinated Indenture" for a description of various contractual
backup obligations of AL&C relating to the Preferred Securities. The total
number of Preferred Securities of all series to be issued under the
registration statement of which this Prospectus forms a part will not
exceed 20,000,000.
The terms of the Preferred Securities of a particular series will be
determined at the time of sale. The specific designation, liquidation
preference per security, initial public offering price, dividend rate (or
method of calculation thereof), dates on which dividends will be payable,
voting rights, any redemption or exchange provisions and the other rights,
preferences, privileges, limitations and restrictions relating to the
Preferred Securities of the particular series in respect of which this
Prospectus is being delivered will be set forth in the Prospectus
Supplement pertaining to such series (the "Prospectus Supplement").
The Preferred Securities may be sold for public offering to or through
underwriters or dealers or may be sold through agents designated from time
to time or directly by the Company. See "Plan of Distribution". The names
of any such underwriters, dealers or agents involved in the sale of the
Preferred Securities of the particular series in respect of which this
Prospectus is being delivered, the number of Preferred Securities to be
purchased by any such underwriters and any applicable commissions or
discounts will be set forth in the Prospectus Supplement. The proceeds to
the Company will also be set forth in the Prospectus Supplement.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus in connection with the offer contained in this Prospectus
and, if given or made, such information or representations must not be
relied upon as having been authorized by AL&C, the Company or any
underwriters, agents or dealers. This Prospectus does not constitute an
offer to sell or solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale
hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of AL&C and its subsidiaries or the
Company since the date hereof or that the information contained herein is
correct at any time subsequent to the date hereof.
This Prospectus may not be used to consummate sales of Preferred
Securities unless accompanied by a Prospectus Supplement.
----------
The date of this Prospectus is , 1994.
AVAILABLE INFORMATION
AL&C is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by AL&C can be inspected and copied
at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, New York, New
York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. AL&C's common stock is listed on the New
York Stock Exchange, the Pacific Stock Exchange and on the Swiss exchanges
in Basel, Geneva and Zurich, and such reports, proxy and information
statements and other information concerning AL&C may also be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005, and the Pacific Stock Exchange, 301 Pine Street, San
Francisco, California 94104.
The Company and AL&C have filed with the Commission a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is
made to the Registration Statement and to the exhibits relating thereto for
further information with respect to AL&C, the Company and the securities
offered hereby.
No separate financial statements of the Company have been included
herein. The Company and AL&C do not consider that such financial
statements would be material to holders of the Preferred Securities because
the Company is a newly formed special purpose entity and has no operating
history. See "Aetna Capital L.L.C.". The Company is a limited liability
company formed under the laws of Delaware and will be managed by AL&C and
Aetna Capital Holdings, Inc. (the "Managing Members"), in their capacity
as the members of the Company that hold all of the Company's Common
Securities. AL&C directly or indirectly owns all of the Common Securities,
which are nontransferable.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
AL&C's Annual Report on Form 10-K for the fiscal year ended December
31, 1993, filed with the Commission pursuant to Section 13 of the Exchange
Act under File No. 1-5704, is incorporated by reference into this
Prospectus and made a part hereof.
All documents filed by AL&C with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
and prior to the termination of the offering described herein shall hereby
be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein or in any Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
AL&C will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference into
this Prospectus (without exhibits to such documents other than exhibits
specifically incorporated by reference into such documents). Requests for
such copies should be directed to the office of the Corporate Secretary,
Aetna Life and Casualty Company, 151 Farmington Avenue, Hartford, CT 06156,
telephone (203) 273-3977.
AETNA LIFE AND CASUALTY COMPANY
AL&C and its subsidiaries ("Aetna") constitute one of the nation's
largest insurance/financial services organizations based on its assets at
December 31, 1992. Based on 1992 premium rankings, Aetna also is one of
the nation's largest stock insurers of property-casualty lines and one of
the largest writers of group health and managed care products, and group
life, annuity and pension products.
AL&C was organized in 1967 as a Connecticut insurance corporation.
The business of Aetna is conducted through five reportable segments: health
and life insurance and services; financial services; commercial property-
casualty insurance and services; personal property-casualty insurance; and
international.
The principal executive offices of AL&C are located at 151 Farmington
Avenue, Hartford, Connecticut 06156; its telephone number is (203) 273-0123.
AETNA CAPITAL L.L.C.
The Company is a limited liability company formed under the laws of
Delaware. AL&C owns directly or indirectly all of the Common Securities of
the Company, which securities are nontransferable. The Company's principal
executive offices are located at 151 Farmington Avenue, Hartford,
Connecticut 06156, telephone: (203) 273-0123. The principal executive
offices of the Managing Members are located at 151 Farmington Avenue,
Hartford, Connecticut 06156, telephone: (203) 273-0123. The Company
exists solely for the purpose of issuing Preferred Securities and Common
Securities and lending the proceeds from the issuance thereof and related
capital contributions to AL&C.
Pursuant to the Company's Amended and Restated Limited Liability
Company Agreement (the "L.L.C. Agreement"), the members of the Company
that hold Common Securities have unlimited liability for the debts,
obligations and liabilities of the Company in the same manner as a general
partner of a Delaware limited partnership (which do not include obligations
to holders of Preferred Securities), to the extent not fully satisfied and
discharged by the Company. That liability on the part of such members is
for the benefit of, and is enforceable by, the liquidating trustee of the
Company in the event of its dissolution, winding up, liquidation or
termination and is for the benefit of third parties to whom the Company
owes such debts, obligations and liabilities. The holders of Preferred
Securities, in their capacity as members of the Company, are not liable for
the debts, obligations or liabilities of the Company.
Each holder of Preferred Securities will be furnished annually with
unaudited financial statements of the Company as soon as available after
the end of the Company's fiscal year.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth Aetna's ratio of earnings to combined
fixed charges and preferred stock dividends for the periods indicated.
Years ended December 31,
---------------------------------
1993 1992 1991 1990 1989
Ratio of Earnings to Combined Fixed ---- ------- ---- ---- ----
Charges and Preferred Stock Dividends.... (a) 0.42(a) 2.13 3.03 4.05
___________
(a) Earnings were inadequate to cover fixed charges by $1.1 billion in
1993 and $112.8 million in 1992.
For purposes of computing the ratio of earnings to combined fixed
charges and preferred stock dividends, "earnings" represent consolidated
earnings from continuing operations before income taxes, cumulative effect
adjustments and extraordinary items plus fixed charges and minority
interest. "Fixed charges" consist of interest (and the portion of rental
expense deemed representative of the interest factor). Preferred stock
dividends, which are not deductible for income tax purposes, have been
increased to a taxable equivalent basis. This adjustment has been
calculated by using the effective tax rate for the applicable year. All
shares of AL&C's preferred stock were redeemed in 1989.
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be loaned
to AL&C and, except as may otherwise be set forth in the applicable
Prospectus Supplement, will be used for general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the
Preferred Securities of any series. Certain terms and provisions of the
Preferred Securities of a particular series will be summarized in the
Prospectus Supplement relating to the Preferred Securities of such series.
If so indicated in the Prospectus Supplement, the terms and provisions of
the Preferred Securities of a particular series may differ from the terms
set forth below. The summaries set forth below and in the applicable
Prospectus Supplement address the material terms of the Preferred
Securities of any particular series but do not purport to be complete and
are subject to, and qualified in their entirety by reference to, the L.L.C.
Agreement and the resolutions adopted or to be adopted by the Managing
Members pursuant to the L.L.C. Agreement and the Delaware Limited
Liability Company Act, establishing the rights, preferences, privileges,
limitations and restrictions relating to the Preferred Securities of any
series or of a particular series. A copy of the form of the L.L.C.
Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
General
The Company is authorized to issue common limited liability company
interests and preferred limited liability company interests. The preferred
limited liability company interests may be issued in one or more series or
classes, with such dividend rights, liquidation preference per security,
redemption or exchange provisions, voting rights and other rights,
preferences, privileges, limitations and restrictions as shall be set forth
in the L.L.C. Agreement and the resolutions providing for the issuance
thereof adopted by the Managing Members. All of the Preferred Securities,
to be issued in one or more series or classes, will rank pari passu with
each other with respect to participation in profits and assets.
The Preferred Securities of any series will be issued in registered
form only without dividend coupons. Registration of, and registration of
transfers of, the Preferred Securities of any series will be by book-entry
only. The Preferred Securities of any series will have the dividend
rights, rights upon liquidation, redemption and exchange provisions and
voting rights set forth below, unless otherwise provided in the Prospectus
Supplement relating to the Preferred Securities of a particular series.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a particular series for specific terms, including (i) the
designation of the Preferred Securities of such series, (ii) the price at
which the Preferred Securities of such series will be issued, (iii) the
dividend rate (or method of calculation thereof) and the dates on which
dividends will be payable, (iv) the voting rights, (v) any redemption or
exchange provisions, (vi) the stated liquidation preference, (vii) any
other rights, preferences, privileges, limitations and restrictions
relating to the Preferred Securities of such series and (viii) the terms
upon which the proceeds from the sale of the Preferred Securities of such
series will be loaned to AL&C.
Dividends
Dividends on the Preferred Securities will be cumulative. Cumulative
dividends on any series of Preferred Securities will accrue from the date
set forth in the Prospectus Supplement relating to such series and will be
payable monthly in arrears on the last day of each calendar month of each
year, commencing on the date specified in the Prospectus Supplement
relating to such series.
The dividend payable on Preferred Securities of a particular series
will be fixed at the rate per annum specified in the Prospectus Supplement
relating to such series. The amount of dividends payable for any full
monthly dividend period will be computed on the basis of twelve 30-day
months and a 360-day year and, for any period shorter than a full monthly
dividend period, will be computed on the basis of the actual number of days
elapsed in such period. The Company may only pay dividends on Preferred
Securities to the extent it has funds legally available therefor. See
"Description of the Guarantee" and "Description of the Debentures and the
Subordinated Indenture" below.
Dividends on the Preferred Securities of any series will be declared
by the Managing Members of the Company to the extent that the Managing
Members reasonably anticipate that at the time of payment the Company will
have, and must be paid by the Company to the extent that at the time of
proposed payment it has, (i) funds legally available for the payment of
such dividends and (ii) cash on hand sufficient to permit such payments.
It is anticipated that the Company's funds will be limited to payments
under the debentures (the "Debentures") issued by AL&C that will evidence
the loans to be made by the Company to AL&C of the proceeds from the
issuance of the Preferred Securities and the Common Securities and the
related capital contributions. See "Description of the Debentures and the
Subordinated Indenture".
Dividends declared on the Preferred Securities of any series will be
payable to the record holders thereof as they appear on the register for
the Preferred Securities of such series on the relevant record dates, which
will be, unless otherwise specified in the Prospectus Supplement relating
to each such series, one Business Day (as hereinafter defined) prior to the
relevant payment dates. Subject to any applicable fiscal or other laws and
regulations, each such payment will be made as described under "Book-Entry-
Only Issuance; The Depository Trust Company" below. In the event that any
date on which dividends are payable on the Preferred Securities of any
series is not a Business Day, then payment of the dividend payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date. A "Business
Day" shall mean any day other than a day on which banking institutions in
The City of New York are authorized or required by law to close.
Except as described herein and in the Prospectus Supplement relating
to the Preferred Securities of a particular series, holders of the
Preferred Securities will have no other right to participate in the profits
of the Company.
Certain Restrictions on the Company
If dividends have not been paid in full on the Preferred Securities of
any series, the Company shall not:
(i) pay, or declare and set aside for payment, any dividends on the
Preferred Securities of any other series or any other limited liability
company interests in the Company ranking pari passu with the Preferred
Securities of such series with respect to participation in profits of the
Company ("Company Dividend Parity Securities"), unless the amount of any
dividends declared on any Company Dividend Parity Securities is paid on the
Company Dividend Parity Securities and the Preferred Securities of such
series on a pro rata basis on the date such dividends are paid on such
Company Dividend Parity Securities, so that the ratio of
(x) (A) the aggregate amount paid as dividends on the Preferred
Securities of such series to (B) the aggregate amount paid as dividends on
the Company Dividend Parity Securities is the same as the ratio of
(y) (A) the aggregate amount of all accumulated arrears of unpaid
dividends on the Preferred Securities of such series to (B) the aggregate
amount of all accumulated arrears of unpaid dividends on the Company
Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any dividends on any
securities of the Company ranking junior to the Preferred Securities of
such series as to dividends ("Company Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend
Parity Securities or Company Dividend Junior Securities;
until, in each case, such time as all accumulated arrears of unpaid
dividends on the Preferred Securities of such series shall have been paid
or set aside for payment in full for all dividend periods terminating on or
prior to, in the case of clauses (i) and (ii), such payment, and in the
case of clause (iii), the date of such redemption, purchase or other
acquisition. So long as the Preferred Securities of any series are
represented by one or more global certificates, dividends on such series of
Preferred Securities shall have been paid in full with respect to any
dividend payment date for such series when the amount of dividends payable
on such date has been paid to The Depository Trust Company ("DTC"). See
"Book-Entry-Only Issuance; The Depository Trust Company".
Redemption or Exchange
The Preferred Securities of any series will be redeemable at the
option of the Company and subject to the prior consent of AL&C, in whole or
in part from time to time, on or after the date specified in the Prospectus
Supplement relating to such series, at the stated liquidation preference
per security for such series, plus accumulated and unpaid dividends
(whether or not declared) (the "Redemption Price") to the date fixed for
redemption (the "Redemption Date"). The Preferred Securities of any series
may also be redeemed at the option of the Company on such other terms and
conditions as may be set forth in the Prospectus Supplement relating to
such series.
If at any time after the issuance of the Preferred Securities of any
series, the Company is or would be required to pay Additional Amounts (as
defined below) with respect to any Preferred Securities of such series, the
Company may, upon not less than 30 nor more than 60 days' notice to the
holders of Preferred Securities of such series with respect to which such
Additional Amounts are required to be paid, redeem such Preferred
Securities at the Redemption Price. In connection with any such
redemption, the Company shall (i) cause the global certificate representing
all of the Preferred Securities of such series to be withdrawn from DTC or
its successor securities depository, (ii) issue share certificates in
definitive form representing Preferred Securities of such series and (iii)
redeem the Preferred Securities of such series with respect to which such
Additional Amounts are required to be paid.
In addition, if the Company and AL&C have been advised by legal
counsel (which counsel is not an employee of AL&C or the Company) that, as
a result of any change after the date of the Prospectus Supplement relating
to any series of Preferred Securities in any applicable income tax laws or
regulations or in the interpretation thereof (including but not limited to
the enactment or imminent enactment of any legislation, the publication of
any judicial decisions, regulatory rulings, regulatory procedures, or
notices or announcements (including notices or announcements of intent to
adopt such procedures or regulations), or a change in the official position
or in the interpretation of law or regulations by any legislative body,
court, governmental authority or regulatory body, irrespective of the
manner in which such change is made known), there exists more than an
insubstantial risk that (i) AL&C will be precluded from deducting the
interest paid on the Debentures relating to the Preferred Securities of
such series for income tax purposes or (ii) the Company will be subject to
federal income tax with respect to the interest received on such
Debentures, then the Company and AL&C may, upon not less than 30 nor more
than 60 days' notice to the holders of Preferred Securities of such series,
either (a) redeem the Preferred Securities of such series, in whole or in
part, at the Redemption Price or (b) exchange the Preferred Securities of
such series for Debentures relating to such Preferred Securities having an
aggregate principal amount and accrued and unpaid interest equal to the
Redemption Price and having an interest rate thereon equal to the dividend
rate on such Preferred Securities.
After the date fixed for any exchange of Preferred Securities of any
series for the related series of Debentures, (i) the Preferred Securities
of such series will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of such Preferred Securities, will exchange
the global certificate or certificates representing the Preferred
Securities of such series for a registered global certificate or
certificates representing the Debentures of such series to be delivered
upon such exchange and (iii) any certificates representing Preferred
Securities of such series not held by DTC or its nominee will be deemed to
represent Debentures of such series having a principal amount and accrued
and unpaid interest equal to the Redemption Price of such Preferred
Securities until such certificates are presented to the Company or its
agent for exchange.
The Preferred Securities of any series will also be redeemed at the
Redemption Price with the proceeds from the repayment by AL&C when due of
the series of Debentures relating to such Preferred Securities or upon any
optional prepayment by AL&C of such Debentures as described under
"Description of the Debentures and the Subordinated Indenture -- Optional
Prepayment," subject to the provisions in clause (iii) under "Certain
Restrictions on the Company" above. Notwithstanding the foregoing, the
Preferred Securities of any series will not be redeemed if AL&C elects to
exchange the Debentures to be repaid or prepaid for new Debentures or
reborrows the proceeds from any such repayment or prepayment in the manner
described under "Description of the Debentures and the Subordinated
Indenture -- Exchanges and Reborrowings".
The Company may not redeem any Preferred Securities of any series
unless all accumulated arrears of unpaid dividends have been paid on all
Preferred Securities of all series for all monthly dividend periods
terminating on or prior to the date of redemption.
In the event that fewer than all the outstanding Preferred Securities
of a particular series are to be redeemed, the Preferred Securities of such
series to be redeemed will be selected as described under "Book-Entry-Only
Issuance; The Depository Trust Company" below.
If the Company gives a notice of redemption in respect of Preferred
Securities of a particular series, then, by 12:00 noon, New York time, on
the applicable Redemption Date, the Company will irrevocably deposit with
DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price to
the holders thereof. See "Book-Entry-Only Issuance; The Depository Trust
Company". If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of
holders of such Preferred Securities of a series so called for redemption
will cease, except the right of the holders of such securities to receive
the Redemption Price, but without interest, and such securities will cease
to be outstanding. In the event that any date on which any payment in
respect of the redemption of Preferred Securities of any series is not a
Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of Preferred Securities of any
series is improperly withheld or refused and not paid either by the Company
or by AL&C pursuant to the Guarantee, dividends on such securities will
continue to accrue, at the then applicable rate, from the Redemption Date
originally established by the Company for such securities to the date such
Redemption Price is actually paid, in which case the actual payment date
will be the date fixed for redemption for purposes of calculating the
Redemption Price.
Subject to the foregoing and applicable law (including, without
limitation, U.S. federal securities laws) AL&C or its subsidiaries may at
any time and from time to time purchase outstanding Preferred Securities of
any series by tender, in the open market or by private agreement.
Liquidation Distribution
In the event of any voluntary or involuntary dissolution, winding up,
liquidation or termination of the Company, the holders of Preferred
Securities of each series at the time outstanding will be entitled to
receive out of the assets of the Company legally available for distribution
to securityholders, before any distribution of assets is made to holders of
Common Securities in the Company or any other class of limited liability
company interests in the Company ranking junior to the Preferred Securities
with respect to participation in assets of the Company, but together with
the holders of Preferred Securities of any other series or any other
limited liability company interests in the Company outstanding ranking pari
passu with the Preferred Securities with respect to participation in the
assets of the Company ("Company Liquidation Parity Securities"), an amount
equal, in the case of the holders of the Preferred Securities of such
series, to the aggregate of the stated liquidation preference for Preferred
Securities of such series as set forth in the Prospectus Supplement and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution"). If, upon any such liquidation,
the Liquidation Distributions can be paid only in part because the Company
has insufficient assets available to pay in full the aggregate Liquidation
Distributions and the aggregate maximum liquidation distributions on the
Company Liquidation Parity Securities, then the amounts payable directly by
the Company on the Preferred Securities of such series and on such Company
Liquidation Parity Securities shall be paid on a pro rata basis, so that
the ratio of
(i)(x) the aggregate amount paid as Liquidation Distributions on the
Preferred Securities of such series to (y) the aggregate amount paid as
liquidation distributions on the Company Liquidation Parity Securities is
the same as the ratio of
(ii)(x) the aggregate Liquidation Distributions to (y) the aggregate
maximum liquidation distributions on the Company Liquidation Parity
Securities.
Pursuant to the L.L.C. Agreement, the Company will automatically
dissolve and be liquidated (i) when the period fixed for the life of the
Company expires, (ii) if the Managing Members by resolution require the
Company to be dissolved, wound up, liquidated, or terminated (subject to
the voting rights of the holders of Preferred Securities described under
"Voting Rights" below) or (iii) if either Managing Member is bankrupt,
insolvent or liquidated or withdraws, resigns or is expelled from the
Company.
Voting Rights
If (i) the Company fails to pay dividends in full on the Preferred
Securities of any series for 18 consecutive monthly dividend periods; (ii)
a Debenture Event of Default (as defined in the Subordinated Indenture)
occurs and is continuing; or (iii) AL&C is in default on any of its
payment obligations under the Guarantee (as described under "Description of
the Guarantee -- Certain Covenants of AL&C"), then the holders of a
majority in stated liquidation preference of the outstanding Preferred
Securities of such series, in the case of clause (i) above, and the holders
of a majority in stated liquidation preference of all outstanding Preferred
Securities, in the case of clauses (ii) and (iii) above, together with the
holders of any other limited liability company interests in the Company
having the right to vote for the appointment of a trustee in such event,
acting as a single class, will be entitled to appoint and authorize a
trustee to enforce the Company's rights under the Debentures against AL&C,
enforce the obligations undertaken by AL&C under the Guarantee and declare
and pay dividends on the Preferred Securities of such series in the case of
clause (i) above. For purposes of determining whether the Company has
failed to pay dividends in full for 18 consecutive monthly dividend
periods, dividends shall be deemed to remain in arrears, notwithstanding
any payments in respect thereof, until full cumulative dividends have been
or contemporaneously are declared and paid with respect to all monthly
dividend periods terminating on or prior to the date of payment of such
full cumulative dividends. Not later than 30 days after such right to
appoint a trustee arises, the Managing Members will convene a meeting for
the above purpose. If the Managing Members fail to convene such meeting
within such 30-day period, the holders of 10% in stated liquidation
preference of the outstanding Preferred Securities of such series, in the
case of clause (i) above, and the holders of 10% in stated liquidation
preference of all outstanding Preferred Securities, in the case of clauses
(ii) and (iii) above, and such other limited liability company interests,
acting as a single class, will be entitled to convene such meeting. Any
trustee so appointed shall vacate office immediately, subject to the terms
of such other limited liability company interests, if the Company shall
have paid in full all accumulated and unpaid dividends on the Preferred
Securities of such series, in the case of clause (i) above, or such default
by AL&C shall have been cured, in the case of clause (ii) or (iii) above.
If any resolution is proposed to be adopted by the securityholders of
the Company providing for, or the Managing Members propose to take any
action to effect, (x) any variation or abrogation of the powers,
preferences and special rights of the Preferred Securities of any series by
way of amendment of the L.L.C. Agreement or otherwise (including, without
limitation, the authorization or issuance of any limited liability company
interests in the Company ranking, as to participation in the profits or
assets of the Company, senior to the Preferred Securities) which variation
or abrogation adversely affects the holders of Preferred Securities of such
series, (y) the dissolution, winding up, liquidation or termination of the
Company or (z) the commencement of any bankruptcy, insolvency,
reorganization or other similar proceeding involving the Company, then the
holders of outstanding Preferred Securities of the series, the powers,
preferences or special rights of which are proposed to be amended in the
case of any action described in clause (x) above, and the holders of all
outstanding Preferred Securities, in the case of any action described in
clauses (y) or (z) above, (and, in the case of any action described in
clause (x) above which would adversely affect the rights, preferences or
privileges of any Company Dividend Parity Securities or any Company
Liquidation Parity Securities, such Company Dividend Parity Securities or
such Company Liquidation Parity Securities, as the case may be, or, in the
case of any action described in clause (y) above, all Company Liquidation
Parity Securities or, in the case of any action described in clause (z)
above, all holders of outstanding Preferred Securities, Company Dividend
Parity Securities and any Company Liquidation Parity Securities other than
holders of any such securities that are also creditors of AL&C or any of
its subsidiaries) will be entitled to vote together as a class on such
resolution or action of the Managing Members (but not any other resolution
or action) and such resolution or action shall not be effective except with
the approval of the holders of a majority in stated liquidation preference
of such outstanding securities (or, under certain circumstances, 100% in
stated liquidation preference of such outstanding securities); provided,
however, that no such approval shall be required under clauses (x) and (y)
if the dissolution, winding up, liquidation or termination of the Company
is proposed or initiated upon the initiation of proceedings, or after
proceedings have been initiated, for the bankruptcy, insolvency or
liquidation of either Managing Member or upon the withdrawal, resignation
or expulsion of either Managing Member of the Company.
The powers, preferences or special rights of the Preferred Securities
of any series will be deemed not to be varied by the creation or issue of,
and no vote will be required for the creation or issue of, any further
limited liability company interests in the Company ranking pari passu with
or junior to the Preferred Securities of any series with respect to voting
rights and rights to participate in the profits or assets of the Company.
Any required approval of holders of Preferred Securities may be given
at a meeting of such holders convened for such purpose or pursuant to
written consent. The Company will cause a notice of any meeting at which
holders of the Preferred Securities of a series are entitled to vote, or of
any matter upon which action may be taken by written consent of such
holders, to be mailed to each holder of record of the Preferred Securities
of such series. Each such notice will include a statement setting forth
(i) the date of such meeting or the date by which such action is to be
taken, (ii) a description of any action proposed to be taken at such
meeting on which such holders are entitled to vote or of such matters upon
which written consent is sought and (iii) instructions for the delivery of
proxies or consents.
Notwithstanding that holders of Preferred Securities of any series are
entitled to vote or consent under any of the circumstances described above,
any of the Preferred Securities of any series that are owned by AL&C or any
entity owned more than 50% by AL&C, either directly or indirectly, shall
not be entitled to vote or consent and shall, for the purposes of such vote
or consent, be treated as if they were not outstanding.
Except as described herein and in the Prospectus Supplement relating
to the Preferred Securities of a particular series, holders of Preferred
Securities will have no other voting rights.
Additional Amounts
All payments in respect of the Preferred Securities by the Company
will be made without withholding or deduction for or on account of any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied upon or as a result of such payment by or
on behalf of the United States of America, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, the Company will pay as a dividend such
additional amounts as may be necessary in order that the net amounts
received by the holders of the Preferred Securities after such withholding
or deduction will equal the amount which would have been receivable in
respect of such Preferred Securities in the absence of such withholding or
deduction ("Additional Amounts"), except that no such Additional Amounts
will be payable to a holder or beneficial owner of Preferred Securities (or
a third party on his behalf) with respect to Preferred Securities:
(a) if such holder or beneficial owner is liable for such taxes,
duties, assessments or governmental charges in respect of such Preferred
Securities by reason of such holder's or owner's having some connection
with the United States, any state thereof or any other jurisdiction through
which or from which such payment is made (including, without limitation,
actual or constructive ownership, past or present, of 10% or more of the
total combined voting power of all classes of stock entitled to vote of
AL&C), other than being a holder or beneficial owner of such Preferred
Securities, or
(b) if the Company has notified such holder of the obligation to
withhold taxes and requested but not received from such holder or
beneficial owner a declaration of non-residence, a valid taxpayer
identification number or other claim for exemption (or information or
certification required to support such claim), and such withholding or
deduction would not have been required had such declaration, taxpayer
identification number or claim been received.
Book-Entry-Only Issuance; The Depository Trust Company
DTC, New York, New York, will act as securities depository for the
Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One or more fully-registered global Preferred
Security certificates will be issued for each series of Preferred
Securities, representing all of the Preferred Securities of such series,
and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Preferred Securities under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Preferred Security ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written
confirmations providing details of their transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Preferred Securities, except in
the event that use of the book-entry system for the Preferred Securities is
discontinued.
To facilitate subsequent transfers, all Preferred Securities deposited
by Participants with DTC are registered in the name of Cede & Co. The
deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Preferred Securities are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Securities of any series are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such series to be redeemed.
Although voting with respect to the Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC mails an Omnibus Proxy to the Company as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts the
Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Dividend payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments
on such payable date. Payments by Participants to Beneficial Owners will
be governed by standing instructions and customary practices and will be
the responsibility of such Participant and not of DTC, the Company or AL&C,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of dividends to DTC will be the responsibility
of the Company, disbursement of such payments to Direct Participants will
be the responsibility of DTC and disbursement of such payments to the
Beneficial Owners will be responsibility of the Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities of any series at any time by
giving reasonable notice to the Company and AL&C. Under such
circumstances, in the event that a successor securities depository is not
obtained, Preferred Security certificates for such series will be printed
and delivered. Additionally, in the event that the Company were to redeem
only a portion of the Preferred Securities of any series because the
Company is required to pay Additional Amounts with respect to such
Preferred Securities to be redeemed, the Company may cause the global
certificate or certificates representing all of the Preferred Securities of
such series to be withdrawn from DTC (or its successor securities
depository) and may issue certificates in definitive form representing such
Preferred Securities. Thereafter, such Preferred Securities subject to
such requirement to pay Additional Amounts would be redeemed.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company believes to be
reliable, but neither the Company nor AL&C takes responsibility for the
accuracy thereof.
Registrar, Transfer Agent and Paying Agent
First Chicago Trust Company of New York will act as registrar,
transfer agent and paying agent for the Preferred Securities.
Registration of transfers of Preferred Securities of any series will
be effected without charge by or on behalf of the Company, but upon payment
(with the giving of such indemnity as the Company or AL&C may require) in
respect of any tax or other governmental charges which may be imposed in
connection therewith.
The Company will not be required to register or cause to be registered
the transfer of Preferred Securities of a particular series after such
Preferred Securities have been called for redemption.
Miscellaneous
The Preferred Securities are not subject to any sinking fund
provisions. Holders of Preferred Securities of any series have no
preemptive rights.
AL&C and the Company will enter into an agreement as to expenses and
liabilities (the "Expense Agreement") pursuant to which AL&C will agree to
guarantee the payment of any liabilities incurred by the Company other than
obligations to holders of Preferred Securities, which will be separately
guaranteed to the extent set forth in the Guarantee. See "Description of
the Guarantee". The Expense Agreement will expressly provide that it is
for the benefit of, and is enforceable by, third parties to whom the
Company owes such obligations. A copy of the form of Expense Agreement has
been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
DESCRIPTION OF THE GUARANTEE
Set forth below is condensed information concerning the guarantee (the
"Guarantee") which will be executed and delivered by AL&C for the benefit
of the holders from time to time of Preferred Securities. This summary
contains all material information concerning the Guarantee but does not
purport to be complete. References to provisions of the Guarantee are
qualified in their entirety by reference to the text of the Payment and
Guarantee Agreement, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
General
AL&C will irrevocably and unconditionally agree, to the extent set
forth herein, to pay in full, to the holders of the Preferred Securities of
any series, the Guarantee Payments (as defined below) (except to the
extent paid by the Company or by AL&C to any trustee appointed by such
holders (as described under "Description of the Preferred Securities --
Voting Rights")), as and when due, regardless of any defense, right of set-
off or counterclaim which the Company may have or assert. The following
payments to the extent not paid by the Company (the "Guarantee Payments")
will be subject to the Guarantee (without duplication): (i) any
accumulated and unpaid dividends which have been theretofore declared on
the Preferred Securities of any series out of funds legally available
therefor, (ii) the redemption price (including all accumulated and unpaid
dividends) payable out of funds legally available therefor with respect to
Preferred Securities of any series called for redemption by the Company and
(iii) upon the liquidation of the Company, the lesser of (a) the aggregate
of the stated liquidation preference of the Preferred Securities and all
accumulated and unpaid dividends thereon (whether or not declared) to the
date of payment and (b) the amount of assets of the Company legally
available for distribution to holders of Preferred Securities in
liquidation.
Certain Covenants of AL&C
In the Guarantee, AL&C will covenant that, so long as any Preferred
Securities of any series remain outstanding, AL&C will not declare or pay
any dividend on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of AL&C's capital stock or make any guarantee payments
with respect to the foregoing (other than (i) payments under the Guarantee,
(ii) acquisitions of shares of AL&C's common stock in connection with the
satisfaction by AL&C of its obligations under any employee benefit plans
and (iii) redemptions of any share purchase rights (the "Rights") issued by
AL&C pursuant to AL&C's Share Purchase Rights Plan adopted on October 27,
1989, as amended from time to time (the "Rights Plan") or the declaration
of a dividend of similar share purchase rights in the future), if at such
time AL&C will be in default with respect to its payment obligations under
the Guarantee or there shall have occurred an Event of Default under the
Subordinated Indenture.
In the Guarantee, AL&C will also covenant that, so long as Preferred
Securities of any series remain outstanding, it will (i) not cause or
permit any Common Securities of the Company to be transferred, (ii)
maintain direct or indirect ownership of all outstanding securities of the
Company other than (x) the Preferred Securities of any series and (y) any
other securities permitted to be issued by the Company that would not cause
it to become an "investment company"under the Investment Company Act of
1940, as amended, (iii) cause at least 21% of the total value of the
Company and at least 21% of all interests in the capital, income, gain,
loss, deduction and credit of the Company to be represented by Common
Securities, (iv) not voluntarily dissolve, wind up, liquidate or terminate
the Company or either of the Managing Members, (v) cause AL&C and Aetna
Capital Holdings, Inc. to remain the Managing Members of the Company and
timely perform all of their respective duties as Managing Members of the
Company (including the duty to declare and pay dividends on the Preferred
Securities as described under "Description of the Preferred Securities --
Dividends") and (vi) use reasonable efforts to cause the Company to remain
a limited liability company and otherwise continue to be treated as a
partnership for U.S. federal income tax purposes.
Additional Amounts
All Guarantee Payments will be made without withholding or deduction
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or as a
result of such payment by or on behalf of the United States of America, any
state thereof or any other jurisdiction through which or from which such
payment is made, or any authority therein or thereof having power to tax,
unless the withholding or deduction of such taxes, duties, assessments or
governmental charges is required by law. In that event, AL&C will pay such
additional amounts as may be necessary in order that the net amounts
received by the holders of the Preferred Securities after such withholding
or deduction will equal the amount which would have been receivable in
respect of such Preferred Securities in the absence of such withholding or
deduction ("Additional Amounts"), except that no such Additional Amounts
will be payable to a holder or beneficial owner of Preferred Securities (or
a third party on his behalf) with respect to Preferred Securities:
(a) if such holder or beneficial owner is liable for such taxes,
duties, assessments or governmental charges in respect of such Preferred
Securities by reason of such holder's or owner's having some connection
with the United States, any state thereof or any other jurisdiction through
which or from which such payment is made (including, without limitation,
actual or constructive ownership, past or present, of 10% or more of the
total combined voting power of all classes of stock entitled to vote of
AL&C), other than being a holder or beneficial owner of such Preferred
Securities, or
(b) if the Company or AL&C has notified such holder of the obligation
to withhold taxes and requested but not received from such holder or
beneficial owner a declaration of non-residence, a valid taxpayer
identification number or other claim for exemption (or information or
certification required to support such claim), and such withholding or
deduction would not have been required had such declaration, taxpayer
identification number or claim been received.
Amendments and Assignment
Except with respect to any changes which do not adversely affect the
rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of a majority in stated liquidation preference of all Preferred
Securities of all series then outstanding. The manner of obtaining any
such approval of holders of the Preferred Securities will be as set forth
under "Description of the Preferred Securities -- Voting Rights". AL&C
shall have the right to assign the Guarantee with the prior consent of the
holders of a majority in stated liquidation preference of all Preferred
Securities then outstanding. All guarantees and agreements contained in
the Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of AL&C and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect as
to the Preferred Securities of any series upon full payment of the
Redemption Price of all Preferred Securities of such series or upon the
exchange of all Preferred Securities of such series, and shall terminate
completely upon full payment of the amounts payable upon liquidation of the
Company. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities of any series must restore payment of any sums paid under the
Preferred Securities of such series or the Guarantee.
Status of the Guarantee
The Guarantee will constitute an unsecured obligation of AL&C and will
rank (i) subordinate and junior in right of payment to all other
liabilities of AL&C, (ii) pari passu with the most senior preferred stock
now or hereafter issued by AL&C and with any guarantee now or hereafter
entered into by AL&C in respect of any preferred or preference stock or
interest of any affiliate of AL&C and (iii) senior to AL&C's common stock.
The Guarantee will constitute a guarantee of payment and not of
collection. A holder of Preferred Securities may enforce the Guarantee
directly against AL&C, and AL&C will waive any right or remedy to require
that any action be brought against the Company or any other person or
entity before proceeding against AL&C. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the
extent not paid by the Company.
Governing Law
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
DESCRIPTION OF THE DEBENTURES AND THE SUBORDINATED INDENTURE
Set forth below is condensed information concerning the Debentures
that will evidence the loans to be made by the Company to AL&C of the
proceeds of the issuance of (i) Preferred Securities of each series and
(ii) the Company's Common Securities and related capital contributions
("Common Securities Payments") and the Subordinated Indenture (the
"Subordinated Indenture") between AL&C and the trustee named therein (the
Trustee"). References to provisions of the Subordinated Indenture are
qualified in their entirety by reference to the text of the Subordinated
Indenture, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. All Debentures will be
issued under the Subordinated Indenture.
General
The Subordinated Indenture does not limit the aggregate principal
amount of Debentures which may be issued thereunder and provides that the
Debentures may be issued thereunder from time to time in one or more
series. The aggregate dollar amount of the Debentures relating to
Preferred Securities of any series will be set forth in the Prospectus
Supplement for such series and will be equal to the sum of the aggregate
liquidation preference of the Preferred Securities of such series and the
related Common Securities Payments.
The entire principal amount of the Debentures relating to the
Preferred Securities of any series will become due and payable, together
with any accrued and unpaid interest thereon, including Additional Interest
(as herein defined), if any, on the earlier of (i) the date that is the
30th anniversary of the issuance of such Preferred Securities, subject to
AL&C's right to exchange such Debentures for new Debentures or reborrow the
proceeds from the repayment of such Debentures upon the terms and subject
to the conditions set forth under "Exchanges and Reborrowings" below and
(ii) the date upon which the Company is dissolved, wound up, liquidated or
terminated or either Managing Member is liquidated, bankrupt or insolvent
or withdraws, resigns or is expelled from the Company.
In the event of any exchange of Preferred Securities of any series for
Debentures relating to such series, (i) the Debentures of such series will
no longer be subject to mandatory prepayment upon the dissolution, winding
up, liquidation or termination of the Company, the liquidation, bankruptcy
or insolvency of either Managing Member or the withdrawal, resignation or
expulsion of either Managing Member from the Company, (ii) the Debentures
of such series will not be subject to an election by AL&C to exchange the
Debentures of such series for new debentures or to prepay or repay the
loans evidenced by the Debentures of such series and reborrow the proceeds
from such prepayment or repayment, (iii) AL&C will use its best efforts to
have the Debentures of such series listed on the same exchange as that on
which the Preferred Securities of such series are listed, (iv) the
Subordinated Indenture may, thereafter, be modified or amended with the
consent of the holders of not less than a majority in principal amount of
the Debentures of such series at the time outstanding; provided, however,
that no such modification or amendment may, without the consent of the
holder or each Debenture affected thereby, (a) change the maturity of the
principal of or interest on any such Debenture; (b) reduce the principal
amount of or the interest rate on any such Debenture; (c) change the place
or currency of payment of principal of or the interest on any such
Debenture; (d) impair the right to institute suit for the enforcement of
any such payment on or with respect to such Debenture; (e) reduce the
percentage of holders of Debentures necessary to modify or amend the
Subordinated Indenture; (f) modify the subordination provisions in a
manner adverse to the holders of such Debentures; or (g) modify the
foregoing requirements or reduce the percentage of outstanding Debentures
necessary to waive compliance with certain provisions of the Subordinated
Indenture or for waiver of certain defaults, (v) AL&C's obligation to pay
Additional Interest (other than Additional Interest, if any, accrued and
unpaid to such date of exchange) shall cease, and (vi) the provisions
described under "Description of the Debentures and the Subordinated
Indenture -- Indenture Events of Default" rather than those described under
"Description of the Debentures and the Subordinated Indenture -- Debenture
Events of Default" shall apply.
The Subordinated Indenture does not contain any provisions that limit
AL&C's ability to incur indebtedness or that afford holders of Debentures
protection in the event of a highly leveraged or similar transaction
involving AL&C.
Mandatory Prepayment
If the Company redeems Preferred Securities of any series in
accordance with the terms thereof, the Debentures relating to such series
will become due and payable in a principal amount equal to the aggregate
stated liquidation preference of the Preferred Securities of such series so
redeemed (together with any accrued but unpaid interest, including
Additional Interest, if any, on the portion being prepaid). Any payment
pursuant to this provision shall be made prior to 12:00 noon, New York
time, on the date of such redemption or at such other time on such earlier
date as the Company and AL&C shall agree.
Optional Prepayment
AL&C shall have the right to prepay the Debentures relating to
Preferred Securities of a series, without premium or penalty, in whole or
in part (together with any accrued but unpaid interest, including
Additional Interest, if any, on the portion being prepaid) at any time
following the date, if any, set forth in the Prospectus Supplement for such
series.
So long as the Preferred Securities of any series are outstanding AL&C
shall also have the right to prepay the related series of Debentures
without premium or penalty, in whole or in part (together with any accrued
but unpaid interest, including Additional Interest, if any), if AL&C has
been advised by legal counsel (which counsel is not an employee of AL&C)
that, as a result of any change after the date of the Prospectus Supplement
relating to such series of Preferred Securities in any applicable income
tax laws or regulations or in the interpretation thereof (including but not
limited to the enactment or imminent enactment of any legislation, the
publication of any judicial decisions, regulatory rulings, regulatory
procedures, or notices or announcements (including notices or announcements
of intent to adopt such procedures or regulations), or a change in the
official position or in the interpretation of law or regulations by any
legislative body, court, governmental authority or regulatory body,
irrespective of the manner in which such change is made known), there
exists more than an insubstantial risk that (i) AL&C will be precluded
from deducting the interest paid on such Debentures for income tax purposes
or (ii) the Company will be subject to federal income tax with respect to
the interest received on such Debentures.
In addition, if at any time after the issuance of the Preferred
Securities of any series, the Company is or would be required to pay
Additional Amounts with respect to any Preferred Securities of such series,
AL&C shall have the right to prepay without premium or penalty (together
with accrued but unpaid interest, including Additional Interest, if any, on
the portion being prepaid) the Debentures relating to such series in a
principal amount not to exceed the aggregate liquidation preference of the
Preferred Securities of such series with respect to which such Additional
Amounts are required to be paid.
The Debentures relating to Preferred Securities of any series may also
be prepaid at the option of AL&C on such terms and conditions as may be set
forth in the Prospectus Supplement relating to such series.
Exchanges and Reborrowings
In lieu of repaying any series of Debentures when due or optionally
prepaying such Debentures, AL&C may elect to exchange such Debentures for
new Debentures (any such election, an "Exchange Election") or, in the event
AL&C repays such Debentures when due or optionally prepays such Debentures,
AL&C may elect to reborrow the proceeds from such repayment or prepayment
(any such election, a "Reborrowing Election"). Notwithstanding the
foregoing, AL&C may only make an Exchange Election or a Reborrowing
Election with respect to any series of Debentures if the Company owns all
of such Debentures and, as determined in the judgment of the Managing
Members and the Company's financial advisor (selected by the Managing
Members and who shall be unaffiliated with AL&C and shall be among the 30
largest investment banking firms, measured by total capital, in the United
States at the time of the issuance of the new Debentures that will evidence
the new loan to be made in connection with such election), (a) AL&C is not
bankrupt, insolvent or in liquidation, (b) AL&C is not in default in the
payment of any interest or principal under the Subordinated Indenture, (c)
AL&C has made timely payments on such Debentures for the immediately
preceding 24 months, (d) the Company is not in arrears on payments of
dividends on the Preferred Securities of the series relating to such
Debentures, (e) AL&C is expected to be able to make timely payment of
principal of and interest on such new loan, (f) such new loan is being made
on terms, and under circumstances, that are consistent with those which a
lender would then require for a loan to an unrelated party, (g) such new
loan is being made at a rate sufficient to provide payments equal to or
greater than the amount of dividend payments required under the Preferred
Securities of such series, (h) such new loan is being made for a term that
is consistent with market circumstances and AL&C's financial condition, (i)
immediately prior to the making of such new loan, the senior unsecured
long-term debt is (or if no such debt is outstanding, would be) rated not
less than BBB (or the equivalent) by Standard & Poor's Corporation and Baa2
(or the equivalent) by Moody's Investors Service, Inc. and the subordinated
unsecured long-term debt of AL&C is (or if no such debt is outstanding,
would be) rated not less than BBB- (or the equivalent) by Standard & Poor's
Corporation and Baa3 by Moody's Investors Service, Inc. (or if either of
such rating organizations is not then rating AL&C's senior or subordinated
unsecured long-term debt, as the case may be, the equivalent of such
ratings by any other "nationally recognized statistical rating
organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act) and (j) such new loan will mature
no later than the nineteenth anniversary of the date it is made.
Interest
The Debentures relating to Preferred Securities of a series shall bear
interest at the annual rate set forth in the Prospectus Supplement for such
series, accruing from the date they are issued until maturity. Such
interest shall be payable monthly on the last day of each calendar month,
commencing on the date specified in the Prospectus Supplement relating to
such series. In the event that any date on which interest is payable on
the Debentures relating to the Preferred Securities of any series is not a
Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if
such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with
the same force and effect as if made on such date; provided that AL&C shall
have the right at any time or times during the term of such Debentures, so
long as AL&C is not in default in the payment of interest under the
Subordinated Indenture, to extend the interest payment period for such
Debentures up to 60 months, at the end of which period AL&C will pay all
interest then accrued and unpaid on such Debentures (together with interest
thereon at the rate specified for such Debentures to the extent permitted
by applicable law). Prior to the termination of any such extended interest
payment period AL&C may further extend the interest payment period for such
Debentures; provided that such extended interest payment period for such
Debentures, together with all such further extensions thereof, may not
exceed 60 months. Following the termination of any extended interest
payment period, if the Company has paid all accrued and unpaid interest
required by such Debentures for such period, then the Company shall have
the right to again extend the interest payment period up to 60 months as
herein described. While the Company holds the Debentures of any series,
AL&C shall give the Company notice of its selection of any extended
interest payment period for such Debentures one Business Day prior to the
earlier of (i) the date the Company declares the dividend on the related
series of Preferred Securities and (ii) the date the Company is required to
give notice of the record or payment date of such dividend to the New York
Stock Exchange or other applicable self-regulatory organization or to
holders of such series of Preferred Securities, but in any event not less
than two Business Days prior to such record date. AL&C will cause the
Company to give such notice of AL&C's selection of any extended interest
payment period to the holders of the related series of Preferred
Securities. After the Debentures of a series have been exchanged for the
related series of Preferred Stock, AL&C shall give the holders of such
Debentures notice of its selection of any extended interest payment period
for such Debentures not less than two Business Days prior to the record
date for the first interest payment which AL&C for which such extension
will be effective.
During any extended interest period, AL&C shall not pay or declare any
dividends on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of its capital stock (other than (i) acquisitions of
shares of AL&C's common stock in connection with the satisfaction by AL&C
of its obligations under any employee benefit plans and (ii) redemptions of
any Rights issued by AL&C under the Rights Plan or the declaration of a
dividend of similar share purchase rights in the future).
Additional Interest
In addition, so long as the Company owns the Debentures of any series,
if at any time following the date of issue of the related series of
Preferred Securities, (i) the Company shall be required to pay any
Additional Amounts or (ii) the Company shall be required to pay, with
respect to its income derived from the interest payments on such
Debentures, any amounts for or on account of any taxes, duties, assessments
or governmental charges of whatever nature imposed by the United States, or
any other taxing authority, then, in any such case, AL&C will pay as
interest such additional amounts ("Additional Interest") as may be
necessary in order that the net amounts received and retained by the
Company after paying such Additional Amounts or after the payment of such
taxes, duties, assessments or governmental charges shall result in the
Company's having such funds as it would have had in the absence of the
payment of such taxes, duties, assessments or governmental charges. The
obligation to pay Additional Interest under (i) above shall be reduced
proportionately to the extent that (x) AL&C or the Company has notified
holders of Preferred Securities of such series of the obligation to
withhold taxes and requested but not received from such holders
declarations of nonresidence or other similar claim for exemption and (y)
such withholding or deduction would not have been required had such
declaration or similar claim been received.
Method and Place of Payment
While the Company holds the Debentures of any series, principal of and
interest (including Additional Interest, if any) on such Debentures shall
be payable in lawful money of the United States, at such place and to such
account as may be designated by the Company. After the Debentures of any
series have been exchanged for the related series of Preferred Stock,
principal of and interest on such Debentures shall be payable at the office
or agency of AL&C maintained for such purposes in the city of Hartford;
provided, however, that at the option of Aetna, payment of interest may be
made by check mailed to the address of the person entitled thereto as such
address shall appear in the Debenture register.
Set-off
Notwithstanding anything to the contrary in the Subordinated Indenture
or Debentures, AL&C shall have the right to set-off any payment it is
otherwise required to make thereunder with and to the extent AL&C has
theretofore made, or is concurrently on the date of such payment making, a
payment under the Guarantee.
Subordination
The Subordinated Indenture will provide that AL&C and the holders of
the Debentures covenant and agree (and each holder of Preferred Securities
by acceptance thereof agrees) that each of the Debentures is subordinate
and junior in right of payment to all Senior Debt as provided in the
Subordinated Indenture. The term "Senior Debt" means the principal of (and
premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization
relating to AL&C to the extent that such claim for post-petition interest
is allowed in such proceeding) on Debt, whether incurred on or prior to the
date of the Subordinated Indenture or thereafter incurred, unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not superior in right
of payment to the Debentures or to other Debt which is pari passu with, or
subordinated to the Debentures; provided, however, that Senior Debt shall
not be deemed to include the Debentures. The term "Debt" means (without
duplication and without regard to any portion of principal amount that has
not accrued and to any interest component thereof (whether accrued or
imputed) that is not due and payable) with respect to AL&C, whether
recourse is to all or a portion of the assets of AL&C and whether or not
contingent, (i) every obligation of AL&C for money borrowed, (ii) every
obligation of AL&C evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) every reimbursement
obligation of AL&C with respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of AL&C, (iv) every obligation
of AL&C issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business), (v) every capital lease
obligation of AL&C, and (vi) every obligation of the type referred to in
clauses (i) through (v) of another person and all dividends of another
person the payment of which, in either case, AL&C has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.
In the event of (i) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, arrangement, reorganization, debt
restructuring or other similar case or proceeding in connection with any
insolvency or bankruptcy proceeding, relative to AL&C or to its assets, or
(ii) any liquidation, dissolution or other winding up of AL&C, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any
other marshalling of assets and liabilities of AL&C, then and in any such
event specified in (i), (ii) or (iii) above (each such event, if any,
herein sometimes referred to as a "Proceeding") the holders of Senior Debt
shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all Senior Debt, or provision shall be made
for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, before the holders of the
Debentures are entitled to receive any payment or distribution of any kind
or character, whether in cash, property or securities (including any
payment or distribution which may be payable or deliverable by reason of
the payment of any other Debt of AL&C subordinated to the payment of the
Debentures, such payment or distribution being hereinafter referred to as
"Junior Subordinated Payment"), on account of principal of or interest on
the Debentures and the holders of Senior Debt shall be entitled to receive,
for application to the payment thereof, any payment or distribution of any
kind or character, whether in cash, property or securities, including any
Junior Subordinated Payment, which may be payable or deliverable in respect
of the Debentures in any such Proceeding.
In the event that, notwithstanding the foregoing, the holders of the
Debentures shall have received any payment or distribution of assets of
AL&C of any kind or character, whether in cash, property or securities,
including any Junior Subordinated Payment, before all Senior Debt is paid
in full or payment thereof is provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, and if
such fact shall, at or prior to the time of such payment or distribution,
have been made known to such holders, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other person making payment or distribution of assets of AL&C for
application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all Senior Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
In the event that any Debentures are declared due and payable before
their stated maturity, then and in such event the holders of the Senior
Debt outstanding at the time such Debentures so become due and payable
shall be entitled to receive payment in full of all amounts due on or in
respect of such Senior Debt, or provision shall be made for such payment in
cash or cash equivalents or otherwise in a manner satisfactory to the
holders of Senior Debt, before the holders of the Debentures are entitled
to receive any payment (including any payment which may be payable by
reason of the payment of any other indebtedness of AL&C being subordinated
to the payment of the Debentures) by AL&C on account of the principal of or
interest on the Debentures. In the event that, notwithstanding the
foregoing, AL&C shall make any payment to the holders of the Debentures
prohibited by the foregoing, and if such fact shall, at or prior to the
time of such payment, have been made known to such holders, then and in
such event such payment shall be paid over and delivered forthwith to AL&C.
In the event and during the continuation of any default in the payment
of principal of (or premium, if any) or interest on any Senior Debt, or in
the event that any event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, unless and until such event of
default shall have been cured or waived or shall have ceased to exist and
such acceleration shall have been rescinded or annulled, or in the event
any judicial proceeding shall be pending with respect to any such default
in payment or such event of default, then no payment (including any payment
which may be payable by reason of the payment of any other indebtedness of
AL&C being subordinated to the payment of the Debentures) shall be made by
AL&C on account of principal of or interest on the Debentures. In the
event that, notwithstanding the foregoing, AL&C shall make any payment to
the holders of the Debentures prohibited by the foregoing, and if such fact
shall, at or prior to the time of such payment, have been made known to
such holders, then and in such event such payment shall be paid over and
delivered forthwith to AL&C.
Subject to the payment in full of all Senior Debt, or the provision of
such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Debt, the holders of the Debentures
shall be subrogated to the extent of the payments or distributions made to
the holders of such Senior Debt (equally and ratably with the holders of
all indebtedness of AL&C which by its express terms is subordinated to
indebtedness of AL&C to substantially the same extent as the Debentures are
subordinated to the Senior Debt and is entitled to like rights of
subrogation by reason of any payments or distributions made to holders of
such Senior Debt) to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities
applicable to the Senior Debt until the principal of and interest on the
Debentures shall be paid in full.
By reason of such subordination, in the event of liquidation or
insolvency, creditors of AL&C who are not holders of Senior Debt may
recover less, ratably, than holders of Senior Debt and may recover more
ratably, than the holders of the Debentures with respect to the Debentures.
In addition, since AL&C is a holding company, the rights of AL&C and hence
the rights of creditors of AL&C (including the rights of holders of the
Debentures), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of AL&C itself as a creditor of the
subsidiary may be recognized.
Covenants
In the Subordinated Indenture, AL&C will covenant that, so long as any
Debentures remain outstanding, AL&C will not declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of AL&C's capital stock or make any guarantee payments with respect
to the foregoing (other than (i) payments under the Guarantee, (ii)
acquisitions of shares of AL&C's common stock in connection with the
satisfaction by AL&C of its obligations under any employee benefit plans
and (iii) redemptions of any Rights issued by AL&C pursuant to the Rights
Plan or the declaration of a dividend of similar share purchase rights in
the future), if at such time AL&C is in default with respect to its payment
obligations under the Guarantee or there shall have occurred an Event of
Default.
In the Subordinated Indenture, AL&C will also covenant for the benefit
of the holders of the Debentures of any series, that, so long as Preferred
Securities of the related series remain outstanding, it will (i) not cause
or permit any Common Securities of the Company to be transferred, (ii)
maintain direct or indirect ownership of all outstanding securities of the
Company other than (x) the Preferred Securities of any series and (y) any
other securities permitted to be issued by the Company that would not cause
the Company to become an "investment company" under the Investment Company
Act of 1940, as amended, (iii) cause at least 21% of the total value of the
Company and at least 21% of all interests in the capital, income, gain,
loss, deduction and credit of the Company to be represented by Common
Securities, (iv) not voluntarily dissolve, wind up, liquidate or terminate
the Company or either of the Managing Members, (v) cause AL&C and Aetna
Capital Holdings, Inc. to remain the Managing Members of the Company and
timely perform all of their respective duties as Managing Members of the
Company (including the duty to declare and pay dividends on the Preferred
Securities as described under "Description of the Preferred Securities --
Dividends"), and (vi) use reasonable efforts to cause the Company to remain
a limited liability company and otherwise continue to be treated as a
partnership for U.S. federal income tax purposes.
Debenture Events of Default
If one or more of the following events (each a "Debenture Event of
Default") shall occur and be continuing while the Company holds the
Debentures of any series:
(a) failure to pay any principal of the Debentures of any series when
due (whether or not payment is prohibited by the provisions described above
under "Subordination" or otherwise);
(b) failure to pay any interest on the Debentures of any series,
including any Additional Interest, when due and such failure continues for
a period of 30 days (whether or not payment is prohibited by the provisions
described above under "Subordination" or otherwise); provided that a valid
extension of the interest payment period by AL&C shall not constitute a
default in the payment of interest for this purpose;
(c) failure by AL&C to perform in any material respect any other
covenant in the Debentures of any series continued for a period of 90 days
after written notice to AL&C from the Company or any holder of Preferred
Securities;
(d) the dissolution, winding up, liquidation or termination of the
Company;
(e) the withdrawal, resignation or expulsion of either Managing Member
from the Company; or
(f) certain events of bankruptcy, insolvency or liquidation of either
of the Managing Members;
then the Company will have the right to declare the principal of and the
interest on such Debentures (including any Additional Interest and any
interest subject to an extension election) to be forthwith due and payable
and to enforce its other rights under such Debentures. No such Debentures
may be so accelerated by the Company unless all Debentures of such series
are so accelerated. Under the terms of the Preferred Securities, the
holders of the series of Preferred Securities related to such Debentures
will have the rights referred to under "Description of the Preferred
Securities -- Voting Rights", including the right to appoint a trustee,
which trustee shall be authorized to exercise the Company's right to
accelerate the principal amount of such Debentures and to enforce the
Company's other creditor rights under such Debentures; provided that any
trustee so appointed shall vacate office immediately if any such Debenture
Event of Default shall have been cured by AL&C. In addition, in the event
AL&C fails to pay any principal of or interest on any series of Debentures
held by the Company when due, holders of the related series of Preferred
Securities shall, under certain circumstances, be entitled to enforce the
Company's right to receive such payments under such Debentures directly
against AL&C.
Indenture Events of Default
If one or more of the following events (each an "Indenture Event
of Default" and, together with each "Debenture Event of Default", an "Event
of Default") shall occur and be continuing after the Debentures of a series
have been exchanged for the related series of Preferred Securities:
(a) failure to pay any principal of the Debentures of any series when
due (whether or not payment is prohibited by the provisions described above
under "Subordination" or otherwise);
(b) failure to pay any interest on the Debentures of any series,
including any Additional Interest, when due and such failure continues for
a period of 30 days (whether or not payment is prohibited by the provisions
described above under "Subordination" or otherwise); provided that a valid
extension of the interest payment period by AL&C shall not constitute a
default in the payment of interest for this purpose;
(c) failure by AL&C to perform in any material respect any other
covenant in the Debentures of any series continued for a period of 90 days
after written notice to AL&C from any holder of Debentures; or
(d) certain events of bankruptcy, insolvency or liquidation of AL&C;
then the Trustee or the holders of at least 25% in principal amount of such
Debentures may declare the principal amount of all such Debentures to be
due and payable immediately; provided, however, that under certain
circumstances the holders of a majority in aggregate principal amount of
such Debentures may rescind or annul such declaration and its consequences.
The Subordinated Indenture provides that the Trustee may withhold notice to
the holders of such Debentures of any default (except in payment of
principal or interest, if any) if it considers it in the interest of such
holders to do so.
AL&C will be required to furnish to the Trustee annually a statement
by certain officers of AL&C as to the compliance with all conditions and
covenants of the Subordinated Indenture.
Following any exchange of Preferred Securities for a series of
Debentures, the holders of a majority in principal amount of such series of
Debentures will have the right, subject to certain limitations, to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to such series of Debentures and to waive certain
defaults.
The Subordinated Indenture provides that, in case an Indenture Event
of Default shall occur and be continuing, the Trustee shall exercise such
of its rights and powers under the Subordinated Indenture, and use the same
degree of care and skill in its exercise, as a prudent man would exercise
or use under the circumstances in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any
of its rights or powers under the Subordinated Indenture at the request of
any of the holders of Debentures unless they shall have offered to the
Trustee security or indemnity in form and substance reasonably satisfactory
to the Trustee against the costs, expenses and liabilities which might be
incurred by it in compliance with such request.
Modification and Waiver
Modifications and amendments of the Subordinated Indenture may be made
by AL&C and the Trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of each series of the Debentures
which is affected by the modification or amendment; provided, however, that
no such modification or amendment may, without the consent of each such
holder of Debentures affected thereby: (i) change the maturity of the
principal of or interest on any such Debenture; (ii) reduce the principal
amount of or the interest rate on any such Debenture; (iii) change the
place or currency of payment of principal of or the interest on any such
Debenture; (iv) impair the right to institute suit for the enforcement of
any such payment on or with respect to such Debenture; (v) reduce the
percentage of holders of Debentures necessary to modify or amend the
Subordinated Indenture; (vi) modify the subordination provisions in a
manner adverse to the holders of such Debentures; or (vii) modify the
foregoing requirements or reduce the percentage of outstanding Debentures
necessary to waive compliance with certain provisions of the Subordinated
Indenture or for waiver of certain defaults.
So long as the Company holds the Debentures of any series, it may not
waive compliance or waive any default in compliance by AL&C with certain
restrictive provisions of the Subordinated Indenture without the approval
of the same percentage of the holders of Preferred Securities of the
related series, obtained in the same manner, as would be required if the
holders of such Preferred Securities then held such Debentures; provided
that if no approval would be required for any such amendment, the Company
may waive such compliance or default in any manner that the parties agree.
The holders of at least a majority of the aggregate principal amount
of the Debentures of any series for which the related Preferred Securities
have been exchanged may, on behalf of all holders of that series, waive
compliance by AL&C with certain restrictive provisions of the Subordinated
Indenture and waive any past default under the Subordinated Indenture,
except a default in the payment of principal or interest or in the
performance of certain covenants.
Global Securities
If at the time of any exchange of Debentures of any series for the
related Preferred Securities such Preferred Securities are held by DTC,
such Debentures, upon such exchange, will be represented by one or more
global securities in a denomination or aggregate denominations equal to the
aggregate principal amount of such Debentures that will be deposited with
DTC. Unless and until it is exchanged in whole or in part for such
Debentures in definitive registered form, a global security may not be
registered for transfer or exchange except as a whole by DTC to a nominee
for DTC.
For a description of DTC and DTC's book-entry system, see "Description
of the Preferred Securities -- Book-Entry-Only Issuance; The Depository
Trust Company". As of the date of this Prospectus, the description therein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities
apply in all material respects to any debt obligations represented by one
or more global securities held by DTC.
Governing Law
The Debentures and the Subordinated Indenture will be governed by and
construed in accordance with the laws of the State of New York.
The Trustee
The Subordinated Indenture contains limitations on the right of the
Trustee, as a creditor of AL&C, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such
claim as security or otherwise. In addition, the Trustee may be deemed to
have a conflicting interest and may be required to resign as Trustee if at
the time of a default under the Subordinated Indenture it is a creditor of
AL&C.
The Trustee or its affiliates may act as depositary for funds of, make
loans to and perform other services for, or may be a customer of, Aetna in
the ordinary course of business.
Miscellaneous
AL&C shall have the right at all times to assign any of its rights or
obligations under the Debentures to a direct or indirect wholly owned
subsidiary of AL&C other than any subsidiary that is an insurance company;
provided that, in the event of any such assignment, AL&C shall remain
jointly and severally liable for all such obligations. AL&C may not
otherwise assign any of its obligations under the Debentures. Except as
described above under "Description of the Preferred Securities --
Redemption or Exchange", the Company may not assign any of its rights under
the Debentures without the prior written consent of AL&C. Subject to the
foregoing, the Debentures shall be binding upon and inure to the benefit of
AL&C and the holders thereof and their respective successors and assigns.
The Subordinated Indenture will provide that AL&C may not consolidate
with or merge into any other person or sell its property and assets as, or
substantially as, an entirety to any person and may not permit any person
to merge into or consolidate with AL&C unless (i) either AL&C will be the
resulting or surviving entity or any successor or purchaser is a
corporation, partnership or trust organized under the laws of the United
States of America, any State or the District of Columbia, and any such
successor or purchaser expressly assumes AL&C's obligations under the
Subordinated Indenture and (ii) immediately after giving effect to the
transaction no Event of Default shall have occurred and be continuing.
TAXATION
The following discussion is a summary of certain United States federal
income tax consequences of the purchase, acquisition, ownership and
disposition of Preferred Securities and Debentures and is based upon the
advice of Davis Polk & Wardwell, counsel to AL&C and the Company. It deals
only with Preferred Securities and Debentures held as capital assets by
initial purchasers who acquire the Preferred Securities at the original
offering price ("Initial Purchasers"), and not with special classes of
holders, such as dealers in securities or currencies, life insurance
companies, persons holding Preferred Securities and Debentures as a hedge
or hedged against currency risks or as part of a straddle, or persons whose
functional currency is not the U.S. dollar. This summary is based on tax
laws in effect in the United States, regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change (possibly on a retroactive basis). This
summary deals only with holders who purchase Preferred Securities of any
series, and is subject to additional discussion of material United States
federal income tax consequences that may appear in a Prospectus Supplement
delivered in connection with a particular series of Preferred Securities.
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE UNITED STATES OR OTHER TAX CONSEQUENCES OF
THE PURCHASE, ACQUISITION, OWNERSHIP AND DISPOSITION OF PREFERRED
SECURITIES AND DEBENTURES, INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAX
LAWS.
Income from the Preferred Securities and Debentures
The Company will be treated as a partnership for federal income tax
purposes. Each holder of Preferred Securities (a "Securityholder") will be
required to include in gross income the Securityholder's distributive share
of the Company's net income. Such income will not exceed dividends
received on a Preferred Security, except in limited circumstances as
described below under "Potential Extension of Payment Period of the
Debentures". Any amount so included in a Securityholder's gross income
will increase his tax basis in the Preferred Securities, and the amount of
cash dividends to the Securityholder will reduce such Securityholder's tax
basis in the Preferred Securities. No portion of the amounts received on a
Preferred Securities will be eligible for the dividends received deduction.
The Company does not presently intend to make an election under
Section 754 of the Internal Revenue Code of 1986, as amended (the "Code").
As a result, a subsequent purchaser of Preferred Securities will not be
permitted to adjust its taxable income from the Company to reflect any
difference between its purchase price for the Preferred Securities and the
Company's underlying tax basis for its assets.
The interest payments on the Debentures will be treated as "original
issue discount" under Treasury Regulations. Each holder of Debentures (a
"Debenture Holder") will be required to include the interest on the
Debentures in income as it accrues, in accordance with a constant yield
method based on a compounding of interest, before the receipt of the
interest. The Debenture Holder's tax basis in the Debentures will be
increased by accrued interest previously included as income by the
Debenture Holder and reduced by the payment of such interest.
Market Discount and Bond Premium of the Debentures
Debenture Holders other than Initial Purchasers may be considered to
have acquired the Debentures with market discount, acquisition premium or
amortizable bond premium. Such holders are advised to consult their own
tax advisors as to the income tax consequences of the acquisition,
ownership and disposition of the Debentures.
Disposition of the Preferred Securities
Gain or loss will be recognized on a sale, exchange or other
disposition of the Preferred Securities (including a distribution of cash
in redemption of all of a Securityholder's Preferred Securities but
excluding the exchange of Preferred Securities for Debentures) equal to the
difference between the amount realized and the Securityholder's tax basis
in the Preferred Securities disposed of. In the case of a cash
distribution in partial redemption of a Securityholder's Preferred
Securities, no loss will be recognized, the Securityholder's tax basis in
the Preferred Securities will be reduced by the amount of the distribution,
and the Securityholder will recognize gain to the extent, if any, that the
amount of the distribution exceeds the Securityholder's tax basis in the
Preferred Securities. Gain or loss recognized by a Securityholder on the
sale or exchange of Preferred Securities held for more than one year will
generally be taxable as long-term capital gain or loss. In certain
circumstances, a portion of the proceeds received upon a disposition of a
Preferred Security by a purchaser other than an Initial Purchaser may be
treated as ordinary income.
Disposition or Retirement of the Debentures
Upon the sale, exchange or retirement of a Debenture, a Debenture
Holder will recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement and such holder's
adjusted tax basis in the Debenture. Subject to the discussion above under
"Market Discount and Bond Premium of the Debentures", such gain or loss
will be capital gain or loss.
Exchange of the Preferred Securities for Debentures of AL&C
Upon a distribution by Aetna Capital L.L.C. of the Debentures of AL&C
in exchange for the Preferred Securities as described under the caption
"Description of the Preferred Securities -- Redemption or Exchange", such
an exchange will be treated as a non-taxable exchange to each
Securityholder and will result in the Securityholder receiving an aggregate
tax basis in the Debentures equal to such Securityholder's aggregate tax
basis in its Preferred Securities. A Debenture Holder's holding period in
the Debentures so received in exchange for Preferred Securities will
include the period for which the Preferred Securities were held by the
Debenture Holder.
Potential Extension of Payment Period of the Debentures
Under the terms of the Debentures, AL&C may be permitted to extend the
interest payment period up to 60 months. In the event that AL&C exercises
this right, AL&C may not declare dividends on any share of its preferred or
common stock, and therefore, the likelihood of extension of the payment
period is, in the view of the Company and AL&C, remote. In the event that
the payment period is extended before the Preferred Securities are
exchanged for the Debentures, the Company will continue to accrue income,
which will be allocated, but not distributed, to beneficial owners on the
last day of each calendar month. As a result, beneficial owners during an
extended interest payment period will include interest in gross income in
advance of the receipt of cash and any such owners who dispose of Preferred
Securities prior to the record date for the payment of dividends following
such extended interest payment period will include interest in gross income
but will not receive from the Company any cash related thereto.
The tax basis of a Preferred Security will be increased by the amount
of any interest that is included in income without a receipt of cash, and
will be decreased again when such holders of record subsequently receive
cash from the Company.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership or a non-resident fiduciary of a foreign estate or
trust.
Under present United States federal income tax law:
(i) payments by the Company or any of its paying agents to any holder
of a Preferred Security who or which is a United States Alien Holder and
payments of principal or interest by AL&C on the Debentures to any holder
of a Debenture who or which is a United States Alien Holder will not be
subject to United States federal withholding tax; provided that (a) the
beneficial owner of the Preferred Security or Debenture, as the case may
be, does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of AL&C entitled to vote, (b)
the beneficial owner of the Preferred Security or Debenture, as the case
may be, is not a controlled foreign corporation that is related to AL&C
through stock ownership, and (c) either (A) the beneficial owner of the
Preferred Security or Debenture certifies to the Company or its agent,
under penalties of perjury, that it is not a United States holder and
provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution") and
holds the Preferred Security or Debenture certifies to the Company or its
agent under penalties of perjury that such statement has been received from
the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Company or its agent with a copy
thereof; and
(ii) a United States Alien Holder of a Preferred Security or Debenture
will not be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security or
Debenture.
Company Information Returns
Within 90 days after the close of every taxable year of the Company,
the Managing Members of the Company will furnish or cause to be furnished
each holder of the Preferred Securities with a Schedule K-1 setting forth
such Securityholder's allocable share of income for the Company's taxable
year.
Any person who holds Preferred Securities as a nominee for another
person is required to furnish to the Company (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee;
(b) notice of whether each beneficial owner is (i) a person who is not a
United States person, (ii) a foreign government, an international
organization or any wholly owned agency or instrumentality of either of the
foregoing, or (iii) a tax-exempt entity; (c) the amount and description of
Preferred Securities held, acquired or transferred for the beneficial
owner; and (d) certain information including the dates of acquisitions and
transfers, methods of acquisition and the costs thereof, as well as net
proceeds from transfers. Brokers and financial institutions are required
to furnish additional information, including whether they are a United
States person and certain information on Preferred Securities they acquire,
hold or transfer for their own account. A penalty of $50 is imposed for
each failure to report the above information to the Company, up to a
maximum of $100,000 per calendar year for all failures.
PLAN OF DISTRIBUTION
The Company may sell Preferred Securities (i) through underwriters,
(ii) through dealers, (iii) through agents or (iv) directly to purchasers.
The Prospectus Supplement relating to the Preferred Securities of a
particular series will set forth the terms of such offering, including the
names of any underwriters, dealers or agents involved in the sale of such
Preferred Securities, the number of Preferred Securities of such series to
be purchased by any underwriters and any applicable commissions or
discounts. The estimated proceeds to the Company from such series of
Preferred Securities will also be set forth in the Prospectus Supplement.
If underwriters are used in the sale, the Preferred Securities being
sold will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. Unless otherwise set forth in the
Prospectus Supplement relating to the Preferred Securities of a particular
series, the obligations of the underwriters to purchase such Preferred
Securities will be subject to certain conditions precedent and the
underwriters will be obliged to purchase all of such Preferred Securities
if any of such Preferred Securities are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
If dealers are used in the sale, unless otherwise indicated in the
Prospectus Supplement relating to the Preferred Securities of a particular
series, the Company will sell such Preferred Securities to the dealers as
principals. The dealers may then resell such Preferred Securities to the
public at varying prices to be determined by such dealers at the time of
resale.
Preferred Securities of a particular series may also be sold through
agents designated by the Company from time to time or directly by the
Company. Any agent involved in the offering and sale of any such Preferred
Securities will be named, and any commissions payable by the Company or
AL&C to such agent will be set forth, in the Prospectus Supplement relating
to the Preferred Securities of such series. Unless otherwise indicated in
such Prospectus Supplement, any such agent will act on a best efforts basis
for the period of its appointment.
Underwriters, dealers and agents may be entitled under agreements
entered into with the Company or AL&C to indemnification by the Company or
AL&C against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which the
underwriters, dealers or agents may be required to make in respect thereof.
Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for, the Company or AL&C in the
ordinary course of business.
The Preferred Securities may or may not be listed on a national
securities exchange or a foreign securities exchange. No assurances can be
given that there will be a market for the Preferred Securities.
VALIDITY OF SECURITIES
The validity of the Preferred Securities will be passed upon on behalf
of the Company by Davis Polk & Wardwell, special counsel to AL&C and the
Company. The validity of the Guarantee and the Debentures will be passed
upon on behalf of AL&C by Zoe Baird, Senior Vice President and General
Counsel of AL&C, and Davis Polk & Wardwell, special counsel to AL&C. The
validity of the Guarantee, the Preferred Securities and the Debentures will
be passed upon on behalf of any agents or underwriters by Sullivan &
Cromwell. Davis Polk & Wardwell and Sullivan & Cromwell will rely upon the
opinion of Zoe Baird as to certain matters governed by Connecticut law. As
of February 28, 1994, Zoe Baird beneficially owned 745, and had options to
purchase 11,000, shares of AL&C's common stock.
EXPERTS
The consolidated financial statements and schedules of Aetna as of
December 31, 1993 and 1992, and for each of the years in the three year
period ended December 31, 1993, incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
KPMG Peat Marwick, independent certified public accountants, as indicated
in their reports with respect thereto, and are incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting
and auditing. The reports of KPMG Peat Marwick on the December 31, 1993
consolidated financial statements and schedules refer to a change in 1993
in the Company's method of accounting for certain investments in debt and
equity securities, reinsurance of short-duration and long-duration
contracts, postemployment benefits, workers' compensation life table
indemnity reserves and retrospectively rated reinsurance contracts and a
change in 1992 in the Company's methods of accounting for income taxes and
postretirement benefits other than pensions.
With respect to any unaudited interim financial information which may
be incorporated by reference in this Prospectus, the independent certified
public accountants may report that they applied limited procedures in
accordance with professional standards for a review of such information.
However, any separate report included in AL&C's Quarterly Reports on Form
10-Q and incorporated by reference herein will state that they did not
audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on any report on such
information should be restricted in light of the limited nature of the
review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act for any report on
the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities
Act.
ERISA MATTERS
The fiduciary considerations summarized below provide a general
discussion that does not include all of the investment considerations
relevant to pension plans, profit-sharing plans, Individual Retirement
Accounts or other employee benefit plans ("ERISA Plans") subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the employee benefit provisions of the Code. This summary is based on the
current provisions of ERISA and regulations and rulings thereunder, which
may be changed by future legislative, administrative or judicial actions.
This discussion should not be construed as legal advice and ERISA Plan
fiduciaries proposing to invest in the Preferred Securities should consult
with and rely upon their own advisors in evaluating these matters.
Prohibited Transactions
Section 406 of ERISA provides that plan fiduciaries are prohibited
from causing a plan to engage in certain types of transactions with certain
persons or entities that are parties in interest. AL&C and certain
affiliates of AL&C may each be considered a "party in interest" within the
meaning of ERISA or a "disqualified person" within the meaning of the Code
with respect to ERISA Plans. Due to the ownership by AL&C directly or
indirectly of all of the Common Securities, as well as the nature of the
Guarantee and the ability of the Company under certain circumstances to
exchange the Preferred Securities for Debentures, prohibited transactions
within the meaning of ERISA or the Code, may arise, for example, if
Preferred Securities are acquired by an ERISA Plan with respect to which
AL&C or any of its affiliates is a service provider, unless such Preferred
Securities are acquired pursuant to an exemption for transactions effected
on behalf of such Plan by a "qualified professional asset manager" or
pursuant to any other available exemption.
Plan Assets
In addition, if the assets of the Company were deemed to be plan
assets of ERISA Plans that are shareholders, the Plan's investment in the
Preferred Securities might be deemed to constitute a delegation under ERISA
of the duty to manage plan assets by a fiduciary of an ERISA Plan investing
in Preferred Securities. Thus, the fiduciary responsibility provisions of
ERISA could extend to the Company's actions and certain transactions
involving the operation of the Company might be deemed to constitute
prohibited transactions under ERISA and the Code. The U.S. Department of
Labor (the "DOL") has issued a final regulation with regard to whether the
underlying assets of an entity in which ERISA Plans acquire equity
interests would be deemed to be plan assets. The regulation provides that
the underlying assets of an entity will not be considered to be plan assets
if the equity interests acquired by ERISA Plans are "publicly-offered
securities" -- that is, they are (1) widely held (i.e., owned by more than
100 investors independent of AL&C and of each other), (2) freely
transferable and (3) sold as part of an offering pursuant to an effective
registration statement under the Securities Act and then timely registered
under Section 12(b) or 12(g) of the Exchange Act. It is expected that the
Preferred Securities will meet the criteria of "publicly-offered
securities" above. The Company expects (although no assurances can be
given) that the Preferred Securities will be held by at least 100
independent investors, there are no restrictions imposed on the transfer of
the Preferred Securities and the Preferred Securities will be sold as part
of an offering pursuant to an effective registration statement under the
Securities Act and then will be timely registered under the Exchange Act.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
----------
TABLE OF CONTENTS
Page
____
Prospectus Supplement
Aetna Life and Casualty Company...........S-2
Aetna Capital L.L.C.......................S-2
Certain Investment Considerations.........S-3
Use of Proceeds...........................S-3
Capitalization............................S-4
Summary Financial Information of Aetna....S-4
Recent Developments.......................S-7
Summary Business Description..............S-8
Certain Terms of the Series A
Preferred Securities.....................S-10
Certain Terms of the Series A Debentures..S-11
Underwriting..............................S-12
Prospectus
Available Information..................... 2
Incorporation of Certain Documents
by Reference............................. 2
Aetna Life and Casualty Company........... 3
Aetna Capital L.L.C....................... 3
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends................................ 4
Use of Proceeds........................... 4
Description of the Preferred Securities... 4
Description of the Guarantee.............. 14
Description of the Debentures and
the Subordinated Indenture........... 17
Taxation................................. 28
Plan of Distribution..................... 31
Validity of Securities................... 32
Experts.................................. 32
ERISA Matters............................ 33
12,000,000 Securities
Aetna Capital L.L.C.
guaranteed to the extent set forth
herein by
Aetna Life and
Casualty Company
% Cumulative
Monthly Income Preferred Securities,
Series A
----------
[Aetna Logo]
----------
Goldman, Sachs & Co.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting compensation. Except for the Registration Fee, all amounts
are estimates.
Registration Fee................................. $ 172,415
Accounting Fees and Expenses..................... 70,000
Blue Sky Fees and Expenses....................... 27,500
Legal Fees and Expenses.......................... 425,000
Printing and Engraving Fees...................... 90,000
Rating Agency Fees............................... 250,000
Stock Exchange Listing Fees...................... 100,000
Trustee Fees..................................... 20,000
Miscellaneous.................................... 45,085
----------
Total......................................... $1,200,000
==========
Item 15. Indemnification of Directors and Officers.
AL&C is a Connecticut corporation. Section 33-320a of the Connecticut
General Statutes ("C.G.S.") provides that a Connecticut corporation shall,
under certain circumstances, indemnify its directors, officers, employees,
agents and certain other persons.
Subsection (b) of C.G.S. Section 33-320a provides that a corporation
shall indemnify any shareholder, director, officer, employee or agent of
the corporation or an eligible outside party, who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation),
against judgments, fines, penalties, amounts paid in settlement and
reasonable expenses (including attorneys' fees) actually incurred by such
person in connection with such action, suit or proceeding provided (1) that
such person was successful on the merits in the defense of such action,
suit or proceeding, or (2) that it shall be concluded that such person
acted in good faith and in a manner he reasonably believed to be in the
best interests of the corporation and, with respect to any criminal action
or proceeding, provided that such person had no reason to believe his
conduct was unlawful, or (3) a court shall have determined that in view of
all the circumstances, such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine; except
that, in connection with an alleged claim based upon the purchase or sale
of securities, the corporation shall only indemnify such person after a
court shall have determined that in view of all the circumstances, he is
fairly and reasonably entitled to be indemnified, and then for such amount
as the court shall determine.
Subsection (c) of C.G.S. Section 33-320a provides that, where a
director or officer was or is a party or was threatened to be made a party
to a proceeding by or in the right of the corporation, the corporation
shall indemnify him against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the proceeding or any
appeal therein, in relation to matters as to which he is finally adjudged
not to have breached his duty to the corporation. The corporation shall
also indemnify a director or officer if a court determines that in view of
all the circumstances, such person is fairly and reasonably entitled to be
indemnified; however, in such a situation, the individual shall only be
indemnified for such amount as the court determines to be appropriate.
Furthermore, the statute provides that the corporation shall not indemnify
a director or officer for amounts paid to the corporation, to a plaintiff
or to counsel for a plaintiff in settling or otherwise disposing of a
threatened or pending action, with or without court approval, or for
expenses incurred in defending a threatened action or a pending action
which is settled or otherwise disposed of without court approval.
C.G.S. Section 33-320a is an exclusive statute. A corporation cannot
indemnify a director or officer to an extent either greater or less than
that authorized by the statute; provided, however, that the statute
specifically authorizes a corporation to procure insurance providing
greater indemnification rights than those set out in C.G.S. Section 33-
320a.
Consistent with the statute, AL&C has procured insurance from several
carriers for its directors and officers which supplements the
indemnification rights provided to those individuals by C.G.S. Section 33-
320a. Unlike the statute, these policies do not require an after-the-fact
determination of good faith in order for the insured director or officer to
receive the benefits provided under the policies nor do they require
affirmative judicial or corporate action as a prerequisite to the insurance
company's duty to defend (and pay for the defense of) the insured director
or officer under the policies. Furthermore, the insurance policies cover
directors and officers for any acts not specifically excluded for which the
director or officer is not eligible for indemnification under C.G.S.
Section 33-320a to the extent such coverage does not violate public policy.
Section 5 of AL&C's Certificate of Incorporation limits the personal
liability of directors for monetary damages to the corporation and its
shareholders for a breach of duty as a director to the amount of the
compensation received by the director for serving the corporation during
the year of the alleged breach of duty.
Reference is made to the Underwriting Agreement filed as Exhibit 1 to
this Registration Statement for certain provisions relating to the
indemnification of directors and officers of AL&C against certain
liabilities, including liabilities under the Securities Act.
Item 16. Exhibits.
1 -- Form of Underwriting Agreement
3.1-- Certificate of Formation of Aetna Capital L.L.C.
3.2-- Form of Amended and Restated Limited Liability Company Agreement of
Aetna Capital L.L.C.
4.1-- Specimen of Preferred Security Certificate
4.2-- Form of Payment and Guarantee Agreement by Aetna Life and Casualty
Company
* 4.3-- Form of Debentures
* 4.4-- Form of Subordinated Indenture
* 5.1-- Opinion of Zoe Baird, Senior Vice President and General Counsel of
Aetna Life and Casualty Company
* 5.2-- Opinion of Davis Polk & Wardwell
* 8.1-- Opinion of Davis Polk & Wardwell as to tax matters
10.1-- Form of Agreement as to Expenses and Liabilities between Aetna
Capital L.L.C. and Aetna Life and Casualty Company
12 -- Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends (incorporated by reference to Aetna Life
and Casualty Company's 1993 Annual Report on Form 10-K filed on
March 18, 1994 (File No. 1-5704))
23.1-- Consent of KPMG Peat Marwick
23.2-- Consent of Zoe Baird, Senior Vice President and General Counsel of
Aetna Life and Casualty Company (included in Exhibit 5.1)
23.3-- Consent of Davis Polk & Wardwell (included in Exhibit 5.2)
23.4-- Consent of Davis Polk & Wardwell (included in Exhibit 8.1)
24 -- Powers of Attorney
*25 -- Statement of Eligibility and Qualification of the Trustee
under the Trust Indenture Act
28 -- Information from Reports Furnished to State Insurance Regulatory
Authorities (incorporated herein by reference to Aetna Life and
Casualty Company's 1993 Annual Report on Form 10-K, filed on March
18, 1994 (File No. 1-5704))
___________
* To be filed by amendment.
Item 17. Undertakings.
Each of the Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of the securities registered hereby, a post-effective amendment to
this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by a Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of AL&C's Annual Report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the Securities offered therein,
and the offering of such Securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That (a) for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrants pursuant to Rule
424(b)(1) or (4) or Rule 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification (other than pursuant to the insurance
described in Item 15 above) for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrants pursuant to the provisions specified in the first
paragraph of Item 15 of this Registration Statement or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in said Act and is therefore unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of their counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Aetna
Capital L.L.C. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut on
March 25, 1994.
AETNA CAPITAL L.L.C.
(Registrant)
By Aetna Life and Casualty Company,
as Managing Member
By /s/ ROBERT E. BROATCH
--------------------------------
Robert E. Broatch
Senior Vice President,
Finance and Corporate Controller
of Aetna Life and Casualty Company
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on March 25, 1994.
Signature Title
--------- -----
* President and Chief Executive Officer
-------------------------------- of Aetna Life and Casualty Company
Ronald E. Compton (Principal Executive Officer)
Group Executive, Finance and
* Administration of Aetna Life
-------------------------------- and Casualty Company
Patrick W. Kenny (Principal Financial Officer)
* Senior Vice President, Finance
-------------------------------- and Corporate Controller of Aetna
Robert E. Broatch Life and Casualty Company
(Principal Accounting Officer)
*By /s/ KIRK P. WICKMAN
-------------------
Kirk P. Wickman
(Attorney-in-fact)
Pursuant to the requirements of the Securities Act of 1933, Aetna Life
and Casualty Company certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut on March 25, 1994.
AETNA LIFE AND CASUALTY COMPANY
(Registrant)
By /s/ ROBERT E. BROATCH
--------------------------------
Robert E. Broatch
Senior Vice President,
Finance and Corporate Controller
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities indicated on March 25, 1994.
Signature Title
--------- -----
* Chairman, President, Chief Executive
-------------------------------- Officer and Director
Ronald E. Compton (Principal Executive Officer)
* Group Executive, Finance and Administration
-------------------------------- (Principal Financial Officer)
Patrick W. Kenny
* Senior Vice President,
-------------------------------- Finance and Corporate Controller
Robert E. Broatch (Principal Accounting Officer)
* Director
--------------------------------
Wallace Barnes
* Director
--------------------------------
John F. Donahue
* Director
--------------------------------
William H. Donaldson
* Director
--------------------------------
Barbara Hackman Franklin
* Director
--------------------------------
Earl G. Graves
* Director
--------------------------------
Gerald Greenwald
Director
--------------------------------
Michael H. Jordan
* Director
--------------------------------
Jack D. Kuehler
* Director
--------------------------------
Frank R. O'Keefe, Jr.
* Director
--------------------------------
David M. Roderick
*By /s/ KIRK P. WICKMAN
--------------------
Kirk P. Wickman
(Attorney-in-Fact)
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Pages
- -------- ----------- ------------
1 -- Form of Underwriting Agreement
3.1 -- Certificate of Formation of Aetna Capital L.L.C.
3.2 -- Form of Amended and Restated Limited Liability
Company Agreement of Aetna Capital L.L.C.
4.1 -- Specimen of Preferred Security Certificate
4.2 -- Form of Payment and Guarantee Agreement by Aetna
Life and Casualty Company
* 4.3 -- Form of Debentures
* 4.4 -- Form of Subordinated Indenture
* 5.1 -- Opinion of Zoe Baird, Senior Vice President and
General Counsel of Aetna Life and Casualty Company
* 5.2 -- Opinion of Davis Polk & Wardwell
* 8.1 -- Opinion of Davis Polk & Wardwell as to tax matters
10.1 -- Form of Agreement as to Expenses and Liabilities
between Aetna Capital L.L.C. and Aetna Life and
Casualty Company
12 -- Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends (incorporated
by reference to Aetna Life and Casualty Company's
1993 Annual Report on Form 10-K filed on March 18,
1994 (File No. 1-5704))
23.1 -- Consent of KPMG Peat Marwick
23.2 -- Consent of Zoe Baird, Senior Vice President and
General Counsel of Aetna Life and Casualty Company
(included in Exhibit 5.1)
23.3 -- Consent of Davis Polk & Wardwell (included in
Exhibit 5.2)
23.4 -- Consent of Davis Polk & Wardwell (included in
Exhibit 8.1)
24 -- Powers of Attorney
*25 -- Statement of Eligibility and Qualification of the
Trustee under the Trust Indenture Act
28 -- Information from Reports Furnished to State
Insurance Regulatory Authorities (incorporated
herein by reference to Aetna Life and Casualty
Company's 1993 Annual Report on Form 10-K, filed on
March 18, 1994 (File No. 1-5704))
____________
* To be filed by amendment.
EXHIBIT 1
AETNA CAPITAL L.L.C.
AETNA LIFE AND CASUALTY COMPANY
Preferred Securities
_______________
Underwriting Agreement
( ), 199_
To the Underwriters
to be named in the applicable
Pricing Agreement
supplemental hereto
Ladies and Gentlemen:
From time to time Aetna Capital L.L.C., a limited
liability company formed under the laws of Delaware (the
"Company") and Aetna Life and Casualty Company, a
Connecticut insurance corporation ("Aetna"), as guarantor
and provider of certain backup obligations, propose to enter
into one or more Pricing Agreements (each a "Pricing
Agreement") in the form of Annex I hereto, with such
additions and deletions as the parties thereto may determine
and subject to the terms and conditions stated herein and
therein, pursuant to which the Company will issue to the
firms named in Schedule I to the applicable Pricing
Agreement (such firms constituting the "Underwriters" with
respect to such Pricing Agreement and the securities
specified therein) its Preferred Limited Liability Company
Interests (the "Preferred Securities"), in one or more
series, guaranteed by Aetna to the extent set forth in the
prospectus and registration statement described herein and
to sell such Preferred Securities (with respect to such
Pricing Agreement, the "Firm Designated Preferred
Securities"). If specified in such Pricing Agreement, the
Company may grant to the Underwriters the right to purchase
at their election an additional number of Preferred
Securities, specified in such Pricing Agreement as provided
in Section 3 hereof (the "Optional Designated Preferred
Securities"). The Firm Designated Preferred Securities and
any Optional Designated Preferred Securities are
collectively called the "Designated Preferred Securities."
The terms and rights of any particular issuance of
Designated Preferred Securities shall be as specified in the
Pricing Agreement relating thereto (to the extent not set
forth in the registration statement or prospectus with
respect thereto) and in or pursuant to the resolution or
resolutions adopted by Aetna and Aetna Capital Holdings,
Inc., in their capacity as the members (the "Managing
Members") of the Company that hold all of the Common Limited
Liability Company Interests (the "Common Securities"). The
Company will loan the proceeds of the offering of the
Designated Preferred Securities to Aetna, such loan to be
evidenced by a series of debentures (the "Debentures") to be
issued by Aetna pursuant to the indenture (the "Indenture")
identified in Schedule II to the Pricing Agreement.
1. Particular sales of Designated Preferred
Securities may be made from time to time to the Underwriters
of such Designated Preferred Securities, for whom the firms
designated as representatives of the Underwriters of such
Designated Preferred Securities in the Pricing Agreement
relating thereto will act as representatives (the
"Representatives"). The term "Representatives" also refers
to a single firm acting as sole representative of the
Underwriters and to Underwriters who act without any firm
being designated as their representative. Except as
incorporated by reference into a Pricing Agreement, this
Underwriting Agreement shall not be construed as an
obligation of the Company to issue any Preferred Securities
or sell any Preferred Securities or as an obligation of any
of the Underwriters to purchase any of the Preferred
Securities. The obligation of the Company to issue any
Preferred Securities and to sell any Preferred Securities
and the obligation of any of the Underwriters to purchase
any of the Preferred Securities shall be evidenced by the
Pricing Agreement with respect to the Designated Preferred
Securities specified therein.
Each Pricing Agreement shall specify, among other
things, the number of Firm Designated Preferred Securities,
the maximum number of Optional Designated Preferred
Securities, if any, the initial public offering price of
such Firm and Optional Designated Preferred Securities or
the manner of determining such price, the purchase price to
the Underwriters of such Designated Preferred Securities,
the amount of any compensation to be paid to the
Underwriters by Aetna for their services thereunder
("Underwriters' Compensation"), the names of the
Underwriters of such Designated Preferred Securities, the
names of the Representatives of such Underwriters, the
number of such Designated Preferred Securities to be
purchased by each Underwriter and the commission, if any,
payable to the Underwriters with respect thereto and shall
set forth the date, time and manner of delivery of such Firm
and Optional Preferred Securities and payment therefor. The
Pricing Agreement shall also specify (to the extent not set
forth in the registration statement or prospectus with
respect thereto) the terms of such Designated Preferred
Securities. A Pricing Agreement shall be in the form of an
executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or
any other rapid transmission device designed to produce a
written record of communications transmitted. The
obligations of the Underwriters under this Agreement and
each Pricing Agreement shall be several and not joint.
2. Each of the Company and Aetna, jointly and
severally, represents and warrants to, and agrees with, each
of the Underwriters that:
(a) A registration statement in respect of
the Preferred Securities has been filed with the
Securities and Exchange Commission (the "Commission");
such registration statement and any post-effective
amendments thereto, each in the form heretofore
delivered or to be delivered to the Representatives
(with exhibits thereto) for delivery to each of the
other Underwriters (without exhibits thereto), have
been declared effective by the Commission in such form;
no other document with respect to such registration
statement or document incorporated by reference therein
has been filed or transmitted for filing with the
Commission prior to the effective date of the registraion
statement; and no stop order suspending the effectiveness
of such registration statement has been issued
and no proceeding for that purpose has been initiated
or, to the knowledge of the Company or Aetna,
threatened by the Commission. Any preliminary
prospectus included in such registration statement or
filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the
Securities Act of 1933, as amended (the "Act"), is
hereinafter collectively called a "Preliminary
Prospectus"; the various parts of such registration
statement, including all exhibits thereto and the
information, if any, deemed to be part of such
registration statement at the time of effectiveness
pursuant to Rule 430A under the Act, but excluding Form
T-1, each as amended at the time such part of the
registration statement became effective are hereinafter
collectively called the "Registration Statement"; the
prospectus relating to the Preferred Securities, in the
form in which it has most recently been filed, or
transmitted for filing, with the Commission on or prior
to the date of this Agreement, is hereinafter called
the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents
incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may
be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed with
the Commission after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such
Preliminary Prospectus or Prospectus, as the case may
be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any
annual report of Aetna filed pursuant to Section 13(a)
or 15(d) of the Exchange Act after the effective date
of the Registration Statement that is incorporated by
reference in the Registration Statement; and any
reference to the Prospectus as amended or supplemented
shall be deemed to refer to the Prospectus as amended
or supplemented in relation to the applicable Designated
Preferred Securities in the form in which it is
first filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof,
including any documents incorporated by reference
therein as of the date of such filing;
(b) The Registration Statement and the
Prospectus conform, and any further amendments or
supplements to the Registration Statement or the
Prospectus will conform, in all material respects to
the requirements of the Act and the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), and
the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein (i) in the
case of the Registration Statement, not misleading and
(ii) in the case of the Prospectus, in light of the
circumstances under which they were made, not
misleading; provided, however, that this representation
and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with
information furnished in writing to the Company or
Aetna by an Underwriter of Designated Preferred
Securities through the Representatives for use in the
Prospectus as amended or supplemented relating to such
Designated Preferred Securities;
(c) Aetna has been duly incorporated and is
validly existing as an insurance corporation in good
standing under the laws of the State of Connecticut;
(d) The Company has been duly formed and is
validly existing as a limited liability company in good
standing under the laws of the Delaware;
(e) The Preferred Securities have been duly
authorized and, when the terms of the Designated Preferred
Securities have been established by resolutions
adopted by the Managing Members and issued and
delivered and paid for pursuant to this Agreement and
the Pricing Agreement with respect to such Designated
Preferred Securities, such Designated Preferred
Securities will be validly issued, fully paid and
non-assessable limited liability company interests in the
Company, as to which the members of the Company who
hold such Designated Preferred Securities (the
"Preferred Securityholders"), in their capacity as
members of the Company, will have no liability solely
by reason of being Preferred Securityholders in excess
of their share of the Company's assets and
undistributed profits (subject to any obligation of a
Preferred Securityholder to repay any funds wrongfully
distributed to it); and the Designated Preferred
Securities will conform, in all material respects, to
the descriptions thereof contained in the Prospectus as
amended or supplemented with respect to such Designated
Preferred Securities;
(f) The Limited Liability Company Agreement
of the Company ("L.L.C. Agreement"), which is in
substantially the form filed as an exhibit to the
Registration Statement, constitutes a valid and legally
binding agreement of the Company, enforceable against
the Company by the members of the Company that hold
Preferred Securities in accordance with its terms,
subject to (1) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar laws
now or hereafter in effect relating to or affecting
creditors' rights generally, (2) general principles of
equity (regardless of whether considered in a
proceeding at law or in equity); and (3) applicable
laws relating to fiduciary duties;
(g) Each of the guarantee of certain
obligations of the Company by Aetna for the benefit of
the holders from time to time of the Preferred
Securities (the "Guarantee Agreement") and the
guarantee by Aetna of certain liabilities of the
Company for the benefit of persons other than such
holders (the "Expense Agreement"), each of which is
substantially in the form filed as an exhibit to the
Registration Statement, has been duly authorized,
executed and delivered by Aetna and, in the case of the
Expense Agreement, the Company, and constitutes a valid
and legally binding agreement of Aetna enforceable
against Aetna in accordance with its terms, subject to
(1) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors'
rights and the rights of creditors of insurance
companies generally and (2) general principles of
equity (regardless of whether considered in a
proceeding at law or in equity); and each of the
Guarantee Agreement and the Expense Agreement conforms,
in all material respects, to the description thereof
contained in the Prospectus as amended or supplemented
with respect to the Designated Preferred Securities;
(h) The Debentures have been duly authorized
by Aetna, and, when the Debentures are issued,
executed, authenticated, delivered and paid for in
accordance with the Indenture, such Debentures will be
duly issued, executed and delivered and will constitute
valid and legally binding obligations of Aetna
enforceable against Aetna in accordance with their
terms, subject to (1) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and
other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and the
rights of creditors of insurance companies generally
and (2) general principles of equity (regardless of
whether considered in a proceeding at law or in
equity); the Indenture, which will be substantially in
the form filed as an exhibit to the Registration
Statement, has been duly authorized by the Company and,
at the Time of Delivery (as defined in Section 4
hereof) for such Designated Preferred Securities, the
Indenture will be duly qualified under the Trust
Indenture Act and, assuming due authorization,
execution and delivery by the trustee under such
Indenture (the "Trustee"), the Indenture will
constitute a valid and legally binding instrument of
Aetna enforceable against Aetna in accordance with its
terms, subject to (1) bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and
other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and the
rights of creditors of insurance companies generally
and (2) general principles of equity (regardless of
whether considered in a proceeding at law or in
equity); and the Indenture conforms, and the Debentures
will conform, in all material respects, to the
descriptions thereof contained in the Prospectus as
amended or supplemented with respect to such Designated
Preferred Securities;
(i) The issue and sale of the Designated
Preferred Securities and the performance by the Company
and Aetna of their respective obligations under this
Agreement, any Pricing Agreement, the Indenture, the
Debentures, the Guarantee Agreement, the Expense
Agreement and each Over-allotment Option (as defined in
Section 3 hereof), if any, and the consummation of the
transactions herein and therein contemplated will not
(1) conflict with or result in a breach or violation by
the Company or Aetna of any of the terms or provisions
of, or constitute a default by the Company or Aetna
under, any indenture, mortgage, deed of trust, loan
agreement or other similar agreement or instrument to
which the Company or Aetna is a party or by which the
Company or Aetna is bound or to which any of the
property or assets of the Company or Aetna is subject,
except, in all such cases, for such conflicts,
breaches, violations or defaults as would not have a
material adverse effect on the financial condition of
Aetna and its subsidiaries taken as a whole or would
not have a material adverse effect on the issuance or
sale of the Designated Preferred Securities, or (2)
result in any violation of (A) the provisions of the
Certificate of Formation of the Company or the L.L.C.
Agreement or the Certificate of Incorporation or
By-Laws of Aetna or (B) any statute of the United States
or the State of Connecticut or Delaware or any order,
rule or regulation of any court or governmental agency
or body of the United States or the State of Connecticut
or Delaware having jurisdiction over the Company or
Aetna or any of their respective properties; provided,
however that in the case of clause (B) of this
paragraph 2(i), this representation and warranty shall
not extend to such violations as would not have a material
adverse effect on the financial condition of Aetna
and its subsidiaries taken as a whole or would not have
a material adverse effect on the issuance or sale of
the Designated Preferred Securities; provided further,
that insofar as this representation and warranty relates
to the performance by the Company and Aetna of
each of their respective obligations under this Agreement,
the Pricing Agreement relating to the Designated
Preferred Securities, the Designated Preferred
Securities, the Indenture, the Debentures, the
Guarantee Agreement and the Expense Agreement, such
performance is subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and
other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and the
rights of creditors of insurance companies generally;
(j) No consent, approval, authorization,
order, registration, filing or qualification of or with
any court or governmental agency or body of the United
States or the States of Connecticut or Delaware is
required for the issue and sale of the Preferred
Securities or the consummation by the Company or Aetna
of the transactions contemplated by this Agreement, any
Pricing Agreement, the Indenture, the Debentures, the
Guarantee Agreement or the Expense Agreement or any
Over-allotment Option, except such as have been, or
will have been prior to the Time of Delivery obtained
under the Act or the Trust Indenture Act or from the
Connecticut Insurance Commissioner and such consents,
approvals, authorizations, orders, registrations,
filings or qualifications as may be required under
state securities or Blue Sky laws or insurance
securities laws of any such jurisdiction in connection
with the purchase and distribution of the Designated
Preferred Securities by the Underwriters, and except
those which, if not obtained, will not have a material
adverse effect on the financial condition of Aetna and
its subsidiaries taken as a whole or would not have a
material adverse effect on the issuance or sale of the
Designated Preferred Securities; and
(k) The Common Securities issued to the
Managing Members have been duly authorized and are
validly issued.
3. Upon the execution of the Pricing Agreement
applicable to any Designated Preferred Securities the
several Underwriters propose to offer the Firm Designated
Preferred Securities for sale upon the terms and conditions
set forth in the Prospectus as amended or supplemented.
The Company may specify in the Pricing Agreement
applicable to any Designated Preferred Securities that the
Company thereby grants to the Underwriters the right (an
"Over-allotment Option") to purchase at their election up to
the number of Optional Designated Preferred Securities set
forth in such Pricing Agreement, at the terms set forth in
the paragraph above, for the sole purpose of covering
over-allotments in the sale of the Firm Designated Preferred
Securities. Any such election to purchase Optional
Designated Preferred Securities may be exercised only by
written notice from the Representatives to the Company and
Aetna, given within a period specified in the Pricing
Agreement, setting forth the aggregate number of Optional
Designated Preferred Securities to be purchased and the date
on which such Optional Designated Preferred Securities are
to be delivered, as determined by the Representatives but in
no event earlier than the First Time of Delivery (as defined
in Section 4 hereof) or, unless the Representatives, Aetna
and the Company otherwise agree in writing, earlier than or
later than the respective number of business days after the
date of such notice set forth in such Pricing Agreement.
The number of Optional Designated Preferred
Securities to be added to the number of Firm Designated
Preferred Securities to be purchased by each Underwriter as
set forth in Schedule I to the Pricing Agreement applicable
to such Designated Preferred Securities shall be, in each
case, the number of Optional Designated Preferred Securities
which each of the Company and Aetna has been advised by the
Representatives have been attributed to such Underwriter,
provided that, if each of the Company and Aetna has not been
so advised, the number of Optional Designated Preferred
Securities to be so added shall be, in each case, that
proportion of Optional Designated Preferred Securities which
the number of Firm Designated Preferred Securities to be
purchased by such Underwriter under such Pricing Agreement
bears to the aggregate number of Firm Designated Preferred
Securities (rounded as the Representatives may determine to
the nearest 100 securities). The total number of Designated
Preferred Securities to be purchased by all the Underwriters
pursuant to such Pricing Agreement shall be the aggregate
number of Firm Designated Preferred Securities set forth in
Schedule I to such Pricing Agreement plus the aggregate
number of the Optional Designated Preferred Securities which
the Underwriters elect to purchase.
4. Unless otherwise specified in the applicable
Pricing Agreement, global certificates for the Firm
Designated Preferred Securities and Optional Designated
Preferred Securities to be purchased by each Underwriter
pursuant to such Pricing Agreement, registered in the name
"Cede & Co.," shall be delivered by or on behalf of the
Company to the Representatives for the account of such
Underwriter, against payment by such Underwriter or on its
behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the
Company or, if so requested by the Company, by wire transfer
to a bank account specified by the Company and specified in
Schedule II, in the funds specified in such Pricing
Agreement. The place, time and date of delivery of and
payment for Firm Designated Preferred Securities and
Optional Designated Preferred Securities shall be as
specified in such Pricing Agreement or at such other place,
time and date as the Representatives, Aetna and the Company
may agree upon in writing. Such time and date for delivery
of Firm Designated Preferred Securities pursuant to the
Pricing Agreement relating thereto is herein called the
"First Time of Delivery," such time and date for delivery of
Optional Designated Preferred Securities, if not the First
Time of Delivery, is herein called the "Second Time of
Delivery," and each such time and date is herein called the
"Time of Delivery."
5. Each of the Company and Aetna, jointly and
severally, agrees with each of the Underwriters of any
Designated Preferred Securities:
(a) To prepare the Prospectus as amended and
supplemented in relation to the applicable Designated
Preferred Securities and to file such Prospectus pursuant
to Rule 424(b) under the Act not later than the
Commission's close of business on the second business
day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated
Preferred Securities or, if applicable, such other time
as may be required by Rule 424(b); to advise the
Representatives promptly of any proposal to amend or
supplement the Registration Statement or Prospectus as
amended or supplemented after the date of the Pricing
Agreement relating to such Designated Preferred
Securities and prior to the Time of Delivery for such
Designated Preferred Securities, and afford the
Representatives a reasonable opportunity to comment on
any such proposed amendment or supplement; to advise
the Representatives of any such amendment or supplement
promptly after such Time of Delivery for so long as the
delivery of a prospectus is required under the Act in
connection with the offering or sale of such Designated
Preferred Securities; to file promptly all reports and
any definitive proxy or information statements required
to be filed by Aetna or the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act for so long as the delivery of a
prospectus is required under the Act in connection with
the offering or sale of such Designated Preferred
Securities, and during such same period to advise the
Representatives, promptly after the Company or Aetna
receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any
amended Prospectus has been filed with the Commission;
for so long as the delivery of a prospectus is required
under the Act in connection with the offering or sale
of the Designated Preferred Securities, to advise the
Representatives promptly of the issuance by the Commission
of any stop order or of any order preventing or
suspending the use of any prospectus relating to the
Designated Preferred Securities, of the suspension of
the qualification of such Designated Preferred
Securities for offering or sale in any jurisdiction or
of the initiation or, if known to the Company or Aetna,
the threatening of any proceeding for any such purpose,
or of any request by the Commission for amending or
supplementing the Registration Statement or Prospectus;
and, in the event of the issuance of any such stop
order or of any such order preventing or suspending the
use of any prospectus relating to the Designated
Preferred Securities or suspending any such qualification,
to use promptly its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to endeavor
to take such action as the Representatives may reasonably
request to qualify such Designated Preferred
Securities for offering and sale under the securities
laws of such jurisdictions of the United States, Puerto
Rico and Guam as the Representatives may reasonably
request and such other jurisdictions as the Company,
Aetna and the Representatives may agree and to comply
with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of
such Designated Preferred Securities, provided that in
connection therewith the Company and Aetna shall not be
required to qualify as a foreign corporation or to file
a general consent to service of process in any
jurisdiction, and provided further that in connection
therewith the Company and Aetna shall not be required
to qualify such Designated Preferred Securities for
offering and sale under the securities laws of any such
jurisdiction for a period in excess of nine months
after the initial time of issue of the Prospectus as
amended or supplemented relating to such Designated
Preferred Securities;
(c) To furnish the Underwriters with copies
of the Prospectus as amended or supplemented in such
quantities as the Representatives may from time to time
reasonably request, and, if the delivery of a prospectus
is required at any time in connection with the
offering or sale of the Designated Preferred Securities
and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or
supplemented would include an untrue statement of a
material fact or omit to state any material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary
during such same period to amend or supplement the
Prospectus in order to comply with the Act or the
Exchange Act, to notify the Representatives and to file
such document and to prepare and furnish without charge
to each Underwriter and to any dealer in securities as
many copies as the Representatives may from time to
time reasonably request of any amended Prospectus or a
supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
provided, however, that in case any Underwriter is
required under the Act to deliver a prospectus in
connection with the offering or sale of the Designated
Preferred Securities at any time more than nine months
after the date of the Pricing Agreement relating to the
Designated Preferred Securities, the costs of such
preparation and furnishing such amended or supplemented
Prospectus shall be borne by the Underwriters of such
Designated Preferred Securities;
(d) In the case of Aetna, to make generally
available to its securityholders as soon as
practicable, but in any event not later than eighteen
months after the effective date of the Registration
Statement (as defined in Rule 158(c)), an earning
statement of Aetna and its subsidiaries (which need not
be audited) complying with Section 11(a) of the Act and
the rules and regulations of the Commission thereunder
(including, at the option of Aetna, Rule 158);
(e) During the period beginning from the
date of the Pricing Agreement for such Designated
Preferred Securities and continuing to and including
the First Time of Delivery for such Designated
Preferred Securities, not to offer, sell, contract to
sell or otherwise dispose of in the United States any
preferred limited liability company interests in the
Company, which are substantially similar to such
Designated Preferred Securities, without the prior
written consent of the Representatives, which consent
shall not be unreasonably withheld; and
(f) To use its best efforts to list, subject
to notice of issuance, the Designated Preferred
Securities on The New York Stock Exchange, Inc.
6. Each of the Company and Aetna, jointly and
severally, covenants and agrees with the several Underwriters
that the Company and Aetna will pay or cause to be
paid the following: (i) the fees, disbursements and
expenses of the Company's and Aetna's counsel and
accountants in connection with the registration of the
Preferred Securities under the Act and all other expenses in
connection with the Company's and Aetna's preparation,
printing and filing of the Registration Statement, any
Preliminary Prospectus and, subject to the proviso of
Section 5(c), the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to
the Underwriters and dealers; (ii) the cost of printing or
otherwise producing any Agreement among Underwriters, this
Agreement, any Pricing Agreement, any Blue Sky and Legal
Investment Memoranda and any other documents in connection
with the offering, purchase, sale and delivery of the
Designated Preferred Securities; (iii) all expenses in
connection with the qualification of the Designated
Preferred Securities for offering and sale under state
securities laws as provided in Section 5(b) hereof,
including the reasonable fees and disbursements of counsel
for the Underwriters in connection with such qualification
and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services
for rating the Designated Preferred Securities; (v) any
filing fees incident to any required review by the National
Association of Securities Dealers, Inc. of the terms of the
sale of the Designated Preferred Securities; (vi) any cost
of preparing certificates representing the Designated
Preferred Securities; (vii) the cost and charges of any
transfer agent or registrar or dividend disbursing agent;
(viii) the fees and expenses of any Trustee and any agent of
any Trustee and the fees and disbursements of counsel for
any Trustee in connection with any Indenture and the
Debentures; and (ix) all other costs and expenses incident
to the performance of each of the Company's and Aetna's
obligations hereunder and under any Over-allotment Option
which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as
provided in this Section, Section 8 and Section 11 hereof,
the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, transfer
taxes on resale of any of the Designated Preferred
Securities by them, and any advertising expenses connected
with any offers they may make.
The foregoing provisions of this Section 6 shall
be without prejudice to each of the Company's and Aetna's
rights under any separate agreements between the Company and
Aetna and their attorneys, accountants and vendors with
respect to such fees, disbursements, expenses and costs.
7. The obligations of the Underwriters of any
Designated Preferred Securities under the Pricing Agreement
relating to such Designated Preferred Securities shall be
subject, in the discretion of the Representatives, to the
condition that all representations and warranties and other
statements of each of the Company and Aetna in or
incorporated by reference in the Pricing Agreement relating
to such Designated Preferred Securities are, at and as of
the respective Time of Delivery for such Designated
Preferred Securities, true and correct, the condition that
each of the Company and Aetna shall have performed in all
material respects all of its obligations hereunder
theretofore to be performed, and the following additional
conditions:
(a) The Prospectus as amended or supplemented
in relation to the applicable Designated
Preferred Securities shall have been filed with the
Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by
the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order
suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or,
to the knowledge of the Company or Aetna, threatened by
the Commission;
(b) Sullivan & Cromwell, counsel for the
Underwriters, shall have furnished to the Representatives
such opinion or opinions, dated the respective
Time of Delivery for such Designated Preferred
Securities, with respect to the incorporation of Aetna
and the Company, the Guarantee Agreement, the Expense
Agreement, the Indenture, the Registration Statement,
the Prospectus as amended or supplemented, the
Investment Company Act of 1940, as amended, the
validity of such Designated Preferred Securities and
the Debentures and other related matters as the
Representatives may reasonably request, and such
counsel shall have received such papers and information
as they may reasonably request to enable them to pass
upon such matters;
(c) Zoe Baird, Senior Vice President and
General Counsel of Aetna, shall have furnished to the
Representatives such counsel's written opinion, dated
the respective Time of Delivery for such Designated
Preferred Securities, in form and substance satisfactory
to the Representatives, to the effect that:
(i) Aetna has been duly incorporated
and is validly existing as an insurance
corporation in good standing under the laws of the
State of Connecticut;
(ii) To the best of such counsel's
knowledge, Aetna is qualified to do business, and
is in good standing, as a foreign insurance corporation
under the laws of the State of Pennsylvania
and the District of Columbia or, if not so
qualified and in good standing in either such
jurisdiction, such failure to be so qualified and
in good standing, as of the date of such opinion,
will not have a material adverse effect on the
financial condition of Aetna and its subsidiaries
taken as a whole;
(iii) Each of Aetna Life Insurance
Company and The Aetna Casualty and Surety Company
has been duly incorporated and is validly existing
as an insurance corporation in good standing under
the laws of the State of Connecticut, and all of
the outstanding shares of capital stock of each
such subsidiary have been duly authorized and
validly issued and are fully paid and
nonassessable, and (except for directors' qualifying
shares, if any) are owned directly or indirectly
by Aetna;
(iv) To the best of such counsel's
knowledge and other than as set forth or
contemplated in the Prospectus, there are no legal or
governmental proceedings pending or threatened
involving Aetna or any of its subsidiaries of a
character required to be disclosed in the
Registration Statement or Prospectus which are not
adequately disclosed in the Registration Statement
or Prospectus;
(v) This Agreement and the Pricing
Agreement with respect to the Designated Preferred
Securities have been duly authorized, executed and
delivered by Aetna;
(vi) Each of the Guarantee Agreement
and the Expense Agreement has been duly authorized,
executed and delivered by Aetna and, in the
case of the Expense Agreement, assuming the due
authorization, execution and delivery thereof by
the Company, constitutes a valid and legally
binding agreement of Aetna enforceable in
accordance with its terms, subject to (1)
bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other similar laws now or
hereafter in effect relating to or affecting
creditors' rights generally and the rights of
creditors of insurance companies generally and (2)
general principles of equity (regardless of
whether considered in a proceeding at law or in
equity);
(vii) The Debentures have been duly
authorized by Aetna, and, when the Debentures are
issued, executed, authenticated, delivered and
paid for in accordance with the Indenture, such
Debentures will be duly issued, executed and
delivered and will constitute valid and legally
binding obligations of Aetna enforceable against
Aetna in accordance with their terms, subject to
(1) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar
laws now or hereafter in effect relating to or
affecting creditors rights generally and the
rights of creditors of insurance companies
generally and (2) general principles of equity
(regardless of whether considered in a proceeding
at law or in equity);
(viii) The Indenture has been duly
authorized, executed and delivered by Aetna and,
assuming the due authorization, execution and
delivery thereof by the Trustee, the Indenture
constitutes a valid and legally binding instrument
of Aetna enforceable against Aetna in accordance
with its terms, subject to (1) bankruptcy,
insolvency, reorganization, fraudulent transfer,
moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors'
rights generally, and the rights of creditors of
insurance companies generally and (2) general
principles of equity (regardless of whether
considered in a proceeding at law or in equity);
and the Indenture has been duly qualified under
the Trust Indenture Act;
(ix) The issue and sale of the
Designated Preferred Securities being delivered at
such Time of Delivery and the performance by Aetna
of its obligations under the Indenture, the
Debentures, the Guarantee Agreement, the Expense
Agreement, this Agreement, and the Pricing
Agreement with respect to the Designated Preferred
Securities will not (1) conflict with or result in
a breach or violation by Aetna of any of the terms
or provisions of, or constitute a default by Aetna
under, any indenture, mortgage, deed of trust,
loan agreement or other similar agreement or
instrument known to such counsel to which Aetna is
a party or by which Aetna is bound or to which any
of the property or assets of Aetna is subject,
except, in all such cases, for such conflicts,
breaches, violations or defaults as would not have
a material adverse effect on the financial
condition of Aetna and its subsidiaries taken as a
whole or would not have a material adverse effect
in the issuance or sale of the Designated
Preferred Securities, and (2) result in any violation
of (A) the provisions of the Certificate of
Incorporation or By-Laws of Aetna or (B) any statute
of the United States or the State of
Connecticut or any order, rule or regulation known to
such counsel of any court or governmental agency
or body of the United States or the State of
Connecticut having jurisdiction over Aetna or any of
its properties, except with respect to clause (B)
of this Paragraph (ix)(2), such violations as
would not have a material adverse effect on the
financial condition of Aetna and its subsidiaries
taken as a whole or would not have a material
adverse effect on the issuance or sale of the
Designated Preferred Securities (and except that
for purposes of this paragraph (ix) such counsel
need not express any opinion as to any violation
of any fraudulent transfer laws or other antifraud
laws or as to any violation of any federal or
state securities laws or blue sky or insurance
laws; provided further, that insofar as
performance by Aetna of its obligations under the
Indenture, the Debentures, the Guarantee
Agreement, the Expense Agreement, this Agreement
and the Pricing Agreement relating to the
Designated Preferred Securities is concerned, such
counsel need not express any opinion as to
bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereafter in effect
relating to or affecting creditors' rights
generally and the rights of creditors of insurance
companies generally);
(x) The documents incorporated by
reference in the Prospectus as amended or
supplemented (other than the financial statements and
related notes, information as to reserves, the
financial statement schedules and the other
financial and statistical data included therein or
omitted therefrom, as to which such counsel need
express no opinion), when they became effective or
were filed with the Commission, as the case may
be, complied as to form in all material respects
with the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations
of the Commission thereunder; and
(xi) Under the laws of the State of
Connecticut and under the federal laws of the
United States, no consent, approval, authorization,
order, registration, filing or qualification
of or with any court or governmental agency or
body is required for the issue and sale of the
Designated Preferred Securities being delivered at
such Time of Delivery in accordance with this
Agreement or the Pricing Agreement relating to the
Designated Preferred Securities, except for such
consents, approvals, authorizations, orders,
registrations, filings or qualifications as have
been obtained under the Act or the Trust Indenture
Act or from the Connecticut Insurance Commissioner
and such consents, approvals, authorizations,
orders, registrations, filings or qualifications
as may be required under state securities or Blue
Sky laws or insurance securities laws of any such
jurisdiction in connection with the purchase and
sale and distribution of the Designated Preferred
Securities by the Underwriters, and except those
which, if not obtained, will not have a material
adverse effect on the financial condition of Aetna
and its subsidiaries taken as a whole.
In addition, such counsel shall state that such
counsel does not know of any contract or other document (i)
of a character required to be filed as an exhibit to the
Registration Statement or to any of the documents incorporated
by reference into the Prospectus as amended or
supplemented which is not so filed, (ii) required to be
incorporated by reference into the Prospectus as amended or
supplemented which is not so incorporated by reference or
(iii) required to be described in the Registration Statement
or the Prospectus as amended or supplemented which is not so
described.
In rendering this opinion required by subsection
(c) of this Section, Ms. Baird may state that she is
admitted to the Bar of the State of Connecticut and she does
not express any opinion as to the laws of any other
jurisdiction other than the federal laws of the United
States of America, Ms. Baird may rely (A) as to any matter
to which you consent (which consent shall not be
unreasonably withheld), to the extent specified in such
opinion, upon the opinions of other counsel in good standing
whom such counsel believes to be reliable, provided that Ms.
Baird shall state that she and you are justified in relying
on such opinions and (B) as to matters of fact, upon certificates
of officers and representatives of Aetna and of
public officials, and may state that she has not verified
independently the accuracy or completeness of information or
documents furnished to such counsel with respect to the
Registration Statement or the Prospectus.
(d) Davis Polk & Wardwell, special counsel
for the Company and Aetna, shall have furnished to the
Representatives their written opinion, dated the
respective Time of Delivery for such Designated
Preferred Securities, in form and substance satisfactory
to the Representatives, to the effect that:
(i) The Company has been duly formed
and is validly existing as a limited liability
company in good standing under the laws of
Delaware;
(ii) The Designated Preferred Securities
being delivered at such Time of Delivery have been
duly authorized and validly issued and are fully
paid and non-assessable limited liability company
interests in the Company, as to which the
Preferred Securityholders, in their capacity as
members of the Company, will have no liability
solely by reason of being Preferred
Securityholders in excess of their share of the
Company's assets and undistributed profits
(subject to any obligation of a Preferred
Securityholder to repay any funds wrongfully
distributed to it); and the Preferred Securities
conform, in all material respects, to the
descriptions thereof contained in the Prospectus
as amended or supplemented with respect to such
Designated Preferred Securities;
(iii) The Common Securities issued to the
Managing Members have been duly authorized and are
validly issued;
(iv) The L.L.C. Agreement constitutes a
valid and legally binding agreement of the
Company, enforceable against the Company by the
members of the Company that hold Preferred
Securities in accordance with its terms, subject
to (1) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar
laws now or hereafter in effect relating to or
affecting creditors' rights generally, (2) general
principles of equity (regardless of whether
considered in a proceeding at law or in equity)
and (3) applicable law relating to fiduciary
duties;
(v) This Agreement and the Pricing
Agreement with respect to such Designated
Preferred Securities have been duly executed and
delivered by each of Aetna and the Company;
(vi) Each of the Guarantee Agreement and
the Expense Agreement have been duly authorized,
executed and delivered by Aetna and, in the case
of the Expense Agreement, the Company and
constitutes a valid and legally binding agreement
of Aetna enforceable against Aetna and in
accordance with its terms, subject to (1)
bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other laws now or
hereafter in effect relating to or affecting
creditors' rights generally and the rights of
creditors of insurance companies generally and (2)
general principles of equity (regardless of
whether considered in a proceeding at law or in
equity);
(vii) The Debentures have been duly
authorized by Aetna, and, when the Debentures are
issued, executed, authenticated, delivered and
paid for in accordance with the Indenture, such
Debentures will be duly issued, executed and
delivered and will constitute valid and legally
binding obligations of Aetna enforceable against
Aetna in accordance with their terms, subject to
(1) bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar
laws now or hereafter in effect relating to or
affecting creditors' rights generally and the
rights of creditors of insurance companies
generally and (2) general principles of equity
(regardless of whether considered in a proceeding
at law or in equity);
(viii) The Indenture has been duly
authorized, executed and delivered by Aetna and,
assuming the due authorization, execution and,
delivery thereof by the Trustee, the Indenture
constitutes a valid and legally binding instrument
of Aetna enforceable against Aetna in accordance
with its terms, subject to (1) bankruptcy,
insolvency, reorganization, fraudulent transfer,
moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors'
rights generally and the rights of creditors of
insurance companies generally and (2) general
principles of equity (regardless of whether
considered in a proceeding at law or in equity);
and the Indenture has been duly qualified under
the Trust Indenture Act;
(ix) The issue and sale of the Designated
Preferred Securities being delivered at such Time
of Delivery and the performance by the Company of
its obligations under this Agreement and the
Pricing Agreement with respect to the Designated
Preferred Securities will not (1) conflict with or
result in a breach or violation by the Company of
any of the terms or provisions of, or constitute a
default by the Company under, any indenture, mortgage,
deed of trust, loan agreement or other
similar agreement or instrument known to such
counsel to which the Company is a party or by
which the Company is bound or to which any of the
property or assets of the Company is subject,
except, in all such cases, for such conflicts,
breaches, violations or defaults as would not have
a material adverse effect on the financial
condition of the Company or would not have a
material adverse effect in the issuance or sale of
the Designated Preferred Securities, and (2) result
in any violation of (A) the provisions of the
Certificate of Formation of the Company or the
L.L.C. Agreement or (B) any statute of Delaware or
any order, rule or regulation known to such
counsel of any court or governmental agency or
body of Delaware having jurisdiction over the
Company or any of its properties, except with
respect to clause (B) of this Paragraph (ix)(2),
such violations as would not have a material
adverse effect on the financial condition of the
Company or would not have a material adverse
effect on the issuance or sale of the Designated
Preferred Securities (and except that for purposes
of this paragraph (ix) such counsel need not
express any opinion as to any violation of any
fraudulent transfer laws or other antifraud laws;
provided further, that insofar as performance by
the Company of its obligations under this Agreement
and the Pricing Agreement relating to the
Designated Preferred Securities is concerned, such
counsel need not express any opinion as to
bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereafter in effect
relating to or affecting creditors' rights
generally);
(x) Under the laws of Delaware, no
consent, approval, authorization, order, registration,
filing or qualification of or with any
court or governmental agency or body is required
for the issue and sale of the Designated Preferred
Securities being delivered at such Time of
Delivery in accordance with this Agreement or the
Pricing Agreement relating to the Designated
Preferred Securities being delivered at such Time
of Delivery;
(xi) The Company is not an "investment
company" within the meaning of the Investment
Company Act of 1940, as amended;
(xii) The statements contained in the
Prospectus under the captions "Description of the
Preferred Securities," "Description of the
Guarantee," "Description of the Debentures and the
Subordinated Indenture," "Taxation", and "Plan of
Distribution" and the corresponding sections in
any prospectus supplement relating to the
description of the Designated Preferred Securities
or their distribution, insofar as such statements
constitute summaries of certain provisions of the
documents or U.S. tax laws referred to therein,
accurately summarize the material provisions of
such documents or U.S. tax laws required to be
stated therein; and
(xiii) (1) such counsel is of the
opinion that the Registration Statement, as
amended, and the Prospectus, as amended or
supplemented, as of the First Time of Delivery for
the Designated Preferred Securities (other than
the financial statements and related notes,
information as to reserves, the financial
statement schedules and the other financial data
included therein or omitted therefrom, as to which
such counsel need express no opinion), comply as
to form in all material respects with the Act and
the Trust Indenture Act and the rules and
regulations of the Commission thereunder, (2)
nothing has come to the attention of such counsel
that would cause such counsel to believe that the
Registration Statement or the Prospectus, as
amended or supplemented, as of the date of the
Pricing Agreement with respect to the Designated
Preferred Securities and the First Time of Delivery
for the Designated Preferred Securities (other
than the financial statements and related notes,
information as to reserves, the financial
statement schedules and the other financial data
included therein or omitted therefrom, as to which
such counsel need express no belief), contained or
contains an untrue statement of a material fact or
omitted or omits to state a material fact
necessary to make the statements therein, in the
light of the circumstances under which they were
made, not misleading.
With respect to clause (xiii) of subsection (d) of
this Section, Davis Polk & Wardwell may state that their
opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and
any amendments or supplements thereto and review and
discussion of the contents thereof, but are without
independent check or verification except as specified. In
rendering the opinion required by subsection (d) of this
Section, Davis Polk & Wardwell may rely upon the accuracy of
matters (A) involving the application of laws of any
jurisdiction other than the United States or New York and as
to any other matter to which you consent (which consent
shall not be unreasonably withheld), to the extent specified
in such opinion, upon the opinions of other counsel
reasonably satisfactory to you (including without
limitation, as to matters of Connecticut law, on the opinion
of Zoe Baird, Senior Vice President and General Counsel of
Aetna and as to matters of Delaware law, on the opinion of
Richards, Layton & Finger, P.A.), and (B) of fact upon
certificates of officers and representatives of the Company
and Aetna and of public officials.
(e) On the date of the Pricing Agreement for
such Designated Preferred Securities and at the
respective Time of Delivery for such Designated
Preferred Securities, KPMG Peat Marwick shall have
furnished to the Representatives a letter, dated the
date of the Pricing Agreement and a letter dated the
First Time of Delivery, respectively, to the effect set
forth in Annex II hereto, and with respect to such
letter dated such First Time of Delivery, as to such
other matters as the Representatives may reasonably
request and in form and substance satisfactory to the
Representatives;
(f) Since the respective dates as of which
information is given in the Prospectus as amended or
supplemented as of the date of the Pricing Agreement
until the respective Time of Delivery of the Designated
Preferred Securities there shall not have been any
adverse change or a development involving a prospective
material adverse change in the financial position,
stockholders' equity or results of operations of Aetna
and its subsidiaries considered as a whole, otherwise
than as set forth or contemplated in such Prospectus as
amended or supplemented, the effect of which, in any
such case described above, is in the reasonable
judgment of the Representatives, after consultation
with the Company and Aetna, so material and adverse as
to make it impracticable to proceed with the public
offering or the delivery of the Designated Preferred
Securities on the terms and in the manner contemplated
in such Prospectus as amended or supplemented;
(g) On or after the date of the Pricing
Agreement relating to the Designated Preferred
Securities until the respective Time of Delivery of the
Designated Preferred Securities, no downgrading shall
have occurred in the rating accorded Aetna's debt
securities or preferred stock by either the Standard &
Poor's Corporation or Moody's Investors Service, Inc.;
(h) On or after the date of the Pricing
Agreement relating to the Designated Preferred
Securities until the respective Time of Delivery of the
Designated Preferred Securities, there shall not have
occurred any of the following: (i) a suspension or
material limitation in trading in securities generally
on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in New York
declared by either Federal or New York state
authorities; or (iii) the outbreak or material
escalation of hostilities involving the United States
or the declaration by the United States of a national
emergency or war, if the effect of any of the above
such events, in the reasonable judgment of the
Representatives, after consultation with the Company
and Aetna, makes it impracticable to proceed with the
public offering or the delivery of the Designated
Preferred Securities on the terms and in the manner
contemplated by the Prospectus as amended or
supplemented; and
(i) Aetna shall have furnished or caused to
be furnished to the Representatives at the respective
Time of Delivery for the Designated Preferred
Securities a certificate or certificates of the Group
Executive - Finance and Administration or the Senior
Vice President - Finance or the Treasurer as to the
accuracy of the representations and warranties of the
Company and Aetna herein at and as of such Time of
Delivery, as to the performance by the Company and
Aetna of all of their obligations hereunder to be
performed at or prior to such Time of Delivery, as to
the matters set forth in subsections (a) and (f) of
this Section and as to such other matters as the
Representatives may reasonably request.
8. (a) Each of the Company and Aetna,
jointly and severally, will indemnify and hold harmless
each Underwriter against any losses, claims, damages or
liabilities to which such Underwriter may become
subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus,
any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented
and any other prospectus relating to the Designated
Preferred Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein (i) in the case of the Registration
Statement, not misleading and (ii) in the case of any
Prospectus, in light of the circumstances in which they
were made, not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with
investigating or defending any such action or claim as
such expenses are incurred; provided, however, that
neither the Company nor Aetna shall be liable in any
such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary
Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the
Designated Preferred Securities, or any such amendment
or supplement, in reliance upon and in conformity with
written information furnished to the Company or Aetna
by any Underwriter of Designated Preferred Securities
through the Representatives for inclusion therein; and
provided, further, that neither the Company nor Aetna
shall be liable to any Underwriter under the indemnity
agreement in this subsection (a) with respect to any
Preliminary Prospectus or any preliminary prospectus
supplement to the extent that any such loss, claim,
damage or liability of such Underwriter results from
the fact such Underwriter sold Designated Preferred
Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such
sale, a copy of the Prospectus (excluding documents
incorporated by reference) or of the Prospectus as then
amended or supplemented (excluding documents
incorporated by reference) in any case where such
delivery is required by the Act if the Company or Aetna
has previously furnished copies thereof to such
Underwriter (or to the Representatives) and the loss,
claim, damage or liability of such Underwriter results
from an untrue or alleged untrue statement or omission
or alleged omission of a material fact contained in the
Preliminary Prospectus or any preliminary prospectus
supplement which was corrected in the Prospectus (or
the Prospectus as amended or supplemented).
(b) Each Underwriter will indemnify and hold
harmless the Company and Aetna against any losses,
claims, damages or liabilities to which the Company or
Aetna may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue
statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus
relating to the Designated Preferred Securities, or any
amendment or supplement thereto, or arise out or are
based upon the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statements therein (i) in the
case of the Registration Statement, not misleading and
(ii) in the case of any Prospectus, in light of the
circumstances under which they were made, not
misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in
any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus
as amended or supplemented and any other prospectus
relating to the Designated Preferred Securities, or any
such amendment or supplement, in reliance upon and in
conformity with written information furnished to the
Company or Aetna by such Underwriter through the
Representatives for inclusion therein; and will
reimburse the Company and Aetna for any legal or other
expenses reasonably incurred by the Company or Aetna in
connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of
the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection,
notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any
liability which it may have to any indemnified party
otherwise than under such subsection. In case any such
action shall be brought against any indemnified party
and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that
it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its
election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of
other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in
connection with the defense thereof other than
reasonable costs of investigation. In no event shall
any indemnifying party be liable for the fees and
expenses of more than one counsel (in addition to local
counsel) separate from their own counsel for all
indemnified parties in connection with any one action
or separate but similar or related actions in the same
jurisdiction arising out of the same general
allegations or circumstances. In no event shall an
indemnifying party be liable with respect to any action
or claim settled without its written consent. No
indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement
of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from
all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in
this Section 8 is unavailable to or insufficient to
hold harmless an indemnified party under subsection (a)
or (b) above in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute
to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative
benefits received by the Company and Aetna on the one
hand and the Underwriters of the Designated Preferred
Securities on the other from the offering of the
Designated Preferred Securities to which such loss,
claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided
by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party is not
entitled to receive the indemnification provided for in
subsection (a) above because of the second proviso
thereof or if the indemnified party failed to give the
notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion
as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and
Aetna on the one hand and the Underwriters of the
Designated Preferred Securities on the other in
connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other
relevant equitable considerations. The relative
benefits received by the Company and Aetna on the one
hand and such Underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from
such offering (before deducting expenses) received by
the Company less the total underwriting compensation
paid by Aetna bear to the total underwriting discounts
and commissions received by such Underwriters. The
relative fault shall be determined by reference to,
among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Company and Aetna on the
one hand or such Underwriters on the other and the
parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission, including with respect to any
Underwriter, the extent to which such losses, claims,
damages or liabilities (or actions in respect thereof)
with respect to any Preliminary Prospectus or any
preliminary prospectus supplement result from the fact
that the Underwriter sold Designated Preferred
Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such
sale, a copy of the Prospectus (excluding documents
incorporated by reference) or of the Prospectus as then
amended or supplemented (excluding documents
incorporated by reference), if the Company or Aetna
have previously furnished copies thereof to such
Underwriters. The Company, Aetna and the Underwriters
agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the
Underwriters were treated as one entity for such
purpose) or by any other method of allocation which
does not take account of the equitable considerations
referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions
in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions
of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the
amount by which the total price at which the applicable
Designated Preferred Securities underwritten by it and
distributed to the public were offered to the public
exceeds the amount of any damages (other than amounts
paid or incurred without the consent of the
indemnifying party as provided in this Section 8) which
such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the
Underwriters of Designated Preferred Securities in this
subsection (d) to contribute are several in proportion
to their respective underwriting obligations with
respect to such Designated Preferred Securities and not
joint. No indemnifying party will be liable for
contribution with respect to any action or claim
settled without its written consent.
(e) The obligations of the Company and Aetna
under this Section 8 shall be in addition to any
liability which the Company and Aetna may otherwise
have and shall extend or not extend, as the case may
be, upon the same terms and conditions, to each person,
if any, who controls any Underwriter within the meaning
of the Act; and the obligations of the Underwriters
under this Section 8 shall be in addition to any
liability which the respective Underwriters may
otherwise have and shall extend or not extend, as the
case may be, upon the same terms and conditions, to
each officer and director of Aetna and the Company and
to each person, if any, who controls Aetna or the
Company within the meaning of the Act.
9. (a) If any Underwriter shall default in
its obligation to purchase the Firm Designated
Preferred Securities or Optional Designated Preferred
Securities which it has agreed to purchase under the
Pricing Agreement relating to such Preferred
Securities, the Representatives may in their discretion
arrange for themselves or another party or other
parties to purchase such Preferred Securities on the
terms contained herein. If within thirty-six hours
after such default by any Underwriter the
Representatives do not arrange for the purchase of such
Firm Designated Preferred Securities or Optional
Designated Preferred Securities, as the case may be,
then the Company and Aetna shall be entitled to a
further period of thirty-six hours within which to
procure another party or other parties reasonably
satisfactory to the Representatives to purchase such
Preferred Securities on such terms. In the event that,
within the respective prescribed period, the
Representatives notify the Company and Aetna that they
have so arranged for the purchase of such Preferred
Securities, or the Company or Aetna notifies the
Representatives that it has so arranged for the purchase of
such Preferred Securities, the Representatives, Aetna
or the Company shall have the right to postpone the
Time of Delivery for such Preferred Securities for a
period of not more than seven days in order to effect
whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus as amended or
supplemented, or in any other documents or arrangements,
and the Company and Aetna agree to file promptly
any amendments or supplements to the Registration
Statement or the Prospectus which in the opinion of the
Representatives may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with
like effect as if such person had originally been a
party to the Pricing Agreement with respect to such
Designated Preferred Securities.
(b) If, after giving effect to any arrangements
for the purchase of the Firm Designated Preferred
Securities or Optional Designated Preferred Securities,
as the case may be, of a defaulting Underwriter or
Underwriters by the Representatives, the Company or
Aetna as provided in subsection (a) above, the aggregate
amount of Designated Preferred Securities which
remains unpurchased does not exceed one-tenth of the
aggregate number of Firm Designated Preferred
Securities or Optional Designated Preferred Securities,
as the case may be, to be purchased at the respective
Time of Delivery, then the Company and Aetna shall have
the right to require each non-defaulting Underwriter to
purchase the number of Firm Designated Preferred
Securities or Optional Designated Preferred Securities,
as the case may be, which such Underwriter agreed to
purchase under the Pricing Agreement relating to such
Designated Preferred Securities and, in addition, to
require each non-defaulting Underwriter to purchase its
pro rata share (based on the number of Firm Designated
Preferred Securities or Optional Designated Preferred
Securities, as the case may be, which such Underwriter
agreed to purchase under such Pricing Agreement) of the
Firm Designated Preferred Securities or the Optional
Designated Preferred Securities, as the case may be, of
such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements
for the purchase of the Firm Designated Preferred
Securities or the Optional Designated Preferred
Securities, as the case may be, of a defaulting
Underwriter or Underwriters by the Representatives,
Aetna or the Company as provided in subsection (a)
above, the aggregate number of Firm Designated
Preferred Securities or the Optional Designated
Preferred Securities, as the case may be, which remains
unpurchased exceeds one-tenth of the aggregate number
of Firm Designated Preferred Securities or Optional
Designated Preferred Securities, as the case may be, to
be purchased at the respective Time of Delivery, as
referred to in subsection (b) above, or if the Company
or Aetna shall not exercise the right described in
subsection (b) above to require non-defaulting
Underwriters to purchase Firm Designated Preferred
Securities or Optional Designated Preferred Securities,
as the case may be, of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to
such Firm Designated Preferred Securities or
Over-allotment Option relating to such Optional Designated
Preferred Securities, as the case may be, shall
thereupon terminate, without liability on the part of
any non-defaulting Underwriter, Aetna or the Company,
except for the expenses to be borne by the Company,
Aetna and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the
Company and Aetna and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of
any Underwriter or any controlling person of any
Underwriter, or the Company or Aetna, or any officer or
director or controlling person of the Company or Aetna, and
shall survive delivery of and payment for the Designated
Preferred Securities.
11. If any Pricing Agreement or Over-allotment
Option shall be terminated pursuant to Section 9 hereof,
neither Aetna nor the Company shall then be under any
liability to any Underwriter with respect to the Firm
Designated Preferred Securities or Optional Designated
Preferred Securities with respect to which such Pricing
Agreement shall have been terminated except as provided in
Section 6 and Section 8 hereof; but, if for any other reason
Designated Preferred Securities are not delivered by or on
behalf of the Company and Aetna as provided herein, the
Company and Aetna will reimburse the Underwriters through
the Representatives for all reasonable out-of-pocket
expenses approved in writing by the Representatives,
including reasonable fees and disbursements of counsel,
reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of such
Designated Preferred Securities, but neither Aetna nor the
Company shall then be under further liability to any
Underwriter with respect to such Designated Preferred
Securities, except as provided in Section 6 and Section 8
hereof.
12. In all dealings hereunder, the Representatives
of the Underwriters of Designated Preferred Securities
shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any
Underwriter made or given by such Representatives jointly or
by such of the Representatives, if any, as may be designated
for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements
hereunder shall be in writing, and if to the Underwriters
shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Representatives as set
forth in the Pricing Agreement; and if to the Company or
Aetna shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company and Aetna set
forth in the Registration Statement; Attention: Corporate
Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission
to such Underwriter at its address set forth in its
Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company
and Aetna by the Representatives upon request. Any such
statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement and each Pricing Agreement
shall be binding upon, and inure solely to the benefit of,
the Underwriters, the Company and Aetna and, to the extent
provided in Section 8 and Section 10 hereof, the officers
and directors of the Company and Aetna and each person who
controls the Company and Aetna or any Underwriter, and their
respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or any such Pricing
Agreement. No purchaser of any of the Preferred Securities
from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
14. Time shall be of the essence for each Pricing
Agreement. As used herein, "business day" shall mean any
day when the Commission's office in Washington, D.C. is open
for business.
15. This Agreement and each Pricing Agreement
shall be governed by and construed in accordance with the
internal laws (and not the conflict of law provisions) of
the State of New York.
16. This Agreement and each Pricing Agreement may
be executed by any one or more of the parties hereto and
thereto in any number of counterparts, each of which shall
be deemed to be an original, but all such respective
counterparts shall together constitute one and the same
instrument.
Very truly yours,
AETNA CAPITAL L.L.C.
By: Aetna Life and Casualty Company,
as Managing Member
By: _______________________
Name:
Title:
AETNA LIFE AND CASUALTY COMPANY
By: ___________________________
Name:
Title:
ANNEX I
PRICING AGREEMENT
Goldman, Sachs & Co.
As Representatives
of the several
Underwriters named in Schedule I hereto,
________, 1994
Ladies and Gentlemen:
Aetna Capital L.L.C., a limited liability company
formed under the laws of Delaware (the "Company"), proposes,
subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated ________, 1994 (the
"Underwriting Agreement"), to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") the
Preferred Securities specified in Schedule II hereto (the
"Designated Preferred Securities" consisting of Firm
Designated Preferred Securities and any Optional Designated
Preferred Securities the Underwriters may elect to purchase)
of ( )% Cumulative Monthly Income Preferred Securities,
Series A, of the Company, guaranteed by Aetna Life and
Casualty Company, a Connecticut insurance corporation
("Aetna"), to the extent set forth in the Prospectus and
Registration Statement relating to the Preferred Securities.
Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall
be deemed to be a part of this Agreement to the same extent
as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein
shall be deemed to have been made at and as of the date of
this Pricing Agreement, except that each representation and
warranty that refers to the Prospectus in Section 2 of the
Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the
Underwriting Agreement in relation to the Prospectus (as
therein defined), and also a representation and warranty as
of the date of this Pricing Agreement in relation to the
Prospectus as amended or supplemented relating to the
Designated Preferred Securities which are the subject of
this Pricing Agreement. Each reference to the
Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be
deemed to refer to you. Unless otherwise defined herein,
terms defined in the Underwriting Agreement are used herein
as therein defined. The Representatives designated to act
on behalf of each of the Underwriters of the Designated
Preferred Securities pursuant to Section 12 of the
Underwriting Agreement and the address of the
Representatives referred to in such Section 12 are set forth
at the end of Schedule II hereto.
An amendment to the Registration Statement, or a
supplement to the Prospectus, as the case may be, relating
to the Designated Preferred Securities, in the form
heretofore delivered to you is now proposed to be filed with
the Commission.
Subject to the terms and conditions set forth
herein and in the Underwriting Agreement incorporated herein
by reference, (a) the Company agrees to issue and to sell to
each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the
Company, at the time and place and at the purchase price to
the Underwriters set forth in Schedule II hereto, the number
of Firm Designated Preferred Securities set forth opposite
the name of such Underwriter in Schedule I hereto and, (b)
in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Designated
Preferred Securities, as provided below, the Company agrees
to issue and sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to
purchase from the Company at the purchase price to the
Underwriters set out in Schedule II hereto that portion of
the number of Optional Designated Preferred Securities as to
which such election shall have been exercised.
The Company hereby grants to each of the
Underwriters the right to purchase at their election up to the
number of Optional Designated Preferred Securities set forth
opposite the name of such Underwriter in Schedule I hereto
on the terms referred to in the paragraph above for the sole
purpose of covering over-allotments in the sale of the Firm
Designated Preferred Securities. Any such election to
purchase Optional Designated Preferred Securities may be
exercised by written notice from the Representatives to the
Company and Aetna given within a period of ___ calendar days
after the date of this Pricing Agreement, setting forth the
aggregate number of Optional Designated Preferred Securities
to be purchased and the date on which such Optional
Designated Preferred Securities are to be delivered, as
determined by the Representatives but in no event earlier
than the First Time of Delivery or, unless the
Representatives, Aetna and the Company otherwise agree in writing,
no earlier than two or later than ten business days after
the date of such notice.
If the foregoing is in accordance with your
understanding, please sign and return to us counterparts hereof,
and upon acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement
incorporated herein by reference, shall constitute a binding
agreement between each of the Underwriters, the Company and
Aetna. It is understood that your acceptance of this letter
on behalf of each of the Underwriters is or will be pursuant
to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the
Company and Aetna for examination upon request.
AETNA CAPITAL L.L.C.
By: Aetna Life and Casualty
Company, as Managing
Member
By: ___________________
Name:
Title:
AETNA LIFE AND CASUALTY COMPANY
By: ___________________________
Name:
Title:
Accepted as of the
date hereof:
Goldman, Sachs & Co.
On behalf of each of
the Underwriters
By: ______________________________
Name:
Title: Attorney-in-Fact
SCHEDULE I
NUMBER OF FIRM MAXIMUM NUMBER OF
DESIGNATED OPTIONAL DESIGNATED
PREFERRED PREFERRED SECURITIES
SECURITIES WHICH
UNDERWRITER TO BE PURCHASED MAY BE PURCHASED
GOLDMAN, SACHS
& CO.
TOTAL _________ ____________ ___________
SCHEDULE II
Title of Designated Preferred Securities: ( )% Cumulative
Monthly Income Preferred Securities, Series __:
Date of Resolution Adopted by the Managing Members to Fix
the Terms and Conditions of the Designated Preferred
Securities:
________, 199_
Number of Designated Preferred Securities:
Number of Firm Designated Preferred Securities:
Maximum Number of Optional Designated Preferred
Securities:
Initial Offering Price to Public:
$______ per security, plus accrued dividends, if any,
from ___________________, 199_
Purchase Price by Underwriters (including the Optional
Designated Preferred Securities):
$______ per security, plus accrued dividends, if any,
from ___________________, 199_
Underwriters' Compensation:
$_____ per security
Specified Funds for Payment of Purchase Price and
Underwriters' Compensation:
((New York) Clearing House Funds)
(Immediately Available Funds)
Indenture:
Indenture dated , 1994 between Aetna and ,
as Trustee
Trustee:
Dividend Rate:
_____% per annum
Dividend Payment Dates:
(insert language from Prospectus
and Prospectus Supplement)
Liquidation Preference:
Redemption and Exchange Provisions:
The Designated Preferred Securities may be
redeemed, in whole or in part at the option of the Company
with Aetna's consent on or after _______, ______ at $______
per security, plus accumulated and unpaid dividends to the
date fixed for redemption (the "Redemption Price").
(insert additional language from Prospectus
and Prospectus Supplement)
(Other possible redemption provisions)
(First) Time of Delivery:
________, 19__
Closing Location:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
(Other Terms)*:
* A description of particular tax, accounting or
other unusual features of the Designated Preferred
Securities should be set forth, or referenced to an attached
and accompanying description, if necessary to ensure
agreement as to the terms of the Designated Preferred
Securities to be purchased and sold. Such a description
might appropriately be in the form in which such features
will be described in the Prospectus Supplement for the
offering.
ANNEX II
Pursuant to Section 7(e) of the Underwriting
Agreement, the accountants shall furnish letters to the
Underwriters to the effect that:
(i) They are independent certified
public accountants with respect to Aetna and its
subsidiaries within the meaning of the Act and the
applicable published rules and regulations
thereunder;
(ii) In their opinion, the financial
statements and any supplementary financial
information and schedules audited by them and
included or incorporated by reference in the
Registration Statement or the Prospectus comply as
to form in all material respects with the
applicable accounting requirements of the Act or
the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and,
if applicable, they have made a review in
accordance with standards established by the
American Institute of Certified Public Accountants
of the consolidated interim financial statements
and selected financial data derived from audited
financial statements of Aetna for the periods
specified in such letter, as indicated in their
reports thereon, copies of which have been
furnished to the representatives of the
Underwriters (the "Representatives");
(iii) The unaudited selected financial
information with respect to the consolidated
results of operations and financial position of
Aetna for the five most recent fiscal years
included in the Prospectus and included or incorporated
by reference in Item 6 of Aetna's Annual
Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after
restatement where applicable) in the audited
consolidated financial statements for five such
fiscal years which were included or incorporated
by reference in Aetna's Annual Reports on Form 10-K
for such fiscal years;
(iv) On the basis of limited procedures,
not constituting an audit in accordance
with generally accepted auditing standards,
consisting of a reading of the unaudited financial
statements and other information referred to
below, a reading of the latest available interim
financial statements of Aetna and its subsidiaries,
inspection of the minute books of Aetna
and its subsidiaries since the date of the latest
audited financial statements included or
incorporated by reference in the Prospectus,
inquiries of officials of Aetna and its subsidiaries
responsible for financial and accounting
matters and such other inquiries and procedures as
may be specified in such letter, nothing came to
their attention that caused them to believe that:
(a) the unaudited condensed
consolidated statements of income, consolidated
balance sheets and consolidated statements of
cash flows included or incorporated by reference
in Aetna's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus
do not comply as to form in all material
respects with the applicable accounting
requirements of the Exchange Act as it
applies to Form 10-Q and the related
published rules and regulations thereunder or,
if no report has been issued by such accountants
on the consolidated interim financial
statements as set forth in (ii) above, based
on a review under the applicable professional
standards that any material modifications
should be made to such condensed consolidated
financial statements for them to be in
conformity with generally accepted accounting
principles;
(b) any other unaudited income
statement data and balance sheet items
included in the Prospectus do not agree with
the corresponding items in the unaudited
consolidated financial statements from which
such data and items were derived, and any
such unaudited data and items were not
determined on a basis substantially
consistent with the basis for the corresponding
amounts in the audited consolidated financial
statements included or incorporated by
reference in Aetna's Annual Report on Form
10-K for the most recent fiscal year;
(c) the unaudited financial
statements which were not included in the
Prospectus but from which were derived the
unaudited condensed financial statements
referred to in clause (a) above and any
unaudited income statement data and balance
sheet items included in the Prospectus and
referred to in Clause (b) above were not
determined on a basis substantially
consistent with the basis for the audited
financial statements included or incorporated
by reference in Aetna's Annual Report on Form
10-K for the most recent fiscal year; and
(d) as of a specified date not
more than five business days prior to the
date of such letter, there have been any
changes in the consolidated Common Stock
(other than issuances of common stock
pursuant to employee benefit plans, upon
exercise of options and stock appreciation
rights, upon earn-outs of performance shares
and upon conversions of convertible securities),
which were outstanding on the date of
the latest balance sheet included or incorporated
by reference in the Prospectus) or any
increase in the consolidated Long-Term Debt
of Aetna and its subsidiaries, as compared
with amounts shown in the latest balance
sheet included or incorporated by reference
in the Prospectus, except in each case for
changes or increases which the Prospectus
discloses have occurred or may occur or which
are described in such letter;
(v) In addition to the audit referred
to in their report(s) included or incorporated by
reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii)
and (iv) above, they have carried out certain
specified procedures, not constituting an audit in
accordance with generally accepted auditing
standards, with respect to certain amounts,
percentages and financial information specified by
the Representatives which are derived from the
general accounting records of Aetna and its
subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference),
or in Part 11 of, or in exhibits and schedules to,
the Registration Statement specified by the
Representatives or in documents incorporated by
reference in the Prospectus specified by the
Representatives, and have compared certain of such
amounts, percentages and financial information
with the accounting records of or schedules prepared
by Aetna and its subsidiaries and have found
them to be in agreement; and
(vi) If pro forma financial statements
and other pro forma financial information (the
"Pro Forma Disclosure") are required to be
included in the Registration Statement, such
letter shall further state that although they are
unable to and do not express any opinion on such
Pro Forma Disclosure or on the pro forma
adjustments applied to the historical amounts
included in that statement, for purposes of such
letter they have:
(a) read the Pro Forma Disclosure;
(b) made inquiries of certain
officials of Aetna who have responsibility
for financial and accounting matters about
the basis for their determination of the pro
forma adjustments and whether the Pro Forma
Disclosure above complies in form in all
material respects with the applicable
accounting requirements of Rule 11-02 of
Regulation S-X; and
(c) proved the arithmetic accuracy
of the application of the pro forma adjustments
to the historical amounts in the
Pro Forma Disclosure; and
on the basis of such procedures, and such other
inquiries and procedures as may be specified in
such letter, nothing came to their attention that
caused them to believe that the Pro Forma
Disclosure included in the Registration Statement
does not comply in form in all material respects
with the applicable requirements of Rule 11-02 of
Regulation S-X and that the pro forma adjustments
have not been properly applied to the historical
amounts in the compilation of that statement
All references in this Annex II to the Prospectus
shall be deemed to refer to the Prospectus (including the
documents incorporated by reference therein) as defined in
the Underwriting Agreement as of the date of the letter
delivered on the date of the Pricing Agreement for purposes
of such letter and to the Prospectus as amended or
supplemented (including the documents incorporated by
reference therein) in relation to the applicable Designated
Preferred Securities for purposes of the letter delivered at
the Time of Delivery for such Designated Preferred
Securities.
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
AETNA CAPITAL L.L.C.
This Certificate of Formation of Aetna Capital
L.L.C. (the "L.L.C.") dated as of March 23, 1994 is being
duly executed and filed by Aetna Life and Casualty Company,
as an authorized person, to form a limited liability company
under the Delaware Limited Liability Company Act (6 Del.C. section
18-101, et seq.).
FIRST. The name of the limited liability company
formed hereby is Aetna Capital L.L.C.
SECOND. The address of the registered office of
the L.L.C. in the State of Delaware is c/o RL&F Service
Corp., One Rodney Square, 10th Floor, Tenth and King
Streets, Wilmington, New Castle County, Delaware 19801.
THIRD. The name and address of the registered
agent for service of process on the L.L.C. in the State of
Delaware is RL&F Service Corp., One Rodney Square, 10th
Floor, Tenth and King Streets, Wilmington, New Castle
County, Delaware 19801.
FOURTH. The latest date on which the L.L.C. is to
dissolve is March 23, 2104.
IN WITNESS WHEREOF, the undersigned has executed
this Certificate of Formation as of the date first above
written.
AETNA LIFE AND CASUALTY COMPANY
/s/ JEAN M. WAGGETT
Name: Jean M. Waggett
Title: Vice President and
Corporate Secretary
EXHIBIT 3.2
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
AETNA CAPITAL L.L.C.
This Amended and Restated Limited Liability
Company Agreement of Aetna Capital L.L.C. (the "Company") is
made as of April __, 1994, among Aetna Life and Casualty
Company ("Aetna") and Aetna Capital Holdings, Inc. ("Aetna
Capital"), as initial Members (as defined below) of the
Company and the Persons (as defined below) who become
Members of the Company in accordance with the provisions
hereof.
WHEREAS, Aetna and Aetna Capital have heretofore
formed a limited liability company pursuant to the Delaware
Limited Liability Company Act, 6 Del.C. section 18-101, et seq.,
as amended from time to time (the "Delaware Act"), by filing
a Certificate of Formation of the Company with the office of
the Secretary of State of the State of Delaware on March 23,
1994, and entering into a Limited Liability Company
Agreement of the Company dated as of March 23, 1994 (the
"Original Limited Liability Company Agreement"); and
WHEREAS, the Members desire to continue the
Company as a limited liability company under the Delaware
Act and to amend and restate the Original Limited Liability
Company Agreement in its entirety.
NOW, THEREFORE, in consideration of the agreements
and obligations set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. The terms defined in
this Article I shall, for the purposes of this Agreement,
have the meanings herein specified.
"Agreement" means this Amended and Restated
Limited Liability Company Agreement, as amended, modified,
supplemented or restated from time to time.
"Certificate" means the Certificate of Formation
and any and all amendments thereto and restatements thereof
filed on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any corresponding federal tax
statute enacted after the date of this Agreement. A
reference to a specific section (section) of the Code refers not
only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date
of this Agreement, as such specific section or corresponding
provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Common Member" means a Member that holds one or
more Common Securities.
"Common Securities" means the Common Interests in
the Company.
"Company Dividend Junior Securities" shall have
the meaning set forth in Section 9.3 of this Agreement.
"Company Dividend Parity Securities" shall have
the meaning set forth in Section 9.3 of this Agreement.
"Company Liquidation Parity Securities" shall have
the meaning set forth in Section 15.5 of this Agreement.
"Debentures" means the Debentures evidencing the
loans to Aetna from the Company of the proceeds of the
issuances of Interests and related capital contributions.
"Guarantee" means the Payment and Guarantee
Agreement to be entered into by Aetna for the benefit of the
Preferred Members.
"Indenture" means the Indenture pursuant to which
the Debentures will be issued.
"Interest" means a limited liability company
interest in the Company, including the right of the holder
thereof to any and all benefits to which a Member may be
entitled as provided in this Agreement, together with the
obligations of a Member to comply with all of the terms and
provisions of this Agreement.
"Liquidation Distribution" shall have the meaning
set forth in Section 15.5 of this Agreement.
"LP Act" means the Delaware Revised Uniform
Limited Partnership Act, 6 Del C. section 17 101, et seq., as
amended from time to time.
"Managing Members" means Aetna Life and Casualty
Company and Aetna Capital Holdings, Inc., in their capacity
as the Members of the Company that hold all of the
outstanding Common Securities.
"Member" means any Person that holds an Interest
in the Company. For purposes of the Delaware Act, the
Managing Members and the Preferred Members shall constitute
separate classes or groups of Members.
"Person" means any individual, corporation,
association, partnership (general or limited), joint
venture, trust, estate, limited liability company, or other
legal entity or organization.
"Preferred Certificate" means a certificate
evidencing the Preferred Securities held by a Preferred
Member.
"Preferred Member" means a Member that holds one
or more Preferred Securities.
"Preferred Securities" means the Preferred
Interests in the Company.
"Tax Matters Partner" means the Managing Member
designated as such in Section 11.1 hereof.
"Third Party Creditors" shall have the meaning set
forth in Section 13.1 of this Agreement.
Section 1.2 Headings. The headings and
subheadings in this Agreement are included for convenience
and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.
ARTICLE II
CONTINUATION AND TERM; ADMISSION OF MEMBERS
Section 2.1 Continuation.
(a) The Members hereby agree to continue the
Company as a limited liability company under and pursuant to
the provisions of the Delaware Act and agree that the
rights, duties and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided
herein.
(b) Upon the execution of this Agreement, Aetna
and Aetna Capital shall continue to be Members of the
Company.
(c) Either Managing Member, as an authorized
person within the meaning of the Delaware Act, shall
execute, deliver and file any and all amendments to and
restatements of the Certificate.
Section 2.2 Name. The name of the Company
heretofore formed and continued hereby is Aetna Capital
L.L.C. The business of the Company may be conducted upon
compliance with all applicable laws under any other name
designated by the Managing Members.
Section 2.3 Term. The term of the Company
commenced on the date the Certificate was filed in the
office of the Secretary of State of the State of Delaware
and shall continue until March 23, 2104, unless dissolved
before such date in accordance with the provisions of this
Agreement.
Section 2.4 Registered Agent and Office. The
Company's registered agent and office in Delaware shall be
RL&F Service Corp., One Rodney Square, 10th Floor, Tenth and
King Streets, Wilmington, New Castle County, Delaware 19801.
At any time, the Managing Members may designate another
registered agent and/or registered office.
Section 2.5 Principal Place of Business. The
principal place of business of the Company shall be at 151
Farmington Avenue, Hartford, Connecticut 06156. The
Managing Members may change the location of the Company's
principal place of business.
Section 2.6 Qualification in Other Jurisdictions.
The Managing Members shall cause the Company to be
qualified, formed or registered under assumed or fictitious
name statutes or similar laws in any jurisdiction in which
the Company transacts business. Either Managing Member, as
an authorized person within the meaning of the Delaware Act,
shall execute, deliver and file any certificates (and any
amendments and/or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which
the Company may wish to conduct business.
Section 2.7 Admission of Members.
(a) A Person shall be admitted as a Member, or
shall become an assignee of an Interest or other rights or
powers of a Member to the extent assigned, and shall become
bound by the terms of this Agreement, without execution of
this Agreement, if such Person (or a representative
authorized by such Person orally, in writing or by other
action such as payment for an Interest) complies with the
conditions for becoming a Member or assignee, as the case
may be, as set forth in Section 2.7(b) and requests (which
request shall be deemed to have been made by such Person
effective upon payment for its Interest) that the records of
the Company reflect such admission or assignment.
The Company shall be promptly notified by any
assignor of any assignment. The Company will reflect
admission of a Member in the records of the Company as soon
as is reasonably practicable after either of the following
events: (i) in the case of a person acquiring an Interest
directly from the Company, at the time of payment therefor,
and (ii) in the case of an assignment, upon notification
thereof (the Company being entitled to assume, in the
absence of knowledge to the contrary, that proper payment
has been made by the assignee).
(b) Whether acquiring an Interest directly from
the Company or by assignment, a Person shall be admitted as
a Member upon the acquisition or assignment, as the case may
be, of such Interest and the reflection of such Person's
admission as a Member in the records of the Company. The
consent of any other Member shall not be required for the
admission of a Member.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose. The primary purpose of the
Company is to issue Interests and to loan the proceeds from
the issuance thereof and the related capital contributions
to Aetna. Subject to the foregoing, the Company may carry
on any lawful business, purpose or activity other than
conducting a financial or insurance business within the
meaning of Section 7704(d)(2) of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS, ALLOCATIONS AND SECURITIES
Section 4.1 Form of Contribution. The
contribution of a Member to the Company may, as determined
by the Managing Members in their discretion, be in cash, or
a promissory note or other obligation to contribute cash.
Section 4.2 Contributions by the Common Members.
The Common Members shall make such contributions to the
Company, either in connection with the purchase of Common
Securities or otherwise, so as to cause their Common
Securities to be entitled to at least 21% of all interest in
the capital, income, gain, loss, deduction, credit and
distributions of the Company at all times.
Section 4.3 Contributions by the Preferred
Members. The Preferred Members shall make such
contributions to the Company in accordance with the
applicable terms of Section 7.1 of this Agreement.
Preferred Members, in their capacity as Members of the
Company, shall not be required to make any additional
contributions to the Company and shall have no additional
liability solely by reason of being Preferred Members in
excess of their share of the Company's assets and
undistributed profits.
Section 4.4 Allocation of Profits and Losses.
The profits and losses of the Company shall, subject to the
applicable terms of Section 9.1 of this Agreement and of any
series of Preferred Securities (including the preferential
allocation of profits and losses, if any), be allocated
entirely to the Common Members.
Section 4.5 Allocation of Distributions. The
distributions of the Company shall, subject to the
applicable terms of Section 9.1 of this Agreement and of any
series of Preferred Securities (including the preferential
allocation of distributions, if any), be allocated entirely
to the Common Members.
Section 4.6 Securities. A Preferred Member's
Interest in the Company shall be represented by the
Preferred Securities held by such Preferred Member. A
Common Member's Interest in the Company shall be represented
by the Common Securities held by such Common Member. Each
Member hereby agrees that its Interest in the Company and in
its Preferred Securities or Common Securities, as the case
may be, shall for all purposes be personal property. A
Member has no interest in specific Company property.
ARTICLE V
MEMBERS
Section 5.1 Powers of Members. The Members shall
have the power to exercise any and all rights or powers
granted to the Members pursuant to the express terms of this
Agreement.
Section 5.2 Partition. Each Member waives any
and all rights that it may have to maintain an action for
partition of the Company's property.
Section 5.3 Resignation. The Managing Members
shall have no right to resign from the Company. Any other
Member may only resign from the Company prior to the
dissolution and winding up of the Company upon the
assignment of its Interests (including any redemption,
repurchase, exchange or other acquisition by the Company),
as the case may be, in accordance with the provisions of
this Agreement. A resigning Member shall not be entitled to
receive any distribution and shall not otherwise be entitled
to receive the fair value of its Interest except as
otherwise expressly provided for in this Agreement.
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company. Except as
otherwise provided herein, the business and affairs of the
Company shall be managed, and all actions required under
this Agreement shall be determined, solely and exclusively
by the Managing Members, which shall have all rights and
powers on behalf and in the name of the Company to perform
all acts necessary and desirable to the objects and purposes
of the Company. Without limiting the generality of the
foregoing, the Managing Members, in their capacity as Common
Member and not by virtue of any delegation of management
power from any Member, shall have the power to:
(a) authorize and engage in transactions and
dealings on behalf of the Company, including transactions
and dealings with any Member (including any Managing Member)
or any affiliate of any Member (including, without
limitation, making loans to Aetna);
(b) call meetings of Members or any class or
series thereof;
(c) issue Interests, including Common Securities,
Preferred Securities and classes and series thereof, in
accordance with this Agreement;
(d) pay all expenses incurred in forming the
Company;
(e) borrow money on behalf of the Company, issue
or guarantee evidences of indebtedness and obtain lines of
credit, loan commitments and letters of credit for the
account of the Company and secure the same by mortgage,
pledge or other lien on any assets of the Company;
(f) lend money, with or without security, to any
person, including any Members (including any Managing
Member) or any affiliate thereof;
(g) determine and make distributions (hereinafter
sometimes referred to as "dividends"), in cash or otherwise,
on Interests, in accordance with the provisions of this
Agreement and of the Delaware Act;
(h) establish a record date with respect to all
actions to be taken hereunder that require a record date be
established, including with respect to allocations,
dividends and voting rights;
(i) establish or set aside in their discretion
any reserve or reserves for contingencies and for any other
proper Company purpose;
(j) redeem, repurchase or exchange on behalf of
the Company Interests which may be so redeemed, repurchased
or exchanged;
(k) appoint (and dismiss from appointment)
officers, attorneys and agents on behalf of the Company, and
employ (and dismiss from employment) any and all persons
providing legal, accounting or financial services to the
Company, or such other employees or agents as the Managing
Members deem necessary or desirable for the management and
operation of the Company, including, without limitation, any
Member (including any Managing Member) or any affiliate of
any Member;
(l) incur and pay all expenses and obligations
incident to the operation and management of the Company,
including, without limitation, the services referred to in
the preceding paragraph, taxes, interest, travel, rent,
insurance, supplies, salaries and wages of the Company's
employees and agents;
(m) acquire and enter into any contract of
insurance necessary or desirable for the protection or
conservation of the Company and its assets or otherwise in
the interest of the Company as the Managing Members shall
determine;
(n) open accounts and deposit, maintain and
withdraw funds in the name of the Company in banks, savings
and loan associations, brokerage firms or other financial
institutions;
(o) effect a dissolution of the Company and act
as liquidating trustee or the person winding up the
Company's affairs, all in accordance with the provisions of
this Agreement and of the Delaware Act;
(p) bring and defend on behalf of the Company
actions and proceedings at law or equity before any court or
governmental, administrative or otherwise regulatory agency,
body or commission or otherwise;
(q) prepare and cause to be prepared reports,
statements and other relevant information for distribution
to Members as may be required or determined to be
appropriate by the Managing Members from time to time;
(r) prepare and file all necessary returns and
statements and pay all taxes, assessments and other
impositions applicable to the assets of the Company; and
(s) execute all other documents or instruments,
perform all duties and powers and do all things for and on
behalf of the Company in all matters necessary or desirable
or incidental to the foregoing.
The expression of any power or authority of the
Managing Members in this Agreement shall not in any way
limit or exclude any other power or authority which is not
specifically or expressly set forth in this Agreement.
Section 6.2 Reliance by Third Parties. Persons
dealing with the Company are entitled to rely conclusively
upon the power and authority of the Managing Members herein
set forth.
Section 6.3 No Management by any Preferred
Members. Except as otherwise expressly provided herein, no
Preferred Member shall take part in the day-to-day
management, operation or control of the business and affairs
of the Company. The Preferred Members, in their capacity as
Preferred Members of the Company, shall not be agents of the
Company and shall not have any right, power or authority to
transact any business in the name of the Company or to act
for or on behalf of or to bind the Company.
Section 6.4 Preferred Members May Appoint a
Trustee. Subject to the terms and conditions set forth in
Section 8.1(b) of this Agreement, the Preferred Members
shall have the right to appoint a trustee, and any trustee
so appointed shall have the power, to declare and pay
dividends on Preferred Securities.
Section 6.5 Business Transactions of a Managing
Member with the Company. The Managing Members or their
affiliates may lend money to, borrow money from, act as
surety, guarantor or endorser for, guarantee or assume one
or more specific obligations of, provide collateral for, and
transact other business with, the Company and, subject to
other applicable law, shall have the same rights and
obligations with respect to any such matter as persons who
are not Managing Members or affiliates thereof.
Section 6.6 Outside Businesses. Any Member or
affiliate thereof may engage in or possess an interest in
other business ventures of any nature or description,
independently or with others, similar or dissimilar to the
business of the Company, and the Company and the Members
shall have no rights by virtue of this Agreement in and to
such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if
competitive with the business of the Company, shall not be
deemed wrongful or improper. No Member or affiliate thereof
shall be obligated to present any particular investment
opportunity to the Company even if such opportunity is of a
character that, if presented to the Company, could be taken
by the Company, and any Member or affiliate thereof shall
have the right to take for its own account (individually or
as a partner or fiduciary) or to recommend to others any
such particular investment opportunity.
ARTICLE VII
COMMON SECURITIES AND PREFERRED SECURITIES
Section 7.1 Common Securities and Preferred
Securities.
(a) The Interests in the Company shall initially
be divided into two classes, Common Securities and Preferred
Securities.
(b) The Preferred Securities may be issued from
time to time in one or more series with such relative
rights, powers, preferences and privileges as may from time
to time be established in a written action or actions of the
Managing Members providing for the issue of such series as
hereinafter provided. Authority is hereby expressly granted
to the Managing Members, subject to the provisions of this
Agreement, to authorize the issue of one or more series of
Preferred Securities, and with respect to each such series
to establish by a written action or actions providing for
the issue of such series:
(i) the maximum number of Preferred Securities to
constitute such series and the distinctive designation
thereof;
(ii) whether the Preferred Securities of such
series shall have voting rights in addition to those
set forth in this Agreement and, if so, the terms of
such voting rights;
(iii) the periodic dividend rate, if any, on the
Preferred Securities of such series, the conditions and
dates upon which such dividends shall be payable, the
dates from which such dividends shall accrue, the
preference or relation which such dividends have with
respect to dividends payable on any other class or
classes of Interests or on any other series of
Preferred Securities, and whether such dividends shall
be cumulative or noncumulative;
(iv) whether the Preferred Securities of such
series shall be subject to redemption by the Company,
and, if made subject to redemption, the times and other
terms and conditions of such redemption (including the
amount and kind of consideration to be received upon
such redemption);
(v) any rights in addition to those set forth in
this Agreement of the holders of Preferred Securities
of such series upon the liquidation, dissolution or
winding up of the Company;
(vi) whether or not the Preferred Securities of
such series shall be subject to the operation of a
retirement or sinking fund, and, if so, the extent to
and manner in which any such retirement or sinking fund
shall be applied to the purchase or redemption of the
Preferred Securities of such series for retirement or
to other Company purposes and the terms and provisions
relative to the operation thereof;
(vii) whether or not the Preferred Securities of
such series shall be convertible into, or exchangeable
for, Interests of any other class or classes, or of any
other series of Preferred Securities, or securities of
any other kind, including those issued by the Managing
Member or any of its affiliates, and if so convertible
or exchangeable, the price or prices or the rate or
rates of conversion or exchange and the method, if any,
of adjusting the same;
(viii) any limitations and restrictions in addition
to those set forth in this Agreement to be effective
while any Preferred Securities of such series are
outstanding upon the payment of periodic dividends or
other distributions on, and upon the purchase,
redemption or other acquisition by the Company of,
Common Securities or any other series of Preferred
Securities;
(ix) any conditions or restrictions in addition to
those set forth in this Agreement upon the issue of any
additional Interests (including additional Preferred
Securities of such series or of any other series
ranking on a parity with or prior to the Preferred
Securities of such series as to periodic dividends or
distribution of assets on liquidation, dissolution or
winding up);
(x) the times, prices and other terms and
conditions for the offering of the Preferred
Securities;
(xi) the allocation of preferential profits or
losses, if any; and
(xii) any other relative rights, powers and duties
as shall not be inconsistent with this Section 7.1.
In connection with the foregoing and without
limiting the generality thereof, the Managing Members are
hereby expressly authorized without the vote or approval of
any Member, to take any action to create under the
provisions of this Agreement a series of Preferred
Securities that was not previously outstanding. Without the
vote or approval of any Member, the Managing Members may
execute, swear to, acknowledge, deliver, file and record
whatever documents may be required in connection with the
issue from time to time of Preferred Securities in one or
more series as shall be necessary, convenient or desirable
to reflect the issue of such series. The Managing Members
shall do all things it deems to be appropriate or necessary
to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or
permissible in connection with any future issuance,
including compliance with any statute, rule, regulation or
guideline of any federal, state or other governmental agency
or any securities exchange.
Any action or actions taken by the Managing
Members pursuant to the provisions of this paragraph (b)
shall be deemed an amendment and supplement to and part of
this Agreement.
(c) All Preferred Securities shall rank senior to
the Common Securities in respect of the right to receive
dividends and the right to receive payments out of the
assets of the Company upon voluntary or involuntary
dissolution and winding up of the Company. All Preferred
Securities redeemed, purchased or otherwise acquired by the
Company (including Preferred Securities surrendered for
conversion or exchange) shall be canceled and thereupon
restored to the status of authorized but unissued Preferred
Securities undesignated as to series.
(d) No holder of Common Securities or of
Preferred Securities shall be entitled as a matter of right
to subscribe for or purchase, or have any preemptive right
with respect to, any part of any new or additional issue of
Preferred Securities of any series whatsoever, or of
securities convertible into any Preferred Securities of any
series whatsoever, whether now or hereafter authorized and
whether issued for cash or other consideration or by way of
dividend.
(e) Common Securities shall be non-assignable and
non-transferable, and may only be issued to and held by the
Managing Members. Any transfer or purported transfer of any
Common Security shall be null and void. Preferred
Securities shall be freely assignable and transferable.
(f) Any Person purchasing Preferred Securities
shall be admitted to the Company as a Preferred Member upon
compliance with Section 2.7.
Section 7.2 Persons Deemed Preferred Members.
The Company may treat the Person in whose name any Preferred
Certificate shall be registered on the books and records of
the Company as a Preferred Member and the sole holder of
such Preferred Certificate for purposes of receiving
dividends and for all other purposes whatsoever and,
accordingly shall not be bound to recognize any equitable or
other claims to or interest in such Preferred Certificate on
the part of any other Person, whether or not the Company
shall have actual or other notice thereof.
ARTICLE VIII
VOTING AND MEETINGS
Section 8.1 Voting Rights of Holders of Preferred
Securities.
(a) Except as shall be otherwise established
herein or in the action or actions of the Managing Members
providing for the issue of any series of Preferred
Securities and except as otherwise required by the Delaware
Act, the Preferred Members holding such Preferred Securities
shall have, with respect to such Preferred Securities, no
right or power to vote on any question or matter or in any
proceeding or to be represented at, or to receive notice of,
any meeting of Members.
(b) If (i) the Company fails to pay dividends in
full on the Preferred Securities of any series for 18
consecutive monthly dividend periods; (ii) a Debenture Event
of Default (as defined in the Indenture) occurs and is
continuing; or (iii) Aetna is in default on any of its
payment obligations under the Guarantee, then the Members
holding a majority in stated liquidation preference of the
outstanding Preferred Securities of such series, in the case
of clause (i) above, and the Members holding a majority in
stated liquidation preference of all outstanding Preferred
Securities, in the case of clauses (ii) and (iii) above,
together with Members holding any other Interests having the
right to vote for appointment of a trustee in such event,
acting as a single class, will be entitled to appoint and
authorize a trustee to enforce the Company's rights under
the Indenture against Aetna, enforce the obligations
undertaken by Aetna under the Guarantee and declare and pay
dividends on the Preferred Securities of such series in the
case of clause (i) above. For purposes of determining
whether the Company has failed to pay dividends in full for
18 consecutive monthly dividend periods, dividends shall be
deemed to remain in arrears, notwithstanding any payments in
respect thereof, until full cumulative dividends have been
or contemporaneously are declared and paid with respect to
all monthly dividend periods terminating on or prior to the
date of payment of such full cumulative dividends. Not
later than 30 days after such right to appoint a trustee
arises, the Managing Members will convene a meeting for the
above purpose. If the Managing Members fail to convene such
meeting within such 30-day period, the Members holding 10%
in stated liquidation preference of the outstanding
Preferred Securities of such series, in the case of clause
(i) above, and the Members holding 10% in stated liquidation
preference of all outstanding Preferred Securities, in the
case of clauses (ii) and (iii) above, and such other
Interests, acting as a single class, will be entitled to
convene such meeting. Any trustee so appointed shall vacate
office immediately, subject to the applicable terms of any
Interests the holders of which were entitled to appoint such
trustee, if the Company shall have paid in full all
accumulated and unpaid dividends on the Preferred Securities
of such series, in the case of clause (i) above, or such
default Aetna shall have been cured, in the case of clause
(ii) or (iii) above.
(c) If any resolution is proposed to be adopted
by the securityholders of the Company providing for, or the
Managing Members propose to take any action to effect:
(i) any variation or abrogation of the powers,
preferences and special rights of the Preferred
Securities of any series by way of amendment of this
Agreement or otherwise (including, without limitation,
the authorization or issuance of any Interests in the
Company ranking, as to participation in the profits or
assets of the Company, senior to the Preferred
Securities) which variation or abrogation adversely
affects the holders of Preferred Securities of such
series,
(ii) the dissolution, winding up, liquidation or
termination of the Company, or
(iii) the commencement of any bankruptcy,
insolvency, reorganization or other similar proceeding
involving the Company,
then the Members holding outstanding Preferred Securities of
the series, the rights, preferences or privileges of which
are proposed to be amended in the case of any resolution or
action described in clause (i) above, and the Members
holding any outstanding Preferred Securities, in the case of
any resolution or action described in clauses (ii) or (iii)
above, (and, in the case of any resolution or action
described in clause (i) above which would adversely affect
the powers, preferences or special rights of any Company
Dividend Parity Securities or any Company Liquidation Parity
Securities, such Company Dividend Parity Securities or such
Company Liquidation Parity Securities, as the case may be,
or, in the case of any resolution or action described in
clause (ii) above, all Company Liquidation Parity Securities
or, in the case of any resolution or action described in
clause (iii) above, all Members holding outstanding
Preferred Securities, Company Dividend Parity Securities and
any Company Liquidation Parity Securities other than Members
holding any such securities that are also creditors of Aetna
or any of its subsidiaries) will be entitled to vote
together as a class on such resolution or action of the
Managing Members (but not any other resolution or action)
and such resolution or action shall not be effective except
with the approval of the Members holding a majority in
stated liquidation preference of such outstanding
securities; provided that no such resolution or action
shall, without the consent of each Preferred Member affected
thereby, (1) change the terms established pursuant to
Section 7.1(c)(iii), (iv), (v), (vi), (vii), (viii) or (xi)
in a manner adverse to such Preferred Member or (2) reduce
the above-stated percentage of stated liquidation preference
necessary to approve such resolution or action or (3) amend
the provisions of Section 7.1(b); provided, further however,
that no such approval shall be required under clauses (i)
and (ii) if the dissolution, winding up, liquidation or
termination of the Company is proposed or initiated upon the
initiation of proceedings, or after proceedings have been
initiated, for the bankruptcy, insolvency or liquidation of
either Managing Member or upon the withdrawal, resignation
or expulsion of either Managing Member from the Company.
The powers, preferences or special rights of the
Preferred Securities of any series will be deemed not to be
varied by the creation or issue of, and no vote will be
required for the creation or issue of, any further Interests
in the Company ranking pari passu with or junior to the
Preferred Securities of any series with respect to voting
rights or rights to participate in the profits or assets of
the Company.
(d) Notwithstanding that Members holding
Preferred Securities of any series are entitled to vote or
consent under any of the circumstances described in this
Agreement, any of the Preferred Securities of any series
that are owned by Aetna or any entity owned more than fifty
percent by Aetna, either directly or indirectly, shall not
be entitled to vote or consent and shall, for the purposes
of such vote or consent, be treated as if they were not
outstanding.
Section 8.2 Voting Rights of Holders of Common
Securities. Except as otherwise provided herein or by the
Managing Members in accordance with Section 7.1 in respect
of any series of Preferred Securities and except as
otherwise provided by the Delaware Act, all voting rights of
the Company shall be vested exclusively in the Common
Members. The Common Securities shall entitle the Common
Members to one vote for each such Common Security held upon
all matters upon which Common Members have the right to
vote. All Common Members shall have the right to vote
separately as a class on any matter on which the Common
Members have the right to vote regardless of the voting
rights of any other Member.
Section 8.3 Meetings of the Members.
(a) Meetings of the Members of any class or
series or of all classes or series of Interests may be
called at any time by the Managing Members or as provided by
any applicable terms of any Preferred Securities. Except to
the extent otherwise provided, the following provisions
shall apply to meetings of Members.
(b) Members may vote in person or by proxy at
such meeting. Whenever a vote, consent or approval of
Members is permitted or required under this Agreement, such
vote, consent or approval may be given at a meeting of
Members or by written consent.
(c) Each Member may authorize any Person to act
for it by proxy on all matters in which a Member is entitled
to participate, including waiving notice of any meeting, or
voting or participating at a meeting. Every proxy must be
signed by the Member or its attorney-in-fact. Every proxy
shall be revocable at the pleasure of the Member executing
it.
(d) Each meeting of Members shall be conducted by
the Managing Members or by such other Person that the
Managing Members may designate.
(e) The Managing Members will cause a notice of
any meeting at which Preferred Members holding Preferred
Securities of a series are entitled to vote pursuant to
Section 8.1(b) and (c) of this Agreement, or of any matter
upon which action may be taken by written consent of such
Preferred Members, to be mailed to each Preferred Member of
record of the Preferred Securities of such series. Each
such notice will include a statement setting forth (i) the
date of such meeting or the date by which such action is to
be taken, (ii) a description of any action proposed to be
taken at such meeting on which such Preferred Members are
entitled to vote or of such matters upon which written
consent is sought and (iii) instructions for the delivery of
proxies or consents.
(f) Subject to Section 8.3(e), the Managing
Members, in their sole discretion, shall establish all other
provisions relating to meetings of Members, including notice
of the time, place or purpose of any meeting at which may
matter is to be voted on by any Members, waiver of any such
notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting
in person or by proxy or any other matter with respect to
the exercise of any such right to vote.
ARTICLE IX
DIVIDENDS
Section 9.1 Dividends. Preferred Members shall
receive periodic dividends, if any, in accordance with the
applicable terms of the Preferred Securities, as and when
declared by the Managing Members and Common Members shall
receive periodic dividends, subject Section 9.3 of this
Agreement and the applicable terms of any series of
Preferred Securities, and to the provisions of the Delaware
Act, as and when declared by the Managing Members, in their
discretion out of funds legally available therefor.
Section 9.2 Limitations on Distributions.
Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall not make a distribution
(including a dividend) to any Member on account of its
Interest in the Company if such distribution would violate
Section 18-607 of the Delaware Act or other applicable law.
Section 9.3 Certain Restrictions on the Payment
of Dividends. If dividends have not been paid in full on
the Preferred Securities of any series, the Company shall
not:
(i) pay, or declare and set aside for payment,
any dividends on the Preferred Securities of any other
series or any other Interests in the Company ranking
pari passu with the Preferred Securities of such series
with respect to participation in profits of the Company
("Company Dividend Parity Securities"), unless the
amount of any dividends declared on any Company
Dividend Parity Securities is paid on the Company
Dividend Parity Securities and the Preferred Securities
of such series on a pro rata basis on the date such
dividends are paid on such Company Dividend Parity
Securities, so that the ratio of
(x) (A) the aggregate amount paid as
dividends on the Preferred Securities of such
series to (B) the aggregate amount paid as
dividends on the Company Dividend Parity
Securities is the same as the ratio of
(y) (A) the aggregate amount of all
accumulated arrears of unpaid dividends on the
Preferred Securities of such series to (B) the
aggregate amount of all accumulated arrears of
unpaid dividends on the Company Dividend Parity
Securities;
(ii) pay, or declare and set aside for payment,
any dividends on any Interests in the Company ranking
junior to the Preferred Securities of such series as to
dividends ("Company Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any
Company Dividend Parity Securities or Company Dividend
Junior Securities;
until, in each case, such time as all accumulated arrears of
unpaid dividends on the Preferred Securities of such series
shall have been paid or set aside for payment in full for
all dividend periods terminating on or prior to, in the case
of clauses (i) and (ii), such payment, and in the case of
clause (iii), the date of such redemption, purchase or other
acquisition.
Section 9.4 Distributions in Kind. A Member, in
the discretion of the Managing Members and in accordance
with any applicable agreement, instrument, action or terms
of the Interests, may receive distributions from the Company
in any form other than cash, and may be compelled to accept
a distribution of any asset in kind from the Company such
that the percentage of the asset distributed to him equals a
percentage of that asset which is equal to the percentage in
which the Member shares in distributions from the Company.
ARTICLE X
BOOKS AND RECORDS
Section 10.1 Books and Records; Accounting.
The Managing Members shall keep or cause to be kept at the
address of the Managing Members (or at such other place as
the Managing Members shall advise the other Members in
writing) true and full books and records regarding the
status of the business and financial condition of the
Company.
Section 10.2 Financial Statements. After the end
of each fiscal year, the Managing Members shall, as soon as
practicable and in any event within 90 days of the close of
the fiscal year, cause to be prepared and made available
upon request of any Preferred Member the unaudited financial
statements of the Company prepared in accordance with
generally accepted accounting principles.
Section 10.3 Fiscal Year. The fiscal year of the
Company for federal income tax and accounting purposes
shall, except as otherwise required in accordance with the
Code, end on December 31 of each year.
ARTICLE XI
TAX MATTERS
Section 11.1 Company Tax Returns. (a) The
Managing Members shall cause to be prepared and timely filed
all tax returns required to be filed for the Company. The
Managing Members may, in their discretion, make or refrain
from making any federal, state or local income or other tax
elections for the Company that they deem necessary or
advisable, including, without limitation, any election under
Section 754 of the Code or any successor provision.
(b) Aetna is hereby designated as the Company's
"Tax Matters Partner" under Code Section 6231(a)(7) and
shall have all the powers and responsibilities of such
position as provided in the Code. Aetna is specifically
directed and authorized to take whatever steps Aetna, in its
discretion, deems necessary or desirable to perfect such
designation, including filing any forms or documents with
the Internal Revenue Service and taking such other action as
may from time to time be required under the regulations
issued under the Code. Expenses incurred by the Tax Matters
Partner, in its capacity as such will be borne by the
Company.
Section 11.2 Tax Reports. After the end of each
fiscal year, the Managing Members shall, as promptly as
practicable and in any event within 90 days of the close of
the fiscal year, cause to be prepared and made available
upon request of any Preferred Member cause to be prepared
and transmitted to each member federal income tax form K-1
or any other forms which are necessary or advisable.
Section 11.3 Taxation as Partnership. The
Company shall be treated as a partnership for U.S. federal
income tax purposes.
ARTICLE XII
EXPENSES
Section 12.1 Expenses. Except as otherwise
provided in this Agreement, the Company shall be responsible
for all and shall pay all expenses out of funds of the
Company determined by the Managing Members to be available
for such purpose, provided that such expenses or obligations
are those of the Company or are otherwise incurred by the
Managing Members in connection with this Agreement,
including, without limitation:
(a) all expenses incurred by the Managing Members
or its affiliates in organizing the Company;
(b) all costs and expenses related to the
business of the Company and all routine administrative
expenses of the Company, including the maintenance of
books and records of the Company, the preparation and
dispatch to the Members of checks, financial reports,
tax returns and notices required pursuant to this
Agreement and the holding of any meetings of the
Members;
(c) all expenses incurred in connection with any
indebtedness or guarantees of the Company or any
proposed or definitive credit facility or other credit
arrangement;
(d) all expenses incurred in connection with any
litigation involving the Company (including the cost of
any investigation and preparation) and the amount of
any judgment or settlement paid in connection therewith
(other than expenses incurred by the Managing Member in
connection with any litigation brought by or on behalf
of any Member against the Managing Member);
(e) all expenses for indemnity or contribution
payable by the Company to any Person;
(f) all expenses incurred in connection with the
collection of amounts due to the Company from any
person;
(g) all expenses incurred in connection with the
preparation of amendments to this Agreement; and
(h) all expenses incurred in connection with the
liquidation, dissolution and winding up of the Company.
ARTICLE XIII
LIABILITY
Section 13.1 Liability of Common Members. Each
Common Member, by acquiring its Interest and being admitted
to the Company as a Common Member, is liable to the
creditors of the Company (other than to Members holding
other classes or series of Interests, in their capacity as
Members) (hereinafter referred to each as a "Third Party
Creditor," and collectively as the "Third Party Creditors")
to the same extent that a general partner of a limited
partnership formed under the LP Act is liable under Section
17-403(b) of the LP Act to creditors of the limited
partnership (other than the other partners in their capacity
as partners), as if the Company was a limited partnership
formed under the LP Act and the Common Members were general
partners of the limited partnership. In furtherance but not
in limitation of the generality of the foregoing, each
Common Member, (i) is liable for any and all debts,
obligations and other liabilities of the Company, whether
arising under contract or by tort, statute, operation of law
or otherwise, enforceable directly and absolutely against
each Common Member by each Third Party Creditor, and (ii) is
deemed to and does assume, as a surety and not as a
guarantor, each debt, obligation or other liability of the
Company to all Third Party Creditors.
Section 13.2 Liability of Preferred Members.
(a) Except as otherwise provided in Section 13.1,
(i) the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be
solely the debts, obligations and liabilities of the Company
and (ii) no Member shall be obligated personally for any
such debt, obligation or liability of the Company solely by
reason of being a Preferred Member of the Company.
(b) Except as otherwise expressly provided in
Section 13.1, a Member, in its capacity as such, shall have
no liability in excess of (i) the amount of its capital
contributions, (ii) its share of any assets and
undistributed profits of the Company, and (iii) the amount
of any distributions wrongfully distributed to it.
ARTICLE XIV
ASSIGNMENT OF INTERESTS
Section 14.1 Assignment of Interests.
Notwithstanding anything to the contrary under this
Agreement, Common Securities shall be non-assignable and
non-transferable, and may only be issued to a Managing
Member and held by the Managing Member to which such Common
Security was originally issued. Preferred Securities shall
be freely assignable and transferable, subject to the
provisions of Section 2.7.
Section 14.2 Right of Assignee to Become a
Member. An assignee shall become a Member upon compliance
with the provisions of Section 2.7.
Section 14.3 Events of Cessation of Membership.
A Person shall cease to be a Member only upon the lawful
assignment of its Interests (including any redemption,
exchange or other repurchase by the Company or the Managing
Members), and the compliance, in cases other than any such
redemption, exchange or repurchase, of the assignee with the
provisions of Section 2.7.
ARTICLE XV
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 15.1 No Dissolution. The Company shall
not be dissolved by the admission of Members in accordance
with the terms of this Agreement. Except as provided in
Section 15.2(c), the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member, or the
occurrence of any other event which terminates the continued
membership of a Member in the Company, shall not cause the
Company to be dissolved and its affairs wound up so long as
the Company at all times has at least two Members. Upon the
occurrence of any such event, the business of the Company
shall be continued without dissolution.
Section 15.2 Events Causing Dissolution. The
Company shall be dissolved and its affairs shall be wound up
upon the occurrence of any of the following events:
(a) the expiration of the term of the Company, as
provided in Section 2.3 hereof;
(b) any Managing Member makes an assignment for
the benefit of creditors, files a voluntary petition in
bankruptcy, is adjudged bankrupt or insolvent, or has
entered against it an order for relief, in any
bankruptcy or insolvency proceeding, files a petition
or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any statute,
law or regulation, files an answer or other pleading
admitting or failing to contest the material
allegations of a petition filed against it in any
proceeding of this nature, seeks, consents or
acquiesces in the appointment of a trustee, receiver or
liquidator of any Managing Member of any substantial
part of its properties, or 120 days after the
commencement of any proceeding against any Managing
Member seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar relief under any statute, law or regulation, if
the proceeding has not been dismissed, or if within 90
days after the appointment without its consent or
acquiescence of a trustee, receiver or liquidator of
any Managing Member or of all or any substantial part
of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any
such stay, the appointment is not vacated;
(c) upon the withdrawal, resignation, expulsion,
dissolution, winding up or liquidation of any Managing
Member or the occurrence of any other event that
terminates the continued membership of such Managing
Member;
(d) a decision made by the Managing Members
(subject to the voting rights of Preferred Members set
forth in Section 8.1) to dissolve the Company;
(e) the entry of a decree of judicial dissolution
under Section 18-802 of the Delaware Act; or
(f) the written consent of all Members.
Section 15.3 Notice of Dissolution. Upon the
dissolution of the Company, the Managing Members shall
promptly notify the Members of such dissolution.
Section 15.4 Liquidation. Upon dissolution of
the Company, the Managing Members, as liquidating trustees,
shall immediately commence to wind up the Company's affairs;
provided, however, that a reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and
the satisfaction of liabilities to creditors so as to enable
the Members to minimize the normal losses attendant upon a
liquidation. The proceeds of liquidation shall be
distributed, as realized, in the manner provided in Section
18-804 of the Delaware Act, subject to the applicable terms
of any series of Preferred Securities.
Section 15.5 Certain Restrictions on Liquidation
Payments. In the event of any voluntary or involuntary
dissolution, winding up, liquidation or termination of the
Company, Members holding Preferred Securities of each series
at the time outstanding will be entitled to receive out of
the assets of the Company legally available for distribution
to Members, before any distribution of assets is made to
Common Members or Members holding any other class of
Interests in the Company ranking junior to the Preferred
Securities with respect to participation in assets of the
Company, but together with Members holding Preferred
Securities of any other series or any other Interests in the
Company outstanding ranking pari passu with the Preferred
Securities with respect to participation in the assets of
the Company ("Company Liquidation Parity Securities"), an
amount equal, in the case of Members holding Preferred
Securities of such series, to the aggregate of the stated
liquidation preference for Preferred Securities of such
series as set forth in the actions taken by the Managing
Members providing for the issue of such series and all
accumulated and unpaid dividends (whether or not declared)
to the date of payment (the "Liquidation Distribution").
If, upon any such liquidation, the Liquidation Distributions
can be paid only in part because the Company has
insufficient assets available to pay in full the aggregate
Liquidation Distributions and the aggregate maximum
liquidation distributions on the Company Liquidation Parity
Securities, then the amounts payable directly by the Company
on the Preferred Securities of such series and on such
Company Liquidation Parity Securities shall be paid on a pro
rata basis, so that the ratio of
(i)(x) the aggregate amount paid as
Liquidation Distributions on the Preferred
Securities of such series to (y) the aggregate
amount paid as liquidation distributions on the
Company Liquidation Parity Securities is the same
as the ratio of
(ii)(x) the aggregate Liquidation
Distributions to (y) the aggregate maximum
liquidation distributions on the Company
Liquidation Parity Securities.
Section 15.6 Termination. The Company shall
terminate when all of the assets of the Company have been
distributed in the manner provided for in this Article XV,
and the Certificate shall have been canceled in the manner
required by the Delaware Act.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Amendments. Except as otherwise
provided in this Agreement or by any applicable terms of any
Preferred Securities (other than Section 14.1 of this
Agreement), this Agreement may be amended by, and only by, a
written instrument executed by the Managing Members.
Section 16.2 Successors; Counterparts. This
Agreement (a) shall be binding as to the executors,
administrators, estates, heirs and legal successors, or
nominees or representatives, of the Members and (b) may be
executed in several counterparts with the same effect as if
the parties executing the several counterparts had all
executed one counterpart.
Section 16.3 Governing Law; Severability. This
Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect
to the principles of conflict of laws thereof. In
particular, this Agreement shall be construed to the maximum
extent possible to comply with all of the terms and
conditions of the Delaware Act. If, nevertheless, it shall
be determined by a court of competent jurisdiction that any
provisions or wording of this Agreement shall be invalid or
unenforceable under the Delaware Act or other applicable
law, such invalidity or unenforceability shall not
invalidate the entire Agreement. In that case, this
Agreement shall be construed as to limit any term or
provision so as to make it enforceable or valid within the
requirements of applicable law, and, in the event such term
or provisions cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
If it shall be determined by a court of competent
jurisdiction that any provision relating to the
distributions and allocations of the Company or to any fee
payable by the Company is invalid or unenforceable, this
Agreement shall be construed or interpreted so as (a) to
make it enforceable or valid and (b) to make the
distributions and allocations as closely equivalent to those
set forth in this Agreement as is permissible under
applicable law.
Section 16.4 Filings. Following the execution
and delivery of this Agreement, the Managing Members shall
promptly prepare any documents required to be filed and
recorded under the Delaware Act, and the Managing Members
shall promptly cause each such document to be filed and
recorded in accordance with the Delaware Act and, to the
extent required by local law, to be filed and recorded or
notice thereof to be published in the appropriate place in
each jurisdiction in which the Company may hereafter
establish a place of business. The Managing Members shall
also promptly cause to be filed, recorded and published such
statements of fictitious business name and any other
notices, certificates, statements or other instruments
required by any provision of any applicable law of the
United States or any state or other jurisdiction which
governs the conduct of its business from time to time.
Section 16.5 Power of Attorney. Each Preferred
Member does hereby constitute and appoint each Managing
Member as its true and lawful representative and
attorney-in-fact, in its name, place and stead to make, execute,
sign, deliver and file (a) any amendment of the Certificate
required because of an amendment to this Agreement or in
order to effectuate any change in the membership of the
Company, (b) this Agreement, (c) any amendments to this
Agreement and (d) all such other instruments, documents and
certificates which may from time to time be required by the
laws of the United States of America, the State of Delaware
or any other jurisdiction, or any political subdivision of
agency thereof, to effectuate, implement and continue the
valid and subsisting existence of the Company or to dissolve
the Company or for any other purpose consistent with this
Agreement and the transactions contemplated hereby.
The power of attorney granted hereby is coupled
with an interest and shall (a) survive and not be affected
by the subsequent death, incapacity, disability,
dissolution, termination or bankruptcy of the Preferred
Member granting the same or the transfer of all or any
portion of such Preferred Member's Interest and (b) extend
to such Preferred Member's successors, assigns and legal
representatives.
Section 16.6 Additional Documents. Each
Preferred Member, upon the request of the Managing Members,
agrees to perform all further acts and execute, acknowledge
and deliver any documents that may be reasonably necessary
to carry out the provisions of this Agreement.
Section 16.7 Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including telecopier or similar writing) and shall
be given to such party (and any other person designated by
such party) at its address or telecopier number set forth in
a schedule filed with the records of the Company or such
other address or telecopier number as such party may
hereafter specify for the purpose of notice to the Managing
Members (if such party is not a Managing Member) or to all
the other Members (if such party is a Managing Member).
Each such notice, request or other communication shall be
effective (a) if given by telecopier, when transmitted to
the number specified pursuant to this Section and the
appropriate confirmation is received, (b) if given by mail,
72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid, or
(c) if given by any other means, when delivered at the
address specified pursuant to this Section.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above stated.
AETNA LIFE AND CASUALTY
COMPANY
By:
Name:
Title:
AETNA CAPITAL HOLDINGS, INC.
By:
Name:
Title:
EXHIBIT 4.1
Certificate Number of
Number Shares
1 00,000,000
CUSIP NO.
CERTIFICATE EVIDENCING INTERESTS
% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A
OF
AETNA CAPITAL L.L.C.
Aetna Capital L.L.C., a Delaware limited liability company (the
"Company"), hereby certifies that Cede & Co. (the "Holder") is the
registered owner of 0,000,000 fully paid and non-assessable interests
of the % Cumulative Monthly Income Preferred Securities, Series A,
of the Company (the "Securities") transferable on the books and
records of the Company, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form
for transfer. The rights, preferences and limitations of the
Securities are set forth in, and this Certificate and the Securities
represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the resolutions of the Managing Members
of the Company authorizing the issuance of the Securities and
determining the preferred, deferred and other special rights and
restrictions, regarding dividends, voting, redemption, exchange,
return of capital and otherwise, and other matters relating to the
Securities (the "Securities Terms"), a copy of which is on file at the
principal office of the Company and at the office of First Chicago
Trust Company of New York, the Registrar and Transfer Agent for the
Securities. The Company or the Registrar and Transfer Agent will
furnish a copy of such Securities Terms to the Holder without charge
upon written request to the Company at its principal place of business
or registered office, as the case may be. Capitalized terms used
herein but not defined shall have the meaning given them in the
Securities Terms. The Holder is entitled to the benefits of the
Payment and Guarantee Agreement of Aetna Life and Casualty Company
dated , 1994 (the "Guarantee") to the extent provided therein
and is entitled to enforce the rights of the Company under the
debentures (the "Debentures") issued by Aetna to the Company pursuant
to the Subordinated Indenture, dated , 1994 between Aetna Life
and Casualty Company and (the "Subordinated Indenture")
to the extent provided therein. The Company will furnish a copy of
such Guarantee and Subordinated Indenture to the Holder without charge
upon written request to the Company at its principal place of business
or registered office.
The Holder, by accepting this Certificate, is deemed to have (i)
agreed that the Debentures are subordinate and junior in right of
payment to all Senior Indebtedness as and to the extent provided in
the Subordinated Indenture and (ii) agreed that the Guarantee is
subordinate and junior in right of payment to all liabilities of Aetna
Life and Casualty Company and pari passu to the most senior preferred
or preference stock of any series now or hereafter issued by Aetna
Life and Casualty Company and pari passu to any guarantee now or
hereafter entered into by Aetna Life and Casualty Company in respect
of any preferred or preference stock of any affiliate of Aetna Life
and Casualty Company, as and to the extent provided in the Guarantee.
IN WITNESS WHEREOF, this certificate has been signed on behalf of the
Company by a duly authorized Managing Member and countersigned by a
duly authorized officer of each of Aetna Life and Casualty Company, as
Guarantor and First Chicago Trust Company of New York, as Registrar
and Transfer Agent this , 1994.
AETNA CAPITAL L.L.C.
BY AETNA LIFE AND CASUALTY
COMPANY,
AS MANAGING MEMBER
By: _________________________
BY FIRST CHICAGO TRUST COMPANY By: AETNA LIFE AND CASUALTY
OF NEW YORK COMPANY AS GUARANTOR
AS REGISTRAR AND TRANSFER AGENT
By: ______________________________ By: _________________________
EXHIBIT 4.2
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT (the
"Guarantee"), dated as of , 1994, is executed and
delivered by Aetna Life and Casualty Company, a Connecticut
insurance corporation ("Aetna") for the benefit of the
Holders (as defined below) from time to time of the
Preferred Securities (as defined below) of Aetna Capital
L.L.C., a Delaware limited liability company (the "Issuer").
WHEREAS, the Issuer intends to issue its common
limited liability company interests (the "Common
Securities") to and receive related capital contributions
from Aetna and Aetna Capital Holdings, Inc. (the "Common
Securities Payments") and to issue and sell from time to
time, in one or more series, preferred limited liability
company interests (the "Preferred Securities") with such
rights, preferences, privileges, limitations and
restrictions as are set forth in a written resolutions or
resolutions by the Managing Members (as defined below)
providing for the issue of such series;
WHEREAS, the Issuer will purchase the Debentures
(as defined below) issued pursuant to the Subordinated
Indenture (as defined below) with the proceeds from the
issuance and sale of the Preferred Securities and with the
proceeds from the issuance and sale of the Common Securities
Payments; and
WHEREAS, Aetna desires hereby to irrevocably and
unconditionally agree to the extent set forth herein to pay
to the Holders the Guarantee Payments (as defined below) and
to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the purchase
by each Holder of the Preferred Securities, which purchase
Aetna hereby agrees shall benefit Aetna and which purchase
Aetna acknowledges will be made in reliance upon the
execution and delivery of this Guarantee, Aetna executes and
delivers this Guarantee for the benefit of the Holders.
ARTICLE I
As used in this Guarantee, the terms set forth
below shall have the following meanings:
"Debenture" shall mean the debentures issued by
Aetna to the Issuer pursuant to the Subordinated Indenture
that will evidence the loans to be made by the Issuer to
Aetna from time to time of the proceeds received by the
Issuer from the issuance and sale of the Preferred
Securities and the Common Securities Payments.
"Guarantee Payments" shall mean, with respect to
any series of Preferred Securities, the following payments,
without duplication, to the extent not paid by the Issuer:
(i) any accumulated and unpaid dividends which have been
theretofore declared on the Preferred Securities of such
series out of funds legally available therefor, (ii) the
redemption price (including all accumulated and unpaid
dividends) payable out of funds legally available therefor with
respect to any Preferred Securities of such series called
for redemption by the Issuer and (iii) upon the liquidation
of the Issuer, the lesser of (a) the Liquidation
Distribution (as defined below) with respect to such series
and (b) the amount of assets of the Issuer legally available
for distribution to Holders of Preferred Securities of such
series in liquidation.
"Holder" shall mean any member of the Issuer from
time to time holding any Preferred Securities of any series;
provided, however, that in determining whether the Holders
of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder,
"Holder" shall not include Aetna or any entity owned 50% or
more by Aetna, either directly or indirectly.
"Liquidation Distribution" shall mean, with
respect to any series of Preferred Securities, the aggregate
of the stated liquidation preference of such series of
Preferred Securities and all accumulated and unpaid
dividends (whether or not declared) with respect to such
series to the date of payment.
"L.L.C. Agreement" shall mean the Issuer's Limited
Liability Company Agreement dated as of March , 1994, as
amended from time to time.
"Managing Members" shall mean Aetna and Aetna
Capital Holdings, Inc., in their capacity as the members of
the Issuer that hold all of the Issuer's outstanding Common
Securities.
"Redemption Price" shall mean, with respect to any
series of Preferred Securities, the aggregate stated
liquidation preference of all Preferred Securities of such
series plus accumulated and unpaid dividends (whether or not
declared) with respect to such series to the date fixed for
redemption.
"Subordinated Indenture" shall mean the
subordinated indenture dated as of , 1994 between
Aetna and , as trustee.
ARTICLE II
Section 2.01. Aetna irrevocably and
unconditionally agrees, to the extent set forth herein, to pay in
full, to the Holders of each series of Preferred Securities
the Guarantee Payments with respect to such series of
Preferred Securities, as and when due (except to the extent
paid by the Issuer or paid by Aetna to any trustee appointed
by such Holders pursuant to Article VIII of the Issuer's
L.L.C. Agreement), regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert.
This Guarantee is continuing, irrevocable, unconditional and
absolute.
Section 2.02. Aetna hereby waives notice of
acceptance of this Guarantee and of any liability to which
it applies or may apply, presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 2.03. The obligations, covenants,
agreements and duties of Aetna under this Guarantee shall in
no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the
Issuer of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the
Issuer of all or any portion of the dividends,
redemption price, liquidation distributions or any
other sums payable under the terms of the Preferred
Securities or the extension of time for the performance
of any other obligation under, arising out of, or in
connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders to enforce, assert
or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency
in, any of the Preferred Securities; or
(f) the settlement or compromise of any
obligation guaranteed hereby or hereby incurred.
There shall be no obligation of the Holders to give notice
to, or obtain consent of, Aetna with respect to the
happening of any of the foregoing.
Section 2.04. This is a guarantee of payment and
not of collection. A Holder may enforce this Guarantee
directly against Aetna, and Aetna waives any right or remedy
to require that any action be brought against the Issuer or
any other person or entity before proceeding against Aetna.
Subject to Section 2.05 hereof, all waivers herein contained
shall be without prejudice to the Holders' right at the
Holders' option to proceed against the Issuer, whether by
separate action or by joinder.
Section 2.05. Aetna shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect
of any amounts paid to the Holders by Aetna under this
Guarantee and shall have the right to waive payment of any
amount of dividends in respect of which payment has been
made to the Holders by Aetna pursuant to Section 2.01
hereof; provided, however, that Aetna shall not (except to
the extent required by mandatory provisions of law) exercise
any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under
this Guarantee. If any amount shall be paid to Aetna in
violation of the preceding sentence, Aetna agrees to pay
over such amount to the Holders.
Section 2.06. Aetna acknowledges that its
obligations hereunder are independent of the obligations of
the Issuer with respect to the Preferred Securities and that
Aetna shall be liable as principal and sole debtor hereunder
to make Guarantee Payments pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (f), inclusive, of
Section 2.03 hereof.
ARTICLE III
Section 3.01. So long as any Preferred Securities
of any series remain outstanding, Aetna shall not declare or
pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital
stock or make any guarantee payments with respect to the
foregoing (other than (i) payments under this Guarantee,
(ii) acquisitions of shares of Aetna's common stock in
connection with the satisfaction by Aetna of its obligations
under any employee benefit plans and (iii) redemptions of
any share purchase rights issued by Aetna pursuant to
Aetna's Share Purchase Rights Plan adopted on October 27,
1989, as amended from time to time or the declaration of a
dividend of similar share purchase rights in the future), if
at such time Aetna shall be in default with respect to its
payment obligations hereunder or there shall have occurred
and be continuing an Event of Default under the Debentures.
Section 3.02. So long as any Preferred Securities
of any series remain outstanding, Aetna shall: (i) not cause
or permit any Common Securities to be transferred; (ii)
maintain direct or indirect 100% ownership of all
outstanding securities of the Issuer other than the
Preferred Securities of any series and any other securities
permitted to be issued by the Issuer that would not cause it
to become an "investment company" under the Investment
Company Act of 1940, as amended; (iii) cause at least 21% of
the total value of the Issuer and at least 21% of all
interests in the capital, income, gain, loss, deduction and
credit of the Issuer to be represented by Common Securities;
(iv) not voluntarily dissolve, wind up, liquidate or
terminate the Issuer or either of the Managing Members; (v)
cause Aetna and Aetna Capital Holdings, Inc. to remain the
Managing Members of the Issuer and timely perform all of
their respective duties as Managing Members (including the
duty to declare and pay dividends on the Preferred
Securities); and (vi) use reasonable efforts to cause the
Issuer to remain a limited liability company and otherwise
continue to be treated as a partnership for United States
federal income tax purposes.
Section 3.03. The Guarantee will constitute an
unsecured obligation of Aetna and will rank (i) subordinate
and junior in right of payment to all other liabilities of
Aetna, (ii) pari passu with the most senior preferred stock
now or hereafter issued by Aetna and with any guarantee now
or hereafter entered into by Aetna in respect of any
preferred or preference stock of any affiliate of Aetna and
(iii) senior to Aetna's common stock.
ARTICLE IV
This Guarantee shall terminate and be of no
further force and effect as to any series of Preferred
Securities upon full payment of the Redemption Price of such
series, and shall terminate completely upon full payment of
the amounts payable to Holders upon liquidation of the
Issuer; provided, however, that this Guarantee shall
continue to be effective or shall be reinstated, as the case
may be, if at any time any Holder must restore payment of
any sums paid under the Preferred Securities of such series
or under this Guarantee for any reason whatsoever. Aetna
agrees to indemnify each Holder and hold it harmless against
any loss it may suffer in such circumstances.
ARTICLE V
Section 5.01. All guarantees and agreements
contained in this Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of Aetna
and shall inure to the benefit of the Holders. Aetna shall
not assign its obligations hereunder without the prior
approval of Holders of not less than a majority in
liquidation preference of all Preferred Securities of all
series then outstanding voting as a single class.
Section 5.02. Except with respect to any changes
which do not adversely affect the rights of Holders (in
which cases no vote will be required), this Guarantee may
only be amended by instrument in writing signed by Aetna
with the prior approval of the Holders of not less than a
majority in stated liquidation preference of all Preferred
Securities of all series then outstanding voting as a single
class. Such approval shall be obtained in the manner set
forth in Article VIII of the L.L.C. Agreement.
Section 5.03. Any notice, request or other
communication required or permitted to be given hereunder to
Aetna shall be given in writing by delivering the same
against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to Aetna, as follows
(and if so given, shall be deemed given when mailed or upon
receipt of an answer-back, if sent by telex), to wit:
Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile No.:
Attention:
Any notice, request or other communication
required or permitted to be given hereunder to the Holders
shall be given by Aetna in the same manner as notices sent
by the Issuer to the Holders.
Section 5.04. The masculine and neuter genders
used herein shall include the masculine, feminine and neuter
genders.
Section 5.05. This Guarantee is solely for the
benefit of the Holders and is not separately transferable
from the Preferred Securities.
Section 5.06. THIS GUARANTEE SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
THIS GUARANTEE is executed as of the day and year
first above written.
Aetna Life and Casualty
Company
By _____________________
Name:
Title:
EXHIBIT 10.1
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT dated as of , 1994, between
Aetna Life and Casualty Company, a Connecticut insurance
corporation ("Aetna") and Aetna Capital L.L.C., a Delaware
limited liability company ("Capital").
WHEREAS, Capital intends to issue its common
limited liability company interests (the "Common
Securities") to and receive related capital contributions
from Aetna and Aetna Capital Holdings, Inc. and to issue and
sell from time to time, in one or more series, preferred
limited liability company interests (the "Preferred
Securities") with such rights, preferences, privileges,
limitations and restrictions as are set forth in a written
resolution or resolutions by the managing members of Capital
providing for the issue of such series;
WHEREAS, Aetna will directly and indirectly own
all of the Common Securities of Capital;
NOW, THEREFORE, in consideration of the purchase
by each holder of the Preferred Securities, which purchase
Aetna hereby agrees shall benefit Aetna and which purchase
Aetna acknowledges will be made in reliance upon the
execution and delivery of this Agreement, Aetna and Capital
hereby agree as follows:
Section 1.01. Guarantee by Aetna. Subject to the
terms and conditions hereof, Aetna hereby irrevocably and
unconditionally guarantees to each person or entity to whom
Capital is now or hereafter becomes indebted or liable (the
"Beneficiaries") (other than obligations to holders of the
Preferred Securities of any series in such holders'
capacities as holders of such Securities; such obligations
being separately guaranteed to the extent set forth in the
Payment and Guarantee Agreement dated the date hereof and
executed and delivered by Aetna (the "Guarantee")) the full
payment, when and as due, regardless of any defense, right
of set-off or counterclaim which Capital may have or assert,
of any and all indebtedness and liabilities of Capital to
such Beneficiaries (collectively, the "Obligations"). This
Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such
Beneficiaries have received notice hereof.
Section 1.02. Term of Agreement. This Agreement
shall terminate and be of no further force and effect upon
the later of (i) the date on which full payment has been
made of all amounts payable to all holders of any series of
the Preferred Securities upon liquidation of Capital and
(ii) the date on which there are no Beneficiaries remaining;
provided, however, that this Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at
any time any holder of Preferred Securities of any series or
any Beneficiary must restore payment of any sums paid under
the Preferred Securities of such series, under any
Obligation, under the Guarantee or under this Agreement for
any reason whatsoever. This Agreement is continuing,
irrevocable, unconditional and absolute.
Section 1.03. Waiver of Notice. Aetna hereby
waives notice of acceptance of this Agreement and of any
Obligation to which it applies or may apply and Aetna hereby
waives presentment, demand for payment, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
Section 1.04. Releases, Waivers, Etc. The
obligations, covenants, agreements and duties of Aetna under
this Agreement shall in no way be affected or impaired by
reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by Capital of
any express or implied agreement, covenant, term or
condition relating to the Obligations to be performed or
observed by Capital;
(b) the extension of time for the payment by
Capital of all or any portion of the Obligations or for the
performance of any other obligation under, arising out of,
or in connection with, the Obligations;
(c) any failure, omission, delay or lack of
diligence on the part of the Beneficiaries to enforce,
assert or exercise any right, privilege, power or remedy
conferred on the Beneficiaries with respect to the
Obligations or any action on the part of Capital granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings
affecting, Capital or any of the assets of Capital; or
(e) the settlement or compromise of any
Obligation guaranteed hereby or any obligation hereby
incurred.
There shall be no obligation of the Beneficiaries to give
notice to, or obtain the consent of, Aetna with respect to
the happening of any of the foregoing.
Section 1.05. Enforcement. A Beneficiary may
enforce this Agreement directly against Aetna and Aetna
waives any right or remedy to require that any action be
brought against Capital or any other person or entity before
proceeding against Aetna.
ARTICLE II
Section 2.01. Binding Effect. All guarantees and
agreements contained in this Agreement shall bind the
successors, assigns, receivers, trustees and representatives
of Aetna and shall inure to the benefit of the
Beneficiaries.
Section 2.02. Amendment. So long as there
remains any Beneficiary of Capital, or any Preferred
Securities of any series are outstanding, this Agreement
shall not be modified or amended in any manner adverse to
such Beneficiaries or to the holders of the Preferred
Securities.
Section 2.03. Notices. Any notice, request or
other communication required or permitted to be given
hereunder shall be given in writing by delivering the same
against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed as follows (and if
so given, shall be deemed given when mailed or upon receipt
of an answer-back, if sent by telex), to wit:
Aetna Capital L.L.C.
c/o Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile No.:
Attention:
Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile No.:
Attention:
Section 2.04 THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
THIS AGREEMENT is executed as of the day and year
first above written.
AETNA LIFE AND CASUALTY COMPANY
By ____________________________
Name:
Title:
AETNA CAPITAL L.L.C.
By Aetna Life and Casualty Company,
as Managing Member
By _______________________
Name:
Title:
Consent of Independent Auditors
EXHIBIT 23.1
The Board of Directors
Aetna Life and Casualty Company
We consent to incorporation by reference in the
Registration Statement on Form S-3 of Aetna Life and
Casualty Company of our reports dated February 8, 1994,
relating to the consolidated balance sheets of Aetna Life
and Casualty Company and Subsidiaries as of December 31,
1993 and 1992 and the related consolidated statements of
income, shareholders' equity, and cash flows and related
schedules for each of the years in the three-year period
ended December 31, 1993, which reports appear in or are
incorporated by reference in the December 31, 1993 annual
report on Form 10-K of Aetna Life and Casualty Company.
Our reports refer to changes in 1993 in the
company's accounting for certain investments in debt and
equity securities, reinsurance of short-duration and
long-duration contracts, post-employment benefits, workers'
compensation life table indemnity reserves and
retrospectively rated reinsurance contracts and to changes
in 1992 in the company's accounting for income taxes and
postretirement benefits other than pensions.
We also consent to the reference to our firm under
the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick
Hartford, Connecticut
March 25, 1994
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned directors and/or officers of Aetna Life
and Casualty Company (the "Company"), hereby severally
constitute and appoint Zoe Baird, Senior Vice President and
General Counsel, John W. Campbell, Vice President and
Counsel, and Kirk P. Wickman, Counsel, and each of them
individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full
power to them and each of them to sign for us, in our names
and in the capacities indicated below, the Registration
Statement on Form S-3 to be filed with the Securities and
Exchange Commission, and any and all amendments to said
Registration Statement (including post-effective
amendments), in connection with the registration under the
Securities Act of 1933, as amended, of up to $500,000,000 of
preferred limited liability company interests in Aetna
Capital L.L.C. guaranteed to the extent set forth in the
Registration Statement by the Company (and other specified
securities of the Company) and to file or cause to be filed
the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys, and each of them,
full power and authority to do and perform each and every
act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes
as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each
of them, or their substitute or substitutes, shall do or
cause to be done by virtue of this Power of Attorney.
WITNESS our hands on this 25th day of March, 1994.
/s/ RONALD E. COMPTON
- -------------------------------- --------------------------------
Ronald E. Compton Michael H. Jordan
Chairman, President and Director Director
(Principal Executive Officer)
/s/ WALLACE BARNES /s/ JACK D. KUEHLER
- -------------------------------- --------------------------------
Wallace Barnes Jack D. Kuehler
Director Director
/s/ JOHN F. DONAHUE /s/ FRANK R. O'KEEFE, JR.
- -------------------------------- --------------------------------
John F. Donahue Frank R. O'Keefe, Jr.
Director Director
/s/ WILLIAM H. DONALDSON /s/ DAVID M. RODERICK
- -------------------------------- --------------------------------
William H. Donaldson David M. Roderick
Director Director
/s/ BARBARA HACKMAN FRANKLIN /s/ PATRICK W. KENNY
- -------------------------------- --------------------------------
Barbara Hackman Franklin Patrick W. Kenny
Director Group Executive, Finance and
Administration
(Principal Financial Officer)
/s/ EARL G. GRAVES /s/ ROBERT E. BROACH
- -------------------------------- --------------------------------
Earl G. Graves Robert E. Broach
Director Senior Vice President, Finance
and Corporate Controller
(Principal Accounting Officer)
/s/ GERALD GREENWALD
- --------------------------------
Gerald Greenwald
Director
