<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2 )*
ARCH PETROLEUM INC.
(Name of Issuer)
COMMON STOCK, $.01 par value
(Title of Class of Securities)
03939B105
(CUSIP Number)
Linda M. Terry, Esq.
CIGNA Corporation, 900 Cottage Grove Road, Bloomfield, CT 06152-2215
(860) 726-8123
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 1, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3)or (4), check the following box / /
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
This Schedule 13D is restated in its entirety pursuant to Rule 101 of Regulation
S-T. The affected portions requiring amendment are in Items 2 through 7.
Page 1 of 26 Pages
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 03939B105 Page 2 of 26 Pages
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
CIGNA Corporation
06-1059331
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(See Instructions) (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS (See Instructions)
00
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 3,636,360
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
3,636,360
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,636,360
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
(See Instructions)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.4%
14 TYPE OF REPORTING PERSON (See Instructions)
HC, CO
<PAGE> 3
This Amendment No. 2 to the Schedule 13D dated October 31, 1994 ("Original
Statement"), as amended by Amendment No. 1 dated February 16, 1995 ("Amendment
No. 1"), hereby amends Items 2 through 7 of such Schedule 13D to the extent and
in the manner set forth below. Unless otherwise indicated, all capitalized terms
used but not defined herein shall have the meaning set forth in such Schedule
13D, the entire text of which is restated at the end of this Amendment No. 2.
ITEM 2. IDENTITY AND BACKGROUND.
The third paragraph of Item 2 is deleted in its entirety and replaced with the
following paragraph:
This filing should not be construed to imply that CIGNA, any of the
CIGNA Subsidiaries or CMP is a member of a group including such person and any
one or more of the other persons referred to in this filing. This Schedule 13D
is filed solely because the CIGNA Subsidiaries are under common control and
because CIGNA, as the common parent of the CIGNA Subsidiaries, may be deemed to
be the beneficial owner of the shares of Common Stock beneficially owned by them
for the purposes of Section 13(d) of the Act.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The following paragraph is added at the end of the text of Item 3:
Effective as of January 1, 1998, in connection with the sale by
Connecticut General and certain of its affiliates of their individual life
insurance and annuity businesses to The Lincoln National Life Insurance Company
("Lincoln") and certain of its affiliates, Connecticut General transferred to
Lincoln in a private transaction certain investment assets associated with such
businesses, including 63,625 shares of Convertible Preferred Stock, $43,727
principal amount of the Series A Notes and $393,539 principal amount of the
Series B Notes. An Investment Administration Agreement effective as of January
1, 1998 (the "Administration Agreement"), provides for CII to manage such
securities of the Issuer, and the shares of Common Stock into which such
securities may be converted (together the "Managed Securities"), for Lincoln on
a fully discretionary basis, subject to the right of Lincoln Investment
Management, Inc. ("LIM"), an affiliate of Lincoln engaged in investment
management activities, to terminate such management services upon 30 days prior
written notice to CII and further subject to LIM's right to sell any or all of
the Managed Securities at any time on Lincoln's behalf after affording
Connecticut General a right of first offer in accordance with the terms of the
Administration Agreement. LIM, an Illinois corporation, and Lincoln, an Indiana
corporation, have their principal offices and places of business at 200 E. Berry
Street, Fort Wayne, Indiana 46802.
ITEM 4. PURPOSE OF TRANSACTION.
The second paragraph of Item 4 is deleted in its entirety and replaced with the
following paragraph:
Except as set forth above, none of CIGNA, any of the CIGNA Subsidiaries
nor CMP has any present plans or proposals that relate to or would result in any
of the actions required to be described in Item 4 of Schedule 13D.
Page 3 of 26 Pages
<PAGE> 4
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Subsections (a), (b) and (d) of Item 5 are deleted in their entirety and the
following is substituted therefor:
(a) CIGNA, through its ownership and control of the CIGNA Subsidiaries,
may be deemed to be the beneficial owner of the following numbers of shares of
Common Stock, representing the following respective percentages of the
outstanding shares of Common Stock:
<TABLE>
<CAPTION>
Right to Acquire
Shares Held at Shares within 60
1/1/98 days of 1/1/98 Percentage of Class
------ -------------- -------------------
<S> <C> <C> <C>
Connecticut General shares 0 497,834 2.4%
CMP shares 0 2,343,271 11.2%
Managed Securities 0 795,255 3.8%
Aggregate 0 3,636,360 17.4%
</TABLE>
(For purposes of the foregoing calculations of percentage ownership, the number
of outstanding shares of Common Stock used was 20,958,164, consisting of the
17,321,804 shares outstanding on October 31, 1997, as reported in the Issuer's
report on Form 10-Q for the quarter ended September 30, 1997, increased by the
3,636,360 shares subject to acquisition as shown above.)
(b) Pursuant to the Certificate of Designation, the holders of shares
of Convertible Preferred Stock have equal voting rights, on an as converted
basis, with every outstanding share of Common Stock and each holder of
Convertible Preferred Stock is entitled to one vote for each share of Common
Stock, on an as converted basis, into which such Convertible Preferred Stock is
at the time convertible on each matter on which the holders of Common Stock are
entitled to vote. By virtue of its ownership of 39,829.5 shares of Convertible
Preferred Stock, Connecticut General presently has the power to vote or direct
the voting of 398,295 shares of Common Stock. By virtue of its ownership of
187,454.5 shares of Convertible Preferred Stock, CMP presently has the power to
vote or direct the voting of 1,874,545 shares of Common Stock. CII presently has
the power to vote or direct the voting of 636,250 shares of Common Stock by
virtue of the 63,625 shares of Convertible Preferred Stock that constitute
Managed Securities. CIGNA, through its control of the CIGNA Subsidiaries, may be
deemed presently to share the power to vote or direct the voting of 2,909,090
shares of Common Stock.
Assuming conversion of their Series A Notes and Series B Notes,
Connecticut General and CMP would have the power to vote or direct the voting of
497,834 shares and 2,343,271 shares of Common Stock, respectively. Assuming
conversion of the Series A Notes and Series B Notes that constitute Managed
Securities, CII would have the power to vote or direct the voting of 795,255
shares of Common Stock. Accordingly, CIGNA, through its control of the CIGNA
Subsidiaries, could be deemed to share the power to vote or direct the voting of
any or all of the 3,636,360 shares of Common Stock that would then be
beneficially owned by them. Assuming conversion of the shares of Convertible
Preferred Stock and Series A Notes and Series B Notes: Connecticut General and
CMP would have the power to dispose of or direct the disposition of 497,834
shares and 2,343,271 shares of Common Stock, respectively; CII would have the
power to dispose of or direct the disposition of 795,255 shares of Common Stock
as Managed Securities; and CIGNA, through its control of the CIGNA Subsidiaries,
could be deemed to share the power to dispose of or direct the
Page 4 of 26 Pages
<PAGE> 5
disposition of any or all of the 3,636,360 shares of Common Stock that would
then be beneficially owned them.
In this subsection (b), references to Connecticut General should be
deemed to include its investment adviser, CIAC, which has voting and dispositive
power with respect to Connecticut General's shares of Common Stock, and
references to CMP or the General Partner should be deemed to include CMP's
investment adviser, CII, which has voting and dispositive power with respect to
CMP's shares of Common Stock.
(d) No person other than those named in the response to Item 2 above,
or Lincoln and/or its affiliates with respect to the Managed Securities, will
have the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, any of the shares of Common Stock referred to
herein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES
OF THE ISSUER.
The final paragraph of Item 6 is deleted in its entirety and replaced with the
following paragraph:
The information provided in Item 3 above relating to the Administration
Agreement is incorporated herein by reference. The Administration Agreement is
attached hereto as Exhibit 4 and incorporated herein by reference and any
description of such Agreement in the items of this Schedule is qualified in its
entirety by reference to such Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following is added at the end of Item 7:
Exhibit 4 -- Investment Administration Agreement (Mezzanine
Investments) dated as of January 1, 1998, between
Lincoln Investment Management, Inc. and CIGNA
Investments, Inc.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: January 9, 1998
CIGNA CORPORATION
By: /s/ Kathryn Pietrowiak
--------------------------
Kathryn Pietrowiak,
Assistant Corporate Secretary
Page 5 of 26 Pages
<PAGE> 6
SET OUT BELOW IS A RESTATEMENT OF THE TEXT OF THE ORIGINAL STATEMENT.
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, $.01 par value (the
"Common Stock"), of Arch Petroleum Inc., a Delaware corporation (the "Issuer"),
whose principal executive offices are located at 777 Taylor Street, Suite II,
Fort Worth, Texas 76102. The Common Stock is and was at all relevant times a
class of equity securities registered pursuant to the Securities Exchange Act of
1934, as amended (the "Act").
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed by CIGNA Corporation, a Delaware
corporation ("CIGNA"). The address of the principal business and principal
office of CIGNA is One Liberty Place, 1650 Market Street, Philadelphia,
Pennsylvania 19192. The principal business of CIGNA is to act as a holding
company for various subsidiaries which provide insurance, health care and
financial services.
CIGNA is the indirect parent of Connecticut General Life Insurance
Company ("Connecticut General") and CIGNA Mezzanine Partners III, Inc. (the
"General Partner"). Each of Connecticut General and the General Partner is
wholly owned by CIGNA through intermediate wholly owned subsidiaries. The
General Partner is the general partner of CIGNA Mezzanine Partners III, L.P.
("CMP"), a Delaware limited partnership which is an unregistered investment fund
investing primarily in mezzanine securities.
This filing should not be construed to imply that CIGNA,
Connecticut General or CMP is a member of a group including CIGNA, Connecticut
General and CMP, or any of them. This Schedule 13D is filed solely because
Connecticut General and the General Partner are under common control and because
CIGNA, as the common parent of Connecticut General and the General Partner, may
be deemed to be the beneficial owner of the shares of Common Stock beneficially
owned by Connecticut General and CMP for the purposes of Section 13(d) of the
Act.
The name, residence or business address, citizenship, present
principal occupation or employment, and the name and address of any corporation
or other organization in which such employment is conducted of each director and
executive officer of CIGNA are set forth in Appendix A attached hereto and
incorporated herein by reference.
To the best of CIGNA's knowledge, during the last five years, none
of CIGNA, Connecticut General, CMP, the General Partner or any person identified
in Appendix A has been (i) convicted in any criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On October 20, 1994, pursuant to a Securities Purchase Agreement
dated as of October 15, 1994 between the Issuer and Connecticut General (the
"Connecticut General Purchase Agreement"), Connecticut General purchased from
the Issuer 103,454.5 shares of the Issuer's Exchangeable Convertible Preferred
Stock (the "Convertible Preferred Stock"), one of the Issuer's 9.75% Series A
Convertible Subordinated Notes due 2004 (the "Series A Notes") in the principal
amount of $71,100 and one of the Issuer's Adjustable Rate Series B
Page 6 of 26 Pages
<PAGE> 7
Subordinated Notes due 2004 (the "Series B Notes") in the principal amount
$639,900. On October 20, 1994, pursuant to a Securities Purchase Agreement dated
as of October 15, 1994 between the Issuer and CMP (the "CMP Purchase
Agreement"), CMP purchased from the Issuer 187,454.5 shares of Convertible
Preferred Stock, one of the Series A Notes in the principal amount of $128,900
and one of the Series B Notes in the principal amount of $1,160,100. The
Connecticut General Purchase Agreement and the CMP Purchase Agreement are
referred to herein as the "Purchase Agreements."
As set forth in the Certificate of Designation of Preferences and
Rights of the Convertible Preferred Stock (the "Certificate of Designation"),
each share of Convertible Preferred Stock is convertible, at any time at the
option of the holder thereof, into such number of whole shares of Common Stock
as is equal to the aggregate liquidation preference of $27.50 per share of the
shares of Convertible Preferred Stock surrendered for conversion divided by the
conversion price of $2.75 per share of Common Stock, subject to anti-dilution
adjustments specified in the Certificate of Designation (the "Preferred Stock
Conversion Price"). As further set forth in the Certificate of Designation, if
at any time after August 20, 1998 the Common Stock is listed on a national
securities exchange or trades in the National Market System or in the
over-the-counter market, and for a period of at least 60 consecutive trading
days commencing on or after August 20, 1998 the closing sale price of the Common
Stock reported on such exchange or in the National Market System or the average
bid and asked prices of the Common Stock in the over-the-counter market equals
or exceeds 125% of the Preferred Stock Target Price (as defined below) then in
effect, the Issuer may convert the shares of Convertible Preferred Stock, as a
whole but not in part, into the respective numbers of whole shares of Common
Stock specified in the preceding sentence at the Preferred Stock Conversion
Price then in effect. The term "Preferred Stock Target Price" means, as of any
date of determination, the product of (a) the applicable redemption price set
forth in the Certificate of Designation and (b) the Preferred Stock Conversion
Price then in effect. The Certificate of Designation also provides that shares
of Convertible Preferred Stock are exchangeable at the option of the Issuer, to
the extent of funds legally available therefor, in whole but not in part, on any
April 20 or October 20 up to and including April 20, 2004, through the issuance
of the Issuer's 10.563% Series C Convertible Subordinated Notes due 2004 (the
"Series C Notes" and, together with the Series A Notes and the Series B Notes,
the "Notes") in redemption of and in exchange for shares of Convertible
Preferred Stock.
As set forth in the Purchase Agreements, each Note is convertible,
at any time in the case of a Series A Note or Series C Note and on or at any
time after the Series B Share Reservation Date (as defined below) in the case of
a Series B Note, at the option of the holder thereof, into such number of whole
shares of Common Stock as is equal to the unpaid principal amount of such Note
divided by the conversion price of $2.75 per share of Common Stock, subject to
anti-dilution adjustments specified in the Purchase Agreements (the "Note
Conversion Price"). The "Series B Share Reservation Date" means the date on
which authorized capital stock of the Issuer shall have been increased (as
evidenced by the filing and effectiveness of an amendment to the Certificate of
Incorporation of the Issuer) so that a sufficient number of shares of Common
Stock shall be reserved for issuance upon conversion of the Series B Notes. As
further set forth in the Purchase Agreements, if at any time after August 20,
1998 the Common Stock is listed on a national securities exchange or trades in
the National Market System or in the over-the-counter market, and for a period
of at least 60 consecutive trading days commencing on or after August 20, 1998
the closing sale price of the Common Stock reported on such exchange or in the
National Market System or the average bid and asked prices of the Common Stock
in the over-the-counter market equals or exceeds 125% of the Note Target Price
(as defined below) then in effect, the Issuer may convert the Notes, as a whole
but not in part, into the respective numbers of whole shares of Common Stock
specified in the preceding sentence at the Note Conversion Price then in effect.
The term "Note Target Price" means, as of
Page 7 of 26 Pages
<PAGE> 8
any date of determination, the product of (1) the applicable prepayment price
set forth in the Purchase Agreements and (2) the Note Conversion Price then in
effect.
Connecticut General and CMP purchased their respective shares of
Convertible Preferred Stock and Notes in a private placement exempt from
registration under the Securities Act of 1933, as amended. Such shares of
Convertible Preferred Stock and Notes were acquired by Connecticut General and
CMP in the ordinary course of their respective investment activities.
None of CIGNA's funds was used to acquire shares of Convertible
Preferred Stock or Notes.
The source of funds for Connecticut General's purchase of shares
of Convertible Preferred Stock and Notes was its general account. The purchase
price for the 103,454.5 shares of Convertible Preferred Stock purchased by
Connecticut General was $27.50 per share for an aggregate purchase price of
$2,844,998.75. The purchase price for the $71,100 aggregate principal amount of
Series A Notes and $639,900 aggregate principal amount of Series B Notes
purchased by Connecticut General was 100% of the principal amount of such Notes.
The source of funds for CMP's purchase of shares of Convertible
Preferred Stock and Notes was capital contributions by its partners. The
purchase price for the 187,454.5 shares of Convertible Preferred Stock purchased
by CMP was $27.50 per share for an aggregate purchase price of $5,154,998.75.
The purchase price for the $128,900 aggregate principal amount of Series A Notes
and $1,160,100 aggregate principal amount of Series B Notes purchased by CMP was
100% of the principal amount of such Notes.
ITEM 4. PURPOSE OF TRANSACTION
Each of Connecticut General and CMP acquired the shares of
Convertible Preferred Stock and Notes acquired by it for its own account for
investment in the ordinary course of its investment activities.
Except as set forth above, neither Connecticut General nor CMP has
any present plans or proposals that relate to or would result in any of the
actions required to be described in Item 4 of schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) CIGNA, through its ownership and control of Connecticut
General and CMP, may be deemed to be the beneficial owner of the following
numbers of shares of Common Stock, representing the following respective
percentages of the shares of Common Stock outstanding on October 20, 1994:
<TABLE>
<CAPTION>
Shares Right to
Beneficially Acquire Shares
BENEFICIAL Owned At Within 60 days Percentage of
HOLDER 10/20/94 Of 10/20/94 Class
------ -------- ----------- -----
<S> <C> <C> <C>
Connecticut General -0- 1,060,399 5.3%
CMP -0- 1,921,417 9.5%
Aggregate -0- 2,981,816 14.8%
------ ---------- ----
</TABLE>
Page 8 of 26 Pages
<PAGE> 9
Upon the occurrence of the Series B Share Reservation Date and
assuming the same number of shares of Common Stock outstanding on such date as
on October 20, 1994 and that the Note Conversion Price has not been adjusted
pursuant to anti-dilution provisions, Connecticut General would have the right
to acquire within 60 days 1,293,089 shares of Common Stock, representing 6.2% of
the outstanding shares of Common Stock, CMP would have the right to acquire
2,343,271 shares of Common Stock, representing 11.3% of the outstanding shares
of Common Stock, and CIGNA, through its ownership and control of Connecticut
General and CMP, could then be deemed to be the beneficial owner of 3,636,360
shares of Common Stock, representing 17.5% of the outstanding shares of Common
Stock.
(For purposes of the foregoing calculations of percentage ownership, the number
of shares of Common Stock outstanding used was 17,186,404, the number of shares
outstanding on October 20, 1994, as represented to Connecticut General and CMP
by the Chief Executive Officer of the Issuer, increased by the number of shares
subject to acquisition by Connecticut General and CMP.)
(b) Pursuant to the Certificate of Designation, the holders of
shares of Convertible Preferred Stock have equal voting rights, on an as
converted basis, with every outstanding share of Common Stock and each holder of
Convertible Preferred Stock is entitled to one vote for each share of Common
Stock, on an as converted basis, into which such Convertible Preferred Stock is
at the time convertible on each matter on which the holders of Common Stock are
entitled to vote. By virtue of its ownership of 103,454.5 shares of Convertible
Preferred Stock, Connecticut General presently has the power to vote or direct
the voting of 1,034,545 shares of Common Stock. By virtue of its ownership of
187,454.5 shares of Convertible Preferred Stock, CMP presently has the power to
vote or direct the voting of 1,874,545 shares of Common Stock. CIGNA, through
its control of Connecticut General and the General Partner, may be deemed
presently to share the power to vote or direct the voting of 2,909,090 shares of
Common Stock.
Assuming conversion of their Series A Notes, Connecticut General
and CMP would have the power to vote or direct the voting of 1,060,399 shares
and 1,921,417 shares of Common Stock, respectively, and CIGNA, through its
control of Connecticut General and the General Partner, could be deemed to share
the power to vote or direct the voting of any or all of the 2,981,816 shares of
Common Stock that would then be beneficially owned by Connecticut General and
CMP. Upon the occurrence of the Series B Share Reservation Date and assuming
conversion of their Series A Notes and Series B Notes, Connecticut General and
CMP would have the power to vote or direct the voting of 1,293,089 shares and
2,343,271 shares of Common Stock, respectively, and CIGNA, through its control
of Connecticut General and the General Partner, could be deemed to share the
power to vote or direct the voting of any or all of the 3,636,360 shares of
Common Stock that would then be beneficially owned by Connecticut General and
CMP.
Assuming conversion of their shares of Convertible Preferred Stock
and Series A Notes, Connecticut General and CMP would have the power to dispose
of or direct the disposition of 1,060,399 shares and 1,921,417 shares of Common
Stock, respectively, and CIGNA, through its control of Connecticut General and
the General Partner, could be deemed to share the power to dispose of or direct
the disposition of any or all of the 2,981,816 shares of Common Stock that would
then be beneficially owned by Connecticut General and CMP. Upon the occurrence
of the Series B Share Reservation Date and assuming conversion of their shares
of Convertible Preferred Stock and Series A Notes and Series B Notes,
Connecticut General and CMP would have the power to dispose of or direct the
disposition of 1,293,089 shares and 2,343,271 shares of Common Stock,
respectively, and CIGNA, through its control of Connecticut General and the
General Partner, could be deemed to share the power to dispose of or direct the
disposition of any or all of the 3,636,360 shares of Common Stock that would
then be beneficially owned by Connecticut General and CMP.
Page 9 of 26 Pages
<PAGE> 10
(c) To the best of CIGNA's knowledge, no transactions in the
Common Stock were effected in the past 60 days by persons named in Item 2 above.
(d) No person other than those named in the response to Item 2
above will have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares of Common Stock
referred to herein.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES
OF THE ISSUER
The agreements entered into by Connecticut General and CMP
relating to this statement are the Connecticut General Purchase Agreement and
the CMP Purchase Agreement, respectively. In addition, pursuant to a
Registration Rights Agreement dated as of October 20, 1994 (the "Registration
Rights Agreement") among the Issuer and The Travelers Indemnity Company, The
Travelers Life and Annuity Company, Connecticut General and CMP (collectively,
the "Purchasers"), the Purchasers have registration rights with respect to the
shares of Common Stock issuable upon conversion of their shares of Convertible
Preferred Stock and Notes. The Connecticut General Purchase Agreement, the CMP
Purchase Agreement and the Registration Rights Agreement are attached hereto as
Exhibit 1, Exhibit 2 and Exhibit 3, respectively, and are incorporated herein by
reference. The descriptions of such agreements in the foregoing items are
qualified in their entirety by reference to such agreements.
Except for the Purchase Agreements and the Registration Rights
Agreement, there are no contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons named in Item 2 above or between such
persons and any other person with respect to any securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 -- Securities Purchase Agreement dated as of
October 15, 1994 between Arch Petroleum Inc.
and Connecticut General Life Insurance
Company.
Exhibit 2 -- Securities Purchase Agreement dated as of
October 15, 1994 between Arch Petroleum Inc.
and CIGNA Mezzanine Partners III, L.P.
Exhibit 3 -- Registration Rights Agreement dated as of
October 20, 1994 among Arch Petroleum Inc.,
The Travelers Indemnity Company, The
Travelers Life and Annuity Company,
Connecticut General Life Insurance Company
and CIGNA Mezzanine Partners III, L.P.
Page 10 of 26 Pages
<PAGE> 11
APPENDIX A
CIGNA CORPORATION
DIRECTORS
(ALL DIRECTORS ARE CITIZENS OF THE UNITED STATES)
<TABLE>
<CAPTION>
RESIDENCE OR
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
---- ---------------- --------------------
<S> <C> <C>
WILSON H. TAYLOR CIGNA Corporation Chairman of the Board and
One Liberty Place Chief Executive Officer
1650 Market Street
Philadelphia, PA 19192-1550
ROBERT P. BAUMAN British Aerospace plc Non-Executive Chairman
Warwick House
P.O. Box 87
Farnborough Aerospace Centre
Farnborough
Hants. GU14 6 YU
England
EVELYN BEREZIN 10 Tinker Lane Venture Capital Consultant
East Setauket, NY 11733
ROBERT H. CAMPBELL Sun Company, Inc. Chairman, President and
1801 Market Street Chief Executive Officer
Philadelphia, PA 19103
ALFRED C. DeCRANE, JR. Texaco, Inc. Chairman of the Board and
2000 Westchester Avenue Chief Executive Officer
White Plains, NY 10650
JAMES F. ENGLISH, JR. Trinity College President Emeritus
c/o Carol J. Ward
CIGNA Corporation
1650 Market Street
Philadelphia, PA 19192-1550
BERNARD M. FOX Northeast Utilities President and
107 Selden Street Chief Executive Officer
Berlin, CT 06037
</TABLE>
Page 11 of 26 Pages
<PAGE> 12
<TABLE>
<CAPTION>
RESIDENCE OR
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
---- ---------------- --------------------
<S> <C> <C>
FRANK S. JONES Massachusetts Institute of Ford Professor Emeritus of
Technology Urban Affairs
c/o Carol J. Ward
CIGNA Corporation
1650 Market Street
Philadelphia, PA 19192-1550
GERALD D. LAUBACH, Ph.D. Pfizer, Inc. Retired President
c/o Carol J. Ward
CIGNA Corporation
1650 Market Street
Philadelphia, PA 19192-1550
MARILYN W. LEWIS American Water Works Company Chairman
2 East Main Street
Strasburg, PA 17579
PAUL F. OREFFICE The Dow Chemical Company Retired Chairman of the Board
c/o Carol J. Ward
CIGNA Corporation
1650 Market Street
Philadelphia, PA 19192-1550
CHARLES R. SHOEMATE CPC International Inc. Chairman, President and
International Plaza Chief Executive Officer
Englewood Cliffs, NJ 07632
LOUIS W. SULLIVAN, M.D. Morehouse School of Medicine President
720 Westview Drive
Atlanta, GA 30314
EZRA K. ZILKHA Zilkha & Sons, Inc. President
767 Fifth Avenue
Suite 4605
New York, NY 10153-0002
</TABLE>
Page 12 of 26 Pages
<PAGE> 13
CIGNA CORPORATION
EXECUTIVE OFFICERS
(ALL EXECUTIVE OFFICERS ARE CITIZENS OF THE UNITED STATES)
<TABLE>
<CAPTION>
RESIDENCE OR
NAME AND CITIZENSHIP BUSINESS ADDRESS PRINCIPAL OCCUPATION
- -------------------- ---------------- --------------------
<S> <C> <C>
WILSON H. TAYLOR One Liberty Place Chairman and Chief Executive
1650 Market Street Officer
Philadelphia, PA 19192-1550
LAWRENCE P. ENGLISH 900 Cottage Grove Road President
Hartford, CT 06152-1216 CIGNA Healthcare
H. EDWARD HANWAY Two Liberty Place President
1601 Chestnut Street CIGNA International
Philadelphia, PA 19192-2531
GERALD A. ISOM Two Liberty Place President
1601 Chestnut Street CIGNA Property & Casualty
Philadelphia, PA 19192-2451
JOHN K. LEONARD Two Liberty Place President
1601 Chestnut Street CIGNA Group Insurance -
Philadelphia, PA 19192-2240 Life-Accident-Disability
DONALD M. LEVINSON One Liberty Place Executive Vice President
1650 Market Street Human Resources and
Philadelphia, PA 19192-1550 Services Division
BYRON D. OLIVER Metro Center President
350 Church Street CIGNA Retirement &
Hartford, CT 06103 Investment Services
ARTHUR C. REEDS, III 900 Cottage Grove Road President
Hartford, CT 06152-2211 CIGNA Investment
Management
JAMES G. STEWART One Liberty Place Executive Vice President and
1650 Market Street Chief Financial Officer
Philadelphia, PA 19192-1550
THOMAS J. WAGNER One Liberty Place Executive Vice President
1650 Market Street General Counsel
Philadelphia, PA 19192-1550
</TABLE>
Page 13 of 26 Pages
<PAGE> 14
SET OUT BELOW IS A RESTATEMENT OF THE TEXT OF AMENDMENT NO. 1.
This Amendment No. 1 to the Schedule 13D dated October 31, 1994 hereby amends
Items 2, 3 and 5 of such Schedule 13D. Unless otherwise indicated, all
capitalized terms used but not defined herein shall have the meaning set forth
in such Schedule 13D.
ITEM 2. IDENTITY AND BACKGROUND.
The second, third and final paragraphs of Item 2 are deleted in their entirety
and replaced with the following paragraphs:
CIGNA is the indirect parent of Connecticut General Life Insurance Company
("Connecticut General") and CIGNA Mezzanine Partners III, Inc. (the "General
Partner"). Each of Connecticut General and the General Partner is wholly owned
by CIGNA through intermediate wholly owned subsidiaries. The General Partner is
the general partner of CIGNA Mezzanine Partners III, L.P. ("CMP"), a Delaware
limited partnership which is an unregistered investment fund investing primarily
in mezzanine securities. CIGNA is also the indirect parent of CIGNA Investment
Advisory Company, Inc. ("CIAC"), which acts as investment adviser for
Connecticut General, and of CIGNA Investments, Inc. ("CII" and together with
Connecticut General, the General Partner and CIAC, the "CIGNA Subsidiaries"),
which acts as investment adviser for CMP.
This filing should not be construed to imply that CIGNA, any of the CIGNA
Subsidiaries or CMP is a member of a group including CIGNA, the CIGNA
Subsidiaries and CMP, or any of them. This Schedule 13D is filed solely because
the CIGNA Subsidiaries are under common control and because CIGNA, as the common
parent of the CIGNA Subsidiaries, may be deemed to be the beneficial owner of
the shares of Common Stock held by Connecticut General and CMP for the purposes
of Section 13(d) of the Act.
To the best of CIGNA's knowledge, during the last five years, none of
CIGNA, the CIGNA Subsidiaries, CMP or any person identified in Appendix A has
been (i) convicted of any criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The following sentence is added at the end of the third paragraph of Item 3:
The Series B Share Reservation Date occurred on February 8, 1995.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Subsection (a) of Item 5 is hereby deleted in its entirety and the following is
substituted therefor:
(a) CIGNA, through its ownership and control of the CIGNA Subsidiaries, may be
deemed to be the beneficial owner of the following numbers of shares of Common
Stock, representing the following respective percentages of the outstanding
shares of Common Stock:
Page 14 of 26 Pages
<PAGE> 15
<TABLE>
<CAPTION>
Right to Acquire
Shares within 60
HOLDER Shares Held at 02/08/95 days of 02/08/95 Percentage of Class
------ ----------------------- ---------------- -------------------
<S> <C> <C> <C>
Connecticut General 0 1,293,089 6.2%
CMP 0 2,343,271 11.3%
Aggregate 0 3,636,360 17.5%
</TABLE>
(For purposes of the foregoing calculations of percentage ownership, the
number of outstanding shares of Common Stock used was 20,822,764,
consisting of the 17,186,404 shares outstanding on December 23, 1994, as
reported in the Issuer's proxy statement dated January 4, 1995, increased
by the 3,636,360 shares subject to acquisition by Connecticut General and
CMP.)
Subsection (b) of Item 5 is hereby amended by addition of the following final
paragraph:
In this subsection (b), references to Connecticut General should be deemed
to include its investment adviser, CIAC, which has voting and dispositive power
with respect to Connecticut General's shares of Common Stock, and references to
CMP or the General Partner should be deemed to include CMP's investment adviser,
CII, which has voting and dispositive power with respect to CMP's shares of
Common Stock.
Page 15 of 26 Pages
<PAGE> 16
EXHIBIT 4
INVESTMENT ADMINISTRATION AGREEMENT
(MEZZANINE INVESTMENTS)
THIS INVESTMENT ADMINISTRATION AGREEMENT is entered into as of January 1,
1998, between LINCOLN INVESTMENT MANAGEMENT, INC., an Illinois corporation,
("Manager") and CIGNA INVESTMENTS, INC., a Delaware corporation, ("Subadviser")
with respect to certain of the assets of The Lincoln National Life Insurance
Company, a life insurance company organized under the laws of the State of
Indiana ("Client") with reference to the following facts:
A. Client has appointed the Manager as investment adviser for its
assets with the authority to select and contract with investment subadvisers in
order to delegate investment management to such investment subadvisers.
B. The Connecticut General Life Insurance Company, a Connecticut
corporation, ("Assignor") and certain of Assignor's affiliates have entered into
that certain Second Amended and Restated Asset Transfer and Acquisition
Agreement dated as of July 27, 1997 (the "Acquisition Agreement") and certain
other agreements ancillary thereto with Client and Lincoln Life & Annuity
Company of New York ("LLANY").
C. The Acquisition Agreement provides for, inter alia, the assignment
and transfer of all or a portion of certain investment assets owned by Assignor
to Client.
D. Accordingly, pursuant to the Master Assignment of Securities dated
as of January 1, 1998 between Client, LLANY and Assignor, Assignor has assigned
and transferred to Client as of the date hereof certain private placement
securities including certain securities, shown on the attached Schedule A, which
were acquired by Assignor as part of a mezzanine investment program. The
securities shown on Schedule A and any securities or collateral received on
conversion or exchange, or in a workout, foreclosure or bankruptcy, or in any
manner with respect to the original securities, but exclusive of any publicly
traded securities, are hereinafter referred to as the "Investments". Each
transaction or series of related transactions pursuant to which particular
Investments were offered by their issuer (including, without limitation, any
subsequent offering, restructuring, reorganization, or workout related thereto)
is hereinafter referred to as a "Mezzanine Transaction".
E. Assignor and its affiliates and affiliate advised accounts maintain
a significant interest in the management of the Investments and desire
Subadviser to manage the Investments, and Manager is willing to have Subadviser
manage the Investments in accordance with the terms and conditions herein set
forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT OF SUBADVISER. Manager hereby retains Subadviser to
perform investment management services with respect to Client's Investments on
the terms set forth in this
Page 16 of 26 Pages
<PAGE> 17
Agreement. Subadviser hereby accepts such retention and agrees during such
period to render the services and to assume the obligations set forth in this
Agreement for the compensation herein provided. This Agreement does not and
shall not be deemed to constitute a partnership or joint venture between the
parties and neither party nor any of its directors, officers, employees or
agents shall, by virtue of the performance of their obligations under this
Agreement, be deemed to be an employee of the other.
2. INVESTMENT MANAGEMENT SERVICES. Subject to Client's right to sell an
Investment in accordance with Section 3(C) of this Agreement, Subadviser, in its
sole discretion, shall make and carry out decisions with respect to the
Investments. Except as provided in Section 3 of this Agreement, Subadviser shall
have the right to manage the Investments and may use and rely upon such
information and materials as it may deem pertinent. Except as provided in
Section 3(B) of this Agreement, Subadviser shall not be required to consult in
advance with anyone; however, Subadviser shall promptly notify Manager of all
material developments and actions taken with respect to each Investment and the
Mezzanine Transaction to which such Investment relates. Except as provided in
Section 3 hereof, Manager hereby authorizes and empowers Subadviser and any
officer of Subadviser and any other individual or entity so designated by any
officer of Subadviser, to execute any and all documents and instruments which he
or it may deem appropriate regarding the holding or disposition of any
Investment; provided, however, that neither Subadviser nor any such individual
or entity shall have any power or authority by virtue of the foregoing clause or
otherwise under this Agreement to direct the Custodian (as defined below) for
the Investments, any broker, dealer or issuer, or any of their respective
agents, to deliver securities or other property or pay cash to Subadviser or any
of its agents. Manager agrees to provide Subadviser with any additional
documentation reasonably necessary to evidence the authority contemplated by
this Agreement.
3. INVESTMENT ADMINISTRATION. Subadviser has assumed no responsibility
under this Agreement other than to render the services called for hereunder.
Subadviser shall manage the Client's interests in the Investments, and shall
take or refrain from taking action with respect thereto, in the identical manner
with which it or any affiliated adviser manages the same interests on behalf of
Assignor. Without limiting the generality of the foregoing, and notwithstanding
anything in this Agreement to the contrary, Subadviser shall manage each
Investment as follows:
(A) COMMUNICATIONS WITH BORROWERS. Subadviser shall have the sole
right to communicate with the issuer and deal sponsor with
respect to each Investment and the Mezzanine Transaction to
which it relates.
(B) CONFLICTS OF INTEREST. Assignor, its affiliates, other
advisory clients of Subadviser and one or more limited
partnerships advised or managed by Subadviser may hold, among
other securities, senior debt or equity of a company, its
parent or subsidiaries and in some instances Subadviser may
owe fiduciary duties to such clients. Client may own
securities of the same company, but the securities may be
subordinated or may otherwise differ with respect to the
rights and remedies available to Client. These holdings
present potential conflicts of interest in negotiating and
administering the respective agreements covering the senior
and mezzanine debt and conflicts of interest among senior
lenders, subordinated lenders and equity owners. Conflicts
arise most often when those companies encounter financial
difficulty. To the best of Subadviser's
Page 17 of 26 Pages
<PAGE> 18
knowledge following reasonable investigation, Schedule B
contains (i) a list of the Investments where Assignor, one or
more of its affiliates, another advisory client of Subadviser
or one or more limited partnerships advised or managed by
Subadviser hold securities in the Mezzanine Transaction
related to each such Investment that are of a class other than
the class to which the Investment belongs (each a "Prior
Notification Investment"), and (ii) a description of such
other class(es) of securities held by such other parties. If
and when Assignor, any affiliate of Assignor, another advisory
client of Subadviser or one or more limited partnerships
advised or managed by Subadviser acquire securities which, if
such securities had been held as of the date of this
Agreement, would have been included on Schedule B as described
above, Subadviser shall promptly notify Manager of such
holding(s) and modify Schedule B as appropriate. Further,
Subadviser shall promptly notify Manager prior to entering
into any waiver, amendment, standstill agreement, or other
material agreement or commencing enforcement action or taking
any other material action with respect to any Prior
Notification Investment. Except as otherwise provided in
Section 8 of this Agreement, Subadviser shall not be liable if
Subadviser or its affiliates in good faith enforce rights held
by them, their affiliates or their advised accounts even if
such enforcement is detrimental to Client's position.
(C) RIGHT OF FIRST OFFER. In the event that Manager, on behalf of
Client, desires to sell an Investment (except for such sales
as Subadviser may direct pursuant to puts, calls, required
"drag-alongs" or otherwise pursuant to the management
authority granted herein), Manager shall have the right to
sell such Investment, but hereby covenants and agrees that it
will not sell, pledge, hypothecate, assign, transfer or
otherwise voluntarily dispose of Client's interest in any
Investment or any part thereof to any person or entity other
than to an affiliate of Assignor or Client (provided that any
such affiliate of Client agrees to be bound by the terms of
this Agreement), until such interest is first offered for sale
by Manager to Assignor. Such offer by Manager shall be made in
writing, setting forth the proposed terms and conditions of
such sale ("Offer"). Assignor shall have twenty (20) business
days following receipt to either accept or reject the Offer.
If Assignor either rejects the Offer or fails to accept the
Offer within the requisite time period, Manager shall be free
to sell the interest in such Investment to any purchaser at a
price equal to or greater than the purchase price set forth in
the Offer. If Manager is unable to reach a definitive
agreement with a prospective purchaser within 120 days
following Assignor's rejection of (or failure to accept) the
Offer, Assignor's right of first offer shall be reinstated as
to any transfer of an interest in that particular Investment.
(D) ADVANCES. Assignor may periodically incur reasonable
out-of-pocket costs and expenses on behalf of the holders of
securities in a Mezzanine Transaction to which an Investment
relates to the extent not paid or reimbursed by an issuer or
other third party, including legal expenses reasonably
incurred in connection with such Mezzanine Transaction and any
expenses reasonably incurred in the course of litigation,
representation on any creditors' committee, reasonable and
customary travel expenses in connection with servicing
delinquent and problem investments, or advances reasonably
made to preserve or protect existing investments, or expenses
reasonably incurred as a result of any other action that
Subadviser (on behalf of Assignor) in its
Page 18 of 26 Pages
<PAGE> 19
sole discretion determines is reasonably necessary or
desirable to maintain or preserve an investment (all such
fees, expenses and advances hereinafter referred to as an
"Advance"). Subadviser shall notify Manager of Client's pro
rata share of any proposed Advance. Within fifteen (15)
business days following Client's receipt of such notice,
Manager shall, at its option, either pay such amount to
Subadviser (thereby avoiding all interest charges) or allow
Subadviser to direct Assignor to make such Advance on Client's
behalf as hereinafter provided. Client shall only be obligated
for its pro rata share of such Advances to the extent of
subsequent distributions made with respect to the Mezzanine
Transaction in relation to which the Advance was made. If
Manager allows Subadviser to direct Assignor to make an
Advance without contributing Client's pro rata share in
advance, interest on such Advance shall be computed at the
coupon rate on the particular Investment with respect to which
the Advance was made and shall include the period from the
date of the Advance until the date of repayment. If Client
holds more than one Investment with respect to a particular
Mezzanine Transaction, the interest rate shall be a blended
rate of all outstanding Investments held by Client with
respect to such Mezzanine Transaction. If the Client holds
only equity securities in a particular Mezzanine Transaction
or the interest rate is not determinable for some other
reason, Subadviser and the Manager shall in good faith agree
on the interest rate and absent such agreement the interest
rate shall be the weighted average interest rate on all other
outstanding Advances made on Client's behalf. Each quarter
Subadviser shall provide to Manager a detailed breakdown of
such Advances with appropriate identification of the
particular Investment to which the Advances relate and with a
computation of the interest payable (if any) with respect to
such Advances. Subadviser may provide such breakdown with
respect to any Mezzanine Transaction in respect to which an
Advance has been made and Subadviser has knowledge that a
distribution with respect to the interests related to such
Mezzanine Transaction is expected. Within ten (10) business
days after any distribution of funds with respect to the
Client's Investment in a Mezzanine Transaction for which
Assignor has made an Advance and for which the Manager
previously has not prepaid Client's pro rata share of such
Advance as provided above, the Manager shall reimburse
Assignor through Subadviser with respect to such Advance up to
the full amount of the distribution paid to the Client;
provided, however, that Client shall not be required to
reimburse Assignor prior to five (5) business days after the
receipt of the breakdown referenced herein. Any amount not so
reimbursed shall continue to be outstanding until reimbursed
at the time of future distributions to the Client with respect
to such Investment.
Expenses incurred by Subadviser or Assignor for overhead,
accounting, investment analysis or similar routine expenses
shall be expenses borne by Subadviser or Assignor. Fees paid
by an issuer to Subadviser or Assignor for structuring or for
servicing in connection with a Mezzanine Transaction shall be
allocated pro rata among the holders of the interests in that
Mezzanine Transaction; provided, however, that Client shall
not be entitled to a pro rata allocation of any fee paid to
Subadviser or Assignor in connection with an Additional
Investment (as defined below) if Manager elects, on Client's
behalf, not to participate in such Additional Investment.
Page 19 of 26 Pages
<PAGE> 20
(E) ADDITIONAL INVESTMENTS. Prior to Subadviser or Assignor making
an additional investment in any Mezzanine Transaction
("Additional Investment") on behalf of Assignor or any of
Subadviser's other accounts, Subadviser shall notify Manager
in writing of the material terms of the proposed Additional
Investment. Without the prior consent of the Manager,
Subadviser is not authorized to make an Additional Investment
on behalf of the Client. Within fifteen (15) business days
following the receipt of such notice from Subadviser, the
Manager will notify Subadviser as to whether the Client will
participate in that Additional Investment. If the Manager
determines not to make an Additional Investment in a
particular Mezzanine Transaction, the Manager agrees that the
interests of Client in that Mezzanine Transaction shall be
subordinated to the interests of other investors holding the
same class of securities in that Mezzanine Transaction;
provided, however, that Client's interests shall be so
subordinated solely with respect to the amount of the
Additional Investments made by the other holders of such class
of securities.
(F) NO REINVESTMENT. Without the prior consent of the Manager,
Subadviser is not authorized to reinvest (i) any distribution
payable to Client with respect to an Investment or (ii) the
proceeds from the sale of any Investment or any interest
therein.
4. REPORTS. Subadviser shall furnish to Manager, at Subadviser's sole
expense, periodic reports showing such data with regard to the Investments as
may be reasonably requested by Manager or, in the absence of specific requests,
as it shall deem advisable.
5. CUSTODY. Subadviser shall under no circumstances act as Client's
custodian ("Custodian") for the Investments or have possession of the
Investments. Moreover, Subadviser shall have no authority to contact the
Custodian concerning Client or Client's interests in the Investments. Manager
agrees to direct Custodian to deliver securities and other assets constituting
Investments (or interests therein) to third parties upon direction by and in
accordance with Subadviser's instructions to Manager for the delivery of such
securities. The Manager acknowledges that Subadviser is under no responsibility
for any default on the part of Custodian and Client will be responsible for the
payment of all fees and expenses charged by Custodian.
6. FEES. The Manager shall pay Subadviser a fee of seven (7) basis
points per annum times "Invested Capital". Invested Capital shall on any date be
the sum of (i) the aggregate principal balance of all debt components of the
Investments, and (ii) the aggregate book value of all equity components of the
Investments, as mutually agreed upon by the parties to this Agreement; provided,
however, that such Invested Capital shall be reduced by any principal
distributed to Client with respect to an Investment and increased by any
Additional Investment (i.e., amounts other than Advances) by Client (if any)
made with respect to a Mezzanine Transaction. Subadviser shall bill Manager
quarterly. The fee shall be payable quarterly within ten (10) business days
following receipt by Manager of a bill from Subadviser on the basis of Invested
Capital as of the end of the last day of the immediately preceding calendar
quarter. Notwithstanding the foregoing, for any calendar quarter during which
this Agreement is not in effect for the full calendar quarter, the fees for
investment advisory services shall be prorated for the period during which the
Agreement is in effect.
Page 20 of 26 Pages
<PAGE> 21
7. DUE AUTHORIZATION. Subadviser represents and warrants that it is
duly registered with the Securities and Exchange Commission pursuant to the
Investment Advisers Act of 1940, as amended. Manager acknowledges receipt of a
copy of Part II of Subadviser's current Form ADV at least 48 hours prior to the
signing of this Agreement. Each party represents and warrants that it has power
and authority to enter into this Agreement and to perform the same, and that the
representatives of such party executing this Agreement on its behalf are duly
authorized to do so. Manager represents and warrants that the retention of
Subadviser as described herein is permitted by law, authorized by corporate
action and the relevant investment management agreements between Manager and
Client, and that there are no restrictions or limitations on the management of
the Investments other than those set forth herein.
8. INDEMNIFICATION. Except as otherwise provided in this Section 8 or
as prohibited by applicable law, Subadviser shall not be liable with respect to
the services rendered or not rendered hereunder or for any mistake of judgment
in the management of the Investments hereunder. Manager hereby agrees to
indemnify Subadviser and hold it harmless against any and all losses, costs,
claims, expenses and liabilities which it may suffer or incur arising out of (i)
a breach of the representations or agreements made by Manager in this Agreement
or (ii) performance of Subadviser's duties in accordance with the terms of this
Agreement; provided, however, that Subadviser shall not be released from
liability by Manager and Manager shall have no obligation to indemnify
Subadviser with respect to any loss, cost, claim, expense or liability that
results from Subadviser's gross negligence, lack of good faith or willful
misconduct. To the extent Subadviser was also acting on behalf of other advisory
clients or affiliates, Manager's indemnification obligations hereunder shall
extend only to its pro rata share of any indemnification obligation hereunder.
9. CONFIDENTIAL RELATIONSHIP. All information and advice furnished by
either party to the other hereunder, including their respective agents and
employees, shall be treated as confidential ("Confidential Information") and
shall not be disclosed to third parties except as required by law or except upon
the prior written approval of the other party; provided, however, that either
party may disclose Confidential Information to (i) its directors, officers,
employees, agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of its investments), (ii) its financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
section, (iii) any federal or state regulatory authority having jurisdiction
over that party, (iv) the National Association of Insurance Commissioners or any
similar organization, (v) or any nationally recognized rating agency that
requires access to such information. Confidential Information shall not include
any information that is or becomes generally available to the public other than
as a result of disclosure by one of the parties hereto, information that was
already known by a party on a non-confidential basis prior to the disclosure, or
information that is subsequently disclosed by a third party, provided that such
third party was not known to the party receiving the information to be bound by
a confidentiality agreement with respect to such information. In addition, the
parties agree to abide by the confidentiality provisions in the contracts,
documents, agreements, waivers, consents and certificates relating to the
Investments.
Page 21 of 26 Pages
<PAGE> 22
10. NOTICES. All notices, requests, demands or other communications
provided for herein shall be in writing and shall be effective three (3)
business days after mailing by first-class registered or certified mail, return
receipt requested, or when personally delivered, to the parties hereto at the
following addresses (which may be changed by notice in accordance herewith):
If to Subadviser: CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, CT 06152-2307
Attention: Private Placements
With a copy to: CIGNA Corporation
Investment Law Department
900 Cottage Grove Road
Hartford, CT 06152-2215
Attention: Assistant General Counsel
Private Placement Unit
If to Manager: Lincoln Investment Management, Inc.
200 E. Berry Street
Fort Wayne, Indiana 46802
Attention: Private Placements
11. MODIFICATION AND WAIVER. This Agreement may be modified, amended or
canceled, and compliance with any of its provisions waived, only by an
instrument in writing executed by the party against whom enforcement of such
modification, amendment, cancellation or waiver of compliance is sought. No
failure by any party hereto to enforce compliance with any provision hereof at
any time shall affect the right at a later time to enforce such compliance. No
waiver of compliance with any provision hereof in any instance by any party
shall, except as otherwise provided in the instrument granting such waiver,
operate as or be construed as a further or continuing waiver of compliance with
such provision or any other provision.
12. HEADINGS. The headings of Sections hereof are for convenience of
reference only and shall not in any way affect the interpretation or
construction of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the United States and the State of New
York without regard to its conflict of law principles.
14. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall, without the prior written consent of the
other, assign any of its rights or obligations hereunder to any person or entity
except as otherwise expressly authorized herein.
Page 22 of 26 Pages
<PAGE> 23
15. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereto waive any provision of law which prohibits or renders unenforceable any
provision hereof.
16. TERMINATION. This Agreement may be terminated by either party at any
time upon 30 days' prior written notice to the other party; provided, however,
that with respect to a Prior Notification Investment under Section 3(B) of this
Agreement whereby an intended action (or inaction) by Subadviser is likely to
have a material adverse effect on the interests of Client in that particular
Prior Notification Investment, Manager shall have the right to immediately
terminate the Agreement with respect to that Prior Notification Investment.
Without limiting Manager's right to terminate the Agreement with respect
to particular Prior Notification Investments as described above, in the event of
a Change of Control of Client or Lincoln National Corporation ("LNC"), Manager
may only terminate this Agreement upon 180 days' prior written notice to
Subadviser; provided, however, that Manager may terminate the Agreement at any
time during such period for cause. For purposes of this provision, "Change of
Control" is defined as the acquisition after the date of this Agreement by any
person (as such term is used in Section 13(d) and Section 14(d)(2) of the
Securities Exchange Act of 1934 as in effect on the date of this Agreement
("Exchange Act")) or related persons constituting a group (as such term is used
in Rule 13d-5 under the Exchange Act), other than existing stockholders of
Client or LNC, of (i) the power to elect, appoint or cause the election or
appointment of at least a majority of the members of the board of directors of
Client or LNC, through beneficial ownership of the capital stock of Client or
LNC or otherwise, or (ii) all or substantially all of the properties and assets
of Client or LNC; provided, however, that with respect to Client, a Change of
Control shall not be deemed to have occurred as long as LNC, either directly or
through one or more affiliates, retains control of Client as described above.
17. SURVIVAL OF CERTAIN PROVISIONS. The provisions of Sections 8 and 9 of
this Agreement shall survive any termination of this Agreement.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
19. FURTHER ASSURANCES. Each of the parties hereto agrees to execute and
deliver, or cause to be executed and delivered, all such instruments, and to
take all such action, as the other party may reasonably request in order to
effectuate the intent and purposes of this Agreement.
Page 23 of 26 Pages
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SUBADVISER:
CIGNA Investments, Inc.,
By: /s/ Marguerite A. Boslaugh
Name: Marguerite A. Boslaugh
Title: Managing Director
MANAGER:
Lincoln Investment Management, Inc.,
By: /s/ David C. Patch
Name: David C. Patch
Title: Vice President
Page 24 of 26 Pages
<PAGE> 25
Investment Administration Agreement
(Mezzanine Investments)
Schedule A
Investments
[TO BE PROVIDED]
Page 25 of 26 Pages
<PAGE> 26
Investment Administration Agreement
(Mezzanine Investments)
Schedule B
Prior Notification Investments
[TO BE PROVIDED]
Page 26 of 26 Pages
