-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, h41feXBCF4eCAyns3hZzAJKksBGGHPbYDwJQ+yk/UC8ss+M/A+c8aKT6JXoB+PDt OdHgzBZtGFYPo5y6Uq0CIQ== 0000950103-94-001933.txt : 19940328 0000950103-94-001933.hdr.sgml : 19940328 ACCESSION NUMBER: 0000950103-94-001933 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA CAPITAL LLC CENTRAL INDEX KEY: 0000920840 STANDARD INDUSTRIAL CLASSIFICATION: 6311 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 33 SEC FILE NUMBER: 033-52819 FILM NUMBER: 94517996 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE STREET 2: FINANCIAL YF8H CITY PLACE CITY: HARTFORD STATE: CT ZIP: 06156 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA LIFE & CASUALTY CO CENTRAL INDEX KEY: 0000002648 STANDARD INDUSTRIAL CLASSIFICATION: 6311 IRS NUMBER: 060843808 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 33 SEC FILE NUMBER: 033-52819-01 FILM NUMBER: 94517997 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE STREET 2: FINANCIAL YF8H CITY PLACE CITY: HARTFORD STATE: CT ZIP: 06156 S-3 1 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.
Year Ended December 31, ------------------------------------------------------- 1993(1)(2) 1992(1) 1991 1990 1989 ----------- ---------- ---------- --------- ----------- (millions) 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) ___________ 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.
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. EX-1 2 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. EX-3.1 3 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 EX-3.2 4 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: EX-4.1 5 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: _________________________ EX-4.2 6 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: EX-10.1 7 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: EX-23.1 8 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 EX-24 9 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 -----END PRIVACY-ENHANCED MESSAGE-----