-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PNNZHLeih3scClwLlVoZREWMkGXSkdCuHQi6ZmX+B9AR/HyPqgMnIhv8b2r9TJeb bwd1LBHK/cz4/gyIdZbOWA== 0000950123-98-006113.txt : 19980622 0000950123-98-006113.hdr.sgml : 19980622 ACCESSION NUMBER: 0000950123-98-006113 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980619 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA INC CENTRAL INDEX KEY: 0001013761 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 020488491 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321 FILM NUMBER: 98651274 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA SERVICES INC /CT/ CENTRAL INDEX KEY: 0000002648 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 060843808 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321-01 FILM NUMBER: 98651275 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE STREET 2: FINANCIAL YF8H CITY PLACE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: AETNA SERVICES INC DATE OF NAME CHANGE: 19960724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA CAPITAL TRUST I CENTRAL INDEX KEY: 0001061651 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321-02 FILM NUMBER: 98651276 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA CAPITAL TRUST II CENTRAL INDEX KEY: 0001061652 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321-03 FILM NUMBER: 98651277 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA CAPITAL TRUST III CENTRAL INDEX KEY: 0001061653 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321-04 FILM NUMBER: 98651278 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AETNA CAPITAL TRUST IV CENTRAL INDEX KEY: 0001061654 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-52321-05 FILM NUMBER: 98651279 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 8602730123 MAIL ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 S-3/A 1 AMENDMENT NO.1 TO A FORM S-3/A FOR AETNA INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998 REGISTRATION NO. 333-52321 333-52321-01 333-52321-02 333-52321-03 333-52321-04 333-52321-05 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ AETNA INC. CONNECTICUT 02-0488491 AETNA SERVICES, INC. CONNECTICUT 06-0843808 AETNA CAPITAL TRUST I DELAWARE TO BE APPLIED FOR AETNA CAPITAL TRUST II DELAWARE TO BE APPLIED FOR AETNA CAPITAL TRUST III DELAWARE TO BE APPLIED FOR AETNA CAPITAL TRUST IV DELAWARE TO BE APPLIED FOR (EXACT NAME OF REGISTRANT AS (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER SPECIFIED IN ITS CHARTER) OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBERS)
151 FARMINGTON AVENUE HARTFORD, CONNECTICUT 06156 (860) 273-0123 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) LUCILLE NICKERSON VICE PRESIDENT AND CORPORATE SECRETARY AETNA INC. 151 FARMINGTON AVENUE HARTFORD, CONNECTICUT 06156 (860) 273-0123 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: WILLIAM J. CASAZZA RICHARD J. SANDLER VICE PRESIDENT AND DEPUTY GENERAL COUNSEL DAVIS POLK & WARDWELL AETNA INC. 450 LEXINGTON AVENUE 151 FARMINGTON AVENUE NEW YORK, NEW YORK 10017 HARTFORD, CONNECTICUT 06156 (212) 450-4000 (860) 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, 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] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earliest effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ================================================================================ 2 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, AS AMENDED 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. 3 EXPLANATORY NOTE This Registration Statement contains two forms of Prospectus to be used in connection with offerings of the following securities: (1) debt securities (both senior and subordinated) of Aetna Services, Inc. and guarantees by Aetna Inc. of such debt securities and (2) junior subordinated debt securities of Aetna Services, Inc., guarantees by Aetna Inc. of such junior subordinated debt securities, preferred securities of Aetna Capital Trust I, II, III and IV, severally, and guarantees by Aetna Inc. and Aetna Services, Inc. of such preferred securities. Each offering of securities made under this Registration Statement will be made pursuant to one of these Prospectuses, with the specifications of the securities offered thereby set forth in an accompanying Prospectus Supplement. The complete Prospectus for the offering of the securities described in (1) follows immediately after this Explanatory Note, which is then immediately followed by the complete Prospectus for the offering of the securities described in (2) above. 4 [AETNA LOGO] AETNA SERVICES, INC. DEBT SECURITIES UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY AETNA INC. Aetna Services, Inc. (the "Company") may from time to time offer its debt securities (the "Debt Securities") which may be either senior debt securities (the "Senior Debt Securities") or subordinated debt securities (the "Subordinated Debt Securities") in amounts, at prices and on terms to be determined at the time of offering. The Senior Debt Securities are unconditionally guaranteed (the "Senior Debt Guarantees") as to the payment of principal, premium, if any, and interest by Aetna Inc. ("Aetna") and the Subordinated Debt Securities are unconditionally guaranteed on a subordinated basis (the "Subordinated Debt Guarantees" and, together with the Senior Debt Guarantees, the "Debt Guarantees") as to the payment of principal, premium, if any, and interest by Aetna. The Company is a wholly-owned subsidiary of Aetna. The Debt Securities offered pursuant to this Prospectus may be issued in one or more series. By separate prospectus, the form of which is included in the Registration Statement of which this Prospectus forms a part, four Delaware statutory business trusts (the "Trusts"), which are direct or indirect wholly owned subsidiaries of Aetna, may from time to time severally offer preferred securities guaranteed by Aetna and the Company to the extent set forth therein and the Company may offer from time to time, either directly or to a Trust, junior subordinated debt securities, guaranteed on a junior subordinated basis as to the payment of principal, premium, if any, and interest by Aetna. The aggregate initial public offering price of the securities to be offered by this Prospectus and such other prospectus shall not exceed $1,700,000,000 (or its equivalent (based on the applicable exchange rate at the time of sale) in one or more foreign currencies, currency units or composite currencies as shall be designated by the Company). Certain specific terms of the particular Debt Securities in respect of which this Prospectus is being delivered are set forth in the accompanying Prospectus Supplement (the "Prospectus Supplement"), including, where applicable, the specific title, aggregate principal amount, the denomination, whether such Debt Securities are secured or unsecured obligations, maturity, premium, if any, the interest rate (which may be fixed, floating or adjustable), the time and method of calculating payment of interest, if any, the place or places where principal of (and premium, if any) and interest, if any, on such Debt Securities will be payable, the currency in which the principal (and premium, if any) and interest, if any, on such Debt Securities will be payable, any terms of redemptions at the option of the Company or the holder, any sinking fund provisions, the initial public offering price and other special terms. If so specified in the applicable Prospectus Supplement, Debt Securities of a series may be issued in whole or in part in the form of one or more temporary or permanent global securities. Unless otherwise specified in a Prospectus Supplement, the Senior Debt Securities and the Senior Debt Guarantees, when issued, will be unsecured and will rank equally with all other unsecured and unsubordinated indebtedness of the Company and Aetna, respectively, and the Subordinated Debt Securities and the Subordinated Debt Guarantees, when issued, will be unsecured and will be subordinated in right of payment to all Senior Debt (as defined) of the Company and Senior Debt of Aetna, respectively. The Prospectus Supplement will contain information concerning certain U.S. federal income tax considerations relating to the Debt Securities offered, if applicable. 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. The Debt Securities will be sold directly, through agents, underwriters or dealers as designated from time to time, or through a combination of such methods. If agents of the Company or any dealers or underwriters are involved in the sale of the Debt Securities in respect of which this Prospectus is being delivered, the names of such agents, dealers or underwriters and any applicable commissions or discounts are set forth in or may be calculated from the Prospectus Supplement with respect to such Debt Securities. THE DATE OF THIS PROSPECTUS IS JUNE 19, 1998. 5 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 THE COMPANY, AETNA 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 MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES OR AETNA AND ITS SUBSIDIARIES SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. AVAILABLE INFORMATION Aetna 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 Aetna 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. Such reports, proxy and information statements and other information concerning Aetna may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company and Aetna have filed with the Commission a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Debt Securities and Debt Guarantees 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 the Company and Aetna and the Debt Securities and Debt Guarantees offered hereby. No separate financial statements of the Company have been included or incorporated by reference herein because the Company and Aetna do not believe that such financial statements would be material to the holders of Debt Securities. However, summarized financial information for the Company (i) at and for the years ended December 31, 1997 and 1996 are included in Note 13 of Aetna's consolidated financial statements for the year ended December 31, 1997 incorporated by reference in Aetna's Annual Report on Form 10-K for the year ended December 31, 1997 incorporated by reference herein and (ii) at and for the three month periods ended March 31, 1998 and 1997 are included in Note 11 of Aetna's consolidated financial statements included in Aetna's Quarterly Report on Form 10-Q for the three month period ended March 31, 1998 incorporated by reference herein. 2 6 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed with the Commission (File No. 1-11913) by Aetna pursuant to the Exchange Act are incorporated by reference into this Prospectus: 1. Aetna's Annual Report on Form 10-K for the year ended December 31, 1997. 2. Aetna's Quarterly Report on Form 10-Q for the three month period ended March 31, 1998. 3. Aetna's Current Report on Form 8-K dated March 16, 1998. 4. Aetna's Current Report on Form 8-K dated May 21, 1998. All documents filed by Aetna 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 of the Debt Securities 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. The Company and Aetna 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 Inc., 151 Farmington Avenue, Hartford CT 06156, telephone (860) 273-3977. 3 7 THE COMPANIES Aetna Inc., together with its subsidiaries, is a leading provider of health and retirement benefit plans and financial services, with three core businesses: Aetna U.S. Healthcare, Aetna Retirement Services and Aetna International. Aetna provides 35 million people worldwide with quality products, services and information that help them manage their health and financial well-being. Aetna U.S. Healthcare Inc. ("Aetna U.S. Healthcare") is a leading health care benefits organization with nearly 14 million health members at March 31, 1998. Aetna U.S. Healthcare has an extensive network of health care providers and offers a broad spectrum of products, including a full range of health, prescription drug, dental and vision plans, as well as group insurance products such as life, disability and long-term care. Aetna Retirement Services provides retirement and investment products nationwide in the education, nonprofit, government, hospital and small business sectors. Aetna Retirement Services had approximately $45 billion of financial services assets under management at March 31, 1998, and Aetna's Aeltus Investment Management Inc. subsidiary ranked among the 100 largest U.S. investment management firms. In 1997 Aetna Retirement Services also expanded its financial planning capability by acquiring Financial Network Investment Corporation, one of the nation's leading financial planning companies. Aetna International offers life insurance, pension management, health products and a limited book of property-casualty coverage to 13 million customers in 14 countries at year-end 1997. Through strategic alliances, the company also provides group benefits and markets investment products in countries across the globe. Aetna also has a Large Case Pensions business that offers pension and annuity products primarily for defined benefit and defined contribution plans. Aetna Services, Inc. is a direct subsidiary of Aetna Inc., the ultimate parent of the Aetna companies, that primarily serves as a financing company, and as a holding company for the Aetna Retirement Services, Aetna International and Large Case Pensions businesses, as well a portion of Aetna's health operations. 4 8 USE OF PROCEEDS Except as may otherwise be set forth in the applicable Prospectus Supplement, the net proceeds from the sale of the Debt Securities will be added to the Company's general funds and used for general corporate purposes, including the repayment of indebtedness. RATIOS OF EARNINGS TO FIXED CHARGES OF AETNA AND THE COMPANY The following table sets forth Aetna's and the Company's historical ratios of earnings to fixed charges for the periods indicated.
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------- ------------------------------------ 1998 1997 1996 1995 1994 1993 --------------- ---- ---- ---- ---- ---- Aetna(a).............................. 4.23 5.74 2.45 4.97 4.74 (b) The Company........................... 3.77 5.78 2.44 (c) (c) (c)
- --------------- (a) Aetna has fully and unconditionally guaranteed the payment of all principal, premium, if any, and interest on all outstanding debt securities of the Company. (b) Aetna reported a pretax loss from continuing operations in 1993 which was inadequate to cover fixed charges by $1.0 billion. (c) In connection with the acquisition of U.S. Healthcare, Inc. (now named Aetna U.S. Healthcare Inc. ("Aetna U.S. Healthcare")) in July 1996, the Company became a wholly-owned subsidiary of Aetna. Accordingly, the Company's ratio of earnings to fixed charges for 1995, 1994 and 1993 are the same as Aetna's. For purposes of computing the ratios of earnings to fixed charges, "earnings" represent consolidated earnings from continuing operations before income taxes, cumulative effect adjustments and extraordinary items plus fixed charges and minority interests. "Fixed charges" consist of interest (and the portion of rental expense deemed representative of the interest factor). The Company's former property-casualty operations (sold to The Travelers Insurance Group Inc. on April 2, 1996) and certain other operations are reflected as discontinued operations in its consolidated financial statements for 1996 and prior years. DESCRIPTION OF DEBT SECURITIES AND DEBT GUARANTEES The following description sets forth certain general terms and provisions of the Debt Securities and Debt Guarantees to which any Prospectus Supplement may relate. The particular terms of the Debt Securities and Debt Guarantees offered by any Prospectus Supplement and the extent, if any, to which such general provisions may not apply to the Debt Securities and Debt Guarantees so offered will be described in the Prospectus Supplement relating to such Debt Securities and Debt Guarantees. The Senior Debt Securities and the Senior Debt Guarantees are to be issued under an Indenture dated as of July 1, 1996 (the "Senior Indenture"), between the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as trustee. The Subordinated Debt Securities and the Subordinated Debt Guarantees are to be issued under a separate Indenture dated as of July 1, 1996 (the "Subordinated Indenture"), also between the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as trustee. The Senior Indenture and the Subordinated Indenture are sometimes referred to collectively as the "Indentures." Copies of the Senior Indenture and the Subordinated Indenture have been filed as exhibits to the Registration Statement. State Street Bank and Trust Company of Connecticut, National Association is hereinafter referred to as the "Trustee." The following summaries of certain provisions of the Senior Debt Securities, the Subordinated Debt Securities, the Senior Debt Guarantees, the Subordinated Debt Guarantees and the Indentures do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indentures applicable to a particular series of Debt Securities and the related Debt Guarantees, including the definitions therein of 5 9 certain terms. Wherever particular Sections, Articles or defined terms of the Indentures are referred to, it is intended that such Sections, Articles or defined terms shall be incorporated herein by reference. Article and Section references used herein are references to the applicable Indenture. Capitalized terms not otherwise defined herein shall have the meaning given in the Indentures. GENERAL The Indentures do not limit the aggregate principal amount of Debt Securities which may be issued thereunder and each Indenture provides that Debt Securities may be issued thereunder from time to time in one or more series. Unless otherwise specified in the Prospectus Supplement, the Senior Debt Securities and the Senior Debt Guarantees when issued will be unsecured and unsubordinated obligations of the Company and Aetna, respectively, and will rank equally and ratably with all other unsecured and unsubordinated indebtedness of the Company and Aetna, respectively. The Subordinated Debt Securities and the Subordinated Debt Guarantees when issued will be unsecured and subordinated in right of payment to the prior payment in full of all Senior Debt (as defined) of the Company and Aetna, respectively, as described under "Subordination of Subordinated Debt Securities and Subordinated Debt Guarantees" and in the Prospectus Supplement applicable to an offering of Subordinated Debt Securities and the Subordinated Debt Guarantees. Reference is made to the Prospectus Supplement relating to the particular Debt Securities offered thereby (the "Offered Debt Securities") which shall set forth whether the Offered Debt Securities shall be Senior Debt Securities, guaranteed on a senior basis by Aetna pursuant to the Senior Debt Guarantees, or Subordinated Debt Securities, guaranteed on a subordinated basis by Aetna pursuant to the Subordinated Debt Guarantees, and shall further set forth the following terms of the Offered Debt Securities: (1) the title of the Offered Debt Securities; (2) any limit on the aggregate principal amount of the Offered Debt Securities; (3) the Person to whom any interest on the Offered Debt Securities will be payable, if other than the Person in whose name such Offered Debt Securities are registered on any Regular Record Date; (4) the date or dates on which the principal of the Offered Debt Securities will be payable; (5) the rate or rates per annum (which may be fixed, floating or adjustable) at which the Offered Debt Securities will bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, the date or dates from which such interest will accrue and the dates on which such interest, if any, will be payable, the right, if any, of the Company to defer or extend an interest payment date and the duration of such deferral or extension and the Regular Record Dates for such interest payment dates; (6) whether the Offered Debt Securities will be secured; (7) the place or places where principal of (and premium, if any) and interest, if any, on Offered Debt Securities will be payable; (8) if applicable, the price at which, the periods within which and the terms and conditions upon which the Offered Debt Securities may be redeemed at the option of the Company pursuant to a sinking fund or otherwise; (9) if applicable, any obligation of the Company to redeem or purchase Offered Debt Securities pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, and the period or periods within which, the price or prices at which and the terms and conditions upon which the Offered Debt Securities will be redeemed or purchased, in whole or in part; (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which the Offered Debt Securities will be issuable; (11) the currency or currencies, including composite currencies or currency units, in which payment of the principal of (or premium, if any) or interest, if any, on any of the Offered Debt Securities will be payable if other than the currency of the United States of America; (12) if the amount of payments of principal of (or premium, if any) or interest, if any, on the Offered Debt Securities may be determined with reference to one or more indices, the manner in which such amounts will be determined; (13) if the principal of (or premium if any) or interest, if any, on any of the Offered Debt Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies, including composite currencies, or currency units other than that or those in which the Debt Securities are stated to be payable, the currency, currencies, including composite currencies, or currency units in which payment of the principal of (or premium if any) or interest, if any, on Debt Securities of such series as to which such election is made will be payable, and the periods within which and the terms and conditions upon which such election is to be made; (14) the portion of the principal amount of the Offered Debt Securities, if other than the principal amount thereof, payable upon acceleration of maturity thereof; (15) whether all or any part of the Offered Debt Securities will be issued in the form of a Global Security or Securities and, if so, the depositary for, and other 6 10 terms relating to, such Global Security or Securities; (16) any event or events of default applicable with respect to the Offered Debt Securities in addition to those provided in the Indentures; (17) any other covenant or warranty included for the benefit of the Offered Debt Securities in addition to (and not inconsistent with) those included in the Indentures for the benefit of Debt Securities in lieu of any covenant or warranty included in the Indentures for the benefit of the Debt Securities of all series, or any provision that any covenant or warranty included in the Indentures for the benefit of Debt Securities of all series shall not be for the benefit of the Offered Debt Securities, or any combination of such covenants, warranties or provisions; (18) the guarantee of Aetna of the Debt Securities if other than as described herein; (19) any restriction or condition on the transferability of the Offered Debt Securities; (20) any authenticating or paying agents, registrars, conversion agents or any other agents with respect to the Offered Debt Securities; and (21) any other terms of the Offered Debt Securities. (Section 301) Unless otherwise indicated in the Prospectus Supplement relating thereto, the Offered Debt Securities are to be issued as registered securities without coupons in denominations of $1,000 or any integral multiple of $1,000. (Section 302) No service charge will be made for any transfer or exchange of such Offered Debt Securities, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 305) Debt Securities may be issued under the Indentures as Original Issue Discount Securities to be sold at a substantial discount below their stated principal amount. Federal income tax consequences and other considerations applicable thereto will be described in the Prospectus Supplement relating hereto. If any index is used to determine the amount of payment of principal of, premium, if any, or interest on any series of Debt Securities, special Federal income tax, accounting and other considerations applicable thereto will be described in the applicable Prospectus Supplement. Since each of Aetna and the Company is a holding company, the rights of Aetna and the Company, respectively, and hence the right of creditors of Aetna and the Company (including the Holders of Debt Securities), to participate in any distribution of the assets of their respective subsidiaries (including in the case of Aetna, the Company and Aetna U.S. Healthcare), upon any such Subsidiary's liquidation or reorganization or otherwise is necessarily subject to the prior claims of creditors of the subsidiary, except to the extent that claims of Aetna or the Company, as a creditor of the subsidiary, may be recognized. The Indentures do not contain any provisions that limit the ability of the Company or Aetna to incur indebtedness or that afford Holders of the Debt Securities protection in the event of a highly leveraged or similar transaction involving the Company or Aetna. EVENTS OF DEFAULT AND NOTICE THEREOF Unless otherwise specified in the Prospectus Supplement, the following events are defined in the Indentures as "Events of Default" with respect to Debt Securities of any series: (a) failure to pay principal (including any sinking fund payment) of, or premium (if any) on, any Debt Security of that series when due (in the case of the Subordinated Indenture, whether or not payment is prohibited by the subordination provisions); (b) failure to pay interest, if any, on any Debt Security of that series when due and such failure continues for a period of 30 days; (c) failure by the Company or Aetna to perform in any material respect any other covenant in the Indentures (other than a covenant included in the Indentures solely for the benefit of a series of Debt Securities other than that series) continued for a period of 90 days after written notice to the Company and Aetna; (d) due acceleration (which acceleration shall not have been rescinded within 30 days after written notice to the Company and Aetna) of any indebtedness for borrowed money in a principal amount in excess of $50,000,000 for which the Company, Aetna or a Principal Subsidiary (as defined) is liable, including Debt Securities for another series (other than acceleration of Non-Recourse Debt for borrowed money which does not exceed in the aggregate 4% of Aetna's total shareholders' equity, as set forth in the most recently published audited consolidated balance sheet of Aetna), or a default by the Company, Aetna or any Principal Subsidiary in the payment at final maturity of outstanding indebtedness for borrowed money in a principal amount in excess of $50,000,000 (other than default in payment at final maturity of Non-Recourse Debt which does not exceed in the aggregate of 4% of Aetna's total shareholders' equity, as set forth 7 11 in the most recently published audited consolidated balance sheet of Aetna) unless such acceleration or default at maturity shall be remedied or cured by the Company, Aetna or such Principal Subsidiary or rescinded, annulled or waived by the holders of such indebtedness, in which case such acceleration or default at maturity shall not constitute an Event of Default under this provision and any acceleration relating thereto shall be rescinded; and (e) certain events of insolvency, reorganization, receivership or liquidation of the Company or Aetna. (Section 501) No Event of Default with respect to Debt Securities of a particular series shall necessarily constitute an Event of Default with respect to Debt Securities of any other series. If an Event of Default with respect to Debt Securities of any series at the time Outstanding shall occur and be continuing, either the Trustee or the Holders of at least 25% in principal amount of the Outstanding Debt Securities of that series may declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all Debt Securities of that series to be due and payable immediately; provided, however, that under certain circumstances the Holders of a majority in aggregate principal amount of Outstanding Debt Securities of that series may rescind or annul such acceleration and its consequences. (Section 502) Reference is made to the Prospectus Supplement relating to any series of Offered Debt Securities which are Original Issue Discount Securities for the particular provisions relating to the principal amount of such Original Issue Discount Securities due on acceleration upon the occurrence of an Event of Default and the continuation thereof. The Indentures provide that the Trustee may withhold notice to the Holders of the Debt Securities of any default (except in payment of principal (or premium, if any) or interest, if any) if it considers it in the interest of the holders of the Debt Securities to do so. (Section 602) The Company and Aetna will be required to furnish to the Trustee annually a statement by certain officers of the Company and Aetna as to the compliance with all conditions and covenants of the Indentures. (Section 1004) The Holders of a majority in principal amount of the Outstanding Debt Securities of any series affected 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 the Debt Securities of such series, and to waive certain defaults. (Sections 512 and 513) The Indentures provide that, in case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the Indentures, 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. (Section 601) Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indentures at the request of any of the Holders of Debt Securities 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. (Section 603) No Holder of a Debt Security of any series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Debt Securities of such series and unless also the Holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of the same series shall have made written request, and offered indemnity to the Trustee in form and substance reasonably satisfactory to the Trustee, to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Debt Securities of the same series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. (Section 507) However, such limitations do not apply to a suit instituted by a Holder of a Debt Security for enforcement of payment of the principal of (or premium, if any) or interest, if any, on such Debt Security on or after the respective due dates expressed in such Debt Security. (Section 508) 8 12 MODIFICATION AND WAIVER Modifications and amendments of the Indentures may be made by the Company, Aetna and the Trustee, with the consent of the Holders of not less than a majority of aggregate principal amount of each series of the Outstanding Debt Securities issued under the Indentures which is affected by the modification or amendment; provided, however, that no such modification or amendment may, without the consent of each Holder of such Debt Security affected thereby: (1) change the Stated Maturity of the principal of (or premium if any) or any installment of principal or interest, if any, on any such Debt Security; (2) reduce the principal amount of (or premium, if any) or the interest rate, if any, on any such Debt Security or the principal amount due upon acceleration of an Original Issue Discount Security; (3) change the place or currency of payment of principal of (or premium if any) or the interest, if any, on any such Debt Security; (4) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Debt Security; (5) reduce the percentage of Holders of Debt Securities necessary to modify or amend the Indentures; (6) modify or affect in any manner adverse to the interest of Holders of Debt Securities the obligation of Aetna under the Debt Guarantees in respect of the due and punctual payment of the principal of (and premium, if any) or interest on the Debt Securities; (7) in the case of the Subordinated Indenture, modify the subordination provisions in a manner adverse to the holders of the Subordinated Debt Securities; or (8) modify the foregoing requirements or reduce the percentage of Outstanding Debt Securities necessary to waive compliance with certain provisions of the Indentures or for waiver of certain defaults. (Section 902) The holders of at least a majority of the aggregate principal amount of the Outstanding Debt Securities of any series may, on behalf of all Holders of that series, waive compliance by the Company and Aetna with certain restrictive provisions of the Indentures and waive any past default under the Indentures, except a default in the payment of principal, premium or interest or in the performance of certain covenants. (Sections 907 and 513) DEFEASANCE AND COVENANT DEFEASANCE The Indentures provide that the Company and Aetna, at the Company's option, (A) will be defeased and discharged from any and all of their respective obligations with respect to such Debt Securities and the Debt Guarantees (including, in the case of Subordinated Debt Securities and Subordinated Debt Guarantees, the provisions described under "Subordination of Subordinated Debt Securities and Subordinated Debt Guarantees" herein and except for the obligations to exchange or register the transfer of such Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or agency in respect of the Debt Securities, and to hold monies for payments in trust) ("defeasance"), or (B) will be released from their respective obligations under the Indentures concerning the restrictions described under "Limitations on Liens on Common Stock of Principal Subsidiaries" and "Consolidation, Merger and Sale of Assets" and any other covenants applicable to such Debt Securities and the Debt Guarantees (including, in the case of the Subordinated Debt Securities and the Subordinated Debt Guarantees, the provisions described under "Subordination of Subordinated Debt Securities and Subordinated Debt Guarantees" herein) which are subject to covenant defeasance ("covenant defeasance"), and the occurrence of an event described and notice thereof in clauses (c) and (d) under "Events of Default and Notice Thereof" (with respect to covenants subject to covenant defeasance) shall no longer be an Event of Default, in each case, upon the irrevocable deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money, and/or U.S. Government Obligations (as defined) (or Foreign Government Obligations (as defined) in the case of Debt Securities denominated in foreign currencies) which through the payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest, if any, on such Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, (i) the Company has delivered to the Trustee an opinion of counsel (as specified in the Indentures) to the effect that the Holders of such Debt Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, (ii) no Event of Default or event which with the giving of notice or 9 13 lapse of time, or both, would become an Event of Default under the Indenture shall have occurred and be continuing on the date of such deposit (or, with respect to any event specified in clause (e) under "Events of Default and Notice Thereof", at any time on or prior to the 90th day after the date of such deposit) and (iii) in the case of Subordinated Debt Securities, (x) no default in the payment of principal of (or premium, if any) or interest, if any, on any Senior Debt of the Company or Aetna beyond any applicable grace period shall have occurred and be continuing, or (y) no other default with respect to any Senior Debt of the Company or Aetna shall have occurred and be continuing and shall have resulted in the acceleration of such Senior Debt. (Article Twelve) The Company may exercise its defeasance option with respect to such Debt Securities and Debt Guarantees notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its defeasance option, payment of such Debt Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of such Debt Securities may not be accelerated by reference to the covenants noted under clause (B) above. In the event the Company and Aetna omit to comply with their remaining obligations with respect to such Debt Securities and Debt Guarantees under the Indentures after the exercise by the Company of its covenant defeasance option and such Debt Securities are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations (or Foreign Government Obligations in the case of Debt Securities denominated in foreign currencies) on deposit with the Trustee may be insufficient to pay amounts due on the Debt Securities of such series at the time of the acceleration resulting from such Event of Default. However, the Company and Aetna will remain liable in respect of such payments. (Article Twelve) LIMITATIONS ON LIENS ON COMMON STOCK OF PRINCIPAL SUBSIDIARIES As long as any of the Debt Securities remains outstanding, Aetna will not, and will not permit any Principal Subsidiary to, issue, assume, incur or guarantee any indebtedness for borrowed money secured by a mortgage, pledge, lien or other encumbrance, directly or indirectly, on any of the Common Stock of a Principal Subsidiary, which Common Stock is owned by Aetna, by the Company or by any Principal Subsidiary, unless the obligations of the Company under the Debt Securities and, if the Company or Aetna so elects, any other indebtedness of the Company or Aetna ranking on a parity with, or prior to, the Debt Securities or Aetna's obligations under the Debt Guarantees, as the case may be, shall be secured equally and ratably with, or prior to, such secured indebtedness for borrowed money so long as it is outstanding and is so secured. (Section 1005) "Principal Subsidiary" means only Aetna Life Insurance Company, Aetna Life Insurance and Annuity Company and Aetna U.S. Healthcare and any other Subsidiary of Aetna which shall hereafter succeed by merger or otherwise to a major part of the business of one or more of the Principal Subsidiaries. The decision as to whether a Subsidiary shall have succeeded to a major part of the business of one or more of the Principal Subsidiaries shall be made in good faith by the Board of Directors of Aetna or a committee thereof by the adoption of a resolution so stating, and Aetna shall within 30 days of the date of the adoption of such resolution deliver to the Trustee a copy thereof, certified by the Corporate Secretary or an Assistant Corporate Secretary of Aetna. (Section 101) "Common Stock" means, with respect to any Principal Subsidiary, stock of any class, however designated, except stock which is non-participating beyond fixed dividend and liquidation preferences and the holders of which have either no voting rights or limited voting rights entitling them, only in the case of certain contingencies, to elect less than a majority of the directors (or persons performing similar functions) of such Principal Subsidiary, and shall include securities of any class, however designated, which are convertible into such Common Stock. (Section 101) CONSOLIDATION, MERGER AND SALE OF ASSETS; ASSUMPTION BY AETNA OR SUBSIDIARY OF COMPANY OBLIGATIONS Neither the Company nor Aetna may consolidate with or merge into any other Person or sell its property and assets as, or substantially as, an entirety to any Person and neither the Company nor Aetna may permit any Person to merge into or consolidate with the Company or Aetna, as the case may be, unless (i) either the 10 14 Company or Aetna, as the case may be, 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 the Company's or Aetna's obligations on the Debt Securities or the Debt Guarantees, as applicable, under a supplemental Indenture, (ii) immediately after giving effect to the transaction no Event of Default shall have occurred and be continuing, and (iii) certain other conditions are met. (Section 801) Aetna or any Subsidiary of Aetna may, where permitted by law, assume the obligations of the Company for the due and punctual payment of the principal of (premium, if any) and interest on and any other payments with respect to the Debt Securities of any series and the performance of every covenant of the Indenture and the Debt Securities on the part of Company to be performed or observed if (i) Aetna or such Subsidiary, as the case may be, shall expressly assume such obligations by a supplemental indenture, in form reasonably satisfactory to the Trustee, and, if such Subsidiary assumed such obligations, Aetna shall, by such supplemental indenture, confirm that its Debt Guarantees with respect to the Debt Securities of such series shall apply to such Subsidiary's obligations under the Debt Securities of such series and the Indenture; (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; and (iii) certain other conditions are met. (Section 803) SUBORDINATION OF SUBORDINATED DEBT SECURITIES AND SUBORDINATED DEBT GUARANTEES Unless otherwise indicated in the Prospectus Supplement, the following provisions will apply to the Subordinated Debt Securities and Subordinated Debt Guarantees. The Subordinated Debt Securities will, to the extent set forth in the Subordinated Indenture, be subordinate in right of payment to the prior payment in full of all Senior Debt of the Company, including the Senior Debt Securities, and the Subordinated Debt Guarantees will, to the extent set forth in the Subordinated Indenture, be subordinate in right of payment to the prior payment in full of all Senior Debt of Aetna, including the Senior Debt Guarantees. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of the Company or Aetna, as the case may be, the holders of Senior Debt of the Company or Aetna, as the case may be, will first be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Debt of the Company or Aetna, as the case may be, before the holders of the Subordinated Debt Securities will be entitled to receive or retain any payment in respect of the principal of (and premium, if any) or interest, if any, on the Subordinated Debt Securities. (Subordinated Indenture Sections 1402 and 1602) By reason of such subordination, in the event of liquidation or insolvency, (i) creditors of the Company who are not holders of Senior Debt of the Company or Subordinated Debt Securities may recover less, ratably, than holders of Senior Debt of the Company and may recover more, ratably, than the holders of the Subordinated Debt Securities and (ii) creditors of Aetna who are not holders of Senior Debt of Aetna or Subordinated Debt Securities may recover less, ratably, than holders of Senior Debt of Aetna and may recover more, ratably, than holders of Subordinated Debt Securities. In the event of the acceleration of the maturity of any Subordinated Debt Securities, the holders of all Senior Debt of the Company and Aetna outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon before the Holders of Subordinated Debt Securities will be entitled to receive any payment upon the principal of (or premium, if any) or interest, if any, on the Subordinated Debt Securities. (Subordinated Indenture Sections 1403 and 1603) No payments on account of principal (or premium, if any) or interest, if any, in respect of the Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in the payment of principal of (or premium, if any) or interest on Senior Debt of the Company or Aetna, or an event of default with respect to any Senior Debt of the Company or Aetna resulting in the acceleration of the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. (Subordinated Indenture Sections 1404 and 1604) 11 15 "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 any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person 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 such Person; 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, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. (Subordinated Indenture Section 101) "Senior Debt" means with respect to any Person 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 such Person to the extent that such claim for post-petition interest is allowed in such proceeding), on Debt of such Person, 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 Subordinated Debt Securities, in the case of the Company, or the Subordinated Debt Guarantees, in the case of Aetna, or to other Debt of such Person which is pari passu with, or subordinated to the Subordinated Debt Securities, in the case of the Company, or the Subordinated Debt Guarantees, in the case of Aetna; provided, however, that Senior Debt shall be deemed not to include (i) in the case of the Company, the Subordinated Debt Securities, (ii) in the case of Aetna, the Subordinated Debt Guarantees or (iii) any other debt securities or guarantees in respect thereof issued to any other trusts, partnerships or other entity affiliated with the Company or Aetna which is a financing vehicle of the Company or Aetna ("Financing Entity") in connection with the issuance of preferred securities of such Financing Entity, including, without limitation indebtedness of the Company and Aetna's guarantee in respect thereof issued to Aetna Capital L.L.C. pursuant to that certain Indenture dated as of November 1, 1994 between the Company and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among the Company, Aetna and The First National Bank of Chicago, as trustee. (Subordinated Indenture Section 101) The Subordinated Indenture does not limit or prohibit the incurrence of additional Senior Debt of the Company or Aetna, which may include indebtedness that is senior to the Subordinated Debt Securities and the Subordinated Debt Guarantees, but subordinate to other obligations of the Company or Aetna, respectively. The Senior Debt Securities and the Senior Debt Guarantees, when issued, will constitute Senior Debt of the Company and Aetna, respectively. At March 31, 1998, each of the Company and Aetna had $2.2 billion of Senior Debt outstanding, no Subordinated Debt Securities or Subordinated Debt Guarantees outstanding, and $348 million of indebtedness which would rank junior in right of payment to the Subordinated Debt Securities and the Subordinated Debt Guarantees. All such Debt of Aetna consists of guarantees of Debt of the Company. The Prospectus Supplement may further describe the provisions, if any, applicable to the subordination of the Subordinated Debt Securities of a particular series or the Subordinated Debt Guarantees with respect thereto. GLOBAL SECURITIES The Debt Securities of a series may be issued in the form of one or more Global Securities that will be deposited with a Depositary or its nominee. In such a case, one or more Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of Outstanding Debt Securities of the series to be represented by such Global Security or Securities. Unless and until it is exchanged in whole or in part for Debt Securities in definitive registered form, a Global Security may 12 16 not be registered for transfer or exchange except as a whole by the Depositary for such Global Security to a nominee for such Depositary and except in the circumstances described in the applicable Prospectus Supplement. (Sections 204 and 305) The specific terms of the depositary arrangement with respect to any portion of a series of Debt Securities to be represented by a Global Security and a description of the Depositary will be contained in the applicable Prospectus Supplement. THE TRUSTEE The Indentures contain limitations on the right of the Trustee, as a creditor of the Company and Aetna, 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 Indentures it is a creditor of the Company or Aetna. The Trustee or its affiliates act as depositary for funds of, makes loans to and performs other services for, or may be a customer of, the Company and Aetna in the ordinary course of business. GOVERNING LAW The Indentures are governed by and shall be construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. PLAN OF DISTRIBUTION The Company may sell Debt Securities to one or more underwriters for public offering and sale by them or may sell Debt Securities to investors or other persons directly or through agents. The Company may sell Debt Securities as soon as practicable after effectiveness of the Registration Statement, provided that favorable market conditions exist. Any such underwriter or agent involved in the offer and sale of the Debt Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Debt Securities at a fixed price or prices, which may be changed, or at prices related to prevailing market prices or at negotiated prices. The Company also may, from time to time, authorize firms acting as the Company's agents to offer and sell the Debt Securities upon the terms and conditions as shall be set forth in any Prospectus Supplement. In connection with the sale of Debt Securities, underwriters may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Debt Securities for whom they may act as agent. Underwriters may sell Debt Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions (which may be changed from time to time) from the purchasers for whom they may act as agent. Any underwriting compensation paid by the Company to underwriters or agents in connection with the offering of Debt Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Debt Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Debt Securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements with the Company and Aetna, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by the Company for certain expenses. Underwriters, dealers and agents may engage in transactions with, or perform services for, or be customers of, the Company and Aetna in the ordinary course of business. 13 17 If so indicated in an applicable Prospectus Supplement, the Company will authorize dealers acting as the Company's agents to solicit offers by certain institutions to purchase Debt Securities from the Company at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount specified in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except that (i) the purchase by an institution of the Debt Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject and (ii) if the Debt Securities are being sold to underwriters, the Company shall have sold to such underwriters such amount specified in the applicable Prospectus Supplement. Agents and underwriters will have no responsibility in respect of the delivery or performance of Contracts. The Debt 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 Debt Securities. VALIDITY OF THE SECURITIES Unless otherwise indicated in the applicable Prospectus Supplement, the validity of the Debt Securities and the Debt Guarantees offered hereby will be passed upon for the Company and Aetna by Thomas J. Calvocoressi, General Counsel to the Company and Aetna, and Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, and for any agents or underwriters by Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. Davis Polk & Wardwell and Sullivan & Cromwell will rely upon the opinion of Thomas J. Calvocoressi as to certain matters governed by Connecticut law. As of March 31, 1998, Thomas J. Calvocoressi beneficially owned 2,701 shares, and had options to purchase 46,704 shares, of Aetna's Common Stock. EXPERTS The consolidated financial statements and schedules of Aetna and its subsidiaries (including the Company) as of December 31, 1997 and 1996, and for each of the years in the three-year period ended December 31, 1997 which are incorporated by reference in Aetna's Annual Report on Form 10-K for the year ended December 31, 1997, have been incorporated by reference in this Prospectus in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. With respect to the unaudited interim financial information of Aetna incorporated by reference in this Prospectus and of Aetna to be incorporated by reference in this Prospectus, the independent certified public accountants have reported and may report that they applied limited procedures in accordance with professional standards for a review of such information. However, any separate report included in Aetna's Quarterly Reports on Form 10-Q and incorporated by reference herein states and will state that they did not audit and they did 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. 14 18 ERISA MATTERS Aetna and the Company and certain of their affiliates, including Aetna Life Insurance Company, Aetna Life Insurance and Annuity Company and Aetna U.S. Healthcare, may each be considered a "party in interest" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code") with respect to many employee benefit plans. Prohibited transactions within the meaning of ERISA or the Code may arise, for example, if Debt Securities are acquired by a pension or other employee benefit plan with respect to which Aetna, the Company or any of their affiliates is a service provider, unless such Debt 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. Any such pension or employee benefit plan proposing to invest in the Debt Securities should consult with its legal counsel. 15 19 [AETNA LOGO] AETNA SERVICES, INC. JUNIOR SUBORDINATED DEBT SECURITIES UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY AETNA INC. AETNA CAPITAL TRUST I AETNA CAPITAL TRUST II AETNA CAPITAL TRUST III AETNA CAPITAL TRUST IV PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AETNA INC. AND AETNA SERVICES, INC. Aetna Services, Inc. (the "Company"), may from time to time offer its unsecured junior subordinated debt securities (the "Junior Subordinated Debt Securities") in one or more series and in amounts, at prices and on terms to be determined at the time of offering. The Junior Subordinated Debt Securities are unconditionally guaranteed on a junior subordinated basis (the "Junior Subordinated Debt Guarantees") as to the payment of principal, premium, if any, and interest by Aetna Inc. ("Aetna"). Unless otherwise specified in the accompanying Prospectus Supplement (the "Prospectus Supplement"), the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees, when issued, will be unsecured and will be subordinated in right of payment to all Senior Debt (as defined herein) of the Company and Senior Debt of Aetna, respectively. The Company is a wholly-owned subsidiary of Aetna. Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III and Aetna Capital Trust IV (collectively, the "Aetna Trusts"), each a statutory business trust formed under the laws of the State of Delaware, may offer and sell, from time to time, preferred securities representing undivided beneficial interests in the assets of the respective Aetna Trust (the "Preferred Securities") in amounts, at prices and on terms to be determined at the time of offering. The payment of periodic cash distributions ("distributions") with respect to Preferred Securities of each of the Aetna Trusts out of moneys held by the Property Trustee (as defined herein) of each of the Aetna Trusts, and payments on liquidation of each Aetna Trust and on redemption of Preferred Securities of such Aetna Trust, will be guaranteed by Aetna and the Company as and to the extent described herein (each such guarantee a "Preferred Securities Guarantee"). See "Description of the Preferred Securities Guarantees." Aetna's and the Company's obligations under each Preferred Securities Guarantee are unsecured obligations of Aetna and the Company and will rank (i) pari passu in right of payment with Aetna's and the Company's obligations under the other Preferred Securities Guarantees and other guarantees of preferred securities of any Financing Entity (as defined), (ii) subordinate and junior in right of payment to all other liabilities of Aetna or the Company except those made pari passu or subordinate by their terms and (iii) senior to all capital stock now or hereafter issued by Aetna or the Company and to any guarantee now or hereafter issued by Aetna or the Company in respect of any of its or their capital stock. Junior Subordinated Debt Securities may be issued and sold from time to time in one or more series by the Company to an Aetna Trust, or a trustee of such trust, in connection with the investment of the proceeds from the offering of Preferred Securities and Common Securities (as defined herein) of such Aetna Trust. The Junior Subordinated Debt Securities purchased by an Aetna Trust may be subsequently distributed pro rata to holders of Preferred Securities and Common Securities in connection with the dissolution of such Aetna Trust, upon the occurrence of certain events as may be described in an accompanying Prospectus Supplement. Specific terms of the particular series of Junior Subordinated Debt Securities or any Preferred Securities of an Aetna Trust in respect of which this Prospectus is being delivered (the "Offered Securities") are set forth in the accompanying Prospectus Supplement which will describe, without limitation and where applicable, the following: (i) in the case of Junior Subordinated Debt Securities, the specific designation, aggregate principal amount, denominations, maturity, premium, if any, interest rate (which may be fixed or variable) or method of calculating interest, if any, place or places where principal, premium, if any, and interest, if any, will be payable, any terms of redemption, any sinking fund provisions, the right of the Company, if any, to defer payment of interest on the Junior Subordinated Debt Securities and the maximum length of such deferral period, and any listing on a securities exchange, methods of distribution and other specific terms of the offering; and (ii) in the case of Preferred Securities, the specific designation, number of securities, liquidation amount per security, initial public offering or purchase price, and any listing on a securities exchange, distribution rate (or method of calculation thereof), dates on which distributions shall be payable and dates from which distributions shall accrue, voting rights (if any), any redemption or sinking fund provisions, any other rights, preferences, privileges, limitations or restrictions relating to the Preferred Securities and the terms upon which the proceeds of the sale of the Preferred Securities shall be used to purchase a specific series of Junior Subordinated Debt Securities of the Company. If so specified in the applicable Prospectus Supplement, Offered Securities of a series may be issued in whole or in part in the form of one or more temporary or permanent global securities. By separate prospectus, the form of which is included in the Registration Statement of which this Prospectus forms a part, the Company may from time to time offer its Senior Debt Securities or Subordinated Debt Securities which debt securities will be guaranteed as to the payment of principal, premium, if any, and interest by Aetna. The aggregate initial public offering price of the securities to be offered by this Prospectus and such other prospectus shall not exceed $1,700,000,000 (or its equivalent (based on the applicable exchange rate at the time of sale) in one or more foreign currencies, currency units or composite currencies as shall be designated by the Company). The Prospectus Supplement will contain information concerning certain U.S. federal income tax considerations relating to the Offered Securities, if applicable. 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. The Offered Securities will be sold directly, through agents, underwriters or dealers as designated from time to time, or through a combination of such methods. If agents of the Company and/or any Aetna Trust or any dealers or underwriters are involved in the sale of the Offered Securities in respect of which this Prospectus is being delivered, the names of such agents, dealers or underwriters and any applicable commissions or discounts are set forth in or may be calculated from the Prospectus Supplement with respect to such Offered Securities. THE DATE OF THIS PROSPECTUS IS JUNE 19, 1998. 20 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 THE COMPANY, AETNA OR THE AETNA TRUSTS, 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 MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES OR AETNA AND ITS SUBSIDIARIES OR ANY OF THE AETNA TRUSTS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. AVAILABLE INFORMATION Aetna 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 Aetna 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. Such reports, proxy and information statements and other information concerning Aetna may also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. The Company, Aetna and the Aetna Trusts have filed with the Commission a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Junior Subordinated Debt Securities, the Junior Subordinated Debt Guarantees, the Preferred Securities and the Preferred Securities Guarantees 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 the Company, Aetna and the Aetna Trusts and the Junior Subordinated Debt Securities, the Junior Subordinated Debt Guarantees, the Preferred Securities and the Preferred Securities Guarantees offered hereby. No separate financial statements of the Company have been included or incorporated by reference herein because the Company and Aetna do not believe that such financial statements would be material to the holders of Junior Subordinated Debt Securities or Preferred Securities of an Aetna Trust. However, summarized financial information for the Company (i) at and for the years ended December 31, 1997 and 1996 are included in Note 13 of Aetna's consolidated financial statements for the year ended December 31, 1997 incorporated by reference in Aetna's Annual Report on Form 10-K for the year ended December 31, 1997 incorporated by reference herein and (ii) at and for the three month periods ended March 31, 1998 and 1997 are included in Note 11 of Aetna's consolidated financial statements included in Aetna's Quarterly Report on Form 10-Q for the three month period ended March 31, 1998 incorporated by reference herein. No separate financial statements of any of the Aetna Trusts have been included or incorporated by reference herein. The Company, Aetna and the Aetna Trusts do not consider that such financial statements would be material to holders of the Preferred Securities because (i) all of the voting securities of each Aetna Trust will be owned, directly or indirectly, by Aetna, a reporting company under the Exchange Act, (ii) each 2 21 of the Aetna Trusts is a newly formed special purpose entity, has no operating history, has no independent operations and is not engaged in, and does not propose to engage in, any activity other than issuing its Trust Securities (as defined herein) representing undivided beneficial interests in the assets of such Aetna Trust and investing the proceeds thereof in Junior Subordinated Debt Securities issued by the Company and guaranteed on a junior subordinated basis as to the payment of principal, premium, if any, and interest by Aetna and (iii) the Company's and Aetna's obligations described herein and in any accompanying Prospectus Supplement under the Declaration (as defined herein) of an Aetna Trust, the Preferred Securities Guarantees with respect to the Preferred Securities issued by such Aetna Trust, the Junior Subordinated Debt Securities purchased by such Aetna Trust, the Junior Subordinated Debt Guarantees and the related Indenture, taken together, constitute a full and unconditional guarantee of payments due on the Preferred Securities of such Aetna Trust. See "The Aetna Trusts," "Description of the Preferred Securities," "Description of the Preferred Securities Guarantees" and "Description of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees". The Aetna Trusts are statutory business trusts formed under the laws of the State of Delaware. Aetna, as of the date of this Prospectus, directly or indirectly beneficially owns all of the beneficial interests in each Aetna Trust. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed with the Commission (File No. 1-11913) by Aetna pursuant to the Exchange Act are incorporated by reference into this Prospectus: 1. Aetna's Annual Report on Form 10-K for the year ended December 31, 1997. 2. Aetna's Quarterly Report on Form 10-Q for the three month period ended March 31, 1998. 3. Aetna's Current Report on Form 8-K dated March 16, 1998. 4. Aetna's Current Report on Form 8-K dated May 21, 1998. All documents filed by Aetna 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 of the Offered Securities 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. The Company and Aetna 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 Inc., 151 Farmington Avenue, Hartford CT 06156, telephone (860) 273-3977. 3 22 THE COMPANIES Aetna Inc., together with its subsidiaries, is a leading provider of health and retirement benefit plans and financial services, with three core businesses: Aetna U.S. Healthcare, Aetna Retirement Services and Aetna International. Aetna provides 35 million people worldwide with quality products, services and information that help them manage their health and financial well-being. Aetna U.S. Healthcare Inc. ("Aetna U.S. Healthcare") is a leading health care benefits organization with nearly 14 million health members at March 31, 1998. Aetna U.S. Healthcare has an extensive network of health care providers and offers a broad spectrum of products, including a full range of health, prescription drug, dental and vision plans, as well as group insurance products such as life, disability and long-term care. Aetna Retirement Services provides retirement and investment products nationwide in the education, nonprofit, government, hospital and small business sectors. Aetna Retirement Services had approximately $45 billion of financial services assets under management at March 31, 1998, and Aetna's Aeltus Investment Management Inc. subsidiary ranked among the 100 largest U.S. investment management firms. In 1997 Aetna Retirement Services also expanded its financial planning capability by acquiring Financial Network Investment Corporation, one of the nation's leading financial planning companies. Aetna International offers life insurance, pension management, health products and a limited book of property-casualty coverage to 13 million customers in 14 countries at year-end 1997. Through strategic alliances, the company also provides group benefits and markets investment products in countries across the globe. Aetna also has a Large Case Pensions business that offers pension and annuity products primarily for defined benefit and defined contribution plans. Aetna Services, Inc. is a direct subsidiary of Aetna Inc., the ultimate parent of the Aetna companies, that primarily serves as a financing company, and as a holding company for the Aetna Retirement Services, Aetna International and Large Case Pensions businesses, as well a portion of Aetna's health operations. 4 23 USE OF PROCEEDS Each Aetna Trust will use all of the proceeds received from the sale of its Trust Securities to purchase Junior Subordinated Debt Securities of the Company. Except as may otherwise be set forth in the applicable Prospectus Supplement, the proceeds from the sale of the Junior Subordinated Debt Securities will be added to the Company's general funds and used for general corporate purposes, including the repayment of indebtedness. RATIO OF EARNINGS TO FIXED CHARGES OF AETNA AND THE COMPANY The following table sets forth Aetna's and the Company's historical ratio of earnings to fixed charges for the periods indicated.
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, --------------- ------------------------------------ 1998 1997 1996 1995 1994 1993 --------------- ---- ---- ---- ---- ---- Aetna (a)................................ 4.23 5.74 2.45 4.97 4.74 (b) The Company.............................. 3.77 5.78 2.44 (c) (c) (c)
- --------------- (a) Aetna has fully and unconditionally guaranteed the payment of all principal, premium, if any, and interest on all outstanding debt securities of the Company. (b) Aetna reported a pretax loss from continuing operations in 1993 which was inadequate to cover fixed charges by $1.0 billion. (c) In connection with the acquisition of U.S. Healthcare, Inc. (now named Aetna U.S. Healthcare Inc. ("Aetna U.S. Healthcare")) in July 1996, the Company became a wholly-owned subsidiary of Aetna. Accordingly, the Company's ratio of earnings to fixed charges for 1995, 1994 and 1993 are the same as Aetna's. For purposes of computing the ratios of earnings to fixed charges, "earnings" represent consolidated earnings from continuing operations before income taxes, cumulative effect adjustments and extraordinary items plus fixed charges and minority interests. "Fixed charges" consist of interest (and the portion of rental expense deemed representative of the interest factor). The Company's former property-casualty operations (sold to The Travelers Insurance Group Inc. on April 2, 1996) and certain other operations are reflected as discontinued operations in its consolidated financial statements for 1996 and prior years. THE AETNA TRUSTS Each of Aetna Capital Trust I, II, III and IV is a statutory business trust formed on May 7, 1998 under the Delaware Business Trust Act (the "Business Trust Act") pursuant to a separate declaration of trust among the Trustees (as defined herein) of such Aetna Trust and the Company and the filing of a certificate of trust with the Secretary of State of the State of Delaware. Such declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part, as of the date the Preferred Securities of such Aetna Trust are initially issued. Each Declaration will be qualified under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). This description summarizes the material terms of the Declarations and is qualified in its entirety by reference to the form of Declaration, which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. TRUST SECURITIES Upon issuance of any Preferred Securities by an Aetna Trust, the holders thereof will own all of the issued and outstanding Preferred Securities of such Aetna Trust. Aetna will acquire directly or indirectly 5 24 securities representing common undivided beneficial interests in the assets of each Aetna Trust (the "Common Securities" and, together with the Preferred Securities, the "Trust Securities") in an amount equal to at least 3% of the total capital of such Aetna Trust and will own, directly or indirectly, all of the issued and outstanding Common Securities of each Aetna Trust. The Preferred Securities and the Common Securities will rank pari passu with each other and will have equivalent terms; provided that (i) if a Declaration Event of Default (as defined herein) under the Declaration of an Aetna Trust occurs and is continuing, the holders of Preferred Securities of such Aetna Trust will have a priority over holders of the Common Securities of such Aetna Trust with respect to payments in respect of distributions and payments upon liquidation, redemption and maturity and (ii) holders of Common Securities of such Aetna Trust have the exclusive right (subject to the terms of the Declaration) to appoint, remove or replace the Trustees and to increase or decrease the number of Trustees. Each Aetna Trust exists for the purpose of (a) issuing its Preferred Securities, (b) issuing its Common Securities, directly or indirectly, to Aetna, (c) investing the gross proceeds from the sale of the Trust Securities in Junior Subordinated Debt Securities of the Company and (d) engaging in only such other activities as are necessary, convenient or incidental thereto. The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the applicable Declaration, the Business Trust Act and the Trust Indenture Act. POWERS AND DUTIES OF TRUSTEES The number of trustees (the "Trustees") of each Aetna Trust shall initially be five. Three of such Trustees (the "Regular Trustees") are individuals who are employees or officers of Aetna or its subsidiaries. The fourth such trustee will be The First National Bank of Chicago, which is unaffiliated with the Company and Aetna and which will serve as the property trustee (the "Property Trustee") and act as the indenture trustee for purposes of the Trust Indenture Act. The fifth such trustee is an affiliate of The First National Bank of Chicago that has its principal place of business in the State of Delaware (the "Delaware Trustee"). Pursuant to each Declaration, legal title to the Junior Subordinated Debt Securities purchased by an Aetna Trust and the related Junior Subordinated Debt Guarantees will be held by the Property Trustee for the benefit of the holders of the Trust Securities of such Aetna Trust, and the Property Trustee will have the power to exercise all rights, powers and privileges under the Indenture (as defined under "Description of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees") with respect to the Junior Subordinated Debt Securities and the related Junior Subordinated Debt Guarantees. In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments in respect of the Junior Subordinated Debt Securities purchased by an Aetna Trust and the related Junior Subordinated Debt Guarantees for the benefit of the holders of Trust Securities of such Aetna Trust. The Property Trustee will promptly make distributions to the holders of the Trust Securities out of funds from the Property Account. The Preferred Securities Guarantees are separately qualified under the Trust Indenture Act and will be held by The First National Bank of Chicago, acting in its capacity as indenture trustee with respect thereto, for the benefit of the holders of the applicable Preferred Securities. As used in this Prospectus and any accompanying Prospectus Supplement, the term "Property Trustee" with respect to an Aetna Trust refers to The First National Bank of Chicago acting either in its capacity as a Trustee under the relevant Declaration and the holder of legal title to the Junior Subordinated Debt Securities purchased by that Aetna Trust and the related Junior Subordinated Debt Guarantees or in its capacity as indenture trustee under, and the holder of, the applicable Preferred Securities Guarantee, as the context may require. The owner of all of the Common Securities of each Aetna Trust will have the exclusive right (subject to the terms of the related Declaration) to appoint, remove or replace Trustees and to increase or decrease the number of Trustees, provided that the number of Trustees shall be at least five and the majority of Trustees shall be Regular Trustees. The term of an Aetna Trust will be set forth in the Prospectus Supplement, but may terminate earlier as provided in such Declaration. The duties and obligations of the Trustees of an Aetna Trust shall be governed by the Declaration of such Aetna Trust. Under its Declaration, each Aetna Trust shall not, and the Trustees shall cause such Aetna Trust not to, engage in any activity other than in connection with the purposes of such Aetna Trust or other than as required or authorized by the related Declaration. In particular, each Aetna Trust shall not and the Trustees shall not (a) invest any proceeds received by such Aetna Trust from holding the Junior Subordinated Debt 6 25 Securities purchased by such Aetna Trust and the related Junior Subordinated Debt Guarantees but shall promptly distribute from the Property Account all such proceeds to holders of Trust Securities pursuant to the terms of the related Declaration and of the Trust Securities; (b) acquire any assets other than as expressly provided in the related Declaration; (c) possess Trust property for other than a Trust purpose; (d) make any loans, other than loans represented by the Junior Subordinated Debt Securities; (e) possess any power or otherwise act in such a way as to vary the assets of such Aetna Trust or the terms of its Trust Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, such Aetna Trust other than its Trust Securities; (g) incur any indebtedness for borrowed money or (h)(i) direct the time, method and place of exercising any trust or power conferred upon the Indenture Trustee (as defined under "Description of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees") with respect to the Junior Subordinated Debt Securities or the related Junior Subordinated Debt Guarantees deposited in that Aetna Trust as trust assets or upon the Property Trustee of that Aetna Trust with respect to its Preferred Securities, (ii) waive any past default that is waivable under the Indenture or the Declaration, (iii) exercise any right to rescind or annul any declaration that the principal of all of the Junior Subordinated Debt Securities deposited in that Aetna Trust as trust assets shall be due and payable or (iv) consent to any amendment, modification or termination of the Indenture or such Junior Subordinated Debt Securities, the related Junior Subordinated Debt Guarantees or the Declaration, in each case where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause such Aetna Trust to be classified for United States Federal income tax purposes as an association taxable as a corporation or a partnership and that such Aetna Trust will continue to be classified as a grantor trust for United States Federal income tax purposes. BOOKS AND RECORDS The books and records of each Aetna Trust will be maintained at the principal office of such Aetna Trust and will be open for inspection by a holder of Preferred Securities of such Aetna Trust or his representative for any purpose reasonably related to his interest in such Aetna Trust during normal business hours. Each holder of Preferred Securities will be furnished annually with unaudited financial statements of the applicable Aetna Trust as soon as available after the end of such Aetna Trust's fiscal year. VOTING Except as provided under the Business Trust Act, the Declaration and the Trust Indenture Act, holders of Preferred Securities will have no voting rights. THE PROPERTY TRUSTEE The Property Trustee, for the benefit of the holders of the Trust Securities of an Aetna Trust, is authorized under each Declaration to exercise all rights under the Indenture with respect to the Junior Subordinated Debt Securities and the related Junior Subordinated Debt Guarantees deposited in such Aetna Trust as trust assets, including its rights as the holder of such Junior Subordinated Debt Securities to enforce the Company's obligations under such Junior Subordinated Debt Securities and Aetna's obligations under the related Junior Subordinated Debt Guarantees upon the occurrence of an Event of Default under the Indenture (as such term is defined under "Description of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees"; any such Event of Default, an "Indenture Event of Default"). The Property Trustee shall also be authorized to enforce the rights of holders of Preferred Securities of an Aetna Trust under the related Preferred Securities Guarantees. If any Aetna Trust's failure to make distributions on the Preferred Securities of an Aetna Trust is a consequence of the Company's exercise of any right under the terms of the Junior Subordinated Debt Securities deposited in such Aetna Trust as trust assets to extend the interest payment period for such Junior Subordinated Debt Securities, the Property Trustee will have no right to enforce the payment of distributions on such Preferred Securities until a Declaration Event of Default shall have occurred. Holders of at least a majority in liquidation amount of the Preferred Securities issued by an Aetna Trust will have the right to direct the Property Trustee for that Aetna Trust with respect to certain 7 26 matters under the Declaration for that Aetna Trust and the related Preferred Securities Guarantees. If the Property Trustee fails to enforce its rights under the Indenture or fails to enforce the Preferred Securities Guarantees, to the extent permitted by applicable law, any holder of Preferred Securities may institute a legal proceeding against the Company and Aetna to enforce such rights or the Preferred Securities Guarantees, as the case may be. In addition, the holders of at least 25% in aggregate liquidation amount of the outstanding Preferred Securities would have the right to directly institute proceedings for enforcement of payment to such holders of principal of, or premium, if any, or interest on the Junior Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities of such holders. DISTRIBUTIONS Pursuant to each Declaration, distributions on the Preferred Securities of an Aetna Trust must be paid on the dates payable to the extent that the Property Trustee for that Aetna Trust has cash on hand in the applicable Property Account to permit such payment. The funds available for distribution to the holders of the Preferred Securities of an Aetna Trust will be limited to payments received by the Property Trustee in respect of the Junior Subordinated Debt Securities and the related Junior Subordinated Debt Guarantees that are deposited in the Aetna Trust as trust assets. If the Company does not make interest payments on the Junior Subordinated Debt Securities, and Aetna does not make payments on the related Junior Subordinated Debt Guarantees, deposited in an Aetna Trust as trust assets, the Property Trustee will not make distributions on the Preferred Securities of such Aetna Trust. Under the Declaration, if and to the extent the Company does make interest payments on the Junior Subordinated Debt Securities, or Aetna makes such payments pursuant to the related Junior Subordinated Debt Guarantees, deposited in an Aetna Trust as trust assets, the Property Trustee is obligated to make distributions on the Trust Securities of such Aetna Trust on a Pro Rata Basis (as defined below). The payment of distributions on the Preferred Securities of an Aetna Trust is guaranteed by each of Aetna and the Company on a junior subordinated basis as and to the extent set forth under "Description of the Preferred Securities Guarantees." A Preferred Securities Guarantee is a full and unconditional guarantee from the time of issuance of the applicable Preferred Securities, but a Preferred Securities Guarantee covers distributions and other payments on the applicable Preferred Securities only if and to the extent that the Company has made a payment to the Property Trustee of interest or principal on the Junior Subordinated Debt Securities, or Aetna has made such payment pursuant to the related Junior Subordinated Debt Guarantees, deposited in the Aetna Trust as trust assets. As used in this Prospectus, the term "Pro Rata Basis" shall mean pro rata to each holder of Trust Securities of an Aetna Trust according to the aggregate liquidation amount of the Trust Securities of such Aetna Trust held by the relevant holder in relation to the aggregate liquidation amount of all Trust Securities of such Aetna Trust outstanding unless, in relation to a payment, a Declaration Event of Default under the Declaration has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each holder of the Preferred Securities of such Aetna Trust pro rata according to the aggregate liquidation amount of the Preferred Securities held by the relevant holder in relation to the aggregate liquidation amount of all the Preferred Securities of such Aetna Trust outstanding, and only after satisfaction of all amounts owed to the holders of such Preferred Securities, to each holder of Common Securities of such Aetna Trust pro rata according to the aggregate liquidation amount of such Common Securities held by the relevant holder in relation to the aggregate liquidation amount of all Common Securities of such Aetna Trust outstanding. DECLARATION EVENTS OF DEFAULT If an Indenture Event of Default occurs and is continuing with respect to Junior Subordinated Debt Securities deposited in an Aetna Trust as trust assets, an Event of Default under the Declaration (a "Declaration Event of Default") of such Aetna Trust will occur and be continuing with respect to any outstanding Trust Securities of such Aetna Trust. In such event, each Declaration provides that the holders of Common Securities of such Aetna Trust will be deemed to have waived any such Declaration Event of Default with respect to the Common Securities until all Declaration Events of Default with respect to the Preferred Securities of such Aetna Trust have been cured or waived. Until all such Declaration Events of Default with respect to the Preferred Securities of such Aetna Trust have been so cured or waived, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Preferred Securities of such 8 27 Aetna Trust and only the holders of such Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under such Declaration and consequently under the Indenture. In the event that any Declaration Event of Default with respect to the Preferred Securities of such Aetna Trust is waived by the holders of the Preferred Securities of such Aetna Trust as provided in the Declaration, the holders of Common Securities pursuant to such Declaration have agreed that such waiver also constitutes a waiver of such Declaration Event of Default with respect to the Common Securities for all purposes under the Declaration without any further act, vote or consent of the holders of the Common Securities. RECORD HOLDERS Preferred Securities will be issued in fully registered form. Each Declaration provides that the Trustees of such Aetna Trust may treat the person in whose name a certificate representing its Preferred Securities is registered on the books and records of such Aetna Trust as the sole holder thereof and of the Preferred Securities represented thereby for purposes of receiving distributions and for all other purposes and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such certificate or in the Preferred Securities represented thereby on the part of any person, whether or not such Aetna Trust shall have actual or other notice thereof. Unless otherwise specified in a Prospectus Supplement, Preferred Securities will be represented by a global certificate registered on the books and records of such Aetna Trust in the name of a depositary (the "Depositary") named in an accompanying Prospectus Supplement or its nominee. Under each Declaration: (i) such Aetna Trust and the Trustees thereof shall be entitled to deal with the Depositary (or any successor depositary) for all purposes, including the payment of distributions and receiving approvals, votes or consents under the related Declaration, and except as set forth in the related Declaration with respect to the Property Trustee, shall have no obligation to persons owning a beneficial interest in Preferred Securities ("Preferred Security Beneficial Owners") registered in the name of and held by the Depositary or its nominee; and (ii) the rights of Preferred Security Beneficial Owners shall be exercised only through the Depositary (or any successor depositary) and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Depositary and/or its participants. With respect to Preferred Securities registered in the name of and held by the Depositary or its nominee, all notices and other communications required under each Declaration shall be given to, and all distributions on such Preferred Securities shall be given or made to, the Depositary (or its successor). The specific terms of the depositary arrangement with respect to the Preferred Securities will be disclosed in the applicable Prospectus Supplement. DEBTS AND OBLIGATIONS OF AN AETNA TRUST In each Declaration, the Company and Aetna have jointly and severally agreed to pay for all debts and obligations (other than with respect to the Trust Securities) and all costs and expenses of the applicable Aetna Trust, including the fees and expenses of its Trustees and any taxes and all costs and expenses with respect thereto, to which such Aetna Trust may become subject, except for United States withholding taxes. The foregoing obligations of the Company and Aetna under each Declaration are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company and Aetna directly against the Company and Aetna and the Company and Aetna have irrevocably waived any right or remedy to require that any such Creditor take any action against any Aetna Trust or any other person before proceeding against the Company or Aetna. The Company and Aetna have agreed in each Declaration to execute such additional agreements as may be necessary or desirable in order to give full effect to the foregoing. The business address of each Aetna Trust is c/o Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156, telephone number (860) 273-0123. 9 28 DESCRIPTION OF THE PREFERRED SECURITIES Each Aetna Trust may issue, from time to time, only one series of Preferred Securities having terms described in the Prospectus Supplement relating thereto. The Declaration of each Aetna Trust authorizes the Regular Trustees of such Aetna Trust to issue on behalf of such Aetna Trust one series of Preferred Securities. Each Declaration will be qualified as an indenture under the Trust Indenture Act. The Preferred Securities will have such terms, including distributions, redemption, voting, liquidation rights and such other preferred, deferred or other special rights or such restrictions as shall be set forth in the related Declaration or made part of such Declaration by the Trust Indenture Act. Reference is made to the Prospectus Supplement relating to the Preferred Securities of an Aetna Trust for specific terms, including (i) the specific designation of such Preferred Securities, (ii) the number of Preferred Securities issued by such Aetna Trust, (iii) the annual distribution rate (or method of calculation thereof) for Preferred Securities issued by such Aetna Trust, the date or dates upon which such distributions shall be payable and the record date or dates for the payment of such distributions, (iv) whether distributions on Preferred Securities issued by such Aetna Trust shall be cumulative, and, in the case of Preferred Securities having such cumulative distribution rights, the date or dates or method of determining the date or dates from which distributions on Preferred Securities issued by such Aetna Trust shall be cumulative, (v) the amount or amounts which shall be paid out of the assets of such Aetna Trust to the holders of Preferred Securities of such Aetna Trust upon voluntary or involuntary dissolution, winding-up or termination of such Aetna Trust, (vi) the obligation or right, if any, of such Aetna Trust to purchase or redeem Preferred Securities issued by such Aetna Trust and the price or prices at which, the period or periods within which and the terms and conditions upon which Preferred Securities issued by such Aetna Trust shall or may be purchased or redeemed, in whole or in part, pursuant to such obligation or right, (vii) the voting rights, if any, of Preferred Securities issued by such Aetna Trust in addition to those required by law, including the number of votes per Preferred Security and any requirement for the approval by the holders of Preferred Securities, or of Preferred Securities issued by one or more Aetna Trusts, or of both, as a condition to specified actions or amendments to the Declaration of such Aetna Trust, (viii) the terms and conditions, if any, upon which the Junior Subordinated Debt Securities may be distributed to holders of Preferred Securities, (ix) if applicable, any securities exchange upon which the Preferred Securities shall be listed, and (x) any other relevant rights, preferences, privileges, limitations or restrictions of Preferred Securities issued by such Aetna Trust consistent with the Declaration of such Aetna Trust or with applicable law. All Preferred Securities offered hereby will be guaranteed by Aetna and the Company as and to the extent set forth below under "Description of the Preferred Securities Guarantees." Certain United States Federal income tax considerations applicable to any offering of Preferred Securities will be described in the Prospectus Supplement relating thereto. In connection with the issuance of Preferred Securities, each Aetna Trust will issue one series of Common Securities. The Declaration of each Aetna Trust authorizes the Regular Trustees of such trust to issue on behalf of such Aetna Trust one series of Common Securities having such terms including distributions, redemption, voting, liquidation rights or such restrictions as shall be set forth therein. The terms of the Common Securities issued by an Aetna Trust will be substantially identical to the terms of the Preferred Securities issued by such Aetna Trust and the Common Securities will rank pari passu, and payments will be made thereon on a Pro Rata Basis with the Preferred Securities except that if a Declaration Event of Default occurs and is continuing, the rights of the holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and maturity will be subordinated to the rights of the holders of such Preferred Securities. Except in certain limited circumstances, the Common Securities issued by an Aetna Trust will also carry the right to vote and to appoint, remove or replace any of the Trustees of that Aetna Trust. All of the Common Securities of an Aetna Trust will be directly or indirectly owned by Aetna. DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES Set forth below is a summary of information concerning the Preferred Securities Guarantees that will be executed and delivered by Aetna and the Company for the benefit of the holders from time to time of Preferred Securities. Each Preferred Securities Guarantee will be separately qualified under the Trust 10 29 Indenture Act and will be held by The First National Bank of Chicago, acting in its capacity as indenture trustee with respect thereto, for the benefit of holders of the Preferred Securities of the applicable Aetna Trust. The terms of each Preferred Securities Guarantee will be those set forth in such Preferred Securities Guarantee and those made part of such Guarantee by the Trust Indenture Act. This description summarizes the material terms of the Preferred Securities Guarantees and is qualified in its entirety by reference to the form of Preferred Securities Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. GENERAL Pursuant to each Preferred Securities Guarantee, Aetna and the Company will irrevocably and unconditionally agree, to the extent set forth therein, to pay in full, to the holders of the Preferred Securities issued by an Aetna Trust, the Guarantee Payments (as defined herein) (without duplication of amounts theretofore paid by such Aetna Trust), to the extent not paid by such Aetna Trust, regardless of any defense, right of set-off or counterclaim that such Aetna Trust may have or assert. The following payments or distributions with respect to Preferred Securities issued by an Aetna Trust to the extent not paid or made by such Aetna Trust (the "Guarantee Payments"), will be subject to the Preferred Securities Guarantee (without duplication): (i) any accrued and unpaid distributions on such Preferred Securities, and the redemption price, including all accrued and unpaid distributions to the date of redemption, with respect to any Preferred Securities called for redemption by such Aetna Trust, but only if and to the extent that in each case the Company has made a payment to the related Property Trustee of interest or principal on the Junior Subordinated Debt Securities, or Aetna has made such payment pursuant to the related Junior Subordinated Debt Guarantees, deposited in such Aetna Trust as trust assets and (ii) upon a voluntary or involuntary dissolution, winding-up or termination of such Aetna Trust (other than in connection with the distribution of such Junior Subordinated Debt Securities to the holders of Preferred Securities or the redemption of all of the Preferred Securities upon the maturity or redemption of such Junior Subordinated Debt Securities) the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment, to the extent such Aetna Trust has funds available therefor or (b) the amount of assets of such Aetna Trust remaining available for distribution to holders of such Preferred Securities in liquidation of such Aetna Trust. Aetna's and the Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by Aetna or the Company to the holders of Preferred Securities or by causing the applicable Aetna Trust to pay such amounts to such holders. A Preferred Securities Guarantee is a full and unconditional guarantee from the time of issuance of the applicable Preferred Securities, but a Preferred Securities Guarantee covers distributions and other payments on such Preferred Securities only if and to the extent that the Company has made a payment to the Property Trustee of interest or principal on the Junior Subordinated Debt Securities, or Aetna has made such payment pursuant to the related Junior Subordinated Debt Guarantees, deposited in the applicable Aetna Trust as trust assets. If the Company does not make interest or principal payments on the Junior Subordinated Debt Securities, or Aetna does not make such payment pursuant to the related Junior Subordinated Debt Guarantees, deposited in the applicable Aetna Trust as trust assets, no payment obligation will arise under a Preferred Securities Guarantee, the Property Trustee will not make distributions on the Preferred Securities of such Aetna Trust and the Aetna Trust will not have funds available therefor. The Company's and Aetna's obligations under the Declaration for each Aetna Trust, the Preferred Securities Guarantee issued with respect to Preferred Securities issued by that Aetna Trust, the Junior Subordinated Debt Securities purchased by that Aetna Trust, the related Junior Subordinated Debt Guarantees, and the related Indenture will in the aggregate provide a full and unconditional guarantee on a subordinated basis by Aetna and the Company of payments due on the Preferred Securities issued by that Aetna Trust. CERTAIN COVENANTS OF AETNA AND THE COMPANY Unless otherwise provided in the applicable Prospectus Supplement, in each Preferred Securities Guarantee, Aetna and the Company will covenant and agree that, so long as any Preferred Securities issued by 11 30 the applicable Aetna Trust remain outstanding, Aetna and the Company will not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 the Preferred Securities Guarantees, (ii) acquisitions of shares of Aetna's or the Company's common stock in connection with the satisfaction by Aetna or the Company, as the case may be, of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by Aetna or the Company or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of Aetna or the Company as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by Aetna or the Company or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of Aetna), if at such time (a) Aetna and the Company shall be in default with respect to their payment obligations under the related Preferred Securities Guarantee, (b) there shall have occurred and be continuing a Declaration Event of Default or (c) the Company shall have given notice of its election to defer payments of interest on the related Junior Subordinated Debt Securities and such period, or any extension thereof, is continuing. In addition, so long as any Preferred Securities remain outstanding, Aetna has agreed (i) to remain the sole direct or indirect owner of all of the outstanding Common Securities issued by the applicable Aetna Trust and shall not cause or permit the Common Securities to be transferred except to the extent permitted by the related Declaration; provided that any permitted successor under the Indenture of the owner of the Common Securities may succeed to such owner's ownership of the Common Securities issued by the applicable Aetna Trust and (ii) to use reasonable efforts to cause such Aetna Trust to continue to be treated as a grantor trust for United States Federal income tax purposes except in connection with a distribution of Junior Subordinated Debt Securities. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Preferred Securities (in which case no consent will be required), each Preferred Securities Guarantee may be amended only with the prior approval of the holders of not less than 66 2/3% in liquidation amount of the outstanding Preferred Securities issued by the applicable Aetna Trust. The manner of obtaining any such approval of holders of such Preferred Securities will be set forth in an accompanying Prospectus Supplement. All guarantees and agreements contained in a Preferred Securities Guarantee shall bind the successors, assignees, receivers, trustees and representatives of Aetna and the Company and shall inure to the benefit of the holders of the Preferred Securities of the applicable Aetna Trust then outstanding. Except in connection with a consolidation, merger or sale involving Aetna or the Company that is permitted under the Indenture, neither Aetna nor the Company may delegate its obligations under any Preferred Securities Guarantee. TERMINATION OF THE PREFERRED SECURITIES GUARANTEES Each Preferred Securities Guarantee will terminate and be of no further force and effect as to the Preferred Securities issued by the applicable Aetna Trust (a) upon full payment of the redemption price of all Preferred Securities of such Aetna Trust, (b) upon distribution of the Junior Subordinated Debt Securities to the holders of the Preferred Securities of such Aetna Trust in exchange for all of the Preferred Securities issued by such Aetna Trust, or (c) upon full payment of the amounts payable upon liquidation of such Aetna Trust. Notwithstanding the foregoing, each Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities issued by the applicable Aetna Trust must restore payment of any sums paid under such Preferred Securities or such Guarantee. STATUS OF THE PREFERRED SECURITIES GUARANTEES Aetna's and the Company's obligations under each Preferred Securities Guarantee to make the Guarantee Payments will constitute an unsecured obligation of Aetna and the Company and will rank (i) pari passu in right of payment with Aetna's and the Company's obligations under the other Preferred Securities Guarantees and other guarantees of preferred securities of any Financing Entity (as defined), (ii) subordinate and junior in right of payment to all other liabilities of Aetna, including the Junior Subordinated Debt 12 31 Guarantees, and of the Company, including the Junior Subordinated Debt Securities, except those made pari passu or subordinate by their terms and (iii) senior to all capital stock now or hereafter issued by Aetna or the Company and to any guarantee now or hereafter issued by Aetna or the Company in respect of any of its or their capital stock. Aetna's and the Company's obligations under each Preferred Securities Guarantee will rank pari passu with its guarantee of the preferred securities issued by Aetna Capital LLC. The Preferred Securities Guarantees will be unsecured and, because Aetna and the Company are non-operating holding companies, will be effectively subordinated to all liabilities of Aetna and Company subsidiaries, respectively. Holders of the Preferred Securities Guarantees should look only to the assets of Aetna and the Company for payment of the Guarantee Payments. Each Declaration provides that each holder of Preferred Securities issued by the applicable Aetna Trust by acceptance thereof agrees to the subordination provisions and other terms of the related Preferred Securities Guarantees. Each Preferred Securities Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the guarantor to enforce its rights under the guarantee without first instituting a legal proceeding against any other person or entity). Each Preferred Securities Guarantee will be deposited with The First National Bank of Chicago, as indenture trustee, to be held for the benefit of the holders of the Preferred Securities issued by the applicable Aetna Trust. The First National Bank of Chicago shall enforce the Preferred Securities Guarantees on behalf of the holders of the Preferred Securities issued by the applicable Aetna Trust. The holders of not less than a majority in aggregate liquidation amount of the Preferred Securities issued by the applicable Aetna Trust have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of the related Preferred Securities Guarantee, including the giving of directions to The First National Bank of Chicago. If The First National Bank of Chicago fails to enforce such Preferred Securities Guarantee as above provided, any holder of Preferred Securities issued by the applicable Aetna Trust may institute a legal proceeding directly against Aetna or the Company to enforce its rights under such Preferred Securities Guarantee, without first instituting a legal proceeding against the applicable Aetna Trust or any other person or entity. MISCELLANEOUS Aetna and the Company are required to file annually with The First National Bank of Chicago an officer's certificate as to Aetna's and the Company's compliance with all conditions under the Preferred Securities Guarantees. The First National Bank of Chicago, prior to the occurrence of a default, undertakes to perform only such duties as are specifically set forth in the applicable Preferred Securities Guarantees and, after default with respect to a Preferred Securities Guarantee, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, The First National Bank of Chicago is under no obligation to exercise any of the powers vested in it by a Preferred Securities Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. GOVERNING LAW The Preferred Securities Guarantees will be governed by, and construed in accordance with, the laws of the State of New York. 13 32 DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES AND JUNIOR SUBORDINATED DEBT GUARANTEES The following description sets forth certain general terms and provisions of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees to which any Prospectus Supplement may relate. The particular terms of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees offered by any Prospectus Supplement and the extent, if any, to which such general provisions may not apply to the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees so offered will be described in the Prospectus Supplement relating to such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees. The Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees are to be issued under an Indenture (together with any supplemental indenture thereto, the "Indenture") to be entered into among the Company, Aetna and The First National Bank of Chicago, as Trustee. A copy of the Indenture has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. The First National Bank of Chicago is hereinafter referred to as the "Trustee". The following summaries of certain provisions of the Junior Subordinated Debt Securities, the Junior Subordinated Debt Guarantees and the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indenture applicable to a particular series of Junior Subordinated Debt Securities and related Junior Subordinated Debt Guarantees, including the definitions therein of certain terms. Capitalized terms not otherwise defined herein shall have the meaning given in the Indenture. GENERAL The Indenture does not limit the aggregate principal amount of Junior Subordinated Debt Securities which may be issued thereunder and the Indenture provides that Junior Subordinated Debt Securities may be issued thereunder from time to time in one or more series. The Junior Subordinated Debt Securities and the Junior Subordinated Debt Guarantees when issued will be unsecured and subordinated in right of payment to the prior payment in full of all Senior Debt (as defined herein) of the Company and Aetna, respectively, as described under "Subordination of Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees" and in the Prospectus Supplement applicable to an offering of Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees. Reference is made to the Prospectus Supplement relating to the particular Junior Subordinated Debt Securities offered thereby which shall set forth the following terms of the Junior Subordinated Debt Securities offered thereby: (1) the title of the Junior Subordinated Debt Securities; (2) any limit on the aggregate principal amount of such Junior Subordinated Debt Securities; (3) the Person to whom any interest on such Junior Subordinated Debt Securities will be payable, if other than the Person in whose name such Junior Subordinated Debt Securities are registered on any Regular Record Date; (4) the date or dates on which the principal of such Junior Subordinated Debt Securities will be payable; (5) the rate or rates per annum (which may be fixed or variable) at which such Junior Subordinated Debt Securities will bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, the date or dates from which such interest will accrue and the dates on which such interest, if any, will be payable, the right, if any, of the Company to defer or extend an interest payment date and the duration of such deferral or extension (an "Extension Period") and the Regular Record Dates for such interest payment dates; (6) whether the Junior Subordinated Debt Securities will be secured; (7) the place or places where principal of (and premium, if any) and interest, if any, on such Junior Subordinated Debt Securities will be payable; (8) if applicable, the price at which, the periods within which and the terms and conditions upon which the Junior Subordinated Debt Securities may be redeemed at the option of the Company, pursuant to a sinking fund or otherwise; (9) if applicable, any obligation of the Company to redeem or purchase such Junior Subordinated Debt Securities pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, and the period or periods within which, the price or prices at which and the terms and conditions upon which the Junior Subordinated Debt Securities will be redeemed or purchased, in whole or in part; (10) the denominations in which such Junior Subordinated Debt Securities will be issuable; (11) if the amount of payments of principal of (or premium, if any) or interest, if any, on the Junior Subordinated Debt Securities may be determined with reference to one 14 33 or more indices, the manner in which such amounts will be determined; (12) the portion of the principal amount of such Junior Subordinated Debt Securities, if other than the principal amount thereof, payable upon acceleration of maturity thereof; (13) whether all or any part of such Junior Subordinated Debt Securities will be issued in the form of a Global Security or Securities and, if so, the depositary for, and other terms related to, such Global Security or Securities; (14) any event or events of default applicable with respect to such Junior Subordinated Debt Securities in addition to those provided in the Indenture; (15) the relative degree to which such Junior Subordinated Debt Securities of the series shall be senior to or be subordinated to other series of such Junior Subordinated Debt Securities in right of payment, whether such other series of Junior Subordinated Debt Securities are outstanding or not; (16) any other covenant or warranty included for the benefit of the Junior Subordinated Debt Securities in addition to (and not inconsistent with) those included in the Indenture for the benefit of Junior Subordinated Debt Securities or in lieu of any covenant or warranty included in the Indenture for the benefit of the Junior Subordinated Debt Securities of all series, or any provision that any covenant or warranty included in the Indenture for the benefit of Junior Subordinated Debt Securities of all series shall not be for the benefit of the applicable Junior Subordinated Debt Securities, or any combination of such covenant, warranty or provisions; (17) the guarantee of Aetna of the Junior Subordinated Debt Securities if other than as described herein; (18) any restriction or condition on the transferability of the Junior Subordinated Debt Securities; (19) any authenticating or paying agents, registrars, conversion agents or any other agents with respect to such Junior Subordinated Debt Securities; and (20) any other terms of such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees not inconsistent with the terms of the Indenture. Unless otherwise specified in the applicable Prospectus Supplement, the Junior Subordinated Debt Securities will not be listed on any securities exchange. Unless otherwise indicated in the Prospectus Supplement relating thereto, Junior Subordinated Debt Securities are to be issued as registered securities without coupons in denominations of $25 or any integral multiple of $25. No service charge will be made for any transfer or exchange of such Junior Subordinated Debt Securities, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Junior Subordinated Debt Securities may be issued under the Indenture as Original Issue Discount Securities to be sold at a substantial discount below their stated principal amount. United States Federal income tax consequences and other considerations applicable thereto will be described in the Prospectus Supplement relating hereto. If any index is used to determine the amount of payments of principal of, premium, if any, or interest on any series of Junior Subordinated Debt Securities, special United States Federal income tax, accounting and other considerations applicable thereto will be described in the applicable Prospectus Supplement. Since each of Aetna and the Company is a holding company, the rights of Aetna and the Company, respectively, and hence the right of creditors of Aetna and the Company (including the Holders of Junior Subordinated Debt Securities), to participate in any distribution of the assets of their respective subsidiaries (including in the case of Aetna, the Company and Aetna U.S. Healthcare), upon any such subsidiary's liquidation or reorganization or otherwise is necessarily subject to the prior claims of creditors of such subsidiary, except to the extent that claims of Aetna or the Company, as a creditor of such subsidiary, may be recognized. The Indenture does not contain any provision that limits the ability of the Company or Aetna to incur indebtedness or that affords Holders of the Junior Subordinated Debt Securities protection in the event of a highly leveraged or similar transaction involving the Company or Aetna. PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE Unless otherwise provided in the applicable Prospectus Supplement, payments in respect of the Junior Subordinated Debt Securities will be made at the office or agency of the Company maintained for that purpose as the Company may designate from time to time, except that, at the option of the Company, interest payments, if any, on Junior Subordinated Debt Securities in registered form may be made (i) by checks mailed to the holders of Junior Subordinated Debt Securities entitled thereto at their registered addresses or 15 34 (ii) by wire transfer to an account maintained by the person entitled thereto as specified in the Register. Unless otherwise indicated in an applicable Prospectus Supplement, payment of any installment of interest on Junior Subordinated Debt Securities in registered form will be made to the person in whose name such Junior Subordinated Debt Security is registered at the close of business on the Regular Record Date for such interest. Notwithstanding the foregoing, so long as the Property Trustee is the legal owner and record holder of the Junior Subordinated Debt Securities and related Junior Subordinated Debt Guarantees, the payment of the principal of and interest (including compounded interest, if any) on the Junior Subordinated Debt Securities held by the Property Trustee will be made by the Company in immediately available funds on the payment date therefor to the Property Account (as defined in the applicable Declaration) established and maintained by the Property Trustee pursuant to the Declaration. Interest payable on any Junior Subordinated Debt Security that is not punctually paid or duly provided for on any interest payment date will forthwith cease to be payable to the person in whose name such Junior Subordinated Debt Security is registered on the relevant record date, and such defaulted interest will instead be payable to the person in whose name such Junior Subordinated Debt Security is registered on the special record date or other specified date determined in accordance with the Indenture; provided, however, that interest shall not be considered payable by the Company on any interest payment date falling within an Extension Period unless the Company has elected to make a full or partial payment of interest accrued on the Junior Subordinated Debt Securities on such interest payment date. Unless otherwise provided in the applicable Prospectus Supplement, Junior Subordinated Debt Securities in registered form will be transferable or exchangeable at the agency of the Company maintained for such purpose as designated by the Company from time to time. Junior Subordinated Debt Securities may be transferred or exchanged without service charge, other than any tax or other governmental charge imposed in connection therewith. EVENTS OF DEFAULT AND NOTICE THEREOF Unless otherwise specified in the Prospectus Supplement, the following events are defined in the Indenture as "Events of Default" with respect to Junior Subordinated Debt Securities of any series: (a) failure to pay principal (including any sinking fund payment) of, or premium (if any) on, any Junior Subordinated Debt Security of that series when due whether or not payment is prohibited by the subordination provisions; (b) failure to pay interest, if any, on any Junior Subordinated Debt Security of that series when due and such failure continues for a period of 30 days; (c) failure by the Company or Aetna to perform in any material respect any other covenant in the Indenture (other than a covenant included in the Indenture solely for the benefit of a series of Junior Subordinated Debt Securities other than that series) continued for a period of 90 days after written notice to the Company and Aetna; and (d) certain events of insolvency, reorganization, receivership or liquidation of the Company or Aetna. No Event of Default with respect to Junior Subordinated Debt Securities of a particular series shall necessarily constitute an Event of Default with respect to Junior Subordinated Debt Securities of any other series. If an Event of Default with respect to Junior Subordinated Debt Securities of any series at the time Outstanding shall occur and be continuing, either the Trustee or the Holders of at least 25% in principal amount of the Outstanding Junior Subordinated Debt Securities of that series may declare the principal amount (or, if the Junior Subordinated Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all Junior Subordinated Debt Securities of that series to be due and payable immediately; provided, however, that under certain circumstances the Holders of a majority in aggregate principal amount of Outstanding Junior Subordinated Debt Securities of that series may rescind or annul such declaration and its consequences. Reference is made to the Prospectus Supplement relating to any series of Junior Subordinated Debt Securities which are Original Issue Discount Securities for the particular provisions relating to the principal amount of such Original Issue Discount Securities due on acceleration upon the occurrence of an Event of Default and the continuation thereof. 16 35 The Indenture provides that the Trustee may withhold notice to the Holders of the Junior Subordinated Debt Securities of any default (except in payment of principal (or premium, if any) or interest, if any) if it considers it in the interest of the Holders of the Junior Subordinated Debt Securities to do so. The Company and Aetna will be required to furnish to the Trustee annually a statement by certain officers of the Company as to the compliance with all conditions and covenants of the Indenture. The Holders of a majority in principal amount of the Outstanding Junior Subordinated Debt Securities of any series affected 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 the Junior Subordinated Debt Securities of such series, and to waive certain defaults. The Indenture provides that, in case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the 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 Indenture, at the request of any of the Holders of Junior Subordinated Debt Securities 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. No Holder of a Junior Subordinated Debt Security of any series will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of a continuing Event of Default with respect to the Junior Subordinated Debt Securities of such series and unless also the Holders of at least 25% in aggregate principal amount of the Outstanding Junior Subordinated Debt Securities of the same series shall have made written request, and offered indemnity to the Trustee in form and substance reasonably satisfactory to the Trustee, to institute such proceeding as trustee, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the Outstanding Junior Subordinated Debt Securities of the same series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a Holder of a Junior Subordinated Debt Security for enforcement of payment of the principal of (or premium, if any) or interest, if any, on such Junior Subordinated Debt Security on or after the respective due dates expressed in such Junior Subordinated Debt Security. MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Company, Aetna and the Trustee, with the consent of the Holders of not less than a majority of aggregate principal amount of each series of the Outstanding Junior Subordinated Debt Securities issued under the Indenture which is affected by the modification or amendment; provided, however, that no such modification or amendment may, without the consent of each Holder of such Junior Subordinated Debt Security affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any) or any installment of principal or interest, if any, on any such Junior Subordinated Debt Security; (2) reduce the principal amount of (or premium, if any) or interest, if any, on any such Junior Subordinated Debt Security or the principal amount due upon acceleration of an Original Issue Discount Security; (3) change the place or currency of payment of principal of (or premium, if any) or the interest, if any, on any such Junior Subordinated Debt Security; (4) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Junior Subordinated Debt Security; (5) reduce the percentage of Holders of Junior Subordinated Debt Securities necessary to modify or amend the Indenture; (6) modify or affect in any manner adverse to the Holders of Junior Subordinated Debt Securities the obligation of Aetna under the Junior Subordinated Debt Guarantees in respect of the due and punctual payment of the principal of (and premium, if any) or interest on the Junior Subordinated Debt Securities; (7) modify the subordination provisions in a manner adverse to the holders of the Junior Subordinated Debt Securities or (8) modify the foregoing requirements or reduce the percentage of 17 36 Outstanding Junior Subordinated Debt Securities necessary to waive compliance with certain provisions of the Indenture or for waiver of certain defaults. The holders of at least a majority of the aggregate principal amount of the Outstanding Junior Subordinated Debt Securities of any series may, on behalf of all Holders of that series, waive compliance by the Company and Aetna with certain restrictive provisions of the Indenture and waive any past default under the Indenture, except a default in the payment of principal, premium or interest or in the performance of certain covenants. DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Company and Aetna, at the Company's option, (A) will be defeased and discharged from any and all of their respective obligations with respect to such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees (including the provisions described under "Subordination of Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees" herein and except for the obligations to exchange or register the transfer of such Junior Subordinated Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen Junior Subordinated Debt Securities, to maintain an office or agency in respect of the Junior Subordinated Debt Securities, and to hold monies for payments in trust) ("defeasance"), or (B) will be released from their respective obligations under the Indenture concerning the restrictions described under "Certain Covenants of the Company and Aetna" and "Consolidation, Merger and Sale of Assets" and any other covenants applicable to such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees (including the provisions described under "Subordination of Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees" herein) which are subject to covenant defeasance ("covenant defeasance"), and the occurrence of an event described and notice thereof in clause (c) under "Events of Default and Notice Thereof" (with respect to covenants subject to covenant defeasance) shall no longer be an Event of Default, in each case, upon the irrevocable deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money, and/or U.S. Government Obligations (as defined) which through the payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest, if any, on such Junior Subordinated Debt Securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, (i) the Company has delivered to the Trustee an opinion of counsel (as specified in the Indenture) to the effect that the Holders of such Junior Subordinated Debt Securities will not recognize income, gain or loss for United States Federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, (ii) no Event of Default or event which with the giving of notice or lapse of time, or both, would become an Event of Default under the Indenture shall have occurred and be continuing on the date of such deposit (or, with respect to any event specified in clause (d) under "Events of Default and Notice Thereof", at any time on or prior to the 90th day after the date of such deposit) and (iii) (x) no default in the payment of principal of (or premium, if any) or interest, if any, on any Senior Debt of the Company or Aetna beyond any applicable grace period shall have occurred and be continuing, or (y) no other default with respect to any Senior Debt of the Company or Aetna shall have occurred and be continuing and shall have resulted in the acceleration of such Senior Debt. If the Company establishes such a trust, it shall be permitted at the date of establishment to extend the interest payment period for only one Extension Period (including any Extension Period outstanding at the date of such establishment). The Company may exercise its defeasance option with respect to such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its defeasance option, payment of such Junior Subordinated Debt Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of such Junior Subordinated Debt Securities may not be accelerated by reference to the covenants noted under clause (B) above. In the event the Company and Aetna omit to comply with their remaining obligations with respect to such Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees under the Indenture after the exercise by the Company of its covenant defeasance option 18 37 and such Junior Subordinated Debt Securities are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations on deposit with the Trustee may be insufficient to pay amounts due on the Junior Subordinated Debt Securities of such series at the time of the acceleration resulting from such Event of Default. However, the Company and Aetna will remain liable in respect of such payments. CERTAIN COVENANTS OF THE COMPANY AND AETNA Unless otherwise provided in the applicable Prospectus Supplement, if Junior Subordinated Debt Securities are issued to an Aetna Trust in connection with the issuance of Trust Securities by such Aetna Trust, in the Indenture, the Company and Aetna will covenant and agree that, so long as any of such Junior Subordinated Debt Securities remain outstanding, the Company and Aetna will not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 the Preferred Securities Guarantees, (ii) acquisitions of shares of the Company's or Aetna's common stock in connection with the satisfaction by the Company or Aetna, as the case may be, of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by the Company or Aetna or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of the Company or Aetna as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by the Company or Aetna or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of Aetna), if at such time (a) the Company and Aetna shall be in default with respect to their payment obligations under the related Preferred Securities Guarantee, (b) there shall have occurred and be continuing an Event of Default or (c) the Company shall have given notice of its election to defer payments of interest on the Junior Subordinated Debt Securities and such period, or any extension thereof, is continuing. CONSOLIDATION, MERGER AND SALE OF ASSETS; ASSUMPTION BY AETNA OR SUBSIDIARY OF COMPANY OBLIGATIONS Neither the Company nor Aetna may consolidate with or merge into any other Person or sell its property and assets as, or substantially as, an entirety to any Person and neither the Company nor Aetna may permit any Person to merge into or consolidate with the Company or Aetna, as the case may be, unless (i) the Company or Aetna, as the case may be, 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 the Company's and Aetna's obligations under the Junior Subordinated Debt Securities or the Junior Subordinated Debt Guarantees, as applicable, under a supplemental Indenture, (ii) immediately after giving effect to the transaction no Event of Default shall have occurred and be continuing, and (iii) certain other conditions are met. Aetna or any Subsidiary of Aetna may, where permitted by law, assume the obligations of the Company for the due and punctual payment of the principal of (premium, if any) and interest on and any other payments with respect to the Junior Subordinated Debt Securities of any series and the performance of every covenant of the Indenture and the Junior Subordinated Debt Securities on the part of Company to be performed or observed if (i) Aetna or such Subsidiary, as the case may be, shall expressly assume such obligations by a supplemental indenture, in form reasonably satisfactory to the Trustee, and, if such Subsidiary assumed such obligations, Aetna shall, by such supplemental indenture, confirm that its Junior Subordinated Debt Guarantees with respect to the Junior Subordinated Debt Securities of such series shall apply to such Subsidiary's obligations under the Junior Subordinated Debt Securities of such series and the Indenture; (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; and (iii) certain other conditions are met. SUBORDINATION OF JUNIOR SUBORDINATED DEBT SECURITIES AND JUNIOR SUBORDINATED DEBT GUARANTEES Unless otherwise indicated in the Prospectus Supplement, the following provisions will apply to the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees. 19 38 The Junior Subordinated Debt Securities will, to the extent set forth in the Indenture, be subordinate in right of payment to the prior payment in full of all Senior Debt of the Company, and the Junior Subordinated Debt Guarantees will, to the extent set for in the Indenture, be subordinate in right of payment to the prior payment in full of all Senior Debt of Aetna. Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency, debt restructuring or similar proceedings in connection with any insolvency or bankruptcy proceeding of the Company or Aetna, as the case may be, the holders of Senior Debt of the Company or Aetna, as the case may be, will first be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Debt of the Company or Aetna, as the case may be, before the holders of the Junior Subordinated Debt Securities will be entitled to receive or retain any payment in respect of the principal of (and premium, if any) or interest, if any, on the Junior Subordinated Debt Securities. By reason of such subordination, in the event of liquidation or insolvency, (i) creditors of the Company who are not holders of Senior Debt of the Company or Junior Subordinated Debt Securities may recover less, ratably, than holders of Senior Debt of the Company and may recover more, ratably, than the holders of the Junior Subordinated Debt Securities and (ii) creditors of Aetna who are not holders of Senior Debt of Aetna or Junior Subordinated Debt Securities may recover less, ratably, than holders of Senior Debt of Aetna and may recover more, ratably, than holders of Junior Subordinated Debt Securities. In the event of the acceleration of the maturity of any Junior Subordinated Debt Securities, the holders of all Senior Debt of the Company and Aetna outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon before the Holders of Junior Subordinated Debt Securities will be entitled to receive any payment upon the principal of (or premium, if any) or interest, if any, on the Junior Subordinated Debt Securities or the Junior Subordinated Debt Guarantees. No payments on account of principal (or premium, if any) or interest, if any, in respect of the Junior Subordinated Debt Securities may be made if there shall have occurred and be continuing a default in the payment of principal of (or premium, if any) or interest on Senior Debt of the Company or Aetna, or an event of default with respect to any Senior Debt of the Company or Aetna, resulting in the acceleration of the maturity thereof, or if any judicial proceeding shall be pending with respect to any such default. "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 any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person 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 such Person; 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, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. "Senior Debt" means with respect to any Person 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 such Person to the extent that such claim for post-petition interest is allowed in such proceeding), on Debt of such Person, whether incurred on or prior to the date of the Indenture or thereafter incurred (including, without limitation indebtedness or guarantees in respect thereof issued or to be issued under the Indenture dated as of July 1, 1996 among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as trustee, providing for the issuance of subordinated debt securities of the Company and guarantees of Aetna in respect thereof), 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 Junior Subordinated Debt Securities in the case of the Company, or the Junior 20 39 Subordinated Debt Guarantees, in the case of Aetna, or to other Debt of such Person which is pari passu with, or subordinated to the Junior Subordinated Debt Securities in the case of the Company, or the Junior Subordinated Debt Guarantees, in the case of Aetna; provided, however, that Senior Debt shall be deemed not to include (i) in the case of the Company, the Junior Subordinated Debt Securities and (ii) in the case of Aetna, the Junior Subordinated Debt Guarantees and provided, further, that Senior Debt shall not include any other debt securities or guarantees in respect thereof issued to any other trusts, partnerships or other entity affiliated with the Company or Aetna which is a financing vehicle of the Company or Aetna ("Financing Entity") in connection with the issuance of preferred securities of such Financing Entity, including, without limitation indebtedness of the Company and Aetna's guarantee in respect thereof issued to Aetna Capital L.L.C. pursuant to that certain Indenture dated as of November 1, 1994 between the Company and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among the Company, Aetna and The First National Bank of Chicago, as trustee. The Indenture does not limit or prohibit the incurrence of additional Senior Debt of the Company or Aetna, which may include indebtedness that is senior to the Junior Subordinated Debt Securities and the Junior Subordinated Debt Guarantees, but subordinate to other obligations of the Company or Aetna, respectively. The Company expects from time to time to incur additional indebtedness constituting Senior Debt. At March 31, 1998, each of the Company and Aetna had $2.2 billion aggregate principal amount of Senior Debt outstanding, no Junior Subordinated Debt Securities or Junior Subordinated Debt Guarantees outstanding and $348 million of indebtedness ranking pari passu in right of payment to the Junior Subordinated Debt Securities and the Junior Subordinated Debt Guarantees. All such Debt of Aetna consists of guarantees of Debt of the Company. The Indenture provides that the foregoing subordination provisions, insofar as they relate to any particular issue of Junior Subordinated Debt Securities or the Junior Subordinated Debt Guarantees with respect thereto, may be changed prior to such issuance. Any such change would be described in the Prospectus Supplement relating to such Junior Subordinated Debt Securities. VOTING RIGHTS The holders of the Junior Subordinated Debt Securities will have no voting rights. GLOBAL SECURITIES The Junior Subordinated Debt Securities of a series may be issued in the form of one or more Global Securities that will be deposited with a Depositary or its nominee. In such a case, one or more Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of Outstanding Junior Subordinated Debt Securities of the series to be represented by such Global Security or Securities. Unless and until it is exchanged in whole or in part for Junior Subordinated Debt Securities in definitive registered form, a Global Security may not be registered for transfer or exchange except as a whole by the Depositary for such Global Security to a nominee for such Depositary and except in the circumstances described in the applicable Prospectus Supplement. The specific terms of the depositary arrangement with respect to any portion of a series of Junior Subordinated Debt Securities to be represented by a Global Security and a description of the Depositary will be contained in the applicable Prospectus Supplement. THE TRUSTEE The Indenture contains limitations on the right of the Trustee, as a creditor of the Company and Aetna, 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 Indenture it is a creditor of the Company or Aetna. 21 40 The Trustee or its affiliates act as depositary for funds of, make loans to and perform other services for, or may be a customer of, the Company and Aetna in the ordinary course of business. GOVERNING LAW The Indenture is governed by and shall be construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. 22 41 PLAN OF DISTRIBUTION The Company may sell Junior Subordinated Debt Securities and the Aetna Trusts may sell Preferred Securities to one or more underwriters for public offering and sale by them or may sell Junior Subordinated Debt Securities or Preferred Securities to investors or other persons directly or through agents. The Company may sell Junior Subordinated Debt Securities and the Aetna Trusts may sell Preferred Securities as soon as practicable after effectiveness of the Registration Statement, provided that favorable market conditions exist. Any such underwriter or agent involved in the offer and sale of the Offered Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Offered Securities at a fixed price or prices, which may be changed, or at prices related to prevailing market prices or at negotiated prices. The Company or the applicable Aetna Trust also may, from time to time, authorize firms acting as the Company's or such Trust's agents to offer and sell the Junior Subordinated Debt Securities or Preferred Securities upon the terms and conditions as shall be set forth in any Prospectus Supplement. In connection with the sale of Offered Securities, underwriters may be deemed to have received compensation from the Company or the applicable Aetna Trust in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Offered Securities for whom they may act as agent. Underwriters may sell Offered Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions (which may be changed from time to time) from the purchasers for whom they may act as agent. Any underwriting compensation paid by the Company or the Aetna Trusts to underwriters or agents in connection with the offering of Offered Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters, dealers and agents participating in the distribution of the Offered Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Offered Securities may be deemed to be underwriting discounts and commissions under the Securities Act. Underwriters, dealers and agents may be entitled, under agreements with the Company, Aetna and the applicable Aetna Trust, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement for certain expenses. Underwriters, dealers and agents may engage in transactions with, or perform services for, or be customers of, the Company, Aetna and the Aetna Trusts in the ordinary course of business. If so indicated in an applicable Prospectus Supplement, the Company or the applicable Aetna Trust will authorize dealers acting as the Company's or such Trust's agents to solicit offers by certain institutions to purchase Offered Securities from the Company or the applicable Aetna Trust, as the case may be, at the public offering price set forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for payment and delivery on the date or dates stated in such Prospectus Supplement. Each Contract will be for an amount specified in the applicable Prospectus Supplement. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and other institutions, but will in all cases be subject to the approval of the Company. Contracts will not be subject to any conditions except that (i) the purchase by an institution of the Offered Securities covered by its Contracts shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject and (ii) if the Offered Securities are being sold to underwriters, the Company or the applicable Aetna Trust, as the case may be, shall have sold to such underwriters such amount specified in the applicable Prospectus Supplement. Agents and underwriters will have no responsibility in respect of the delivery or performance of Contracts. The Offered 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 Offered Securities. 23 42 VALIDITY OF THE SECURITIES Unless otherwise indicated in the applicable Prospectus Supplement, the validity of the Junior Subordinated Debt Securities, the Junior Subordinated Debt Guarantees and the Preferred Securities Guarantees offered hereby will be passed upon for the Company and Aetna by Thomas J. Calvocoressi, counsel to the Company and Aetna, and Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Unless otherwise indicated in the applicable Prospectus Supplement, certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon for the Aetna Trusts, the Company and Aetna by Richards, Layton & Finger, P.A., Wilmington, Delaware 19899, special Delaware counsel to the Aetna Trusts, the Company and Aetna. Certain legal matters in connection with the Offered Securities will be passed upon for any agents or underwriters by Sullivan & Cromwell, 125 Broad Street, New York, New York 10004. Davis Polk & Wardwell and Sullivan & Cromwell will rely upon the opinions of Thomas J. Calvocoressi and Richards, Layton & Finger, P.A. as to certain matters governed by Connecticut law or Delaware law, respectively. As of March 31, 1998, Thomas J. Calvocoressi beneficially owned 2,701 shares, and had options to purchase 46,704 shares, of Aetna's Common Stock. EXPERTS The consolidated financial statements and schedules of Aetna and its subsidiaries (including the Company) as of December 31, 1997 and 1996, and for each of the years in the three-year period ended December 31, 1997 which are incorporated by reference in Aetna's Annual Report on Form 10-K for the year ended December 31, 1997, have been incorporated by reference in this Prospectus in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. With respect to the unaudited interim financial information of Aetna incorporated by reference in this Prospectus and of Aetna to be incorporated by reference in this Prospectus, the independent certified public accountants have reported and may report that they applied limited procedures in accordance with professional standards for a review of such information. However, any separate report included in Aetna's Quarterly Reports on Form 10-Q and incorporated by reference herein states and 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 Aetna and the Company and certain of their affiliates, including Aetna Life Insurance Company, Aetna Life Insurance and Annuity Company and Aetna U.S. Healthcare, may each be considered a "party in interest" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a "disqualified person" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code") with respect to many employee benefit plans. Prohibited transactions within the meaning of ERISA or the Code may arise, for example, if Offered Securities are acquired by a pension or other employee benefit plan with respect to which Aetna, the Company or any of their affiliates is a service provider, unless such Offered 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. Any such pension or employee benefit plan proposing to invest in the Offered Securities should consult with its legal counsel. 24 43 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. Except for the SEC Registration Fee, all amounts shown are estimates. SEC Registration Fee........................................ $ 324,500 Accounting Fees and Expenses................................ 120,000 Legal Fees and Expenses..................................... 200,000 Blue Sky Fees and Expenses.................................. 75,000 Printing and Engraving Expenses............................. 80,000 Trustee's Fees and Expenses................................. 27,500 Rating Agency Fees.......................................... 500,000 Miscellaneous............................................... 22,500 ---------- Total............................................. $1,349,500 ==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Aetna and the Company are Connecticut corporations. Section 33-771(e) of the Connecticut General Statutes ("C.G.S.") provides for indemnification of directors and Section 33-776(d) provides for indemnification of officers, employees and agents of Connecticut corporations. These statutes provide in general that Connecticut corporations incorporated prior to January 1, 1997 shall indemnify their officers, directors, employees and agents against "liability" (defined as the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding). In the case of a proceeding by or in the right of the corporation, indemnification is limited to reasonable expenses incurred in connection with the proceeding against the corporation to which the individual was named a party. The corporation's obligation to provide such indemnification does not apply unless (1) the individual has met the standard of conduct set forth in Section 33-171; and (2) a determination is made (by majority vote of a quorum of the board of directors who were not parties to the proceeding, or if a quorum cannot be obtained, by a committee of the board selected as described in Section 33-775(b)(1); by special legal counsel selected by the board of directors or members thereof as described in Section 33-775(b)(2); or by shareholders) that the individual met the standard set forth in Section 33-771; or (3) the court, upon application by the individual, determines in view of all the circumstances that such person is reasonably entitled to be indemnified. Section 33-772 and Section 33-776(c) provide, respectively, that a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding, and that an officer, employee or agent of a corporation who is not a director is entitled to mandatory indemnification under Section 33-772, and may apply to a court under Section 33-774, for indemnification or advance for expenses, in each case to the same extent to which a director may be entitled to indemnification or advance for expenses under those sections. Also, under Section 33-779, a corporation may provide indemnification of or advance expenses to a director, officer, employee or agent only as permitted by Sections 33-770 to 33-778, inclusive, of the Connecticut General Statutes, as amended. The statute authorizes a corporation to procure indemnification insurance on behalf of an individual who is or was a director, officer, employer or agent of the corporation. Consistent with the statute, Aetna has procured insurance coverage from several carriers for directors and officers of Aetna and its subsidiaries which supplements the indemnification rights provided to those individuals by the C.G.S. 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 II-1 44 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 or will 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 33-771 and 33-776 to the extent such coverage does not violate public policy. As permitted under Connecticut law, Aetna's and the Company's Certificates of Incorporation limit the personal liability of directors for monetary damages to Aetna and the Company and their respective shareholders for a breach of their fiduciary duty as directors to the amount of their compensation for serving Aetna or the Company as directors during the year of the violation. These provisions do not eliminate the liability of a director if such breach (i) involved a knowing and culpable violation of law by the director, (ii) enabled the director or an associate (as defined) to receive an improper personal gain, (iii) showed a lack of good faith and a conscious disregard for the duty of the director to Aetna or the Company under circumstances in which the director was aware that his or her conduct or omission created an unjustifiable risk of serious injury to Aetna or the Company, (iv) constituted a sustained and unexcused pattern of inattention that amounted to an abdication of the director's duty to Aetna or the Company or (v) created liability under C.G.S. Section 33-757 (relating to the distribution of assets of Aetna or the Company, whether by dividend, purchase or redemption of shares or otherwise, in violation of the Connecticut corporation law). Reference is made to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement for certain provisions relating to the indemnification of directors and officers of Aetna and the Company against certain liabilities, including liabilities under the Securities Act. The Aetna Capital Trust I, II, III and IV are Delaware business trusts. Each Declaration will provide for the Company and Aetna to indemnify the Trustees of the relevant Trust, to the fullest extent permitted by applicable law. II-2 45 ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION ----------- ----------- 1.1 Form of Underwriting Agreement relating to the Debt Securities 1.2 Form of Underwriting Agreement relating to the Preferred Securities* 4.1 Senior Indenture, dated as of July 1, 1996, among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (including the forms of the Senior Debt Securities and Senior Debt Guarantees) (incorporated herein by reference to Exhibit 4.1 of Aetna's Quarterly Report on Form 10-Q filed on October 25, 1996). 4.2 Form of Subordinated Indenture, dated as of July 1, 1996, among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (including the forms of the Subordinated Debt Securities and Subordinated Debt Guarantees) 4.3 Form of Junior Subordinated Indenture among the Company, Aetna and The First National Bank of Chicago, as Trustee 4.3.1 Form of Supplemental Indenture to be used in connection with issuance of Junior Subordinated Debt Securities and Preferred Securities (including the forms of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees) 4.4 Declaration of Trust of Aetna Capital Trust I+ 4.5 Declaration of Trust of Aetna Capital Trust II+ 4.6 Declaration of Trust of Aetna Capital Trust III+ 4.7 Declaration of Trust of Aetna Capital Trust IV+ 4.8 Certificate of Trust of Aetna Capital Trust I+ 4.9 Certificate of Trust of Aetna Capital Trust II+ 4.10 Certificate of Trust of Aetna Capital Trust III+ 4.11 Certificate of Trust of Aetna Capital Trust IV+ 4.12 Form of Amended and Restated Declaration of Trust for each of Aetna Capital Trust I, II, III, and IV (including the form of Preferred Securities) 4.13 Form of Guarantee Agreement among the Company, Aetna and The First National Bank of Chicago, as Trustee, with respect to each of Aetna Capital Trust I, II, III and IV's Preferred Securities 5.1 Opinion of Thomas J. Calvocoressi, General Counsel to the Company and Aetna 5.2 Opinion of Davis Polk & Wardwell 5.3 Opinion of Richards, Layton & Finger, P.A. 12.1 Computation of Ratios of Earnings to Fixed Charges (incorporated herein by reference to Exhibit 12 of Aetna's Quarterly Report on Form 10Q filed on May 6, 1998) 23.1 Consent of Thomas J. Calvocoressi (contained in Exhibit 5.1) 23.2 Consent of Davis Polk & Wardwell (contained in Exhibit 5.2) 23.3 Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.3) 23.4 Consent of KPMG Peat Marwick LLP 23.5 Letter of KPMG Peat Marwick LLP regarding Unaudited Interim Financial Information+ 24.1 Powers of Attorney for the Company 24.2 Powers of Attorney for Aetna 24.3 Powers of Attorneys for the Company, as sponsor, to sign the Registration Statement on behalf of Aetna Capital Trust I, II, III and IV (included in Exhibits 4.4, 4.5, 4.6 and 4.7, respectively) 25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust Company of Connecticut, National Association, as Trustee, under the Senior Indenture+ 25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust Company of Connecticut, National Association, as Trustee, under the Subordinated Indenture+
II-3 46
EXHIBIT NO. DESCRIPTION ----------- ----------- 25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Junior Subordinated Indenture+ 25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust I+ 25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust II+ 25.6 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust III+ 25.7 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust IV+ 25.8 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust I+ 25.9 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust II+ 25.10 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust III+ 25.11 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust IV+
- --------------- * Indicates document to be filed as an exhibit to a subsequent Current Report on Form 8-K and incorporated herein by reference. + Indicates document previously filed. ITEM 17. UNDERTAKINGS. The undersigned registrants hereby undertake: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (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 the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs (i) and (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the II-4 47 Commission by Aetna or the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, 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, each filing of Aetna's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this 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 for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (6) That for the purpose of determining any liability under the Securities Act, 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 public offering thereof. (7) Insofar as indemnification (other than pursuant to the insurance described in Item 15 above) for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities 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 them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-5 48 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Aetna Services, Inc. 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 or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut on June 16, 1998. AETNA SERVICES, INC. By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President Finance Pursuant to the requirements of the Securities Act of 1933, this Registration Statement or amendment thereto has been signed below by the following directors and officers of Aetna Services, Inc. in the capacities indicated on June 16, 1998.
SIGNATURE TITLE --------- ----- * Chief Executive Officer, President and - ----------------------------------------------------- Director (Principal Executive Officer and Richard L. Huber Principal Financial Officer) * Director - ----------------------------------------------------- Timothy A. Holt * Director, Vice President and Corporate - ----------------------------------------------------- Controller (Controller and Principal Alan M. Bennett Accounting Officer) *By: /s/ ALFRED P. QUIRK, JR. ------------------------------------------------- Attorney-in-fact
II-6 49 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Aetna Inc. has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut on June 16, 1998. AETNA INC. By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President, Finance Pursuant to the requirements of the Securities Act of 1933, this Registration Statement or amendment thereto has been signed below by the following directors and officers of Aetna Inc. in the capacities indicated on June 16, 1998.
SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer, President - ----------------------------------------------------- and Director (Principal Executive Officer Richard L. Huber and Principal Financial Officer) * Director - ----------------------------------------------------- Leonard Abramson * Director - ----------------------------------------------------- Betsy Z. Cohen Director - ----------------------------------------------------- William H. Donaldson * Director - ----------------------------------------------------- Barbara Hackman Franklin * Director - ----------------------------------------------------- Jerome S. Goodman * Director - ----------------------------------------------------- Earl G. Graves Director - ----------------------------------------------------- Gerald Greenwald * Director - ----------------------------------------------------- Ellen M. Hancock * Director - ----------------------------------------------------- Michael H. Jordan * Director - ----------------------------------------------------- Jack D. Kuehler
II-7 50
SIGNATURE TITLE --------- ----- * Director - ----------------------------------------------------- Frank R. O'Keefe, Jr. Director - ----------------------------------------------------- Judith Rodin * Vice President and Corporate Controller - ----------------------------------------------------- (Controller and Principal Accounting Alan M. Bennett Officer) By: /s/ ALFRED P. QUIRK, JR. ------------------------------------------------- Attorney-in-fact
II-8 51 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III and Aetna Capital Trust IV each 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 or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut on June 16, 1998. AETNA CAPITAL TRUST I By: Aetna Services, Inc., as Sponsor By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President Finance AETNA CAPITAL TRUST II By: Aetna Services, Inc., as Sponsor By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President Finance AETNA CAPITAL TRUST III By: Aetna Services, Inc., as Sponsor By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President Finance AETNA CAPITAL TRUST IV By: Aetna Services, Inc., as Sponsor By: /s/ ALFRED P. QUIRK, JR. ------------------------------------ Name: Alfred P. Quirk, Jr. Title: Vice President Finance II-9 52 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- -------- 1.1 Form of Underwriting Agreement relating to the Debt Securities.................................................. 1.2 Form of Underwriting Agreement relating to the Preferred Securities*................................................. 4.1 Senior Indenture, dated as of July 1, 1996, among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (including the forms of the Senior Debt Securities and Senior Debt Guarantees) (incorporated herein by reference to Exhibit 4.1 of Aetna's Quarterly Report on Form 10-Q filed on October 25, 1996)................................................... 4.2 Form of Subordinated Indenture, dated as of July 1, 1996, among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (including the forms of the Subordinated Debt Securities and Subordinated Debt Guarantees)............................... 4.3 Form of Junior Subordinated Indenture among the Company, Aetna and The First National Bank of Chicago, as Trustee.... 4.3.1 Form of Supplemental Indenture to be used in connection with issuance of Junior Subordinated Debt Securities and Preferred Securities (including the forms of the Junior Subordinated Debt Securities and Junior Subordinated Debt Guarantees)................................................. 4.4 Declaration of Trust of Aetna Capital Trust I+.............. 4.5 Declaration of Trust of Aetna Capital Trust II+............. 4.6 Declaration of Trust of Aetna Capital Trust III+............ 4.7 Declaration of Trust of Aetna Capital Trust IV+............. 4.8 Certificate of Trust of Aetna Capital Trust I+.............. 4.9 Certificate of Trust of Aetna Capital Trust II+............. 4.10 Certificate of Trust of Aetna Capital Trust III+............ 4.11 Certificate of Trust of Aetna Capital Trust IV+............. 4.12 Form of Amended and Restated Declaration of Trust for each of Aetna Capital Trust I, II, III, and IV (including the form of Preferred Securities)............................... 4.13 Form of Guarantee Agreement among the Company, Aetna and The First National Bank of Chicago, as Trustee, with respect to each of Aetna Capital Trust I, II, III and IV's Preferred Securities.................................................. 5.1 Opinion of Thomas J. Calvocoressi, General Counsel to the Company and Aetna........................................... 5.2 Opinion of Davis Polk & Wardwell............................ 5.3 Opinion of Richards, Layton & Finger, P.A. ................. 12.1 Computation of Ratios of Earnings to Fixed Charges (incorporated herein by reference to Exhibit 12 of Aetna's Quarterly Report on Form 10Q filed on May 6, 1998).......... 23.1 Consent of Thomas J. Calvocoressi (contained in Exhibit 5.1)........................................................ 23.2 Consent of Davis Polk & Wardwell (contained in Exhibit 5.2)........................................................ 23.3 Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.3)................................................ 23.4 Consent of KPMG Peat Marwick LLP............................ 23.5 Letter of KPMG Peat Marwick LLP regarding Unaudited Interim Financial Information+...................................... 24.1 Powers of Attorney for the Company.......................... 24.2 Powers of Attorney for Aetna................................ 24.3 Powers of Attorneys for the Company, as sponsor, to sign the Registration Statement on behalf of Aetna Capital Trust I, II, III and IV (included in Exhibits 4.4, 4.5, 4.6 and 4.7, respectively)...............................................
53
EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- -------- 25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust Company of Connecticut, National Association, as Trustee, under the Senior Indenture+........................................... 25.2 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of State Street Bank and Trust Company of Connecticut, National Association, as Trustee, under the Subordinated Indenture+..................................... 25.3 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Junior Subordinated Indenture+........... 25.4 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust I+.............. 25.5 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust II+............. 25.6 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust III+............ 25.7 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, with respect to the Amended and Restated Declaration of Trust of Aetna Capital Trust IV+............. 25.8 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust I+...................................... 25.9 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust II+..................................... 25.10 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust III+.................................... 25.11 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The First National Bank of Chicago, as Trustee, under the Preferred Securities Guarantee of Aetna and the Company with respect to the Preferred Securities of Aetna Capital Trust IV+.....................................
- --------------- * Indicates document to be filed as an exhibit to a subsequent Current Report on Form 8-K and incorporated herein by reference. + Indicates document previously filed. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 AETNA SERVICES, INC. AETNA INC. Guaranteed Debt Securities ------------ Underwriting Agreement -------, ---- To the Underwriters to be named in the applicable Pricing Agreement supplemental hereto Ladies and Gentlemen: From time to time Aetna Services, Inc. a Connecticut corporation (the "Company"), and Aetna Inc., a Connecticut corporation (the "Guarantor"), 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, to issue and sell 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) certain debt securities of the Company (the "Securities") specified in Schedule II to such Pricing Agreement (with respect to such Pricing Agreement, the "Designated Securities"), guaranteed by the Guarantor, less the Designated Securities covered by Delayed Delivery Contracts (as defined in Section 3 hereof), if any, as provided in Section 3 hereof and as may be specified in Schedule II to such Pricing Agreement (with respect to such Pricing Agreement, any Designated Securities to be covered by Delayed Delivery Contracts being herein sometimes referred to as "Contract Securities" and the Designated Securities to be purchased 2 by the Underwriters (after giving effect to the deduction, if any, for Contract Securities) being herein sometimes referred to as "Underwriters' Securities"). The terms and rights of any particular issuance of Designated Securities shall be as specified in the Pricing Agreement relating thereto and in or pursuant to the indenture (the "Indenture") identified in Schedule II to such Pricing Agreement. The Designated Securities shall be guaranteed (the "Guarantees") by the Guarantor as specified in the Pricing Agreement relating to such Designated Securities and in or pursuant to the Indenture identified in Schedule II to such Pricing Agreement. 1. Particular sales of Designated Securities may be made from time to time to the Underwriters of such Securities, for whom the firms designated as representatives of the Underwriters of such 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 or the Guarantor to sell any of the Securities guaranteed by the Guarantor or as an obligation of any of the Underwriters to purchase any of the Securities. The obligation of the Company to issue and sell any of the Securities, the obligation of the Guarantor to issue its Guarantee of any of the Securities and the obligation of any of the Underwriters to purchase any of the Securities shall be evidenced by the Pricing Agreement with respect to the Designated Securities specified therein. Each Pricing Agreement shall specify, among other things, the aggregate principal amount of such Designated Securities, the initial public offering price of such Designated Securities, the purchase price to the Underwriters of such Designated Securities, the names of the Underwriters of such Designated Securities, the names of the Representatives of such Underwriters, the principal amount of such Designated Securities to be purchased by each Underwriter and whether any of such Designated Securities shall be covered by Delayed Delivery Contracts, and shall set forth the date, time and manner of delivery of such Designated Securities and payment therefor. The Pricing Agreement shall also specify (to the extent not set forth in the Indenture and the registration statement and prospectus with respect thereto) the terms of such Designated 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 3 transmitted. The obligations of the Underwriters under this Agreement and each Pricing Agreement shall be several and not joint. 2. The Company and the Guarantor jointly and severally represent and warrant to, and agree with, each of the Underwriters that: (a) A registration statement in respect of the Securities and the Guarantees has been filed with the Securities and Exchange Commission (the "Commission"); such registration statement and any post-effective amendment 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 registration 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 the Guarantor, 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 called a "Preliminary Prospectus"; the various parts of such registration statement, including all exhibits thereto, 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", provided if the Company and the Guarantor have filed an abbreviated registration statement to register additional Securities and Guarantees pursuant to Rule 462(b) under the Act (the "Rule 462 Registration Statement"), then any reference in this Agreement or a Pricing Agreement to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement; the prospectus relating to the Securities and the Guarantees, 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 4 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 the Guarantor 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 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 the Guarantor by an Underwriter of Designated Securities through the Representatives for use in the Prospectus as amended or supplemented relating to such Securities; 5 (c) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Connecticut; each of the Company and the Guarantor is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except where the failure to be so qualified or in good standing would not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole; (d) The Securities have been duly authorized by the Company; and, when Designated Securities are issued, executed, authenticated, delivered and paid for pursuant to this Agreement and the Pricing Agreement with respect to such Designated Securities and the Indenture and, in the case of any Contract Securities, pursuant to Delayed Delivery Contracts with respect to such Contract Securities, such Designated Securities will have been duly issued, executed and delivered and will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, subject to (1) 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 and (2) general principles of equity (regardless of whether considered in a proceeding at law or in equity); (e) The Guarantees have been duly authorized by the Guarantor; and, when (i) the Guarantees endorsed on the Designated Securities are issued and executed by the Guarantor pursuant to the Indenture and (ii) such Designated Securities are issued, executed, authenticated, delivered and paid for pursuant to this Agreement and the Pricing Agreement with respect to such Designated Securities and the Indenture and, in the case of any Contract Securities, pursuant to Delayed Delivery Contracts with respect to such Contract Securities, such Guarantees will have been duly issued, executed and delivered and will constitute valid and legally binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to (1) bankruptcy, insolvency, reorganization, moratorium and other similar laws now or hereafter in effect relating to or 6 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); (f) The Indenture, which will be substantially in one of the forms filed as an exhibit to the Registration Statement, has been duly authorized by the Company and the Guarantor and, at the Time of Delivery (as defined in Section 4 hereof) for such Designated 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 the Company and the Guarantor enforceable against the Company and the Guarantor in accordance with its terms, subject to (1) 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 and (2) general principles of equity (regardless of whether considered in a proceeding at law or in equity); and the Indenture conforms, and the Designated Securities and the Guarantees will conform, in all material respects, to the descriptions thereof contained in the Prospectus as amended or supplemented with respect to such Designated Securities; (g) The issue and sale of the Securities, the issuance of the Guarantees and the compliance by the Company and the Guarantor with all of the provisions of the Designated Securities and the Guarantees, respectively, the Indenture, each of the Delayed Delivery Contracts, if any, this Agreement and any Pricing Agreement, 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 the Guarantor, as applicable, of any of the terms or provisions of, or constitute a default by the Company or the Guarantor, as applicable, under, any indenture, mortgage, deed of trust, loan agreement or other similar agreement or instrument to which the Company or the Guarantor, as the case may be, is a party or by which the Company or the Guarantor, as the case may be, is bound or to which any of the property or assets of the Company or the Guarantor, as the case may be, is subject, except, in all such cases, for such conflicts, 7 breaches, violations or defaults as would not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole, or would not have a material adverse effect on the issuance or sale of the Designated Securities or the issuance of the Guarantees, and (2) result in any violation of (A) the provisions of the Certificate of Incorporation or By-Laws of the Company or the Guarantor or (B) any statute of the United States or the State of Connecticut or any order, rule or regulation of any court or governmental agency or body of the United States or the State of Connecticut having jurisdiction over the Company or the Guarantor or any of their respective properties; provided, however that in the case of clause (B) of this paragraph 2(g), this representation and warranty shall not extend to such violations as would not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole or would not have a material adverse effect on the issuance or sale of the Designated Securities or the issuance of the Guarantees; provided further, that insofar as this representation and warranty relates to the performance by the Company or the Guarantor of its obligations under the Indenture, this Agreement, the Pricing Agreement relating to the Designated Securities, the Delayed Delivery Contracts, if any, and the Designated Securities and the Guarantees, 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; (h) 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 State of Connecticut is required for the issue and sale of the Securities by the Company or the issuance of the Guarantees by the Guarantor or the consummation by the Company and the Guarantor of the transactions contemplated by this Agreement or any Pricing Agreement or the Indenture or any Delayed Delivery Contract except such as have been, or will have been prior to the Time of Delivery, obtained under the Act and the Trust Indenture Act 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 Securities by the Underwriters, and except those which, if not obtained, will 8 not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole or would not have a material adverse effect on the issuance or sale of the Securities by the Company or the issuance of the Guarantees by the Guarantor; (i) In the event any of the Securities are purchased pursuant to Delayed Delivery Contracts, each of such Delayed Delivery Contracts has been duly authorized by the Company and the Guarantor and, when executed and delivered by the Company, the Guarantor and the purchaser named therein, will constitute a valid and legally binding agreement of the Company and the Guarantor enforceable against the Company and the Guarantor 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 any Delayed Delivery Contracts will conform, in all material respects, to the description thereof, contained in the Prospectus as amended or supplemented with respect to such Designated Securities; and (j) All of the outstanding shares of capital stock of the Company, Aetna Life Insurance Company, Aetna Life Insurance and Annuity Company and Aetna U.S. Healthcare Inc. have been duly authorized and validly issued and are fully paid and non-assessable, and (except for directors' qualifying shares, if any) are owned directly or indirectly by the Guarantor. 3. Upon the execution of the Pricing Agreement applicable to any Designated Securities, the several Underwriters propose to offer such Underwriters' Securities for sale upon the terms and conditions set forth in the Prospectus as amended or supplemented. The Company may specify in Schedule II to the Pricing Agreement applicable to any Designated Securities that the Underwriters are authorized to solicit offers to purchase Designated Securities from the Company pursuant to delayed delivery contracts (herein called "Delayed Delivery Contracts"), substantially in the form 9 of Annex II attached hereto but with such changes therein as the Representatives and the Company may authorize or approve. If so specified, the Underwriters will endeavor to make such arrangements, and as compensation therefor the Company will pay to the Representatives, for the accounts of the Underwriters, at the Time of Delivery, such commission, if any, as may be set forth in such Pricing Agreement. Delayed Delivery Contracts, if any, are to be with investors of the types described in the Prospectus as amended or supplemented and subject to other conditions therein set forth. The Underwriters will not have any responsibility with respect to the validity or performance of any Delayed Delivery Contracts. The principal amount of Contract Securities to be deducted from the principal amount of Designated Securities to be purchased by each Underwriter as set forth in Schedule 1 to the Pricing Agreement applicable to such Designated Securities shall be, in each case, the principal amount of Contract Securities which the Company has been advised by the Representatives have been attributed to such Underwriter, provided that, if the Company has not been so advised, the amount of Contract Securities to be so deducted shall be, in each case, that proportion of Contract Securities which the principal amount of Designated Securities to be purchased by such Underwriter under such Pricing Agreement bears to the total principal amount of the Designated Securities (rounded as the Representatives may determine). The total principal amount of Underwriters' Securities to be purchased by all the Underwriters pursuant to such Pricing Agreement shall be the total principal amount of Designated Securities set forth in Schedule 1 to such Pricing Agreement less the principal amount of the Contract Securities so set forth. If the Company determines to enter into Delayed Delivery Contracts, the Company will deliver to the Representatives not later than 3:30 p.m., New York City time, on the third business day preceding the Time of Delivery specified in the applicable Pricing Agreement (or such other time and date as the Representatives and the Company may agree upon in writing) a written notice setting forth the principal amount of Contract Securities. 4. Underwriters' Securities having the Guarantee of the Guarantor endorsed thereon to be purchased by each Underwriter pursuant to the Pricing Agreement relating thereto, in definitive form to the extent practicable, and in such authorized denominations and registered in such names as the Representatives may request upon at least twenty-four hours prior notice to the Company, 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 wire transfer to a bank account specified by the Company and specified in Schedule II, in federal or other funds immediately available in New York City, all at the place and the time and date specified in such Pricing 10 Agreement or at such other place and time and date as the Representatives and the Company may agree upon in writing, such time and date being herein called the "Time of Delivery" for such Securities. Concurrently with the delivery of and payment for the Underwriters' Securities, the Company will deliver to the Representatives for the accounts of the Underwriters a check payable to the order of the party designated in the Pricing Agreement relating to such Securities in the amount of any compensation payable by the Company to the Underwriters in respect of any Delayed Delivery Contracts as provided in Section 3 hereof and the Pricing Agreement relating to such Securities. 5. The Company and the Guarantor agree with each of the Underwriters of any Designated Securities: (a) To prepare the Prospectus as amended and supplemented in relation to the applicable Designated 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 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 Securities and prior to the Time of Delivery for such Designated 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 Securities; to file promptly all reports and any definitive proxy or information statements required to be filed by the Guarantor 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 Securities, 11 and during such same period to advise the Representatives, promptly after the Company or the Guarantor 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 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 Securities, of the suspension of the qualification of such Designated Securities for offering or sale in any jurisdiction or of the initiation or, if known to the Company or the Guarantor, 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 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 Securities and the Guarantees 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 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 Securities, provided that in connection therewith neither the Company nor the Guarantor shall 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 neither the Company nor the Guarantor shall be required to qualify such Designated Securities and Guarantees 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 Securities; 12 (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 Securities and the related Guarantees 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 Securities and the related Guarantees at any time more than nine months after the date of the Pricing Agreement relating to the Designated Securities and the related Guarantees, the costs of such preparation and furnishing such amended or supplemented Prospectus shall be borne by the Underwriters of such Designated Securities; (d) To make generally available to the Company's and the Guarantor's 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 the Guarantor 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 the Guarantor Rule 158); and (e) During the period beginning from the date of the Pricing Agreement for such Designated Securities and continuing to and including the Time of Delivery for such Designated Securities, not to offer, sell, contract to sell or otherwise dispose of in the United States any debt securities of the 13 Company guaranteed by the Guarantor which mature more than one year after such Time of Delivery and which are substantially similar to such Designated Securities and the related Guarantees, without the prior written consent of the Representatives, which consent shall not be unreasonably withheld. 6. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the registration of the Securities and the Guarantees under the Act and all other expenses in connection with the Company's and the Guarantor'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 Indenture, any Delayed Delivery Contracts, any Blue Sky and Legal Investment Memoranda and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities and the Guarantees 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 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 Securities; (vi) any cost of preparing certificates or other evidences of the Securities or any costs of The Depository Trust Company; (vii) 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 Securities; and (viii) all other costs and expenses incident to the performance of the Company's and the Guarantor's obligations hereunder and under any Delayed Delivery Contracts 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 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 the Company's or the Guarantor's rights under any separate agreements between the 14 Company or the Guarantor and their respective attorneys, accountants and vendors with respect to such fees, disbursements, expenses and costs. 7. The obligations of the Underwriters of any Designated Securities under the Pricing Agreement relating to such Designated Securities shall be subject, in the discretion of the Representatives, to the condition that all representations and warranties and other statements of the Company and the Guarantor in or incorporated by reference in the Pricing Agreement relating to such Designated Securities are, at and as of the Time of Delivery for such Designated Securities, true and correct, the condition that the Company and the Guarantor 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 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 the Guarantor, threatened by the Commission; (b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished to the Representatives such opinion or opinions, dated the Time of Delivery for such Designated Securities, with respect to the incorporation of the Company and the Guarantor, the validity of the Indenture, the Designated Securities, the Guarantees, the Delayed Delivery Contracts, if any, the Registration Statement, the Prospectus as amended or supplemented 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) Thomas J. Calvocoressi, counsel to the Company and the Guarantor, shall have furnished to the Representatives such counsel's written opinion, dated the Time of 15 Delivery for such Designated Securities, in form and substance satisfactory to the Representatives, to the effect that: (i) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Connecticut; (ii) Each of Aetna Life Insurance Company and Aetna Life Insurance and Annuity Company has been duly incorporated and is validly existing as an insurance corporation in good standing under the laws of the State of Connecticut; Aetna U.S. Healthcare Inc. has been duly incorporated and is validly existing and in good standing under the laws of the State of Pennsylvania; all of the outstanding shares of capital stock of the Company, Aetna Life Insurance and Annuity Company and Aetna U.S. Healthcare Inc. have been duly authorized and validly issued and are fully paid and non-assessable, and (except for directors' qualifying shares, if any) are owned directly or indirectly by the Guarantor; and all of the outstanding shares of capital stock of Aetna Life Insurance Company (except for directors' qualifying shares, if any) are owned directly or indirectly by the Company; (iii) 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 the Company or the Guarantor or any of their respective 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; (iv) This Agreement and the Pricing Agreement with respect to the Designated Securities have been duly authorized, executed and delivered by the Company and the Guarantor; 16 (v) The Designated Securities have been duly authorized by the Company; assuming the due authentication of the Underwriters' Securities by the Trustee, the Underwriters' Securities have been duly issued, executed and delivered and constitute valid and legally binding obligations of the Company enforceable against the Company 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); and assuming the due authentication of the Contract Securities by the Trustee, the Contract Securities, if any, when issued, executed and delivered and when paid for in accordance with the Delayed Delivery Contracts will constitute valid and legally binding obligations of the Company enforceable against the Company 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); (vi) The Guarantees have been duly authorized by the Guarantor; upon execution and delivery of the Underwriters Securities by the Company against payment therefor and assuming the due authentication of the Underwriters' Securities by the Trustee, the Guarantees endorsed on the Underwriters' Securities have been duly issued, executed and delivered and constitute valid and legally binding obligations of the Guarantor enforceable against the Guarantor 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); and when the Contract 17 Securities, if any, are issued, executed, authenticated and delivered in accordance with the Indenture and paid for in accordance with the Delayed Delivery Contracts, upon execution and delivery of the Guarantees endorsed on such Contract Securities in accordance with the Indenture, such Guarantees will constitute valid and legally binding obligations of the Guarantor enforceable against the Guarantor 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); (vii) The Indenture has been duly authorized, executed and delivered by the Company and the Guarantor and, assuming the due authorization, execution and delivery thereof by the Trustee, the Indenture constitutes a valid and legally binding instrument of the Company and the Guarantor enforceable against the Company and the Guarantor 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); (viii) The issue and sale of the Designated Securities, the issuance of the Guarantees and the performance by the Company and the Guarantor of their respective obligations under the Designated Securities, the Guarantees, the Indenture, each of the Delayed Delivery Contracts, if any, this Agreement and the Pricing Agreement with respect to the Designated Securities will not (1) conflict with or result in a breach or violation by the Company or the Guarantor of any of the terms or provisions of, or constitute a default by the Company or the Guarantor under, any indenture, mortgage, deed of trust, loan agreement or other similar agreement or instrument known 18 to such counsel to which the Company or the Guarantor is a party or by which the Company or the Guarantor is bound or to which any of the property or assets of the Company or the Guarantor 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 Guarantor and its subsidiaries taken as a whole, or would not have a material adverse effect on the issuance or sale of the Designated Securities or the issuance of the Guarantees; and (2) result in any violation of (A) the provisions of the Certificate of Incorporation or By-Laws of the Company or the Guarantor 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 the Company or the Guarantor or any of their respective properties, except with respect to clause (B) of this Paragraph (viii) (2), such violations as would not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole, or would not have a material adverse effect on the issuance or sale of the Designated Securities or the issuance of the Guarantees (and except that for purposes of this paragraph (viii) 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 and state securities laws or blue sky or insurance laws; provided further, that insofar as performance by the Company and the Guarantor of their respective obligations under the Indenture, the Delayed Delivery Contracts, if any, the Underwriting Agreement, the Pricing Agreement relating to the Designated Securities, and the Designated Securities and the Guarantees 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); (ix) 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 19 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; (x) 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 Securities and the issuance of the Guarantees in accordance with the Indenture, each of the Delayed Delivery Contracts, if any, this Agreement and the Pricing Agreement with respect to the Designated Securities except for such consents, approvals, authorizations, orders, registrations, filings or qualifications as have been obtained under the Act and the Trust Indenture Act and such 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 Securities by the Underwriters, and except those which, if not obtained, will not have a material adverse effect on the financial condition of the Guarantor and its subsidiaries taken as a whole; and (xi) In the event any of the Designated Securities are to be purchased pursuant to Delayed Delivery Contracts, each of such Delayed Delivery Contracts has been duly authorized, executed and delivered by the Company and the Guarantor and, assuming such Delayed Delivery Contract has been duly authorized, executed and delivered by the purchaser named therein, and the Securities to be delivered thereunder have been paid for by the purchaser named therein, such Delayed Delivery Contract constitutes a valid and legally binding agreement of the Company and the Guarantor enforceable against the Company and the Guarantor in accordance with its terms, subject to (1) bankruptcy, insolvency, reorganization, 20 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 any Delayed Delivery Contracts conform in all material respects to the description thereof in the Prospectus as amended or supplemented. 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 the opinion required by subsection (c) of this Section, Mr. Calvocoressi may state that he is admitted to the Bar of the State of Connecticut and that his opinion is limited to the laws of the State of Connecticut and the federal laws of the United States of America. Mr. Calvocoressi 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 Mr. Calvocoressi shall state that he and you are justified in relying on such opinions and (B) as to matters of fact, upon certificates of officers and representatives of the Company and the Guarantor and of public officials, and may state that he 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 the Guarantor, shall have furnished to the Representatives their written opinion, dated the Time of Delivery for such Designated Securities, in form and substance satisfactory to the Representatives, to the effect that: (i) This Agreement and the Pricing Agreement with respect to the Designated 21 Securities have been duly authorized, executed and delivered by the Company and the Guarantor; (ii) The Designated Securities have been duly authorized by the Company; assuming the due authentication of the Underwriters' Securities by the Trustee, the Underwriters' Securities are duly issued, executed and delivered, and constitute valid and legally binding obligations of the Company enforceable against the Company 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 Contract Securities when issued, executed and delivered (and assuming the due authentication thereof by the Trustee) and when paid for in accordance with the Indenture and the Delayed Delivery Contracts, will constitute valid and legally binding obligations of the Company enforceable against the Company 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); and the Designated Securities and the Indenture conform in all material respects to the descriptions thereof in the Prospectus as amended or supplemented; (iii) The Guarantees have been duly authorized by the Guarantor; upon execution and delivery of the Underwriters' Securities by the Company against payment therefor and assuming the due authentication of the Underwriters' Securities by the Trustee, the Guarantees endorsed on the Underwriters' Securities will be duly issued, executed and delivered, and constitute valid and legally binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms, subject to (1) bankruptcy, insolvency, 22 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 when the Contract Securities are issued, executed and delivered (and assuming the due authentication thereof by the Trustee) and paid for in accordance with the Indenture and the Delayed Delivery Contracts, upon execution and delivery of the Guarantees endorsed on such Contract Securities, such Guarantees will constitute valid and legally binding obligations of the Guarantor enforceable against the Guarantor 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); and the Guarantees conform in all material respects to the description thereof in the Prospectus as amended or supplemented; (iv) The Indenture has been duly authorized, executed and delivered by the Company and the Guarantor and, assuming the due authorization, execution and delivery thereof by the Trustee, the Indenture constitutes a valid and legally binding instrument of the Company and the Guarantor enforceable against the Company and the Guarantor 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; (v) In the event any of the Designated Securities are to be purchased pursuant to Delayed Delivery Contracts, each of such Delayed Delivery 23 Contracts has been duly authorized, executed and delivered by the Company and the Guarantor and, assuming such Delayed Delivery Contract has been duly authorized, executed and delivered by the purchaser named therein, and the Securities to be delivered thereunder have been paid for by the purchaser named therein, such Delayed Delivery Contract constitutes a valid and legally binding agreement of the Company and the Guarantor 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); and any Delayed Delivery Contracts conform in all material respects to the description thereof in the Prospectus as amended and supplemented; (vi) The statements contained in the Prospectus under the captions "Description of Debt Securities and Debt Guarantees" and "Plan of Distribution" and the corresponding sections in any prospectus supplement relating to the description of the Designated Securities or their distribution, insofar as such statements constitute summaries of certain provisions of the documents referred to therein, accurately summarize the material provisions of such documents required to be stated therein; and (vii) (1) such counsel is of the opinion that the Registration Statement, as amended, and the Prospectus, as amended or supplemented, as of the Time of Delivery (other than the financial statements and related notes, 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 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 each part of the Registration Statement (other than the financial statements and related notes, the financial statement schedules and the other 24 financial data included therein or omitted therefrom, as to which such counsel need express no belief), at the time such part became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (3) 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 Time of Delivery (other than the financial statements and related notes, the financial statement schedules and the other financial data included therein or omitted therefrom, as to which such counsel need express no belief), contains an untrue statement of a material fact 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 (vii) 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 (other than the documents incorporated by reference therein) and any amendments or supplements thereto and review and discussion of the contents thereof (including the documents incorporated by reference therein), 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 Thomas J. Calvocoressi, counsel to the Company and the Guarantor), and (B) of fact upon certificates of officers and representatives of the Company and the Guarantor and of public officials. (e) At the Time of Delivery for such Designated Securities, KPMG Peat Marwick LLP, independent public accountants for the Company and the Guarantor, shall have furnished to the Representatives a letter dated such Time of Delivery to the effect set forth in Annex III hereto and as to such other matters as the Representatives may reasonably request and in form and substance satisfactory to the Representatives, provided 25 that the letter shall use a "cut-off date" not earlier than the date of the Pricing Agreement; (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 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 the Guarantor and its subsidiaries considered as a whole, otherwise than as set forth or contemplated in the Prospectus as amended or supplemented as of the date of the Pricing Agreement, the effect of which, in any such case described above, is in the reasonable judgment of the Representatives, after consultation with the Company and Guarantor, so material and adverse as to make it impracticable to proceed with the public offering or the delivery of the Underwriters' Securities on the terms and in the manner contemplated in the Prospectus as amended or supplemented as of the date of the Pricing Agreement; (g) On or after the date of the Pricing Agreement relating to the Designated Securities, no downgrading shall have occurred in the rating accorded the Company's or the Guarantor's debt securities 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 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 specified events, in the reasonable judgment of the Representatives, after consultation with the Company and the Guarantor, makes it impracticable to proceed with the public offering or the delivery of the Underwriters' Securities on the 26 terms and in the manner contemplated by the Prospectus as amended or supplemented; and (i) The Company and the Guarantor shall each have furnished or caused to be furnished to the Representatives at the Time of Delivery for the Designated Securities a certificate or certificates of the Vice Chairman for Strategy and Finance or the Vice President, Corporate Finance or the Treasurer as to the accuracy of the representations and warranties of the Company and the Guarantor herein at and as of such Time of Delivery, as to the performance by the Company and the Guarantor of all of their respective 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) The Company and the Guarantor, jointly and severally, will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, 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 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 the Company and the Guarantor shall not 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 Securities, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company or the Guarantor by any Underwriter of Designated Securities through the Representatives for inclusion therein; and provided, further, that the Company and the Guarantor shall not be liable to any 27 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 that such Underwriter sold 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 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 the Guarantor against any losses, claims, damages or liabilities to which the Company or the Guarantor 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 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 Securities, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company or the Guarantor by such Underwriter through the Representatives for inclusion therein; and will reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company or the Guarantor in 28 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, unless such indemnifying party and indemnified party are named parties to any such action (including any impleaded parties) and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. 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 29 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 the Guarantor on the one hand and the Underwriters of the Designated Securities on the other from the offering of the Designated 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 the Guarantor on the one hand and the Underwriters of the Designated 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 the Guarantor on the one hand and such Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Company 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 the Guarantor 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 30 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 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 has previously furnished copies thereof to such Underwriters. The Company, the Guarantor 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 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 Securities in this subsection (d) to contribute are several in proportion to their respective underwriting obligations with respect to such 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 the Guarantor under this Section 8 shall be in addition to any liability which the Company and the Guarantor may otherwise have and shall extend or not extend, as the case may be, upon the 31 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 the Company and the Guarantor and to each person, if any, who controls the Company and the Guarantor within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Underwriters' Securities which it has agreed to purchase under the Pricing Agreement relating to such Underwriters' Securities, the Representatives may in their discretion arrange for themselves or another party or other parties to purchase such Underwriters' 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 Underwriters' Securities, then the Company 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 Underwriters' Securities on such terms. In the event that, within the respective prescribed period, the Representatives notify the Company and the Guarantor that they have so arranged for the purchase of such Underwriters' Securities, or the Company notifies the Representatives that it has so arranged for the purchase of such Underwriters' Securities, the Representatives or the Company shall have the right to postpone the Time of Delivery for such Underwriters' 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 the Guarantor 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 Securities. (b) If, after giving effect to any arrangements for the purchase of the Underwriters' Securities of a defaulting Underwriter or Underwriters by the Representatives and the Company as provided in subsection (a) above, the aggregate amount of such Underwriters' Securities which remains unpurchased does not exceed one- tenth of the aggregate principal amount of the Designated Securities, then the Company shall have 32 the right to require each non-defaulting Underwriter to purchase the principal amount of Underwriters' Securities which such Underwriter agreed to purchase under the Pricing Agreement relating to such Designated Securities and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the principal amount of Designated Securities which such Underwriter agreed to purchase under such Pricing Agreement) of the Underwriters' Securities 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 Designated Securities of a defaulting Underwriter or Underwriters by the Representatives and the Company as provided in subsection (a) above, the aggregate principal amount of Designated Securities which remains unpurchased exceeds one-tenth of the aggregate principal amount of the Designated Securities, as referred to in subsection (b) above, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Designated Securities of a defaulting Underwriter or Underwriters, then the Pricing Agreement relating to such Designated Securities shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company or the Guarantor, except for the expenses to be borne by the Company 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, the Guarantor 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 the Guarantor, or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Securities. 33 11. If any Pricing Agreement shall be terminated pursuant to Section 9 hereof, the Company and the Guarantor shall not then be under any liability to any Underwriter with respect to the Designated Securities covered by such Pricing Agreement except as provided in Section 6 and Section 8 hereof; but, if for any other reason Underwriters' Securities are not delivered by or on behalf of the Company as provided herein, the Company 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 Securities, but the Company and the Guarantor shall then be under no further liability to any Underwriter with respect to such Designated Securities except as provided in Section 6 and Section 8 hereof. 12. In all dealings hereunder, the Representatives of the Underwriters of Designated 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 the Guarantor shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company and the Guarantor 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 the Guarantor 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, the Guarantor and, to the extent provided in Section 8 and Section 10 hereof, the officers and directors of the Company, the Guarantor and each person who controls the Company, the Guarantor 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 34 purchaser of any of the 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 LAWS, BUT WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OF THE STATE OF NEW YORK. 35 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 SERVICES, INC. By:_______________________________________ Name: Title: AETNA INC. By:_______________________________________ Name: Title: 36 ANNEX I PRICING AGREEMENT [Insert Representatives] As Representatives of the several Underwriters named in Schedule 1 hereto -----------, ----. Ladies and Gentlemen: Aetna Services, Inc. a Connecticut corporation (the "Company"), proposes, subject to the terms and conditions stated herein and in the Underwriting Agreement, dated _______ (the "Underwriting Agreement"), to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") the Securities specified in Schedule II hereto (the "Designated Securities"). The Securities specified in Schedule II hereto shall be guaranteed by Aetna Inc., a Connecticut corporation (the "Guarantor"), as set forth in the Indenture identified in Schedule II hereto. Each of the provisions of the Underwriting Agreement is incorporated herein by reference in its entirety, and 37 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 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 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 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, 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 principal amount of Designated Securities set forth opposite the name of such Underwriter in Schedule I hereto, less the principal amount of Designated Securities covered by Delayed Delivery Contracts, if any, as may be specified in Schedule II, and the Guarantor agrees to issue its Guarantees with respect to such Designated Securities. 38 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 and the Company and the Guarantor. 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 the Guarantor for examination upon request. Very truly yours, AETNA SERVICES, INC. By:_______________________________________ Name: Title: AETNA INC. By:_______________________________________ Name: Title: 39 Accepted as of the date hereof: [Insert Representatives] On behalf of each of the Underwriters By:_________________________ Name: Title: 40 SCHEDULE I
Principal Amount of Designated Securities to be Underwriter Purchased ----------- ---------- $ ---------- Total................................. $ ==========
41 SCHEDULE II TITLE OF DESIGNATED SECURITIES: [ %] Guaranteed [Floating Rate] [Zero Coupon] [Senior] [Subordinated] [Junior Subordinated] [Notes] [Debentures] due AGGREGATE PRINCIPAL AMOUNT: [$] [Foreign Currency] PRICE TO PUBLIC: % of the principal amount of the Designated Securities, plus accrued interest from to [and accrued amortization, if any, from to ] PURCHASE PRICE BY UNDERWRITERS: % of the principal amount of the Designated Securities, plus accrued interest from to [and accrued amortization, if any, from to ] 42 SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE: Immediately Available Funds INDENTURE: Indenture dated 19 , among the Company, the Guarantor and as Trustee MATURITY: INTEREST RATE: [ %] [Zero Coupon] [See Floating Rate Provisions] INTEREST PAYMENT DATES: [months and dates] REDEMPTION PROVISIONS: [No provisions for redemption] [The Designated Securities may be redeemed, otherwise than through the sinking fund, in whole or in part at the option of the Company, in the amount of [$] or an integral multiple thereof, 43 [or on after _________, at the following redemption prices (expressed in percentages of principal amount). If [redeemed on or before ________, % and if] redeemed during the 12-month period beginning , YEAR _____ REDEMPTION PRICE _________________ and thereafter at 100% of their principal amount, together in each case with accrued interest to the redemption date.] [on any interest payment date falling on or after _____, _____, at the election of the Company, at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption.] [Other possible redemption provisions, such as mandatory redemption upon occurrence of certain events or redemption for changes in tax law] [Restriction on refunding] SINKING FUND PROVISIONS: [No sinking fund provisions] [The Designated Securities are entitled to the benefit of a sinking fund to retire [$] principal amount of Designated Securities on in each of the years through at 100% of their principal amount plus accrued interest][, together with [cumulative] [noncumulative] redemptions at the option of the Company to retire an additional [$] principal amount of 44 Designated Securities in the years through at 100% of their principal amount plus accrued interest]. [If Securities may be put to the issuer by holders, insert OPTIONAL REPAYMENT PROVISIONS: Securities are repayable on , [insert date and years], at the option of the holder, at their principal amount with accrued interest. [If securities are Floating Rate debt securities, insert - FLOATING RATE PROVISIONS: Initial annual interest rate will be % through (and thereafter will be adjusted (monthly] [on each , and ] [to an annual rate of % above the average rate for -year [month] [securities] [certificates of deposit] issued by and [insert names of banks] [and the annual interest rate [thereafter] [from through ] will be the interest yield equivalent of the weekly average per annum market discount rate for -month Treasury bills plus % of Interest Differential (the excess, if any, of (i) then current weekly average per annum secondary market yield for -month certificates of deposit over (ii) then current interest yield equivalent of the weekly average per annum market discount rate for -month Treasury bills); [from and thereafter the rate will be the then current interest yield equivalent plus % of Interest Differential].] TIME OF DELIVERY: 45 CLOSING LOCATION: DELAYED DELIVERY: [None] [Underwriters' commission shall be __% of the principal amount of Designated Securities for which Delayed Delivery Contracts have been entered into. Such commission shall be payable to the order of ____] NAMES AND ADDRESSES OF REPRESENTATIVES: Designated Representatives: Address for Notices, etc.: [OTHER TERMS]: 46 ANNEX II DELAYED DELIVERY CONTRACT Aetna Services, Inc. 151 Farmington Avenue Hartford, CT 06156 Attention ____________ Aetna Inc. 151 Farmington Avenue Hartford, CT 06156 Attention ____________ ____________, ____ Dear Sirs: 47 The undersigned hereby agrees to purchase from Aetna Services, Inc. (hereinafter called the "Company"), and the Company agrees to sell to the undersigned, $__________ principal amount of the Company's debt securities (hereinafter called the "Designated Securities"), guaranteed by Aetna Inc. (hereinafter called the "Guarantor"), offered by the Company's and the Guarantor's Prospectus dated _____________, as amended or supplemented, receipt of a copy of which is hereby acknowledged, at a purchase price of __% of the principal amount thereof, plus accrued interest from the date from which interest accrues as set forth below, and on the further terms and conditions set forth below, and on the further terms and conditions set forth in this contract. The undersigned will purchase the Designated Securities from the Company on __________ (the "Delivery Date") and interest on the Designated Securities so purchased will accrue from ___________. The undersigned will purchase the Designated Securities from the Company on the delivery date or dates and in the principal amount or amounts set forth below:
Date from Which Delivery Date Principal Amount Amount Interest Accrues - ------------- ---------------- ----------------------- __________, 19__ $________ __________, 19__ __________, 19__ $________ __________, 19__
EACH SUCH DATE ON WHICH DESIGNATED SECURITIES ARE TO BE PURCHASED HEREUNDER IS HEREINAFTER REFERRED TO AS A "DELIVERY DATE." Payment for the Designated Securities which the undersigned has agreed to purchase on each Delivery Date shall be made to the Company in Federal or other funds immediately available in New York City, by wire transfer to a bank account specified by the Company, on such Delivery Date upon delivery to the 48 undersigned of the Designated Securities, having the Guarantee of the Guarantor endorsed thereon, then to be purchased by the undersigned in definitive fully registered form and in such denominations and registered in such names as the undersigned may designate by written, telex or facsimile communication addressed to the Company not less than five full business days prior to such Delivery Date. The obligation of the undersigned to take delivery of and make payment for Designated Securities on each Delivery Date shall be subject to the condition that the purchase of Designated Securities to be made by the undersigned shall not on such Delivery Date be prohibited under the laws of the jurisdiction to which the undersigned is subject. The obligation of the undersigned to take delivery of and make payment for Designated Securities shall not be affected by the failure of any purchaser to take delivery of and make payment for Designated Securities pursuant to other contracts similar to this contract. The undersigned understands that Underwriters (the "Underwriters") are also purchasing Designated Securities from the Company, but that the obligations of the undersigned hereunder are not contingent on such purchases. Promptly after completion of the sale to the Underwriters the Company will mail or deliver to the undersigned at its address set forth below notice to such effect, accompanied by a copy of the opinion of counsel for the Company and the Guarantor delivered to the Underwriters in connection therewith. The undersigned represents and warrants that, as of the date of this contract, the undersigned is not prohibited from purchasing the Designated Securities hereby agreed to be purchased by it under the laws of the jurisdiction to which the undersigned is subject. This contract will inure to the benefit of and be binding upon the parties hereto and their respective successors, but will not be assignable by either party hereto without the written consent of the other. This contract may be executed by either of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 49 It is understood that the acceptance by the Company and the Guarantor of any Delayed Delivery Contract (including this contract) is in the Company's and the Guarantor's sole discretion and that, without limiting the foregoing, acceptances of such contracts need not be on a first-come, first-served basis. If this contract is acceptable to the Company and the Guarantor, it is requested that the Company and the Guarantor sign the form of acceptance below and mail or deliver one of the counterparts hereof to the undersigned at its address set forth below. This will become a binding contract among the Company, the Guarantor and the undersigned when such counterpart is so mailed or delivered by the Company and the Guarantor. Yours very truly, By:_______________________________________ (Authorized Signature) Name: Title: _______________________________________ (Address) Accepted:__________ Aetna Services, Inc. 50 By________________________ Name: Title: Aetna Inc. By________________________ Name: Title: 51 ANNEX III Pursuant to Section 7(f) of the Underwriting Agreement, KPMG Peat Marwick LLP shall furnish letters to the Underwriters with respect to the Company and the Guarantor to the effect that: (i) They are independent certified public accountants with respect to the Company and the Guarantor and their respective 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 the Company 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 the Company or the Guarantor for the five most recent fiscal years included in the Prospectus and included or incorporated by reference in Item 6 of the Company's or the Guarantor'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 52 incorporated by reference in the Company's or the Guarantor'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 the Company or the Guarantor and their respective subsidiaries, inspection of the minute books of the Company and the Guarantor and their respective subsidiaries since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, inquiries of officials of the Company and the Guarantor and their respective 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 the Company's or the Guarantor'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 their 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 53 substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included or incorporated by reference in the Company's or the Guarantor'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 the Company's or the Guarantor's Annual Report on Form 10-K for the most recent fiscal year; (d) as of a specified date not more than three 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 the Company and the Guarantor and their respective 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; and (i) for the period from the date of the latest financial statements included or incorporated by reference in the Prospectus to the last day of the month immediately preceding the date of such letter for which monthly financial statements are available, if any, there were any decreases in consolidated total revenues or income before income taxes, discontinued operations and cumulative effect of accounting changes or the per share amounts of consolidated income before income taxes, discontinued operations and cumulative effect of accounting changes, in each case as compared with the 54 comparable period of the preceding year, except in each case for decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (ii) 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 the Company or the Guarantor and their respective subsidiaries, which appear in the Prospectus (excluding documents incorporated by reference), or in Part II 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 the Company or the Guarantor and their respective subsidiaries and have found them to be in agreement. (iii) 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: (e) read the Pro Forma Disclosure; (f) made inquiries of certain officials of the Company and the Guarantor who have responsibility for financial and 55 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 (g) 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 III 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 Securities for purposes of the letter delivered at the Time of Delivery for such Designated Securities. EX-4.2 3 FORM OF SUBORDINATED INDENTURE 1 Exhibit 4.2 ================================================================================ AETNA LIFE AND CASUALTY COMPANY (To Be Renamed Aetna Services, Inc.) ISSUER AETNA INC., GUARANTOR and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, TRUSTEE ---------- INDENTURE Dated as of July 1, 1996 ---------- Subordinated Debt Securities ================================================================================ 2 Reconciliation and tie between certain Sections of this Indenture, dated as of July 1, 1996, and Sections 310 through 318, inclusive, of the Trust Indenture Act of 1939: Trust Indenture Act Section......................... Indenture Section ss. 310(a)(1)............................. 609 (a)(2).............................. 609 (a)(3).............................. Not Applicable (a)(4).............................. Not Applicable (b)................................. 608 .................................... 610 ss. 311(a)................................ 613 (b)................................. 613 ss. 312(a)................................ 701 .................................... 702(a) (b)................................. 702(b) (c)................................. 702(c) ss. 313(a)................................ 703(a) (b)................................. 703(a) (c)................................. 703(a) (d)................................. 703(b) ss. 314(a)................................ 704 (a)(4).............................. 101 .................................... 1004 (b)................................. Not Applicable (c)(1).............................. 102 (c)(2).............................. 102 (c)(3).............................. Not Applicable (d)................................. Not Applicable (e)................................. 102 ss. 315(a)................................ 601 (b)................................. 602 (c)................................. 601 (d)................................. 601 (e)................................. 514 ss. 316(a)................................ 101 (a)(1)(A)........................... 502 .................................... 512 (a)(1)(B)........................... 513 (a)(2).............................. Not Applicable 3 (b)................................. 508 (c)................................. 104(c) ss. 317(a)(1)............................. 503 (a)(2).............................. 504 (b)................................. 1003 ss. 318(a)................................ 107 - ------------------- NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 3 4 TABLE OF CONTENTS ---------- Page ---- PARTIES........................................................................1 RECITALS.......................................................................1 ARTICLE ONE Definitions and Other Provisions of General Application..................1 Section 101. Definitions................................................1 Section 102. Compliance Certificates and Opinions......................11 Section 103. Form of Documents Delivered to Trustee....................12 Section 104. Acts of Holders; Record Dates.............................13 Section 105. Notices, Etc., to Trustee, Company and Guarantor..........14 Section 106. Notice to Holders; Waiver.................................15 Section 107. Conflict with Trust Indenture Act.........................15 Section 108. Effect of Headings and Table of Contents..................16 Section 109. Successors and Assigns....................................16 Section 110. Separability Clause.......................................16 Section 111. Benefits of Indenture.....................................16 Section 112. Governing Law.............................................16 Section 113. Legal Holidays............................................16 Section 114. Personal Immunity from Liability for Incorporators, Stockholders, Etc.................................................17 ARTICLE TWO Security Forms..........................................................17 Section 201. Forms Generally...........................................17 Section 202. Form of Face of Security..................................18 Section 203. Form of Reverse of Security...............................21 Section 204. Form of Legend for Global Securities......................25 Section 205. Form of Trustee's Certificate of Authentication...........26 Section 206. Form of Guarantee.........................................26 ARTICLE THREE The Securities..........................................................29 Section 301. Amount Unlimited; Issuable in Series......................29 Section 302. Denominations.............................................32 Section 303. Execution, Authentication, Delivery and Dating............32 Section 304. Temporary Securities......................................35 - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. i 5 Page ---- Section 305. Registration, Registration of Transfer and Exchange.......36 Section 306. Mutilated, Destroyed, Lost and Stolen Securities..........38 Section 307. Payment of Interest; Interest Rights Preserved............38 Section 308. Persons Deemed Owners.....................................40 Section 309. Cancellation..............................................40 Section 310. Computation of Interest...................................41 ARTICLE FOUR Satisfaction and Discharge..............................................41 Section 401. Satisfaction and Discharge of Indenture...................41 Section 402. Application of Trust Fund.................................43 ARTICLE FIVE Remedies................................................................44 Section 501. Events of Default.........................................44 Section 502. Acceleration of Maturity; Rescission and Annulment........47 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee........................................................49 Section 504. Trustee May File Proofs of Claim..........................50 Section 505. Trustee May Enforce Claims Without Possession of Securities........................................................51 Section 506. Application of Money Collected............................51 Section 507. Limitation on Suits.......................................52 Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest..............................................53 Section 509. Restoration of Rights and Remedies........................53 Section 510. Rights and Remedies Cumulative............................53 Section 511. Delay or Omission Not Waiver..............................53 Section 512. Control by Holders........................................54 Section 513. Waiver of Past Defaults...................................54 Section 514. Undertaking for Costs.....................................55 ARTICLE SIX The Trustee.............................................................56 Section 601. Certain Duties and Responsibilities.......................56 Section 602. Notice of Defaults........................................56 Section 603. Certain Rights of Trustee.................................56 Section 604. Not Responsible for Recitals or Issuance of Securities........................................................58 Section 605. May Hold Securities.......................................58 - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. ii 6 Page ---- Section 606. Money Held in Trust.......................................58 Section 607. Compensation and Reimbursement............................58 Section 608. Disqualification; Conflicting Interests...................59 Section 610. Resignation and Removal; Appointment of Successor.........59 Section 611. Acceptance of Appointment by Successor....................61 Section 612. Merger, Conversion, Consolidation or Succession to Business..........................................................63 Section 613. Preferential Collection of Claims Against Company or Guarantor......................................................63 Section 614. Appointment of Authenticating Agent.......................63 ARTICLE SEVEN Holders' Lists and Reports by Trustee, Company and Guarantor............65 Section 701. Company and Guarantor to Furnish Trustee Names and Addresses of Holders..........................................65 Section 702. Preservation of Information; Communications to Holders...........................................................66 Section 703. Reports by Trustee........................................66 Section 704. Reports by Company and Guarantor..........................66 ARTICLE EIGHT Consolidation, Merger, or Sale of Assets................................67 Section 801. Company or Guarantor May Consolidate, Etc., Only on Certain Terms..................................................67 Section 802. Successor Substituted.....................................68 Section 803. Assumption by Guarantor or Subsidiary of Company's Obligations.............................................68 ARTICLE NINE Supplemental Indentures.................................................70 Section 901. Supplemental Indentures Without Consent of Holders...........................................................70 Section 902. Supplemental Indentures with Consent of Holders...........72 Section 903. Execution of Supplemental Indentures......................73 Section 904. Effect of Supplemental Indentures.........................73 Section 905. Conformity with Trust Indenture Act.......................74 Section 906. Reference in Securities to Supplemental Indentures........74 Section 907. Waiver of Compliance by Holders...........................74 Section 908. Subordination Unimpaired..................................74 - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. iii 7 Page ---- ARTICLE TEN Covenants...............................................................75 Section 1001. Payment of Principal, Premium and Interest...............75 Section 1002. Maintenance of Office or Agency by Company and Guarantor.........................................................75 Section 1003. Money for Securities Payments to Be Held in Trust........76 Section 1004. Statement by Officers as to Default......................77 Section 1005. Limitations on Liens on Common Stock of Principal Subsidiaries............................................78 ARTICLE ELEVEN Redemption of Securities................................................78 Section 1101. Applicability of Article.................................78 Section 1102. Election to Redeem; Notice to Trustee....................78 Section 1103. Selection by Trustee of Securities To Be Redeemed........79 Section 1104. Notice of Redemption.....................................79 Section 1105. Deposit of Redemption Price..............................80 Section 1106. Securities Payable on Redemption Date....................80 Section 1107. Securities Redeemed in Part..............................81 ARTICLE TWELVE Defeasance and Covenant Defeasance......................................81 Section 1201. Company's Option to Effect Defeasance or Covenant Defeasance...............................................81 Section 1202. Defeasance and Discharge.................................81 Section 1203. Covenant Defeasance......................................82 Section 1204. Conditions to Defeasance or Covenant Defeasance..........83 Section 1205. Deposited Money and U.S. Government Obligations or Foreign Government Obligations to be Held In Trust; Other Miscellaneous Provisions..........................86 Section 1206. Reinstatement............................................87 ARTICLE THIRTEEN Sinking Funds...........................................................88 Section 1301. Applicability of Article.................................88 Section 1302. Satisfaction of Sinking Fund Payments with Securities........................................................88 Section 1303. Redemption of Securities for Sinking Fund................88 ARTICLE FOURTEEN Subordination of Securities.............................................89 - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. iv 8 Page ---- Section 1401. Securities Subordinate to Senior Debt of the Company...........................................................89 Section 1402. Payment Over of Proceeds Upon Dissolution, Etc. of the Company....................................................89 Section 1403. Prior Payment to Senior Debt of the Company Upon Acceleration of Securities........................................91 Section 1404. No Payment When Senior Debt of the Company in Default...........................................................92 Section 1405. Payment Permitted If No Default..........................92 Section 1406. Subrogation to Rights of Holders of Senior Debt of the Company.......................................................93 Section 1407. Provisions Solely to Define Relative Rights..............94 Section 1408. Trustee to Effectuate Subordination......................94 Section 1409. No Waiver of Subordination Provisions....................94 Section 1410. Notice to Trustee........................................95 Section 1411. Reliance on Judicial Order or Certificate of Liquidating Agent.................................................96 Section 1412. Trustee Not Fiduciary For Holders of Senior Debt of the Company....................................................96 Section 1413. Rights of Trustee as Holder of Senior Debt of the Company; Preservation of Trustee's Rights.........................97 Section 1414. Article Applicable to Paying Agents......................97 Section 1415. Defeasance of This Article Fourteen......................97 ARTICLE FIFTEEN Guarantee of Securities.................................................97 Section 1501. Guarantee................................................97 Section 1502. Subrogation..............................................98 Section 1503. Reinstatement............................................99 Section 1504. Execution and Delivery of Guarantees.....................99 ARTICLE SIXTEEN Subordination of Guarantees.............................................99 Section 1601. Guarantees Subordinate to Senior Debt of the Guarantor.........................................................99 Section 1602. Payment Over of Proceeds Upon Dissolution, Etc. of the Guarantor.................................................100 Section 1603. Prior Payment to Senior Debt of the Guarantor Upon Acceleration of Securities..................................101 - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. v 9 Page ---- Section 1604. No Payment When Senior Debt of the Guarantor in Default..........................................................102 Section 1605. Payment Permitted If No Default.........................103 Section 1606. Subrogation to Rights of Holders of Senior Debt of the Guarantor....................................................103 Section 1607. Provisions Solely to Define Relative Rights.............104 Section 1608. Trustee to Effectuate Subordination.....................105 Section 1609. No Waiver of Subordination Provisions...................105 Section 1610. Notice to Trustee.......................................106 Section 1611. Reliance on Judicial Order or Certificate of Liquidating Agent................................................107 Section 1612. Trustee Not Fiduciary For Holders of Senior Debt of the Guarantor.................................................107 Section 1613. Rights of Trustee as Holder of Senior Debt of the Guarantor; Preservation of Trustee's Rights......................107 Section 1614. Article Applicable to Paying Agents.....................108 Section 1615. Defeasance of This Article Sixteen......................108 TESTIMONIUM SIGNATURES AND SEALS ACKNOWLEDGEMENTS - ------------ NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. vi 10 INDENTURE, dated as of July 1, 1996, among AETNA LIFE AND CASUALTY COMPANY (to be renamed Aetna Services, Inc.), a corporation duly organized and validly existing under the laws of the State of Connecticut (herein called the "Company"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, AETNA INC., a corporation duly organized and existing under the laws of the State of Connecticut (herein called the "Guarantor"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national association duly organized and existing under the laws of the United States of America, as Trustee (herein called the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. The Guarantor has duly authorized the unconditional guarantee of the Securities on the terms hereinafter set forth and the execution and delivery of the Indenture. All things necessary to make this Indenture a valid agreement of the Company and the Guarantor, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: 11 (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act or the Securities Act of 1933, as amended, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; (4) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors", when used with reference to either the Company or the Guarantor, means either (i) the Board of Directors of the Company or the Guarantor, as the case may be, the Executive Committee of such Board of Directors or any other duly authorized committee of directors and/or officers appointed by such Board of Directors or Executive Committee, or (ii) one or more duly authorized officers of the Company or the Guarantor, as the case may be, to whom the Board of Directors of the Company or the Guarantor or a committee thereof has delegated the authority to act with respect to the matters contemplated by this Indenture. "Board Resolution", when used with reference to either the Company or the Guarantor, means (i) a copy of a resolution certified by the Corporate 2 12 Secretary or an Assistant Corporate Secretary of the Company or the Guarantor, as the case may be, to have been duly adopted by the Board of Directors or a committee thereof and to be in full force and effect on the date of such certification or (ii) a certificate signed by the authorized officer or officers of the Company or the Guarantor, as the case may be, to whom the Board of Directors of the Company or the Guarantor or a committee thereof has delegated its authority (as described in the definition of Board of Directors), and in each case, delivered to the Trustee. "Business Day", when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" means with respect to any Principal Subsidiary, stock of any class, however designated, except stock which is non-participating beyond fixed dividend and liquidation preferences and the holders of which have either no voting rights or limited voting rights entitling them, only in the case of certain contingencies, to elect less than a majority of the directors (or persons performing similar functions) of such Principal Subsidiary, and shall include securities of any class, however designated, which are convertible into such Common Stock. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order", when used with reference to the Company or the Guarantor, means a written request or order signed in the name of the Company or of the Guarantor, as the case may be, by (i) any two of the following individuals: the Chairman, the President, a Vice Chairman, or a Vice President, or (ii) by one of the foregoing individuals and by any other Vice President, the Treasurer, an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate Secretary or any other individual authorized by the Board of Directors for such purpose, and delivered to the Trustee. 3 13 "Corporate Trust Office" means the principal office of the Trustee located at 750 Main Street, Suite 1114, Hartford, Connecticut 06103 at which at any particular time its corporate trust business shall be administered. "corporation" means a corporation, association, company, joint-stock company or business trust. "Covenant Defeasance" has the meaning specified in Section 1203. "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 any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person 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 such Person, 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, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1202. "Depositary" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto. "Floating or Adjustable Rate Provision" means a formula or provision, specified in or pursuant to a Board Resolution or an indenture supplemental 4 14 hereto, providing for the determination, whether pursuant to objective factors or pursuant to the sole discretion of any Person (including the Company), and periodic adjustment of the interest rate borne by a Floating or Adjustable Rate Security. "Floating or Adjustable Rate Security" means any Security which provides for interest thereon at a periodic rate that may vary from time to time over the term thereof in accordance with a Floating or Adjustable Rate Provision. "Foreign Government Obligations" has the meaning specified in Section 1204. "Global Security" means a Security that evidences all or part of the Securities of any series and is authenticated and delivered to, and registered in the name of, the Depositary for such Securities or a nominee thereof. "Guarantee" means any guarantee of the Guarantor endorsed on a Security authenticated and delivered pursuant to this Indenture and shall include the guarantee set forth in Section 1501. "Guaranteed Obligations" shall have the meaning set forth in Section 1501. "Guarantor" means the Person named as the "Guarantor" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Guarantor" shall mean such successor Person. "Guarantor Junior Subordinated Payment" has the meaning specified in Section 1602. "Guarantor Proceeding" has the meaning specified in Section 1602. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. 5 15 The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301. "interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an instalment of interest on such Security. "Junior Subordinated Payment" has the meaning specified in Section 1402. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Non-Recourse Debt" means any indebtedness for money borrowed as to which the liability of the Guarantor, the Company or the Principal Subsidiaries is limited solely to specific assets. "Notice of Default" means a written notice of the kind specified in Section 501(4). "Officers' Certificate" when used with respect to the Company or the Guarantor, means a certificate signed by (i) any two of the following individuals: the Chairman, the President, a Vice Chairman or a Vice President, or (ii) by one of the foregoing individuals and by any other Vice President, the Treasurer, an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate Secretary, of the Company or the Guarantor, as the case may be, or any other individual authorized by the Board of Directors of the Company or the Guarantor, as the case may be, for such purpose, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company or the Guarantor, as the case may be. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel to the Company or the Guarantor, as the case may be, or who may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements required by Section 314(e) of the Trust Indenture Act, if applicable. 6 16 "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or the Guarantor) in trust or set aside and segregated in trust by the Company or the Guarantor (if the Company or the Guarantor shall act as Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities as to which Defeasance has been effected pursuant to Section 1202; and (iv) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (A) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (B) the principal amount of a Security denominated in one or more foreign currencies or currency units shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar 7 17 equivalent on the date of original issuance of such Security of the amount determined as provided in (A) above) of such Security, and (C) Securities owned by the Company, the Guarantor or any other obligor upon the Securities or any Subsidiary of the Company or the Guarantor or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company, the Guarantor or any other obligor upon the Securities or any Subsidiary of the Company, the Guarantor or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principal Subsidiary" means only Aetna Life Insurance Company, Aetna Life Insurance and Annuity Company and U.S. Healthcare, Inc., and any other Subsidiary of the Guarantor which shall hereafter succeed by merger or otherwise to a major part of the business of one or more of the Principal Subsidiaries. The decision as to whether a Subsidiary shall have succeeded to a major part of the business of one or more of the Principal Subsidiaries shall be made in good faith by the Board of Directors of the Guarantor or a committee thereof by the adoption of a resolution so stating, and the Guarantor shall within 30 days of the date of the 8 18 adoption of such resolution deliver to the Trustee a copy thereof, certified by the Corporate Secretary or an Assistant Corporate Secretary of the Guarantor. "Proceeding" has the meaning specified in Section 1402. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Debt" with respect to any Person 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 such Person to the extent that such claim for post-petition interest is allowed in such proceeding), on Debt of such Person, whether incurred on or prior to the date of this 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 9 19 not superior in right of payment to the Securities, in the case of the Company, or the Guarantees, in the case of the Guarantor, or to other Debt of such Person which is pari passu with, or subordinated to the Securities, in the case of the Company, or the Guarantees, in the case of the Guarantor; provided, however, that Senior Debt shall not be deemed to include (1) in the case of the Company, the Securities, (2) in the case of the Guarantor, the Guarantees or (3) any other debt securities or guarantees in respect thereof issued to any other trusts, partnerships or other entity affiliated with the company or the Guarantor which is a financing vehicle of the Company or the Guarantor ("Financing Entity") in connection with the issuance of preferred securities of such Financing Entity, including, without limitation, indebtedness of the Company and the Guarantor's guarantee in respect thereof issued to Aetna Capital L.L.C. pursuant to that certain Indenture dated as of November 1, 1994 between Aetna Services, Inc. and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among Aetna Services, Inc., Aetna Inc. and The First National Bank of Chicago, as trustee. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any instalment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such instalment of principal or interest is due and payable. "Subsidiary" of any Person means a corporation more than 50% of the voting power of which is controlled, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more other Subsidiaries of such Person. For the purposes of this definition, "voting power" means the power to vote for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust 10 20 Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "U.S. Government Obligations" has the meaning specified in Section 1204. "Vice President", when used with respect to the Company, the Guarantor or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". Section 102. Compliance Certificates and Opinions. Upon any application or request by the Company or the Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or the Guarantor, as the case may be, shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company or the Guarantor, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (excluding certificates provided for in Section 1004) shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 11 21 Section 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company or the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which its certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or the Guarantor, as the case may be, stating that the information with respect to such factual matters is in the possession of the Company or the Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Any certificate, statement or opinion of an officer of the Company or the Guarantor or of counsel may be based, insofar as it relates to accounting matters, upon a certificate, opinion or representation by an accountant or firm of accountants in the employ of the Company or the Guarantor, as the case may be, unless such officer or counsel, as the case may be, knows, or in the exercise of reasonable care should know, that the certificate, opinion or representation with respect to such accounting matters upon which its certificate, statement or opinion may be based is erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 104. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly 12 22 appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company and the Guarantor. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee, the Company and the Guarantor, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company or the Guarantor may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Outstanding Securities of such series. If not set by the Company or the Guarantor prior to the first solicitation of a Holder of Securities of such series made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders of one or more series of Securities, only the Holders of Securities of such series on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register or by a certificate of the Security Registrar. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the 13 23 same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Company or the Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. Section 105. Notices, Etc., to Trustee, Company and Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company or by the Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company or the Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, in the case of the Company, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument, Attention: Treasurer, or at any other address previously furnished in writing to the Trustee by the Company, with a copy to the Guarantor, and, in the case of the Guarantor, first-class postage prepaid and addressed to it at the address of its principal office specified in the first paragraph of this instrument, Attention: Treasurer, or at any other address previously furnished in writing to the Trustee by the Guarantor, with a copy to the Company. Section 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such 14 24 event, at its address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice; provided, however, that the Company, the Guarantor or the Trustee, upon a good faith determination that mailing is in the circumstances impractical, may give such notice by any other method which, in the reasonable belief of the Company or the Guarantor or, in the case of the Trustee, of the Company, the Guarantor and the Trustee, is likely to be received by the Holders. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company or the Guarantor shall bind their successors and assigns, whether so expressed or not. 15 25 Section 110. Separability Clause. In case any provision in this Indenture or in the Securities or in the Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 111. Benefits of Indenture. Nothing in this Indenture or in the Securities or in the Guarantees, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders and, to the extent specifically set forth herein, the holders of Senior Debt of the Company or the Guarantor, as the case may be, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 112. Governing Law. This Indenture and the Securities and the Guarantees shall be governed by and construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. Section 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of the Securities of any series which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such Interest Payment Date or Redemption Date, or at the Stated Maturity, as the case may be. 16 26 Section 114. Personal Immunity from Liability for Incorporators, Stockholders, Etc. No recourse shall be had for the payment of the principal of or premium, if any, or interest, if any, on any Security, or for any claim based thereon, or otherwise in respect of any Security or of the Guarantees, or based on or in respect of this Indenture or any indenture supplemental hereto, against any incorporator, or against any past, present or future stockholder, director or officer, as such, of the Company or of any successor corporation, or of the Guarantor or of any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released as a condition of, and as consideration for, the execution of this Indenture and the issue of the Securities and the Guarantees. ARTICLE TWO Security Forms Section 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution of the Company or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistent herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution of the Company, a copy of an appropriate record of such action shall be certified by the Corporate Secretary or an Assistant Corporate Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The Guarantees by the Guarantor to be endorsed on the Securities of each series shall be substantially in such form set forth in Section 206, or in such other form as shall be established by or pursuant to a Board Resolution of the Guarantor, or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are 17 27 required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistent herewith, be determined by the officers executing such Guarantees, all as evidenced by such execution. If the form of Guarantees to be endorsed on the Securities of any series is established by action taken pursuant to a Board Resolution of the Guarantor, a copy of an appropriate record of such action shall be certified by the Corporate Secretary or an Assistant Corporate Secretary of the Guarantor and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The definitive Securities and the Guarantees shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Face of Security. [Insert any legend required by the Internal Revenue Code and the regulations thereunder.] [AETNA LIFE AND CASUALTY COMPANY] [AETNA SERVICES, INC.] [...%] GUARANTEED SUBORDINATED [ZERO COUPON][NOTE][DEBENTURE]DUE... No. ......... [$] ........ AETNA LIFE AND CASUALTY COMPANY, [AETNA SERVICES, INC.], a Connecticut corporation (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to .............................................., or registered assigns, the principal sum of ................ ................... [Dollars] [if other than Dollars, substitute other currency or currency units] [if the Security is to bear interest prior to Maturity, insert -- , and to pay interest thereon from ............. or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually on ............ and ............ in each year] [If other than semi-annual payments, insert frequency of payments and payment dates], commencing ........., at [If the Security is to bear interest at a fixed rate, insert -- the rate of ....% per annum [If the Security is a Floating or Adjustable Rate 18 28 Security, insert -- a rate per annum [computed-determined] in accordance with the [insert defined name of Floating or Adjustable Rate Provision] set forth below] [If the security is to bear interest at a rate determined with reference to an index, refer to description of index below] until the principal hereof is paid or made available for payment [if applicable, insert -- , and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ....% per annum on any overdue principal and premium and on any overdue instalment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the ....... or ....... (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture]. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Company, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. [If the Securities are Floating or Adjustable Rate Securities with respect to which the principal of or any premium or interest may be determined with reference to an index, insert the text of the Floating or Adjustable Rate Provision.] [If the Security is not to bear interest prior to Maturity, insert -- The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of ....% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment 19 29 to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ......% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of (and premium, if any) and [if applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in ............, in such coin or currency [of the United States of America] [if the Security is denominated in a currency other than U.S. dollars, specify other currency or currency unit in which payment of the principal of and any premium or interest may be made] as at the time of payment is legal tender for payment of public and private debts [if applicable, insert -- ; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: [AETNA LIFE AND CASUALTY COMPANY] [AETNA SERVICES, INC.] By______________________ [Seal] Attest: ........................... 20 30 Section 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of July 1, 1996 (herein called the "Indenture"), among the Company, as Issuer, Aetna Inc., as Guarantor (herein called the "Guarantor") and ..................., as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantor, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof[, limited in aggregate principal amount to [$]...........]. [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' nor more than 60 days' notice by mail, [if applicable, insert -- (1) on ........... in any year commencing with the year ...... and ending with the year ...... through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after ............], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): If redeemed [on or before ..............., ....%, and if redeemed] during the 12-month period beginning ............. of the years indicated,
Redemption Redemption Year Price Year Price ---- ---------- ---- ----------
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption [if applicable, insert -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert -- The Securities of this series are subject to redemption upon not less than 30 days' nor more than 60 days' notice by mail, (1) on ............ in any year commencing with the year .... and ending with the year .... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the 21 31 principal amount) set forth in the table below, and (2) at any time [on or after ............], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ............ of the years indicated,
Redemption Price Redemption Price For Redemption For Redemption Otherwise Than Through Operation Through Operation Year of the Sinking Fund of the Sinking Fund ---- ------------------- -------------------
and thereafter at a Redemption Price equal to .....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [The sinking fund for this series provides for the redemption on ............ in each year beginning with the year ....... and ending with the year ...... of [not less than] [$].......... [("mandatory sinking fund") and not more than [$].........] aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made [in the inverse order in which they become due].] [If the Security is subject to redemption, insert -- In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.] The Indenture contains provisions for defeasance at any time of (1) the entire indebtedness of this Security or (2) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture. 22 32 [If the Security is not an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.] [If the Security is an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Guarantor and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company, the Guarantor and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company or the Guarantor or both, with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and [rate-rates], and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registerable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on 23 33 this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of [$]....... and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Company, the Guarantor, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture provides that the Company and the Guarantor, at the Company's option, (a) will be discharged from any and all obligations in respect of the Securities (except for certain obligations to register the transfer or exchange of Securities, replace stolen, lost or mutilated Securities, maintain paying agencies and hold moneys for payment in trust) or (b) need not comply with certain restrictive covenants of the Indenture, in each case if the Company or the Guarantor deposits, in trust, with the Trustee money or U.S. Government Obligations (or Foreign Government Obligations if the Securities are denominated in a foreign currency or currencies) which through the payment of interest thereon and principal thereof in accordance with their terms will provide money, in an amount sufficient to pay all the principal (including any mandatory sinking fund payments) of, and (premium, if any) and interest on, the Securities on the dates such payments are due in accordance with the terms of such Securities and Guarantees, and certain other conditions are satisfied. No recourse shall be had for the payment of the principal of (and premium, if any) or interest on this Security, or for any claim based hereon, or otherwise in respect hereof or of the Guarantee endorsed hereon, or based on or in respect of 24 34 the Indenture or any indenture supplemental thereto, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, or of the Guarantor or of any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. Section 204. Form of Legend for Global Securities. Every Global Security authenticated and delivered hereunder shall bear a legend in substantially the following form or such other legends as may be required: This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Security may not be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary or a nominee thereof and no such transfer may be registered, except in the limited circumstances described in the Indenture. Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, this Security shall be a Global Security subject to the foregoing, except in such limited circumstances. Section 205. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture. ............................., As Trustee By........................... Authorized Officer 25 35 Section 206. Form of Guarantee. Guarantees to be endorsed on the Securities shall, subject to Section 201, be in substantially the form set forth below; words enclosed in brackets shall be inserted, if applicable: GUARANTEE OF AETNA INC. Aetna Inc., a Connecticut corporation (herein called the "Guarantor", which term includes any successor corporation under the Indenture referred to in the Security upon which this Guarantee is endorsed), for value received, hereby unconditionally guarantees to the Holder of the Security upon which this Guarantee is endorsed the due and punctual payment of the principal of, premium, if any, and interest on said Security [and the due and punctual payment of the sinking fund payments provided for herein], when and as the same shall become due and payable, whether at the Stated Maturity or upon declaration of acceleration, call for redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. In case of the failure of [Aetna Life and Casualty Company] [Aetna Services, Inc.], a Connecticut corporation (herein called the "Company", which term includes any successor corporation under such Indenture) punctually to make any such payment of principal, premium or interest [or sinking fund payment], the Guarantor hereby agrees to pay or to cause any such payment to be made punctually when and as the same shall become due and payable, whether at Stated Maturity or upon declaration of acceleration, call for redemption or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be as if it were principal debtor and not merely surety, and shall be absolute and unconditional, irrespective of, and shall be unaffected by, the validity, legality or enforceability of said Security or the Indenture, or the absence of any action to enforce the same, or any waiver, modification, indulgence or consent granted to the Company with respect thereto, by the Holder of said Security or by the Trustee, the recovery of any judgment against the Company or any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor; provided, however, that notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of the Guarantor, increase the principal amount of said Security or the interest rate thereon or increase any premium payable upon redemption thereof. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of bankruptcy of the Company, any right of set- 26 36 off or to counterclaim, any right to require a proceeding first against the Company, protest or notice with respect to said Security or the indebtedness evidenced thereby [or with respect to any sinking fund payment required under said Security] and all demands whatsoever, and covenants that this Guarantee will not be discharged except by payment in full of the principal of, and premium, if any, and interest on said Security. The Guarantor shall be subrogated to all rights of the Holder against the Company in respect of any amounts paid to such Holder by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of all Holders of all outstanding Securities of this series issued under the Indenture, be entitled to enforce, or to receive, any payments arising out of or based upon such right of subrogation until the principal of, premium, if any, and interest then due and payable on all Securities of the same series issued under the Indenture shall have been irrevocably paid in full in accordance with the terms of such Securities. This Guarantee is a guarantee of payment when due and not of collection. This Guarantee shall continue to be effective, or be reinstated, as the case may be, in respect of said Security if at any time payment, or any part thereof, of said Security is rescinded or must otherwise be restored or returned by the Holder of said Security or any trustee for said Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other entity, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any other entity or any substantial part of their respective property, or otherwise, all as though such payments had not been made. No reference herein to such Indenture and no provision of this Guarantee or of such Indenture shall alter or impair the guarantee of the Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal of, and premium, if any, and interest on the Security upon which this Guarantee is endorsed at the times, place and rate, and in the cash or currency prescribed herein. The obligations of the Guarantor under this Guarantee are, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Debt of the Guarantor, and this Guarantee is issued subject to the provisions of the Indenture with respect thereto. Each Holder of the Security on which this Guarantee is endorsed, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the 27 37 subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. This Guarantee shall not be valid or become obligatory for any purpose until the certificate of authentication on said Security shall have been manually signed by or on behalf of the Trustee under such Indenture. All terms used in this Guarantee which are defined in such Indenture shall have the meanings assigned to them in such Indenture. IN WITNESS WHEREOF, Aetna Inc. has caused the execution hereof in its corporate name by its duly authorized officers. AETNA INC. By__________________ [Seal] Attest: - ------------------------------- [Assistant] Corporate Secretary ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolutions of the Company and the Guarantor, as appropriate, and set forth in Officers' Certificates of the Company 28 38 and the Guarantor, as appropriate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Sections 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of the Securities of the series is payable; (5) the rate or rates at which the Securities of the series shall bear interest, if any, or the Floating or Adjustable Rate Provision pursuant to which such rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any interest payable on any Interest Payment Date; (6) whether the Securities of the series would be secured pursuant to Section 901(6); (7) the place or places where the principal of and any premium and interest on Securities of the series shall be payable; (8) if applicable, the period or periods within which, the price or prices at which (including premium, if any) and the terms and conditions upon which Securities of the series may or are required to be redeemed or prepaid, in whole or in part, at the 29 39 option of the Company or the Guarantor pursuant to a sinking fund or otherwise; (9) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (11) if other than such coin or currency of the United States of America as at the time is legal tender for payment of public or private debts, the currency or currencies, including composite currencies, or currency units in which payment of the principal of and any premium and interest on any Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101; (12) if the amount of payments of principal of or any premium or interest on any Securities of the series may be determined with reference to one or more indices, the manner in which such amounts shall be determined; (13) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies, including composite currencies, or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies, including composite currencies, or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (14) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof 30 40 pursuant to Section 502 or provable under any applicable federal or state bankruptcy or similar law pursuant to Section 503; (15) if applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstance other than those set forth in Section 305 in which any such Global Security may be transferred to, and registered and exchanged for Securities registered in the name of, a Person other than the Depositary for such Global Security or a nominee thereof and in which any such transfer may be registered; (16) any other event or events of default applicable with respect to the Securities of the series in addition to those provided in Section 501(1) through (7); (17) any other covenant or warranty included for the benefit of Securities of the series in addition to (and not inconsistent with) those included in this Indenture for the benefit of Securities of all series, or any other covenant or warranty included for the benefit of Securities of the series in lieu of any covenant or warranty included in this Indenture for the benefit of Securities of all series, or any provision that any covenant or warranty included in this Indenture for the benefit of Securities of all series shall not be for the benefit of Securities of the series, or any combination of such covenants, warranties or provisions; (18) if other than as set forth in Section 206, the Guarantee of the Securities of such series pursuant to Article Fifteen hereof; (19) any restriction or condition on the transferability of the Securities of the series; (20) any authenticating or paying agents, registrars or any other agents with respect to the Securities of the series; and (21) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). 31 41 All Securities of any one series shall be substantially identical except as to denomination and number and except as may otherwise be provided in or pursuant to the Board Resolutions referred to above and set forth in such Officers' Certificate or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution of the Company or the Guarantor, a copy of such action shall be delivered to the Trustee. Section 302. Denominations. The Securities of each series shall be issuable in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman, its President, a Vice Chairman, any Vice President, its Treasurer or Assistant Treasurer, under its corporate seal reproduced thereon attested by its Corporate Secretary or one of its Assistant Corporate Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. The Guarantees shall be executed on behalf of the Guarantor by its Chairman, its President, a Vice Chairman, any Vice President, its Treasurer or Assistant Treasurer, under its corporate seal reproduced thereon and attested by its Corporate Secretary or one of its Assistant Corporate Secretaries. The signature of any of these officers on the Guarantees may be manual or facsimile. The seal of the Company or the Guarantor, as the case may be, may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company or of the Guarantor shall bind the Company or the Guarantor, as the case may be, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. Minor typographical and other minor errors in the text of any Security or the Guarantee endorsed thereon or minor defects in the seal or facsimile signature on any Security or the Guarantee endorsed thereon shall not affect the validity or enforceability of such Security or 32 42 such Guaranty if such Security has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company and having endorsed thereon Guarantees executed by the Guarantor to the Trustee for authentication, together with a Company Order of the Company for the authentication and delivery of such Securities, and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities having such Guarantees endorsed thereon. If the form or terms of the Securities of the series or the form of Guarantees endorsed thereon have been established in or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities and Guarantees endorsed thereon, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form or forms of such Securities and the applicable Guarantees have been established by or pursuant to Board Resolution as permitted by Section 201, that such form or forms have been established in conformity with the provisions of this Indenture; (b) if the terms of such Securities and the applicable Guarantees have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally or the rights of creditors of insurance companies generally and to general equity principles; and (d) that such Guarantees, when the Securities on which such Guarantees are endorsed are authenticated and delivered by the Trustee and issued by the Company in the manner and subject 33 43 to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Guarantor, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith by its board of directors, executive committee, or a trust committee of directors or responsible officers of the Trustee shall determine that such action would expose the Trustee to personal liability to existing Holders of Securities. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security and the applicable Guarantee shall be dated the date of its authentication. No Security or Guarantee endorsed thereon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and that such Security or Guarantee is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security and the Guarantee endorsed thereon shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. 34 44 Section 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities substantially of the tenor of the definitive Securities in lieu of which they are issued and having endorsed thereon Guarantees of the Guarantor substantially of the tenor of definitive Guarantees, which Securities and Guarantees may be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities or such Guarantees may determine, as evidenced by their execution of such Securities and such Guarantees. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor which have endorsed thereon Guarantees duly executed by the Guarantor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. Section 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it or the Trustee may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same 35 45 series, of any authorized denominations and of a like aggregate principal amount and tenor which have endorsed thereon a Guarantee duly executed by the Guarantor. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, each such Security having endorsed thereon a Guarantee duly executed by the Guarantor upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company and the Guarantor, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, exchange, redemption or payment shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. Unless otherwise required by the rules of any stock exchange on which the Securities are listed or of any quotation system through which the Securities are traded, neither the Company nor the Trustee shall be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding any other provision in this Indenture, no Global Security may be transferred to, or registered or exchanged for Securities registered in the name of, any Person other than the Depositary for such Global Security or any 36 46 nominee thereof, and no such transfer may be registered, unless (1) such Depositary (A) notifies the Company and the Trustee that it is unwilling or unable to continue as Depositary for such Global Security or (B) ceases to be a clearing agency registered under the Exchange Act, (2) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so transferable, registrable and exchangeable, and such transfers shall be registrable, (3) there shall have occurred and be continuing an Event of Default with respect to the Securities evidenced by such Global Security or (4) there shall exist such other circumstances, if any, as have been specified for this purpose as contemplated by Section 301. Notwithstanding any other provision in this Indenture, a Global Security to which the restriction set forth in the preceding sentence shall have ceased to apply may be transferred only to, and may be registered and exchanged for Securities registered only in the name or names of, such Person or Persons as the Depositary for such Global Security shall have directed and no transfer thereof other than such a transfer may be registered. Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security to which the restriction set forth in the first sentence of the preceding paragraph shall apply, whether pursuant to this Section, Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security. Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If there shall be delivered to the Company and the Trustee (i) a mutilated Security, or (ii) evidence to their satisfaction of the destruction, loss or theft of any Security and in either case such security or indemnity as may be required by either of them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such mutilated, destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount having endorsed thereon a Guarantee duly executed by the Guarantor, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company or the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. 37 47 Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and the Guarantor, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not 38 48 less than 10 days prior to the date of the proposed payment and not less than 15 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at its address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. 39 49 No holder of any beneficial interest in any Global Security held on its behalf by a Depositary shall have any rights under this Indenture with respect to such Global Security, and such Depositary may be treated by the Company, the Guarantor, the Trustee, and any agent of the Company, the Guarantor or the Trustee as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary as Holder of any Security. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company or the Guarantor may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or the Guarantor may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. Acquisition by the Company or the Guarantor of any Security shall not operate as a redemption or satisfaction of the indebtedness represented by such Security unless and until the same is delivered to the Trustee for cancellation. Section 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months and, for any period shorter than a full monthly period, shall be computed on the basis of the actual number of days elapsed in such period. 40 50 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities of a series herein expressly provided for) with respect to Securities of any series and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to a series, when (1) either (A) all Securities of such series theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities of such series for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company or the Guarantor and thereafter repaid to the Company or the Guarantor or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities of such series not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or the Guarantor, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee in trust for the purpose (A) money (either in United States dollars or such other currency or currency unit in which the Securities of any series may be payable) in an amount, or (B) U.S. Government 41 51 Obligations (or Foreign Government Obligations if the Securities are denominated in a foreign currency or currencies) that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient to pay and discharge the entire indebtedness on such Securities of such series not theretofore delivered to the Trustee for cancellation, for principal of (and premium, if any) and interest to the date of such deposit (in the case of Securities of such series which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Guarantor has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to such series have been complied with. In the event there are Securities of two or more series outstanding hereunder, the Trustee shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to Securities of a particular series as to which it is Trustee and if the other conditions thereto are met. In the event that there are two or more Trustees hereunder, then the effectiveness of any such instrument shall be conditioned upon receipt of such instruments from all Trustees hereunder. Notwithstanding the satisfaction and discharge of this Indenture with respect to a particular series, the obligations of the Company and the Guarantor to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive until there are no Securities Outstanding with respect to a particular series and the obligations of the Company, the Guarantor and the Trustee with respect to all other series of Securities shall survive. 42 52 Section 402. Application of Trust Fund. Subject to provisions of the last paragraph of Section 1003, all amounts deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or the Guarantor acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such funds have been deposited with the Trustee. Money deposited pursuant to this Section not in violation of this Indenture shall not be subject to claims of the holders of Senior Debt of the Company under Article Fourteen or of the holders of Senior Debt of the Guarantor under Article Sixteen. ARTICLE FIVE Remedies Section 501. Events of Default. "Event of Default" whenever used with respect to Securities of a series means any one of the following events and such other events as may be established with respect to the Securities of such series as contemplated by Section 301 hereof (whether or not it shall be occasioned by the provisions of Article Fourteen or Article Sixteen): (1) Default in the payment of any instalment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (2) Default in the payment of the principal of or premium, if any, on any of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (3) Default in the making of any sinking fund payment, whether mandatory or optional, as and when the same shall become due and payable by the terms of the Securities of such series; or 43 53 (4) Failure on the part of the Company or the Guarantor duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Company or the Guarantor contained in this Indenture (other than those set forth exclusively in the terms of any other particular series of Securities established as contemplated by this Indenture for the benefit of such other series) and written notice of such failure, stating that such notice is a "Notice of Default" hereunder, and requiring the Company or the Guarantor, as the case may be, to remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Company and the Guarantor by the Trustee, or to the Company, the Guarantor and the Trustee by the holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series, and such failure shall have continued unremedied for a period of 90 days after the date of the Company's and the Guarantor's receipt of such Notice of Default; or (5) An event of default, as defined in any indenture or instrument evidencing or under which the Company, the Guarantor or any Principal Subsidiary shall have outstanding indebtedness for borrowed money in a principal amount in excess of $50,000,000, shall happen and be continuing and such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable (other than acceleration of Non-Recourse Debt which does not exceed in the aggregate 4% of the Guarantor's total shareholders' equity, as set forth in the most recently published audited consolidated balance sheet of the Guarantor) or the Company, the Guarantor or any Principal Subsidiary shall default in the payment at final maturity of outstanding indebtedness for borrowed money in a principal amount in excess of $50,000,000 (other than default in payment at final maturity of Non-Recourse Debt which does not exceed in the aggregate 4% of the Guarantor's total shareholders' equity as set forth in the most recently published audited consolidated balance sheet of the Guarantor), and such acceleration or default at maturity shall not be waived, rescinded or annulled within 30 days after written notice thereof, stating that such notice is a "Notice of Default" hereunder, shall have been given to the Company and the Guarantor by the Trustee (if such event be known to it), or to the Company, the Guarantor and the Trustee by the holders of at least 25% in aggregate principal amount of the Outstanding Securities of 44 54 that series; provided, however, that if such acceleration under such indenture or instrument or default at maturity shall be remedied or cured by the Company, the Guarantor or Principal Subsidiary, or waived, rescinded or annulled by the requisite holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders; and provided further, that, subject to the provisions of Sections 601 and 602, the Trustee shall not be charged with knowledge of any such default unless written notice thereof shall have been given to the Trustee by the Company or the Guarantor, as the case may be, by the holder of any such indebtedness or an agent of the holder of any such indebtedness, by the trustee then acting under any such indenture or other instrument under which such default shall have occurred, or by the holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series; or (6) A decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of the Company or the Guarantor under any applicable Federal or State bankruptcy or similar law, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, trustee, assignee, sequestrator or similar official in bankruptcy or insolvency of the Company or the Guarantor or of all or substantially all of the Company's or the Guarantor's property, or for the winding up or liquidation of the Company's or the Guarantor's affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or (7) The Company or the Guarantor shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization, arrangement, adjustment or composition under any applicable Federal or State bankruptcy or similar law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver, liquidator, trustee, assignee, sequestrator or similar 45 55 official in bankruptcy or insolvency of the Company or the Guarantor or of all or substantially all of the Company's or the Guarantor's property, or shall make an assignment for the benefit of creditors, or either the Company or the Guarantor shall admit in writing its inability to pay its debts generally as they become due and its willingness to be adjudged a bankrupt, or corporate action shall be taken by the Company or the Guarantor in furtherance of any of the aforesaid purposes. Upon receipt by the Trustee of any Notice of Default pursuant to this Section 501 with respect to Securities of any series, a record date shall automatically and without any other action by any Person be set for the purpose of determining the holders of Outstanding Securities of such series entitled to join in such Notice of Default, which record date shall be the close of business on the day the Trustee receives such Notice of Default. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Notice of Default, whether or not such Holders remain Holders after such record date; provided that, unless such Notice of Default shall have become effective by virtue of Holders of at least 25% in principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such Notice of Default shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a Notice of Default contrary to or different from, or, after the expiration of such period, identical to, a Notice of Default that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company and the Guarantor (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) and all accrued interest thereon shall become immediately due and payable. 46 56 At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses as are a result of negligence or bad faith on the part of the Trustee; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of and interest, if any, on the Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Trustee of any declaration of acceleration, or any rescission and annulment of any such declaration, pursuant to this Section 502 with respect to Securities of any series, a record date shall automatically and 47 57 without any other action by any Person be set for the purpose of determining the Holders of Outstanding Securities of such series entitled to join in such declaration, or rescission and annulment, as the case may be, which record date shall be the close of business on the day the Trustee receives such declaration, or rescission and annulment, as the case may be. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such declaration, or rescission and annulment, as the case may be, whether or not such Holders remain Holders after such record date; provided that, unless such declaration, or rescission and annulment, as the case may be, shall have become effective by virtue of Holders of at least 25%, in the case of any declaration of acceleration, or a majority, in the case of any rescission or annulment, in principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such declaration, or rescission and annulment, as the case may be, shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a declaration of acceleration, or a rescission and annulment of any such declaration, contrary to or different from, or, after the expiration of such period, identical to, a declaration, or rescission and annulment, as the case may be, that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon written demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the 48 58 reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee. Until such demand is made by the Trustee, the Company may pay the principal of and premium, if any, and interest, if any, on the Securities of any series to the Holders thereof, whether or not the Securities of such series are overdue. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company, the Guarantor or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, the Guarantor or any other obligor upon such Securities, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company, the Guarantor or any other obligor upon the Securities or the property of the Company, the Guarantor or such other obligor or their creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities in accordance with the terms thereof and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and 49 59 (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607 except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Subject to Article Fourteen and Article Sixteen, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the 50 60 Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively; and THIRD: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. Section 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory in form and substance to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders 51 61 of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) any interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Guarantor, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. 52 62 Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Subject to Section 507, every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Upon receipt by the Trustee of any such direction with respect to Securities of any series, a record date shall be set for determining the Holders of Outstanding Securities of such series entitled to join in such direction, which record date shall be the close of business on the day the Trustee receives such direction. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such direction, whether or not such Holders remain Holders after such record date; provided that, unless such direction shall have become effective by virtue of Holders of at least a majority in principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such direction shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a direction contrary to or different from, or, after the expiration of such period, identical to, a direction that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. 53 63 Section 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of or any premium or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. With respect to any series of Securities, the Company or the Guarantor may, but shall not be obligated to, establish a record date for the purpose of determining the Persons entitled to waive any past default hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, whether or not such Holders remain Holders after such record date; provided, however, that unless such Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall have waived such default prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be cancelled and of no effect. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Guarantor. 54 64 ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company or the Guarantor mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the 55 65 Board of Directors of the Company or the Guarantor may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory in form and substance to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) prior to the occurrence of an Event of Default and after the remedy or waiver of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall upon reasonable notice to the Company and the Guarantor be entitled to examine the books, records and premises of the Company and the Guarantor, personally or by agent or attorney at a time and place acceptable to the Company or the Guarantor, as the case may be; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible 56 66 for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company or the Guarantor, as the case may be, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities or of the Guarantees. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. Section 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company or the Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company or the Guarantor with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company or the Guarantor, as the case may be. Section 607. Compensation and Reimbursement. The Company and the Guarantor agree (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its written request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture 57 67 (including the reasonable compensation, and reasonable expenses and disbursements of its agents and outside counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. Section 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 or is a subsidiary of a corporation which shall be a Person that has a combined capital and surplus of at least $50,000,000 and which unconditionally guarantees the obligations of the Trustee hereunder. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. 58 68 (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company and the Guarantor. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company and the Guarantor. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or the Guarantor or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or the Guarantor or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and 59 69 that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the Guarantor and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company, to the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the Guarantor, the retiring Trustee and each successor Trustee with respect to the 60 70 Securities of such series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer the rights, powers, trust and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustee co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company and the Guarantor or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraphs (a) and (b) of this Section, as the case may be. (d) No successor shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the 61 71 Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 613. Preferential Collection of Claims Against Company or Guarantor. If and when the Trustee shall be or become a creditor of the Company, the Guarantor or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company, the Guarantor or any such other obligor. Section 614. Appointment of Authenticating Agent. The Trustee may with the consent of the Company appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the 62 72 provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee or the Company may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company or the Trustee, as the case may be. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. .........................................., 63 73 As Trustee By........................................., As Authenticating Agent By........................................., Authorized Officer ARTICLE SEVEN Holders' Lists and Reports by Trustee, Company and Guarantor Section 701. Company and Guarantor to Furnish Trustee Names and Addresses of Holders. The Company and the Guarantor will furnish or cause to be furnished to the Trustee (a) semi-annually, not later than 10 days after each Regular Record Date in each year, a list for each series of Securities, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of such series as of the preceding Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company or the Guarantor of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. 64 74 (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company, the Guarantor and the Trustee that none of the Company, the Guarantor, the Trustee or any agent of any of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. Section 703. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. To the extent that any such report is required by the Trust Indenture Act with respect to any 12 month period, such report shall cover the 12 month period ending July 15 and shall be transmitted by the next succeeding September 15. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company and the Guarantor. The Company will notify the Trustee when any Securities are listed on any stock exchange. Section 704. Reports by Company and Guarantor. The Company and the Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. 65 75 ARTICLE EIGHT Consolidation, Merger, or Sale of Assets Section 801. Company or Guarantor May Consolidate, Etc., Only on Certain Terms. Neither the Company nor the Guarantor shall consolidate with or merge into any other Person or sell its properties and assets as, or substantially as, an entirety to any Person, and neither the Company nor the Guarantor shall permit any Person to consolidate with or merge into the Company or the Guarantor, as the case may be, unless: (i) in case the Company or the Guarantor, as the case may be, shall consolidate with or merge into another Person (including, without limitation, the Guarantor or the Company, as the case may be), or sell its properties and assets as, or substantially as, an entirety to any Person (including, without limitation, the Guarantor or the Company, as the case may be), the Person formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or the Person which purchases the properties and assets of the Company or the Guarantor, as the case may be, as, or substantially, as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, in the case of any such transaction involving the Company, the due and punctual payment of the principal of and any premium and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed, and, in the case of any such transaction involving the Guarantor, the due and punctual performance of the Guarantees and the performance or observance of every covenant of this Indenture on the part of the Guarantor to be performed or observed, in each case by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Company or the Guarantor, as the case may be) formed by such consolidation or into which the Company or the Guarantor, as the case may be, shall have been merged or by the corporation which shall have acquired the assets of the Company or the Guarantor, as the case may be; 66 76 (2) immediately after giving effect to such transaction, no Event of Default shall have happened and be continuing; and (3) the Company or the Guarantor, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, or sale and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. Section 802. Successor Substituted. Upon any consolidation of the Company or the Guarantor, as the case may be, with, or merger of the Company or the Guarantor, as the case may be, into, any other Person or any sale of the properties and assets of the Company or the Guarantor, as the case may be, as, or substantially as, an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or to which such sale is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or the Guarantor, as the case may be, herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities or the Guarantees, as the case may be. Section 803. Assumption by Guarantor or Subsidiary of Company's Obligations. The Guarantor or any Subsidiary of the Guarantor may, where permitted by law, assume the obligations of the Company (or any Person which shall have previously assumed the obligations of the Company) for the due and punctual payment of the principal of (and any premium), interest on and any other payments with respect to the Securities and the performance of every covenant of this Indenture and the Securities on the part of the Company (or such other Person) to be performed or observed, provided that: (1) the Guarantor or such Subsidiary, as the case may be, shall expressly assume such obligations by an indenture supplemental hereto, in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee and if such Subsidiary assumed such obligations, the Guarantor shall, by such supplemental indenture, confirm that its Guarantees shall apply to 67 77 such Subsidiary's obligations under the Securities and this Indenture, as modified by such supplemental indenture; (2) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (3) the Guarantor or such Subsidiary, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such assumption and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; (4) such assumption shall not result in adverse tax consequences to any Holder; and (5) the Guarantor and/or such Subsidiary shall have delivered to the Trustee an Opinion of Counsel to the effect that (1) the Securities are legal, valid and binding obligations of the assuming corporation enforceable against the assuming corporation in accordance with their terms subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally, and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity) and (2) if a Subsidiary of the Guarantor is the assuming corporation, the Guarantees continue to be the legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regarding whether considered in a proceeding at law or in equity). Upon any such assumption, the Guarantor or such Subsidiary shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if the Guarantor or such Subsidiary, as the case may be, had been named as the "Company" herein, and the Person named as the "Company" in the first paragraph of this instrument or any successor Person which shall theretofore have become such in the manner 68 78 prescribed in this Article shall be released from its liability as obligor upon the Securities. ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantor, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor herein and in the Securities or Guarantees; or (2) to add to the covenants of the Company or the Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company or the Guarantor; or (3) to add any additional Events of Default; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, including, without limitation, with respect to any of the provisions set forth in Articles Fourteen, Fifteen and Sixteen provided that any such addition, change or elimination (i) shall neither (A) apply 69 79 to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities pursuant to the requirements of Section 1005, or to otherwise secure the Securities of any series or the Guarantees; or (7) to establish the form or terms of Securities of any series or the form of Guarantees as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (9) shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or (10) to conform to any mandatory provisions of law. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority of principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company, the Guarantor and the Trustee, the Company and the Guarantor, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, 70 80 (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon (including any change in the Floating or Adjustable Rate Provision pursuant to which such rate is determined that would reduce such rate for any period) or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of this Indenture with respect to the subordination of the Securities of any series or the subordination of the Guarantees of such Securities in a manner adverse to the Holders, or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 907, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 907, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8), or (4) modify or affect in any manner adverse to the interests of the Holders of any Securities the terms and conditions of the obligations of the Guarantor in respect of the due and punctual payment of the principal thereof, premium, if any, and interest, if any, thereon or any sinking fund payments provided in respect thereof. 71 81 A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company and the Guarantor shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee, the Company and the Guarantor, to any such supplemental 72 82 indenture may be prepared and executed by the Company, the Guarantees endorsed thereon may be executed by the Guarantor and such Securities may be authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. Section 907. Waiver of Compliance by Holders. Anything in this Indenture to the contrary notwithstanding, any of the acts which the Company or the Guarantor is required to do, or is prohibited from doing, by any of the provisions of this Indenture may, to the extent that such provisions might be changed or eliminated by a supplemental indenture pursuant to Section 902 upon consent of holders of not less than a majority in aggregate principal amount of the then Outstanding Securities of the series affected, be omitted or done by the Company or the Guarantor, as the case may be, if there is obtained the prior consent or waiver of the holders of at least a majority in aggregate principal amount of the then Outstanding Securities of such series. Section 908. Subordination Unimpaired. No provision in any supplemental indenture that affects the superior position of the holders of Senior Debt of the Company or of Senior Debt of the Guarantor shall be effective against holders of such Senior Debt without the consent of any such affected holder. ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay or cause to be paid the principal of and any premium and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency by Company and Guarantor. (a) So long as any Securities are Outstanding, the Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where 73 83 Securities of that series may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. (b) So long as any Securities are Outstanding, the Guarantor will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment under the Guarantees endorsed thereon and where notices and demands to or upon the Guarantor in respect of the Guarantees endorsed on the Securities of that series and this Indenture may be served. The Guarantor will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Guarantor shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Guarantor hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Guarantor may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for such purpose or where such notices or demands may be served and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Guarantor of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Guarantor will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. 74 84 Section 1003. Money for Securities Payments to Be Held in Trust. If the Company or the Guarantor shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, and upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company or the Guarantor, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company or the Guarantor, as the case may be, on Company Request, or (if then held by the Company or the Guarantor) shall be 75 85 discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company or the Guarantor for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company or the Guarantor as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company or the Guarantor, as the case may be. Section 1004. Statement by Officers as to Default. The Company and the Guarantor will each deliver to the Trustee within 120 days after the end of each fiscal year of the Guarantor ending after the date hereof, a certificate signed by the Company's or the Guarantor's, as the case may be, principal executive officer, principal financial officer or principal accounting officer stating whether or not to the best knowledge of the signer thereof the Company or the Guarantor, as the case may be, is in compliance with all terms, conditions and covenants of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the signer has obtained knowledge of any continuing default by the Company or the Guarantor in the performance, observation or fulfillment of any such term, condition or covenant, specifying each such default and the nature thereof. Section 1005. Limitations on Liens on Common Stock of Principal Subsidiaries. As long as any of the Securities remains outstanding, the Guarantor will not, and will not permit any Principal Subsidiary to, issue, assume, incur or guarantee any indebtedness for borrowed money secured by a mortgage, pledge, lien or other encumbrance, directly or indirectly, on any of the Common Stock of a Principal Subsidiary, which Common Stock is owned by the Guarantor, by the Company or by any Principal Subsidiary, unless the obligations of the Company under the Securities and, if the Company or the Guarantor so elects, any other indebtedness of the Company or the Guarantor ranking on a parity with or prior to the Securities or the Guarantor's obligations under the Guarantees, as the case may be, shall be secured equally and ratably with, or prior to, such secured indebtedness for borrowed money so long as it is outstanding and is so secured. 76 86 ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. Section 1102. Election to Redeem; Notice to Trustee. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. Section 1103. Selection by Trustee of Securities To Be Redeemed. If less than all the Securities of any series are to be redeemed (unless all of the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. If less than all of the Securities of such series and of a specified tenor are to be redeemed, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. 77 87 The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at its address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. 78 88 Section 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. 79 89 ARTICLE TWELVE Defeasance and Covenant Defeasance Section 1201. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may elect, at any time, to have either Section 1202 or Section 1203 applied to the Outstanding Securities of any series and the Guarantees endorsed thereon, upon compliance with the conditions set forth below in this Article Twelve. Section 1202. Defeasance and Discharge. Upon the Company's exercise of the option provided in Section 1201 to have this Section 1202 applied to the Outstanding Securities of any series and the Guarantees endorsed thereon, the Company and the Guarantor shall each be deemed to have been discharged from its obligations, and the provisions of Article Fourteen and Article Sixteen shall cease to be effective, with respect to the Outstanding Securities of such series and the Guarantees endorsed thereon as provided in this Section on and after the date the conditions set forth in Section 1204 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company and the Guarantor shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and the Guarantees endorsed thereon and to have satisfied all their other obligations under the Securities of such series, the Guarantees endorsed thereon and this Indenture insofar as the Securities of such series and the Guarantees endorsed thereon are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of Securities of such series to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities of such series when payments are due, (2) the Company's or the Guarantor's obligations, as the case may be, with respect to the Securities of such series under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, its rights under Section 607 and (4) this Article Twelve. Subject to compliance with this Article Twelve, the Company may exercise its option provided in Section 1201 to have this Section 1202 applied to the Outstanding Securities of any series and the Guarantees endorsed thereon notwithstanding the prior exercise of its option provided in Section 1201 to have 80 90 Section 1203 applied to the Outstanding Securities of such series and the Guarantees endorsed thereon. Section 1203. Covenant Defeasance. Upon the Company's exercise of the option provided in Section 1201 to have this Section 1203 applied to the Outstanding Securities of any series and the Guarantees endorsed thereon, (1) the Guarantor shall be released from its obligations under Section 1005 and the Company and the Guarantor shall be released from their obligations under Section 801 and (2) the occurrence of any event specified in Sections 501(3), 501(4) (with respect to Section 1005 and Section 801) and 501(5) shall be deemed not to be or result in an Event of Default, and (3) the provisions of Article Fourteen and Article Sixteen shall cease to be effective, in each case with respect to the Outstanding Securities of such series as provided in this Section on and after the date the conditions set forth in Section 1204 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company and the Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and the Securities of such series shall be unaffected thereby. Section 1204. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1202 or Section 1203 to the Outstanding Securities of any series: (1) The Company or the Guarantor shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee that satisfies the requirements contemplated by Section 609 and agrees to comply with the provisions of this Article Twelve applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Outstanding Securities of such series, (A) in the case of Securities of such series denominated in U.S. dollars, (i) money in an amount, or (ii) U.S. Government Obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (iii) a combination thereof, 81 91 in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on the Securities of such series on the respective Stated Maturities, in accordance with the terms of this Indenture and the Securities of such series or (B) in the case of Securities of such series denominated in a currency other than the U.S. dollar, (i) money in such currency in an amount, or (ii) Foreign Government Obligations that through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in such currency in an amount, or (iii) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on the Securities of such series on the respective Stated Maturities, in accordance with the terms of this Indenture and the Securities of such series. As used herein, (1) "U.S. Government Obligation" means (x) any security that is (i) a direct obligation of the United States of America for the payment of which full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality for the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any specific payment of principal of or interest on any such U.S. Government Obligation specified in Clause (x) and held by such custodian for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any such U.S. Government Obligation, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the Holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt and (2) 82 92 "Foreign Government Obligation" means (x) any security that is (i) a direct obligation of the government that issued such currency for the payment of which full faith and credit of such government is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality for such government the payment of which is unconditionally guaranteed as a full faith and credit obligation by such government, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any specific payment of principal of or interest on any such Foreign Government Obligation specified in Clause (x) and held by such custodian for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any such Foreign Government Obligation, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the Holder of such depositary receipt from any amount received by the custodian in respect of the Foreign Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the case of an election under Section 1202, the Company shall have delivered to the Trustee an Opinion of Counsel stating that the Holders of the Outstanding Securities of such series will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to the Securities of such series and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (3) In the case of an election under Section 1203, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holder of the Outstanding Securities of such series will not recognize gain or loss for Federal income tax purposes as result of the deposit and Covenant Defeasance to be effected with respect to the Securities of such series and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. 83 93 (4) The Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities of such series, if then listed on any securities exchange, will not be delisted as a result of such deposit. (5) No Event of Default or event that (after notice or lapse of time or both) would become an Event of Default shall have occurred and be continuing at the time of such deposit or, with regard to any Event of Default or any such event specified in Sections 501(6) and 501(7), at any time on or prior to the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th day). (6) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. (7) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless such trust shall be qualified under such Act or exempt from regulation thereunder. (8) At the time of such deposit: (A) no default in the payment of principal of (or premium, if any) or interest on any Senior Debt of the Company or Senior Debt of the Guarantor shall have occurred and be continuing or (B) no other event of default with respect to any Senior Debt of the Company or Senior Debt of the Guarantor shall have occurred and be continuing and shall have resulted in such Senior Debt of the Company or Senior Debt of the Guarantor becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, or, in the case of either Clause (A) or Clause (B) above, each such default or event of default shall have been cured or waived or shall have ceased to exist. Section 1205. Deposited Money and U.S. Government Obligations or Foreign Government Obligations to be Held In Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations or Foreign Government Obligations (including 84 94 the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 1206, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 1204 in respect of the Securities of any series shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities of such series and this Indenture, to the payment, either directly or through any such Paying Agent (including the Company or the Guarantor acting as its own Paying Agent) as the Trustee may determine, to the Holders of Securities of such series, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. Money so held in trust shall not be subject to the provisions of Article Fourteen or of Article Sixteen. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations or Foreign Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge that by law is for the account of the Holders of Outstanding Securities. Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Company or the Guarantor, as the case may be, from time to time upon Company Request any money or U.S. Government Obligations or Foreign Government Obligations held by it as provided in Section 1204 with respect to Securities of any series that, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Defeasance or Covenant Defeasance with respect to the Securities of such series and the Guarantees endorsed thereon. Section 1206. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article Twelve with respect to the Securities of any series by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Securities of such series and the Guarantees endorsed thereon shall be revived and reinstated as though no deposit had occurred pursuant to this Article Twelve with respect to Securities of such series until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1205 with respect to Securities of such series in accordance with this Article Twelve; provided, however, that if the 85 95 Company makes any payment of principal of or any premium or interest on any Security of such series following the reinstatement of its obligations or if the Guarantor makes any payment in respect thereof pursuant to its Guarantee of such Securities of such series, the Company or the Guarantor, as the case may be, shall be subrogated to the rights of the Holders of Securities of such series to receive such payment from the money so held in trust. ARTICLE THIRTEEN Sinking Funds Section 1301. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1302. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. Section 1302. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been acquired or redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities or otherwise, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. 86 96 Section 1303. Redemption of Securities for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1302 and will also deliver to the Trustee any Securities to be so delivered. Not less than 15 nor more than 45 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE FOURTEEN Subordination of Securities Section 1401. Securities Subordinate to Senior Debt of the Company. The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article Four and Article Twelve), the payment of the principal of (and premium, if any) and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Debt of the Company. Section 1402. Payment Over of Proceeds Upon Dissolution, Etc. of the Company. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, arrangement, reorganization, debt restructuring or other similar case or proceeding in connection with any insolvency or bankruptcy proceeding, relative to the Company or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the 87 97 Company, then and in any such event specified in (a), (b) or (c) above (each such event, if any, herein sometimes referred to as a "Proceeding") the holders of Senior Debt of the Company shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Debt of the Company, 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 of the Company, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Debt of the Company subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as "Junior Subordinated Payment"), on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary of the Company and to that end the holders of Senior Debt of the Company 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 Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, before all Senior Debt of the Company 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 of the Company, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Debt of the Company remaining unpaid, to the extent necessary to pay all Senior Debt of the Company in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Company. Any taxes that have been withheld or deducted from any payment or distribution in respect of the Securities, or any taxes that ought to have been withheld or deducted from any such payment or distribution that have been remitted to the relevant taxing authority, shall not be considered to be an amount that the Trustee or the Holder of any Security receives for purposes of this Section. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be 88 98 deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Debt of the Company to substantially the same extent as the Securities are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Company following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article Eight. Section 1403. Prior Payment to Senior Debt of the Company Upon Acceleration of Securities. In the event that any Securities are declared due and payable before their Stated Maturity, then and in such event the holders of the Senior Debt of the Company outstanding at the time such Securities 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 of the Company, 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 of the Company, before the Holders of the Securities are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities) by the Company on account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Thirteen by delivering and crediting pursuant to Section 1302 Securities which have been acquired (upon redemption or otherwise) prior to such declaration of acceleration. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. 89 99 The provisions of this Section shall not apply to any payment with respect to which Section 1402 would be applicable. Section 1404. No Payment When Senior Debt of the Company in Default. (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt of the Company, or in the event that any event of default with respect to any Senior Debt of the Company shall have occurred and be continuing and shall have resulted in such Senior Debt of the Company becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event of default, then no payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities) shall be made by the Company on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Thirteen by delivering and crediting pursuant to Section 1302 Securities which have been acquired (upon redemption or otherwise) prior to such default in payment or event of default. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any payment with respect to which Section 1402 would be applicable. Section 1405. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any Proceeding referred to in Section 1402 or under the conditions described in Sections 1403 and 1404, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money deposited with it hereunder to the 90 100 payment of or on account of the principal of (and premium, if any) or interest on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. Section 1406. Subrogation to Rights of Holders of Senior Debt of the Company. Subject to the payment in full of all Senior Debt of the Company, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt of the Company, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt of the Company pursuant to the provisions of this Article (equally and ratably with the holders of all other indebtedness of the Company which by its express terms is subordinated to indebtedness of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt of the Company and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt of the Company) to the rights of the holders of such Senior Debt of the Company to receive payments and distributions of cash, property and securities of the Company applicable to the Senior Debt of the Company until the principal of (and premium, if any) and interest on the Securities shall be paid in full. If the Trustee or the Holders of the Securities are not for any reason entitled to be subrogated to the rights of holders of Senior Debt of the Company in respect of such payment or distribution, then the Trustee or the Holders of the Securities may require each holder of Senior Debt of the Company to whom any such payment or distribution is made as a condition to such payment or distribution to assign its Senior Debt of the Company to the extent of such payment or distribution and all rights with respect thereto to the Trustee on behalf of the Holders. Such assignment shall not be effective until such time as all Senior Debt of the Company has been paid in full or payment thereof provided for. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Debt of the Company of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt of the Company by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt of the Company, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt of the Company. 91 101 Section 1407. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt of the Company on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Debt of the Company, and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Debt of the Company, are intended to rank equally with all other general unsecured obligations of the Company), to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Debt of the Company; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt of the Company to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Without limiting the generality of the foregoing, nothing contained in this Article will restrict the right of the Trustee or the Holders of Securities of any series to take any action to declare the Securities of such series to be due and payable prior to their stated maturity pursuant to Section 502 or to pursue any rights or remedies hereunder. Section 1408. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. Section 1409. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this 92 102 Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities, and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt of the Company, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter or increase, Senior Debt of the Company, or otherwise amend or supplement in any manner Senior Debt of the Company or any instrument evidencing the same or any agreement under which Senior Debt of the Company is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt of the Company; (iii) release any Person liable in any manner for the collection of Senior Debt of the Company; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. Section 1410. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt of the Company or from any trustee, agent or representative therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or 93 103 herself to be a holder of Senior Debt of the Company (or a trustee, agent or representative therefor) to establish that such notice has been given by a holder of Senior Debt of the Company (or a trustee, agent or representative therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt of the Company to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt of the Company held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1411. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt of the Company and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1412. Trustee Not Fiduciary For Holders of Senior Debt of the Company. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Company and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt of the Company shall be entitled by virtue of this Article or otherwise. 94 104 Section 1413. Rights of Trustee as Holder of Senior Debt of the Company; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt of the Company which may at any time be held by it, to the same extent as any other holder of Senior Debt of the Company, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. Section 1414. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. Section 1415. Defeasance of This Article Fourteen. The subordination of the Securities provided by this Article Fourteen is expressly made subject to the provisions for defeasance or covenant defeasance in Article Twelve and, anything herein to the contrary notwithstanding, upon the effectiveness of any such defeasance or covenant defeasance, the Securities then outstanding shall thereupon cease to be subordinated pursuant to this Article Fourteen. ARTICLE FIFTEEN Guarantee of Securities Section 1501. Guarantee. The Guarantor hereby unconditionally guarantees to each Holder of a Security of each series of the Company authenticated and delivered by the Trustee or an Authenticating Agent the due and punctual payment of the principal of (premium, if any) and interest on such Security and the due and punctual payment of any sinking fund payments provided for pursuant to the terms of such Security, 95 105 when and as the same shall become due and payable, whether at Stated Maturity, by declaration of acceleration, call for redemption or otherwise according to the terms of such Security and of this Indenture (the "Guaranteed Obligations"). In case of default by the Company in the payment of any such principal, premium, interest or sinking fund payment, the Guarantor agrees duly and punctually to make any such payment when and as the same shall become due and payable, whether at the Stated Maturity, by declaration of acceleration, call for redemption or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be as if it were principal debtor and not merely surety, and shall be absolute and unconditional irrespective of, and shall be unaffected by, the validity, legality or enforceability of any Security of any series or this Indenture, the absence of any action to enforce the same or any waiver, modification or indulgence or consent granted to the Company with respect thereto by the Holder of any Security of any series or the Trustee, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor; provided, however, that notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of the Guarantor, increase the principal amount of a Security or the interest rate thereon or increase any premium payable upon redemption thereof. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right of set-off or counterclaim, any right to require a proceeding first against the Company, protect or notice with respect to any Security or the indebtedness evidenced thereby or with respect to any sinking fund payment required pursuant to the terms of a Security issued under this Indenture and all demands whatsoever, and covenants that this Guarantee will not be discharged as to any Security except by payment in full of the principal of (premium, if any) and interest on such Security. Section 1502. Subrogation. The Guarantor shall be subrogated to all rights of the Holder of a Security against the Company in respect of any amounts paid to such Holder by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of all Holders of Securities of such series, be entitled to enforce, or to receive, any payments arising out of or based upon, such right of subrogation until the principal of (and premium, if any) and interest then due and payable on all Securities of the relevant series shall have been irrevocably paid in full in accordance with the terms of such Securities. 96 106 Section 1503. Reinstatement. The Guarantee of the Guarantor is a guarantee of payment when due and not of collection. The Guarantee shall continue to be effective, or be reinstated, as the case may be, in respect of any Security if at any time payment, or any part thereof, of such Security is rescinded or must otherwise be restored or returned by the Holder of such Security or any trustee for said Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other entity, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any other entity or any substantial part of their respective property, or otherwise, all as though such payments had not been made. Section 1504. Execution and Delivery of Guarantees. To evidence its guarantee set forth in Section 1501, the Guarantor hereby agrees to execute, subject to Section 201, the Guarantee in a form established pursuant to Section 206, to be endorsed on each Security authenticated and delivered by the Trustee. Each such Guarantee shall be executed by the Guarantor as provided in Section 303. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee endorsed thereon on behalf of the Guarantor. ARTICLE SIXTEEN Subordination of Guarantees Section 1601. Guarantees Subordinate to Senior Debt of the Guarantor. The Guarantor covenants and agrees, and each Holder of a Security, by its acceptance of the Securities, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article Four and Article Twelve), all obligations of the Guarantor under the Guarantees are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Debt of the Guarantor. 97 107 Section 1602. Payment Over of Proceeds Upon Dissolution, Etc. of the Guarantor. In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, arrangement, reorganization, debt restructuring or other similar case or proceeding in connection with any insolvency or bankruptcy proceeding, relative to the Guarantor or to its assets, or (b) any liquidation, dissolution or other winding up of the Guarantor, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Guarantor, then and in any such event specified in (a), (b) or (c) above (each such event, if any, herein sometimes referred to as a "Guarantor Proceeding") the holders of Senior Debt of the Guarantor shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Debt of the Guarantor, 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 of the Guarantor, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Debt of the Guarantor subordinated to the payment of the Guarantees, such payment or distribution being hereinafter referred to as "Guarantor Junior Subordinated Payment"), pursuant to the Guarantee of the Guarantor on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Guarantor or any Subsidiary of the Guarantor and to that end the holders of Senior Debt of the Guarantor shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Guarantor Junior Subordinated Payment, which may be payable or deliverable pursuant to the Guarantee of the Guarantor in respect of the Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received on account of the Securities or the Guarantee of the Guarantor any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities, including any Guarantor Junior Subordinated Payment, before all Senior Debt of the Guarantor 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 of the Guarantor, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, 98 108 custodian, assignee, agent or other Person making payment or distribution of assets of the Guarantor for application to the payment of all Senior Debt of the Guarantor remaining unpaid, to the extent necessary to pay all Senior Debt of the Guarantor in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Guarantor. Any taxes that have been withheld or deducted from any payment or distribution in respect of the Securities or the Guarantees, or any taxes that ought to have been withheld or deducted from any such payment or distribution that have been remitted to the relevant taxing authority, shall not be considered to be an amount that the Trustee or the Holder of any Security receives for purposes of this Section. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Guarantor as reorganized or readjusted, or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Debt of the Guarantor to substantially the same extent as the Guarantees are so subordinated as provided in this Article. The consolidation of the Guarantor with, or the merger of the Guarantor into, another Person or the liquidation or dissolution of the Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a Guarantor Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Guarantor is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article Eight. Section 1603. Prior Payment to Senior Debt of the Guarantor Upon Acceleration of Securities. In the event that any Securities are declared due and payable before their Stated Maturity, then and in such event the holders of the Senior Debt of the Guarantor outstanding at the time such Securities 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 of the Guarantor, 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 of the Guarantor, before the Holders of the Securities are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of the Guarantees) pursuant to the Guarantee of the Guarantor on 99 109 account of the principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Guarantor or any Subsidiary; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Thirteen by delivering and crediting pursuant to Section 1302 Securities which have been acquired (upon redemption or otherwise) prior to such declaration of acceleration. In the event that, notwithstanding the foregoing, the Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 1602 would be applicable. Section 1604. No Payment When Senior Debt of the Guarantor in Default. (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt of the Guarantor, or in the event that any event of default with respect to any Senior Debt of the Guarantor shall have occurred and be continuing and shall have resulted in such Senior Debt of the Guarantor becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event of default, then no payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Guarantor being subordinated to the payment of the Guarantees) shall be made by the Guarantor pursuant to the Guarantees on account of principal of (or premium, if any) or interest on the Securities or on account of the purchase or other acquisition of Securities by the Guarantor or any Subsidiary; provided, however, that nothing in this Section shall prevent the satisfaction of any sinking fund payment in accordance with Article Thirteen by delivering and crediting pursuant to Section 1302 Securities which have been acquired (upon redemption or otherwise) prior to such default in payment or event of default. In the event that, notwithstanding the foregoing, the Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the 100 110 foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 1602 would be applicable. Section 1605. Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities or the Guarantees shall prevent (a) the Guarantor, at any time except during the pendency of any Guarantor Proceeding referred to in Section 1602 or under the conditions described in Sections 1603 and 1604, from making payments at any time pursuant to the Guarantees of the Guarantor of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest on the Securities or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article. Section 1606. Subrogation to Rights of Holders of Senior Debt of the Guarantor. Subject to the payment in full of all Senior Debt of the Guarantor, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt of the Guarantor, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt of the Guarantor pursuant to the provisions of this Article (equally and ratably with the holders of all other indebtedness of the Guarantor which by its express terms is subordinated to indebtedness of the Guarantor to substantially the same extent as the Guarantees are subordinated to the Senior Debt of the Guarantor and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt of the Guarantor) to the rights of the holders of such Senior Debt of the Guarantor to receive payments and distributions of cash, property and securities of the Guarantor applicable to the Senior Debt of the Guarantor until the principal of (and premium, if any) and interest on the Securities shall be paid in full. If the Trustee or the Holders of the Securities are not for any reason entitled to be subrogated to the rights of holders of Senior Debt of the Guarantor in respect of such payment or distribution, then the Trustee or the Holders of the Securities may require each holder of Senior Debt of the Guarantor to whom any such 101 111 payment or distribution is made as a condition to such payment or distribution to assign its Senior Debt of the Guarantor to the extent of such payment or distribution and all rights with respect thereto to the Trustee on behalf of the Holders. Such assignment shall not be effective until such time as all Senior Debt of the Guarantor has been paid in full or payment thereof provided for. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Debt of the Guarantor of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt of the Guarantor by Holders of the Securities or the Trustee, shall, as among the Guarantor, its creditors other than holders of Senior Debt of the Guarantor, and the Holders of the Securities, be deemed to be a payment or distribution by the Guarantor to or on account of the Senior Debt of the Guarantor. Section 1607. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt of the Guarantor on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities or in the Guarantees is intended to or shall (a) impair, as among the Guarantor, its creditors other than holders of Senior Debt of the Guarantor, and the Holders of the Securities, the obligations of the Guarantor, which are absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Debt of the Guarantor, are intended to rank equally with all other general unsecured obligations of the Guarantor), to pay to the Holders of the Securities pursuant to and in accordance with the Guarantees the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Guarantor of the Holders of the Securities and creditors of the Guarantor other than the holders of Senior Debt of the Guarantor; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Guarantor Proceeding, subject to the rights, if any, under this Article of the holders of Senior Debt of the Guarantor to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Without limiting the generality of the foregoing, nothing contained in this Article will restrict the right of the Trustee or the Holders of the Securities of any series to take any action to declare the Securities of such series to be due and payable prior to their stated maturity pursuant to Section 502 or to pursue any rights or remedies hereunder. 102 112 Section 1608. Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. Section 1609. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt of the Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt of the Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities, and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt of the Guarantor, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter or increase, Senior Debt of the Guarantor, or otherwise amend or supplement in any manner Senior Debt of the Guarantor or any instrument evidencing the same or any agreement under which Senior Debt of the Guarantor is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt of the Guarantor; (iii) release any Person liable in any manner for the collection of Senior Debt of the Guarantor; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. Section 1610. Notice to Trustee. The Guarantor shall give prompt written notice to the Trustee of any fact known to the Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Guarantees. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Guarantees, unless and until the Trustee shall have received written notice thereof from the Guarantor or a holder 103 113 of Senior Debt of the Guarantor or from any trustee, agent or representative therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Debt of the Guarantor (or a trustee, agent or representative therefor) to establish that such notice has been given by a holder of Senior Debt of the Guarantor (or a trustee, agent or representative therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt of the Guarantor to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt of the Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. Section 1611. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Guarantor referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Guarantor Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt of the Guarantor and other indebtedness of the Guarantor, the amount thereof or payable thereon, the amount 104 114 or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. Section 1612. Trustee Not Fiduciary For Holders of Senior Debt of the Guarantor. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Guarantor and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Guarantor or to any other Person cash, property or securities to which any holders of Senior Debt of the Guarantor shall be entitled by virtue of this Article or otherwise. Section 1613. Rights of Trustee as Holder of Senior Debt of the Guarantor; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Debt of the Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Debt of the Guarantor, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. Section 1614. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Guarantor and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. Section 1615. Defeasance of This Article Sixteen. The subordination of the Guarantees provided by this Article Sixteen is expressly made subject to the provisions for defeasance or covenant defeasance in Article Twelve and, anything herein to the contrary notwithstanding, upon the effectiveness of any such defeasance or covenant defeasance with respect to the Securities of a series, the Guarantees of the Guarantor with respect to the Securities of such series shall thereupon cease to be subordinated pursuant to this Article Sixteen. 105 115 * * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 106 116 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. AETNA LIFE AND CASUALTY COMPANY By ______________________________ Name: Title: [Seal] Attest: - -------------------- AETNA INC. By ______________________________ Name: Title: [Seal] Attest: - -------------------- STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION By ______________________________ Name: Title: [Seal] Attest: - -------------------- 107 117 STATE OF CONNECTICUT ) ) ss.: COUNTY OF HARTFORD ) On the day of , 1996, before me personally came , to me known, who, being by me duly sworn, did depose and say that (s)he is of AETNA LIFE AND CASUALTY COMPANY, one of the corporations described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that (s)he signed her/his name thereto by like authority. ------------------------- Notary Public 108 118 STATE OF CONNECTICUT ) ) ss.: COUNTY OF HARTFORD ) On the day of , 1996, before me personally came , to me known, who, being by me duly sworn, did depose and say that (s)he is of AETNA INC., one of the corporations described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that (s)he signed her/his name thereto by like authority. ------------------------- Notary Public 109 119 COMMONWEALTH OF MASSACHUSETTS ) ) ss.: COUNTY OF SUFFOLK ) On the day of , 1996, before me personally came , to me known, who, being by me duly sworn, did depose and say that (s)he is of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, one of the corporations described in and which executed the foregoing instrument; that (s)he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that (s)he signed her/his name thereto by like authority. ------------------------- Notary Public 110 EX-4.3 4 FORM OF JUNIOR SUBORDINATED INDENTURE 1 Exhibit 4.3 ================================================================================ AETNA SERVICES, INC., as Issuer AETNA INC., as Guarantor and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee ------------------------------------ INDENTURE Dated as of ___________ __, 1998 ------------------------------------ Junior Subordinated Debentures ================================================================================ 2 TABLE OF CONTENTS --------------- PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions.....................................................1 Aetna Capital Trust......................................................2 Affiliate................................................................2 Authenticating Agent.....................................................2 Board of Directors.......................................................2 Board Resolution.........................................................2 Business Day.............................................................3 Certificate..............................................................3 Commission...............................................................3 Common Securities........................................................3 Company..................................................................3 Corporate Trust Office...................................................3 Declaration of Trust.....................................................4 Debenture" or "Debentures................................................4 Debenture Register.......................................................4 Debenture Registrar......................................................4 Default..................................................................4 Depositary...............................................................4 Event of Default.........................................................4 Exchange Act.............................................................4 Global Debenture.........................................................4 Guarantee................................................................4 Guaranteed Obligations...................................................4 Guarantor................................................................4 Holder, "holder of Debentures", "registered holder"......................4 Indebtedness.............................................................5 Indenture................................................................5 Interest Payment Date....................................................5 Officers' Certificate....................................................5 Opinion of Counsel.......................................................6 Original Issue Discount Debenture........................................6 Outstanding..............................................................6 Person...................................................................6 Place of Payment.........................................................6 Predecessor Debenture....................................................6 3 PAGE ---- Preferred Securities Guarantee...........................................7 Preferred Securities.....................................................7 Property Trustee.........................................................7 Responsible Officer......................................................7 Security Exchange........................................................7 Senior Indebtedness......................................................8 Stated Maturity..........................................................8 Subsidiary...............................................................8 Trustee..................................................................9 U.S. Government Obligations..............................................9 Trust Indenture Act......................................................9 ARTICLE 2 ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES SECTION 2.01. Designation, Terms, Amount, Authentication and Delivery of Debentures............................................................9 SECTION 2.02. Form of Debentures and Trustee's Certificate...................12 SECTION 2.03. Date and Denominations of Debentures and Provisions for Payment of Principal, Premium and Interest..............................13 SECTION 2.04. Execution, Authentication, Delivery and Dating.................15 SECTION 2.05. Exchange of Debentures.........................................17 SECTION 2.06. Temporary Debentures...........................................18 SECTION 2.07. Mutilated, Destroyed, Lost and Stolen Debentures...............19 SECTION 2.08. Cancellation...................................................20 SECTION 2.09. Provisions of Indenture and Debentures for Sole Benefit of Parties and Holders.....................................................20 SECTION 2.10. Appointment of Authenticating Agent............................20 SECTION 2.11. Global Debenture...............................................21 SECTION 2.12. Cusip Numbers..................................................22 ARTICLE 3 REDEMPTION OF DEBENTURES AND SINKING FUND PROVISIONS SECTION 3.01. Redemption of Debentures.......................................23 SECTION 3.02. Notice of Redemption...........................................23 SECTION 3.03. When Debentures Called for Redemption Become Due and Payable.................................................................24 SECTION 3.04. Sinking Fund for Debentures....................................25 ii 4 PAGE ---- SECTION 3.05. Satisfaction of Sinking Fund Payments with Debentures..........25 SECTION 3.06. Redemption of Debentures for Sinking Fund......................25 ARTICLE 4 PARTICULAR COVENANTS OF THE COMPANY AND THE GUARANTOR SECTION 4.01. Payment of Principal, Premium and Interest.....................26 SECTION 4.02. Maintenance of Office or Agency by Company and Guarantor...............................................................26 SECTION 4.03. Money for Debentures Payments to Be Held in Trust..............27 SECTION 4.04. Statement by Officers as to Default............................28 ARTICLE 5 HOLDERS' LISTS AND REPORTS BY THE COMPANY, THE GUARANTOR AND THE TRUSTEE SECTION 5.01. Company and Guarantor to Furnish Trustee Names and Addresses of Holders....................................................29 SECTION 5.02. Preservation of Information; Communications to Holders.........29 SECTION 5.03. Reports by Company and Guarantor...............................30 SECTION 5.04. Reports by Trustee.............................................30 ARTICLE 6 REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT SECTION 6.01. Events of Default..............................................30 SECTION 6.02. Acceleration of Maturity; Rescission and Annulment.............33 SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by Trustee.................................................................35 SECTION 6.04. Trustee May File Proofs of Claim...............................36 SECTION 6.05. Trustee May Enforce Claims Without Possession of Debentures..............................................................37 SECTION 6.06. Application of Money Collected.................................37 SECTION 6.07. Limitation on Suits............................................38 SECTION 6.08. Unconditional Right of Holders to Receive Payment..............38 SECTION 6.09. Restoration of Rights and Remedies .......................................................................39 SECTION 6.10. Remedies Cumulative............................................39 SECTION 6.11. Delay or Omission Not Waiver...................................39 iii 5 PAGE ---- SECTION 6.12. Control by Holders.............................................39 SECTION 6.13. Waiver of Past Defaults........................................40 SECTION 6.14. Undertaking for Costs..........................................41 SECTION 6.15. Enforcement by Holders of Preferred Securities.................41 ARTICLE 7 CONCERNING THE TRUSTEE SECTION 7.01. Obligations of Trustee.........................................41 SECTION 7.02. Reliance, Evidence and Indemnity of Trustee....................43 SECTION 7.03. No Liability for Certain Statements............................44 SECTION 7.04. Trustee, Paying Agent or Debenture Registrar May Own Debentures..............................................................45 SECTION 7.05. Moneys Received by Trustee to Be Held in Trust.................45 SECTION 7.06. Compensation of Trustee........................................45 SECTION 7.07. Right of Trustee to Rely on Certificate of Officers of Company.................................................................45 SECTION 7.08. Conflicting Interest of Trustee...............................46 SECTION 7.09. Requirements for Eligibility of Trustee........................52 SECTION 7.10. Resignation and Removal........................................53 SECTION 7.11. Successor Trustee..............................................54 SECTION 7.12. Successor to Trustee by Merger, Consolidation or Succession to Business..................................................55 SECTION 7.13. Trustee as Creditor............................................56 ARTICLE 8 CONCERNING THE HOLDERS SECTION 8.01. Evidence of Action by Holders..................................60 SECTION 8.02. Proof of Execution of Instruments and of Holding of Debentures..............................................................61 SECTION 8.03. Who May Be Deemed Owners of Debentures.........................61 SECTION 8.04. Debentures Owned by Company, the Guarantor or Controlled or Controlling Companies Disregarded for Certain Purposes................................................................61 SECTION 8.05. Instruments Executed by Holders................................62 iv 6 PAGE ---- ARTICLE 9 SUPPLEMENTAL INDENTURES SECTION 9.01. Purposes for Which Supplemental Indentures May Be Entered into Without Consent of Holders.................................62 SECTION 9.02. Modification of Indenture with Consent of Holders..............63 SECTION 9.03. Effect of Supplemental Indentures..............................65 SECTION 9.04. Debentures May Bear Notation of Changes........................65 SECTION 9.05. Opinion of Counsel.............................................65 ARTICLE 10 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 10.01. Company or Guarantor May Consolidate, Etc., Only on Certain Terms...........................................................66 SECTION 10.02. Successor Substituted.........................................67 SECTION 10.03. Assumption by Guarantor or Subsidiary of Company's Obligations.............................................................67 ARTICLE 11 SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE; UNCLAIMED MONEYS SECTION 11.01. Satisfaction, Discharge and Defeasance of Indenture...........68 SECTION 11.02. Application by Trustee of Funds Deposited for Payment of Debentures...........................................................71 SECTION 11.03. Repayment of Funds at Satisfaction, Discharge or Defeasance..............................................................71 SECTION 11.04. Repayment of Moneys Held by Paying Agent......................72 SECTION 11.05. Indemnification of Trustee....................................72 ARTICLE 12 IMMUNITY OF INCORPORATORS, STOCKHOLDER SECTION 12.01. Incorporators, Stockholders, Officers and Directors of Company Exempt from Individual Liability................................72 v 7 PAGE ---- ARTICLE 13 MISCELLANEOUS PROVISIONS SECTION 13.01. Successors and Assigns of Company or Guarantor Bound by Indenture............................................................73 SECTION 13.02. Acts of Board, Committee or Officer of Successor Company or Guarantor Valid..............................................73 SECTION 13.03. Surrender of Powers...........................................73 SECTION 13.04. Required Notices or Demands May be Served by Mail.............73 SECTION 13.05. Indenture, Debentures and Guarantees to Be Construed in Accordance with Laws of the State of New York........................74 SECTION 13.06. Officers' Certificates and Opinion of Counsel................74 SECTION 13.07. Payments Not Due on Business Day..............................75 SECTION 13.08. Provisions Required by Trust Indenture Act of 1939 to Control.................................................................75 SECTION 13.09. Indenture May Be Executed in Counterparts.....................75 SECTION 13.10. Separability of Indenture Provisions..........................75 SECTION 13.11. Assignment by Company to Subsidiary...........................75 SECTION 13.12. Holders of Preferred Securities Third Party Beneficiaries.....75 ARTICLE 14 SUBORDINATION OF DEBENTURES SECTION 14.01. Agreement to Subordinate......................................76 SECTION 14.02. Rights of Senior Indebtedness in the Event of Insolvency, Etc., of the Company....................................................76 SECTION 14.03. Payment Over of Proceeds Received on Debentures...............77 SECTION 14.04. Payments to Holders...........................................79 SECTION 14.05. Holders of Debentures Authorize Trustee to Effectuate Subordination of Debentures.............................................79 SECTION 14.06. Notice to Trustee.............................................80 SECTION 14.07. Trustees May Hold Senior Indebtedness.........................80 SECTION 14.08. Applicability of Article to Paying Agents....................80 ARTICLE 15 GUARANTEE OF DEBENTURES SECTION 15.01. Guarantee.....................................................80 SECTION 15.02. Subrogation...................................................81 SECTION 15.03. Reinstatement.................................................81 vi 8 PAGE ---- SECTION 15.04. Execution and Delivery of Guarantees..........................81 ARTICLE 16 SUBORDINATION OF GUARANTEES SECTION 16.01. Agreement to Subordinate......................................82 SECTION 16.02. Rights of Senior Indebtedness in the Event of Insolvency, Etc. of the Guarantor...................................................82 SECTION 16.03. Payment Over of Proceeds Received on Guarantees...............83 SECTION 16.04. Payments to Holders...........................................85 SECTION 16.05. Holders of Debentures Authorize Trustee to Effectuate Subordination of Guarantee..............................................85 SECTION 16.06. Notice to Trustee.............................................86 SECTION 16.07. Trustees May Hold Senior Indebtedness.........................86 SECTION 16.08. Applicability of Article to Paying Agents....................86 vii 9 INDENTURE, dated as of __________ __, 1998, between and among AETNA SERVICES, INC., a corporation duly organized and validly existing under the laws of the State of Connecticut (herein called the "Company"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, AETNA INC., a corporation duly organized and existing under the laws of the State of Connecticut (herein called the "Guarantor"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association duly organized and existing under the laws of the United States of America, as Trustee (herein called the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of debentures (herein called the "Debentures"), to be issued in one or more series as in this Indenture provided. The Guarantor has duly authorized the unconditional guarantee of the Debentures on the terms hereinafter set forth and the execution and delivery of the Indenture. All things necessary to make this Indenture a valid agreement of the Company and the Guarantor, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Debentures or of series thereof, as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The terms defined in this Section (except as in this Indenture otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture, any resolution of the Board of Directors of the Company or the Guarantor and of any indenture supplemental hereof shall have the respective meanings specified in this Section. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939, 10 as amended, or which are by reference in such Act defined in the Securities Act of 1933, as amended (except as herein otherwise expressly provided or unless the context otherwise requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this instrument. "Aetna Capital Trust" means such statutory business trust created under the laws of the State of Delaware specified in the applicable Board Resolution of the Company or supplemental indenture establishing a particular series of Debentures pursuant to Section 2.01 hereof. "Affiliate" of the Company means any company at least a majority of whose outstanding voting stock shall at the time be owned by the Company, or by one or more direct or indirect subsidiaries of the Company or by the Company and one or more direct or indirect subsidiaries of the Company. For the purposes only of this definition of the term "Affiliate", the term "voting stock", as applied to the stock of any company, shall mean stock of any class or classes having ordinary voting power for the election of a majority of the directors of such company, other than stock having such power only by reason of the occurrence of a contingency. "Authenticating Agent" means an authenticating agent with respect to all or any of the series of Debentures, as the case may be, appointed with respect to all or any series of the Debentures, as the case may be, by the Trustee pursuant to Section 2.10. "Board of Directors," when used with reference to either the Company or the Guarantor, means either (i) the Board of Directors of the Company or the Guarantor, as the case may be, the Executive Committee of such Board of Directors or any other duly authorized committee of directors and/or officers appointed by such Board of Directors or Executive Committee, or (ii) one or more duly authorized officers of the Company or the Guarantor, as the case may be, to whom the Board of Directors of the Company or the Guarantor or a committee thereof has delegated the authority to act with respect to the matters contemplated by this Indenture. "Board Resolution," when used with reference to either the Company or the Guarantor, means (i) a copy of a resolution certified by the Corporate Secretary or an Assistant Corporate Secretary of the Company or the Guarantor, as the case may be, to have been adopted by the Board of Directors or a committee thereof and to be in full force and effect on the date of such certification or (ii) a certificate signed by the authorized officer or officers of the Company or the Guarantor, as the case may be, to whom the Board of Directors of 2 11 the Company or the Guarantor or a committee thereof has delegated its authority (as described in the definition of Board of Directors), and in each case, delivered to the Trustee. "Business Day," when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Certificate", when used with reference to either the Company or the Guarantor, means a certificate signed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company or the Guarantor, as the case may be. The Certificate need not comply with the provisions of Section 13.06. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Securities" means the common undivided beneficial interests in the assets of the applicable Aetna Capital Trust. "Company" means Aetna Services, Inc., a corporation duly organized and existing under the laws of the State of Connecticut, and, subject to the provisions of Article 10, shall also include its successors and assigns. "Company Order", when used with reference to the Company or the Guarantor, means a written request or order signed in the name of the Company or of the Guarantor, as the case may be, by (i) any two of the following individuals: the Chairman, the President, a Vice Chairman, a Senior Vice President, or a Vice President, or (ii) by one of the foregoing individuals and by any other Vice President, the Treasurer, an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate Secretary or any other individual authorized by the Board of Directors for such purpose, and delivered to the Trustee. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Indenture is located at 153 West 51st Street, 5th Floor, Suite 4015, New York, NY 10019 Attention: Corporate Trust Administration. 3 12 "Declaration of Trust" means the Declaration of Trust of the Aetna Capital Trust, if any, specified in the applicable Board Resolution of the Company or supplemental indenture establishing a particular series of Debentures pursuant to Section 2.01 hereof. "Debenture" or "Debentures" means any Debenture or Debentures, as the case may be, authenticated and delivered under this Indenture. "Debenture Register" shall have the meaning set forth in Section 2.05(b). "Debenture Registrar" shall have the meaning set forth in Section 2.05(b). "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Depositary" means with respect to Debentures of any series, for which the Company shall determine that such Debentures will be issued as a Global Debenture, The Depository Trust Company, New York, New York, another clearing agency, or any successor registered as a clearing agency under the Exchange Act, or other applicable statute or regulation, which, in each case, shall be designated by the Company pursuant to either Section 2.01 or 2.11. "Event of Default", with respect to Debentures of a particular series means any event specified in Section 6.01, continued for the period of time, if any, therein designated. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto. "Global Debenture" means, with respect to any series of Debentures, a Debenture executed by the Company and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with the Indenture, which shall be registered in the name of the Depositary or its nominee. "Guarantee" means any guarantee of the Guarantor endorsed on a Debenture authenticated and delivered pursuant to this Indenture and shall include the guarantee set forth in Section 15.01. "Guaranteed Obligations" shall have the meaning set forth in Section 15.01. "Guarantor" means Aetna Inc., a corporation duly organized and existing under the laws of the State of Connecticut and subject to the provisions of Article 10, shall also include its successors and assigns. "Holder", "holder of Debentures", "registered holder", or other similar term, means the person or persons in whose name or names a particular Debenture 4 13 shall be registered on the books of the Company kept for the purpose in accordance with the terms of this Indenture. "Indebtedness" 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 any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person 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 such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person 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 such Person; 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, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor or otherwise. "Indenture" means this instrument as originally executed, or, if amended or supplemented as herein provided, as so amended or supplemented. "Interest Payment Date" when used with respect to any installment of interest on a Debenture of a particular series means the date specified in such Debenture or in a Board Resolution or in an indenture supplemental hereto with respect to such series as the fixed date on which an installment of interest with respect to Debentures of that series is due and payable. "Officers' Certificate" when used with respect to the Company or the Guarantor, means a certificate signed by (i) any two of the following individuals: the Chairman, the President, a Vice Chairman, Senior Vice President or a Vice President, or (ii) by one of the foregoing individuals and by any other Vice President, the Treasurer, an Assistant Treasurer, the Corporate Secretary or an Assistant Corporate Secretary, of the Company or the Guarantor, as the case may be, or any other individual authorized by the Board of Directors of the Company or the Guarantor, as the case may be, for such purpose, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 4.04 shall be the 5 14 principal executive, financial or accounting officer of the Company or the Guarantor, as the case may be. "Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel for the Company or the Guarantor, and who shall be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 13.06, if and to the extent required by the provisions thereof. "Original Issue Discount Debenture" means any Debenture which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the fixed date on which the principal on such Debenture is due and payable. "Outstanding", when used with reference to Debentures of any series, subject to the provisions of Section 8.01, means, as of any particular time, all Debentures of that series theretofore authenticated and delivered by the Trustee under this Indenture, except (a) Debentures theretofore canceled by the Trustee or any paying agent, or delivered to the Trustee or any paying agent for cancellation or which have previously been canceled; (b) Debentures or portions thereof for the payment or redemption of which moneys or U.S. Government Obligations in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company or the Guarantor) or shall have been set aside and segregated in trust for the holders of such Debentures by the Company or the Guarantor (if the Company or the Guarantor shall act as its own paying agent); provided, however, that if such Debentures or portions of such Debentures are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article 3 provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and (c) Debentures in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.07. "Person" means any individual, corporation, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Debentures of any series, means the place or places where the principal of and any premium and interest on the Debentures of that series are payable as specified as contemplated by Section 2.01(g). "Predecessor Debenture" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced 6 15 by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture. "Preferred Securities Guarantee" means the Preferred Securities Guarantee, if any, that the Company and the Guarantor may enter into that operates directly or indirectly for the benefit of holders of Preferred Securities issued by a Aetna Capital Trust. "Preferred Securities" means the preferred undivided beneficial interests in the assets of the applicable Aetna Capital Trust. "Property Trustee" means the entity performing the function of the Property Trustee under the applicable Declaration of Trust of an Aetna Capital Trust. "Responsible Officer" when used with respect to the Trustee means any officer or assistant officer of the Trustee assigned to administer corporate trust matters or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Security Exchange" when used with respect to the Debentures of any series which are held as trust assets of an Aetna Trust pursuant to the Declaration of Trust of such Aetna Capital Trust, means the distribution of the Debentures of such series by such Aetna Capital Trust in exchange for the Preferred Securities and Common Securities of such Aetna Capital Trust in dissolution of such Aetna Capital Trust pursuant to the Declaration of Trust of such Aetna Capital Trust. 7 16 "Senior Indebtedness" means with respect to any Person 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 such Person to the extent that such claim for post-petition interest is allowed in such proceeding), on Indebtedness of such Person, whether incurred on or prior to the date of the Indenture or thereafter incurred (including, without limitation, indebtedness or guarantees in respect thereof issued or to be issued under the Indenture dated as of July 1, 1996 among Aetna Services, Inc., Aetna Inc. and State Street Bank and Trust Company of Connecticut, National Association, as trustee, providing for the issuance of subordinated debt securities of Aetna Services, Inc. and guarantees of Aetna Inc. in respect thereof), 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 in the case of the Company, or the Guarantees, in the case of the Guarantor, or to other Indebtedness of such Person which is pari passu with, or subordinated to the Debentures in the case of the Company, or the Guarantees, in the case of the Guarantor; provided, however, that Senior Indebtedness shall be deemed not to include (i) in the case of the Company, the Debentures, and (ii) in the case of the Guarantor, the Guarantees and provided, further, that Senior Indebtedness shall not include any other debt securities or guarantees in respect thereof issued to any other trusts, partnerships or other entity affiliated with the Company or the Guarantor which is a financing vehicle of the Company or the Guarantor ("Financing Entity") in connection with the issuance of preferred securities of such Financing Entity, including, without limitation, indebtedness of the Company and the Guarantor's guarantee in respect thereof issued to Aetna Capital L.L.C. pursuant to that certain Indenture dated as of November 1, 1994 between Aetna Services, Inc. and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among Aetna Services, Inc., Aetna Inc. and The First National Bank of Chicago, as trustee. "Stated Maturity" when used with respect to any Debenture or any installment of principal thereof or interest thereon, means the date specified in such Debenture as the fixed date on which the principal of such Debenture or such installment of principal or interest is due and payable. "Subsidiary" of any Person means a corporation more than 50% of the voting power of which is controlled, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one and more other Subsidiaries of such Person. For the purposes of this definition, "voting power" means the power to vote for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. 8 17 "Trustee" means The First National Bank of Chicago, a national banking association, and, subject to the provisions of Article 7, shall also include its successors and assigns, and, if at any time there is more than one person acting in such capacity hereunder, "Trustee" shall mean each such person. The term "Trustee" as used with respect to a particular series of the Debentures shall mean the trustee with respect to that series. "U.S. Government Obligations" means (x) any security that is (i) a direct obligation of the United States of America for the payment of which full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality for the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any specific payment of principal of or interest on any such U.S. Government Obligation specified in Clause (x) and held by such custodian for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any such U.S. Government Obligation, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. "Trust Indenture Act", subject to the provisions of Section 9.01 and 9.02, means the Trust Indenture Act of 1939, as amended and in effect at the date of execution of this Indenture. ARTICLE 2 ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF DEBENTURES SECTION 2.01. Designation, Terms, Amount, Authentication and Delivery of Debentures. The aggregate principal amount of Debentures which may be authenticated and delivered under this Indenture is unlimited. The Debentures may be issued in one or more series up to the aggregate principal amount of Debentures of that series and the Guarantees may be endorsed on such Debentures as from time to time authorized by or pursuant to a Board 9 18 Resolution of the Company or the Guarantor, as the case may be, or pursuant to one or more indentures supplemental hereto, prior to the initial issuance of Debentures of a particular series. Prior to the initial issuance of Debentures of any series, there shall be established in or pursuant to a Board Resolution of the Company and the Guarantor, and set forth in an Officers' Certificate of the Company and the Guarantor, or established in one or more indentures supplemental hereto: (a) the title of the Debentures of the series (which shall distinguish the Debentures of the series from all other Debentures); (b) any limit upon the aggregate principal amount of the Debentures of that series which may be authenticated and delivered under this Indenture (except for Debentures authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Debentures of that series): (c) the Person to whom any interest on such Debentures will be payable, if other than the Person in whose name such Debentures are registered on any regular record date with respect to any Interest Payment Date; (d) the date or dates on which the principal of the Debentures of the series is payable; (e) the rate or rates per annum (which may be fixed or variable) at which the Debentures of the series shall bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, the date or dates from which such interest will accrue and the dates on which such interest, if any, will be payable, the right, if any, of the Company to defer or extend an interest payment date and the duration of such deferral or extension (an "Extension Period") and the regular record dates for such Interest Payment Dates; (f) whether the Debentures will be secured; (g) the place or places where principal of (and premium, if any) and interest, if any, on such Debentures will be payable; (h) if applicable, the price at which, the periods within which and the terms and conditions upon which the Debentures may be redeemed at the option of the Company, pursuant to a sinking fund or otherwise; 10 19 (i) the obligation, if any, of the Company to redeem or purchase Debentures of the series pursuant to any sinking fund or analogous provisions (including payments made in cash in anticipation of future sinking fund obligations) or at the option of a holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Debentures of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (j) the form of the Debentures of the series including the form of the Certificate of Authentication for such series; (k) if other than denominations of $25 or any integral multiple thereof, the denominations in which the Debentures of the series shall be issuable; (l) If the Debentures of such series are to be deposited as trust assets in an Aetna Capital Trust, the name of the applicable Aetna Capital Trust (which shall distinguish such statutory business trust from all other Aetna Capital Trusts) into which the Debentures of such series are to be deposited as trust assets and the date of its Declaration of Trust. (m) if the amount of payments of principal of (or premium, if any) or interest, if any, on the Debentures may be determined with reference to one or more indices, the manner in which such amounts will be determined; (n) the portion of the principal amount of such Debentures, if other than the principal amount thereof, payable upon acceleration of maturity thereof; (o) whether all or any part of such Debentures will be issued in the form of a Global Debenture or Debentures and, if so, the depositary for, and other terms related to, such Global Debenture or Debentures; (p) any event or events of default applicable with respect to such Debentures in addition to those provided in this Indenture; (q) the relative degree to which such Debentures of the series shall be senior to or be subordinated to other series of such Debentures in right of payment, whether such other series of Debentures are outstanding or not; 11 20 (r) any other covenant or warranty included for the benefit of the Debentures in addition to (and not inconsistent with) those included in this Indenture for the benefit of Debentures or in lieu of any covenant or warranty included in this Indenture for the benefit of the Debentures of all series, or any provision that any covenant or warranty included in this Indenture for the benefit of Debentures of all series shall not be for the benefit of the applicable Debentures, or any combination of such covenant, warranty or provisions; (s) the guarantee of the Guarantor of the Debentures if other than as described herein; (t) any restriction or condition on the transferability of the Debentures; (u) any authenticating or paying agents, registrars, conversion agents or any other agents with respect to such Debentures; and (v) any other terms of such Debentures and Guarantees not inconsistent with the terms of this Indenture. All Debentures of any one series and the Guarantees endorsed thereon shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to any such Board Resolutions or in any indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to Board Resolution of the Company and the Guarantor, copies of appropriate records of such action shall be certified by the Secretary or an Assistant Secretary of the Company and the Guarantor and delivered to the Trustee at or prior to the delivery of the Officers' Certificates setting forth the terms of the series. SECTION 2.02. Form of Debentures and Trustee's Certificate. The Debentures of any series, the Guarantees endorsed thereon and the Trustee's certificate of authentication to be borne by such Debentures shall be substantially of the tenor and purport as set forth in one or more indentures supplemental hereto or as provided in the Board Resolutions of the Company and the Guarantor and as set forth in an Officers' Certificate, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with 12 21 any rule or regulation of any stock exchange on which Debentures of that series may be listed, or to conform to usage. SECTION 2.03. Date and Denominations of Debentures and Provisions for Payment of Principal, Premium and Interest. The Debentures shall be issuable as registered Debentures and in the denominations of $25 or any integral multiple thereof, subject to Section 2.01(k). The Debentures of a particular series shall bear interest payable on the dates and at the rate specified with respect to that series. The principal of and the interest on the Debentures of any series, as well as any premium thereon in case of redemption thereof prior to maturity, shall be payable in the coin or currency of the United States of America which at the time is legal tender for public and private debt, at the office or agency of the Company maintained for that purpose in the Place of Payment. Each Debenture shall be dated the date of its authentication. Interest on the Debentures shall be computed on the basis of a 360-day year composed of twelve 30-day months. The interest installment on any Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures of that series shall be paid to the person in whose name said Debenture (or one or more Predecessor Debentures) is registered at the close of business on the regular record date for such interest installment. In the event that any Debenture of a particular series or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debenture will be paid upon presentation and surrender of such Debenture as provided in Section 3.03. Any interest on any Debenture which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date for Debentures of the same series (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company, at its election, as provided in clause (a) or clause (b) below: (a) The Company may make payment of any Defaulted Interest on Debentures to the persons in whose names such Debentures (or their respective Predecessor Debentures) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of 13 22 such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Holder at his or her address as it appears in the Debenture Register (as hereinafter defined), not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names such Debentures (or their Predecessor Debentures) are registered on such special record date and shall be no longer payable pursuant to the following clause (2). (b) The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Unless otherwise set forth in Board Resolutions of the Company and the Guarantor or one or more indentures supplemental hereto establishing the terms of any series of Debentures pursuant to Section 2.01 hereof, the term "regular record date" as used in this Indenture with respect to a series of Debentures with respect to any Interest Payment Date for such series shall mean either the fifteenth day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the first day of a month, or the last day of the month immediately preceding the month in which an Interest Payment Date established for such series pursuant to Section 2.01 hereof shall occur, if such Interest Payment Date is the fifteenth day of a month, whether or not such date is Business Day. Subject to the foregoing provisions of this Section, each Debenture of a series delivered under this Indenture upon transfer of or in exchange for or in lieu 14 23 of any other Debenture of such series shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debenture. SECTION 2.04. Execution, Authentication, Delivery and Dating. The Debentures shall, subject to the provisions of Section 2.06, be printed on steel-engraved borders or fully or partially engraved, or legibly typed, as the proper officer of the Company may determine, and shall be executed on behalf of the Company by its Chairman, its President, a Vice Chairman, any Vice President, its Treasurer or Assistant Treasurer, under its corporate seal reproduced thereon attested by its Corporate Secretary or one of its Assistant Corporate Secretaries. The signature of any of these officers on the Debentures may be manual or facsimile. The Guarantees shall be executed on behalf of the Guarantor by its Chairman, its President, a Vice Chairman, any Vice President, its Treasurer or Assistant Treasurer, under its corporate seal reproduced thereon and attested by its Corporate Secretary or one of its Assistant Corporate Secretaries. The signature of any of these officers on the Guarantees may be manual or facsimile. The seal of the Company or the Guarantor, as the case may be, may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Debentures. Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company or of the Guarantor shall bind the Company or the Guarantor, as the case may be, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debentures or did not hold such offices at the date of such Debentures. Minor typographical and other minor errors in the text of any Debenture or the Guarantee endorsed thereon or minor defects in the seal or facsimile signature on any Debenture or the Guarantee endorsed thereon shall not affect the validity or enforceability of such Debenture or such Guaranty if such Debenture has been duly authenticated and delivered by the Trustee. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debentures of any series executed by the Company and having endorsed thereon Guarantees executed by the Guarantor to the Trustee for authentication, together with a Company Order of the Company for the authentication and delivery of such Debentures, and the Trustee in accordance with such Company Order shall authenticate and deliver such Debentures. If the form or terms of the Debentures of the series or the form of Guarantees endorsed thereon have been established in or pursuant to one or more Board Resolutions as permitted by Sections 2.01 and 2.02, in authenticating such Debentures, and accepting the additional responsibilities under this Indenture in 15 24 relation to such Debentures and Guarantees endorsed thereon, the Trustee shall be entitled to receive, and (subject to Section 7.02(d)) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) if the form or forms of such Debentures and the applicable Guarantees have been established by or pursuant to Board Resolution as permitted by Section 2.02, that such form or forms have been established in conformity with the provisions of this Indenture; (b) if the terms of such Debentures and the applicable Guarantees have been established by or pursuant to Board Resolution as permitted by Section 2.01, that such terms have been established in conformity with the provisions of this Indenture; (c) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally or the rights of creditors of insurance companies generally and to general equity principles; and (d) that such Guarantees, when the Debentures on which such Guarantees are endorsed are authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Guarantor, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith by its board of directors, executive committee, or a trust committee of directors or responsible officers of the Trustee shall determine that such action would expose the Trustee to personal liability to existing Holders of Debentures. Notwithstanding the provisions of Section 2.01 and of the preceding paragraph, if all Debentures of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 2.01 or the Company Order and Opinion of Counsel otherwise 16 25 required pursuant to such preceding paragraph at or prior to the time of authentication of each Debenture of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Debenture of such series to be issued. Each Debenture and the applicable Guarantee shall be dated the date of its authentication. No Debenture or Guarantee endorsed thereon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Debenture a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Debenture shall be conclusive evidence, and the only evidence, that such Debenture has been duly authenticated and delivered hereunder and that such Debenture or Guarantee is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Debenture shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Debenture to the Trustee for cancellation as provided in Section 2.08, for all purposes of this Indenture such Debenture and the Guarantee endorsed thereon shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 2.05. Exchange of Debentures. (a) Debentures of any series may be exchanged upon presentation thereof at the office or agency of the Company designated for such purpose at the applicable Place of Payment, for other Debentures of such series of authorized denominations, and for a like aggregate principal amount, upon payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, all as provided in this Section. In respect of any Debentures so surrendered for exchange, the Company shall execute, the Guarantor shall endorse, the Trustee shall authenticate and such office or agency shall make available for delivery in exchange therefor the Debenture or Debentures of the same series which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding. (b) The Company shall keep, or cause to be kept, at its office or agency designated for such purpose at the applicable Place of Payment, or such other location designated by the Company a register or registers (herein referred to as the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall register the Debentures and the transfers of Debentures as in this Article provided and which at all reasonable times shall be open for inspection by the Trustee. The registrar for the purpose of registering 17 26 Debentures and transfer of Debentures as herein provided shall be appointed as authorized by Board Resolution (the "Debenture Registrar"). Upon surrender for transfer of any Debenture at the office or agency of the Company designated for such purpose at the applicable Place of Payment for that series, the Company shall execute, the Guarantor shall endorse, the Trustee shall authenticate and such office or agency shall make available for delivery in the name of the transferee or transferees a new Debenture or Debentures of the same series as the Debenture presented for a like aggregate principal amount. All Debentures presented or surrendered for exchange or registration of transfer, as provided in this Section, shall be accompanied (if so required by the Company or the Debenture Registrar) by a written instrument or instruments of transfer, in form satisfactory to the Company, the Guarantor or the Debenture Registrar, duly executed by the registered holder or by his duly authorized attorney in writing. (c) No service charge shall be made for any exchange or registration of transfer of Debentures, or issue of new Debentures in case of partial redemption of any series, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge in relation thereto, other than exchanges pursuant to Section 2.06, the second paragraph of Section 3.03 and Section 9.04 not involving any transfer. (d) The Company shall not be required (i) to issue, exchange or register the transfer of any Debentures during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the outstanding Debentures of the same series and ending at the close of business on the day of such mailing, nor (ii) to register the transfer of or exchange any Debentures of any series or portions thereof called for redemption. The provisions of this Section 2.05 are, with respect to any Global Debenture, subject to Section 2.11 hereof. SECTION 2.06. Temporary Debentures. Pending the preparation of definitive Debentures of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Debentures substantially of the tenor of the definitive Debentures in lieu of which they are issued and having endorsed thereon Guarantees of the Guarantor substantially of the tenor of definitive Guarantees, which Debentures and Guarantees may be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Debentures or 18 27 such Guarantees may determine, as evidenced by their execution of such Debentures and such Guarantees. If temporary Debentures of any series are issued, the Company will cause definitive Debentures of that series to be prepared without unreasonable delay. After the preparation of definitive Debentures of such series, the temporary Debentures of such series shall be exchangeable for definitive Debentures of such series upon surrender of the temporary Debentures of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Debentures of any series, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Debentures of the same series, of any authorized denominations and of a like aggregate principal amount and tenor which have endorsed thereon Guarantees duly executed by the Guarantor. Until so exchanged the temporary Debentures of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures of such series and tenor. SECTION 2.07. Mutilated, Destroyed, Lost and Stolen Debentures. If there shall be delivered to the Company and the Trustee (a) a mutilated Debenture, or (b) evidence to their satisfaction of the destruction, loss or theft of any Debenture and in either case such security or indemnity as may be required by either of them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Debenture has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such mutilated, destroyed, lost or stolen Debenture, a new Debenture of the same series and of like tenor and principal amount having endorsed thereon a Guarantee duly executed by the Guarantor, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture. Upon the issuance of any new Debenture under this Section, the Company or the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Debenture of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company and the Guarantor, whether or not the 19 28 destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures. SECTION 2.08. Cancellation. All Debentures surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company or the Guarantor may at any time deliver to the Trustee for cancellation any Debentures previously authenticated and delivered hereunder which the Company or the Guarantor may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Debentures previously authenticated hereunder which the Company has not issued and sold, and all Debentures so delivered shall be promptly cancelled by the Trustee. No Debentures shall be authenticated in lieu of or in exchange for any Debentures cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Debentures held by the Trustee shall be disposed of as directed by a Company Order. Acquisition by the Company or the Guarantor of any Debenture shall not operate as a redemption or satisfaction of the indebtedness represented by such Debenture unless and until the same is delivered to the Trustee for cancellation. SECTION 2.09. Provisions of Indenture and Debentures for Sole Benefit of Parties and Holders. Nothing in this Indenture or in the Debentures, express or implied, shall give or be construed to give to any person, firm or corporation, other than the parties hereto and the holders of the Debentures, any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all such covenants, conditions and provisions being for the sole benefit of the parties hereto and of the holders of the Debentures. SECTION 2.10. Appointment of Authenticating Agent. So long as any of the Debentures of any series remain outstanding there may be an Authenticating Agent for any or all such series of Debentures which the Trustee shall have the right to appoint. Said Authenticating Agent shall be authorized to act on behalf of the Trustee to authenticate Debentures of such series issued upon exchange, transfer or partial redemption thereof, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all 20 29 purposes as if authenticated by the Trustee hereunder. All references in this Indenture to the authentication of Debentures by the Trustee shall be deemed to include authentication by an Authenticating Agent for such series except for authentication upon original issuance or pursuant to Section 2.07 hereof. Each Authenticating Agent shall be acceptable to the Company and shall be a corporation which has a combined capital and surplus, as most recently reported or determined by it, sufficient under the laws of any jurisdiction under which it is organized or in which it is doing business to conduct a trust business, and which is otherwise authorized under such laws to conduct such business and is subject to supervision or examination by Federal or State authorities. If at any time any Authenticating Agent shall cease to be eligible in accordance with these provisions, it shall resign immediately. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee, the Company and the Guarantor. The Trustee may at any time (and upon request by the Company shall) terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent, the Company and the Guarantor. Upon resignation, termination or cessation of eligibility of any Authenticating Agent, the Trustee may appoint an eligible successor Authenticating Agent acceptable to the Company and the Guarantor. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder as if originally named as an Authenticating Agent pursuant hereto. SECTION 2.11. Global Debenture. (a) If the Company shall establish pursuant to Section 2.01 that the Debentures of a particular series are to be issued as one or more Global Debentures, then the Company shall execute and the Trustee shall, in accordance with Section 2.04, authenticate and deliver, and the Guarantor shall execute the Guarantee endorsed on, one or more Global Debentures which (i) shall represent, and shall be denominated in an aggregate amount equal to the aggregate principal amount of, all of the Outstanding Debentures of such series, (ii) shall be registered in the name of the Depositary or its nominee, (iii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction and (iv) shall bear a legend substantially to the following effect: "Except as otherwise provided in Section 2.11 of the Indenture, this Debenture may be transferred, in whole but not in part, only to another nominee of the Depositary or to a successor Depositary or to a nominee of such successor Depositary." (b) Notwithstanding the provisions of Section 2.05, the Global Debenture of a series may be transferred, in whole but not in part and in the manner provided in Section 2.05, only to another nominee of the Depositary for 21 30 such series, or to a successor Depositary for such series selected or approved by the Company or to a nominee of such successor Depositary. (c) If at any time the Depositary for a series of Debentures notifies the Company that it is unwilling or unable to continue as Depositary for such series or if at any time the Depositary for such series shall no longer be registered or in good standing under the Exchange Act, or other applicable statute or regulation and a successor Depositary for such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, this Section 2.11 shall no longer be applicable to the Debentures of such series and the Company will execute, and the Guarantor shall execute the Guarantee endorsed on, and subject to Section 2.05, the Trustee will authenticate and make available for delivery Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debentures of such series in exchange for such Global Debenture. In addition, the Company may at any time determine that the Debentures of any series shall no longer be represented by one or more Global Debentures and that the provisions of this Section shall no longer apply to the Debentures of such series. In such event the Company will execute, and the Guarantor shall execute the Guarantee endorsed on, and subject to Section 2.05, the Trustee, upon receipt of an Officers' Certificate evidencing such determination by the Company, will authenticate and deliver Debentures of such series in definitive registered form without coupons, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debentures of such series in exchange for such Global Debentures. Upon the exchange of the Global Debentures for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debentures shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debentures pursuant to this Section 2.11(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures to the Depositary for delivery to the persons in whose names such Debentures are so registered. SECTION 2.12. Cusip Numbers. The Company in issuing the Debentures and the Guarantor in endorsing the Guarantees may use "CUSIP" and "CINS" numbers (if then generally in use), and the Trustee shall use CUSIP numbers or CINS numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders and no representation shall be made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of redemption or exchange. 22 31 ARTICLE 3 REDEMPTION OF DEBENTURES AND SINKING FUND PROVISIONS SECTION 3.01. Redemption of Debentures. The Company may redeem the Debentures of any series issued hereunder on and after the dates and in accordance with the terms established for such series pursuant to Section 2.01 hereof. SECTION 3.02. Notice of Redemption. (a) In case the Company shall desire to exercise such right to redeem all or, as the case may be, a portion of the Debentures of any series in accordance with the right reserved so to do, it shall give notice of such redemption to holders of the Debentures of such series to be redeemed by mailing, first class postage prepaid, a notice of such redemption not less than 30 days and not more than 60 days before the date fixed for redemption of that series to such holders at their last addresses as they shall appear upon the Debenture Register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the registered holder receives the notice. In any case, failure duly to give such notice to the holder of any Debenture of any series designated for redemption in whole or in part, or any defect in the notice, shall not affect the validity of the proceedings for the redemption of any other Debentures of such series or any other series. In the case of any redemption of Debentures prior to the expiration of any restriction on such redemption provided in the terms of such Debentures or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with any such restriction. Each such notice of redemption shall specify the date fixed for redemption and the redemption price at which Debentures of that series are to be redeemed, and shall state that payment of the redemption price of such Debentures to be redeemed will be made at the office or agency of the Company in a Place of Payment, upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, that from and after said date interest will cease to accrue and that the redemption is for a sinking fund, if such is the case. If less than all the Debentures of a series are to be redeemed, the notice to the holders of Debentures of that series to be redeemed in whole or in part shall specify the particular Debentures to be so redeemed. In case any Debenture is to be redeemed in part only, the notice which relates to such Debenture shall state the portion of the principal amount thereof to be redeemed, and shall state that on and after the redemption date, upon surrender of such Debenture, a new Debenture or Debentures of such series in principal amount equal to the unredeemed portion thereof will be issued. 23 32 (b) If less than all the Debentures of a series are to be redeemed, the Company shall give the Trustee at least 45 days' notice in advance of the date fixed for redemption as to the aggregate principal amount of Debentures of the series to be redeemed, and thereupon the Trustee shall select, by lot or in such other manner as it shall deem appropriate and fair in its discretion and which may provide for the selection of a portion or portions (equal to $25 or any integral multiple thereof) of the principal amount of such Debentures of a denomination larger than $25, the Debentures to be redeemed and shall thereafter promptly notify the Company in writing of the numbers of the Debentures to be redeemed, in whole or in part. The Company may, if and whenever it shall so elect, by delivery of instructions signed on its behalf by its President, Chief Executive Officer or any Vice President, instruct the Trustee or any paying agent to call all or any part of the Debentures of a particular series for redemption and to give notice of redemption in the manner set forth in this Section, such notice to be in the name of the Company or its own name as the Trustee or such paying agent may deem advisable. In any case in which notice of redemption is to be given by the Trustee or any such paying agent, the Company shall deliver or cause to be delivered to, or permit to remain with, the Trustee or such paying agent, as the case may be, such Debenture Register, transfer books or other records, or suitable copies or extracts therefrom, sufficient to enable the Trustee or such paying agent to give any notice by mail that may be required under the provisions of this Section. SECTION 3.03. When Debentures Called for Redemption Become Due and Payable. (a) If the giving of notice of redemption shall have been completed as above provided, the Debentures or portions of Debentures of the series to be redeemed specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption and interest on such Debentures or portions of Debentures shall cease to accrue on and after the date fixed for redemption, unless the Company shall default in the payment of such redemption price and accrued interest with respect to any such Debenture or portion thereof. On presentation and surrender of such Debentures on or after the date fixed for redemption at the place of payment specified in the notice, said Debentures shall be paid and redeemed at the applicable redemption price for such series, together with interest accrued thereon to the date fixed for redemption (but if the date fixed for redemption is an Interest Payment Date, the interest installment payable on such date shall be payable to the registered holder at the close of business on the applicable record date pursuant to Section 2.03). (b) Upon presentation of any Debenture of such series which is to be redeemed in part only, the Company shall execute and the Trustee shall 24 33 authenticate and the office or agency where the Debenture is presented shall make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of the same series, of authorized denominations in principal amount equal to the unredeemed portion of the Debenture so presented. SECTION 3.04. Sinking Fund for Debentures. The provisions of Sections 3.04, 3.05 and 3.06 shall be applicable to any sinking fund for the retirement of Debentures of a series, except as otherwise specified as contemplated by Section 2.01 for Debentures of such series. The minimum amount of any sinking fund payment provided for by the terms of Debentures of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Debentures of any series is herein referred to as on "optional sinking fund payment". If provided for by the terms of Debentures for any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 3.05. Each sinking fund payment shall be applied to the redemption of Debentures of any series as provided for by the terms of Debentures of such series. SECTION 3.05. Satisfaction of Sinking Fund Payments with Debentures. The Company (a) may deliver outstanding Debentures of a series (other than any previously called for redemption) and (b) may apply as a credit Debentures of a series which have been redeemed either at the election of the Company pursuant to the terms of such Debentures or through the application of permitted optional sinking fund payments pursuant to the terms of such Debentures, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Debentures of such series required to be made pursuant to the terms of such Debentures as provided for by the terms of such series; provided that such Debentures have not been previously so credited. Such Debentures shall be received and credited for such purpose by the Trustee at the redemption price specified in such Debentures for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 3.06. Redemption of Debentures for Sinking Fund. Not less than 45 days prior to each sinking fund payment date for any series of Debentures, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms for that series, the portion thereof, if any, which is to be satisfied by delivering and crediting Debentures of that series pursuant to Section 3.05 and the basis for such credit and will, together with such Officers' Certificate, deliver to the Trustee any Debentures to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Debentures to be 25 34 redeemed upon such sinking fund payment date in the manner specified in Section 3.02 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.02. Such notice having been duly given, the redemption of such Debentures shall be made upon the terms and in the manner stated in Section 3.03. ARTICLE 4 PARTICULAR COVENANTS OF THE COMPANY AND THE GUARANTOR SECTION 4.01. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Debentures that it will duly and punctually pay or cause to be paid the principal of and any premium and interest on the Debentures of that series in accordance with the terms of the Debentures and this Indenture. SECTION 4.02. Maintenance of Office or Agency by Company and Guarantor. (a) So long as any Debentures of any series are Outstanding, the Company will maintain in each Place of Payment for any series of Debentures an office or agency where Debentures of that series may be presented or surrendered for payment, where Debentures of that series may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Company in respect of the Debentures of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Debentures of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Debentures of any series for such purposes. The Company will give prompt written notice to the Trustee of any such 26 35 designation or rescission and of any change in the location of any such other office or agency. (b) So long as any Debentures of any series are Outstanding, the Guarantor will maintain in each Place of Payment for any series of Debentures an office or agency where Debentures of that series may be presented or surrendered for payment under the Guarantees endorsed thereon and where notices and demands to or upon the Guarantor in respect of the Guarantees endorsed on the Debentures of that series and this Indenture may be served. The Guarantor will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Guarantor shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Guarantor hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Guarantor may also from time to time designate one or more other offices or agencies where the Debentures of one or more series may be presented or surrendered for such purpose or where such notices or demands may be served and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Guarantor of its obligation to maintain an office or agency in each Place of Payment for Debentures of any series for such purposes. The Guarantor will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 4.03. Money for Debentures Payments to Be Held in Trust. If the Company or the Guarantor shall at any time act as its or their own Paying Agent with respect to any series of Debentures, it or they will, on or before each due date of the principal of or any premium or interest on any of the Debentures of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Debentures, it will, prior to each due date of the principal of or any premium or interest on any Debentures of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. 27 36 The Company will cause each Paying Agent for any series of Debentures other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the Company (or any other obligor upon the Debentures of that series) in the making of any payment in respect of the Debentures of that series, and upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Debentures of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. SECTION 4.04. Statement by Officers as to Default. The Company and the Guarantor will each deliver to the Trustee within 120 days after the end of each fiscal year of the Guarantor ending after the date hereof, a certificate signed by the Company's or the Guarantor's, as the case may be, principal executive officer, principal financial officer or principal accounting officer stating whether or not to the best knowledge of the signer thereof the Company or the Guarantor, as the case may be, is in compliance with all terms, conditions and covenants of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the signer has obtained knowledge of any continuing default by the Company or the Guarantor, as the case may be, in the performance, observation or fulfillment of any such term, condition or covenant, specifying each such default and the nature thereof. 28 37 ARTICLE 5 HOLDERS' LISTS AND REPORTS BY THE COMPANY, THE GUARANTOR AND THE TRUSTEE SECTION 5.01. Company and Guarantor to Furnish Trustee Names and Addresses of Holders. The Company and the Guarantor will furnish or cause to be furnished to the Trustee: (a) semi-annually, not later than 10 days after each regular record date for the interest payable on any Interest Payment Date in each year, a list for each series of Debentures, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Debentures of such series as of the preceding regular record date for the interest payable on any Interest Payment Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company or the Guarantor of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Debenture Registrar. SECTION 5.02. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 5.01 and the names and addresses of Holders received by the Trustee in its capacity as Debenture Registrar. The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list so furnished. (b) The rights of the Holders to communicate with other Holders with respect to their rights under this Indenture or under the Debentures, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. 29 38 (c) Every Holder of Debentures, by receiving and holding the same, agrees with the Company, the Guarantor and the Trustee that none of the Company, the Guarantor, the Trustee or any agent of any of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 5.03. Reports by Company and Guarantor. The Company and the Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. SECTION 5.04. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. To the extent that any such report is required by the Trust Indenture Act with respect to any 12 month period, such report shall cover the 12 month period ending May 15 and shall be transmitted by the next succeeding July 15. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Debentures are listed, with the Commission and with the Company and the Guarantor. The Company will notify the Trustee when any Debentures are listed on any stock exchange. ARTICLE 6 REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT SECTION 6.01. Events of Default. "Event of Default" whenever used with respect to Debentures of a series means any one of the following events and such other events as may be established with respect to the Debentures of such series as contemplated by Section 2.01 hereof (whether or not it shall be occasioned by the provisions of Article 14 or Article 16): 30 39 (a) Default in the payment of any installment of interest upon any of the Debentures of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (b) Default in the payment of the principal of or premium, if any, on any of the Debentures of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) Default in the making of any sinking fund payment, whether mandatory or optional (the latter subsequent to an exercise of the respective option), as and when the same shall become due and payable by the terms of the Debentures of such series; or (d) Failure on the part of the Company or the Guarantor duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Company or the Guarantor contained in this Indenture (other than those set forth exclusively in the terms of any other particular series of Debentures established as contemplated by this Indenture for the benefit of such other series) and written notice of such failure, stating that such notice is a "Notice of Default" hereunder, and requiring the Company or the Guarantor, as the case may be, to remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Company and the Guarantor by the Trustee, or to the Company, the Guarantor and the Trustee by the holders of at least 25% in aggregate principal amount of the Outstanding Debentures of that series, and such failure shall have continued unremedied for a period of 90 days after the date of the Company's and the Guarantor's receipt of such Notice of Default; or 31 40 (e) A decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of the Company or the Guarantor under any applicable Federal or State bankruptcy or similar law, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, trustee, assignee, sequestrator or similar official in bankruptcy or insolvency of the Company or the Guarantor or of all or substantially all of the Company's or the Guarantor's property, or for the winding up or liquidation of the Company's or the Guarantor's affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or (f) The Company or the Guarantor shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or 32 41 consent seeking reorganization, arrangement, adjustment or composition under any applicable Federal or State bankruptcy or similar law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver, liquidator, trustee, assignee, sequestrator or similar official in bankruptcy or insolvency of the Company or the Guarantor or of all or substantially all of the Company's or the Guarantor's property, or shall make an assignment for the benefit of creditors, or either the Company or the Guarantor shall admit in writing its inability to pay its debts generally as they become due and its willingness to be adjudged a bankrupt, or corporate action shall be taken by the Company or the Guarantor in furtherance of any of the aforesaid purposes. Upon receipt by the Trustee of any Notice of Default pursuant to Section 6.01(d) with respect to Debentures of any series, a record date shall automatically and without any other action by any Person be set for the purpose of determining the holders of Outstanding Debentures of such series entitled to join in such Notice of Default, which record date shall be the close of business on the day the Trustee receives such Notice of Default. The Holders of Outstanding Debentures of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Notice of Default, whether or not such Holders remain Holders after such record date; provided that, unless such Notice of Default shall have become effective by virtue of Holders of at least 25% in principal amount of Outstanding Debentures of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such Notice of Default shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a Notice of Default contrary to or different from, or, after the expiration of such period, identical to, a Notice of Default that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. SECTION 6.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Debentures of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debentures of that series may declare the principal amount (or, if any of the securities of that series are Original Issue Discount Debentures, such portion of the principal amount of such Debentures as may be specified in the terms thereof) of all of the Debentures of that series to be due and payable immediately, by a notice in writing to the Company and the Guarantor (and to the Trustee if given by Holders), and upon 33 42 any such declaration such principal amount (or specified amount) and all accrued interest thereon shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Debentures of any series has been made and before a judgment or decree for pay ment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Debentures of that series (subject to, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Debenture Exchange has not theretofore occurred, such consent of the holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust), by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if (i) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue interest on all Debentures of that series, (B) the principal of (and premium, if any, on) any Debentures of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Debentures, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Debentures, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses as are a result of negligence or bad faith on the part of the Trustee; and (ii) all Events of Default with respect to Debentures of that series, other than the non-payment of the principal of and interest, if any, on the Debentures of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.13. 34 43 No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Trustee of any declaration of acceleration, or any rescission and annulment of any such declaration, pursuant to this Section 6.02 with respect to Debentures of any series, a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders of Outstanding Debentures of such series entitled to join in such declaration, or rescission and annulment, as the case may be, which record date shall be the close of business on the day the Trustee receives such declaration, or rescission and annulment, as the case may be. The Holders of Outstanding Debentures of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such declaration, or rescission and annulment, as the case may be, whether or not such Holders remain Holders after such record date; provided that, unless such declaration, or rescission and annulment, as the case may be, shall have become effective by virtue of Holders of at least 25%, in the case of any declaration of acceleration, or a majority, in the case of any rescission or annulment, in principal amount of Outstanding Debentures of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such declaration, or rescission and annulment, as the case may be, shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a declaration of acceleration, or a rescission and annulment of any such declaration, contrary to or different from, or, after the expiration of such period, identical to, a declaration, or rescission and annulment, as the case may be, that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by Trustee. (a) The Company covenants that if (i) default is made in the payment of any interest on any Debenture when such interest becomes due and payable and such default continues for a period of 30 days, or (ii) default is made in the payment of the principal of (or premium, if any, on) any Debenture at the Maturity thereof, the Company will, upon written demand of the Trustee, pay to it, for the benefit of the Holders of such Debentures, the whole amount then due and payable on such Debentures for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any 35 44 overdue interest, at the rate or rates prescribed therefor in such Debentures, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee. Until such demand is made by the Trustee, the Company may pay the principal of and premium, if any, and interest, if any, on the Debentures of any series to the Holders thereof, whether or not the Debentures of such series are overdue. (b) If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company, the Guarantor or any other obligor upon such Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, the Guarantor or any other obligor upon such Debentures, wherever situated. (c) If an Event of Default with respect to Debentures of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Debentures of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 6.04. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company, the Guarantor or any other obligor upon the Debentures or the property of the Company, the Guarantor or such other obligor or their creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Debentures in accordance with the terms thereof and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and 36 45 (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.06 except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 6.05. Trustee May Enforce Claims Without Possession of Debentures. All rights of action and claims under this Indenture or the Debentures may be prosecuted and enforced by the Trustee without the possession of any of the Debentures or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel except such costs and expenses, as are a result of negligence or bad faith on the part of the Trustee, be for the ratable benefit of the Holders of the Debentures in respect of which such judgment has been recovered. SECTION 6.06. Application of Money Collected. Subject to Article 14 and Article 16, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Debentures and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 7.06; SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Debentures in respect of 37 46 which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Debentures for principal and any premium and interest, respectively; and THIRD: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto. SECTION 6.07. Limitation on Suits. No Holder of any Debenture of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Debentures of that series; (b) the Holders of not less than 25% in principal amount of the Outstanding Debentures of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory in form and substance to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Debentures of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 6.08. Unconditional Right of Holders to Receive Payment. Notwithstanding any other provisions of this Indenture, however, the right of any Holder of any Debenture to receive payment of the principal of (and premium, if any) and interest on such Debenture, as therein provided, on or after the respective due dates 38 47 expressed in such Debenture (or in the case of redemption, on the redemption date), or to institute suit for the enforcement of any such payment on or after such respective dates or redemption date, shall not be impaired or affected without the consent of such Holder. SECTION 6.09. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Guarantor, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.10. Remedies Cumulative. All powers and remedies given by this Article to the Trustee or to the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any others thereof or of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to such Debentures. SECTION 6.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 6.07, every power and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders. SECTION 6.12. Control by Holders. The Holders of a majority in principal amount of the Outstanding Debentures of any series (with, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Debentures of such series, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and 39 48 (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Upon receipt by the Trustee of any such direction with respect to Debentures of any series, a record date shall be set for determining the Holders of Outstanding Debentures of such series entitled to join in such direction, which record date shall be the close of business on the day the Trustee receives such direction. The Holders of Out standing Debentures of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such direction, whether or not such Holders remain Holders after such record date; provided that, unless such direction shall have become effective by virtue of Holders of at least a majority in principal amount of Outstanding Debentures of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such direction shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a direction contrary to or different from, or, after the expiration of such period, identical to, a direction that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. SECTION 6.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Debentures of any series (with, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust) may on behalf of the Holders of all the Debentures of such series waive any past default hereunder with respect to such series and its consequences, except a default (i) in the payment of the principal of or any premium or interest on any Debenture of such series, or (ii) in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Debenture of such series affected. With respect to any series of Debentures, the Company or the Guarantor may, but shall not be obligated to, establish a record date for the purpose of determining the Persons entitled to waive any past default hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, whether or not such Holders remain Holders after such record date; provided, however, that unless such Holders of not less than a majority in principal amount of the Outstanding Debentures of such series shall have waived such 40 49 default prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be cancelled and of no effect. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 6.14. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Guarantor. SECTION 6.15. Enforcement by Holders of Preferred Securities. If, prior to a Security Exchange with respect to the Debentures of any series, a Default with respect to the Debentures of such series shall have occurred, the Company expressly acknowledges that under the circumstances set forth in the applicable Declaration of Trust, any holder of Preferred Securities of the applicable Aetna Capital Trust may enforce directly against the Company the applicable Property Trustee's rights hereunder. In furtherance of the foregoing and for the avoidance of any doubt, the Company acknowledges that, under the circumstances described in the applicable Declaration of Trust, any such holder of Preferred Securities, in its own name, in the name of the applicable Aetna Capital Trust or in the name of the holders of the Preferred Securities issued by such Aetna Capital Trust, may institute or cause to be instituted a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce the applicable Property Trustee's rights hereunder directly against the Company as issuer of the applicable series of Debentures, and may prosecute such proceeding to judgment or final decree, and enforce the same against the Company. ARTICLE 7 CONCERNING THE TRUSTEE SECTION 7.01. Obligations of Trustee. (a) The Trustee, prior to the occurrence of an Event of Default with respect to Debentures of a series and after the curing of all Events of Default with respect to Debentures of that series which may have occurred, 41 50 shall undertake to perform with respect to Debentures of such series such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to Debentures of a series has occurred (which has not been cured or waived), the Trustee shall exercise with respect to Debentures of that series such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default with respect to Debentures of a series and after the curing or waiving of all such Events of Default with respect to that series which may have occurred: (A) the duties and obligations of the Trustee shall with respect to Debentures of such series be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable with respect to Debentures of such series except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (B) in the absence of bad faith on the part of the Trustee, the Trustee may with respect to Debentures of such series conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the Debentures of any 42 51 series at the time outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture with respect to the Debentures of that series; (iv) none of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Indenture or adequate indemnity against such risk is not reasonably assured to it; and (v) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article 7. SECTION 7.02. Reliance, Evidence and Indemnity of Trustee. Except as otherwise provided in Section 7.01: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) Any request, direction, order or demand of the Company or the Guarantor mentioned herein shall be sufficiently evidenced by a Board Resolution or an instrument signed in the name of the Company or the Guarantor, as the case may be, by the President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer (unless other evidence in respect thereof is specifically prescribed herein); (c) The Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted hereunder in good faith and in reliance thereon; (d) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders 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 may be incurred therein or thereby; nothing herein contained shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to a series of the Debentures 43 52 (which has not been cured or waived) to exercise with respect to Debentures of that series such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (e) The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, security, or other papers or documents, unless requested in writing so to do by the holders of not less than a majority in principal amount of the outstanding Debentures of the particular series affected thereby (determined as provided in Section 8.04); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such costs, expenses or liabilities as a condition to so proceeding. The reasonable expense of every such examination shall be paid by the Company or, if paid by the Trustee, shall be repaid by the Company upon demand; and (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 7.03. No Liability for Certain Statements. (a) The recitals contained herein and in the Debentures (other than the Certificate of Authentication on the Debentures) shall be taken as the statements of the Company or the Guarantor, as the case may be, and the Trustee assumes no responsibility for the correctness of the same. (b) The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. (c) The Trustee shall not be accountable for the use or application by the Company of any of the Debentures or of the proceeds of such Debentures, or for the use or application of any moneys paid over by the Trustee in accordance with any provision of this Indenture or established pursuant to Section 2.01, or for the use or application of any moneys received by any paying agent other than the Trustee. 44 53 SECTION 7.04. Trustee, Paying Agent or Debenture Registrar May Own Debentures. The Trustee or any paying agent or Debenture Registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, paying agent or Debenture Registrar. SECTION 7.05. Moneys Received by Trustee to Be Held in Trust. Subject to the provisions of Section 11.05, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received by it hereunder except such as it may agree with the Company to pay thereon. SECTION 7.06. Compensation of Trustee. (a) The Company and the Guarantor covenant and agree to pay to the Trustee from time to time, and the Trustee shall be entitled to, such reasonable compensation as the Company and the Trustee shall from time to time agree in writing (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, except as otherwise provided herein, to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company and the Guarantor also covenant to indemnify the Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any loss, liability or expense including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred without negligence or bad faith on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability in the premises. (b) The obligations of the Company under this Section to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures. The provisions of this Section 7.06 shall survive the termination of this Indenture or the resignation or removal of the Trustee. SECTION 7.07. Right of Trustee to Rely on Certificate of Officers of Company. Except as otherwise provided in Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting to take any action 45 54 hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted to be taken by it under the provisions of this Indenture upon the faith thereof. SECTION 7.08. Conflicting Interest of Trustee. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section, with respect to the Debentures of any series and if the Default to which such conflicting interest relates has not been cured, duly waived or otherwise eliminated, within 90 days after ascertaining that it has such conflicting interest, it shall either eliminate such conflicting interest, except as otherwise provided herein, or resign with respect to the Debentures of that series in the manner and with the effect specified in Section 7.10 and the Company shall promptly appoint a successor Trustee in the manner provided herein. (b) In the event that the Trustee shall fail to comply with the provisions of subsection (a) of this Section, with respect to the Debentures of any series the Trustee shall, within ten days after the expiration of such 90-day period, transmit notice of such failure by mail, first class postage prepaid, to the Holders of that series as their names and addresses appear upon the registration books. (c) For the purposes of this Section the Trustee shall be deemed to have a conflicting interest with respect to the Debentures of any series if a Default has occurred and is continuing and: (i) the Trustee is trustee under this Indenture with respect to the outstanding Debentures of any series other than that series, or is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Debentures issued under this Indenture; provided that there shall be excluded from the operation of this paragraph the Debentures of any series other than that series and any other indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding if (i) this Indenture and such other indenture or indentures and all series of securities issuable thereunder are wholly unsecured and rank equally and such other indenture or indentures (and such series) are hereafter qualified under the Trust Indenture Act, unless the Commission shall have found and declared by order pursuant to subsection (b) of Section 305 or subsection (c) of Section 307 of the Trust Indenture Act, that differences exist between (A) the provisions of this Indenture with respect to Debentures of that series and with respect to one or more other series or (B) the provisions of this Indenture and the provisions of such 46 55 other indenture or indentures (or such series), which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to the Debentures of that series and such other series or such other indenture or indentures, or (ii) the Company shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that the trusteeship under this Indenture with respect to Debentures of that series and such other series or such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Debentures of that series and such other series or under such other indentures; (ii) the Trustee or any of its directors or executive officers is an underwriter for the Company or the Guarantor; (iii) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with or an underwriter for the Company or the Guarantor; (iv) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company or the Guarantor who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee and a director and/or an executive officer of the Company or the Guarantor, but may not be at the same time an executive officer of both the Trustee and the Company or the Guarantor; (B) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee and a director of the Company or the Guarantor; and (C) the Trustee may be designated by the Company or the Guarantor or by an underwriter for the Company or the Guarantor to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depository, or in any other similar capacity, or, subject to the provisions of paragraph (i) of this subsection (c), to act as trustee whether under an indenture or otherwise; (v) 10% or more of the voting securities of the Trustee is beneficially owned either by the Company or the Guarantor or by any director, partner, or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or the Guarantor or by any director, partner, or executive officer thereof, or is beneficially owned, collectively by any two or more such persons; 47 56 (vi) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this subsection (c) defined), (A) 5% or more of the voting securities, or 10% or more of any other class of security, of the Company or the Guarantor, not including the Debentures issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (B) 10% or more of any class of security of an underwriter for the Company or the Guarantor; (vii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this subsection (c) defined), 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company or the Guarantor; (viii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this subsection (c) defined), 10% or more of any class of security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Company or the Guarantor; (ix) the Trustee owns, on the date of Default upon the Debentures of any series or any anniversary of such Default while such Default upon the Debentures issued under this Indenture remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflict interest under paragraph (vi), (vii), or (viii) of this subsection (c). As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which includes them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any such Default upon the Debentures issued under this Indenture and annually in each succeeding year that the Debentures issued under this Indenture remain in Default, the Trustee shall make a check of its holding of such securities in any of the above-mentioned capacities as of such dates. If the Company fails to make payment in full of principal of or interest on any of the Debentures when and as the same becomes due and payable or the Guarantor fails to make payment in full of amounts under the Guarantee with regard to principal of or interest on any of the Debentures, when and as the same 48 57 become due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holding of such securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph (ix), all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (vi), (vii) and (viii) of this subsection (c); or (x) except under the circumstances described in paragraph (i), (iii), (iv), (v) or (vi) of subsection (b) of Section 7.13 the Trustee shall be or shall become a creditor of the Company or the Guarantor. For purposes of paragraph (i) of this subsection (c), and of Section 6.12, the term "series of securities" or "securities" means a series, class or group of securities issuable under an indenture pursuant to whose terms holders of one such series may vote to direct the indenture trustee, or otherwise take action pursuant to a vote of such holders, separately from holders of another such series; provided, that, "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly secured. The specification of percentages in paragraphs (v) to (ix), inclusive, of this subsection(c) shall not be construed as indicating that the ownership of such percentages of securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (iii) or (vii) of this subsection(c). For the purposes of paragraphs (vi), (vii), (viii) and (ix) of this subsection(c) only, (A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in "default", when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (1) any security which it holds as collateral security (as trustee or otherwise) for any obligation which is not in default as defined in clause (B) above, or (2) any security which it holds as collateral security under this Indenture, irrespective of any Default hereunder, or (3) any security which it holds as agent for collection, or as custodian, escrow agent or depositary, or in any similar representative capacity. Except as above provided, the word "security" or securities" as used in this Indenture shall mean any note, stock, treasury stock, bond, debenture, evidence of 49 58 indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. (d) For the purposes of this Section: (i) The term "underwriter" when used with reference to the Company shall mean every person, who, within one year prior to the time as of which the determination is made, has purchased from the Company or the Guarantor with a view to, or has offered or sold for the Company or the Guarantor in connection with, the distribution of any security of the Company or the Guarantor, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (ii) The term "director" shall mean any member of the board of directors of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (iii) The term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (iv) The term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (v) The term "Company" shall mean any obligor upon the Debentures. (vi) The term "Guarantor" shall mean any obligor upon the Guarantees. 50 59 (vii) The term "executive officer" shall mean the chairman of the board of directors, president, every vice president, every assistant vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated. (e) The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions: (i) A specified percentage of the voting securities of the Trustee, the Company, the Guarantor or any other person referred to in this Section (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (ii) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (iii) The term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares and the number of units if relating to any other kind of security. (iv) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (D) securities held in escrow if placed in escrow by the issuer thereof, provided, however, that any voting securities of an issuer shall be 51 60 deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (v) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes; and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. (f) Except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Debentures issued under this Indenture, or in the payment of any sinking or analogous fund installment, the Trustee shall not be required to resign as provided by this Section 7.08 if such Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that (i) the default under the Indenture may be cured or waived during a reasonable period and under the procedures described in such application and (ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of Holders. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. Any resignation of the Trustee shall become effective only upon the appointment of a successor trustee and such successor's acceptance of such an appointment. SECTION 7.09. Requirements for Eligibility of Trustee. There shall at all times be a Trustee with respect to the Debentures issued hereunder which shall at all times be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or other person permitted to act as trustee by the Commission, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million dollars, and subject to supervision or examination by Federal, State, Territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Company and the Guarantor may not, nor may any person directly or indirectly controlling, controlled by, or under common control with the Company or the Guarantor, serve as Trustee. In case at any time the Trustee 52 61 shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. SECTION 7.10. Resignation and Removal. (a) The Trustee or any successor hereafter appointed, may at any time resign with respect to the Debentures of one or more series by giving written notice thereof to the Company and the Guarantor and by transmitting notice of resignation by mail, first class postage prepaid, to the Holders of such series, as their names and addresses appear upon the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee with respect to Debentures of such series by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee with respect to Debentures of such series, or any Holder of that series who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (b) In case at any time any of the following shall occur: (i) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 after written request therefor by the Company, the Guarantor or by any Holder who has been a bona fide holder of a Debenture or Debentures for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company, the Guarantor or by any such Holder; or (iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Company and the Guarantor may remove the Trustee with respect to all Debentures and appoint a successor trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of removal, the Trustee so removed may petition any court of competent jurisdiction for the 53 62 appointment of a successor trustee with respect to Debentures of such series, or any Holder of that series who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (c) The holders of a majority in aggregate principal amount of the Debentures of any series at the time outstanding may at any time remove the Trustee with respect to such series and appoint a successor trustee. (d) Any resignation or removal of the Trustee and appointment of a successor trustee with respect to the Debentures of a series pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.11. (e) Any successor trustee appointed pursuant to this Section may be appointed with respect to the Debentures of one or more series or all of such series, and at any time there shall be only one Trustee with respect to the Debentures of any particular series. SECTION 7.11. Successor Trustee. (a) In case of the appointment hereunder of a successor trustee with respect to all Debentures, every such successor trustee so appointed shall execute, acknowledge and deliver to the Company, the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor trustee all the rights, powers, and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor trustee with respect to the Debentures of one or more (but not all) series, the Company, the Guarantor, the retiring Trustee and each successor trustee with respect to the Debentures of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor trustee relates, (ii) shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to 54 63 the Debentures of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust, that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and that no Trustee shall be responsible for any act or failure to act on the part of any other Trustee hereunder; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein, such retiring Trustee shall with respect to the Debentures of that or those series to which the appointment of such successor trustee relates have no further responsibility for the exercise of rights and powers or for the performance of the duties and obligations vested in the Trustee under this Indenture, and each such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures of that or those series to which the appointment of such successor trustee relates; but, on request of the Company, the Guarantor or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor trustee, to the extent contemplated by such supplemental indenture, the property and money held by such retiring Trustee hereunder with respect to the Debentures of that or those series to which the appointment of such successor trustee relates. (c) Upon request of any such successor trustee, the Company and the Guarantor shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor trustee all such rights, power and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor trustee shall accept its appointment unless at the time of such acceptance such successor trustee shall be qualified and eligible under this Article. (e) Upon acceptance of appointment by a successor trustee as provided in this Section, the Company shall transmit notice of the succession of such trustee hereunder by mail, first class postage prepaid, to the Holders, as their names and addresses appear upon the Debenture Register. If the Company fails to transmit such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be transmitted at the expense of the Company. SECTION 7.12. Successor to Trustee by Merger, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to substantially all of the corporate trust business of the Trustee, shall be the successor of the 55 64 Trustee hereunder, provided such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case any Debentures shall have been authenticated, but not made available for delivery, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and make available for delivery the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures. SECTION 7.13. Trustee as Creditor. (a) Subject to the provisions of subsection (b) of this Section, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company or the Guarantor within three months prior to a default, as defined in subsection (b) of this Section, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the holders of the Debentures and the holders of other indenture securities (as defined in subsection (c) of this Section): (i) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three months' period and valid as against the Company or the Guarantor and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (ii) of this subsection, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company or the Guarantor upon the date of such default; and (ii) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three months' period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (1) payments made on account of any such claim by any person (other than the Company or the Guarantor) who is liable thereon, and (2) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (3) distributions made in cash, securities, or other property in respect of claims filed against the Company or the Guarantor in bankruptcy or receivership or in a case for reorganization pursuant to the Federal Bankruptcy Code or applicable State law; 56 65 (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three months' period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three months' period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default, as defined in subsection(c) of this Section, would occur within three months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such three months' period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Holders and the holders of other indenture securities in such manner that the Trustee, the Holders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company or the Guarantor in bankruptcy or receivership or in a case for reorganization pursuant to the Federal Bankruptcy Code or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company or the Guarantor of the funds and property in such special account and before crediting to the respective claims of the Trustee, the Holders and the holders of other indenture securities dividends on claims filed against the Company or the Guarantor in bankruptcy or receivership or in a case for reorganization pursuant to the Federal Bankruptcy Code or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall 57 66 include any distribution with respect to such claim, in bankruptcy or receivership or in a case for reorganization pursuant to the Federal Bankruptcy Code or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or a case for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Holders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Holders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such three months' period shall be subject to the provisions of this subsection(a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three months' period, it shall be subject to the provisions of this subsection(a) if and only if the following conditions exist: (i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three months' period; and (ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal. (b) There shall be excluded from the operation of subsection(a) of this Section a creditor relationship arising from: (i) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; (ii) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property other than cash which shall at any time be subject to the lien, if any, of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the 58 67 making thereof is given to the Holders at the time and in the manner provided in this Indenture; (iii) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, subscription agent, fiscal agent or depositary, or other similar capacity; (iv) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection(c) of this Section; (v) the ownership of stock or of other securities of a Company organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (vi) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptance or obligations which fall within the classification of self-liquidating paper as defined in subsection(c) of this Section. (c) As used in this Section: (i) The term "default" shall mean any failure to make payment in full of the principal of (or premium, if any) or interest upon any of the Debenture or upon the other indenture securities when and as such principal (or premium, if any) or interest becomes due and payable. (ii) The term "other indenture securities" shall mean securities upon which the Company or the Guarantor is an obligor (as defined in the Trust Indenture Act) outstanding under any other indenture (A) under which the Trustee is also trustee, (B) which contains provisions substantially similar to the provisions of subsection(a) of this Section, and (C) under which a default exists at the time of the apportionment of the funds and property held in said special account. (iii) The term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand. (iv) The term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which 59 68 is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. (v) The term "Company" shall mean any obligor upon any of the Debentures. (vi) The term "Guarantor" shall mean any obligor upon any of the Guarantees. ARTICLE 8 CONCERNING THE HOLDERS SECTION 8.01. Evidence of Action by Holders. Whenever in this Indenture it is provided that the holders of a majority or specified percentage in aggregate principal amount of the Debentures of a particular series may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such majority or specified percentage of that series have joined therein may be evidenced by any instrument or any number of instruments of similar tenor executed by such holders of Debentures of that series in person or by agent or proxy appointed in writing. If the Company shall solicit from the Holders of any series any request, demand, authorization, direction, notice, consent, waiver or other action, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such series for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action may be given before or after the record date, but only the Holders of record at the close of business on the record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Debentures of that series have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action, and for that purpose the outstanding Debentures of that series shall be computed as of the record date; provided that no such authorization, agreement or consent by such Holders on the record date shall be deemed effective unless it shall 60 69 become effective pursuant to the provisions of this Indenture not later than six months after the record date. SECTION 8.02. Proof of Execution of Instruments and of Holding of Debentures. Subject to the provisions of Section 7.01, proof of the execution of any instrument by a Holder (such proof will not require notarization) or his agent or proxy and proof of the holding by any person of any of the Debentures shall be sufficient if made in the following manner; (a) The fact and date of the execution by any such person of any instrument may be proved in any reasonable manner acceptable to the Trustee. (b) The ownership of Debentures shall be proved by the Debenture Register of such Debentures or by a certificate of the Debenture Registrar thereof. (c) The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary. SECTION 8.03. Who May Be Deemed Owners of Debentures. Prior to the due presentment for registration of transfer of any Debenture, the Company, the Guarantor, the Trustee, any paying agent and any Debenture Registrar may deem and treat the person in whose name such Debenture shall be registered upon the books of the Company as the absolute owner of such Debenture (whether or not such Debenture shall be overdue and notwithstanding any notice of ownership or writing thereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal of, premium, if any, and (subject to Section 2.03) interest on such Debenture and for all other purposes; and neither the Company nor the Guarantor nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. SECTION 8.04. Debentures Owned by Company, the Guarantor or Controlled or Controlling Companies Disregarded for Certain Purposes. In determining whether the holders of the requisite aggregate principal amount of Debentures of a particular series have concurred in any direction, consent or waiver under this Indenture, Debentures of that series which are owned by the Company, any other obligor on the Debentures, the Guarantor or any other obligor under the Guarantee of that series or by any Subsidiary of the Company, the Guarantor or of such other obligor on the Debentures or Guarantees of that series shall be disregarded and deemed not to be outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures of such series which the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section, if the pledgee shall establish to the 61 70 satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. SECTION 8.05. Instruments Executed by Holders. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 8.01, of the taking of any action by the holders of the majority or percentage in aggregate principal amount of the Debentures of a particular series specified in this Indenture in connection with such action, any holder of a Debenture of that series which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee, and upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Debenture. Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange therefor, on registration of transfer thereof or in place thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture. Any action taken by the holders of the majority or percentage in aggregate principal amount of the Debentures of a particular series specified in this Indenture in connection with such action shall be conclusively binding upon the Company, the Guarantor, the Trustee and the holders of all the Debentures of that series. ARTICLE 9 SUPPLEMENTAL INDENTURES SECTION 9.01. Purposes for Which Supplemental Indentures May Be Entered into Without Consent of Holders. In addition to any supplemental indenture otherwise authorized by this Indenture, the Company, the Guarantor, both when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect), without the consent of the Holders, for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company or the Guarantor, and the assumption by any such successor of the covenants of the Company or the Guarantor contained herein or otherwise established with respect to the Debentures or the Guarantees; or 62 71 (b) to add to the covenants of the Company or the Guarantor such further covenants, restrictions, conditions or provisions for the protection of the holders of the Debentures of all or any series as the Boards of Directors and the Trustee shall consider to be for the protection of the holders of Debentures of all or any series, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or an Event of Default with respect to such series permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the holders of a majority in aggregate principal amount of the Debentures of such series to waive such default; or (c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture as shall not be inconsistent with the provisions of this Indenture and shall not adversely affect the interests of the holders of the Debentures of any series; or (d) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Debenture outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision. The Trustee is hereby authorized to join with the Company and the Guarantor in the execution of any such supplemental indenture, and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section may be executed by the Company, the Guarantor and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.02. SECTION 9.02. Modification of Indenture with Consent of Holders. With the consent (evidenced as provided in Section 8.01) of the holders of not less than a majority in aggregate principal amount of the Debentures of each series affected by such supplemental indenture or indentures at the time outstanding (and, in the case of any series of Debentures held as trust assets of a Aetna Capital Trust and with respect to 63 72 which a Security Exchange has not theretofore occurred, such consent of holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust), the Company, the Guarantor, both when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as then in effect) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures of such series under this Indenture; provided, however, that no such supplemental indenture shall without the consent of each Holder of such Debenture affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any) or any installment of principal or interest, if any, on any such Debenture; (2) reduce the principal amount of (or premium, if any) or interest, if any, on any such Debenture or the principal amount due upon acceleration of any Original Issue Discount Debenture; (3) change the place or currency of payment of principal of (or premium, if any) or the interest, if any, on any such Debenture; (4) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Debenture; (5) reduce the percentage of Holders of Debentures necessary to modify or amend this Indenture (and, in the case of any series of Debentures held as trust assets of a Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of the holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust) then outstanding and affected thereby; (6) modify or affect in any manner adverse to the Holders of Debentures the obligation of the Guarantor under the Guarantees in respect of the due and punctual payment of the principal of (and premium, if any) or interest on the Debentures; (7) modify the subordination provisions of Articles 14 and 16 in a manner adverse to the holders of the Debentures; or (8) modify the foregoing requirements or reduce the percentage of Outstanding Debentures necessary to waive compliance with certain provisions of this Indenture or for waiver of certain defaults. Upon the request of the Company and the Guarantor, accompanied by respective Board Resolutions authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Holders (and, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust) required to consent thereto as aforesaid, the Trustee shall join with the Company and the Guarantor in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion but shall not be obligated to enter into such supplemental indenture. 64 73 It shall not be necessary for the consent of the Holders of any series affected thereby under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company, the Guarantor and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental indenture, to the Holders of all series affected thereby as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions of this Article or of Section 10.01, this Indenture shall, with respect to such series, be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company, the Guarantor and the holders of Debentures of the series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.04. Debentures May Bear Notation of Changes. Debentures of any series, affected by a supplemental indenture, authenticated and delivered after the execution of such supplemental indenture pursuant to the provisions of this Article or of Section 10.01, may bear a notation in form approved by the Company and the Guarantor, provided such form meets the requirements of any exchange upon which such series may be listed, as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Debentures of that series so modified as to conform, in the opinion of the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Company and the Guarantor, authenticated by the Trustee and delivered in exchange for the Debentures of that series then outstanding. SECTION 9.05. Opinion of Counsel. The Trustee, subject to the provisions of Section 7.01, may receive an Opinion of Counsel for the Company and the Guarantor as conclusive evidence that any supplemental indenture executed pursuant to this Article is authorized or permitted by, and conforms to, the terms of this Article and that it is proper for the Trustee under the provisions of this Article to join in the execution thereof. 65 74 ARTICLE 10 CONSOLIDATION, MERGER, SALE OR CONVEYANCE SECTION 10.01. Company or Guarantor May Consolidate, Etc., Only on Certain Terms. Neither the Company nor the Guarantor shall consolidate with or merge into any other Person or sell its properties and assets as, or substantially as, an entirety to any Per son, and neither the Company nor the Guarantor shall permit any Person to consolidate with or merge into the Company or the Guarantor, as the case may be, unless: (a) in case the Company or the Guarantor, as the case may be, shall consolidate with or merge into another Person (including, without limitation, the Guarantor or the Company, as the case may be), or sell its properties and assets as, or substantially as, an entirety to any Person (including, without limitation, the Guarantor or the Company, as the case may be), the Person formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or the Person which purchases the properties and assets of the Company or the Guarantor, as the case may be, as, or substantially as, an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, in the case of any such transaction involving the Company, the due and punctual payment of the principal of and any premium and interest on all the Debentures and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed, and, in the case of any such transaction involving the Guarantor, the due and punctual performance of the Guarantees and the performance or observance of every covenant of this Indenture on the part of the Guarantor to be performed or observed, in each case by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by the Person (if other than the Company or the Guarantor, as the case may be) formed by such consolidation or into which the Company or the Guarantor, as the case may be, shall have been merged or by the corporation which shall have acquired the assets of the Company or the Guarantor, as the case may be; (b) immediately after giving effect to such transaction, no Event of Default shall have happened and be continuing; and (c) the Company or the Guarantor, as the case may be, has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, or sale and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. 66 75 SECTION 10.02. Successor Substituted. Upon any consolidation of the Company or the Guarantor, as the case may be, with, or merger of the Company or the Guarantor, as the case may be, into, any other Person or any sale of the properties and assets of the Company or the Guarantor, as the case may be, as, or substantially as, an entirety in accordance with Section 10.01, the successor Person formed by such consolidation or into which the Company or the Guarantor, as the case may be, is merged or to which such sale is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or the Guarantor, as the case may be, herein, and thereafter the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Debentures or the Guarantees, as the case may be. SECTION 10.03. Assumption by Guarantor or Subsidiary of Company's Obligations. The Guarantor or any Subsidiary of the Guarantor may, where permitted by law, assume the obligations of the Company (or any Person which shall have previously assumed the obligations of the Company) for the due and punctual payment of the principal of (and any premium), interest on and any other payments with respect to the Debentures and the performance of every covenant of this Indenture and the Debentures on the part of the Company (or such other Person) to be performed or observed, provided that: (a) the Guarantor or such Subsidiary, as the case may be, shall expressly assume such obligations by an indenture supplemental hereto, in form reasonably satisfactory to the Trustee, executed and delivered to the Trustee and if such Subsidiary assumed such obligations, the Guarantor shall, by such supplemental indenture, confirm that its Guarantees shall apply to such Subsidiary's obligations under the Debentures and this Indenture, as modified by such supplemental indenture; (b) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (c) the Guarantor or such Subsidiary, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such assumption and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; (d) such assumption shall not result in adverse tax consequences to any Holder; and (e) the Guarantor and/or such Subsidiary shall have delivered to the Trustee an Opinion of Counsel to the effect that (1) the Debentures are legal, valid and binding 67 76 obligations of the assuming corporation enforceable against the assuming corporation in accordance with their terms subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally, and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity) and (2) if a Subsidiary of the Guarantor is the assuming corporation, the Guarantees continue to be the legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with their terms subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regarding whether considered in a proceeding at law or in equity). Upon any such assumption, the Guarantor or such Subsidiary shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if the Guarantor or such Subsidiary, as the case may be, had been named as the "Company" herein, and the Person named as the "Company" in the first paragraph of this instrument or any successor Person which shall theretofore have become such in the manner prescribed in this Article shall be released from its liability as obligor upon the Debentures. ARTICLE 11 SATISFACTION, DISCHARGE AND DEFEASANCE OF INDENTURE; UNCLAIMED MONEYS SECTION 11.01. Satisfaction, Discharge and Defeasance of Indenture. (a) If at any time (i) the Company or the Guarantor shall have paid or caused to be paid the principal of and interest on all the Debentures of any series Outstanding hereunder (other than Debentures of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.07) as and when the same shall have become due and payable, or (ii) the Company or the Guarantor shall have delivered to the Trustee for cancellation all Debentures of any series theretofore authenticated (other than any Debentures of such series which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07) or (iii) (A) all the Debentures of a series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (B) the Company or the Guarantor shall have irrevocably deposited or caused to be deposited with the Trustee as trust funds the entire amount in cash (other than moneys repaid by the Trustee or any paying agent to 68 77 the Company in accordance with Section 11.04) or U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (1) the principal and interest on all Debentures of such series on each date that such principal or interest is due and payable and (2) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Debentures of such series; and if, in any such case, the Company or the Guarantor shall also pay or cause to be paid all other sums payable hereunder by the Company or the Guarantor, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer and exchange of Debentures of such series and the Company's right of optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Debentures, (iii) rights of holders of Debentures to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the holders of Debentures of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and (vi) the obligations of the Company and the Guarantor under Section 4.02) and the Trustee, on demand of the Company and the Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture; provided, that the rights of Holders of the Debentures to receive amounts in respect of principal of and interest on the Debentures held by them shall not be delayed longer than required by then-applicable mandatory rules or policies of any securities exchange upon which the Debentures are listed. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Debentures of such series. (b) The following provisions shall apply to the Debentures of each series unless specifically otherwise provided in Board Resolutions of the Company and the Guarantor or indenture supplemental hereto provided pursuant to Section 2.01. In addition to discharge of the Indenture pursuant to the next preceding paragraph, Company and the Guarantor, at the Company's option, (A) will be defeased and discharged from any and all of their respective obligations with respect to such Debentures and Guarantees (including the provisions of Articles 14 and 16 and except as to (i) rights of registration of transfer and exchange of Debentures of such series and the Company's right of optional redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Debentures, (iii) rights of holders of Debentures to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the holders of Debentures to receive mandatory 69 78 sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Debentures as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Company under Section 4.02) (and the Trustee, at the expense of the Company, shall at the Company's or the Guarantor's request, execute proper instruments acknowledging the same) ("defeasance"), or (B) will be released from their respective obligations under the Indenture concerning the restrictions set forth in Article 10 and any other covenants applicable to such Debentures and Guarantees (including the provisions of Articles 14 and 16) which are subject to covenant defeasance ("covenant defeasance"), and the occurrence of an event set forth and notice thereof in Section 6.01(d) (with respect to covenants subject to covenant defeasance) shall no longer be an Event of Default, in each case, upon the irrevocable deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money, and/or U.S. Government Obligations which in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification to the Trustee through the payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest, if any, on such Debentures, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if (i) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Company is a party or by which it is bound; (ii) the Company has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Company or the Guarantor has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and such opinion shall confirm that, the holders of the Debentures of such series will not recognize income, gain or loss for United States Federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such defeasance or covenant defeasance had not occurred; (iii) no Event of Default or event which with the giving of notice or lapse of time, or both, would become an Event of Default under this Indenture shall have occurred and be continuing on the date of such deposit (or, with respect to any event specified in Section 6.01(e) or 6.01(f), at any time on or prior to the 90th day after the date of such deposit); (iv) (x) no default in the payment of principal of (or premium, if any) or interest, if any, on any Senior Indebtedness of the Company or the Guarantor 70 79 beyond any applicable grace period shall have occurred and be continuing, or (y) no other default with respect to any Senior Indebtedness of the Company or the Guarantor shall have occurred and be continuing and shall have resulted in the acceleration of such Senior Indebtedness; (v) the Company and the Guarantor have delivered to the Trustee an Officer's Certificates and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the contemplated by this provision have been complied with; and (vi) no event or condition shall exist that, pursuant to the provisions of Section 14.02 or 14.03 or Section 16.02 or 16.03, would prevent the Company or the Guarantor, as the case may be, from making payments of the principal of or interest on the Debentures of such series on the date of such deposit. The Company may exercise its defeasance option with respect to the Debentures and Guarantees of any series notwithstanding its prior exercise of its covenant defeasance option with respect to such series or any other series. If the Company exercises its defeasance option, payment of such Debentures may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of such Debentures may not be accelerated by reference to the covenants noted under clause (B) above. In the event the amount of money and/or U.S. Government Obligations on deposit with the Trustee is insufficient to pay amounts due on the Debentures of such series as and when the same shall become due, the Company and the Guarantor will remain liable in respect of such payments. SECTION 11.02. Application by Trustee of Funds Deposited for Payment of Debentures. Subject to Section 11.04, all moneys deposited with the Trustee (or other trustee) pursuant to Section 11.01 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Company or the Guarantor acting as its own paying agent), to the Holders of the particular Debentures of such series for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such money need not be segregated from other funds except to the extent required by law. SECTION 11.03. Repayment of Funds at Satisfaction, Discharge or Defeasance. In connection with the satisfaction, discharge or defeasance of this Indenture with respect to Debentures of any series, all moneys then held by any paying agent under the provisions of this Indenture with respect to such series of Debentures shall, upon demand of the Company or the Guarantor, be repaid to the Company or the Guarantor, as the case may be or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys. 71 80 SECTION 11.04. Repayment of Moneys Held by Paying Agent. Any moneys deposited with or paid to the Trustee or any paying agent or then held by the Company or the Guarantor, in trust for the payment of the principal of or interest on any Debenture of any series and not applied but remaining unclaimed for two years after the date upon which such principal or interest shall have become due and payable, shall, upon the written request of the Company and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Company or the Guarantor, as the case may be, by the Trustee, or (if then held by the Company or the Guarantor) shall be discharged from such trust, for such series or such paying agent, and the Holder of the Debentures of such series shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Company and the Guarantor for any payment which such holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease; provided, however, that the Trustee or such paying agent, before being required to make any such repayment with respect to moneys deposited with it for any payment series, shall at the expense of the Company, mail by first-class mail to holders of such Debentures at their addresses as they shall appear on the Debenture Register, notice, that such moneys remain and that, after a date specified therein, which shall not be less than thirty days from the date of such mailing or publication, any unclaimed balance of such money then remaining will be repaid to the Company or the Guarantor, as the case may be. SECTION 11.05. Indemnification of Trustee. The Company and the Guarantor shall jointly and severally pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 11.01 or the principal or interest received in respect of such obligations. ARTICLE 12 IMMUNITY OF INCORPORATORS, STOCKHOLDER SECTION 12.01. Incorporators, Stockholders, Officers and Directors of Company Exempt from Individual Liability. No recourse under or upon any obligations, covenant or agreement of this Indenture, or of any Debenture, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, past, present or future as such, of the Company, the Guarantor or of any predecessor or successor corporation, either directly or through the Company, the Guarantor or any such predecessor or successor corporation, whether by virtue of any constitution, statue or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued 72 81 hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors as such, of the Company, the Guarantor or of any predecessor or successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Debentures or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issuance of such Debentures. ARTICLE 13 MISCELLANEOUS PROVISIONS SECTION 13.01. Successors and Assigns of Company or Guarantor Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Company or the Guarantor shall bind its successors and assigns, whether so expressed or not. SECTION 13.02. Acts of Board, Committee or Officer of Successor Company or Guarantor Valid. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company or the Guarantor shall and may be done and performed with like force and effect by the corresponding board, committee or officer of any corporation that shall at the time be the lawful sole successor of the Company or the Guarantor, as the case may be. SECTION 13.03. Surrender of Powers. The Company or the Guarantor by instrument in writing executed by authority of two-thirds of Board of Directors of the Company or the Guarantor, as the case may be, and delivered to the Trustee may surrender any of the powers reserved to the Company or the Guarantor, as the case may be, and thereupon such power so surrendered shall terminate both as to the Company or the Guarantor, as the case may be, and as to any respective successor corporation. SECTION 13.04. Required Notices or Demands May be Served by Mail. Except as otherwise expressly provided herein any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Company may be given or served by being deposited first class 73 82 postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: Aetna Services, Inc., 151 Farmington Avenue, Hartford, Connecticut 06156, Attention: Corporate Secretary. Except as otherwise expressly provided herein any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Debentures to or on the Guarantor may be given or served by being deposited first class postage prepaid in a post-office letterbox addressed (until another address is filed in writing by the Company with the Trustee), as follows: Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156, Attention: Corporate Secretary. Any notice, election, request or demand by the Company, the Guarantor or any Holder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the Corporate Trust Office of the Trustee. SECTION 13.05. Indenture, Debentures and Guarantees to Be Construed in Accordance with Laws of the State of New York. This Indenture, each Debenture and each Guarantee shall be deemed to be a contract made under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State (without regard to principles of conflicts of laws thereof). SECTION 13.06. Officers' Certificates and Opinion of Counsel. (a) Upon any application or demand by the Company or the Guarantor to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. (b) Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant in this Indenture (other than the certificate provided pursuant to Section 5.03 of this Indenture) shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. 74 83 SECTION 13.07. Payments Not Due on Business Day. Except as provided pursuant to Section 2.01 pursuant to a Board Resolution, and as set forth in an Officers' Certificate, or established in one or more indentures supplemental to the Indenture, in any case where the date of maturity of interest or principal of any Debenture or the date of redemption of any Debenture shall not be a Business Day then payment of interest or principal (and premium, if any) may be made on the next succeeding Business Day with the same force and effect as if made on the nominal date of maturity or redemption, and no interest shall accrue for the period after such nominal date. SECTION 13.08. Provisions Required by Trust Indenture Act of 1939 to Control. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 13.09. Indenture May Be Executed in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 13.10. Separability of Indenture Provisions. In case any one or more of the provisions contained in this Indenture or in the Debentures of any series shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 13.11. Assignment by Company to Subsidiary. Each of the Company and the Guarantor will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company or the Guarantor, as the case may be; provided that, in the event of any such assignment, the Company or the Guarantor, as the case may be, will remain jointly and severally liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties thereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto. SECTION 13.12. Holders of Preferred Securities Third Party Beneficiaries. The Company and the Guarantor hereby acknowledge that, to the extent specifically set forth herein, prior to a Security Exchange with respect to the Debentures of any series held as trust assets of a Aetna Capital Trust, the holders of the Preferred Securities of such Aetna Capital Trust shall expressly be third party beneficiaries of this Indenture. The Company and the Guarantor further acknowledge that, prior to a Security Exchange with respect to Debentures of any series held as trust assets of a Aetna Capital Trust, if the Property Trustee of such Aetna Capital Trust fails to enforce its rights under this Indenture as the holder of the Debentures of a series held as trust assets of such Aetna Capital Trust, any 75 84 holder of the Preferred Securities of such Aetna Capital Trust may institute legal proceedings directly against the Company and/or the Guarantor to enforce such Property Trustee's rights under this Indenture without first instituting any legal proceedings against such Property Trustee or any other person or entity. ARTICLE 14 SUBORDINATION OF DEBENTURES SECTION 14.01. Agreement to Subordinate. (a) The Company, for itself, its successors and assigns, covenants and agrees, and each holder of a Debenture, by its acceptance thereof, likewise covenants and agrees, that the payment of the principal of, premium, if any, and interest on, each and all of the Debentures is hereby expressly subordinated, to the extent and in the manner hereinafter in this Article 14 set forth, in right of payment to the prior payment in full of all Senior Indebtedness. (b) The payment of the principal of, premium, if any, and interest on, each and all of the Debentures shall rank on a parity with the obligations of the Company under that certain Indenture dated as of November 1, 1994 between Aetna Services, Inc. and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among Aetna Services, Inc., Aetna Inc. and The First National Bank of Chicago, as trustee. SECTION 14.02. Rights of Senior Indebtedness in the Event of Insolvency, Etc., of the Company. (a) In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Company or to its creditors, as such, or to its property, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, or in the event of any execution sale, then the holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of principal thereof and interest due thereon (including without limitation, except to the extent, if any, prohibited by mandatory provisions of law, post-petition interest in any such proceedings) in money of all Senior Indebtedness of the Company before the holders of Debentures are entitled to receive any payment on account of the principal of or interest on the indebtedness evidenced by the Debentures, and to that end the holders of Senior Indebtedness of the Company shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in connection with any such proceedings or sale in respect of the principal of or interest 76 85 on the Debentures other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 14 with respect to the Debentures, to the payment of all indebtedness of the nature of Senior Indebtedness of the Company, provided that the rights of the holders of the Senior Indebtedness of the Company are not altered by such reorganization or readjustment; (b) In the event and during the continuation of any default in payment of any Senior Indebtedness of the Company or if any event of default, as therein defined, shall exist under any Senior Indebtedness of the Company or any agreement pursuant to which any Senior Indebtedness of the Company is issued, no payment of the principal of, premium if any, or interest on the Debentures shall be made and the Company covenants that it will, upon ascertaining any such default or event of default, provide written notice to the Trustee of such default or event of default; (c) In the event that the Debentures of any series are declared due and payable before their expressed maturity (under circumstances when the provisions of subsection(a) of this Section 14.02 shall not be applicable), the holders of all Senior Indebtedness of the Company shall be entitled to receive payment in full in money of such Senior Indebtedness of the Company before such holders of Debentures are entitled to receive any payment on account of the principal of or interest on the Debentures; and (d) No holder of Senior Indebtedness shall be prejudiced in his right to enforce subordination of the Debentures by any act or failure to act on the part of the Company. SECTION 14.03. Payment Over of Proceeds Received on Debentures. In the event that, notwithstanding the provisions of Section 14.02, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities (other than securities of the Company as reorganized or readjusted or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 14 with respect to the Debentures, to the payment of all indebtedness of the nature of Senior Indebtedness of the Company, provided that the rights of the holders of the Senior Indebtedness of the Company are not altered by such reorganization or readjustment) shall be received by the holders or by the Trustee for their benefit in connection with any proceedings or sale referred to in subsection (a) of Section 14.02 before all Senior Indebtedness of the Company is paid in full in money, such payment or distribution shall be paid over to the holders of such Senior Indebtedness of the Company or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness of the Company may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the Senior Indebtedness held or represented by each, for application 77 86 to the payment of all Senior Indebtedness of the Company remaining unpaid until all such Senior Indebtedness of the Company shall have been paid in full in money, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness of the Company. From and after the payment in full in money of all Senior Indebtedness of the Company, the holders of Debentures (together with the holders of any other indebtedness of the Company which is subordinate in right of payment to the payment in full of all Senior Indebtedness of the Company, which is not subordinate in right of payment to the Debentures and which by its terms grants such right of subrogation to the holder thereof) shall be subrogated to the rights of the holders of Senior Indebtedness of the Company to receive payments or distributions of assets or securities of the Company applicable to the Senior Indebtedness of the Company until the Debentures shall be paid in full, and, for the purposes of such subrogation, no such payments or distributions to the holders of Senior Indebtedness of the Company of assets or securities, which otherwise would have been payable or distributable to holders of Debentures, shall, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders, be deemed to be a payment by the Company to or on account of the Senior Indebtedness of the Company, it being understood that the provisions of this Article 14 are and are intended solely for the purpose of defining the relative rights of the holders, on the one hand, and the holders of the Senior Indebtedness of the Company, on the other hand, and nothing contained in this Article 14 or elsewhere in this Indenture or in the Debentures is intended to or shall impair as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders, the obligation of the Company, which is unconditional and absolute, to pay to the holders the principal of and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the holders and creditors of the Company other than the holders of the Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture subject to the rights of the holders of Senior Indebtedness of the Company, under Section 14.02, to receive cash, property or securities of the Company otherwise payable or deliverable to the holders of the Debentures. Upon any distribution or payment in connection with any proceedings or sale referred to in subsection (a) of Section 14.02, the Trustee, subject as between the Trustee and the holders to the provisions of Sections 7.01 and 7.02 hereof, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making any distribution or payment to the Trustee for the purpose of ascertaining the holders of Senior Indebtedness of the Company entitled to participate in such payment or distribution, the amount of such Senior Indebtedness of the Company or the amount payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 14. In the event that the Trustee determines, in good 78 87 faith, that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Section 14.03, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Company held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this Section 14.03, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company, and shall not be liable to any such holders if it shall in good faith pay over or distribute to holders of Debentures or the Company or any other person moneys or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of Article 14 of this Indenture or otherwise. SECTION 14.04. Payments to Holders. Nothing contained in this Article 14 or elsewhere in this Indenture, or in any of the Debentures, shall prevent at any time, (a) the Company from making payments at any time of principal of or interest on the Debentures, except under the conditions described in Section 14.02 or during the pendency of any proceedings or sale therein referred to, provided, however, that payments of principal of or interest on the Debentures shall only be made by the Company within three Business Days of the due dates for such payments or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of or interest on the Debentures, if at the time of such deposit the Trustee did not have written notice in accordance with Section 14.06 of any event prohibiting the making of such deposit by the Company or if in the event of redemption, the Trustee did not have such written notice prior to the time that the notice of redemption pursuant to Section 3.02 was given (which notice of redemption shall in no event be given more than 60 days prior to the date fixed for redemption). SECTION 14.05. Holders of Debentures Authorize Trustee to Effectuate Subordination of Debentures. Each Holder by his acceptance of a Debenture authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article 14 and appoints the Trustee as attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of such Holder's Debentures in the form required in said proceedings and cause said claim to be approved. 79 88 SECTION 14.06. Notice to Trustee. Notwithstanding the provisions of this Article 14 or any other provisions of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment of moneys to the Trustee, unless and until a Responsible Officer shall have received written notice thereof from the Company or from the holder or the representative of any class of Senior Indebtedness of the Company; provided, however, that if at least two Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of either the cash amount payable at maturity or interest on any Debenture) a Responsible Officer shall not have received with respect to such monies the notice provided for in this Section 14.06, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary, which may be received by it on or after such two Business Days prior to such date. SECTION 14.07. Trustees May Hold Senior Indebtedness. The Trustee or any Authenticating Agent shall be entitled to all the rights set forth in this Article 14 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness. SECTION 14.08. Applicability of Article 14 to Paying Agents. In case at any time any paying agent other than the Trustee shall be appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to and including such paying agent within its meaning as fully for all intents and purposes as if such paying agent were named in this Article 14 in place of the Trustee. ARTICLE 15 GUARANTEE OF DEBENTURES SECTION 15.01. Guarantee. The Guarantor hereby unconditionally guarantees to each Holder of a Debenture of each series of the Company authenticated and delivered by the Trustee or an Authenticating Agent the due and punctual payment of the principal of (premium, if any) and interest on such Debenture and the due and punctual payment of any sinking fund payments provided for pursuant to the terms of such Debenture, when and as the same shall become due and payable, whether at Stated Maturity, by declaration of acceleration, call for redemption or otherwise according to the terms of such Debenture and of this Indenture (the "Guaranteed Obligations"). In case of default by the Company in the payment of any such principal, premium, interest or sinking fund payment, the Guarantor agrees duly and punctually to make any such payment when and 80 89 as the same shall become due and payable, whether at the Stated Maturity, by declaration of acceleration, call for redemption or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be as if it were principal debtor and not merely surety, and shall be absolute and unconditional irrespective of, and shall be unaffected by, the validity, legality or enforceability of any Debenture of any series or this Indenture, the absence of any action to enforce the same or any waiver, modification or indulgence or consent granted to the Company with respect thereto by the Holder of any Debenture of any series or the Trustee, the recovery of any judgment against the Company or any action to enforce the same, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor; provided, however, that notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of the Guarantor, increase the principal amount of a Debenture or the interest rate thereon or increase any premium payable upon redemption thereof. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of the Company, any right of set-off or counterclaim, any right to require a proceeding first against the Company, protect or notice with respect to any Debenture or the indebtedness evidenced thereby or with respect to any sinking fund payment required pursuant to the terms of a Debenture issued under this Indenture and all demands whatsoever, and covenants that this Guarantee will not be discharged as to any Debenture except by payment in full of the principal of (premium, if any) and interest on such Debenture. SECTION 15.02. Subrogation. The Guarantor shall be subrogated to all rights of the Holder of a Debenture against the Company in respect of any amounts paid to such Holder by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of all Holders of Debentures of such series, be entitled to enforce, or to receive, any payments arising out of or based upon, such right of subrogation until the principal of (and premium, if any) and interest then due and payable on all Debentures of the relevant series shall have been irrevocably paid in full in accordance with the terms of such Debentures. SECTION 15.03. Reinstatement. The Guarantee of the Guarantor is a guarantee of payment when due and not of collection. The Guarantee shall continue to be effective, or be reinstated, as the case may be, in respect of any Debenture if at any time payment, or any part thereof, of such Debenture is rescinded or must otherwise be restored or returned by the Holder of such Debenture or any trustee for said Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other entity, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any other entity or any substantial part of their respective property, or otherwise, all as though such payments had not been made. SECTION 15.04. Execution and Delivery of Guarantees. To evidence its guarantee set forth in Section 15.01, the Guarantor hereby agrees to execute, subject to 81 90 Section 2.02 the Guarantee in a form established pursuant to indenture supplemental hereto, to be endorsed on each Debenture authenticated and delivered by the Trustee. Each such Guarantee shall be executed by the Guarantor as provided in Section 2.01. The delivery of any Debenture by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee endorsed thereon on behalf of the Guarantor. ARTICLE 16 SUBORDINATION OF GUARANTEES SECTION 16.01. Agreement to Subordinate. The Guarantor, for itself, its successors and assigns, covenants and agrees, and each holder of a Debenture, by its acceptance thereof, likewise covenants and agrees, that all obligations of the Guarantor under the Guarantee are hereby expressly subordinated, to the extent and in the manner hereinafter in this Article 16 set forth, in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor. (b) The obligations of the Guarantor under the Guarantees shall rank on a parity with the obligations of the Guarantor under that certain Indenture dated as of November 1, 1994 between Aetna Services, Inc. and The First National Bank of Chicago, as trustee, as amended by the First Indenture Supplement dated August 1, 1996 among Aetna Services, Inc., Aetna Inc. and The First National Bank of Chicago, as trustee. SECTION 16.02. Rights of Senior Indebtedness in the Event of Insolvency, Etc. of the Guarantor. (a) In the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to the Guarantor or to its creditors, as such, or to its property, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Guarantor, whether or not involving insolvency or bankruptcy, or in the event of any execution sale, then the holders of Senior Indebtedness of the Guarantor shall be entitled to receive payment in full of principal thereof and interest due thereon (including without limitation, except to the extent, if any, prohibited by mandatory provisions of law, post-petition interest in any such proceedings) in money of all Senior Indebtedness of the Guarantor before the holders of Debentures are entitled to receive any payment on account of the obligations under the Guarantees, and to that end the holders of Senior Indebtedness of the Guarantor shall be entitled to receive for application in payment thereof any payment or distribution of any kind or character, whether in cash or property 82 91 or securities, which may be payable or deliverable in connection with any such proceedings or sale in respect of the obligations under the Guarantees other than securities of the Guarantor as reorganized or readjusted or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 16 with respect to the Guarantees, to the payment of all indebtedness of the nature of Senior Indebtedness of the Guarantor, provided that the rights of the holders of the Senior Indebtedness of the Guarantor are not altered by such reorganization or readjustment; (b) In the event and during the continuation of any default in payment of any Senior Indebtedness of the Guarantor or if any event of default, as therein defined, shall exist under any Senior Indebtedness of the Guarantor or any agreement pursuant to which any Senior Indebtedness of the Guarantor is issued, no payment of the obligations under the Guarantee shall be made and the Guarantor covenants that it will, upon ascertaining any such default or event of default, provide written notice to the Trustee of such default or event of default; (c) In the event that the Debentures of any series are declared due and payable before their expressed maturity (under circumstances when the provisions of subsection(a) of this Section 16.02 shall not be applicable), the holders of all Senior Indebtedness of the Guarantor shall be entitled to receive payment in full in money of such Senior Indebtedness of the Guarantor before such holders of Debentures are entitled to receive any payment on account of the obligations under the Guarantee; and (d) No holder of Senior Indebtedness shall be prejudiced in his right to enforce subordination of the Guarantees by any act or failure to act on the part of the Guarantee. SECTION 16.03. Payment Over of Proceeds Received on Guarantees. In the event that, notwithstanding the provisions of Section 16.02, any payment or distribution of assets of the Guarantor of any kind or character, whether in cash, property or securities (other than securities of the Guarantor as reorganized or readjusted or securities of the Guarantor or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article 16 with respect to the Guarantees, to the payment of all indebtedness of the nature of Senior Indebtedness of the Guarantor, provided that the rights of the holders of the Senior Indebtedness of the Guarantor are not altered by such reorganization or readjustment) shall be received by the holders or by the Trustee for their benefit in connection with any proceedings or sale referred to in subsection (a) of Section 16.02 before all Senior Indebtedness of the Guarantor is paid in full in money, such payment or distribution shall be paid over to the holders of such Senior Indebtedness of the Guarantor or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness of the Guarantor may have been issued, ratably according to the aggregate amounts remaining 83 92 unpaid on account of the Senior Indebtedness held or represented by each, for application to the payment of all Senior Indebtedness of the Guarantor remaining unpaid until all such Senior Indebtedness of the Guarantor shall have been paid in full in money, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness of the Guarantor. From and after the payment in full in money of all Senior Indebtedness of the Guarantor, the holders of Guarantees (together with the holders of any other indebtedness of the Guarantor which is subordinate in right of payment to the payment in full of all Senior Indebtedness of the Guarantor, which is not subordinate in right of payment to the Guarantees and which by its terms grants such right of subrogation to the holder thereof) shall be subrogated to the rights of the holders of Senior Indebtedness of the Guarantor to receive payments or distributions of assets or securities of the Guarantor applicable to the Senior Indebtedness of the Guarantor until the Guarantees shall be paid in full, and, for the purposes of such subrogation, no such payments or distributions to the holders of Senior Indebtedness of the Guarantor of assets or securities, which otherwise would have been payable or distributable to holders of Guarantees, shall, as between the Guarantor, its creditors other than the holders of Senior Indebtedness of the Guarantor, and the holders, be deemed to be a payment by the Guarantor to or on account of the Senior Indebtedness of the Guarantor, it being understood that the provisions of this Article 16 are and are intended solely for the purpose of defining the relative rights of the holders, on the one hand, and the holders of the Senior Indebtedness of the Guarantor, on the other hand, and nothing contained in this Article 16 or elsewhere in this Indenture or in the Guarantees is intended to or shall impair as between the Guarantor, its creditors other than the holders of Senior Indebtedness of the Guarantor, and the holders, the obligation of the Guarantor, which is unconditional and absolute, to pay to the holders the obligations under the Guarantees as and when the same shall become due and payable in accordance with their terms, or to affect the relative rights of the holders and creditors of the Guarantor other than the holders of the Senior Indebtedness of the Guarantor, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture subject to the rights of the holders of Senior Indebtedness of the Guarantor, under Section 16.02, to receive cash, property or securities of the Guarantor otherwise payable or deliverable to the holders of the Debentures. Upon any distribution or payment in connection with any proceedings or sale referred to in subsection (a) of Section 16.02, the Trustee, subject as between the Trustee and the holders to the provisions of Sections 7.01 and 7.02 hereof, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making any distribution or payment to the Trustee for the purpose of ascertaining the holders of Senior Indebtedness of the Guarantor entitled to participate in such payment or distribution, the amount of such Senior Indebtedness of the Guarantor or the amount payable thereon, the amount or amounts paid or distributed thereon and all other facts 84 93 pertinent thereto or to this Article 16. In the event that the Trustee determines, in good faith, that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness of the Guarantor to participate in any payment or distribution pursuant to this Section 16.03, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of the Guarantor held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this Section 16.03, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Guarantor, and shall not be liable to any such holders if it shall in good faith pay over or distribute to holders of Debentures or the Guarantor or any other person moneys or assets to which any holders of Senior Indebtedness of the Guarantor shall be entitled by virtue of Article 16 of this Indenture or otherwise. SECTION 16.04. Payments to Holders. Nothing contained in this Article 16 or elsewhere in this Indenture, or in any of the Debentures, shall prevent at any time, (a) the Guarantor from making payments at any time of the obligations under the Guarantees, except under the conditions described in Section 16.02 or during the pendency of any proceedings or sale therein referred to, provided, however, that payments of principal of or interest on the Debentures shall only be made by the Guarantor within three business days of the due dates for such payments or (b) the application by the Trustee of any moneys deposited with it hereunder to the payment of or on account of the principal of or interest on the Debentures, if at the time of such deposit the Trustee did not have written notice in accordance with Section 16.06 of any event prohibiting the making of such deposit by the Guarantor or if in the event of redemption, the Trustee did not have such written notice prior to the time that the notice of redemption pursuant to Section 3.02 was given (which notice of redemption shall in no event be given more than 60 days prior to the date fixed for redemption). SECTION 16.05. Holders of Debentures Authorize Trustee to Effectuate Subordination of Guarantee. Each Holder by his acceptance of a Debenture authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article 16 and appoints the Trustee as attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up, liquidation or reorganization of the Guarantor (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Guarantor, the immediate filing of a claim for the unpaid balance of such 85 94 Holder's Debentures in the form required in said proceedings and cause said claim to be approved. SECTION 16.06. Notice to Trustee. Notwithstanding the provisions of this Article 16 or any other provisions of this Indenture, the Trustee shall not be charged with the knowledge of the existence of any facts which would prohibit the making of any payment of moneys to the Trustee, unless and until a Responsible Officer shall have received written notice thereof from the Guarantor or from the holder or the representative of any class of Senior Indebtedness of the Guarantor; provided, however, that if at least two Business Days prior to the date upon which by the terms hereof any such monies may become payable for any purpose (including, without limitation, the payment of either the cash amount payable at maturity or interest on any Debenture) the Trustee shall not have received with respect to such monies the notice provided for in this Section 16.06, then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary, which may be received by it on or after such two business days prior to such date. SECTION 16.07. Trustees May Hold Senior Indebtedness. The Trustee or any Authenticating Agent shall be entitled to all the rights set forth in this Article 16 with respect to any Senior Indebtedness of the Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness. SECTION 16.08. Applicability of Article 16 to Paying Agents. In case at any time any paying agent other than the Trustee shall be appointed by the Guarantor and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to and including such paying agent within its meaning as fully for all intents and purposes as if such paying agent were named in this Article 16 in place of the Trustee. 86 95 The First National Bank of Chicago, as Trustee, hereby accepts the trust in this Indenture declared and provided, upon the terms and conditions hereinabove set forth. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. AETNA SERVICES, INC. By -------------------------------------------- Name: Title: Attest: By -------------------------- Name: Title: AETNA INC. By -------------------------------------------- Name: Title: Attest: By -------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO By -------------------------------------------- Name: Title: Attest: By -------------------------- Name: Title: 87 96 STATE OF [ ] ) ss.: COUNTY OF [ ] ) On __________, 199__ before me, ____________________, Notary Public, personally appeared ______________________ and / / personally known to me -OR - / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. - ----------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER / / INDIVIDUAL(S) _____________________ / / CORPORATE OFFICER(S) / / PARTNER(S) / / ATTORNEY-IN-FACT / / TRUSTEE(S) / / GUARDIAN/CONSERVATOR / / OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) AETNA SERVICES, INC. 97 STATE OF [ ] ) ss.: COUNTY OF [ ] ) On __________, 199__ before me, ____________________, Notary Public, personally appeared ______________________ and / / personally known to me -OR - / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. - ----------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER / / INDIVIDUAL(S) _____________________ / / CORPORATE OFFICER(S) / / PARTNER(S) / / ATTORNEY-IN-FACT / / TRUSTEE(S) / / GUARDIAN/CONSERVATOR / / OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) AETNA INC. 89 98 STATE OF [ ] ) ss.: COUNTY OF [ ] ) On _________, 199__ before me, __________________, Notary Public, personally appeared ___________________ and / / personally known to me - OR - / / proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Witness my hand and official seal. - ----------------------------- Signature of Notary CAPACITY CLAIMED BY SIGNER / / INDIVIDUAL(S) _________________________ / / CORPORATE OFFICER(S) / / TRUST OFFICER / / ATTORNEY-IN-FACT / / TRUSTEE(S) / / GUARDIAN/CONSERVATOR / / OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTITY(IES) THE FIRST NATIONAL BANK OF CHICAGO EX-4.3.1 5 FORM OF SUPPLEMENTAL INDENTURE 1 Exhibit 4.3.1 - -------------------------------------------------------------------------------- AETNA SERVICES, INC., AETNA INC. AND THE FIRST NATIONAL BANK OF CHICAGO as Trustee ------------------------ __ SUPPLEMENTAL INDENTURE Dated as of __ TO INDENTURE Dated as of June __, 1998 ------------------------ __% Junior Subordinated Debentures Due 20__ - -------------------------------------------------------------------------------- 2 __ Supplemental INDENTURE, dated as of the __ day of __, 199__ (this "__ Supplemental Indenture"), among and between AETNA SERVICES, INC., a corporation duly organized and existing under the laws of the State of Connecticut (hereinafter sometimes referred to as the "Company"), AETNA INC., a corporation duly organized and existing under the laws of the State of Connecticut (hereinafter sometimes referred to as the "Guarantor") and THE FIRST NATIONAL BANK OF CHICAGO, a National Banking Association, as trustee (hereinafter sometimes referred to as the "Trustee") under the Indenture dated as of June __, 1998 among and between the Company, the Guarantor and the Trustee (the "Indenture") (as set forth in Section 7.01 hereof and except as otherwise set forth herein, all terms used and not defined herein are used as defined in the Indenture). WHEREAS, the Company and the Guarantor have executed and delivered the Indenture to the Trustee to provide for the future issuance and guarantee of its junior subordinated debentures (the "Debentures"), said Debentures to be issued from time to time in such series as may be determined by the Company and the Guarantor under the Indenture, in an unlimited aggregate principal amount which may be authenticated and delivered thereunder as in the Indenture provided; and WHEREAS, pursuant to the terms of the Indenture, the Company and the Guarantor desire to provide for the establishment of a new series of Debentures to be known as the Company's __% Junior Subordinated Debentures due 20__ (said series being hereinafter referred to as the "Series __% Debentures"), the form and substance of such Series __% Debentures and the terms, provisions and conditions thereof to be as provided in the Indenture and in this __ Supplemental Indenture; and WHEREAS, the Company has caused to be formed Aetna Capital Trust __ ("Aetna Capital __") as a statutory business trust under the Business Trust Act of the State of Delaware (12 Del. Code ss. 3801 et seq.) pursuant to a declaration of trust dated May 7, 1998 (the "Original Declaration") and the filing of a certificate of trust with the Secretary of State of the State of Delaware on May 7, 1998; and WHEREAS, the Original Declaration is to be amended and restated in its entirety pursuant to an Amended and Restated Declaration of Trust dated as of __, 199__ (such Amended and Restated Declaration of Trust, as amended from time to time, the "Declaration of Trust"); and WHEREAS, Aetna Capital __ desires to issue its __% Preferred Trust Securities (the "Preferred Securities") and sell such Preferred Securities to initial purchasers; and 3 WHEREAS, pursuant to the Preferred Securities Guarantees (the "Preferred Securities Guarantees"), each of the Company and the Guarantor have irrevocably and unconditionally guaranteed, to the extent set forth therein, to pay in full, to the holders of the Preferred Securities, the Guarantee Payments (as defined therein), to the extent not paid by Aetna Capital __; and WHEREAS, in connection with such purchases of Preferred Securities and the related purchase by the Company of the Common Securities (as defined in the Declaration of Trust) of Aetna Capital __, Aetna Capital __ will purchase as trust assets Series __% Debentures; and WHEREAS, pursuant to the Declaration of Trust, the legal title to the Series __% Debentures shall be owned and held of record in the name of The First National Bank of Chicago or its successor under the Declaration of Trust, as Property Trustee (the "Property Trustee"), in trust for the benefit of holders of the Preferred Securities and the Common Securities; and WHEREAS, upon the occurrence of a Special Event (as defined in the Declaration of Trust) the Regular Trustees (as defined in the Declaration of Trust) of Aetna Capital __ shall, unless the Series __% Debentures are redeemed as described herein, dissolve Aetna Capital __ and cause to be distributed to the holders of the Preferred Securities and Common Securities, on a Pro Rata basis (determined as provided in the terms of the Preferred Securities and Common Securities attached as Exhibits B and C to the Declaration of Trust), Series __% Debentures and in connection with a Liquidation Distribution (as defined in the Declaration of Trust) the Regular Trustees may cause to be distributed to holders of Preferred Securities and Common Securities, on such a Pro Rata basis, Series __% Debentures (each a "Dissolution Event"); and WHEREAS, the Company and the Guarantor desire and have requested the Trustee to join with them in the execution and delivery of this __ Supplemental Indenture, and all requirements necessary to make this __ Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Series __% Debentures, when executed by the Company and the Guarantor and authenticated and delivered by the Trustee, the valid obligations of the Company and the Guarantor, have been performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized; NOW THEREFORE, in consideration of the purchase and acceptance of the Series __% Debentures by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Series __% Debentures and the terms, provisions and conditions thereof, the Company and the Guarantor covenant and agree with the Trustee as follows: 2 4 ARTICLE 1 GENERAL TERMS AND CONDITIONS OF THE SERIES __% DEBENTURES SECTION 1.01. There is hereby authorized a series of Debentures designated the "__% Junior Subordinated Debentures Due 20__", limited in aggregate principal amount to $__ (except as provided in this Section 1.01 and 6.01). Upon exercise of the overallotment option set forth in the Underwriting Agreement (as defined in the Declaration of Trust), additional Series __% Debentures in the aggregate principal amount of up to $__ may be executed by the Company and the Guarantor and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver said Series __% Debentures to or upon the written order of the Company, which order shall be accompanied by evidence satisfactory to the Trustee that the overallotment option has been exercised. The Series __% Debentures shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon, including Compounded Interest (as hereinafter defined) on __, 20__. SECTION 1.02. (a) Except as provided in Section 1.02(b), the Series __% Debentures shall be issued in fully registered certificated form without interest coupons. Principal and interest on the Series __% Debentures issued in certificated form will be payable, the transfer of such Series __% Debentures will be registrable and such Series __% Debentures will be exchangeable for Series __% Debentures bearing identical terms and provisions at the office or agency of the Company in the Place of Payment; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debenture register and that the payment of principal with respect to the Series __% Debentures will only be made upon surrender of the Series __% Debentures to the Trustee. Notwithstanding the foregoing, so long as the Property Trustee is the legal owner and record holder of the Series __% Debentures, the payment of the principal of and interest (including Compounded Interest, if any) on the Series __% Debentures held by the Property Trustee will be made by the Company in immediately available funds on the payment date therefor at such place and to the Property Account (as defined in the Declaration of Trust) established and maintained by the Property Trustee pursuant to the Declaration of Trust. (b) In connection with a Dissolution Event; (i) Series __% Debentures in certificated form may be presented to the Trustee by the Property Trustee in exchange for a Global Debenture representing the Series __% Debentures in an aggregate principal amount equal to all Outstanding Series __% Debentures, to be registered in the 3 5 name of the Depositary, or its nominee, and delivered by the Trustee to the Depositary for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees (as defined in the Declaration of Trust). The Company and the Guarantor upon any such presentation shall execute a Global Debenture representing the Series __% Debentures in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Indenture and this __ Supplemental Indenture. Payments on the Series __% Debentures issued as a Global Debenture will be made to the Depositary; and (ii) if any Preferred Securities are held in non book-entry certificated form, Series __% Debentures in certificated form may be presented to the Trustee by the Property Trustee and any Preferred Security Certificate (as defined in the Declaration of Trust) which represents Preferred Securities other than Preferred Securities held by the Clearing Agency (as defined in the Declaration of Trust) or its nominee ("Non Book-Entry Preferred Securities") will be deemed to represent beneficial interests in Series __% Debentures presented to the Trustee by the Property Trustee having an aggregate principal amount equal to the aggregate liquidation amount of the Non Book-Entry Preferred Securities until such Preferred Security Certificate is presented to the Debenture Registrar for transfer or reissuance at which time such Preferred Security Certificate will be cancelled and a Series __% Debenture, registered in the name of the holder of the Preferred Security Certificate or the transferee of the holder of such Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Security Certificate canceled will be executed by the Company and the Guarantor and delivered to the Trustee for authentication and delivery in accordance with the Indenture and this __ Supplemental Indenture. On issue of such Series __% Debentures, Series __% Debentures with an equivalent aggregate amount that were presented by the Property Trustee to the Trustee will be deemed to have been canceled. SECTION 1.03. Each Series __% Debenture will bear interest at the rate of __% per annum from __, 199__ until the principal thereof becomes due and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum, compounded monthly, payable (subject to the provisions of Article Three) monthly in arrears on the last day of each month (each, an "Interest Payment Date", commencing on __, 199__), to the person in whose name such Series __% Debenture or any predecessor Series __% Debenture is registered, at the close of business on the regular record date for such interest 4 6 installment, which, except as set forth below, shall be, in respect of any Series __% Debentures of which the Property Trustee is the registered holder of or a Global Debenture, the close of business on the business day next preceding that Interest Payment Date. Notwithstanding the foregoing sentence, if the Preferred Securities are no longer in book-entry only form or if pursuant to the provisions of Section 2.11(c) of the Indenture the Series __% Debentures are not represented by a Global Debenture, the regular record dates for such interest installment shall be the close of business on the last day of the month next preceding that Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name the Series __% Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Series __% Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Series __% Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a 30-day monthly interest period for which interest is computed, the amount of interest payable will be computed on the basis of the actual number of days elapsed. In the event that any date on which interest is payable on the Series __% Debentures is not a business day, then payment of 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. Principal of and any premium and interest on the Series __% Debentures shall be payable at The First National Bank of Chicago, 14 Wall Street, 8th Floor, New York, NY 10005 (the "Place of Payment"). ARTICLE 2 OPTIONAL REDEMPTION OF THE SERIES __% DEBENTURES SECTION 2.01. Except as provided in Section 2.02, Series ` % Debentures may not be redeemed by the Company prior to _, 20_. Subject to the terms of Article Three of the Indenture, the Company shall have the right to redeem the Series __% Debentures, in whole or in part, from time to time, on or 5 7 after __, 20__, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest thereon, including Compounded Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. SECTION 2.02. If, at any time, a Tax Event (as defined below) shall occur or be continuing and (i) the Regular Trustees and the Company shall have received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Company would be precluded from deducting the interest on the Series __% Debentures for United States federal income tax purposes even if the Series __% Debentures were distributed to the holders of Preferred Securities and Common Securities in liquidation of such holder's interest in Aetna Capital __ as set forth in the Declaration of Trust or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion (as defined below) cannot be delivered to Aetna Capital __, the Company shall have the right at any time, upon not less than 30 nor more than 60 days' notice, to redeem the Series __% Debentures in whole or in part for cash at the Optional Redemption Price within 90 days following the occurrence of such Tax Event; provided, however, that, if at the time there is available to the Company or the Regular Trustees on behalf of Aetna Capital __ the opportunity to eliminate, within such 90 day period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on Aetna Capital __, the Company or the holders of the Preferred Securities, the Company or the Regular Trustees on behalf of Aetna Capital __ will pursue such measure in lieu of redemption and provided further that the Company shall have no right to redeem the Series __% Debentures while the Regular Trustees on behalf of Aetna Capital __ are pursuing any such Ministerial Action. "Tax Event" means that the Company and the Regular Trustees shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after __, 199__ as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any 6 8 action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after __, 199__ there is more than an insubstantial risk that (i) Aetna Capital __ is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Series ` % Debentures, (ii) Aetna Capital __ is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges or (iii) interest payable by the Company to Aetna Capital __ on the Series __% Debentures is not, or within 90 days of the date thereof will not be, deductible by the Company for United States federal income tax purposes. "No Recognition Opinion" means an opinion of a nationally recognized independent tax counsel experienced in such matters, which opinion may rely on any then applicable published revenue ruling of the Internal Revenue Service, to the effect that the holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of a dissolution of Aetna Capital __ and distribution of the Series __% Debentures as provided in the Declaration of Trust. SECTION 2.03. If the Series __% Debentures are only partially redeemed pursuant to this Article Two, the Series __% Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee, provided that if at the time of redemption, the Series __% Debentures are registered as a Global Debenture, the Depository shall determine by lot the principal amount of such Series __% Debentures held by each Debenture Holder to be redeemed in accordance with its customary procedures. Notwithstanding the foregoing, if a partial redemption of the Series __% Debentures would result in the delisting of the Preferred Securities by any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and will only redeem the Series __% Debentures in whole. ARTICLE 3 EXTENSION OF INTEREST PAYMENT PERIOD SECTION 3.01. So long as the Company is not in default in the payment of interest on the Series __% Debentures, the Company shall have the right, at any time during the term of the Series __% Debentures, from time to time to extend the interest payment period of such Series __% Debentures for up to 60 consecutive 7 9 monthly interest periods (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest accrued and unpaid thereon (together with interest thereon at the rate of __% per annum to the extent permitted by applicable law, compounded monthly ("Compounded Interest")). During such Extended Interest Payment Period the Company and the Guarantor shall not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 the Preferred Securities Guarantee or the equivalent preferred securities guarantees respecting preferred securities of Aetna Capital Trust __, __ or __, (ii) acquisitions of shares of the Company's or the Guarantor's common stock in connection with the satisfaction by the Company or the Guarantor, as the case may be, of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by the Company or the Guarantor or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of the Company or the Guarantor as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by the Company or the Guarantor or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of Guarantor). Prior to the termination of any such Extended Interest Payment Period, the Company may pay all or any portion of the interest accrued on the Series __% Debentures on any Interest Payment Date to holders of record on the regular record date for such Interest Payment Date or from time to time further extend such Period; provided that such Period together with all such further extensions thereof shall not exceed 60 consecutive monthly interest periods. Upon the termination of any Extended Interest Payment Period and upon the payment of all accrued and unpaid interest then due, together with Compounded Interest, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. However, if the Company establishes a trust pursuant to Section 11.01(b) of the Indenture, it shall be permitted at the date of establishment to extend the interest payment period for only one Extended Interest Payment Period (including any Extended Interest Payment Period outstanding at the date of such establishment). No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. At the end of the Extended Interest Payment Period the Company shall pay all interest accrued and unpaid on the Series __% Debentures including any Compounded Interest which shall be payable to the holders of the Series __% Debentures in whose names the Series __% Debentures are registered in the Debenture register on the first record date after the end of the Extended Interest Payment Period. SECTION 3.02. (a) So long as the Property Trustee is the legal owner and holder of record of the Series __% Debentures, at the time the Company selects an Extended Interest Payment Period, the Company shall give both the Property Trustee and the Trustee written notice of its selection of such Extended Interest Payment Period one Business Day prior to the earlier of (i) the next succeeding 8 10 date on which distributions on the Preferred Securities are payable or (ii) the date Aetna Capital __ is required to give notice of the record date or the date such distributions are payable to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities, but in any event not less than one Business Day prior to such record date. The Company shall cause Aetna Capital __ to give notice of the Company's election of such Extended Interest Payment Period to the holders of the Preferred Securities. (b) If as a result of a Dissolution Event Series __% Debentures have been distributed to holders of Preferred Securities and Common Securities, at the time the Company elects an Extended Interest Payment Period, the Company shall give the holders of the Series __% Debentures and the Trustee written notice of its election of such Extended Interest Payment Period at least 10 Business Days prior to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date the Company is required to give notice of the record or payment date of such interest payment to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Series __% Debentures. SECTION 3.03. The month in which any notice is given pursuant to Section 3.02 shall be counted as one of the 60 months permitted in the maximum Extended Interest Payment Period permitted under this Article Three. ARTICLE 4 COVENANTS APPLICABLE TO SERIES __% DEBENTURES SECTION 4.01. So long as any of the Series __% Debentures remain outstanding, the Company and the Guarantor shall not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 the Preferred Securities Guarantee or the equivalent preferred securities guarantees respecting preferred securities of Aetna Capital Trust __, __ or __, (ii) acquisitions of shares of the Company's or the Guarantor's common stock in connection with the satisfaction by the Company or the Guarantor, as the case may be, of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by the Company or the Guarantor or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of the Company or the Guarantor as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by the Company or the Guarantor or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of the Guarantor), if at such time (a) the Company and the Guarantor shall be in default with respect to their payment obligations under the Preferred Securities Guarantee, (b) there shall have occurred and be continuing an Event of Default with respect to the Series __% Debentures or (c) the Company shall have given notice of its election of an Extended Interest Payment Period (as defined herein) and such period, or any extension thereof, is continuing. 9 11 The covenant set forth in the preceding paragraph shall be deemed to be included in the recital of provisions of the Indenture set forth in clause (B) of Section 11.01(b) thereof, and shall therefore cease to be binding upon the Company and the Guarantor in the event of covenant defeasance. SECTION 4.02. In connection with the distribution of the Series __% Debentures to the holders of the Preferred Securities upon a Dissolution Event, the Company and the Guarantor will use their best efforts to list such Series __% Debentures on the New York Stock Exchange, if the Preferred Securities are then listed and traded on the New York Stock Exchange, or on such other exchange as the Preferred Securities are then listed and traded. SECTION 4.03. The Company and the Guarantor covenant and agree for the benefit of the holders of the Preferred Securities to comply fully with all of their respective obligations and agreements under the Declaration of Trust, including, without limitation, their obligations under Article 4 thereof. SECTION 4.04. Prior to the distribution of Series __% Debentures to the holders of Preferred Securities upon a Dissolution Event, the Company and the Guarantor covenant and agree for the benefit of the holders of the Preferred Securities (i) not to cause or permit the Common Securities to be transferred except as permitted by the Declaration of Trust and (ii) that they will use reasonable efforts to cause Aetna Capital __ to continue to be treated as a grantor trust for United States federal income tax purposes, except in connection with a distribution of the Series __% Debentures as provided in the Declaration of Trust. 10 12 ARTICLE 5 FORM OF SERIES __% DEBENTURES SECTION 5.01. The Series __% Debentures and the Guarantor's Guarantees and the Trustee's Certificate of Authentication to be endorsed on the Series __% Debentures are to be substantially in the following forms: (FORM OF FACE OF DEBENTURE) [IF THE NOTE IS TO BE A GLOBAL DEBENTURE, INSERT: This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Debenture is exchangeable for Debentures registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Debenture (other than a transfer of this Debenture as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Debenture is presented by an authorized representative to The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] No. $ CUSIP NO. _________ AETNA SERVICES, INC. AETNA, INC. __% JUNIOR SUBORDINATED DEBENTURE DUE 20__ Aetna Services, Inc., a corporation duly organized and existing under the laws of the State of Connecticut (herein referred to as the "Company", which term includes any successor corporation under the Indenture hereinafter referred 11 13 to), for value received, hereby promises to pay to __, or registered assigns, the principal sum of __ Dollars on __, 20__, and to pay interest on said principal sum from __, 199__ or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, monthly (subject to deferral as set forth herein) in arrears on the last day of each month commencing __, 199__ at the rate of __% per annum plus Compounded Interest, if any, until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months and for any period shorter than a 30-day monthly interest period for which interest is computed, the amount of interest payable will be computed on the basis of the actual number of days elapsed. In the event that any date on which interest is payable on this Debenture is not a Business Day, then payment of 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. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Debentures, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, [which shall be the close of business on the day next preceding such Interest Payment Date, provided if the Preferred Securities of Aetna Capital Trust [ ] are no longer in book-entry only form, the regular record dates shall be the close of business on the fifteenth (15th) day of each month next preceding such Interest Payment Date] [IF PURSUANT TO THE PROVISIONS OF SECTION 2.11(c) OF THE INDENTURE THE SERIES __% DEBENTURES ARE NOT REPRESENTED BY A GLOBAL DEBENTURE -- which shall be the close of business on the fifteenth (15th) day of each month next preceding such Interest Payment Date.] Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of this series of Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest 12 14 on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in __, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by wire transfer to an account maintained by the registered holder as such may appear in the Debenture register or by check mailed to the registered holder at such address as shall appear in the Debenture register, and that the payment of principal will only be made upon the surrender of this Debenture to the Trustee. Notwithstanding the foregoing, so long as the owner and record holder of this Debenture is the Property Trustee (as defined in the Indenture referred to on the reverse hereof), the payment of the principal of (and premium, if any) and interest (including Compounded Interest, if any) on this Debenture will be made at such place and to such account of the Property Trustee as may be designated by the Property Trustee. The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. Unless the Certificate of Authentication hereon has been executed by the Trustee referred to on the reverse side hereof, this Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. The provisions of this Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. 13 15 IN WITNESS WHEREOF, the Company has caused this Instrument to be executed. Dated _______________ AETNA SERVICES, INC. By --------------------------- Attest: By ----------------------- Secretary 14 16 (FORM OF CERTIFICATE OF AUTHENTICATION) CERTIFICATE OF AUTHENTICATION This is one of the Debentures of the series of Debentures described in the within-mentioned Indenture. The First National Bank of Chicago as Trustee ------------------------------------ or as Authentication Agent By -------------------------- ------------------------------------ Authorized Signatory Authorized Signatory (FORM OF REVERSE OF DEBENTURE) This Debenture is one of a duly authorized series of Debentures of the Company (herein sometimes referred to as the "Debentures"), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of _______, 1998 duly executed and delivered between the Company, Aetna Inc. (the "Guarantor") and The First National Bank of Chicago, a National Banking Association, as Trustee (herein referred to as the "Trustee"), as supplemented by the __ Supplemental Indenture dated as of __, 199__ between the Company, the Guarantor and the Trustee (said Indenture as so supplemented being hereinafter referred to as the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company, the Guarantor and the holders of the Debentures, and, to the extent specifically set forth in the Indenture, the holders of Senior Indebtedness and Preferred Securities. By the terms of the Indenture, the Debentures are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. This series of Debentures is designated the __% Junior Subordinated Debentures due 20__ and is limited in aggregate principal amount as specified in said __ Supplemental Indenture. Except as provided in the next paragraph, the Debentures may not be redeemed by the Company prior to __, 20__. The Company shall have the right to redeem this Debenture at the option of the Company, without premium or penalty, in whole or in part at any time on or after __, 20__ (an "Optional Redemption"), 15 17 at a redemption price equal to 100% of the principal amount plus any accrued but unpaid interest, including any Compounded Interest, if any, to the date of such redemption (the "Optional Redemption Price"). Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days' notice, at the Optional Redemption Price. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee; provided if, at the time of redemption, the Debentures are registered as a Global Debenture, the Depository shall determine the principal amount of such Debentures held by each holder of Debentures to be redeemed in accordance with its customary procedures. If, at any time, a Tax Event (as defined below) shall occur or be continuing after receipt of a Dissolution Tax Opinion (as defined below) and (i) the Regular Trustees and the Company shall have received an opinion (a "Redemption Tax Opinion") of a nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Company would be precluded from deducting the interest on the Series __% Debentures for United States federal income tax purposes even if the Series __% Debentures were distributed to the holders of Preferred Securities and Common Securities in liquidation of such holder's interest in Aetna Capital __ as set forth in the Declaration of Trust or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion (as defined below) cannot be delivered to Aetna Capital __, the Company shall have the right at any time, upon not less than 30 nor more than 60 days' notice, to redeem the Series __% Debentures in whole or in part for cash at the Optional Redemption Price within 90 days following the occurrence of such Tax Event; provided, however, that, if at the time there is available to the Company or the Regular Trustees on behalf of Aetna Capital __ the opportunity to eliminate, within such 90 day period, the Tax Event by taking some ministerial action ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure, which has no adverse effect on Aetna Capital __, the Company or the holders of the Preferred Securities, the Company or the Regular Trustees on behalf of Aetna Capital __ will pursue such measure in lieu of redemption and provided further that the Company shall have no right to redeem the Series __% Debentures while the Regular Trustees on behalf of Aetna Capital __ are pursuing any such Ministerial Action. "Tax Event" means that the Company and the Regular Trustees shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after __, 199__, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United 16 18 States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after __, 199__, there is more than an insubstantial risk that (i) Aetna Capital __ is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Series __% Debentures, (ii) Aetna Capital __ is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges or (iii) interest payable by the Company to Aetna Capital __ on the Series __% Debentures is not, or within 90 days of the date thereof will not be, deductible by the Company for United States federal income tax purposes. "No Recognition Opinion" means an opinion of a nationally recognized independent tax counsel experienced in such matters, which opinion may rely on any then applicable published revenue ruling of the Internal Revenue Service, to the effect that the holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of a dissolution of Aetna Capital __ and distribution of the Series __% Debentures as provided in the Declaration of Trust. If the Debentures are only partially redeemed by the Company pursuant to an Optional Redemption or as a result of a Tax Event as described above, the Debentures will be redeemed pro rata or by lot or in some other equitable manner determined by the Trustee. Notwithstanding the foregoing, if a partial redemption of the Series __% Debentures would result in the delisting of the Preferred Securities by any national securities exchange or other organization on which the Preferred Securities are then listed, the Company shall not be permitted to effect such partial redemption and will only redeem the Series __% Debentures in whole. In the event of redemption of this Debenture in part only, a new Debenture or Debentures of this series for unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debentures may be 17 19 declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Debentures of each series affected at the time outstanding, as defined in the Indenture (and, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust), to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Debentures; provided, however, that no such supplemental indenture shall, without the consent of each Holder of such Debenture affected thereby: (1) change the Stated Maturity of the principal of (or premium, if any) or any installment of principal or interest, if any, on any such Debenture; (2) reduce the principal amount of (or premium, if any) or interest, if any, on any such Debenture or the principal amount due upon acceleration of any Original Issue Discount Debenture; (3) change the place or currency of payment of principal of (or premium, if any) or the interest, if any, on any such Debenture; (4) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Debenture; (5) reduce the percentage of Holders of Debentures necessary to modify or amend the Indentures (and, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Security Exchange has not theretofore occurred, such consent of the holders of the Preferred Securities and the Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust) then outstanding and affected thereby; (6) modify or affect in any manner adverse to the Holders of Debentures the obligation of the Guarantor under the Guarantees in respect of the due and punctual payment of the principal of (and premium, if any) or interest on the Debentures; (7) modify the subordination provisions of Articles 14 and 16 of the Indenture in a manner adverse to the holders of the Debentures; or (8) modify the foregoing requirements or reduce the percentage of Outstanding Debentures necessary to waive compliance with certain provisions of the Indenture or for waiver of certain defaults. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Debentures of a series at the time outstanding 18 20 affected thereby (subject, in the case of any series of Debentures held as trust assets of an Aetna Capital Trust and with respect to which a Securities Exchange has not theretofore occurred, to such consent of holders of Preferred Securities and Common Securities of such Aetna Capital Trust as may be required under the Declaration of Trust of such Aetna Capital Trust), on behalf of the Holders of the Debenture of such series, to waive any past default under the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium or interest on any Debenture of such series. Any such consent or waiver by the registered Holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Debenture and of any Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. Subject to Section 13.12 of the Indenture, no reference herein to the Indenture (other than such Section) and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Debenture at the time and place at the rate and in the money herein prescribed. So long as the Company is not in default in the payment of interest on the Debentures, the Company shall have the right, at any time during the term of the Debentures, from time to time to extend the interest payment period of such Debentures for up to 60 consecutive monthly interest periods (the "Extended Interest Payment Period"), at the end of which period the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate of __% per annum to the extent permitted by applicable law, compounded monthly ("Compounded Interest")). During such Extended Interest Payment Period the Company and the Guarantor shall not declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 the Preferred Securities Guarantee or the equivalent preferred securities guarantees respecting preferred securities of Aetna Capital Trust __,__ or __, (ii) acquisitions of shares of the Company's or the Guarantor's common stock in connection with the satisfaction by the Company or the Guarantor, as the case may be, of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by the Company or the Guarantor or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of the Company or the Guarantor as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by the Company or the Guarantor or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of Guarantor. Prior to the termination of any such Extended Interest Payment Period, the Company may pay all or any portion of the interest accrued on the Series __% Debentures on any Interest Payment Date to holders of 19 21 record on the regular record date for such Interest Payment Date or from time to time further extend such Period; provided that such Period together with all such further extensions thereof shall not exceed 60 consecutive monthly interest periods. Upon the termination of any Extended Interest Payment Period and upon the payment of all accrued and unpaid interest then due, together with Compounded Interest, the Company may select a new Extended Interest Payment Period, subject to the foregoing requirements. However, if the Company establishes a trust pursuant to Section 11.01(b) of the Indenture, it shall be permitted at the date of establishment to extend the interest payment period for only one Extended Interest Payment Period (including any Extended Interest Payment Period outstanding at the date of such establishment). No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof. At the end of the Extended Interest Payment Period the Company shall pay all interest accrued and unpaid on the Series __% Debentures including any Compounded Interest which shall be payable to the holders of the Series __% Debentures in whose names the Series __% Debentures are registered in the Debenture register on the first record date after the end of the Extended Interest Payment Period. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Debenture Register of the Company, upon surrender of this Debenture for transfer at the office or agency of the Company in __ accompanied by a written instrument or instruments of transfer in form satisfactory to the Company, the Guarantor or the Debenture Registrar duly executed by the registered holder hereof or his attorney duly authorized in writing, and thereupon a new Debenture or Debentures of the same series as this Debenture for a like aggregate principal amount. No service charge will be made for any such registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Debenture, the Company, the Guarantor, the Trustee, any paying agent and any Debenture Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Debenture Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Guarantor nor the Trustee nor any paying agent nor any Debenture Registrar shall be affected by any notice to the contrary. No recourse under or upon any obligations, covenant or agreement of the Indenture, or of this Debenture, or for any claim based hereon, or otherwise in 20 22 respect hereof, shall be had against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company, the Guarantor or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such personal liability being expressly waived and released and as a consideration for, the execution of the Indenture and the issuance of this Debenture. [If certificated Debentures -- The Debentures of this series are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereto.] [If Global Debenture -- This Global Debenture is exchangeable for Debentures in definitive form under certain limited circumstances set forth in the Indenture. Debentures of this series so issued are issuable only in registered form without coupons in denominations of $25 or any integral multiple thereof.] As provided in the Indenture and subject to certain limitations [If Global Debenture -- herein and] therein set forth, Debentures of this series [If Global Debenture -- so issued] are exchangeable for a like aggregate principal amount of Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE 6 ORIGINAL ISSUE OF SERIES __% DEBENTURES SECTION 6.01. Except as provided in Section 1.01 and this Section 6.01, Series __% Debentures in the aggregate principal amount equal to $__ may, upon execution of this __ Supplemental Indenture, be executed by the Company endorsed with a Guarantee by the Guarantor and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman, its President, any Senior Vice President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. Upon exercise of the overallotment option set forth in the Underwriting Agreement, additional Series __% Debentures in the aggregate principal amount of up to $__ may be executed by the Company, endorsed by the Guarantor and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Series __% Debentures executed as aforesaid by the Company, to or upon the written order of the Company, which order shall be 21 23 accompanied by evidence satisfactory to the Trustee that the overallotment option has been exercised. ARTICLE 7 MISCELLANEOUS PROVISIONS SECTION 7.01. Except as otherwise expressly provided in this __ Supplemental Indenture or in the form of Series __% Debenture or otherwise clearly required by the context hereof or thereof, all terms used herein or in said form of Series __% Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them thereby. SECTION 7.02. The Indenture, as supplemented by this __ Supplemental Indenture, is in all respects ratified and confirmed. This __ Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 7.03. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this __ Supplemental Indenture. SECTION 7.04. This __ Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. 22 24 IN WITNESS WHEREOF, the parties hereto have caused this __ Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, on the date or dates indicated in the acknowledgments and as of the day and year first above written. AETNA SERVICES, INC. By ------------------------------------- Name: Title: Attest: - ------------------------------------- Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, as Trustee By ------------------------------------- Name: Title: Attest: - ------------------------------------- Name: Title: 23 25 STATE OF [ ] ) ) ss.: COUNTY OF [ ] ) __________, 199__ On the ______ day of ___________, in the year one thousand nine hundred ninety-____________, before me personally came _________________ to me known, who, being by me duly sworn, did depose and say that he resides at ____________________________________; that he is _________________ of AETNA SERVICES, INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to the said instrument is such corporation seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. ------------------------------------ NOTARY PUBLIC My Commission Expires 24 26 STATE OF [ ] ) ) ss.: COUNTY OF [ ] ) __________, 199__ On the ______ day of ___________, in the year one thousand nine hundred ninety-_______ before me personally came ___________________ to me known, who, being by me duly sworn, did depose and say that he resides at ___________________ that he is a __________of THE FIRST NATIONAL BANK OF CHICAGO, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation and that he signed his name thereto by like authority. ---------------------------------- NOTARY PUBLIC My Commission Expires 25 27 (FORM OF GUARANTEE) GUARANTEE OF AETNA INC. Aetna Inc., a corporation duly organized and existing under the laws of the State of Connecticut (herein sometimes referred to as the "Guarantor"), for value received, hereby unconditionally guarantees to the Holder of this Debenture upon which this Guarantee is endorsed the due and punctual payment of the principal of, premium, if any, and interest on this Debenture and the due and punctual payment of the sinking fund payments provided for herein, when and as the same shall become due and payable, whether at the Stated Maturity or upon declaration of acceleration, call for redemption or otherwise, according to the terms thereof and of the Indenture referred to therein. In case of the failure of Aetna Services, Inc., a corporation duly organized and existing under the laws of the State of Connecticut (herein sometimes referred to as the "Company"), punctually to make any such payment of principal, premium or interest or sinking fund payment, the Guarantor hereby agrees to pay or to cause any such payment to be made punctually when and as the same shall become due and payable, whether at Stated Maturity or upon declaration of acceleration, call for redemption or otherwise, and as if such payment were made by the Company. The Guarantor hereby agrees that its obligations hereunder shall be as if it were principal debtor and not merely surety, and shall be absolute and unconditional, irrespective of, and shall be unaffected by, the validity, legality or enforceability of this Debenture or the Indenture, or the absence of any action to enforce the same, or any waiver, modification, indulgence or consent granted to the Company with respect thereto, by the Holder of this Debenture or by the Trustee, the recovery of any judgment against the Company or any action to enforce the same or any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor; provided, however, that notwithstanding the foregoing, no such waiver, modification or indulgence shall, without the consent of the Guarantor, increase the principal amount of this Debenture or the interest rate thereon or increase any premium payable upon redemption thereof. The Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of bankruptcy of the Company, any right of set-off or to counterclaim, any right to require a proceeding first against the Company, protest or notice with respect to this Debenture or the indebtedness evidenced thereby or with respect to any sinking fund payment required under this Debenture and all demands whatsoever, and covenants that this Guarantee will not be discharged except by payment in full of the principal of, and premium, if any, and interest on this Debenture. 26 28 The Guarantor shall be subrogated to all rights of the Holder against the Company in respect of any amounts paid to such Holder by the Guarantor pursuant to the provisions of this Guarantee; provided, however, that the Guarantor shall not, without the consent of all Holders of Debentures, be entitled to enforce, or to receive, any payments arising out of or based upon such right of subrogation until the principal of, (and premium, if any) and interest then due and payable on all Debentures of the same series issued under the Indenture shall have been irrevocably paid in full in accordance with the terms of such Debentures. This Guarantee is a guarantee of payment when due and not of collection. This Guarantee shall continue to be effective, or be reinstated, as the case may be, in respect of this Debenture if at any time payment, or any part thereof, of this Debenture is rescinded or must otherwise be restored or returned by the Holder of this Debenture or any trustee for said Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any other entity, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any other entity or any substantial part of their respective property, or otherwise, all as though such payments had not been made. No reference herein to such Indenture and no provision of this Guarantee or of such Indenture shall alter or impair the guarantee of the Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal of, and premium, if any, and interest on the Debenture upon which this Guarantee is endorsed at the times, place and rate, and in the cash or currency prescribed herein. The obligations of the Guarantor under this Guarantee are, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Guarantor, and this Guarantee is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Debenture on which this Guarantee is endorsed, by accepting the same, (a) agrees to such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, but without regard to principles of conflicts of laws. 27 29 This Guarantee shall not be valid or become obligatory for any purpose until the certificate of authentication on this Debenture shall have been manually signed by or on behalf of the Trustee under such Indenture. All terms used in this Guarantee which are defined in such Indenture shall have the meanings assigned to them in such Indenture. 28 30 IN WITNESS WHEREOF, Aetna Inc. has caused the execution hereof in its corporate name by its duly authorized officers. AETNA INC. By ------------------------------- [Seal] Attest: ---------------------------- Name: Title: 29 31 STATE OF [ ] ) ) ss.: COUNTY OF [ ] ) _________, 199__ On the _______ day of ____________, in the year one thousand nine hundred ninety-_______ before me personally came _______________________ to me known, who, being by me duly sworn, did depose and say that he resides at _______________; that he is a ____________ of AETNA INC., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation and that he signed his name thereto by like authority. -------------------------------- NOTARY PUBLIC My Commission Expires 30 EX-4.12 6 FORM OF AMENDED AND RESTATED DECLARATION 1 Exhibit 4.12 - -------------------------------------------------------------------------------- Form of AMENDED AND RESTATED DECLARATION OF TRUST AETNA CAPITAL TRUST [ ], ------------------------------ ------------------------------ Dated as of , 19 ---------- -- ------------------------------ - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS --------------- PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions.......................................2 ARTICLE 2 TRUST INDENTURE ACT SECTION 2.01. Trust Indenture Act; Application..................9 SECTION 2.02. Lists of Holders of Preferred Securities..........9 SECTION 2.03. Reports by the Property Trustee...................9 SECTION 2.04. Periodic Reports to Property Trustee.............10 SECTION 2.05. Evidence of Compliance with Conditions Precedent.10 SECTION 2.06. Events of Default; Waiver........................10 SECTION 2.07. Disclosure of Information........................12 ARTICLE 3 ORGANIZATION SECTION 3.01. Name.............................................13 SECTION 3.02. Office...........................................13 SECTION 3.03. Issuance of the Trust Securities.................13 SECTION 3.04. Purchase of Debentures...........................14 SECTION 3.05. Purpose..........................................14 SECTION 3.06. Authority........................................15 SECTION 3.07. Title to Property of the Trust...................15 SECTION 3.08. Powers and Duties of the Regular Trustees........15 SECTION 3.09. Prohibition of Actions by Trust and Trustees.....18 SECTION 3.10. Powers and Duties of the Property Trustee........19 SECTION 3.11. Delaware Trustee.................................22 SECTION 3.12. Certain Rights and Duties of the Property Trustee .........................................22 SECTION 3.13. Registration Statement and Related Matters.......25 SECTION 3.14. Filing of Amendments to Certificate of Trust.....26 SECTION 3.15. Execution of Documents by Regular Trustees.......26 SECTION 3.16. Trustees Not Responsible for Recitals or Issuance of Securities...........................26 SECTION 3.17. Duration of Trust................................26 3 PAGE ---- ARTICLE 4 THE SPONSOR SECTION 4.01. Purchase of Common Securities by Services........27 SECTION 4.02. Expenses.........................................27 ARTICLE 5 TRUSTEES SECTION 5.01. Number of Trustees; Qualifications...............28 SECTION 5.02. Appointment, Removal and Resignation of Trustees.30 SECTION 5.03. Vacancies among Trustees.........................32 SECTION 5.04. Effect of Vacancies..............................32 SECTION 5.05. Meetings.........................................32 SECTION 5.06. Delegation of Power..............................33 SECTION 5.07. Other Activities.................................33 ARTICLE 6 DISTRIBUTIONS SECTION 6.01. Distributions....................................34 ARTICLE 7 ISSUANCE OF SECURITIES SECTION 7.01. General Provisions Regarding Securities..........34 ARTICLE 8 TERMINATION OF TRUST SECTION 8.01. Termination of Trust.............................36 ARTICLE 9 TRANSFER OF INTERESTS SECTION 9.01. Transfer of Securities...........................37 SECTION 9.02. Transfer of Certificates.........................37 SECTION 9.03. Deemed Security Holders..........................38 SECTION 9.04. Book Entry Interests.............................38 SECTION 9.05. Notices to Holders of Certificates...............39 SECTION 9.06. Appointment of Successor Clearing Agency.........39 SECTION 9.07. Definitive Preferred Securities Certificates.....39 ii 4 PAGE ---- SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates .............................40 ARTICLE 10 LIMITATION OF LIABILITY; INDEMNIFICATION SECTION 10.01. Exculpation.....................................40 SECTION 10.02. Indemnification.................................41 ARTICLE 11 ACCOUNTING SECTION 11.01. Fiscal Year.....................................41 SECTION 11.02. Certain Accounting Matters......................41 SECTION 11.03. Banking.........................................43 SECTION 11.04. Withholding.....................................43 ARTICLE 12 AMENDMENTS AND MEETINGS SECTION 12.01. Amendments......................................43 SECTION 12.02. Meetings of the Holders of Securities; Action by Written Consent.......................45 ARTICLE 13 REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.01. Representations and Warranties of Property Trustee ...............................47 ARTICLE 14 MISCELLANEOUS SECTION 14.01. Notices.........................................48 SECTION 14.02. Undertaking for Costs...........................50 SECTION 14.03. Governing Law...................................50 SECTION 14.04. Headings........................................50 SECTION 14.05. Partial Enforceability..........................51 SECTION 14.06. Counterparts....................................51 SECTION 14.07. Intention of the Parties........................51 SECTION 14.08. Successors and Assigns..........................51 iii 5 PAGE ---- EXHIBIT A: CERTIFICATE OF TRUST EXHIBIT B: TERMS OF PREFERRED SECURITIES EXHIBIT C: TERMS OF COMMON SECURITIES iv 6 AMENDED AND RESTATED DECLARATION OF TRUST OF AETNA CAPITAL TRUST [ ] __________, 19__ AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of __________, 199__ by the undersigned trustees (together with all other Persons from time to time duly appointed and serving as trustees in accordance with the provisions of this Declaration, the "Trustees"), Aetna Services, Inc., a Connecticut corporation, as trust sponsor ("Services" or the "Sponsor"), Aetna Inc., a Connecticut corporation ("Aetna"), and by the holders, from time to time, of undivided beneficial interests in the assets of the Trust to be issued pursuant to this Declaration. WHEREAS, the Sponsor and the Trustees entered into a Declaration of Trust dated as of May 7, 1998 (the "Original Declaration") in order to establish a statutory business trust (the "Trust") under the Business Trust Act (as hereinafter defined); WHEREAS, the Certificate of Trust (the "Certificate of Trust") of the Trust was filed with the office of the Secretary of State of the State of Delaware on May 7, 1998; WHEREAS, the Trustees and the Sponsor desire to continue the Trust pursuant to the Business Trust Act, for the purpose of, as described more fully in Sections 3.03 and 3.04 hereof, (i) issuing and selling Preferred Securities (as defined herein) representing preferred undivided beneficial interests in the assets of the Trust for cash and investing the proceeds thereof in Debentures (as hereinafter defined) of Services issued under the Indenture (as hereinafter defined) to be held as assets of the Trust and (ii) issuing and selling Common Securities (as hereinafter defined) representing common undivided beneficial interests in the assets of the Trust to Services in exchange for cash and investing the proceeds thereof in additional Debentures issued under the Indenture to be held as assets of the Trust; and WHEREAS, Aetna has agreed to assume certain responsibilities under this Declaration; NOW, THEREFORE, it being the intention of the parties hereto that the Trust constitute a business trust under the Business Trust Act, that the Original 7 Declaration be amended and restated in its entirety as provided herein and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets referred to in clauses (i) and (ii) of the previous Whereas clause purchased by the Trust will be held in trust for the benefit of the Holders (as defined herein) from time to time, of the Certificates (as defined herein) representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.01; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Amended and Restated Declaration of Trust (including Exhibits A, B and C hereto (the "Exhibits")) as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections and Exhibits are to Articles and Sections of and Exhibits to this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Aetna" means Aetna Inc., a Connecticut corporation, or any successor entity in a merger, to its rights and obligations under this Declaration. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder. 2 8 "Book Entry Interest" means a beneficial interest in a Global Certificate registered in the name of a Clearing Agency or a nominee thereof, ownership and transfers of which shall be maintained and made through book entries by such Clearing Agency as described in Section 9.04. "Business Day" means any day other than a day on which banking institutions in New York, New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code ss. 3801 et seq., as it may be amended from time to time. "Certificate" means a Common Security Certificate or a Preferred Security Certificate. "Certificate of Trust" has the meaning set forth in the second WHEREAS clause above. "Clearing Agency" means an organization registered as a "Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as depository for the Preferred Securities and in whose name or in the name of a nominee of that organization, shall be registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of the Preferred Securities. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" means the Closing Date as specified in the Underwriting Agreement, which date is also the date of execution and delivery of this Declaration. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. A reference to a specific section ((Sec.)) 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 Declaration, as such specific section or corresponding provision is in effect on the date of application of the provisions of this Declaration containing such reference. "Commission" means the Securities and Exchange Commission. "Common Security" has the meaning specified in Section 7.01(b). 3 9 "Common Security Certificate" means a definitive certificate in fully registered form representing a Common Security substantially in the form of Annex I to Exhibit C. "Covered Person" means (i) any officer, director, shareholder, partner, member, representative, employee or agent of the Trust or its Affiliates, (ii) any officer, director, shareholder, employees, representatives or agents of Aetna or its Affiliates and (iii) the Holders from time to time of the Securities. "Debenture Trustee" means The First National Bank of Chicago, as trustee under the Indenture until a successor is appointed thereunder and thereafter means such successor trustee. "Debentures" means the series of Junior Subordinated Debentures issued by Services under the Indenture to the Property Trustee and entitled the "____% Junior Subordinated Debentures due [ ]". "Definitive Preferred Security Certificates" has the meaning set forth in Section 9.04. "Delaware Trustee" has the meaning set forth in Section 5.01(a)(iii). "Depositary Agreement" means the agreement among the Trust, the Property Trustee, Aetna and Services dated as of the Closing Date, as the same may be amended or supplemented from time to time. "Distribution" means a distribution payable to Holders of Securities in accordance with Section 6.01. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Event of Default" in respect of the Securities means an Indenture Event of Default has occurred and is continuing in respect of the Debentures. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time or any successor legislation. "Fiscal Year" has the meaning specified in Section 11.01. "Global Certificate" has the meaning set forth in Section 9.04. 4 10 "Holder" means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. "Indemnified Person" means any Trustee, any Affiliate of any Trustee, any officers, directors, shareholders, members, partners, employees, representatives or agents of any Trustee, or any employee or agent of the Trust or its Affiliates. "Indenture" means the Indenture dated as of __________ __, 199__ among and between Services, Aetna and the Debenture Trustee as supplemented by the [ ] Supplemental Indenture thereto dated as of , pursuant to which the Debentures are to be issued by Services and to be guaranteed by Aetna. "Indenture Event of Default" means an event or condition defined as an "Event of Default" with respect to the Debentures under Section 6.01(a) of the Indenture has occurred and is continuing. "Investment Company" means an investment company as defined in the Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as amended from time to time or any successor legislation. "Legal Action" has the meaning specified in Section 3.08(g). "Liquidation Distribution" has the meaning set forth in Exhibits B and C hereto establishing the terms of the Securities. "Majority in liquidation amount of the Securities" means, except as otherwise required by the Trust Indenture Act and except as provided in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holder(s) of outstanding Preferred Securities or Common Securities voting separately as a class, who are the record owners of a relevant class of Securities whose liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents more than 50% of the liquidation amount of all outstanding Securities of such class. 5 11 "Ministerial Action" has the meaning set forth in the terms of the Securities as set forth in Exhibits B and C hereto. "Option Closing Date" means the Option Closing Date as specified in the Underwriting Agreement. "Original Declaration" has the meaning set forth in the first WHEREAS clause above. "Paying Agent" has the meaning specified in Section 3.10(i). "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee" means the Guarantee Agreement dated as of __________, 199__ of Services and Aetna in respect of the Preferred Securities. "Preferred Security" has the meaning specified in Section 7.01(b). "Preferred Security Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Preferred Security Certificate" means a definitive certificate in fully registered form representing a Preferred Security substantially in the form of Annex I to Exhibit B. "Property Trustee" means the Trustee meeting the eligibility requirements set forth in Section 5.01(c) and having the duties set forth for the Property Trustee herein. "Property Account" has the meaning specified in Section 3.10(c)(i). "Quorum" means a majority of the Regular Trustees or, if there are only two Regular Trustees, both such Regular Trustees. "Regular Trustee" means any Trustee other than the Property Trustee and the Delaware Trustee. 6 12 "Related Party" means any direct or indirect wholly owned subsidiary of Services or Aetna or any other Person which owns, directly or indirectly, 100% of the outstanding voting securities of Services or Aetna. "Resignation Request" has the meaning specified in Section 5.02(d). "Responsible Officer" means, with respect to the Property Trustee, any officer of the Property Trustee assigned to administer corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any successor rule thereunder. "Securities" means the Common Securities and the Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time or any successor legislation. "66-2/3% in liquidation amount of the Securities" means, except as otherwise required by the Trust Indenture Act and except as provided in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holder(s) of outstanding Preferred Securities or Common Securities, voting separately as a class, who are the record owners of a relevant class of Securities whose liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents 66-2/3% or more of the liquidation amount of all outstanding Securities of such class. "Special Event" has the meaning set forth in the terms of the Securities as set forth in Exhibits B and C hereto. "Sponsor" or "Services" means Aetna Services, Inc., a Connecticut corporation, or any successor entity in a merger, in its capacity as sponsor of the Trust. 7 13 "Successor Delaware Trustee" has the meaning specified in Section 5.02(b)(ii). "Successor Property Trustee" means a successor Trustee possessing the qualifications to act as Property Trustee under Section 5.01(c). "10% in liquidation amount of the Securities" means, except as otherwise required by the Trust Indenture Act and except as provided in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holder(s) of outstanding Preferred Securities or Common Securities, voting separately as a class, who are the record owners of a relevant class of Securities whose liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents 10% or more of the liquidation amount of all outstanding Securities of such class. "Treasury Regulations" means the income tax regulations including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Underwriting Agreement" means the Underwriting Agreement dated as of __________, 199__ among the Trust, the Sponsor and Aetna, as representative of the several underwriters named therein. 8 14 ARTICLE 2 TRUST INDENTURE ACT SECTION 2.01. Trust Indenture Act; Application. (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions; (b) if and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by ss.ss.310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; (c) the Property Trustee, to the extent permitted by applicable law and/or the rules and regulations of the Commission, shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act; and (d) the application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.02. Lists of Holders of Preferred Securities. (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Property Trustee with such information as is required under ss. 312(a) of the Trust Indenture Act at the times and in the manner provided in ss. 312(a); and (b) the Property Trustee shall comply with its obligations under ss.ss. 310(b), 311 and 312(b) of the Trust Indenture Act. SECTION 2.03. Reports by the Property Trustee. Within 60 days after May 15 of each year, the Property Trustee shall provide to the Holders of the Securities such reports as are required by ss. 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by ss. 313 of the Trust Indenture Act. The Property Trustee shall also comply with the requirements of ss. 313(d) of the Trust Indenture Act. 9 15 SECTION 2.04. Periodic Reports to Property Trustee. Each of the Sponsor, Aetna and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee, the Commission and the Holders of the Securities, as applicable, such documents, reports and information as required by ss. 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by ss. 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by ss. 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to ss. 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each Fiscal Year). SECTION 2.05. Evidence of Compliance with Conditions Precedent. Each of the Sponsor, Aetna and the Regular Trustees on behalf of the Trust shall provide to the Property Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration which relate to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to ss. 314(c) shall comply with ss. 314(e) of the Trust Indenture Act. SECTION 2.06. Events of Default; Waiver. (a) Subject to Section 2.06(c), Holders of Preferred Securities may, by vote of at least a Majority in liquidation amount of the Preferred Securities (A) in accordance with the terms of the Preferred Securities, direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee, or (B) on behalf of the Holders of all Preferred Securities, waive any past Event of Default in respect of the Preferred Securities and its consequences; provided that if the Event of Default arises out of an Indenture Event of Default: (i) which is not waivable under the Indenture, the Event of Default under this Declaration shall also be not waivable; or (ii) which requires the consent or vote of (1) holders of Debentures representing a specified percentage greater than a majority in principal amount of the Debentures, or (2) each holder of Debentures, the Event of Default under this Declaration may only be waived by, in the case of clause (1) above, the vote of Holders of Preferred Securities representing such specified percentage of the aggregate liquidation amount of the Preferred Securities or, in the case of clause (2) above, each Holder of Preferred Securities. 10 16 Upon such waiver, any such default shall cease to exist, and any Event of Default with respect to the Preferred Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Preferred Securities or impair any right consequent thereon. (b) Subject to Section 2.06(c), Holders of Common Securities may by vote of at least a Majority in liquidation amount of the Common Securities, (A) in accordance with the terms of the Common Securities, direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or exercising any trust or power conferred upon the Property Trustee or (B) on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the Event of Default arises out of an Indenture Event of Default: (i) which is not waivable under the Indenture, except where the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below, the Event of Default under this Declaration shall also not be waivable; or (ii) which requires the consent or vote of (1) holders of Debentures representing a specified percentage greater than a majority in principal amount of the Debentures or (2) each holder of Debentures, except where the holders of the Common Securities are deemed to have waived such Event of Default under this Declaration as provided below, the Event of Default under this Declaration may only be waived by, in the case of clause (1) above, the vote of Holders of Common Securities representing such specified percentage of the aggregate liquidation amount of the Common Securities or, in the case of clause (2) above, each holder of Common Securities; and provided, further, that each Holder of Common Securities will be deemed to have waived any Event of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived by the Holders of Preferred Securities as provided in this Declaration or otherwise eliminated and until all Events of Default with respect to the Preferred Securities have been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of the Preferred Securities and only the Holders of the Preferred Securities will have the right to direct the Property Trustee in accordance with the terms of this Declaration or the Securities. In the event that any Event of Default with respect to the Preferred Securities is waived by the Holders of Preferred Securities as 11 17 provided in this Declaration, the Holders of Common Securities agree that such waiver shall also constitute the waiver of such Event of Default with respect to the Common Securities for all purposes under this Declaration without any further act, vote or consent of the Holders of the Common Securities. Subject to the foregoing provisions of this Section 2.06(b), upon such waiver, any such default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) The right of any Holder of Securities to receive payment of Distributions on the Securities in accordance with this Declaration and the terms of the Securities set forth in Exhibits B and C on or after the respective payment dates therefor, or to institute suit for the enforcement of any such payment on or after such payment dates, shall not be impaired without the consent of such Holder. (d) As provided in the terms of the Securities set forth in Exhibits B and C hereto, a waiver of an Indenture Event of Default by the Property Trustee at the written direction of the Holders of the Preferred Securities constitutes a waiver of the corresponding Event of Default under this Declaration in respect of the Securities. SECTION 2.07. Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Securities in accordance with ss. 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to ss. 312 of the Trust Indenture Act, nor shall the Property Trustee be held accountable by reason of mailing any material pursuant to a request made under ss. 312(b) of the Trust Indenture Act. 12 18 ARTICLE 3 ORGANIZATION SECTION 3.01. Name. The Trust continued by this Declaration is named "Aetna Capital Trust [ ]" as such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.02. Office. The address of the principal office of the Trust is c/o Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156. Upon ten days' written notice to the Holders, the Regular Trustees may change the location of the Trust's principal office. At any time, the Regular Trustees may designate another registered agent and/or registered office. SECTION 3.03. Issuance of the Trust Securities. On __________, 199_ the Sponsor, on behalf of the Trust and pursuant to the Original Declaration, executed and delivered the Underwriting Agreement. On the Closing Date and contemporaneously with the execution and delivery of this Declaration, the Regular Trustees, on behalf of the Trust, shall execute and deliver to (i) the underwriters named in the Underwriting Agreement, a Global Certificate, registered in the name of the nominee of the initial Clearing Agency as specified in Section 9.04, in an aggregate amount of ___________ Preferred Securities having an aggregate liquidation amount of $__________, against receipt of the aggregate purchase price of such Preferred Securities of $___________, and (ii) the Sponsor, Common Securities Certificates, registered in the name of the Sponsor, in an aggregate amount of ________ Common Securities having an aggregate liquidation amount of $____________, against receipt of the aggregate purchase price of such Common Securities of $___________.(1) In the event and to the extent the over allotment option granted by the Trust pursuant to the Underwriting Agreement is exercised by such underwriters, on the Option Closing Date the Regular Trustees, on behalf of the Trust, shall execute and deliver to such underwriters a Global Certificate, registered in the name of the nominee of the initial Clearing Agency as specified in Section 9.04, in an aggregate amount of up to ___________ Preferred - ---------- (1) See Section 4.01. 13 19 Securities having an aggregate liquidation amount of up to $___________, against receipt of the aggregate purchase price of such Preferred Securities of up to $__________. SECTION 3.04. Purchase of Debentures. On the Closing Date and contemporaneously with the execution and delivery of this Declaration, the Regular Trustees, on behalf of the Trust, shall purchase from the Sponsor with the proceeds received by the Trust from the sale of the Securities on such date pursuant to Section 3.03, at a purchase price of 100% of the principal amount thereof, Debentures, registered in the name of the Property Trustee and having an aggregate principal amount equal to $___________, and, in satisfaction of the purchase price for such Debentures, the Regular Trustee, on behalf of the Trust, shall deliver or cause to be delivered to the Sponsor the sum of $___________. In the event the over allotment option granted by the Trust with respect to the Preferred Securities pursuant to the Underwriting Agreement is exercised by the underwriters named therein, on the Option Closing Date the Regular Trustees, on behalf of the Trust, shall purchase from the Sponsor with the proceeds received by the Trust from the sale of the Preferred Securities on such date pursuant to Section 3.03, at a purchase price of 100% of the principal amount thereof, additional Debentures, registered in the name of the Property Trustee and having an aggregate principal amount of up to $__________, and, in satisfaction of the purchase price for such Debentures, the Regular Trustees, on behalf of the Trust, shall deliver or cause to be delivered to the Sponsor an amount equal to the aggregate principal amount of the Debentures being purchased. SECTION 3.05. Purpose. The exclusive purposes and functions of the Trust are: (a)(i) to issue and sell Preferred Securities for cash and use the proceeds of such sales to acquire from Services Debentures issued under the Indenture having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities so issued and sold; (ii) to enter into such agreements and arrangements as may be necessary in connection with the sale of Preferred Securities to the initial purchasers thereof (including the Underwriting Agreement) and to take all action, and exercise such discretion, as may be necessary or desirable in connection therewith and to file such registration statements or make such other filings under the Securities Act, the Exchange Act or state securities or "Blue Sky" laws as may be necessary or desirable in connection therewith and the issuance of the Preferred Securities; and (iii) to issue and sell Common Securities to Services for cash and use the proceeds of such sale to purchase as trust assets an equal aggregate principal amount of Debentures issued under the Indenture; 14 20 and (b) except as otherwise limited herein, to engage in only those other activities necessary, convenient or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets or at any time while the Securities are outstanding, otherwise undertake (or permit to be undertaken) any activity that would result in or cause the Trust to be treated as anything other than a grantor trust for United States federal income tax purposes. SECTION 3.06. Authority. Subject to the limitations provided in this Declaration and to the specific duties of the Property Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Regular Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Property Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.07. Title to Property of the Trust. Except as provided in Section 3.10 with respect to the Debentures and the Property Account or unless otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an individual undivided beneficial interest in the assets of the Trust. SECTION 3.08. Powers and Duties of the Regular Trustees. The Regular Trustees shall have the exclusive power, authority and duty to cause the Trust, and shall cause the Trust, to engage in the following activities: (a) to issue Preferred Securities and Common Securities, in each case in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Preferred Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities and the issuance of Securities shall be limited to (x) a one-time, simultaneous issuance of both Preferred Securities and Common Securities on the Closing Date and (y) any subsequent issuance of Preferred Securities on the Option Closing Date pursuant to an exercise of the over-allotment option granted to underwriters in the Underwriting Agreement; 15 21 (b) in connection with the issuance of the Preferred Securities, at the direction of the Sponsor, to effect or cause to be effected the filings, and to execute or cause to be executed, the documents, set forth in Section 3.13 and to execute, deliver and perform on behalf of the Trust the Depositary Agreement; (c) to acquire as trust assets Debentures with the proceeds of the sale of the Preferred Securities and Common Securities; provided, however, that the Regular Trustees shall cause legal title to all of the Debentures to be vested in, and the Debentures to be held of record in the name of, the Property Trustee for the benefit of the Holders of the Preferred Securities and the Common Securities; (d) subject to Section 3.13, to cause the Trust to enter into the Underwriting Agreement and such other agreements and arrangements as may be necessary or desirable in connection with the sale of Preferred Securities to the initial purchasers thereof and the consummation thereof, and to take all action, and exercise all discretion, as may be necessary or desirable in connection with the consummation thereof; (e) to give the Sponsor, Aetna and the Property Trustee prompt written notice of the occurrence of a Special Event; provided, that the Regular Trustees shall consult with the Sponsor and the Property Trustee before taking or refraining to take any Ministerial Action in relation to a Special Event; (f) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including for the purposes of Section 316(c) of the Trust Indenture Act and with respect to Distributions, voting rights, redemptions, and exchanges, and to issue relevant notices to Holders of the Preferred Securities and Common Securities as to such actions and applicable record dates; (g) to bring or defend, pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.10(e), the Property Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; 16 22 (j) to give the certificate to the Property Trustee required by ss. 314(a)(4) of the Trust Indenture Act, which certificate may be executed by any Regular Trustee; (k) to incur expenses which are necessary or incidental to carrying out any of the purposes of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities, the Regular Trustees hereby initially appointing the Property Trustee for such purposes; (m) to take all actions and perform such duties as may be required of the Regular Trustee pursuant to this Declaration, including, without limitation, the terms of the Securities set forth in Exhibits B and C hereto; (n) to execute all documents or instruments, perform all duties and powers and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing; (o) to take all action which may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust has been created; (p) to take all action, not inconsistent with this Declaration or with applicable law, which the Regular Trustees determine in their discretion to be reasonable and necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.08, in order that: (i) the Trust will not be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and will be treated as a grantor trust for United States federal income tax purposes; and (iii) the Trust will comply with any requirements imposed by any taxing authority on holders of instruments treated as indebtedness for United States federal income tax purposes; 17 23 provided that such action does not adversely affect the interests of Holders; (q) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; and (r) subject to the requirements of Rule 3a-7 and ss. 317(b) of the Trust Indenture Act, to appoint one or more Paying Agents in addition to the Property Trustee. The Regular Trustees must exercise the powers set forth in this Section 3.08 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.05 and the Regular Trustees shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.05. Subject to this Section 3.08, the Regular Trustees shall have none of the powers nor any of the authority of the Property Trustee set forth in Section 3.10. SECTION 3.09. Prohibition of Actions by Trust and Trustees. The Trust shall not, and the Trustees (including the Property Trustee) shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Property Trustee) shall not cause the Trust to: (a) invest any proceeds received by the Trust from holding the Debentures but shall promptly distribute from the Property Account all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (b) acquire any assets other than as expressly provided herein; (c) possess Trust property for other than a Trust purpose; (d) make any loans, other than loans represented by the Debentures; (e) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever; (f) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, the Trust other than the Securities; (g) incur any indebtedness for borrowed money; or 18 24 (h) (i) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under this Declaration or the Indenture, (iii) exercise any right to rescind or annul any declaration that the principal of all of the Debentures shall be due and payable or (iv) consent to any amendment, modification or termination of this Declaration, the Indenture or the Debentures, where such consent shall be required, unless in the case of this clause (h) the Property Trustee shall have received an unqualified opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that such action will not cause the Trust to be classified for United States federal income tax purposes as an association taxable as a corporation or partnership and that the Trust will continue to be classified as a grantor trust for United States federal income tax purposes. SECTION 3.10. Powers and Duties of the Property Trustee. (a) The legal title to the Debentures shall be owned by and held of record in the name of the Property Trustee (acting in such capacity) in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Property Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Property Trustee in accordance with Article V. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) The Property Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or, if the Property Trustee does not also act as the Delaware Trustee, the Delaware Trustee. (c) The Property Trustee shall: (i) establish and maintain a segregated non-interest bearing bank account (the "Property Account") in the name of and under the exclusive control of the Property Trustee on behalf of the Holders of the Securities and on the receipt of payments of funds made in respect of the Debentures held by the Property Trustee, deposit such funds into the Property Account and, without any further acts of the Property Trustee or the Regular Trustees, promptly make payments to the Holders of the Preferred Securities and Common Securities from the Property Account in accordance with Section 6.01. Funds in the Property Account shall be held uninvested, and without liability for interest thereon, until disbursed in accordance with this Declaration. The Property Account shall be an account which is maintained with a banking institution whose long term 19 25 unsecured indebtedness is rated by a "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act, at least equal to (but in no event less than "A" or the equivalent) the rating assigned to the Preferred Securities by a nationally recognized statistical rating organization, and may include the Property Trustee; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect promptly the redemption of the Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; (iii) upon notice of distribution issued by the Regular Trustees in accordance with the terms of the Preferred Securities and the Common Securities, engage in such ministerial activities as shall be necessary or appropriate to effect promptly the distribution pursuant to terms of the Securities of Debentures to Holders of Securities upon the occurrence of a Special Event; and (iv) have the legal power to exercise all of the rights, powers and privileges of a holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Property Trustee, subject to Section 2.06(b), shall for the benefit of the Holders of the Securities, enforce its rights as holder of the Debentures under the Indenture, subject to the rights of the Holders of the Preferred Securities pursuant to the terms of this Declaration, the Business Trust Act and the Trust Indenture Act. (d) The Property Trustee shall take all actions and perform such duties as may be specifically required of the Property Trustee pursuant to the terms of this Declaration, including, without limitation, the Securities set forth in Exhibits B and C hereto. (e) The Property Trustee shall take any Legal Action which arises out of or in connection with an Event of Default or the Property Trustee's duties and obligations under this Declaration, the Business Trust Act or the Trust Indenture Act. (f) All moneys deposited in the Property Account, and all Debentures held by the Property Trustee for the benefit of the Holders of the Securities will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of the Property Trustee or its agents or their creditors. 20 26 (g) The Property Trustee shall, within 90 days after the occurrence of a default with respect to the Securities, transmit by mail, first class postage prepaid, to the holders of the Securities, as their names and addresses appear upon the register, notice of all defaults with respect to the Securities known to the Property Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 3.10(g) being hereby defined to be an Indenture Event of Default, not including any periods of grace provided for in the Indenture and irrespective of the giving of any notice provided therein); provided, that, except in the case of default in the payment of the principal of (or premium, if any) or interest on any of the Debentures, the Property Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers, of the Property Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. The Property Trustee shall not be deemed to have knowledge of any default, except (i) a default in the payment of principal, premium or interest on the Debentures or (ii) any default as to which the Property Trustee shall have received written notice or a Responsible Officer charged with the administration of this Declaration shall have obtained written notice. (h) The Property Trustee shall continue to serve as a Trustee until either: (i) the Trust has been completely liquidated and the proceeds thereof distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Property Trustee has been appointed and accepted that appointment in accordance with Article 5. (i) The Property Trustee shall act as paying agent in respect of the Common Securities and, if the Preferred Securities are not in book entry only form, the Preferred Securities and, subject to Section 3.08(r), may authorize one or more Persons (each, a "Paying Agent") to pay Distributions, redemption payments or liquidation payments on behalf of the Trust with respect to the Preferred Securities. Any such Paying Agent shall comply with ss. 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee, after consultation with the Regular Trustees, at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Property Trustee, subject to Section 3.08(r). (j) The Property Trustee shall give prompt written notice to the Holders of the Securities of any notice received by it from Services of its election to defer 21 27 payments of interest on the Debentures by extending the interest payment period with respect thereto. (k) Subject to this Section 3.10, the Property Trustee shall have none of the powers or the authority of the Regular Trustees set forth in Section 3.08. (l) The Property Trustee shall exercise the powers, duties and rights set forth in this Section 3.10 and Section 3.12 in a manner which is consistent with the purposes and functions of the Trust set out in Section 3.05, and the Property Trustee shall not take any action which is inconsistent with the purposes and functions of the Trust set forth in Section 3.05. SECTION 3.11. Delaware Trustee. Notwithstanding any other provision of this Declaration other than Section 5.01(a)(iii), the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Trustees described in this Declaration. Except as set forth in Section 5.01(a)(iii), the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of ss. 3807(a) of the Business Trust Act. No implied covenants or obligations shall be read into this Declaration against the Delaware Trustee. SECTION 3.12. Certain Rights and Duties of the Property Trustee. (a) The Property Trustee, before the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration, and no implied covenants shall be read into this Declaration against the Property Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.06, the Property Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Declaration shall be construed to relieve the Property Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: 22 28 (A) the duties and obligations of the Property Trustee shall be determined solely by the express provisions of this Declaration, and the Property Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Property Trustee; and (B) in the absence of bad faith on the part of the Property Trustee, the Property Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Property Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Property Trustee, the Property Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Property Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Property Trustee, unless it shall be proved that the Property Trustee was negligent in ascertaining the pertinent facts; (iii) the Property Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders as provided herein relating to the time, method and place of conducting any proceeding for any remedy available to the Property Trustee hereunder or under the Indenture, or exercising any trust or power conferred upon the Property Trustee under this Declaration; and (iv) no provision of this Declaration shall require the Property Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Declaration or adequate indemnity against such risk or liability is not reasonably assured to it. (c) Subject to the provisions of Sections 3.12(a) and 3.12(b): (i) whenever in the administration of this Declaration, the Property Trustee shall deem it desirable that a matter be proved or 23 29 established prior to taking, suffering or omitting any action hereunder, the Property Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part and, if the Trust is excluded from the definition of Investment Company solely by means of Rule 3a-7, subject to the requirements of Rule 3a-7, request and rely upon a certificate, which shall comply with the provisions of ss. 314(e) of the Trust Indenture Act, signed by any two of the Regular Trustees or by an authorized officer of the Sponsor, as the case may be; (ii) The Property Trustee (A) may consult with counsel (which may be counsel to the Sponsor or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (iii) The Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care; (iv) The Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holders, unless such Holders shall have offered to the Property Trustee reasonable security and indemnity against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Property Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived) to exercise such of the rights and powers vested in it by this Declaration, and to use the same degree of care and skill in this exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; and (v) Any action taken by the Property Trustee or its agents hereunder shall bind the Holders of the Securities and the signature of the Property Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as 24 30 to the authority of the Property Trustee to so act, or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Property Trustee's or its agent's taking such action. SECTION 3.13. Registration Statement and Related Matters. In accordance with the Original Declaration, Services and the Trustees have authorized and directed, and hereby confirm the authorization of, Services, as the sponsor of the Trust, (i) to file with the Commission and execute, in each case on behalf of the Trust, (a) the Registration Statement on Form S-3 (File No. 333-07657) (the "1933 Act Registration Statement") including any amendments thereto and any further pre-effective or post-effective amendments to such Registration Statement, relating to the registration under the Securities Act of the Preferred Securities of the Trust and (b) a Registration Statement on Form 8-A or other appropriate form (the "1934 Act Registration Statement") (including all pre-effective and post-effective amendments thereto) relating to the registration of the Preferred Securities of the Trust under Section 12(b) of the Exchange Act; (ii) to prepare and file with the New York Stock Exchange and execute on behalf of the Trust a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Preferred Securities to be listed on the New York Stock Exchange; (iii) to prepare and file and execute on behalf of the Trust such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents as shall be necessary or desirable to register the Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as Services on behalf of the Trust, may deem necessary or desirable and (iv) to negotiate the terms of and to execute on behalf of the Trust the Underwriting Agreement. In the event that any filing referred to in clauses (i)-(iii) above is required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws, to be executed on behalf of the Trust by the Trustees, the Regular Trustees, in their capacities as Trustees of the Trust, are hereby authorized and directed to join in any such filing and to execute on behalf of the Trust any and all of the foregoing, it being understood that the Property Trustee and the Delaware Trustee, in their capacities as Trustees of the Trust, shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange or state securities or blue sky laws. In connection with all of the foregoing, Aetna, Services and each Trustee, solely in its capacity as Trustee of the Trust, constitute and appoint Richard L. Huber, Alfred P. Quirk, Jr., Alan M. Bennett and Thomas J. Calvocoressi and each of them, as his, her or its, as the case may be, true and lawful attorneys-in-fact, and agents, with full power of substitution and resubstitution, for Aetna, Services or 25 31 such Trustee or in Aetna's, Services' or such Trustee's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the 1933 Act Registration Statement and the 1934 Act Registration Statement and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents 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 Aetna, Services or such Trustee might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her substitute or substitutes, shall do or cause to be done by virtue hereof. SECTION 3.14. Filing of Amendments to Certificate of Trust. The Certificate of Trust as filed with the Secretary of State of the State of Delaware on May 7, 1998 is attached hereto as Exhibit A. On or after the date of execution of this Declaration, the Trustees shall cause the filing with the Secretary of State of the State of Delaware of such amendments to the Certificate of Trust as the Trustees shall deem necessary or desirable. SECTION 3.15. Execution of Documents by Regular Trustees. Unless otherwise determined by the Regular Trustees and except as otherwise required by the Business Trust Act with respect to the Certificate of Trust or otherwise, a majority of, or if there are only two, both of, the Regular Trustees are authorized to execute and deliver on behalf of the Trust any documents which the Regular Trustees have the power and authority to execute or deliver pursuant to this Declaration. SECTION 3.16. Trustees Not Responsible for Recitals or Issuance of Securities. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, Aetna and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.17. Duration of Trust. The Trust, absent termination pursuant to the provisions of Article 8 hereof, shall have existence until ___________, 20__. 26 32 ARTICLE 4 THE SPONSOR SECTION 4.01. Purchase of Common Securities by Services. On the Closing Date Services will purchase all of the Common Securities issued by the Trust at the same time as the Preferred Securities to be issued on such date are issued, such purchase to be in an amount equal to 3% of the total capital of the Trust (including for this purpose the maximum amount of Preferred Securities, if any, which may be issued on the Option Closing Date pursuant to the exercise of the over allotment option set forth in the Underwriting Agreement). SECTION 4.02. Expenses. (a) In connection with the purchase of the Debentures by the Trust, the Sponsor (not in its capacity as a Holder, if applicable) and Aetna (not in its capacity as a Holder, if applicable) shall be jointly and severally responsible for and shall pay for all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the issuance of the Preferred Securities to initial purchasers thereof, the fees and expenses (including reasonable counsel fees and expenses) of the Trustees (including any amounts payable under Article 10), the costs and expenses relating to the operation of the Trust, including without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the disposition of Trust assets). (b) In connection with the purchase of the Debentures by the Trust, the Sponsor (not in its capacity as a Holder, if applicable) and Aetna (not in its capacity as a Holder, if applicable) will jointly and severally be responsible for the payment of any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. (c) The Sponsor's and Aetna's obligations under this Section 4.02 shall be for the benefit of, and shall be enforceable by, any Person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. Any such Creditor may enforce the 27 33 Sponsor's or Aetna's obligations under this Section 4.02 directly against the Sponsor or Aetna and the Sponsor and Aetna irrevocably waive any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor or Aetna. The Sponsor and Aetna agree to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 4.02. ARTICLE 5 TRUSTEES SECTION 5.01. Number of Trustees; Qualifications. (a) The number of Trustees initially shall be five (5). At any time (i) before the issuance of the Securities, the Sponsor may, by written instrument, increase or decrease the number of, and appoint, remove and replace the, Trustees, and (ii) after the issuance of the Securities the number of Trustees may be increased or decreased solely by, and Trustees may be appointed, removed or replaced solely by, vote of Holders of Common Securities representing a Majority in liquidation amount of the Common Securities voting as a class; provided that in any case: (i) the number of Trustees shall be at least five (5) unless the Trustee that acts as the Property Trustee also acts as the Delaware Trustee, in which cases the number of Trustees shall be at least three (3); (ii) at least a majority of the Trustees shall at all times be officers, directors or employees of Services or Aetna; (iii) if required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be either a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware and otherwise is permitted to act as a Trustee hereunder under the laws of the State of Delaware, except that if the Property Trustee has its principal place of business in the State of Delaware and otherwise is permitted to act as a Trustee hereunder under the laws of the State of Delaware, then the Property Trustee shall also be the Delaware Trustee and Section 3.09 shall have no application; and 28 34 (iv) there shall at all times be a Property Trustee hereunder which shall satisfy the requirements of Section 5.01(c). Each Trustee shall be either a natural person at least 21 years of age or a legal entity which shall act through one or more duly appointed representatives. (b) The initial Regular Trustees shall be: Alan M. Bennett Alfred P. Quirk, Jr. John L. Bridge c/o Aetna Inc. 151 Farmington Avenue Hartford, Connecticut 06156 (c) There shall at all times be one Trustee which shall act as Property Trustee. In order to act as Property Trustee hereunder, such Trustee shall: (i) not be an Affiliate of the Sponsor; (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.01(c)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published; and (iii) if the Trust is excluded from the definition of an Investment Company solely by reason of Rule 3a-7 and to the extent Rule 3a-7 requires a trustee having certain qualifications to hold title to the "eligible assets" (as defined in Rule 3a-7) of the Trust, the Property Trustee shall possess those qualifications. If at any time the Property Trustee shall cease to satisfy the requirements of clauses (i)-(iii) above, the Property Trustee shall immediately resign in the 29 35 manner and with the effect set out in Section 5.02(d). If the Property Trustee has or shall acquire any "conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the Property Trustee and the Holders of the Common Securities (as if such Holders were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of ss. 310(b) of the Trust Indenture Act. The Preferred Guarantee shall be deemed to be specifically described in this Declaration for the purposes of clause (i) of the first proviso contained in ss. 310(b) of the Trust Indenture Act. The initial Trustee which shall serve as the Property Trustee is The First National Bank of Chicago, a National Banking Association, whose address is as set forth in Section 14.01(b). (d) The initial Trustee which shall serve as the Delaware Trustee is First Chicago Delaware Inc., a Delaware corporation, whose address is as set forth in Section 14.01(c). (e) Any action taken by Holders of Common Securities pursuant to this Article 5 shall be taken at a meeting of Holders of Common Securities convened for such purpose or by written consent as provided in Section 12.02. (f) No amendment may be made to this Section 5.01 which would change any rights with respect to the number, existence or appointment and removal of Trustees, except with the consent of each Holder of Common Securities. SECTION 5.02. Appointment, Removal and Resignation of Trustees. (a) Subject to Section 5.02(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of the Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of the Securities by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class. (b) (i) The Trustee that acts as Property Trustee shall not be removed in accordance with Section 5.02(a) until a Successor Property Trustee possessing the qualifications to act as Property Trustee under Section 5.01(c) has been appointed and has accepted such appointment by written instrument executed by such Successor Property Trustee and delivered to the Regular Trustees, the Sponsor and the Property Trustee being removed; and 30 36 (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with Section 5.02(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Section 5.01(a)(iii) (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees, the Sponsor and the Delaware Trustee being removed. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. (d) Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) no such resignation of the Trustee that acts as the Property Trustee shall be effective until: (A) a Successor Property Trustee possessing the qualifications to act as Property Trustee under Section 5.01(c) has been appointed and has accepted such appointment by instrument executed by such Successor Property Trustee and delivered to the Trust, the Sponsor and the resigning Property Trustee; or (B) if the Trust is excluded from the definition of an Investment Company solely by reason of Rule 3a-7, until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (e) If no Successor Property Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.02 within 60 days after delivery to the Sponsor and the Trust of a Resignation Request, the resigning Property Trustee or Delaware Trustee may petition any court of competent jurisdiction for appointment of a Successor Property Trustee 31 37 or Successor Delaware Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.03. Vacancies among Trustees. If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the existence of such vacancy by a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with the requirements of this Article 5. SECTION 5.04. Effect of Vacancies. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee, or any one of them, shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur until such vacancy is filled as provided in this Article 5, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.05. Meetings. Meetings of the Regular Trustees shall be held from time to time upon the call of any Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in- person meeting of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meeting of the Regular Trustees or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before such meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote 32 38 with respect to such matter; provided that a Quorum is present, or without a meeting by the unanimous written consent of the Regular Trustees. SECTION 5.06. Delegation of Power. (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any registration statement or amendment thereto or other document or schedule filed with the Commission or making any other governmental filing (including, without limitation to filings referred to in Section 3.13). (b) The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 5.07. Other Activities. Subject to Section 5.01(c) (with respect to the Property Trustee), the Sponsor and any Trustee 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 Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration 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 Trust, shall not be deemed wrongful or improper. Neither the Sponsor, nor any Trustee, shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and the Sponsor or any Trustee 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 or other opportunity. Any Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as Sponsory for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE 6 DISTRIBUTIONS SECTION 6.01. Distributions. Holders shall receive periodic distributions, redemption payments and liquidation distributions in accordance with the applicable terms of the relevant Holder's Securities ("Distributions"). Distributions shall be made to the Holders of Preferred Securities and Common Securities in accordance with the terms of the Securities as set forth in Exhibits B and C hereto. If and to the extent that Services makes a payment of interest (including Compounded Interest (as defined in the Indenture)), premium and principal on the Debentures held by the Property Trustee (the amount of any such payment being a "Payment Amount"), the Property Trustee shall and is directed to promptly make a Distribution of the Payment Amount to Holders in accordance with the terms of the Securities as set forth in Exhibits B and C hereto. 33 39 ARTICLE 7 ISSUANCE OF SECURITIES SECTION 7.01. General Provisions Regarding Securities. (a) The Regular Trustees shall issue on behalf of the Trust securities in fully registered form representing undivided beneficial interests in the assets of the Trust in accordance with Section 7.01(b) and for the consideration specified in Section 3.03. (b) The Regular Trustees shall issue on behalf of the Trust one class of preferred securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit B (the "Preferred Securities") which terms are incorporated by reference in, and made a part of, this Declaration as if specifically set forth herein, and one class of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Exhibit C (the "Common Securities") which terms are incorporated by reference in, and made a part of, this Declaration as if specifically set forth herein. The Trust shall have no securities or other interests in the assets of the Trust other than the Preferred Securities and the Common Securities. (c) The Certificates shall be signed on behalf of the Trust by the Regular Trustees (or if there are more than two Regular Trustees by any two of the Regular Trustees). Such signatures may be the manual or facsimile signatures of the present or any future Regular Trustee. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity of any Certificate. In case any Regular Trustee of the Trust who shall have signed any of the Certificates shall cease to be such Regular Trustee before the Certificate so signed shall be delivered by the Trust, such Certificate nevertheless may be delivered as though the person who signed such Certificate had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons as, at the actual date of the execution of such Certificate, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or 34 40 regulation of any stock exchange on which Securities may be listed, or to conform to usage. Pending the preparation of definitive Certificates, the Regular Trustees on behalf of the Trust may execute temporary Certificates (printed, lithographed or typewritten), in substantially the form of the definitive Certificates in lieu of which they are issued, but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Regular Trustees. Each temporary Certificate shall be executed by the Regular Trustees on behalf of the Trust upon the same conditions and in substantially the same manner, and with like effect, as definitive Certificates. Without unnecessary delay, the Regular Trustees on behalf of the Trust will execute and furnish definitive Certificates and thereupon any or all temporary Certificates may be surrendered to the transfer agent and registrar in exchange therefor (without charge to the Holders). Each Certificate whether in temporary or definitive form shall be countersigned by the manual or facsimile signature of an authorized signatory of the Person acting as registrar and transfer agent for the Securities, which shall initially be the Property Trustee. (d) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (e) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (f) Every Person, by virtue of having become a Holder or a Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by this Declaration. (g) Upon issuance of the Securities as provided in this Declaration, the Regular Trustees on behalf of the Trust shall return to Services the $10 constituting initial trust assets as set forth in the Original Declaration. ARTICLE 8 TERMINATION OF TRUST SECTION 8.01. Termination of Trust. 35 41 This Declaration and the Trust shall terminate and be of no further force or effect when: (i) all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders of Securities in accordance with the terms of the Securities; or (ii) all of the Debentures shall have been distributed to the Holders of Securities in exchange for all of the Securities in accordance with the terms of the Securities; or (iii) upon the expiration of the term of the Trust as set forth in Section 3.17, and a certificate of cancellation is filed by the Trustees with the Secretary of State of the State of Delaware. The Trustees shall so file such a certificate as soon as practicable after the occurrence of an event referred to in this Section 8.01. The provisions of Sections 3.12 and 4.02 and Article 10 shall survive the termination of the Trust. ARTICLE 9 TRANSFER OF INTERESTS SECTION 9.01. Transfer of Securities. (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article 9, Preferred Securities shall be freely transferable. (c) Subject to this Article 9, Services and any Related Party may only transfer Common Securities to Services or a Related Party; provided that any such transfer shall be subject to the condition that the transferor shall have obtained (1) either a ruling from the Internal Revenue Service or an unqualified written opinion addressed to the Trust and delivered to the Trustees of nationally recognized independent tax counsel experienced in such matters to the effect that 36 42 such transfer will not (i) cause the Trust to be treated as issuing a class of interests in the Trust differing from the class of interests represented by the Common Securities originally issued to Services, (ii) result in the Trust acquiring or disposing of, or being deemed to have acquired or disposed of, an asset, or (iii) result in or cause the Trust to be treated as anything other than a grantor trust for United States federal income tax purposes and (2) an unqualified written opinion addressed to the Trust and delivered to the Trustees of a nationally recognized independent counsel experienced in such matters that such transfer will not cause the Trust to be an Investment Company or controlled by an Investment Company. SECTION 9.02. Transfer of Certificates. The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges which may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.03. Deemed Security Holders. The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trustees shall have actual or other notice thereof. 37 43 SECTION 9.04. Book Entry Interests. Unless otherwise specified in the terms of the Preferred Securities, the Preferred Securities Certificates, on original issuance (including Preferred Securities, if any, issued on the Option Closing Date pursuant to the exercise of the over allotment option set forth in the Underwriting Agreement), will be issued in the form of one or more, fully registered, global Preferred Security Certificates (each a "Global Certificate"), to be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will receive a definitive Preferred Security Certificate representing such Preferred Security Beneficial Owner's interests in such Global Certificates, except as provided in Section 9.07. Unless and until definitive, fully registered Preferred Security Certificates (the "Definitive Preferred Security Certificates") have been issued to the Preferred Security Beneficial Owners pursuant to Section 9.07: (i) the provisions of this Section 9.04 shall be in full force and effect; (ii) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Preferred Securities and the sole holder of the Global Certificates and, except as set forth herein or in Rule 3a-7 with respect to the Property Trustee, shall have no obligation to the Preferred Security Beneficial Owners; (iii) to the extent that the provisions of this Section 9.04 conflict with any other provisions of this Declaration, the provisions of this Section 9.04 shall control; and (iv) the rights of the Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants; provided, that solely for the purposes of determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Declaration, so long as Definitive Preferred Security Certificates have not been issued, the Trustees may conclusively rely on, and shall be protected in relying on, any written instrument (including a proxy) delivered to the Trustees by the Depository setting forth the Preferred Security Beneficial Owners' votes or assigning the right to vote on any matter to any other Persons either in whole or in part. DTC will make book entry transfers among the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. SECTION 9.05. Notices to Holders of Certificates. 38 44 Whenever a notice or other communication to the Holders is required to be given under this Declaration, unless and until Definitive Preferred Security Certificates shall have been issued pursuant to Section 9.07, the relevant Trustees shall give all such notices and communications, specified herein to be given to Preferred Securities Holders, to the Clearing Agency and, with respect to any Preferred Security Certificate registered in the name of a Clearing Agency or the nominee of a Clearing Agency, the Trustees shall, except as set forth herein or in Rule 3a-7 with respect to the Property Trustee, have no notice obligations to the Preferred Security Beneficial Owners. SECTION 9.06. Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to the Preferred Securities. SECTION 9.07. Definitive Preferred Securities Certificates. If (i) a Clearing Agency elects to discontinue its services as securities depository with respect to the Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.06 or (ii) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Preferred Securities, then (x) Definitive Preferred Security Certificates shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Preferred Securities and (y) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause definitive Preferred Security Certificates to be delivered to Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, such instructions. SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a bona fide purchaser, any two Regular Trustees on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such 39 45 mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.08, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE 10 LIMITATION OF LIABILITY; INDEMNIFICATION SECTION 10.01. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence (but, in the case of the Property Trustee, subject to Section 2.01) or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid. (c) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of Securities, in their capacities as Holders, shall be entitled to the same limitation of liability that is extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. 40 46 SECTION 10.02. Indemnification. (a) To the fullest extent permitted by applicable law, the Sponsor shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Sponsor prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 10.02(a). (c) The provisions of this Section 10.02 shall survive the termination of this Declaration or the resignation or removal of any Trustee. ARTICLE 11 ACCOUNTING SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.02. Certain Accounting Matters. (a) At all times during the existence of the Trust, the Regular Trustees shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for United States federal income tax purposes. The books and records of the Trust, together with a copy of this Declaration and a certified copy of the Certificate of Trust, or any amendment 41 47 thereto, shall at all times be maintained at the principal office of the Trust and shall be open for inspection for any examination by any Holder or its duly authorized representative for any purpose reasonably related to its interest in the Trust during normal business hours. (b) The Regular Trustees shall, as soon as available after the end of each Fiscal Year of the Trust, cause to be prepared and mailed to each Holder of Securities unaudited financial statements of the Trust for such Fiscal Year, prepared in accordance with generally accepted accounting principles; provided that if the Trust is required to comply with the periodic reporting requirements of Sections 13(a) or 15(d) of the Exchange Act, such financial statements for such Fiscal Year shall be examined and reported on by a firm of independent certified public accountants selected by the Regular Trustees (which firm may be the firm used by the Sponsor). (c) The Regular Trustees shall cause to be prepared and mailed to each Holder of Securities, an annual United States federal income tax information statement, on such form as is required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on such form as is required by the Code, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority, such returns to be filed as soon as practicable after the end of each Fiscal Year of the Trust. SECTION 11.03. Banking. The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Property Trustee shall be made directly to the Property Account and no other funds from the Trust shall be deposited in the Property Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Property Trustee shall designate the sole signatories for the Property Account. SECTION 11.04. Withholding. 42 48 The Trust and the Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Trust shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount to be withheld was not withheld from a Distribution, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE 12 AMENDMENTS AND MEETINGS SECTION 12.01. Amendments. (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may be amended by, and only by, a written instrument executed by a majority of the Regular Trustees; provided, however, that (i) no amendment to this Declaration shall be made unless the Regular Trustees shall have obtained (A) either a ruling from the Internal Revenue Service or a written unqualified opinion of nationally recognized independent tax counsel experienced in such matters to the effect that such amendment will not cause the Trust to be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership and to the effect that the Trust will continue to be treated as a grantor trust for purposes of United States federal income taxation and (B) a written unqualified opinion of nationally recognized independent counsel experienced in such matters to the effect that such amendment will not cause the Trust to be an Investment Company which is required to be registered under the Investment Company Act, (ii) at such time after the Trust has issued any Securities which remain outstanding, any amendment which would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities, (iii) Section 4.02, Section 43 49 9.1(c) and this Section 12.01 shall not be amended without the consent of all of the Holders of the Securities, (iv) no amendment which adversely affects the rights, powers and privileges of the Property Trustee or the Delaware Trustee shall be made without the consent of the Property Trustee or the Delaware Trustee, as the case may be, (v) Article 4 shall not be amended without the consent of the Sponsor, and (vi) the rights of Holders of Common Securities under Article 5 to increase or decrease the number of, and to appoint, replace or remove, Trustees shall not be amended without the consent of each Holder of Common Securities. (b) Notwithstanding Section 12.02(b)(ii), this Declaration may be amended without the consent of the Holders of the Securities to (i) cure any ambiguity, (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration, (iii) to add to the covenants, restrictions or obligations of the Sponsor, and (iv) to conform to any changes in Rule 3a-7 or any change in interpretation or application of Rule 3a-7 by the Commission, which amendment does not adversely affect the rights, preferences or privileges of the Holders. SECTION 12.02. Meetings of the Holders of Securities; Action by Written Consent. (a) Meetings of the Holders of Preferred Securities and/or Common Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of Holders of Preferred Securities or Common Securities, if directed to do so by Holders of at least 25% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Certificates held by the Holders of Securities exercising the right to call a meeting and only those specified Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provision shall apply to meetings of Holders of Securities: 44 50 (i) Notice of any such meeting shall be given by mail to all the Holders of Securities having a right to vote thereat not less than 7 days nor more than 60 days prior to the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by Holders of Securities owning not less than the minimum aggregate liquidation amount of Securities that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Holders of Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees. (ii) Each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of a Security is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Security executing it. Except as otherwise provided herein or in the terms of the Securities, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation. (iii) Each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate. (iv) Unless otherwise provided in the Business Trust Act, this Declaration or the rules of any stock exchange on which the Preferred Securities are then listed or admitted for trading, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any 45 51 Holders of Securities, 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 13 REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE SECTION 13.01. Representations and Warranties of Property Trustee. (a) The Trustee which acts as initial Property Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Property Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Property Trustee's acceptance of its appointment as Property Trustee that: (i) The Property Trustee is a national banking association with trust powers, duly organized, validly existing and in good standing under the laws of the United States, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration. (ii) The execution, delivery and performance by the Property Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Property Trustee. The Declaration has been duly executed and delivered by the Property Trustee, and constitutes a legal, valid and binding obligation of the Property Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law). (iii) The execution, delivery and performance of this Declaration by the Property Trustee does not conflict with or constitute a breach of the Articles of Association or By-laws of the Property Trustee. (iv) No consent, approval or authorization of, or registration with or notice to, any banking authority which supervises or regulates the 46 52 Property Trustee is required for the execution, delivery or performance by the Property Trustee, of this Declaration. (v) The Property Trustee satisfies the qualifications set forth in Section 5.01(c). (b) The Trustee which acts as initial Delaware Trustee represents and warrants to the Trust and the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee, that it satisfies the qualifications set forth in Section 5.01(a)(iii). ARTICLE 14 MISCELLANEOUS SECTION 14.01. Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Regular Trustees on behalf of the Trust may give notice of to the Holders of the Securities): Aetna Capital Trust [ ] c/o Aetna Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Attention:Alan M. Bennett Alfred P. Quirk, Jr. John L. Bridge Trustees Facsimile No: (860) 273-0123 (b) if given to the Property Trustee, at the mailing address of the Property Trustee set forth below (or such other address as the Property Trustee may give notice of to the Holders of the Securities): 47 53 The First National Bank of Chicago 153 West 51st Street 5th Floor, Suite 4015 New York, NY 10019 Attention: Corporate Trust Administration Facsimile No: 212-373-1383 (c) if given to the Delaware Trustee, at the mailing address of the Delaware Trustee set forth below (or such other address as the Delaware Trustee may give notice of to the Holders of the Securities): First Chicago Delaware Inc. 300 King Street Wilmington, Delaware 19801 Attention: Delaware Trustee, Corporate Trust Administration With a copy to: The First National Bank of Chicago 153 West 51st Street 5th Floor, Suite 4015 New York, NY 10019 Attention: Corporate Trust Administration (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Aetna Services, Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Attention:Corporate Secretary Facsimile No: 860-273-[ ] (e) if given to Aetna, at the mailing address of Aetna set forth below (or such other address as Aetna may give notice to the Trust): Aetna Inc. 151 Farmington Avenue Hartford, Connecticut 06156 48 54 Attention:Corporate Secretary Facsimile No: 860-273-[ ] (f) if given to any other Holder, at the address set forth on the books and records of the Trust. A copy of any notice to the Property Trustee or the Delaware Trustee shall also be sent to the Trust. All notices shall be deemed to have been given, when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 14.02. Undertaking for Costs. All parties to this Declaration agree, and each Holder of any Securities by his or her acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Declaration, or in any suit against the Property Trustee for any action taken or omitted by it as Property Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 14.02 shall not apply to any suit instituted by the Property Trustee, to any suit instituted by any Holder of Preferred Securities, or group of Holders of Preferred Securities, holding more than 10% in aggregate liquidation amount of the outstanding Preferred Securities, or to any suit instituted by any Holder of Preferred Securities for the enforcement of the payment of the principal of (or premium, if any) or interest on the Debentures, on or after the respective due dates expressed in such Debentures. SECTION 14.03. Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. 49 55 SECTION 14.04. Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.05. Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.06. Counterparts. This Declaration may contain more than one counterpart of the signature pages and this Declaration may be executed by the affixing of the signature of the Sponsor and each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. SECTION 14.07. Intention of the Parties. It is the intention of the parties hereto that the Trust not be classified for United States federal income tax purposes as an association taxable as a corporation or partnership but that the Trust be treated as a grantor trust for United States federal income tax purposes. The provisions of this Declaration shall be interpreted to further this intention of the parties. SECTION 14.08. Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. 50 56 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. Aetna Services, Inc., as Sponsor By: ------------------------------ Name: Title: Aetna Inc. By: ------------------------------ Name: Title: - --------------------------------- Alan M. Bennett as Trustee - --------------------------------- Alfred P. Quirk, Jr. as Trustee - --------------------------------- John L. Bridge as Trustee The First National Bank of Chicago as Property Trustee By: ------------------------------ Name: Title: 51 57 First Chicago Delaware Inc. as Delaware Trustee By: ------------------------------ Name: Title: 52 58 STATE OF [ ] ) ) COUNTY OF [ ] ) BEFORE ME, the undersigned authority, on this day of _____________, 199_, personally appeared _______________ (on behalf of Aetna Services, Inc.), [ ] (on behalf of Aetna Inc.) and Alan M. Bennett, Alfred P. Quirk, Jr. and John L. Bridge, each known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer, as the case may be, whose name is subscribed to the foregoing instrument, and each acknowledged to me that he executed the same as the act of such are for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS _____ day of _________, 199_. (SEAL) ------------------------------------- NOTARY PUBLIC, STATE OF [ ] Print Name: -------------------------- Commission Expires: ------------------- 59 STATE OF [ ] ) ) COUNTY OF [ ] ) BEFORE ME, the undersigned authority, on this day of _____________, 199_, personally appeared ________________ of The First National Bank of Chicago known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose names are subscribed to the foregoing instrument, and acknowledged to me that she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS _____ day of _________, 199_. (SEAL) ------------------------------------- NOTARY PUBLIC, STATE OF [ ] Print Name: -------------------------- Commission Expires: ------------------- 60 STATE OF [ ] ) ) COUNTY OF [ ] ) BEFORE ME, the undersigned authority, on this day of _____________, 199_, personally appeared _______________________ of First Chicago Delaware Inc. known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose names are subscribed to the foregoing instrument, and acknowledged to me that she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS _____ day of _________, 199_. (SEAL) ------------------------------------- NOTARY PUBLIC, STATE OF [ ] Print Name: -------------------------- Commission Expires: ------------------- 61 EXHIBIT A CERTIFICATE OF TRUST OF AETNA CAPITAL TRUST [ ] THIS Certificate of Trust of Aetna Capital Trust [ ] (the "Trust"), dated May 7, 1998, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. Code ss. 3801 et seq.). 1. Name. The name of the business trust being formed hereby is Aetna Capital Trust [ ]. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware is First Chicago Delaware Inc., 300 King Street, Wilmington, Delaware 19801. 3. Effective Date. This Certificate of Trust shall be effective as of its filing. 4. Counterparts. This Certificate of Trust may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. First Chicago Delaware, Inc., as Delaware Trustee By: /s/ Sandra L. Caruba -------------------------------- Name: Sandra L. Caruba Title: Vice President 62 The First National Bank of Chicago, as Property Trustee By: /s/ Sandra L. Caruba -------------------------------- Name: Sandra L. Caruba Title: Vice President /s/ Alan M. Bennett ----------------------------------- Alan M. Bennett, as Trustee /s/ Alfred P. Quirk, Jr. ----------------------------------- Alfred P. Quirk, Jr. as Trustee /s/ John L. Bridge ----------------------------------- John L. Bridge, as Trustee 2 63 EXHIBIT B TERMS OF PREFERRED SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust of Aetna Capital Trust [ ] dated as of ____________, 199__ (as amended from time to time, the "Declaration"), the designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth below (each capitalized term used but not defined herein having the meaning set forth in the Declaration): 1. Designation and Number. Preferred Securities of the Trust with an aggregate liquidation amount in the assets of the Trust of ___________________________________________ Dollars ($___________) (including up to _______________________________________________ Dollars ($___________) issuable upon exercise of the over allotment option set forth in the Underwriting Agreement) and a liquidation amount in the assets of the Trust of $25 per Preferred Security, are hereby designated as "____% Preferred Trust Securities". The Preferred Security Certificates evidencing the Preferred Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange on which the Preferred Securities are listed. In connection with the issuance and sale of the Preferred Securities and the Common Securities, the Trust will purchase as trust assets Debentures of Services having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities and Common Securities so issued and bearing interest at an annual rate equal to the annual Distribution rate on the Preferred Securities and Common Securities and having payment and redemption provisions which correspond to the payment and redemption provisions of the Preferred Securities and Common Securities. 2. Distributions. (a) Distributions payable on each Preferred Security will be fixed at a rate per annum of ____% (the "Coupon Rate") of the stated liquidation amount of $25 per Preferred Security. Distributions in arrears for more than one month will bear interest at the rate per annum of ____% thereof (to the extent permitted by law), compounded [monthly]. The term "Distributions" as used in these terms means such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution will be made by the Property Trustee only to the extent that interest payments are made in respect of the Debentures held by the Property Trustee. The amount of Distributions payable 64 for any period will be computed for any [monthly] Distribution period on the basis of a 360-day year of twelve 30-day months[, and for any Distribution period shorter or longer than a 30-day month Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed]. (b) Distributions on the Preferred Securities will be cumulative, will accrue from ___________, 199__ and will be payable [monthly] in arrears, on the last day of each month commencing on ________________, 199__, except as otherwise described below, but only if and to the extent that interest payments are made in respect of the Debentures held by the Property Trustee. So long as Services shall not be in default in the payment of interest on the Debentures, Services has the right under the Indenture for the Debentures to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding [60] consecutive [monthly] interest periods (each, an "Extension Period") and, as a consequence, [monthly] Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the rate of ____% per annum, compounded [monthly] during any such Extension Period. Prior to the termination of any such Extension Period, Services may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed [60] consecutive [monthly] interest periods. Upon the termination of any Extension Period and the payment of all amounts then due, Services may commence a new Extension Period, subject to the above requirements. Payments of accrued Distributions will be payable to Holders of Preferred Securities as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. (c) Distributions on the Preferred Securities will be payable promptly by the Property Trustee (or other Paying Agent) upon receipt of immediately available funds to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. While the Preferred Securities remain in book-entry only form, the relevant record dates shall be one business day prior to the relevant Distribution date, and if the Preferred Securities are no longer in book-entry only form, the relevant record dates will be the fifteenth (15th) day of the month prior to the relevant Distribution date, which record and payment dates correspond to the record and interest payment dates on the Debentures. Distributions payable on any Preferred Securities that are not punctually paid on any Distribution payment date as a result of Services having failed to make the corresponding interest payment on the Debentures will forthwith cease to be payable to the person in whose name such Preferred Security is registered on the relevant record date, and such defaulted Distribution will instead be payable to the person in whose name such Preferred Security is registered on the special record 2 65 date established by the Regular Trustees, which record date shall correspond to the special record date or other specified date determined in accordance with the Indenture; provided, however, that Distributions shall not be considered payable on any Distribution payment date falling within an Extension Period unless Services has elected to make a full or partial payment of interest accrued on the Debentures on such Distribution payment date. Subject to any applicable laws and regulations and the provisions of the Declaration, each payment in respect of the Preferred Securities will be made as described paragraph 9 hereof. If any date on which Distributions are payable on the Preferred Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that 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. (d) All Distributions paid with respect to the Preferred Securities and the Common Securities will be paid Pro Rata to the Holders thereof entitled thereto. If an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities with respect to Distributions. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for under the Declaration, such money or property shall be distributed Pro Rata among the Holders of the Preferred Securities and Common Securities. 3. Liquidation Distribution Upon Dissolution. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Preferred Securities and Common Securities at the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive Pro Rata solely out of the assets of the Trust available for distribution to Holders of Preferred Securities and Common Securities after satisfaction of liabilities to creditors as provided by applicable law, an amount equal to the aggregate of the stated liquidation amount of $25 per Preferred Security and Common Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, and after satisfaction of liabilities to creditors as provided by applicable law, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Preferred Securities and Common Securities and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Preferred Securities and Common Securities, shall be distributed Pro Rata to the 3 66 Holders of the Preferred Securities and Common Securities in exchange for such Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Preferred Securities and Common Securities shall be paid, subject to the next paragraph, on a Pro Rata basis. Holders of Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution Pro Rata with Holders of Preferred Securities, except that if an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities with respect to such Liquidation Distribution. 4. Redemption and Distribution of Debentures. The Preferred Securities and Common Securities may only be redeemed if Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities and Common Securities are repaid, redeemed or distributed as set forth below: (a) Upon the repayment of the Debentures, in whole or in part, whether at maturity, upon redemption at any time or from time to time on or after _________, 20__, the proceeds of such repayment will be promptly applied to redeem Pro Rata Preferred Securities and Common Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed, upon not less than 30 nor more than 60 days' notice, at a redemption price of $25 per Preferred and Common Security plus an amount equal to accrued and unpaid Distributions thereon to the date of redemption, payable in cash (the "Redemption Price"). The date of any such repayment or redemption of Preferred Securities and Common Securities shall be established to coincide with the repayment or redemption date of the Debentures. (b) If fewer than all the outstanding Preferred Securities and Common Securities are to be so redeemed, the Preferred Securities and the Common Securities will be redeemed Pro Rata and the Preferred Securities to be redeemed as described in paragraph 4(f)(ii) below. If a partial redemption would result in the delisting of the Preferred Securities by any national securities exchange or other organization on which the Preferred Securities are then listed, Services pursuant to the Indenture will only redeem Debentures in whole and, as a result, the Trust may only redeem the Preferred Securities in whole. 4 67 (c) If, at any time, a Tax Event or an Investment Company Event (each as hereinafter defined, and each a "Special Event") shall occur and be continuing, the Regular Trustees shall, unless the Debentures are redeemed in the limited circumstances described below, dissolve the Trust and, after satisfaction of creditors as provided by applicable law, cause Debentures held by the Property Trustee having an aggregate principal amount equal to the aggregate stated liquidation amount of and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment as the Preferred Securities and Common Securities, to be distributed to the Holders of the Preferred Securities and Common Securities on a Pro Rata basis in liquidation of such Holders' interests in the Trust, within 90 days following the occurrence of such Special Event (the "90 Day Period"; provided, however, that in the case of the occurrence of a Tax Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on any then applicable published revenue ruling of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and distribution of Debentures; and provided, further, that, if and as long as at the time there is available to the Trust the opportunity to eliminate, within the 90 Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, Services, Aetna or the Holders of the Preferred Securities ("Ministerial Action"), the Trust will pursue such measure in lieu of dissolution. If in the case of the occurrence of a Tax Event, (i) the Regular Trustees have received an opinion (a "Redemption Tax Opinion") of nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that Services would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even if the Debentures were distributed to the Holders of Preferred Securities and Common Securities in liquidation of such Holder's interest in the Trust as described in this paragraph 4(c) or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, Services shall have the right at any time, upon not less than 30 nor more than 60 days' notice, to redeem the Debentures in whole or in part for cash at the Redemption Price within 90 days following the occurrence of such Tax Event, and promptly following such redemption Preferred Securities and Common Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed will be redeemed by the Trust at the Redemption Price on a Pro Rata basis; provided, however, that, 5 68 if at the time there is available to Services or the Regular Trustees on behalf of the Trust the opportunity to eliminate, within such 90 day period, the Tax Event by taking some Ministerial Action, Services or the Regular Trustees on behalf of the Trust will pursue such measure in lieu of redemption and; provided, further, that Services shall have no right to redeem the Debentures while the Regular Trustees on behalf of the Trust are pursuing such Ministerial Action. The Common Securities will be redeemed Pro Rata with the Preferred Securities, except that if an Event of Default under the Indenture has occurred and is continuing, the Preferred Securities will have a priority over the Common Securities with respect to payment of the Redemption Price. "Tax Event" means that the Regular Trustees shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after ____________, 199_ as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after _________, 199_, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges or (iii) interest payable by Services to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible by Services for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an Investment 6 69 Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after _________, 199_. On the date fixed for any distribution of Debentures, upon dissolution of the Trust, (i) the Preferred Securities will no longer be deemed to be outstanding and (ii) certificates representing Preferred Securities will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the stated liquidation amount of, and bearing accrued and unpaid interest equal to accrued and unpaid Distributions on, such Preferred Securities until such certificates are presented to Services or its agent for transfer or reissuance. (d) The Trust may not redeem fewer than all the outstanding Preferred Securities unless all accrued and unpaid Distributions have been paid on all Preferred Securities for all [monthly] Distribution periods terminating on or prior to the date of redemption. (e) If Debentures are distributed to Holders of the Preferred Securities, Services, pursuant to the terms of the Indenture, will use its best efforts to have the Debentures listed on the New York Stock Exchange or on such other exchange as the Preferred Securities were listed immediately prior to the distribution of the Debentures. (f) (i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Preferred Securities and Common Securities (a "Redemption/Distribution Notice") will be given by the Regular Trustees on behalf of the Trust by mail to each Holder of Preferred Securities and Common Securities to be redeemed or exchanged not less than 30 nor more than 60 days prior to the date fixed for redemption or exchange thereof. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph (f)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Preferred Securities and Common Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Preferred Securities and Common Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Preferred Securities are to be redeemed, the Preferred Securities to be redeemed will be redeemed Pro Rata from each Holder of Preferred Securities, it being understood that, in respect of Preferred Securities registered in the name of and held of record by DTC (or 7 70 successor Clearing Agency) or any other nominee, the Preferred Securities will be redeemed from, and the distribution of the proceeds of such redemption will be made to, each Clearing Agency Participant (or person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such agency or nominee. (iii) Subject to paragraph 9 hereof, if the Trust gives a Redemption/ Distribution Notice in respect of a redemption of Preferred Securities as provided in this paragraph 4 (which notice will be irrevocable) then (A) while the Preferred Securities are in book-entry only form, with respect to the Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that Services has paid the Property Trustee, in immediately available funds, a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will deposit irrevocably with DTC (or successor Clearing Agency) funds sufficient to pay the applicable Redemption Price with respect to the Preferred Securities and will give DTC (or successor Clearing Agency) irrevocable instructions and authority to pay the Redemption Price to the Holders of the Preferred Securities and (B) if the Preferred Securities are issued in definitive form, with respect to the Preferred Securities and provided that Services has paid the Property Trustee, in immediately available funds, a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Property Trustee will pay the relevant Redemption Price to the Holders of such Preferred Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the redemption date, Distributions will cease to accrue on the Preferred Securities called for redemption, such Preferred Securities will no longer be deemed to be outstanding and all rights of Holders of such Preferred Securities so called for redemption will cease, except the right of the Holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. Neither the Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Preferred Securities which have been so called for redemption. If any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that 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 each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by the Property Trustee or by Services or Aetna pursuant to the Preferred Securities Guarantee, Distributions on such Preferred Securities will continue to accrue, 8 71 from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to DTC or its nominee (or any successor Clearing Agency or its nominee) if the Global Certificates have been issued or, if Definitive Preferred Security Certificates have been issued, to the Holders of the Preferred Securities. (v) Upon the date of dissolution of the Trust and distribution of Debentures as a result of the occurrence of a Special Event, Preferred Security Certificates shall be deemed to represent beneficial interests in the Debentures so distributed, and the Preferred Securities will no longer be deemed outstanding and may be canceled by the Regular Trustees. The Debentures so distributed shall have an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities so distributed. (vi) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), Services, Aetna or any of its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. 5. Voting Rights. (a) Except as provided under paragraph 5(b) below and as otherwise required by law and the Declaration, the Holders of the Preferred Securities will have no voting rights. (b) If any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than in connection with the distribution of Debentures held by the Property Trustee, upon the occurrence of a Special Event or in connection with the redemption of Preferred Securities as a consequence of a redemption of Debentures, then the Holders of outstanding Securities will be entitled to vote on such amendment or proposal as a class and such amendment or proposal shall not be effective except with the approval of the Holders of Securities representing 66-2/3% in liquidation amount of such Securities; provided, however, that (A) if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66-2/3% in liquidation amount of such class of Securities and (B) 9 72 amendments to the Declaration shall be subject to such further requirements as are set forth in Sections 12.1 and 12.2 of the Declaration. In the event the consent of the Property Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Property Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination. The Property Trustee shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided that where such amendment, modification or termination of the Indenture requires the consent or vote of (1) holders of Debentures representing a specified percentage greater than a majority in principal amount of the Debentures or (2) each holder of Debentures, the Property Trustee may only vote with respect to that amendment, modification or termination as directed by, in the case of clause (1) above, the vote of Holders of Securities representing such specified percentage of the aggregate liquidation amount of the Securities, or, in the case of clause (2) above, each Holder of Securities; and provided, further, that the Property Trustee shall be under no obligation to take any action in accordance with the directions of the Holders of Securities unless the Property Trustee shall have received, at the expense of the Sponsor, an opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership on account of such action and will be treated as a grantor trust for United States federal income tax purposes following such action. Subject to Section 2.6 of the Declaration, and the provisions of this and the next succeeding paragraph, the Holders of a Majority in liquidation amount of the Preferred Securities, voting separately as a class shall have the right to (A) on behalf of all Holders of Preferred Securities, waive any past default that is waivable under the Declaration (subject to, and in accordance with the Declaration) and (B) direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as the holder of the Debentures, to (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default that is waivable under Section 6.06 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided that where the taking of any action under the Indenture requires the consent or vote of (1) holders of Debentures representing a 10 73 specified percentage greater than a majority in principal amount of the Debentures or (2) each holder of Debentures, the Property Trustee may only take such action if directed by, in the case of clause (1) above, the vote of Holders of Preferred Securities representing such specified percentage of the aggregate liquidation amount of the Preferred Securities, or, in the case of clause (2) above, each Holder of Preferred Securities. The Property Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Preferred Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall be under no obligation to take any of the foregoing actions at the direction of the Holders of Preferred Securities unless the Property Trustee shall have received, at the expense of the Sponsor, an opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership on account of such action and will be treated as a grantor trust for United States federal income tax purposes following such action. If the Property Trustee fails to enforce its rights under the Declaration (including, without limitation, its rights, powers and privileges as a holder of the Debentures under the Indenture), any Holder of Preferred Securities may, to the extent permitted by law, after a period of 30 days has elapsed from such Holder's written request to the Property Trustee to enforce such rights, institute a legal proceeding directly against Services and Aetna to enforce the Property Trustee's rights under the Declaration, without first instituting a legal proceeding against the Property Trustee or any other Person. A waiver of an Indenture Event of Default by the Property Trustee at the direction of the Holders of the Preferred Securities will constitute a waiver of the corresponding Event of Default under the Declaration in respect of the Securities. Any required approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities of the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Preferred Securities. 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 resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. 11 74 No vote or consent of the Holders of Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities in accordance with the Declaration. Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities at such time that are owned by Services or by any entity directly or indirectly controlling or controlled by or under direct or indirect common control with Services shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. Except as provided in this paragraph 5, Holders of the Preferred Securities will have no rights to increase or decrease the number of Trustees or to appoint, remove or replace a Trustee, which voting rights are vested solely in the Holders of the Common Securities. 6. Pro Rata Treatment. A reference in these terms of the Preferred Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 7. Ranking. The Preferred Securities rank pari passu and payment thereon will be made Pro Rata with the Common Securities except that where an Event of Default occurs and is continuing, the rights of Holders of Preferred Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise rank in priority to the rights of Holders of the Common Securities. 8. Mergers, Consolidations or Amalgamations. The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets to, any corporation or other body. 12 75 9. Transfer, Exchange, Method of Payments. Payment of Distributions and payments on redemption of the Preferred Securities will be payable, the transfer of the Preferred Securities will be registrable, and Preferred Securities will be exchangeable for Preferred Securities of other denominations of a like aggregate liquidation amount, at the principal corporate trust office of the Property Trustee in The City of Chicago; provided that payment of Distributions may be made at the option of the Regular Trustees on behalf of the Trust by check mailed to the address of the persons entitled thereto and that the payment on redemption of any Preferred Security will be made only upon surrender of such Preferred Security to the Property Trustee. 10. Acceptance of Indenture and Preferred Guarantee. Each Holder of Preferred Securities, by the acceptance thereof, agrees to the provisions of (i) the Preferred Guarantee, including the subordination provisions therein and (ii) the Indenture and the Debentures, including the subordination provisions of the Indenture. 11. No Preemptive Rights. The Holders of Preferred Securities shall have no preemptive rights to subscribe to any additional Preferred Securities or Common Securities. 12. Miscellaneous. These terms shall constitute a part of the Declaration. The Trust will provide a copy of the Declaration and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. 13 76 Annex I [IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depository Trust Company ("DTC") or a nominee of DTC. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than DTC or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Number Preferred Securities ----------- ----------- CUSIP NO. ----------- Certificate Evidencing Preferred Securities of Aetna Capital Trust [ ] ____% Preferred Trust Securities (liquidation amount $25 per Preferred Security) Aetna Capital Trust [ ], a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that _________ (the "Holder") is the registered owner of _____ (______) preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust 77 designated the ____% Preferred Trust Securities (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of the Trust dated as of ___________, 199_, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Preferred Securities as set forth in Exhibit B thereto. The Preferred Securities and the Common Securities issued by the Trust pursuant to the Declaration represent undivided beneficial interests in the assets of the Trust, including the Debentures (as defined in the Declaration) issued by Aetna Services, Inc., a Connecticut corporation ("Services"), to the Trust pursuant to the Indenture referred to in the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement of Services and Aetna Inc. ("Aetna") dated as of __________, 199_ (the "Guarantee") to the extent provided therein. The Trust will furnish a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business or registered office. The Holder of this Certificate, by accepting this Certificate, is deemed to have (i) agreed to the terms of the Indenture and the Debentures, including that the Debentures are subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) as and to the extent provided in the Indenture and (ii) agreed to the terms of the Guarantee, including that the Guarantee ranks (a) pari passu in right of payment with Aetna's and Services' obligations under other guarantees of preferred securities, (b) subordinate and junior in right of payment to all other liabilities of Aetna, including the guarantee under the Indenture of the Debentures, and of Services, including the Debentures, except those made pari passu or subordinate by their terms, and (c) senior to all capital stock now or hereafter issued by Aetna or Services and to any guarantee now or hereafter entered into by Aetna or Services in respect of any of its or their capital stock. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 2 78 IN WITNESS WHEREOF, the undersigned Trustees of the Trust have executed this certificate this ____ day of __________, 199_. AETNA CAPITAL TRUST [ ] By: , as Trustee ------------------------- Name: Title: Trustee By: , as Trustee ------------------------- Name: Title: Trustee Dated: Countersigned and Registered: The First National Bank of Chicago Transfer Agent and Registrar By: ------------------------- Authorized Signature 3 79 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this - -------------------------------------------------------- Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ------------------------------ Signature: -------------------------- NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. 4 80 EXHIBIT C TERMS OF COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust of Aetna Capital Trust [ ] dated as of ____________, 199__ (as amended from time to time, the "Declaration"), the designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth below (each capitalized term used but not defined herein having the meaning set forth in the Declaration): 1. Designation and Number. Common Securities of the Trust with an aggregate liquidation amount in the assets of the Trust of __________________________________________ Dollars ($____________) and a liquidation amount in the assets of the Trust of $25 per Common Security, are hereby designated as "____% Common Trust Securities". The Common Security Certificates evidencing the Common Securities shall be substantially in the form attached hereto as Annex I, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. The Common Securities are to be issued and sold to Aetna Services, Inc. ("Services") in consideration of $_____________ in cash. In connection with the issuance and sale of the Preferred Securities and the Common Securities, the Trust will purchase as trust assets Debentures of Services having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities and Common Securities so issued, and bearing interest at an annual rate equal to the annual Distribution rate on the Preferred Securities and Common Securities and having payment and redemption provisions which correspond to the payment and redemption provisions of the Preferred Securities and Common Securities. 2. Distributions. (a) Distributions payable on each Common Security will be fixed at a rate per annum of ____% (the "Coupon Rate") of the stated liquidation amount of $25 per Common Security. Distributions in arrears for more than one month will bear interest at the rate per annum of ____% thereof (to the extent permitted by applicable law), compounded [monthly]. The term "Distributions" as used in these terms means such periodic cash distributions and any such interest payable unless otherwise stated. A Distribution will be made by the Property Trustee only to the extent that interest payments are made in respect of the Debentures held by the Property Trustee. The amount of Distributions payable for any period will be computed for any [monthly] Distribution period on 81 the basis of a 360-day year of twelve 30-day months[, and for any Distribution period shorter than a 30-day month Distribution period for which Distributions are computed, Distributions will be computed on the basis of the actual number of days elapsed]. (b) Distributions on the Common Securities will be cumulative, will accrue from _________, 199__ and will be payable [monthly] in arrears, on the last day of each month commencing on __________, 199__, except as otherwise described below, but only if and to the extent that interest payments are made in respect of the Debentures held by the Property Trustee. So long as Services shall not be in default in the payment of interest on the Debentures, Services has the right under the Indenture for the Debentures to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period not exceeding [60] consecutive [monthly] interest periods (each, an "Extension Period") and, as a consequence, [monthly] Distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at the rate of ____% per annum, compounded [monthly] during any such Extension Period. Prior to the termination of any such Extension Period, Services may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed [60] consecutive [monthly] interest periods. Upon the termination of any Extension Period and the payment of all amounts then due, Services may commence a new Extension Period, subject to the above requirements. Payments of accrued Distributions will be payable to Holders of Common Securities as they appear on the books and records of the Trust on the first record date after the end of the Extension Period. (c) Distributions on the Common Securities will be payable promptly by the Property Trustee (or other Paying Agent) upon receipt of immediately available funds to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates which will be one business day prior to the relevant Distribution date unless the Preferred Securities are no longer in book-entry only form in which event the relevant record dates will be the fifteenth (15th) day of the month prior to the relevant Distribution date, which record and payment dates correspond to the record and interest payment dates on the Debentures. Distributions payable on any Common Securities that are not punctually paid on any Distribution date as a result of Services having failed to make the corresponding interest payment on the Debentures will forthwith cease to be payable to the person in whose name such Common Security is registered on the relevant record date, and such defaulted Distribution will instead be payable to the person in whose name such Common Security is registered on the special record date established by the Regular Trustees, which record date shall correspond to the special record date or other specified date determined in 2 82 accordance with the Indenture; provided, however, that Distributions shall not be considered payable on any Distribution payment date falling within an Extension Period unless Services has elected to make a full or partial payment of interest accrued on the Debentures on such Distribution payment date. Subject to any applicable laws and regulations and the provisions of the Declaration, each payment in respect of the Common Securities will be made as described in paragraph 9 hereof. If any date on which Distributions are payable on the Common Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that 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. (d) All Distributions paid with respect to the Common Securities and the Preferred Securities will be paid Pro Rata to the Holders thereof entitled thereto. If an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities with respect to Distributions. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for under the Declaration, such money or property shall be distributed Pro Rata among the Holders of the Preferred Securities and Common Securities. 3. Liquidation Distribution Upon Dissolution. In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Preferred Securities and Common Securities at the date of the dissolution, winding-up or termination, as the case may be, will be entitled to receive Pro Rata solely out of the assets of the Trust available for distribution to Holders of Preferred Securities and Common Securities, after satisfaction of liabilities to creditors as provided by applicable law, an amount equal to the aggregate of the stated liquidation amount of $25 per Preferred Security and Common Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, in connection with such dissolution, winding-up or termination, and after satisfaction of liabilities to creditors as provided by applicable law, Debentures in an aggregate principal amount equal to the aggregate stated liquidation amount of such Preferred Securities and Common Securities bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, such Preferred Securities and Common Securities, shall be distributed Pro Rata to the Holders of the Preferred Securities and Common Securities in exchange for such Securities. 3 83 If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Preferred Securities and Common Securities shall be paid, subject to the next paragraph, on a Pro Rata basis. Holders of Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution Pro Rata with Holders of Preferred Securities, except that if an Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities with respect to such Liquidation Distribution. 4. Redemption and Distribution of Debentures. The Preferred Securities and Common Securities may only be redeemed if Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Preferred Securities and Common Securities are repaid, redeemed or distributed as set forth below: (a) Upon the repayment of the Debentures, in whole or in part, whether at maturity, upon redemption at any time or from time to time on or after __________, 200_, the proceeds of such repayment will be promptly applied to redeem Pro Rata Preferred Securities and Common Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed, upon not less than 30 nor more than 60 days' notice, at a redemption price of $25 per Preferred and Common Security plus an amount equal to accrued and unpaid Distributions thereon to the date of redemption, payable in cash (the "Redemption Price"). The date of any such repayment or redemption of Preferred Securities and Common Securities shall be established to coincide with the repayment or redemption date of the Debentures. (b) If fewer than all the outstanding Preferred Securities and Common Securities are to be so redeemed, the Preferred Securities and the Common Securities will be redeemed Pro Rata and the Common Securities to be redeemed will be redeemed as described in paragraph 4(e)(ii) below. If a partial redemption would result in the delisting of the Preferred Securities by any national securities exchange or other organization on which the Preferred Securities are then listed, Services pursuant to the Indenture will only redeem Debentures in whole and, as a result, the Trust may only redeem the Common Securities in whole. (c) If, at any time, a Tax Event or an Investment Company Event (each as hereinafter defined, and each a "Special Event") shall occur and be continuing, the Regular Trustees shall, unless the Debentures are redeemed in the limited circumstances described below, dissolve the Trust and, after satisfaction of 4 84 creditors, cause Debentures held by the Property Trustee having an aggregate principal amount equal to the aggregate stated liquidation amount of and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment as the Preferred Securities and Common Securities, to be distributed to the Holders of the Preferred Securities and Common Securities on a Pro Rata basis in liquidation of such Holders' interests in the Trust, within 90 days following the occurrence of such Special Event (the "90 Day Period"); provided, however, that in the case of the occurrence of a Tax Event, as a condition of such dissolution and distribution, the Regular Trustees shall have received an opinion of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on any then applicable published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and distribution of Debentures; and provided, further, that, if and as long as at the time there is available to the Trust the opportunity to eliminate, within such 90 Day Period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure that has no adverse effect on the Trust, Services, Aetna or the Holders of the Preferred Securities ("Ministerial Action") the Trust will pursue such measure in lieu of dissolution. If in the case of the occurrence of a Tax Event, (i) the Regular Trustees have received an opinion (a "Redemption Tax Opinion") of nationally recognized independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that Services would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even if the Debentures were distributed to the Holders of Preferred Securities and Common Securities in liquidation of such Holder's interest in the Trust as described in this paragraph 4(c) or (ii) the Regular Trustees shall have been informed by such tax counsel that a No Recognition Opinion cannot be delivered to the Trust, Services shall have the right at any time, upon not less than 30 nor more than 60 days' notice, to redeem the Debentures in whole or in part for cash at the Redemption Price within 90 days following the occurrence of such Tax Event, and promptly following such redemption Preferred Securities and Common Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed will be redeemed by the Trust at the Redemption Price on a Pro Rata basis: provided, however, that, if at the time there is available to Services or the Regular Trustees on behalf of the Trust the opportunity to eliminate, within such 90 day period, the Tax Event by taking some Ministerial Action, Services or the Holders of the Preferred Securities, Services or the Regular Trustees on behalf of the Trust will pursue such measure in lieu of redemption; and provided, further, that Services shall 5 85 have no right to redeem the Debentures while the Regular Trustees on behalf of the Trust are pursuing such Ministerial Action. The Common Securities will be redeemed Pro Rata with the Preferred Securities, except that if an Event of Default under the Indenture has occurred and is continuing, the Preferred Securities will have a priority over the Common Securities with respect to payment of the Redemption Price. "Tax Event" means that the Regular Trustees shall have obtained an opinion of nationally recognized independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after __________, 199_ as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination), (c) any interpretation or pronouncement that provides for a position with respect to such laws or regulations that differs from the theretofore generally accepted position or (d) any action taken by any governmental agency or regulatory authority, which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after __________, 199_, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to income accrued or received on the Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges or (iii) interest payable by Services to the Trust on the Debentures is not, or within 90 days of the date thereof will not be, deductible by Services for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of nationally recognized independent counsel experienced in practice under the Investment Company Act that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk that the Trust is or will be considered an Investment Company which is required to be registered under the Investment Company Act, which Change in 1940 Act Law becomes effective on or after __________, 199_. On the date fixed for any distribution of Debentures, upon dissolution of the Trust, (i) the Common Securities will no longer be deemed to be outstanding 6 86 and (ii) any certificates representing Common Securities will be deemed to represent beneficial interests in the Debentures having an aggregate principal amount equal to the stated liquidation amount of, and bearing accrued and unpaid interest equal to accrued and unpaid Distributions on, such Common Securities until such certificates are presented to Aetna or its agent for transfer or reissuance. (d) The Trust may not redeem fewer than all the outstanding Common Securities unless all accrued and unpaid Distributions have been paid on all Common Securities for all [monthly] Distribution periods terminating on or prior to the date of redemption. (e)(i) Notice of any redemption of, or notice of distribution of Debentures in exchange for, the Preferred Securities and Common Securities (a "Redemption/Distribution Notice") will be given by the Regular Trustees on behalf of the Trust by mail to each Holder of Preferred Securities and Common Securities to be redeemed or exchanged not less than 30 nor more than 60 days prior to the date fixed for redemption or exchange thereof. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph (e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of Preferred Securities and Common Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Preferred Securities and Common Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (ii) In the event that fewer than all the outstanding Common Securities are to be redeemed, the Common Securities to be redeemed will be redeemed Pro Rata from each Holder of Common Securities (subject to adjustment to eliminate fractional Common Securities). (iii) If the Trust gives a Redemption/ Distribution Notice in respect of a redemption of Common Securities as provided in this paragraph 4 (which notice will be irrevocable) then immediately prior to the close of business on the redemption date, provided that Services has paid to the Property Trustee in immediately available funds a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, Distributions will cease to accrue on the Common Securities called for redemption, such Common Securities will no longer be deemed to be outstanding and all rights of Holders of such Common Securities so called for redemption will cease, except the right of the Holders of such Common Securities to receive the Redemption Price, but without 7 87 interest on such Redemption Price. Neither the Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Common Securities which have been so called for redemption. If any date fixed for redemption of Common Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that 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 each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price in respect of Common Securities is improperly withheld or refused and not paid by the Property Trustee, Distributions on such Common Securities will continue to accrue, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. (iv) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to the Holders of the Common Securities. (v) Upon the date of dissolution of the Trust and distribution of Debentures as a result of the occurrence of a Special Event, Common Security Certificates shall be deemed to represent beneficial interests in the Debentures so distributed, and the Common Securities will no longer be deemed outstanding and may be canceled by the Regular Trustees. The Debentures so distributed shall have an aggregate principal amount equal to the aggregate liquidation amount of the Common Securities so distributed. 5. Voting Rights. (a) Except as provided under paragraph 5(b) below and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) Holders of Common Securities have the sole right under the Declaration to increase or decrease the number of Trustees, and to appoint, remove or replace a Trustee, any such increase, decrease, appointment, removal or replacement to be approved by Holders of Common Securities representing a Majority in liquidation amount of the Common Securities. If any proposed amendment to the Declaration provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than in connection with the distribution of Debentures held by the Property Trustee, upon the occurrence of a Special Event or in connection with the redemption of Common Securities as a consequence of a 8 88 redemption of Debentures, then the Holders of outstanding Securities will be entitled to vote on such amendment or proposal as a class and such amendment or proposal shall not be effective except with the approval of the Holders of Securities representing 66-2/3% in liquidation amount of such Securities; provided, however, that (A) if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 66-2/3% in liquidation amount of such class of Securities, (B) the rights of Holders of Common Securities under Article V of the Declaration to increase or decrease the number of, and to appoint, replace or remove, Trustees shall not be amended without the consent of each Holder of Common Securities, and (C) amendments to the Declaration shall be subject to such further requirements as are set forth in Sections 12.1 and 12.2 of the Declaration. In the event the consent of the Property Trustee as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Property Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination. The Property Trustee shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided that where such amendment, modification or termination of the Indenture requires the consent or vote of (1) holders of Debentures representing a specified percentage greater than a majority in principal amount of the Debentures or (2) each holder of Debentures, the Property Trustee may only vote with respect to that amendment, modification or termination as directed by, in the case of clause (1) above, the vote of Holders of Securities representing such specified percentage of the aggregate liquidation amount of the Securities, or, in the case of clause (2) above, each Holder of Securities; and provided, further, that the Property Trustee shall be under no obligation to take any action in accordance with the directions of the Holders of the Securities unless the Property Trustee shall have received, at the expense of the Sponsor, an opinion of nationally recognized independent tax counsel recognized as an expert in such matters to the effect that the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership on account of such action and will be treated as a grantor trust for United States federal income tax purposes following such action. Subject to Section 2.6 of the Declaration, and the provisions of this and the next succeeding paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class shall have the right to (A) on behalf of all Holders of Common Securities, waive any past default that is 9 89 waivable under the Declaration (subject to, and in accordance with the Declaration) and (B) direct the time, method, and place of conducting any proceeding for any remedy available to the Property Trustee, or exercising any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Debentures, to (i) direct the time, method and place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 6.06 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided that where the taking of any action under the Indenture requires the consent or vote of (1) holders of Debentures representing a specified percentage greater than a majority in principal amount of the Debentures or (e) each holder of Debentures, the Property Trustee may only take such action if directed by, in the case of clause (1) above, the vote of Holders of Common Securities representing such specified percentage of the aggregate liquidation amount of the Common Securities, or, in the case of clause (2) above, each Holder of Common Securities. Pursuant to this paragraph, the Property Trustee shall not revoke, or take any action inconsistent with, any action previously authorized or approved by a vote of the Holders of the Preferred Securities, and shall not take any action in accordance with the direction of the Holders of the Common Securities under this paragraph if the action is prejudicial to the Holders of Preferred Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or the Debenture Trustee as set forth above, the Property Trustee shall be under no obligation to take any of the foregoing actions at the direction of the Holders of Common Securities unless the Properties Trustee shall have received, at the expense of the Sponsor, an opinion of nationally recognized independent tax counsel recognized as expert in such matters to the effect that the Trust will not be classified for United States federal income tax purposes as an association taxable as a corporation or a partnership on account of such action and will be treated as a grantor trust for United States income tax purposes following such action. Notwithstanding any other provision of these terms, each Holder of Common Securities will be deemed to have waived any Event of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Preferred Securities have been cured, waived by the Holders of Preferred Securities as provided in the Declaration or otherwise eliminated, and until all Events of Default with respect to the Preferred Securities have been so cured, waived by the Holders of Preferred Securities or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the Holders of Preferred Securities and only the Holders of the Preferred Securities will have the 10 90 right to direct the Property Trustee in accordance with the terms of the Declaration or of the Securities. In the event that any Event of Default with respect to the Preferred Securities is waived by the Holders of Preferred Securities as provided in the Declaration, the Holders of Common Securities agree that such waiver shall also constitute the waiver of such Event of Default with respect to the Common Securities for all purposes under the Declaration without any further act, vote or consent of the Holders of the Common Securities. A waiver of an Indenture Event of Default by the Property Trustee at the direction of the Holders of the Preferred Securities will constitute a waiver of the corresponding Event of Default under the Declaration in respect of the Securities. Any required approval of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities of the Trust or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of Common Securities. 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 resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of Common Securities will be required for the Trust to redeem and cancel Common Securities in accordance with the Declaration. 6. Pro Rata Treatment. A reference in these terms of the Common Securities to any payment, distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Preferred Securities pro rata according to the aggregate liquidation amount of Preferred Securities held by the relevant Holder relative to the aggregate liquidation amount of all Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 11 91 7. Ranking. The Common Securities rank pari passu and payment thereon will be made Pro Rata with the Preferred Securities except that where an Event of Default occurs and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon liquidation, redemption or otherwise are subordinate to the rights of Holders of the Preferred Securities. 8. Mergers, Consolidations or Amalgamations. The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets to, any corporation or other body. 9. Transfers, Exchanges, Method of Payments. Payment of Distributions and payments on redemption of the Common Securities will be payable, the transfer of the Common Securities will be registrable, and Common Securities will be exchangeable for Common Securities of other denominations of a like aggregate liquidation amount, at the principal corporate trust office of the Property Trustee in The City of Chicago; provided that payment of Distributions may be made at the option of the Regular Trustees on behalf of the Trust by check mailed to the address of the persons entitled thereto and that the payment on redemption of any Common Security will be made only upon surrender of such Common Security to the Property Trustee. Notwithstanding the foregoing, transfers of Common Securities are subject to conditions set forth in Section 9.1(c) of the Declaration. 10. Acceptance of Indenture. Each Holder of Common Securities, by the acceptance thereof, agrees to the provisions of the Indenture and the Debentures, including the subordination provisions thereof. 11. No Preemptive Rights. The Holders of Common Securities shall have no preemptive rights to subscribe to any additional Common Securities or Preferred Securities. 12. Miscellaneous. These terms shall constitute a part of the Declaration. The Trust will provide a copy of the Declaration and the Indenture to a Holder without charge on written request to the Trust at its principal place of business. 12 92 Annex I TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN THE DECLARATION REFERRED TO BELOW Certificate Number Number of Common Securities ------ ---------- Certificate Evidencing Common Securities of Aetna Capital Trust [ ] ____% Common Trust Securities (liquidation amount $25 per Common Security) Aetna Capital Trust [ ], a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Aetna Services, Inc. (the "Holder") is the registered owner of ____________________________ (_________) common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the "____% Common Trust Securities" (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer and satisfaction of the other conditions set forth in the Declaration (as defined below) including, without limitation Section 9.01(c) thereof. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of the Trust dated as of __________, 199__, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Common Securities as set forth in Exhibit C thereto. The Common Securities and the Preferred Securities issued by the Trust pursuant to the Declaration represent undivided beneficial interests in the assets of the Trust, including the Debentures (as defined in the Declaration) 93 issued by Aetna Services, Inc., a Connecticut corporation, to the Trust pursuant to the Indenture referred to in the Declaration. The Trust will furnish a copy of the Declaration and the Indenture to the Holder without charge upon written request to the Trust at its principal place of business or registered office. The Holder of this Certificate, by accepting this Certificate, is deemed to have agreed to the terms of the Indenture and the Debentures, including that the Debentures are subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Indenture) as and to the extent provided in the Indenture. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the undersigned Trustees of the Trust have executed this certificate this day of , 199_. --- -------------- AETNA CAPITAL TRUST [ ] By: , as Trustee ------------------------- Name: Title: Trustee By: , as Trustee ------------------------- Name: Title: Trustee Dated: Countersigned and Registered: The First National Bank of Chicago Transfer Agent and Registrar By: ------------------------------- Authorized Signature 2 94 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert assignee's social security or tax identification number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Insert address and zip code of assignee) and irrevocably appoints - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- agent to transfer this - -------------------------------------------------------- Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: ---------------------------- Signature: -------------------------------- (Sign exactly as your name appears on the other side of this Common Security Certificate) 3 EX-4.13 7 FORM OF GUARANTEE AGREEMENT 1 Exhibit 4.13 ================================================================================ AETNA INC. AETNA SERVICES, INC. GUARANTEE AGREEMENT ------------------ Dated as of __________, 199_ ------------------ ================================================================================ 2 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of __________, 199_, is executed and delivered by AETNA SERVICES, INC., a corporation duly organized and validly existing under the laws of the State of Connecticut (herein called the "Company"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, AETNA INC., a corporation duly organized and existing under the laws of the State of Connecticut ("Aetna," and together with the Company, the "Guarantors"), having its principal office at 151 Farmington Avenue, Hartford, Connecticut 06156, and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association duly organized and existing under the laws of the United States of America, as the initial Guarantee Trustee (as defined herein) for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Aetna Capital Trust ___, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration"), dated as of ______________, 199_ among the trustees of the Issuer named therein, the Company, as Sponsor, Aetna and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer may issue up to _______________ aggregate liquidation amount of its _____% Preferred Securities (the "Preferred Securities") representing undivided beneficial interests in the assets of the Issuer and having the terms set forth in Exhibit B to the Declaration, of which $_____________ liquidation amount of Preferred Securities are being issued as of the date hereof. Up to the remaining $______________ liquidation amount of Preferred Securities may be issued by the Issuer if and to the extent that the over-allotment option in the Underwriting Agreement (as defined in the Declaration) is exercised by the Underwriters named therein. WHEREAS, as incentive for the Holders to purchase Preferred Securities, the Guarantors desire to irrevocably and unconditionally, jointly and severally agree, to the extent set forth herein, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by the initial purchasers thereof of Preferred Securities, which purchase the Guarantors hereby agree shall benefit the Guarantors, the Guarantors execute and deliver this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities. 3 ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. (a) Capitalized terms used in this Guarantee Agreement but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Commission" means the Securities and Exchange Commission. "Common Securities" means the securities representing undivided beneficial interests in the assets of the Issuer, having the terms set forth in Exhibit C to the Declaration. "Covered Person" means any Holder of Preferred Securities. "Debentures" means the series of Junior Subordinated Debentures issued by the Company under the Indenture to the Property Trustee, guaranteed by Aetna, and entitled the "_____% Junior Subordinated Debentures due ____". 2 4 "Distributions" means the periodic distributions and other payments payable to Holders of Preferred Securities in accordance with the terms of the Preferred Securities set forth in Exhibit B to the Declaration. "Event of Default" means a default by the Guarantors on any of their payment or other obligations under this Guarantee Agreement. "Financing Entity" means any trust, partnership or other entity affiliated with the Company or Aetna which is a financing vehicle of the Company or Aetna, including Aetna Capital L.L.C., a Delaware limited liability company. "Guarantee Payments" shall mean the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions and the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer but only if and to the extent that in each case either Guarantor has made a payment to the Property Trustee of interest or principal on the Debentures and (ii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to Holders or the redemption of all the Preferred Securities upon the maturity or redemption of the Debentures as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer has funds available therefor, or (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means The First National Bank of Chicago until a Successor Guarantee Trustee has been appointed and accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Holder" shall mean any holder, as registered on the books and records of the Issuer, of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include either Guarantor or any entity directly or indirectly controlling or controlled by or under direct or indirect common control with either Guarantor. "Indemnified Person" means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, and any officers, directors, shareholders, members, partners, employees, representatives or agents of the Guarantee Trustee. 3 5 "Indenture" means the Junior Subordinated Indenture dated as of __, 199_ among and between the Company, Aetna and The First National Bank of Chicago, as trustee, as supplemented by the [ ] Supplemental Indenture thereto dated as of ___________ 199___, pursuant to which the Debentures are to be issued. "Majority in liquidation amount of the Preferred Securities" means, except as otherwise required by the Trust Indenture Act, Holder(s) of outstanding Preferred Securities voting together as a single class, who are the record owners of Preferred Securities whose liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) represents more than 50% of the liquidation amount of all outstanding Preferred Securities. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Securities" has the meaning set forth in the first WHEREAS clause above. "Property Trustee" means the Person acting as Property Trustee under the Declaration. "Redemption Price" means the amount payable on redemption of the Preferred Securities in accordance with the terms of the Preferred Securities. "Responsible Officer" means, with respect to the Guarantee Trustee, any officer of the Guarantee Trustee assigned to administer corporate trust matters and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "66-2/3% in liquidation amount of the Preferred Securities" means, except as otherwise required by the Trust Indenture Act, Holder(s) of outstanding Preferred Securities voting together as a single class who are the record owners of Preferred Securities whose liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid 4 6 Distributions to the date upon which the voting percentages are determined) represents 66-2/3% or more of the liquidation amount of all Preferred Securities. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as a Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. ARTICLE 2 TRUST INDENTURE ACT SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions; (b) if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control; and (c) the application of the Trust Indenture Act to this Guarantee Agreement shall not affect the nature of the Preferred Securities as equity securities representing undivided beneficial interests in the assets of the Issuer. SECTION 2.02. Lists of Holders of Preferred Securities. (a) The Guarantors shall provide the Guarantee Trustee with such information as is required under ss. 312(a) of the Trust Indenture Act at the times and in the manner provided in ss. 312(a); and (b) the Guarantee Trustee shall comply with its obligations under ss.ss. 310(b), 311 and 312(b) of the Trust Indenture Act. SECTION 2.03. Reports By The Guarantee Trustee. Within 60 days after May 15 of each year, the Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by ss. 313 of the Trust Indenture Act, if any, in the form, in the manner and at the times provided by ss. 313 of the 5 7 Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of ss. 313(d) of the Trust Indenture Act. SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantors shall provide to the Guarantee Trustee, the Commission and the Holders of the Preferred Securities, as applicable, such documents, reports and information as required by ss. 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance certificates required by ss. 314(a)(4) and (c) of the Trust Indenture Act, any such certificates to be provided in the form, in the manner and at the times required by ss. 314(a)(4) and (c) of the Trust Indenture Act (provided that any certificate to be provided pursuant to ss. 314(a)(4) of the Trust Indenture Act shall be provided within 120 days of the end of each fiscal year of the Issuer). SECTION 2.05. Evidence of Compliance with Conditions Precedent. The Guarantors shall provide to the Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Guarantee Agreement which relate to any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given pursuant to ss. 314(c) shall comply with ss. 314(e) of the Trust Indenture Act. SECTION 2.06. Events of Default; Waiver. (a) Subject to Section 2.6(b), Holders of Preferred Securities may by vote of at least a Majority in liquidation amount of the Preferred Securities, (A) direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon by the Guarantee Trustee or (B) on behalf of the Holders of all Preferred Securities waive any past Event of Default and its consequences. Upon such waiver, any such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. (b) The right of any Holder of Preferred Securities to receive payment of the Guarantee Payments in accordance with this Guarantee Agreement, or to institute suit for the enforcement of any such payment, shall not be impaired without the consent of each such Holder. SECTION 2.07. Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Preferred Securities in accordance with ss. 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to ss. 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held 6 8 accountable by reason of mailing any material pursuant to a request made under ss. 312(b) of the Trust Indenture Act. SECTION 2.08. Conflicting Interest. The Declaration shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE 3 POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee in trust for the benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall not transfer its right, title and interest in the Guarantee Agreement to any Person except a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4. The right, title and interest of the Guarantee Trustee to the Guarantee Agreement shall vest automatically in each Person who may hereafter be appointed as Guarantee Trustee in accordance with Article IV. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. (b) If an Event of Default occurs and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of the Preferred Securities. (c) This Guarantee Agreement and all moneys received by the Property Trustee hereunder in respect of the Guarantee Payments will not be subject to any right, charge, security interest, lien or claim of any kind in favor of, or for the benefit of that Guarantee Trustee or its agents or their creditors. (d) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the holders of the Preferred Securities, as their names and addresses appear upon the register, notice of all Events of Default known to the Guarantee Trustee, unless such defaults shall have been cured before the giving of such notice; provided, that, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Guarantee Trustee in good faith determine that 7 9 the withholding of such notice is in the interests of the Holders of the Preferred Securities. The Guarantee Trustee shall not be deemed to have knowledge of any default except any default as to which the Guarantee Trustee shall have received written notice or a Responsible Officer charged with the administration of this Guarantee Agreement shall have obtained written notice. (e) The Guarantee Trustee shall not resign as a Trustee unless a Successor Guarantee Trustee has been appointed and accepted that appointment in accordance with Article IV. SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee. (a) The Guarantee Trustee, before the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6(a)), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement, and no implied covenants or obligations shall be read into this Guarantee Agreement against the Guarantee Trustee; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof are specifically required to 8 10 be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of Preferred Securities as provided herein relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. (c) Subject to the provisions of Section 3.2(a) and (b): (i) whenever in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon a certificate, which shall comply with the provisions of ss. 314(e) of the Trust Indenture Act, signed by any authorized officers of the Guarantors; (ii) the Guarantee Trustee (A) may consult with counsel (which may be counsel to either Guarantor or any of its Affiliates and may include any of its employees) selected by it in good faith and with due care and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice and opinion and (B) shall have the right at any time to seek instructions concerning the 9 11 administration of this Guarantee Agreement from any court of competent jurisdiction; (iii) the Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it in good faith and with due care; (iv) the Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holders of Preferred Securities, unless such Holders shall have offered to the Guarantee Trustee reasonable security and indemnity against the costs, expenses (including its attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that nothing contained in this clause (iv) shall relieve the Guarantee Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived) to exercise such of the rights and powers vested in it by this Guarantee Agreement, and to use the same degree of care and skill in this exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs; and (v) any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action; and no third party shall be required to inquire as to the authority of the Guarantee Trustee to so act, or as to its compliance with any of the terms and provisions of this Guarantee Agreement, both of which shall be conclusively evidenced by the Guarantee Trustee's or its agent's taking such action. SECTION 3.03. Not Responsible for Recitals or Issuance. The recitals contained in this Guarantee shall be taken as the statements of the Guarantors and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representations as to the validity or sufficiency of this Guarantee Agreement. 10 12 ARTICLE 4 GUARANTEE TRUSTEE SECTION 4.01. Qualifications. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of either Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Guarantee Trustee shall cease to satisfy the requirements of clauses (i)-(ii) above, the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the Guarantee Trustee and the Guarantors shall in all respects comply with the provisions of ss. 310(b) of the Trust Indenture Act. SECTION 4.02. Appointment, Removal and Resignation of Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by either Guarantor. (b) The Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1(a) has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantors and the Guarantee Trustee being removed. 11 13 (c) The Guarantee Trustee appointed to office shall hold office until his successor shall have been appointed or until its removal or resignation. (d) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument (a "Resignation Request") in writing signed by the Guarantee Trustee and delivered to the Guarantors, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that no such resignation of the Guarantee Trustee shall be effective until a Successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1(a) has been appointed and has accepted such appointment by instrument executed by such Successor Guarantee Trustee and delivered to Guarantors and the resigning Guarantee Trustee. (e) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantors of a Resignation Request, the resigning Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon after such notice, if any, as it may deem proper and prescribe, appoint a Successor Guarantee Trustee. ARTICLE 5 GUARANTEE SECTION 5.01. Guarantee. The Guarantors irrevocably and unconditionally, jointly and severally agree to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer) regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantors' obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantors to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.02. Waiver of Notice. The Guarantors hereby waive notice of acceptance of this Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantors, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 12 14 SECTION 5.03. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantors under this Guarantee 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 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 Distributions (other than an extension of time for payment of Distributions that results from the extension of any interest payment period on the Debentures), Redemption Price, Liquidation Distribution (as defined in the Declaration) 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, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantors with respect to the happening of any of the foregoing. 13 15 SECTION 5.04. Enforcement of Guarantee. The Guarantors and the Guarantee Trustee expressly acknowledge that (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) Holders representing not less than a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available in respect of this Guarantee Agreement including the giving of directions to the Guarantee Trustee, or exercising any trust or other power conferred upon the Guarantee Trustee under this Guarantee Agreement, and (iv) if the Guarantee Trustee fails to enforce this Guarantee Agreement, any Holder of Preferred Securities may institute a legal proceeding directly against either or both of the Guarantors to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee, or any other Person. SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not merely of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer). SECTION 5.06. Subrogation. The Guarantors shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantors under this Guarantee Agreement; provided, however, that the Guarantors shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or 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 payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantors in violation of the preceding sentence, the Guarantors agree to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.07. Independent Obligations. The Guarantors acknowledge that their obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that each of the Guarantors shall be liable (on a joint and several basis with one another) as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. 14 16 ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.01. Limitation of Transactions. So long as any Preferred Securities remain outstanding, neither Guarantor shall declare or pay any dividend on, or redeem, purchase, acquire or make a distribution or 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 Agreement or the equivalent guarantee agreements respecting preferred securities of Aetna Capital Trust_____,_____or_____, (ii) acquisitions of shares of a Guarantor's common stock in connection with the satisfaction by such Guarantor of its obligations under any employee benefit plan, (iii) stock repurchases in the open market, (iv) redemptions of any share purchase rights issued by a Guarantor or the declaration of a dividend of share purchase rights, (v) accrued dividends (and cash in lieu of fractional shares) upon the conversion of any preferred stock of such Guarantor as may be outstanding from time to time, in each case in accordance with the terms of such stock and (vi) stock dividends paid by a Guarantor or any dividends paid by the Company provided the Company is a direct or indirect wholly owned subsidiary of the Guarantor), if at such time (a) the Guarantors shall be in default with respect to their payment obligations hereunder, (b) there shall have occurred and be continuing an event of default under the Declaration or (c) the Company shall have given notice of its election of an Extended Interest Payment Period (as defined in the Indenture) and such period, or any extension thereof, is continuing. In addition, so long as any Preferred Securities remain outstanding, each Guarantor (i) will remain the sole direct or indirect owner of all of the outstanding Common Securities and shall not cause or permit the Common Securities to be transferred except to the extent such transfer is permitted under Section 9.1(c) of the Declaration; provided that any permitted successor of a Guarantor under the Indenture may succeed to the Guarantor's direct or indirect ownership of the Common Securities and (ii) will use reasonable efforts to cause the Issuer to continue to be treated as a grantor trust for United States federal income tax purposes except in connection with a distribution of Debentures as provided in the Declaration. SECTION 6.02. Subordination. This Guarantee Agreement will constitute an unsecured obligation of each of the Guarantors and will rank (i) pari passu in right of payment with any guarantee of a Guarantor issued in respect of any Preferred Securities of Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III or Aetna Capital Trust IV or issued in respect of any preferred securities of any Financing Entity, (ii) subordinate and junior in right of payment to all other liabilities of such Guarantor, including the Debentures in the case of the Company and the guarantees of the Debentures in the case of Aetna, except those made pari passu or subordinate by their terms, and (iii) senior to all capital stock now or hereafter issued by such Guarantor and to any guarantee now or hereafter entered into by such Guarantor in respect of any of its capital stock. Each Guarantor's obligations under this Guarantee Agreement will rank pari passu with respect to obligations under other guarantee agreements which it may enter into from time to time to the extent that such agreements shall be entered into in substantially the 15 17 form hereof and provide for comparable guarantees by such Guarantor of payment on preferred securities issued by other Aetna Capital Trusts. ARTICLE 7 TERMINATION SECTION 7.01. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon full payment of the Redemption Price of all Preferred Securities, or upon the distribution of Debentures to Holders of Preferred Securities and Common Securities in exchange for all of the Preferred Securities and Common Securities, or upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to the Preferred Securities or this Guarantee Agreement. ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION SECTION 8.01. Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to either Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee Agreement or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of either Guarantor and upon such information, opinions, reports or statements presented to either Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of either Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or 16 18 any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.02. Indemnification. (a) To the fullest extent permitted by applicable law, the Guarantors, jointly and severally, shall indemnify and hold harmless each Indemnified Person from and against any loss, damage or claim incurred by such Indemnified Person by reason of any act or omission performed or omitted by such Indemnified Person in good faith and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Guarantee Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of negligence or willful misconduct with respect to such acts or omissions. (b) To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Guarantors prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Guarantors of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in Section 8.2(a). (c) The provisions of this Section 8.02 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assignees, receivers, trustees and representatives of each of the Guarantors and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantors that is permitted under the Indenture, the Guarantors shall not assign their obligations hereunder. SECTION 9.02. Amendments. Except with respect to any changes which do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than 66-2/3% in liquidation amount of the Preferred Securities. The provisions of Section 12.2 of the Declaration concerning meetings of Holders shall apply to the giving of such approval. 17 19 SECTION 9.03. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantors, to the address set forth below or such other address as the Guarantors may give notice of to the Holders: Aetna Inc. Aetna Services, Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Attention: Corporate Secretary Facsimile No: 860-273-[ ] (b) if given to the Guarantee Trustee, to the address set forth below or such other address as the Guarantee Trustee may give notice to the Holders: The First National Bank of Chicago 153 West 51st Street 5th Floor, Suite 4015 New York, NY 10019 Attention: Corporate Trust Administration (c) if given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.04. Genders. The masculine, feminine and neuter genders used herein shall include the masculine, feminine and neuter genders. SECTION 9.05. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and subject to Section 3.1(a) is not separately transferable from the Preferred Securities. 18 20 SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS). SECTION 9.07. Counterparts. This Guarantee Agreement may be executed in counterparts, each of which shall be an original; but such counterparts shall together constitute one and the same instrument. SECTION 9.08. Exercise of Overallotment Option. If and to the extent that Preferred Securities are issued by the Issuer upon exercise of the overallotment option referred to the second WHEREAS clause, the Guarantors agree to give prompt notice thereof to the Guarantee Trustee but the failure to give such notice shall not relieve the Guarantors of any of their obligations hereunder. THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. AETNA SERVICES, INC. By:____________________________ Name: Title: AETNA INC. By:____________________________ Name: Title: THE FIRST NATIONAL BANK OF CHICAGO, As Guarantee Trustee By:____________________________ Name: Title: 19 21 STATE OF ) COUNTY OF ) BEFORE ME, the undersigned authority, on this day of ________, 199_, personally appeared _______________ of Aetna Services, Inc., known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF __________, 199_. [SEAL] - -------------------------------- NOTARY PUBLIC Print Name:_____________________ Commission Expires:_____________ 20 22 STATE OF ) COUNTY OF ) BEFORE ME, the undersigned authority, on this day of ________, 199_, personally appeared _______________ of Aetna Inc., known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF __________, 199_. [SEAL] - -------------------------------- NOTARY PUBLIC Print Name:_____________________ Commission Expires:_____________ 21 23 STATE OF ) COUNTY OF ) BEFORE ME, the undersigned authority, on this day of ________, 199_, personally appeared _______________ of The First National Bank of Chicago, known to me (or proved to me by introduction upon the oath of a person known to me) to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same as the act of such trust for the purposes and consideration herein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF __________, 199_. [SEAL] - -------------------------------- NOTARY PUBLIC Print Name:_____________________ Commission Expires:_____________ 22 EX-5.1 8 OPINION OF THOMAS J. CALVOCORESSI 1 Aetna Inc. Aetna Services, Inc. 151 Farmington Avenue Hartford, CT 06156 Thomas J. Calvocoressi Vice President and General Counsel Law and Regulatory Affairs, RC4A (860) 273-4444 Fax: (860) 549-6755 June 19, 1998 Aetna Services, Inc. 151 Farmington Avenue Hartford, CT 06156 Aetna Inc. 151 Farmington Avenue Hartford, CT 06156 I am Vice President and General Counsel of Aetna Inc., a Connecticut corporation ("Aetna"), and Aetna Services, Inc., a Connecticut corporation ("Aetna Services"). In connection with the registration under the Securities Act of 1933, as amended (the "Securities Act"), of up to $1.7 billion of (i)(a) senior, subordinated or junior subordinated debt securities of Aetna Services (collectively, the "Debt Securities"), and (b) senior, subordinated or junior subordinated guarantees of Aetna of the Debt Securities (the "Debt Guarantees") and (ii) preferred securities of Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III and Aetna Capital Trust IV, each a Delaware business trust, and related guarantees of Aetna and Aetna Services of the preferred securities pursuant to guarantee agreements (the "Guarantee Agreements"), I have examined or caused to be examined necessary or appropriate corporate records, certificates or other documents, and questions of law for the purposes of this opinion. Upon the basis of such examination, I advise you that, in my opinion: 1. The Debt Securities will constitute valid and legally binding obligations of Aetna Services subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity) when the following conditions are met: (i) the registration statement has become effective under the Securities Act; (ii) the indenture relating to the Debt Securities and the Debt Guarantees has been duly executed and delivered; (iii) the terms of the Debt Securities and of their issuance and sale have been duly established in conformity with the indenture relating to the Debt Securities and the Debt Guarantees so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Aetna Services and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Aetna Services; and (iv) the Debt Securities have been duly executed and authenticated in accordance with the indenture relating to the Debt Securities and the Debt Guarantees, and duly issued and sold as contemplated by the registration statement and any prospectus supplement relating thereto. 2 Page 2 June 19, 1998 2. The Debt Guarantees will constitute valid and legally binding obligations of Aetna subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity) when the following conditions are met: (i) the registration statement has become effective under the Securities Act; (ii) the indenture relating to the Debt Securities and the Debt Guarantees has been duly executed and delivered; (iii) the terms of the Debt Securities and the Debt Guarantees to be endorsed thereon and of their issuance and sale have been duly established in conformity with the indenture relating to the Debt Securities and the Debt Guarantees so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Aetna or Aetna Services and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over Aetna or Aetna Services; (iv) the Debt Guarantees to be endorsed on the Debt Securities have been duly executed in accordance with the indenture relating to the Debt Securities and the Debt Guarantees; and (v) the Debt Securities have been duly executed and authenticated in accordance with the indenture relating to the Debt Securities and the Debt Guarantees, and duly issued and sold as contemplated by the registration statement and any prospectus supplement relating thereto. 3. Each Guarantee Agreement will constitute a valid and legally binding obligation of each of Aetna and Aetna Services subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity) when the following conditions are met: (i) the registration statement has become effective under the Securities Act; (ii) the Guarantee Agreement has been duly executed and delivered; (iii) the Guarantee Agreement when so executed and delivered does not violate any applicable law or result in a default under or breach of any agreement or instrument binding upon Aetna or Aetna Services and complies with any requirement or restriction imposed by any court or governmental body having jurisdiction over Aetna or Aetna Services; and (iv) the securities entitled to the benefits of the Guarantee Agreement have been duly issued and sold as contemplated by the registration statement and any prospectus supplement relating thereto. I note that, as of the date of this opinion, a judgment for money in an action based on a security denominated in a foreign currency, currency unit or composite currency in a Federal court in the United States ordinarily would be enforced only in United States dollars. I also note that, as of the date of this opinion, a state court in the State of Connecticut rendering a judgment on a security denominated in a foreign currency, currency unit or composite currency may apply Section 50a-57 of the General Statutes of Connecticut, and render such judgment in the foreign currency in which the security in respect thereof is denominated. Such judgment then would be payable in that foreign currency or, at the option of the judgment debtor, in the amount of United States dollars which will purchase that foreign currency on the conversion date (as defined in such Statutes). 3 Page 3 June 19, 1998 The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Connecticut and I do not express any opinion as to the effect of the laws of any other jurisdiction. In my examination or the examination which I caused to be made, the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted as originals, the conformity to original documents of all documents submitted as certified or photostatic copies and the authenticity of the originals of such latter documents were assumed. As to any facts material to the opinions expressed herein which were not independently established or verified, I have relied upon oral or written statements and representations of officers and other representatives of Aetna Services, Aetna and others. I hereby consent to the filing of this opinion as Exhibit 5.1 to the registration statement and to the reference made to me under the heading "Validity of the Securities" in the prospectuses contained therein. In giving such consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, /s/ Thomas J. Calvocoressi Thomas J. Calvocoressi EX-5.2 9 OPINION OF DAVIS POLK & WARDWELL 1 Exhibit 5.2 [ DAVID POLK & WARDWELL LETTERHEAD ] June 19, 1998 Aetna Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Aetna Services, Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Ladies and Gentlemen: We have acted as special New York counsel to Aetna Inc. ("Aetna") and Aetna Services, Inc. (the "Company"), each a Connecticut corporation, in connection with the preparation of the Registration Statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act") by Aetna, the Company, and Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III and Aetna Capital Trust IV, each a Delaware statutory business trust (each, an "Aetna Trust"), with respect to the contemplated issuance from time to time of up to $1,700,000,000 aggregate public offering price, or the equivalent thereof in one or more foreign currencies, currency units or composite currencies, of (i) senior, subordinated and junior subordinated debt securities (each, a "Debt Security") of the Company, (ii) senior, subordinated and junior subordinated guarantees of the Debt Securities (each, a "Debt Guarantee") of Aetna, (iii) preferred securities (the "Preferred Securities") of the Aetna Trusts and (iv) guarantees of the Preferred Securities (the "Preferred Securities Guarantees") of the Company and Aetna. The Debt Securities and Debt Guarantees may be issued pursuant to the Senior Debt Securities Indenture dated as of July 1, 1996 among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National Association, as Trustee (the "Senior Indenture"), the Subordinated Debt Securities Indenture dated as of July 1, 1996 and to be entered into among the Company, Aetna and State Street Bank and Trust Company of Connecticut, National 2 Aetna Inc. Aetna Services, Inc. 2 June 19, 1998 Association, as Trustee (the "Subordinated Indenture") and the Junior Subordinated Debentures Indenture to be entered into among the Company, Aetna and The First National Bank of Chicago, as Trustee (the "Junior Subordinated Indenture", and, together with the Senior Indenture and the Subordinated Indenture, each an "Indenture"). The Preferred Securities of an Aetna Trust may be issued pursuant to an Amended and Restated Declaration of Trust to be entered into among the trustees named therein, the Company, as Sponsor, Aetna and the holders, from time to time, of undivided beneficial interests in the assets of such Aetna Trust (a "Declaration of Trust"). The Preferred Securities Guarantees relating to the Preferred Securities of an Aetna Trust may be issued pursuant to a Guarantee Agreement to be entered into among the Company, Aetna and The First National Bank of Chicago, as Guarantee Trustee (a "Guarantee Agreement"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary for the purpose of rendering this opinion. Upon the basis of the foregoing, we are of the opinion that: (1) When the Indenture and any supplemental indenture to be entered into in connection with the issuance of a particular Debt Security have been duly authorized, executed and delivered by the Company, Aetna and the applicable trustee, the specific terms of such Debt Security have been duly authorized and established in accordance with such Indenture and such Debt Security has been duly authorized, executed, authenticated, issued and delivered in accordance with such Indenture and the applicable underwriting or other agreement, such Debt Security will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity). 3 Aetna Inc. Aetna Services, Inc. 3 June 19, 1998 (2) When the Indenture and any supplemental indenture to be entered into in connection with the issuance of a particular Debt Security and the Debt Guarantee to be endorsed thereon have been duly authorized, executed and delivered by the Company, Aetna and the applicable trustee, the specific terms of such Debt Security and Debt Guarantee have been duly authorized and established in accordance with such Indenture, such Debt Guarantee has been duly authorized and executed in accordance with such Indenture and such Debt Security has been duly authorized, executed, authenticated, issued and delivered in accordance with such Indenture and the applicable underwriting or other agreement, such Debt Guarantee will constitute a valid and binding obligation of Aetna, enforceable in accordance with its terms, subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity). (3) When the Preferred Securities Guarantees under the applicable Guarantee Agreement have been duly authorized by the Company and Aetna, such Guarantee Agreement has been duly authorized, executed and delivered by the Company, Aetna and the Guarantee Trustee and the Preferred Securities to which such Preferred Securities Guarantees relate have been duly issued by the applicable Aetna Trust in accordance with the applicable Declaration of Trust and the applicable underwriting or other agreement relating thereto, such Preferred Securities Guarantees will constitute valid and binding obligations of the Company and Aetna, respectively, enforceable in accordance with their terms, subject to (a) bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and the rights of creditors of insurance companies generally and (b) general principles of equity (regardless of whether considered in a proceeding at law or in equity). 4 Aetna Inc. Aetna Services, Inc. 4 June 19, 1998 In connection with the opinions expressed above, we have assumed that, at or prior to the delivery of any such security, (i) the terms of such security shall have been duly established and the issuance and sale of such security shall have been duly authorized, and such authorization shall not have been modified or rescinded; (ii) the Registration Statement shall have been declared effective and such effectiveness shall not have been terminated or rescinded; and (iii) there shall not have occurred any change in law affecting the validity or enforceability of such security. We have also assumed that none of the terms of any security to be established subsequent to the date hereof, nor the issuance and delivery of such security, nor the compliance by the Company or Aetna with the terms of such security, will violate any applicable law or will result in a violation of any provision of any instrument or agreement then binding upon the Company or Aetna, or any restriction imposed by any court or governmental body having jurisdiction over the Company or Aetna. We note that, as of the date of this opinion, a judgment for money in an action based on a security denominated in a foreign currency, currency unit or composite currency in a federal or state court located in the State of New York ordinarily would be enforced in the State of New York only in U.S. dollars. The date used to determine the rate of conversion into U.S. dollars of the relevant foreign currency, currency unit or composite currency will depend upon various factors, including which court renders the judgment. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. To the extent that the foregoing opinion expresses conclusions as to matters of the laws of the State of Connecticut, we have, with your permission and without any independent investigation, relied on the opinion of Thomas J. Calvocoressi, counsel to the Company and Aetna. To the extent that the foregoing opinion expresses conclusions as to matters of the laws of the State of Delaware, we have, with your permission and without any independent investigation, relied on the opinion of Richards, Layton & Finger, special Delaware counsel to the Company, Aetna and the Aetna Trusts. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to our name under the headings "Validity of the Securities." In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. 5 Aetna Inc. Aetna Services, Inc. 5 June 19, 1998 Very truly yours, /s/ Davis Polk & Wardwell Davis Polk & Wardwell EX-5.3 10 OPINION OF RICHARDS, LAYTON & FINGER, P.A. 1 Exhibit 5.3 [ RICHARDS, LAYTON & FINGER, PA LETTERHEAD ] June 19, 1998 Aetna Capital Trust I Aetna Capital Trust II Aetna Capital Trust III Aetna Capital Trust IV c/o Aetna, Inc. 151 Farmington Avenue Hartford, Connecticut 06156 Re: Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III and Aetna Capital Trust IV Ladies and Gentlemen: We have acted as special Delaware counsel for Aetna Services, Inc., a Connecticut corporation (the "Company"), Aetna Inc., a Connecticut corporation ("Aetna"), Aetna Capital Trust I, a Delaware business trust ("Trust I"), Aetna Capital Trust II, a Delaware business trust ("Trust II"), Aetna Capital Trust III, a Delaware business trust ("Trust III"), and Aetna Capital Trust IV, a Delaware business trust ("Trust IV")(Trust I, Trust II, Trust III and Trust IV are hereinafter collectively referred to as the "Trusts") in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of Trust I, dated May 7, 1998, as filed with the office of the Secretary of State of the State of Delaware (the "Secretary of State") on May 7, 1998; (b) The Certificate of Trust of Trust II, dated May 7, 1998, as filed with the office of the Secretary of State on May 7, 1998; 2 Aetna Capital Trust I Aetna Capital Trust II Aetna Capital Trust III Aetna Capital Trust IV June 19, 1998 Page 2 (c) The Certificate of Trust of Trust III, dated May 7, 1998, as filed with the office of the Secretary of State on May 7, 1998; (d) The Certificate of Trust of Trust IV, dated May 7, 1998, as filed with the office of the Secretary of State on May 7, 1998; (e) The Declaration of Trust of Trust I, dated as of May 7, 1998, among the Company, Aetna and the trustees of Trust I named therein; (f) The Declaration of Trust of Trust II, dated as of May 7, 1998, among the Company, Aetna and the trustees of Trust II named therein; (g) The Declaration of Trust of Trust III, dated as of May 7, 1998, among the Company, Aetna and the trustees of Trust III named therein; (h) The Declaration of Trust of Trust IV, dated as of May 7, 1998, among the Company, Aetna and the trustees of Trust IV named therein; (i) Amendment No. 1 to the Registration Statement (the "Registration Statement") on Form S-3, including a preliminary prospectus with respect to the Trusts (the "Prospectus"), relating to the Preferred Securities of each of the Trusts representing preferred undivided beneficial interests in the assets of such Trust (each, a "Preferred Security" and collectively, the "Preferred Securities"), filed by the Company, Aetna and the Trusts with the Securities and Exchange Commission on or about June 19, 1998; (j) A form of Amended and Restated Declaration of Trust of each of the Trusts, to be entered into between the Company, Aetna, the trustees of the applicable Trust named therein, and the holders, from time to time, of the undivided beneficial interests in the assets of such Trust (including the exhibits thereto) (the "Declaration"), attached as an exhibit to the Registration Statement; and (k) A Certificate of Good Standing for each of the Trusts, dated June 19, 1998, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Declarations. 3 Aetna Capital Trust I Aetna Capital Trust II Aetna Capital Trust III Aetna Capital Trust IV June 19, 1998 Page 3 For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (k) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (k) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that each Declaration constitutes the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the applicable Trust, and that each Declaration and each Certificate of Trust are in full force and effect and have not been amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the applicable Trust (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for such Preferred Security, in accordance with the applicable Declaration and the Registration Statement, and (vii) that the Preferred Securities are issued and sold to the Preferred Security Holders in accordance with the applicable Declaration and the Registration Statement. We have not participated in the preparation of the Registration Statement and assume no responsibility for its contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating 4 Aetna Capital Trust I Aetna Capital Trust II Aetna Capital Trust III Aetna Capital Trust IV June 19, 1998 Page 4 thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. Each of the Trusts has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act. 2. The Preferred Securities of each Trust will represent valid and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable undivided beneficial interests in the assets of such Trust. 3. The Preferred Security Holders, as beneficial owners of the applicable Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the applicable Declaration. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Validity of the Securities" in the Prospectus. In giving the foregoing consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person for any purpose. Very truly yours, CDK /s/ Richards, Layton & Finger, PA EX-23.4 11 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23.4 [KPMG Peat Marwick LLP Letterhead] CONSENT OF INDEPENDENT AUDITORS The Board of Directors Aetna Inc. We consent to incorporation by reference in Amendment No. 1 to Registration Statement Nos. 333-52321, 333-52321-01, 333-52321-02, 333-52321-03, 333-52321-04 and 333-52321-05 on Form S-3 of Aetna Inc. or its Subsidiaries of our reports dated February 3, 1998, relating to the consolidated balance sheets of Aetna Inc. and Subsidiaries as of December 31, 1997 and 1996 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, 1997, which reports appear in or are incorporated by reference in the December 31, 1997 annual report on Form 10-K of Aetna Inc. We also consent to the reference to our firm under the heading "Experts" in the Prospectus. /s/ KPMG PEAT MARWICK LLP June 19, 1998 EX-24.1 12 POWERS OF ATTORNEY FOR THE COMPANY 1 Exhibit 24.1 POWER OF ATTORNEY We, the undersigned directors and/or officers of Aetna Services, Inc. (the "Company"), hereby severally constitute and appoint Richard L. Huber, Chairman and Chief Executive Officer, Alfred P. Quirk Jr., Vice President, Finance, Alan M. Bennett, Vice President and Corporate Controller, and Thomas J. Calvocoressi, Vice President and General Counsel, and each of them individually, with full power 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, (i) 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, for issuance and sale, in one or more series, of debt or similar obligations of Aetna Services, Inc. (including depository receipts evidencing interests therein) (the "Debt Securities") and of beneficial interests in business trusts (the "Trust Securities", such trusts currently expected to be named Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III, and Aetna Capital Trust IV), formed under the laws of the State of Delaware, such Debt Securities and Trust Securities being guaranteed to the extent set forth in the Registration Statement by Aetna Inc. and/or the Company, and (ii) a Registration Statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, 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 16th day of June, 1998. /s/ Richard L. Huber /s/ Alan M. Bennett __________________________________ _____________________________ Richard L. Huber Alan M. Bennett Chief Executive Officer, President Director, Vice President and and Director Corporate Controller (Principal Executive Officer and (Controller and Principal Principal Financial Officer) Accounting Officer) /s/ Timothy A. Holt __________________________________ Timothy A. Holt Director EX-24.2 13 POWERS OF ATTORNEY 1 EXHIBIT 24.2 POWER OF ATTORNEY We, the undersigned directors and/or officers of Aetna Inc., hereby severally constitute and appoint Richard L. Huber, Chairman and Chief Executive Officer, Alfred P. Quirk, Jr., Vice President, Finance, Alan M. Bennett, Vice President and Corporate Controller, and Thomas J. Calvocoressi, Vice President and General Counsel, and each of them individually, with full power 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, (i) 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, for issuance and sale, in one or more series, of debt or similar obligations of Aetna Services, Inc. (including depository receipts evidencing interests therein) (the "Debt Securities") and of beneficial interest in business trusts (the "Trust Securities", such trusts currently expected to be named Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III, and Aetna Capital Trust IV), to be formed under the laws of the State of Delaware, such Debt Securities and Trust Securities being guaranteed to the extent set forth in the Registration Statement by Aetna Inc. and/or Aetna Services, Inc., and (ii) a Registration Statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462(b) under the Securities Act, 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 24th day of April 1998. - ----------------------------------- ----------------------------- Richard L. Huber, Chairman, Chief Gerald Greenwald, Director Executive Officer, President and Director (Principal Executive Officer and Principal Financial Officer) /s/ Leonard Abramson /s/ Ellen M. Hancock - ----------------------------------- ------------------------------- Leonard Abramson, Director Ellen M. Hancock, Director /s/ Betsy Z. Cohen /s/ Michael H. Jordan - ----------------------------------- ------------------------------- Betsy Z. Cohen, Director Michael H. Jordan, Director /s/ Jack D. Kuehler - ----------------------------------- ------------------------------- William H. Donaldson, Director Jack D. Kuehler, Director /s/ Barbara H. Franklin /s/ Frank R. O'Keefe, Jr. - ----------------------------------- ------------------------------- Barbara Hackman Franklin, Director Frank R. O'Keefe, Jr., Director /s/ Jerome S. Goodman - ----------------------------------- ------------------------------- Jerome S. Goodman, Director Judith Rodin, Director /s/ Earl G. Graves /s/ Alan M. Bennett - ----------------------------------- ------------------------------- Earl G. Graves, Director Alan M. Bennett, Vice President and Corporate Controller (Controller and Principal Accounting Officer) 2 EXHIBIT 24.2 POWER OF ATTORNEY We, the undersigned directors and/or officers of Aetna Inc., hereby severally constitute and appoint Richard L. Huber, Chairman and Chief Executive Officer, Alfred P. Quirk, Jr., Vice President, Finance, Alan M. Bennett, Vice President and Corporate Controller, and Thomas J. Calvocoressi, Vice President and General Counsel, and each of them individually, with full power 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, (i) 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, for issuance and sale, in one or more series, of debt or similar obligations of Aetna Services, Inc. (including depository receipts evidencing interests therein) (the "Debt Securities") and of beneficial interest in business trusts (the "Trust Securities", such trusts currently expected to be named Aetna Capital Trust I, Aetna Capital Trust II, Aetna Capital Trust III, and Aetna Capital Trust IV), to be formed under the laws of the State of Delaware, such Debt Securities and Trust Securities being guaranteed to the extent set forth in the Registration Statement by Aetna Inc. and/or Aetna Services, Inc., and (ii) a Registration Statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462(b) under the Securities Act, 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 16th day of June 1998. /s/ Richard Huber - ----------------------------------- ----------------------------- Richard L. Huber, Chairman, Chief Gerald Greenwald, Director Executive Officer, President and Director (Principal Executive Officer and Principal Financial Officer) - ----------------------------------- ------------------------------- Leonard Abramson, Director Ellen M. Hancock, Director - ----------------------------------- ------------------------------- Betsy Z. Cohen, Director Michael H. Jordan, Director - ----------------------------------- ------------------------------- William H. Donaldson, Director Jack D. Kuehler, Director - ----------------------------------- ------------------------------- Barbara Hackman Franklin, Director Frank R. O'Keefe, Jr., Director - ----------------------------------- ------------------------------- Jerome S. Goodman, Director Judith Rodin, Director - ----------------------------------- ------------------------------- Earl G. Graves, Director Alan M. Bennett, Vice President and Corporate Controller (Controller and Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----