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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a
AETNA INC.
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(Name of Registrant as Specified In Its Charter)
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2001 Aetna Proxy Statement
Notice of Annual Meeting
[AETNA LOGO]
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TABLE OF CONTENTS
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General Information............................................... 1
I. Election of Directors....................................... 3
Nominees for Directorships with Terms Expiring at 2004
Annual Meeting.............................................. 4
Directors Continuing in Office with Terms Expiring at 2002
Annual Meeting.............................................. 6
Directors Continuing in Office with Terms Expiring at 2003
Annual Meeting.............................................. 8
Director Compensation in 2000............................... 10
Other Information Regarding Directors....................... 11
Committees of the Board..................................... 12
Certain Transactions and Relationships...................... 13
Section 16(a) Beneficial Ownership Reporting Compliance..... 13
Security Ownership of Certain Beneficial Owners, Directors,
Nominees and Executive Officers............................. 14
Executive Compensation...................................... 17
Summary Compensation Table................................ 17
Stock Option Grants Table................................. 19
Stock Option Exercises and December 31, 2000 Stock Option
Value Table............................................... 21
Long-Term Incentive Awards Table.......................... 21
Pension Plan.............................................. 21
Other Agreements.......................................... 22
Report of the Committee on Compensation and Organization.... 24
Report of the Audit Committee............................... 29
Corporate Performance Graphs................................ 31
II. Appointment of Auditors..................................... 33
III. Shareholder Proposal to Implement Cumulative Voting in
Election of Directors....................................... 34
Voting of Other Matters........................................... 35
Other Information................................................. 35
Appendix A--Audit Committee Charter............................... A-1
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[AETNA LOGO]
AETNA INC. WILLIAM H. DONALDSON
151 Farmington Avenue Chairman
Hartford, Connecticut 06156 JOHN W. ROWE, M.D.
President and Chief
Executive Officer
To Our Shareholders:
The 2001 Annual Meeting of Shareholders will be held on Friday, April 27, 2001,
at 9:30 a.m. at our Company Headquarters in Hartford, Connecticut, and we hope
you will attend.
The matters expected to be acted on at the meeting are described in detail in
the attached Notice of Annual Meeting of Shareholders and Proxy Statement. In
addition to specific agenda items, we will discuss generally the operations of
Aetna. We welcome any questions you have concerning Aetna and will provide time
during the meeting for questions from shareholders.
If you are unable to attend the Annual Meeting, it is still important that your
shares be represented. Please vote your shares promptly.
/s/ WILLIAM H. DONALDSON
William H. Donaldson
Chairman
/s/ JOHN W. ROWE
John W. Rowe, M.D.
President and Chief Executive Officer
March 23, 2001
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[AETNA LOGO]
AETNA INC. WILLIAM J. CASAZZA
151 Farmington Avenue Vice President and
Hartford, Connecticut 06156 Corporate Secretary
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Aetna Inc.
will be held at the Company's Headquarters, 151 Farmington Avenue, Hartford,
Connecticut, on Friday, April 27, 2001, at 9:30 a.m. for the following purposes:
1. To elect four Directors with terms expiring at the Annual Meeting in 2004;
2. To approve the appointment of KPMG LLP as independent auditors for the
current calendar year;
3. To consider and act on one shareholder proposal, if properly presented at
the meeting; and
4. To transact any other business that may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 23, 2001 as
the record date for determination of the shareholders entitled to vote at the
Annual Meeting or any adjournment thereof.
The Annual Meeting is open to all shareholders or their authorized
representatives. In order to attend the Annual Meeting, you must present an
admission ticket. You may request a ticket in advance by following the
instructions below. Shareholders who do not have admission tickets will be
admitted only following proof of share ownership. If you hold Aetna common
shares in your own name, please signify your intention to attend when you vote
over the Internet or by telephone or check the appropriate box on your proxy
card. If you hold your shares through the Aetna Incentive Savings Plan, please
indicate your intention to attend when you access the telephone voting system or
check the appropriate box on your voting instruction card. If you hold your
shares through a broker, bank or other holder of record and plan to attend, you
must send a written request to attend along with proof that you own the shares
(such as a copy of your brokerage or bank account statement) to the Corporate
Secretary at the above address.
It is important that your shares be represented and voted at the Annual Meeting.
You can vote your shares by one of the following methods: vote over the Internet
or by telephone using the instructions on the enclosed proxy card (if these
options are available to you), or mark, sign, date and promptly return the
enclosed proxy card in the postage-paid envelope furnished for that purpose. If
you attend the Annual Meeting, you may vote in person if you wish, even if you
have previously voted.
This Proxy Statement and the Company's 2000 Annual Report to Shareholders are
available on Aetna's Internet site at http://www.aetna.com/investor/2001proxy/
and http://www.aetna.com/00annualrpt/, respectively.
By order of the Board of Directors,
/s/ William J. Casazza
William J. Casazza
Vice President and Corporate Secretary
March 23, 2001
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Aetna Inc. (the Company) of proxies to be voted at the
Annual Meeting of Shareholders to be held at the Company's Headquarters on April
27, 2001. This Proxy Statement and the enclosed proxy card are being mailed to
shareholders on or about March 23, 2001.
Prior to December 13, 2000, the Company, a Pennsylvania corporation (formerly
Aetna U.S. Healthcare Inc.), was a subsidiary of a Connecticut corporation named
Aetna Inc. (former Aetna). On December 13, 2000, the Company changed its name to
Aetna Inc., and the Company's Common Shares were distributed by former Aetna to
its shareholders in a spin-off. As part of the same transaction, former Aetna,
which was then comprised of its financial services and international businesses,
was merged into a subsidiary of ING Groep N.V. (collectively, the Transaction).
Where indicated, the information contained in this Proxy Statement relates to
former Aetna prior to the Transaction; otherwise the information contained in
this Proxy Statement relates to the Company.
Shareholders Entitled to Vote; Votes Entitled to be Cast
Shareholders of record of the Company's Common Shares, par value $.01 per share
(Common Stock), at the close of business on February 23, 2001 will be entitled
to vote at the Annual Meeting. On that date, 143,847,551 shares of Common Stock
were outstanding. Each share of Common Stock is entitled to cast one vote. Any
shares of Common Stock held for you under the DirectSERVICE Investment Program
have been included on the enclosed proxy card.
Voting by Internet, by Telephone or by Mail
YOUR VOTE IS IMPORTANT. Because many shareholders cannot attend the Annual
Meeting in person, it is necessary that a large number be represented by proxy.
Most shareholders have a choice of voting over the Internet, by using a
toll-free telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Check your proxy card or the information
forwarded by your broker, bank or other holder of record to see which options
are available to you. Please be aware that if you vote over the Internet, you
may incur costs such as telecommunication and Internet access charges for which
you will be responsible. The Internet and telephone voting procedures are
designed to authenticate shareholders by use of a Control Number and to allow
shareholders to confirm that their instructions have been properly recorded. In
order to provide shareholders of record with additional time to vote their
shares while still permitting an orderly tabulation of votes, Internet and
telephone voting for those shareholders will be available until 11:59 p.m.,
Eastern time, on April 26, 2001.
You may revoke your proxy at any time before it is exercised by writing to the
Corporate Secretary, by timely delivery of a properly executed, later-dated
proxy (including a proxy card or an Internet or telephone vote) or by voting by
ballot at the Annual Meeting. By providing your voting instructions promptly,
you may save the Company the expense of a second mailing.
Voting at the Annual Meeting
The method by which you vote will in no way limit your right to vote at the
Annual Meeting if you later decide to attend in person. If your shares are held
in the name of a broker, bank or other holder of record, you must obtain a
proxy, executed in your favor, from the holder of record, to be able to vote at
the Annual Meeting.
All shares entitled to vote and represented by properly completed proxy cards or
by properly recorded Internet or telephone votes received prior to the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
your instructions. IF NO INSTRUCTIONS ARE INDICATED ON A PROPERLY COMPLETED
PROXY, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED AS RECOMMENDED BY THE
BOARD OF DIRECTORS.
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Voting by Participants in the Company's Incentive Savings Plan
Participants in the Aetna Incentive Savings Plan (the ISP) who receive this
Proxy Statement in their capacity as participants in the ISP will receive voting
instruction cards in lieu of proxy cards. The voting instruction cards direct
the trustee of the ISP how to vote the shares. Shares held in the ISP may be
voted by using a toll-free telephone number or by marking, signing and dating
the voting instruction card and mailing it in the postage-paid envelope
provided. Shares held in the ISP for which no directions are received are voted
by the trustee in the same percentage as the shares for which directions are
received.
Quorum; Required Vote
The presence at the Annual Meeting, in person or by proxy, of at least a
majority of the votes entitled to be cast at the meeting constitutes a quorum.
Under Pennsylvania corporation law, the approval of any corporate action taken
at a shareholder meeting is based on votes cast. "Votes cast" means votes
actually cast "for" or "against" a particular proposal, whether by proxy or in
person. Abstentions and broker nonvotes are not considered "votes cast." Broker
nonvotes occur when a broker nominee (that has voted on one or more matters at
the meeting) does not vote on one or more other matters at the meeting because
it has not received instructions from the beneficial owner to so vote and does
not have discretionary authority to do so. Directors are elected by a plurality
of votes cast. Shareholder approval of each other proposal to be considered at
the Annual Meeting occurs if the votes cast in favor of the proposal exceed the
votes cast against the proposal.
Tabulation of Votes
Votes are counted by tellers of the Company's Transfer Agent who have been
appointed as inspectors for purposes of the Annual Meeting. The inspectors will
determine the number of shares outstanding and the voting power of each share,
determine the shares represented at the Annual Meeting, determine the validity
of proxies and ballots, count all votes and determine the results of the actions
taken at the Annual Meeting.
Cost and Method of Proxy Solicitation
The Company will bear the cost of soliciting proxies. In addition to the use of
the mails, solicitations may be made by personal interview, telegram or
telephone by Directors, officers and employees of the Company and its
subsidiaries. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation material to
beneficial owners, and the Company will reimburse them for reasonable
out-of-pocket expenses incurred in doing so. To assist in the solicitation of
proxies, the Company has engaged Georgeson Shareholder Communications Inc., New
York, New York, for a fee of $16,000 plus reasonable out-of-pocket expenses.
Annual Meeting Business -- Advance Notice Procedures
The Company's By-Laws require that notice of nominations of persons for election
to the Board of Directors, other than those made by or at the direction of the
Board of Directors, must have been received no later than 90 calendar days
before the Annual Meeting, or January 27, 2001 for purposes of this Annual
Meeting. The notice must present certain information concerning the nominee and
the shareholder making the nomination. The notice also must include the
nominee's written consent to being a nominee and to serving if elected. Notices
must be sent to the Corporate Secretary, Aetna Inc., 151 Farmington Avenue,
Hartford, Connecticut 06156.
The Company's By-Laws also provide that no business may be brought before an
annual meeting except as specified in the notice of meeting or as otherwise
brought before the meeting by or at the direction of the Board of Directors or
by a shareholder entitled to vote who has delivered written notice to the
Company within the time limits described above for delivery of notice of a
nomination for the election of a Director. The notice must set forth: (a) a
brief description of the issue to be considered at the meeting and the reasons
for bringing it before the meeting; (b) the shareholder's name and address; (c)
evidence of the class and
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number of shares owned by the shareholder; and (d) any material interest of the
shareholder in the issue. These requirements apply to any matter that a
shareholder wishes to raise at an annual meeting other than pursuant to the
procedures specified in Securities and Exchange Commission (SEC) Rule 14a-8.
Notices must be sent to the Corporate Secretary, Aetna Inc., 151 Farmington
Avenue, Hartford, Connecticut 06156.
I. ELECTION OF DIRECTORS
Four individuals will be nominated for election as Directors at the Annual
Meeting. The terms of office for the Directors to be elected at this meeting
will run until the Annual Meeting in 2004 and until their successors are duly
elected and qualified. These four Directors, together with the eight Directors
whose terms continue beyond the Annual Meeting (the Continuing Directors), will
comprise the Board of Directors. At and after the Company's Annual Meeting in
2004, the shareholders will elect all Directors annually for a one-year term.
The four individuals (or such lesser number if the Board has reduced the number
of Directors to be elected at the Annual Meeting as provided below) receiving
the greatest number of votes cast at the meeting will be elected Directors.
UNLESS YOU DIRECT TO THE CONTRARY ON THE PROXY YOU COMPLETE, THE SHARES
REPRESENTED BY THAT PROXY WILL BE VOTED FOR THE ELECTION OF THE FOUR NOMINEES
LISTED ON THE FOLLOWING PAGES (the Nominees). If any Nominee becomes unavailable
for election, the proxies may vote your shares for any substitute nominee
proposed by the Board of Directors, or the Board may reduce the number of
Directors to be elected.
All Nominees and Continuing Directors are currently Directors of the Company and
were appointed Directors during 2000, prior to the Transaction. Each of the
Nominees and Continuing Directors was elected a Director of former Aetna at its
2000 Annual Meeting, except Dr. Rowe, who joined the Board of former Aetna in
September 2000. The following pages list the names and ages of the Nominees and
the Continuing Directors as of the date of the Annual Meeting, the year each
first became a Director of the Company, the principal occupation and publicly
traded company directorships of each as of February 23, 2001 and a brief
description of the business experience of each for at least the last five years.
On July 19, 1996, Aetna Life and Casualty Company (AL&C) and the Company (then
known as U.S. Healthcare, Inc. (USHC)) consummated a transaction pursuant to
which each became a wholly-owned subsidiary of former Aetna (the USHC Merger).
The information presented includes a Director's prior service with former Aetna
and AL&C or USHC, as appropriate. Former Aetna, AL&C and USHC are collectively
referred to as the Company's Predecessors.
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NOMINEES FOR DIRECTORSHIPS WITH TERMS EXPIRING AT 2004 ANNUAL MEETING
[BARBARA H. FRANKLIN PHOTO] BARBARA HACKMAN FRANKLIN, age 61, is President and Chief
Director since 2000 Executive Officer of Barbara Franklin Enterprises (private
Director of the Company's investment and international trade consulting firm). From
Predecessors from 1979 to 1992 1992 to 1993, she served as the 29th U.S. Secretary of
and from 1993 to 2000 Commerce. Before her appointment, Ms. Franklin was President
and Chief Executive Officer of Franklin Associates
(management consulting firm), which she founded in 1984. Ms.
Franklin also served as Alternate Representative to the 44th
Session of the United Nations General Assembly and as a
public member of the Board of the American Institute of
Certified Public Accountants and of the Auditing Standards
Board and is the only non-CPA to receive the John J. McCloy
award for contributions to audit excellence. Ms. Franklin
also has been a Senior Fellow of The Wharton School of the
University of Pennsylvania, an original Commissioner of the
U.S. Consumer Product Safety Commission, a Staff Assistant
to the President of the United States and an Assistant Vice
President of Citibank, N.A. Ms. Franklin is a Distinguished
Visiting Fellow at the Heritage Foundation; is active in
numerous international organizations; and is a trustee of
the Economic Club of New York. She is a director of The Dow
Chemical Company (chemicals, plastics and agricultural
products), MedImmune, Inc. (biotechnology company), Milacron
Inc. (plastics processing technologies and industrial
products for metalworking) and Watson Wyatt & Company
(global human capital consulting firm). Ms. Franklin is
Chairman of the Board of Guest Services, Inc. (private
hospitality company).
[EARL G. GRAVES photo] EARL G. GRAVES, age 66, is Chairman and Chief Executive
Director since 2000 Officer of Earl G. Graves, Ltd. (a multifaceted
Director of the Company's communications company) and is the Publisher of Black
Predecessors from 1994 to 2000 Enterprise magazine, which he founded in 1970. Additionally,
since 1998, Mr. Graves is Managing Director of Black
Enterprise/Greenwich Street Corporate Growth Partners, L.P.
Mr. Graves is a director of AMR Corporation and its
subsidiary, American Airlines, Inc., Federated Department
Stores Inc. (retailer) and Rohm and Haas Company (specialty
chemicals and plastics) and is a nominee for election to the
Supervisory Board of DaimlerChrysler AG (transportation
products and financial and other services). Mr. Graves also
is a trustee of Howard University and is a member of the
Executive Board and Executive Committee of the National
Office of the Boy Scouts of America, serving as Vice
President of Relationships and Marketing. He also serves on
the Board of Directors of Aetna Foundation, Inc.
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[Gerald Greenwald photo] GERALD GREENWALD, age 65, is a founding principal of the
Director since 2000 Greenbriar Equity Group (the Group makes investments in the
Director of the Company's global transportation sector). Mr. Greenwald is Chairman
Predecessors from 1993 to 2000 Emeritus of UAL Corporation and United Airlines (UAL), its
principal subsidiary company. He retired in July 1999 as
Chairman and Chief Executive Officer of UAL Corporation and
UAL, having served in those positions since July 1994. From
1979 to 1990, Mr. Greenwald held various executive positions
with Chrysler Corporation (automotive manufacturer), serving
as Vice Chairman of the Board from 1989 to May 1990 and as
Chairman of Chrysler Motors from 1985 to 1988. In 1990, Mr.
Greenwald was selected to serve as Chief Executive Officer
of United Employee Acquisition Corporation in connection
with the proposed 1990 employee acquisition of UAL. From
1991 to 1992, he was a Managing Director of Dillon Read &
Co., Inc. (investment banking) and, from 1992 to 1993, he
was President and Deputy Chief Executive Officer of Olympia
& York Developments Ltd. (Canadian real estate company). Mr.
Greenwald then served as Chairman and Managing Director of
Tatra Truck Company (truck manufacturer in the Czech
Republic) from 1993 to 1994. Mr. Greenwald is a trustee of
the Aspen Institute.
[Michael H. Jordan photo] MICHAEL H. JORDAN, age 64, retired on December 31, 1998 as
Director since 2000 Chairman and Chief Executive Officer of CBS Corporation
Director of the Company's (media company), having assumed that position with CBS (then
Predecessors from 1992 to 2000 Westinghouse Electric Corporation) in 1993. Currently, Mr.
Jordan is serving as Chairman of Clariti Telecommunications
International Ltd. (international telecommunications), as
Chairman of Luminant Worldwide Corporation (Internet and
electronic commerce services) and as Chairman of the Board
of eOriginal, Inc. (electronic document services). From 1992
to 1993, he was a partner with Clayton, Dubilier & Rice,
Inc. (private investing firm). Mr. Jordan retired in July
1992 as Chairman and Chief Executive Officer of the PepsiCo
International Foods and Beverages Division of PepsiCo, Inc.
(snack foods and beverages), having held various positions
with PepsiCo since 1974. Mr. Jordan also is a director of
Dell Computer Corporation (personal computers) and WPP Group
plc (global communication services company).
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT 2002 ANNUAL MEETING
[WILLIAM H. DONALDSON PHOTO] WILLIAM H. DONALDSON, age 69, became Chairman of the
Director since 2000 Company on May 30, 2000. He will retire as Chairman of the
Director of the Company's Company effective April 1, 2001. Mr. Donaldson also served
Predecessors from 1977 to 2000 as President and Chief Executive Officer of the Company
from May 30 until September 15, 2000. He also served as
Chairman, President and Chief Executive Officer of former
Aetna from February 25, 2000 until completion of the
Transaction. In 1959, Mr. Donaldson co-founded Donaldson,
Lufkin & Jenrette, Inc. (investment banking) and more
recently served as Co-Founder and Senior Advisor of that
firm from September 1995 until he joined former Aetna. He
served as Chairman and Chief Executive Officer and a
director of the New York Stock Exchange, Inc. from 1991 to
1995, was formerly Chairman and Chief Executive Officer of
Donaldson, Lufkin & Jenrette, Inc. and is a co-founder of
its former subsidiary, Alliance Capital Management Corp.
(investment management). Mr. Donaldson is Chairman of the
Carnegie Endowment for International Peace and a director
of Bright Horizons Family Solutions, Inc. (family support
services) and Mail.com, Inc. (Internet service provider).
The founding Dean and Professor of Management at the Yale
School of Management, he also served as U.S. Under
Secretary of State and Counsel to the Vice President of the
United States. Mr. Donaldson is a director of the Lincoln
Center for the Performing Arts and the Foreign Policy
Association, is a trustee of the Aspen Institute, the
Marine Corps University Foundation and The New York City
Police Foundation, Inc., and is the Chairman of the Yale
School of Management Advisory Board.
[JEROME S. GOODMAN photo] JEROME S. GOODMAN, age 66, retired as Chairman of Travel
Director since 2000 One (the nation's eighth-largest travel management company)
Director of the Company's upon the sale of that firm to American Express Company on
Predecessors from 1988 to 2000 November 15, 1998. He had served as Chairman of Travel One
since 1971 and was the sole shareholder from 1971 to 1994.
Mr. Goodman was a member of the New Jersey Sports and
Exposition Authority from 1991 to 1994 and its Chairman
from 1992 to 1994. He also served as Chairman, President
and Chief Executive Officer of First Peoples Financial
Corporation (bank holding company) from 1987 to 1992 and
President and Chief Executive Officer of First Peoples Bank
of NJ from 1983 to 1987. He was a member of the Board of
Directors of GBC Technologies, Inc. from 1992 to 1995 and a
trustee of Resource Asset Investment Trust (real estate
investment trust) from 1997 to 1999. Mr. Goodman is a
director of The Maine Merchant Bank, LLC, and he also is a
member of the Board of Trustees of the University of the
Sciences in Philadelphia and served as its Chairman from
1988 to 1991.
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[Ellen M. Hancock photo] ELLEN M. HANCOCK, age 58, is Chairman of the Board and
Director since 2000 Chief Executive Officer of Exodus Communications, Inc.
Director of the Company's (Internet system and network management services). Mrs.
Predecessors from 1995 to 2000 Hancock joined Exodus on March 10, 1998 as President and
served in that position until June 7, 2000, when she was
appointed Chairman of the Board. She has served as Chief
Executive Officer of Exodus since September 10, 1998. Mrs.
Hancock held various staff, managerial and executive
positions at International Business Machines Corporation
(information-handling systems, equipment and services) from
1966 to 1995. She became a Vice President of IBM in 1985
and served as President, Communication Products Division,
from 1986 to 1988, when she was named General Manager,
Networking Systems. Mrs. Hancock was elected an IBM Senior
Vice President in November 1992, and in 1993 was appointed
Senior Vice President and Group Executive, which position
she held until February 1995. Mrs. Hancock served as an
Executive Vice President and Chief Operating Officer of
National Semiconductor Corporation (semiconductors) from
September 1995 to May 1996 and served as Executive Vice
President for Research and Development and Chief Technology
Officer of Apple Computer, Inc. (personal computers) from
July 1996 to July 1997. Mrs. Hancock is a director of
Colgate-Palmolive Company (consumer products).
[Judith Rodin photo] JUDITH RODIN, age 56, became President of the University of
Director since 2000 Pennsylvania in July 1994. Prior to assuming her current
Director of the Company's position, Dr. Rodin had served as Provost of Yale
Predecessors from 1995 to 2000 University since 1992. Dr. Rodin joined the Yale faculty in
1972, and held teaching and research positions of
increasing responsibility in the Department of Psychology.
She became a Professor of Psychology in 1979 and a
Professor of Medicine and Psychiatry in 1985, and served as
Chair of the Department of Psychology from 1989 to 1991 and
Dean of the Graduate School of Arts and Sciences from 1991
to 1992 when she became Provost. Dr. Rodin is a director of
AMR Corporation and its subsidiary, American Airlines, Inc.
and Electronic Data Systems Corporation (information
technology services). She also is a trustee of the
Brookings Institution.
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DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT 2003 ANNUAL MEETING
[BETSY Z. COHEN PHOTO] BETSY Z. COHEN, age 59, is Chairman, Chief Executive
Director since 2000 Officer and trustee of Resource Asset Investment Trust
Director of the Company's (real estate investment trust), a position she assumed in
Predecessors from 1994 to 2000 August 1997. She also serves as Chief Executive Officer of
TheBancorp.com, Inc. (Internet banking and financial
services) and as Chairman of FinancialMuse.com, Inc.
(Web-based provider of financial services). From 1999 to
2000, Mrs. Cohen also had served as a director of Hudson
United Bancorp (holding company), the successor to
JeffBanks, Inc. where she had been Chairman and Chief
Executive Officer since its inception in 1981 and also
served as Chairman and Chief Executive Officer of its
subsidiaries, Jefferson Bank (which she founded in 1974)
and Jefferson Bank New Jersey (which she founded in 1987)
prior to JeffBanks' merger with Hudson United Bancorp in
December 1999. From 1985 until 1993, Mrs. Cohen was a
director of First Union Corp. of Virginia (bank holding
company) and its predecessor, Dominion Bankshares, Inc. In
1969, Mrs. Cohen co-founded a commercial law firm and
served as a Senior Partner until 1984. Mrs. Cohen also is a
director of The Maine Merchant Bank, LLC and is a trustee
of Corporate Office Properties Trust.
[JEFFREY E. GARTEN photo] JEFFREY E. GARTEN, age 54, is the Dean of the Yale School
Director since 2000 of Management, a position he assumed in 1995. Mr. Garten
Director of the Company's held senior posts on the White House Staff and at the U.S.
Predecessors from 2000 Department of State from 1973 to 1979. He joined Shearson
Lehman Brothers (investment banking) in 1979 and served as
Managing Director from 1984 to 1987. In 1987, Mr. Garten
founded Eliot Group, Inc. (investment banking) and served
as President until 1990, when he became Managing Director
of The Blackstone Group (private merchant bank). From 1992
to 1993, Mr. Garten was Professor of Finance and Economics
at Columbia University's Graduate School of Business. He
was appointed U.S. Under Secretary of Commerce for
International Trade in 1993 and served in that position
until 1995. Mr. Garten is a director of Calpine Corporation
(power company) and a director of 42 Warburg Pincus mutual
funds. He is the author of A Cold Peace: America, Japan,
Germany and the Struggle for Supremacy, The Big Ten: Big
Emerging Markets and How They Will Change Our Lives and The
Mind of the CEO, and he writes a monthly column for
Business Week magazine. He also serves on the Board of
Directors of Aetna Foundation, Inc.
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[Jack D. Kuehler photo] JACK D. KUEHLER, age 68, retired in August 1993 as Vice
Director since 2000 Chairman and a director of International Business Machines
Director of the Company's Corporation (information-handling systems, equipment and
Predecessors from 1990 to 2000 services), having held various positions with IBM since
joining that company in 1958. Prior to his appointment as
Vice Chairman of IBM in January 1993, Mr. Kuehler served as
President from 1989 to 1993, as Vice Chairman from 1988 to
1989 and as Executive Vice President from 1987 to 1988. Mr.
Kuehler is a director of Arch Chemicals Inc. (specialty
chemicals), Mail.com, Inc. (Internet service provider) and
The Parsons Corporation (heavy construction and engineering
services). He also is a member of the National Academy of
Engineering and a fellow of the Institute of Electrical and
Electronics Engineers, Inc.
[John W. Rowe photo] JOHN W. ROWE, M.D., age 56, became President and Chief
Director since 2000 Executive Officer of the Company on September 15, 2000,
Director of the Company's when the Company was former Aetna's health and related
Predecessors from 2000 benefits subsidiary, and continued in that role following
the Transaction, when the Company became an independent,
public company. He will become Chairman of the Company
effective April 1, 2001. Dr. Rowe also served as an
executive officer of former Aetna from September 15, 2000
until the Transaction. Prior to joining Aetna, Dr. Rowe
served as President and Chief Executive Officer of Mount
Sinai NYU Health, a position he assumed in 1998 after
overseeing the 1998 merger of the Mount Sinai and NYU
Medical Centers. Dr. Rowe joined The Mount Sinai Hospital
and the Mount Sinai School of Medicine as President in
1988. Before that, Dr. Rowe was a Professor of Medicine and
the founding Director of the Division on Aging at Harvard
Medical School and Chief of Gerontology at Boston's Beth
Israel Hospital. He has authored over 200 scientific
publications, mostly on the physiology of the aging
process, and a leading textbook of geriatric medicine. Dr.
Rowe has received many honors and awards for his research
and health policy efforts regarding care of the elderly.
Dr. Rowe was Director of the MacArthur Foundation Research
Network on Successful Aging and is co-author, with Robert
Kahn, Ph.D., of Successful Aging. Dr. Rowe is a member of
the Institute of Medicine of the National Academy of
Sciences and the Medicare Payment Advisory Commission. He
also is a director of Cantel Medical Corporation (infection
prevention and control products and diagnostic and medical
equipment).
9
15
DIRECTOR COMPENSATION IN 2000
Compensation for outside Directors is reviewed annually by the Nominating and
Corporate Governance Committee (the Nominating Committee). The Nominating
Committee's goal of attracting and retaining qualified Directors is supported
through a competitive compensation program that provides remuneration for
Directors' contributions, while offering stock-based compensation alternatives
that strengthen the Directors' mutuality of interests with other shareholders.
Directors who are officers of the Company (including Mr. Donaldson for the
period from February 25, 2000, when he became an officer of former Aetna, until
April 1, 2001, when he will retire as Chairman of the Company) receive no
additional compensation for membership on the Board or any of its Committees.
The Company did not have any outside Directors until immediately prior to the
Transaction, when the Directors of former Aetna became Directors of the Company.
The following table sets forth the cash and stock-based compensation paid by
former Aetna and the Company to each Nominee and Continuing Director who was an
outside Director of former Aetna and the Company in 2000.
- --------------------------------------------------------------------------------
CASH
COMPENSATION(1) STOCK UNITS
------------------ -----------
ANNUAL NUMBER
RETAINER MEETING OF UNITS
NAME FEES(2) FEES(3) GRANTED(4)
---- -------- ------- -----------
Betsy Z. Cohen.............................................. $33,000 $31,000 350
William H. Donaldson(5)..................................... 7,334 5,000 0
Barbara Hackman Franklin.................................... 36,000 31,000 350
Jeffrey E. Garten........................................... 32,334 23,000 1,850
Jerome S. Goodman........................................... 33,000 24,000 350
Earl G. Graves.............................................. 41,000 28,000 350
Gerald Greenwald............................................ 35,250 31,000 350
Ellen M. Hancock............................................ 33,000 31,000 350
Michael H. Jordan........................................... 36,000 30,000 350
Jack D. Kuehler............................................. 36,000 33,000 350
Judith Rodin................................................ 33,000 19,000 350
- --------------------------------------------------------------------------------
(1) Under the Aetna Inc. Nonemployee Director Compensation Plan (the Director
Plan), nonemployee Directors may defer payment of some or all of their
annual retainer, meeting fees and dividend equivalents paid on stock units
to a stock unit or interest account until after they have resigned or
retired (as defined in the Director Plan) from the Board. During the period
of deferral, amounts deferred to the stock unit account track the value of
the Company's Common Stock and earn dividend equivalents. Amounts deferred
to the interest account accrue interest pursuant to a formula equal to the
rate of interest paid from time to time under a fixed interest rate fund
option of the Company's Incentive Savings Plan for employees (currently
yielding 6.55% a year). The Director Plan is a successor to the Nonemployee
Director Deferred Stock and Deferred Compensation Plan (the Prior Director
Plan). The Prior Director Plan was adopted by former Aetna and assumed by
the Company immediately prior to the Transaction. In 2000, eight Directors
deferred all or a portion of their Director cash compensation to a stock
unit account. The table above includes cash compensation that was deferred
by Directors during 2000 under the Director Plan and the Prior Director
Plan.
(2) The Company currently pays a retainer fee of $25,000 a year to outside
Directors for Board membership. The Company also pays a $4,000 retainer to
such Directors for membership on Committees of the Board ($7,000 in the case
of each Committee chair).
(3) The Company currently pays $1,000 to outside Directors for attendance at
each Board or Committee meeting.
(4) Pursuant to the Director Plan, nonemployee Directors, upon their initial
election to the Board, receive a one-time grant of units convertible upon
retirement from Board service into 1,500 shares of Common Stock (Initial
Units). Directors of former Aetna did not receive additional Initial Units
upon their election to the Board of the Company. Additionally, on the date
of each Annual Meeting during the term
10
16
of the Director Plan, each nonemployee Director will receive units
convertible upon retirement from Board service into 350 shares of Common
Stock (Annual Units). Generally, to become fully vested in the units, a
Director must complete, in the case of the Initial Units, three years of
service and, in the case of the Annual Units, one year of service following
the grant of the units. If service is sooner terminated by reason of death,
disability, retirement or acceptance of a position in government service, a
Director is entitled to receive the full grant if the Director has completed
a minimum of six consecutive months of service as a Director since such
grant. A Director's right with respect to unvested units also will vest upon
a change-in-control of the Company (as defined in the Director Plan).
Accordingly, all outstanding unvested units convertible into shares of
Common Stock of former Aetna vested at the time of the Transaction, and all
of these units were adjusted to reflect the Transaction and became
convertible into shares of Common Stock of the Company. If a Director
terminates Board service prior to completion of three years or one year of
service, as applicable, from the grant date of any units that have not
otherwise vested under the terms of the Director Plan, the Director will be
entitled to receive a pro rata portion of the award. Although Directors
receive dividend equivalents, they have no voting rights with respect to the
shares that are subject to any grant. The units granted are not
transferable.
(5) Reflects pro rata cash compensation received by Mr. Donaldson for service as
a Director prior to his appointment as an officer of former Aetna on
February 25, 2000.
OTHER INFORMATION REGARDING DIRECTORS
As part of its overall program of support for charitable institutions and in
order to attract and retain qualified Directors, former Aetna established, and
the Company assumed as of the time of the Transaction, the Director Charitable
Award Program. Only outside Directors are eligible to participate in the
program. The program may be funded by life insurance on the lives of the
participating Directors. As a result of the Transaction, each of the Directors
is fully vested in the program. Each new Director who participates in the
program will be fully vested in the program upon completion of five years of
service as a Director or upon death or disability. Under the program, the
Company intends to make a charitable contribution of $1 million in ten equal
annual installments, with the first installment made following each
participating Director's retirement from the Board, allocated among up to five
charitable organizations recommended by the Director. Beneficiary organizations
recommended by Directors must be, among other things, tax exempt under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code). Donations
the Company ultimately pays are expected to be deductible from taxable income
for purposes of U.S. federal and other income taxes payable by the Company.
Directors derive no personal financial or tax benefit from the program, since
all insurance proceeds and charitable deductions accrue solely to the Company.
The program will not result in a material cost to the Company.
The Company provides $150,000 of group life insurance for its outside Directors.
Optional medical, dental and long-term care coverage for outside Directors and
their eligible dependents is available to Directors at a cost similar to that
charged to Company employees.
The Company intends to review Director compensation with the goal of increasing
over time the proportion of stock-based compensation that will be received by
the Directors.
Prior to the Transaction, the Board of former Aetna met 17 times in 2000. The
Board of the Company did not meet in 2000 after the Transaction. During 2000,
each Director of former Aetna attended 75 percent or more of the combined
aggregate meetings of the Board and the Committees of the Board on which he or
she served. The average attendance by all Directors was over 94 percent.
11
17
COMMITTEES OF THE BOARD
The following table presents, as of December 31, 2000, the Committees of the
Board of Directors, the membership of such Committees and the number of times
each Committee of former Aetna met in 2000. Effective April 1, 2001, Dr. Rowe
will become Chairman of the Executive Committee and Mr. Donaldson will resign as
a member of that committee.
- ----------------------------------------------------------------------------------------------
COMMITTEE
----------------------------------------------------------
NOMINATING
COMPENSATION AND
AND CORPORATE
NOMINEE/DIRECTOR AUDIT ORGANIZATION EXECUTIVE INVESTMENT GOVERNANCE
- ----------------------------------------------------------------------------------------------
Betsy Z. Cohen X X
William H. Donaldson X*
Barbara Hackman Franklin X* X
Jeffrey E. Garten X
Jerome S. Goodman X X
Earl G. Graves X X X
Gerald Greenwald X X*
Ellen M. Hancock X X
Michael H. Jordan X* X
Jack D. Kuehler X X*
Judith Rodin X X
John W. Rowe, M.D.
- ----------------------------------------------------------------------------------------------
Number of Meetings in 2000 (former
Aetna): 8 12 1 3 5
- ----------------------------------------------------------------------------------------------
* Committee Chair
The functions and responsibilities of the standing Committees of the Company's
Board are described below.
- - Audit Committee. This Committee is composed entirely of nonemployee
Directors. The Committee recommends the independent auditors that the full
Board nominates for shareholder approval at the Annual Meeting, discusses with
the internal and independent auditors the scope and results of their audits,
discusses with management and the independent accountants the Company's
financial statements and other financial disclosures, and monitors
developments in accounting principles and methods used in presenting financial
results. The Committee also regularly meets privately with the director of the
Company's internal audit staff and with the Company's independent accountants,
and regularly discusses with management the Company's internal accounting
control procedures and other internal compliance programs. For more detail
regarding the role, responsibilities and limitations of the Committee, please
refer to the Audit Committee Report beginning on page 29 and the Audit
Committee Charter, which is attached to this Proxy Statement as Appendix A.
- - Committee on Compensation and Organization. This Committee is composed
entirely of nonemployee Directors. The Committee administers the Company's
2000 Stock Plan and the Annual Incentive Plan, and reviews and makes
recommendations to the Board with respect to the compensation of certain
senior executives. The Committee also reviews the Company's overall
compensation policy and makes recommendations with respect thereto.
Periodically, the Committee reviews senior management succession plans and
related matters.
- - Executive Committee. This Committee is authorized to act on behalf of the
full Board between regular Board meetings, usually when timing is critical.
- - Investment Committee. This Committee is composed entirely of nonemployee
Directors. The Committee oversees the management of the Company's investment
portfolios and reviews investment policy and strategy.
12
18
- - Nominating and Corporate Governance Committee. The Nominating Committee is
composed entirely of nonemployee Directors. The Nominating Committee reviews
the qualifications of all candidates for membership on the Board and Board
Committees. It makes recommendations to the full Board on Director nominees,
on the structure, composition and function of Board Committees, on Director
compensation, on the independence of nonemployee Directors and on the Director
retirement policy. It reviews conflicts of interest that may affect Directors,
as well as substantial changes in any Director's circumstances (for example,
change of employment), and advises the Board on procedures for assessing the
performance of the Board. The Nominating Committee also advises the Board on
all other matters concerning corporate governance to the extent specific
matters are not the responsibility of other Committees.
In recommending Director nominees to the Board, the Nominating Committee
solicits candidate recommendations from its own members, other Directors of the
Company and management. Although the Nominating Committee does not specifically
solicit suggestions for possible candidates from shareholders, the Nominating
Committee will consider candidates meeting the criteria described below.
(Suggestions, together with a description of the proposed nominee's
qualifications, other relevant biographical information and an indication of
the willingness of the proposed nominee to serve, should be sent to the
Nominating Committee Chairman, in care of the Corporate Secretary, Aetna Inc.,
151 Farmington Avenue, Hartford, Connecticut 06156.)
Nominees are selected through a process based on criteria set with the
concurrence of the full Board and reevaluated periodically. The criteria
include: the relevance of the candidate's experience to the business of the
Company and its affiliates, enhancing diversity, independence from conflict or
direct economic relationship with the Company, and the ability of the candidate
to attend meetings regularly and devote an appropriate amount of effort in
preparation for those meetings.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Subsidiaries of the Company have entered into reinsurance arrangements with
Lloyd's of London. Richard L. Huber, the former Chairman, Chief Executive
Officer and President of former Aetna, is an investor in several Lloyd's
syndicates. As an investor in a Lloyd's syndicate, he does not exercise control
over the syndicate. Mr. Huber resigned from all of his positions with former
Aetna effective February 25, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and
executive officers to file reports of holdings and transactions in Aetna stock
with the SEC and New York Stock Exchange. Based on our records and other
information, we believe that during our fiscal year ended December 31, 2000, our
Directors and executive officers met all applicable SEC filing requirements.
13
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS
The following table presents, as of December 31, 2000, the names of persons
known to the Company to be the beneficial owners of more than 5% of the
outstanding shares of its Common Stock. The information set forth in the table
below and in the related footnotes was furnished by the respective persons.
- ------------------------------------------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE
BENEFICIAL OWNER OF BENEFICIAL PERCENT
OWNERSHIP
- ------------------------------------------------------------------------
AXA Financial, Inc. 11,575,443 shares(1) 8.12%
1290 Avenue of the Americas
New York, New York 10104
Capital Research and Management Company 11,345,000 shares(2) 7.95%
333 South Hope Street
Los Angeles, California 90071
Southeastern Asset Management, Inc. 8,691,000 shares(3) 6.09%
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
Wellington Management Company, LLP 9,467,300 shares(4) 6.64%
75 State Street
Boston, Massachusetts 02109
(1) Also reported as beneficially owned by the following affiliates of AXA
Financial, Inc.: AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D.
Mutuelle, and AXA Assurances Vie Mutuelle, each with an address at 370, rue
Saint Honore, 75001 Paris, France; AXA Courtage Assurance Mutuelle, with an
address at 26, rue Louis le Grand, 75002 Paris, France; and AXA, with an
address at 25, avenue Matignon, 75008 Paris, France (collectively, the AXA
Group). Of the reported shares, the AXA Group reports that it has sole
voting power with respect to 6,082,535 shares, that it shares voting power
with respect to 1,242,300 shares and that it has sole dispositive power with
respect to 11,575,443 shares. The AXA Group reports that its shares are
deemed to be beneficially owned by the following subsidiaries of AXA
Financial, Inc.: Alliance Capital Management L.P. (11,574,284 shares) and
The Equitable Life Assurance Society of the United States (1,159 shares).
(2) Of the reported shares, Capital Research and Management Company reports that
it does not have sole or shared voting power with respect to any shares and
that it has sole dispositive power with respect to 11,345,000 shares.
(3) Of the reported shares, Southeastern Asset Management, Inc. reports that it
has sole voting power with respect to 5,822,600 shares, that it shares
voting power with respect to 1,611,000 shares, that it has sole dispositive
power with respect to 7,070,000 shares and that it shares dispositive power
with respect to 1,611,000 shares. The reported shares also were reported to
be beneficially owned by O. Mason Hawkins, Chairman of the Board and C.E.O.
of Southeastern Asset Management, Inc., in the event he could be deemed to
be a controlling person of that firm as a result of his official positions
with or ownership of its voting securities. Mr. Hawkins is reported to have
no voting power and no dispositive power with respect to the shares.
(4) Of the reported shares, Wellington Management Company, LLP reports that it
does not have sole voting power with respect to any shares, that it shares
voting power with respect to 586,100 shares, that it does not have sole
dispositive power with respect to any shares and that it shares dispositive
power with respect to 9,467,300 shares.
14
20
Beneficial Ownership Table
The following table presents, as of February 23, 2001, the beneficial ownership
of, and other interests in, shares of Common Stock of each current Director and
Nominee, each executive officer named in the Summary Compensation Table on page
17, and the Directors and executive officers of the Company, as a group. The
information set forth below and in the related footnotes on the following page
has been furnished by the respective persons.
- -------------------------------------------------------------------------------
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------
COMMON
NAME OF BENEFICIAL COMMON SHARE
OWNER AND POSITION SHARES PERCENT EQUIVALENTS(1)
- -------------------------------------------------------------------------------
Betsy Z. Cohen 1,571 * 8,489
(current Director)
William H. Donaldson 1,139,470(2) * 6,857
(Chairman and current Director)
Barbara Hackman Franklin 4,477 * 7,584
(current Director and Nominee)
Jeffrey E. Garten 200 * 3,844
(current Director)
Jerome S. Goodman 22,008(3) * 12,792
(current Director)
Earl G. Graves 500 * 11,684
(current Director and Nominee)
Gerald Greenwald 3,000(4) * 18,229
(current Director and Nominee)
Ellen M. Hancock 2,000(5) * 15,242
(current Director)
Michael H. Jordan 3,000 * 14,740
(current Director and Nominee)
Jack D. Kuehler 12,000(6) * 19,309
(current Director)
Judith Rodin 502 * 16,249
(current Director)
John W. Rowe, M.D. 1,000 * 51,936(7)
(President, Chief Executive
Officer and current Director)
L. Edward Shaw, Jr. 263,370(8) *
(named executive)
Alan J. Weber 878,131(9) *
(named executive)
John W. Coyle 134,555(10) *
(named executive)
Richard L. Huber 1,855,173(11) 1.27%
(former Chief Executive Officer)
Directors and executive 4,506,396(12) 3.04% 186,955
officers as a group
(16 persons)
- ----------------------------------
* Less than 1%
Unless otherwise noted in the footnotes, each person currently has sole voting
and investment powers over the shares set forth above.
15
21
Notes to Beneficial Ownership Table
- --------------------------------------------------------------------------------
(1) Except as set forth in Note 7, represents stock units issued under the
Nonemployee Director Compensation Plan and the Prior Director Plan, accrued
stock units resulting from deferral of retainer and attendance fees and
stock units credited to certain Directors in 1996 in connection with the
elimination of the Director retirement plan. Stock units, which do not have
voting rights, track the value of the Company's Common Stock and earn
dividend equivalents that may be reinvested. Reflects adjustments made to
reflect the conversion of stock units previously issued under the Prior
Director Plan upon the consummation of the Transaction.
(2) Includes 1,038,720 shares that Mr. Donaldson has the right to acquire upon
the exercise of stock options.
(3) Includes 17,034 shares held by Wellington Limited Partnership, of which Mr.
Goodman is a general partner. Excludes 50 shares held by his spouse, as to
which Mr. Goodman disclaims beneficial ownership. Mr. Goodman also
disclaims beneficial ownership in 20,000 shares held by Conwell Limited
Partnership, of which Conwell Corporation is the General Partner. Mr.
Goodman's adult children are limited partners of Conwell Limited
Partnership and Mr. Goodman is President of Conwell Corporation.
(4) Represents shares held by his spouse, as to which Mr. Greenwald has no
voting or investment power.
(5) Held jointly with her spouse, as to which Mrs. Hancock shares voting and
investment powers.
(6) Held jointly with his spouse, as to which Mr. Kuehler shares voting and
investment powers.
(7) Represents 51,936 restricted stock units that vest in three equal annual
installments commencing on September 15, 2001.
(8) Includes 261,370 shares that Mr. Shaw has the right to acquire upon
exercise of stock options. Also includes 2,000 shares that Mr. Shaw held
jointly with his spouse, as to which Mr. Shaw shares voting and investment
power.
(9) Includes 852,271 shares that Mr. Weber has the right to acquire upon
exercise of stock options.
(10) Includes 131,790 shares that Mr. Coyle has the right to acquire upon
exercise of stock options.
(11) Includes 42,218 shares held by Huber Associates Limited Partnership, a
family limited partnership (HALP). Mr. Huber and his spouse are the sole
general partners of HALP and hold a 1% limited partnership interest, and
each of three other family members is a 33% limited partner. Also includes
1,546,081 shares that Mr. Huber has the right to acquire upon exercise of
stock options and 177,622 shares that HALP has the right to acquire upon
exercise of stock options. Mr. Huber disclaims beneficial ownership of all
shares and stock options held by HALP, except as to his pecuniary interest
in HALP.
(12) Directors and executive officers as a group have sole voting and investment
powers over 251,982 shares and share voting and investment powers with
respect to 59,218 shares. Included in the number of shares shown in the
table are 2,772 shares held under the ISP and beneficially owned by
executive officers, and 4,189,424 shares that Directors and executive
officers have the right to acquire upon the exercise of stock options.
16
22
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for the periods indicated certain compensation of
the President and Chief Executive Officer (CEO), the former CEO of former Aetna
and each of the four other most highly compensated executive officers of the
Company (as of December 31, 2000) in 2000.
- --------------------------------------------------------------------------------
LONG-TERM COMPENSATION
--------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
-------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL ANNUAL RESTRICTED STOCK
POSITION IN 2000 YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS(7)
- ----------------------------------------------------------------------------------------------------
William H. Donaldson 2000 $1,000,000 $6,000,000 $29,559(9) $5,600,000(10) 1,038,720
Chairman(1)
John W. Rowe, M.D. 2000 $ 273,077 $ 375,000 $ 0 $1,367,188(11) 1,246,464
President and Chief
Executive Officer (2)
L. Edward Shaw, Jr. 2000 $ 492,308 $ 650,000 $ 0 $ 0 140,227
Executive Vice President 1999 268,269 208,501(8) 9,324 0 225,015(12)
and General Counsel(3)
Alan J. Weber 2000 $ 750,000 $1,100,000 $ 0 $ 0 83,096
Vice Chairman for 1999 750,000 750,000 0 0 176,581
Strategy and Finance and 1998 302,885 0(8) 0 1,039,688 592,594(13)
Chief Financial
Officer(4)
John W. Coyle 2000 $ 415,891 $ 360,000 $ 0 $ 0 18,696
Former Vice President,
Business Operations(5)
Richard L. Huber 2000 $ 169,231 $ 0 $ 0 $ 0 0
Former Chairman, Chief 1999 1,000,000 680,800(8) 0 0 623,232(12)
Executive Officer and 1998 888,846 470,250(8) 0 0 415,488(13)
President of former
Aetna(6)
- ----------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
----------
PAYOUTS
----------
LONG-TERM
NAME AND PRINCIPAL INCENTIVE ALL OTHER
POSITION IN 2000 PLAN COMPENSATION
- -------------------------------------------------------------------------
William H. Donaldson $ 0 $ 20,834(15)
Chairman(1)
John W. Rowe, M.D. $ 0 $2,013,654(16)
President and Chief
Executive Officer (2)
L. Edward Shaw, Jr. $ 581,788(14) $ 14,928(17)
Executive Vice President 0 50,000
and General Counsel(3)
Alan J. Weber $1,603,662(14) $ 45,500(17)
Vice Chairman for 0 36,058
Strategy and Finance and 0 0
Chief Financial
Officer(4)
John W. Coyle $ 470,267(14) $ 37,075(17)
Former Vice President,
Business Operations(5)
Richard L. Huber $3,140,563(14) $3,679,193(18)
Former Chairman, Chief 0 73,513
Executive Officer and 837,262 44,442
President of former
Aetna(6)
- ---------------------------------------------------------------------------------------
(1) Mr. Donaldson became Chairman, President and Chief Executive Officer of the
Company on May 30, 2000 and served as President and Chief Executive Officer
until September 15, 2000. Mr. Donaldson also served as Chairman, President
and Chief Executive Officer of former Aetna from February 25, 2000 until
the time of the Transaction. Effective April 1, 2001, Mr. Donaldson will
retire as Chairman of the Company. Mr. Donaldson was not an executive
officer of the Company or former Aetna at any time in 1998 or 1999.
(2) Dr. Rowe became President and Chief Executive Officer of the Company on
September 15, 2000, when the Company was former Aetna's health and related
benefits subsidiary, and continued in that role following the Transaction,
when the Company became an independent, public company. Effective April 1,
2001, Dr. Rowe will also become Chairman of the Company. Dr. Rowe was also
an executive officer of former Aetna from September 15, 2000 until the
Transaction. Dr. Rowe was not an executive officer of the Company or former
Aetna at any time in 1998 or 1999.
(3) Mr. Shaw was an executive officer of former Aetna from May 1999 until the
time of the Transaction, and became an executive officer of the Company
during 2000. Mr. Shaw was not an executive officer at any time in 1998.
(4) Mr. Weber was an executive officer of former Aetna from August 1998 until
the time of the Transaction, and became an executive officer of the Company
during 2000.
(5) Mr. Coyle was not an executive officer at any time in 1998 or 1999. Mr.
Coyle resigned from all of his positions with the Company effective
February 9, 2001.
(6) Mr. Huber was named Chairman of former Aetna on March 1, 1998 and Chief
Executive Officer and President of former Aetna on July 28, 1997. Mr. Huber
resigned from all of his positions with former Aetna and the Company
effective February 25, 2000.
17
23
(7) Represents stock options granted under the Company's 2000 Stock Plan (the
2000 Stock Plan) and former Aetna's 1996 Stock Incentive Plan (the former
Aetna Stock Plan), adjusted to reflect conversion to stock options under
the 2000 Stock Plan upon consummation of the Transaction.
(8) Amounts shown do not include the amount of bonus forgone at the election of
the executive in exchange for a stock option grant (see Notes 12 and 13).
(9) Represents reimbursement for certain income taxes pursuant to Mr.
Donaldson's employment agreement.
(10) The value of the restricted stock was determined using the closing price of
former Aetna's Common Stock on March 10, 2000, the last day of trading
prior to the date of the grant. Dividends are paid on the shares. The
restricted stock vested upon completion of the Transaction.
(11) The value of the restricted stock units was determined using the closing
price of former Aetna's Common Stock on September 15, 2000, the date of the
grant. Dividend equivalents are paid on the restricted stock units. The
restricted stock units will vest in three equal installments on September
15, 2001, September 15, 2002 and September 15, 2003. At December 31, 2000,
Dr. Rowe held 51,936 restricted stock units with a value of $2,132,623.
(12) Includes a stock option grant on February 8, 2000 for 40,814 and 100,000
shares of former Aetna Common Stock to Messrs. Shaw and Huber,
respectively, which converted into options for 84,788 and 207,774 shares,
respectively, of the Company's Common Stock upon consummation of the
Transaction, in lieu of payment of all or a portion of the named
executive's 1999 bonus award at the election of such executive. Executives
were not permitted to acquire options on more than 100,000 shares of former
Aetna Common Stock under this program each year.
(13) Includes a stock option grant on February 1, 1999 for 85,252 and 100,000
shares of former Aetna Common Stock to Messrs. Weber and Huber,
respectively, which converted into options for 177,106 and 207,744 shares,
respectively, of the Company's Common Stock upon consummation of the
Transaction, in lieu of payment of all or a portion of the named
executive's 1998 bonus award at the election of such executive. Executives
were not permitted to acquire options on more than 100,000 shares of former
Aetna Common Stock under this program each year.
(14) Long-term incentive units awarded under the former Aetna Stock Plan vested
and were paid out at target performance level upon completion of the
Transaction.
(15) Includes $8,500 in matching contribution made by the Company and former
Aetna under the ISP (see Note 17). Also includes $12,334 paid to Mr.
Donaldson as outside Director's fees prior to his becoming an officer of
former Aetna on February 25, 2000.
(16) Includes $13,654 in matching contribution made by the Company and former
Aetna under the ISP and the Supplemental ISP (see Note 17). Also includes
$2,000,000 sign-on bonus in accordance with Dr. Rowe's employment
agreement. The amount of the sign-on bonus was determined primarily to make
Dr. Rowe whole for deferred and other compensation which Dr. Rowe forfeited
by joining the Company.
(17) Matching contribution made by the Company and former Aetna under the ISP
and the Supplemental ISP. The ISP is a profit-sharing thrift plan qualified
under the Code. The Company matches, dollar-for-dollar, amounts deferred by
employees under the ISP up to 5% of annual salary. The Company has
established the Supplemental ISP to provide the deferred and matching
benefits that would have been credited to the ISP but for limits imposed by
the Employee Retirement Income Security Act (ERISA) and the Code. The
Supplemental ISP also is used to provide other benefits not otherwise
payable under the ISP, as provided from time to time by the Company's
Board.
(18) Includes $43,655 in matching contribution made by former Aetna under the
ISP and the Supplemental ISP (see Note 17). Also includes severance
payments of $3,384,000, payment of $161,538 for accrued paid time off and
payment of $90,000 in lieu of outplacement and transitional financial
counseling.
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Stock Option Grants Table
The following table sets forth certain information concerning stock options
granted during 2000 by former Aetna prior to the Transaction and by the Company
thereafter to the persons listed in the Summary Compensation Table on page 17.
The number of shares reported reflects the adjustment of the options granted by
former Aetna to options for shares of the Company's Common Stock, which occurred
upon consummation of the Transaction. The hypothetical grant date present values
of stock options granted in 2000 shown below are presented pursuant to SEC rules
and are calculated under the modified Black-Scholes Model for pricing options.
- --------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1)
- ---------------------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL STOCK
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
STOCK OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME GRANTED 2000 SHARE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
William H. Donaldson......... 623,232(2) 6.27% $19.7960 February 28, 2010 $4,215,000(8)
207,744(2) 2.09% 26.4749 February 28, 2010 1,018,000(8)
207,744(2) 2.09% 31.2885 February 28, 2010 816,000(8)
John W. Rowe, M.D............ 623,232(3) 6.27% 26.3245 September 15, 2010 6,135,000(9)
415,488(3) 4.18% 35.0116 September 15, 2010 3,112,000(9)
207,744(4) 2.09% 35.0116 December 14, 2010 2,823,241(10)
L. Edward Shaw, Jr........... 84,788(5) 0.85% 22.1427 February 8, 2005 648,534(11)
21,813(2) 0.22% 19.7960 February 28, 2010 147,525(8)
7,271(2) 0.07% 26.4749 February 28, 2010 35,630(8)
7,271(2) 0.07% 31.2885 February 28, 2010 28,560(8)
103,872(6) 1.05% 26.6554 September 5, 2010 1,037,000(12)
Alan J. Weber................ 49,858(2) 0.50% 19.7960 February 28, 2010 337,200(8)
16,619(2) 0.17% 26.4749 February 28, 2010 81,440(8)
16,619(2) 0.17% 31.2885 February 28, 2010 65,280(8)
John W. Coyle................ 2,908(7) 0.03% 22.1427 February 8, 2010 22,246(11)
15,788(2) 0.16% 19.7960 February 28, 2010 106,780(8)
Richard L. Huber............. 207,744(5) 2.09% 22.1427 February 8, 2005 1,589,000(11)
- ---------------------------------------------------------------------------------------------------------
(1) Options granted prior to the Transaction were granted under the former
Aetna Stock Plan and were adjusted to reflect conversion to options under
the 2000 Stock Plan. Options granted after the Transaction were granted
under the 2000 Stock Plan. The 2000 Stock Plan permits participants to use
shares of the Company's Common Stock to exercise options. The 2000 Stock
Plan provides that the option price shall not be less than 100% of the fair
market value of the Common Stock on the date the option is granted. Under
the 2000 Stock Plan, options may be granted until December 31, 2010.
(2) Date of grant was February 29, 2000. Option vested and became exercisable
upon completion of the Transaction.
(3) Date of grant was September 15, 2000; initial exercise date is September
15, 2001; option vests in equal installments over a period of three years.
(4) Date of grant was December 14, 2000; initial exercise date is December 14,
2001; option vests in equal installments over a period of three years.
(5) Represents option granted in lieu of all or a portion of the named
executive's 1999 bonus award at the election of such named executive. Date
of grant was February 8, 2000; option vested immediately.
(6) Date of grant was September 5, 2000; initial exercise date is September 5,
2001; option vests in equal installments over a period of three years.
(7) Date of grant was February 8, 2000. Option vested and became exercisable
upon completion of the Transaction.
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(8) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted February 29, 2000 were as
follows: (i) a volatility factor of 39.2%, representing the three-year
historical volatility of the Common Stock as of the date of the option
grant; (ii) a risk-free rate of return of 6.61%, representing the five-year
U.S. Treasury bond rate in effect on the date of the option grant; (iii) a
dividend yield of 1.9%, representing the Company's then current annual
dividend, divided by the Common Stock price on the date of the option
grant; and (iv) a four-year option term, representing the historical
average life of the options granted. No further discount to the option
value calculated was taken to give effect to the fact that the options are
not freely transferable or to the exercise or lapse of the options after
the vesting period but prior to the end of the option period.
(9) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted September 15, 2000 were as
follows: (i) a volatility factor of 43.8%, representing the three-year
historical volatility of the Common Stock as of the date of the option
grant; (ii) a risk-free rate of return of 5.93%, representing the five-year
U.S. Treasury bond rate in effect on the date of the option grant; (iii) a
dividend yield of 1.5%, representing the Company's then current annual
dividend, divided by the Common Stock price on the date of the option
grant; and (iv) a four-year option term, representing the historical
average life of the options granted. No further discount to the option
value calculated was taken to give effect to the fact that the options are
not freely transferable or to the exercise or lapse of the options after
the vesting period but prior to the end of the option period.
(10) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted December 14, 2000 were as
follows: (i) a volatility factor of 43.3%, representing the three-year
historical volatility of the Common Stock as of the date of the option
grant; (ii) a risk-free rate of return of 5.19%, representing the five-year
U.S. Treasury bond rate in effect on the date of the option grant; (iii) a
dividend yield of 0.1%, representing the Company's then current annual
dividend, divided by the Common Stock price on the date of the option
grant; and (iv) a four-year option term, representing the historical
average life of the options granted. No further discount to the option
value calculated was taken to give effect to the fact that the options are
not freely transferable or to the exercise or lapse of the options after
the vesting period but prior to the end of the option period.
(11) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted February 8, 2000 were as follows:
(i) a volatility factor of 38.7%, representing the three-year historical
volatility of the Common Stock as of the date of the option grant; (ii) a
risk-free rate of return of 6.74%, representing the five-year U.S. Treasury
bond rate in effect on the date of the option grant; (iii) a dividend yield
of 1.7%, representing the Company's then current annual dividend, divided
by the Common Stock price on the date of the option grant; and (iv) a
four-year option term, representing the historical average life of the
options granted. No further discount to the option value calculated was
taken to give effect to the fact that the options are not freely
transferable or to the exercise or lapse of the options after the vesting
period but prior to the end of the option period.
(12) The assumptions made and factors used by the Company in the Black-Scholes
Model calculation for the options granted September 5, 2000 were as
follows: (i) a volatility factor of 43.8%, representing the three-year
historical volatility of the Common Stock as of the date of the option
grant; (ii) a risk-free rate of return of 5.92%, representing the five-year
U.S. Treasury bond rate in effect on the date of the option grant; (iii) a
dividend yield of 1.4%, representing the Company's then current annual
dividend, divided by the Common Stock price on the date of the option
grant; and (iv) a four-year option term, representing the historical
average life of the options granted. No further discount to the option
value calculated was taken to give effect to the fact that the options are
not freely transferable or to the exercise or lapse of the options after
the vesting period but prior to the end of the option period.
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There is no assurance that the hypothetical present values of stock options
presented in the preceding table represent the actual values of such options.
The hypothetical values shown should not be construed as predictions by the
Company as to the future value of its Common Stock.
Stock Option Exercises and December 31, 2000 Stock Option Value Table
The following table sets forth certain information concerning stock options
exercised during 2000 by the persons listed in the Summary Compensation Table on
page 17 and the number and value of specified options held by those persons at
December 31, 2000. The values of unexercised in-the-money stock options at
December 31, 2000 shown below are presented pursuant to SEC rules. There is no
assurance that the values of unexercised in-the-money stock options reflected in
this table will be realized.
- --------------------------------------------------------------------------------
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES VALUE UNEXERCISED OPTIONS AT OPTIONS AT
ACQUIRED REALIZED DECEMBER 31, 2000 DECEMBER 31, 2000(1)
ON ON ------------------------------ ------------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- ------------------------------------------------------------------------------------------------------------------
William H. Donaldson 0 0 1,038,720 0 $18,314,940 $ 0
John W. Rowe, M.D. 0 0 0 1,246,464 0 12,956,308
L. Edward Shaw, Jr. 0 0 261,370 103,872 2,858,646 1,496,494
Alan J. Weber 0 0 852,271 0 5,372,680 0
John W. Coyle 0 0 131,790 0 870,455 0
Richard L. Huber(3) 0 0 1,723,703 0 11,770,780 0
- ------------------------------------------------------------------------------------------------------------------
(1) Based on the December 29, 2000 closing stock price of $41.0625.
(2) Represents stock options that are not vested.
(3) Includes stock options held by Huber Associates Limited Partnership (HALP).
For additional information about HALP, see Note 11 to the Beneficial
Ownership Table. Mr. Huber disclaims beneficial ownership of all stock
options held by HALP, except as to his pecuniary interest in HALP.
Long-Term Incentive Awards Table
The following table sets forth certain information concerning long-term
incentive awards granted during 2000 to certain persons listed in the Summary
Compensation Table on page 17 under the former Aetna Stock Plan.
- --------------------------------------------------------------------------------
PERFORMANCE ESTIMATED FUTURE PAYOUTS
OR OTHER (IN SHARES) UNDER
NUMBER OF PERIOD UNTIL NON-STOCK PRICE BASED PLANS
UNITS GRANTED MATURATION ------------------------------
NAME IN 2000(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------------------------------------------------------
John W. Coyle 700 1999 - 2002 350 700 1,225
L. Edward Shaw, Jr. 9,500 1999 - 2002 4,750 9,500 16,625
- ---------------------------------------------------------------------------------------------------
(1) The incentive units vested and were paid out at target performance level
upon completion of the Transaction.
Pension Plan
The Company provides for certain of its employees a noncontributory, defined
benefit pension plan (the Pension Plan). The Company became the plan sponsor of
the Pension Plan upon consummation of the Transaction. Effective January 1,
1999, the Pension Plan was amended to convert the plan's final average pay
benefit formula to a cash balance design. Under this design, the pension benefit
is expressed as a cash balance account. Each year a participant's cash balance
account is credited with (i) a pension credit based on the participant's age,
years of service and eligible pay for that year, and (ii) an interest credit
based on the participant's account balance as of the beginning of the year and
an interest rate that equals the average
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30-year U.S. Treasury bond rate for October of the prior calendar year. (For
2000, the interest rate was 6.26%.) For purposes of the Pension Plan, eligible
pay is generally base pay and certain other forms of cash compensation,
including annual performance bonuses but excluding long-term incentive
compensation and proceeds from stock option exercises.
Employees with former Aetna pension benefits as of December 31, 1998 (including
Messrs. Huber and Coyle) are considered transition participants under the
Pension Plan. Transition participants continue to accrue benefits under the
Pension Plan's final average pay formula until December 31, 2006. Under this
formula, retirement benefits are calculated on the basis of (i) the number of
years of credited service (maximum credit is 35 years) and (ii) the employee's
average annual earnings during the 60 consecutive months out of the last 120
months of service that yield the highest annual compensation. On termination of
employment, the value of the cash balance account is compared to the lump sum
value of the benefit under the final average pay formula, and the greater of
these two amounts becomes the cash balance account value.
The estimated annual benefits expressed as a single life annuity payable at age
65 for Messrs. Shaw and Weber are $91,488 and $712,205, respectively. These
estimates assume each named executive continues working for the Company until
age 65, the account balance receives annual interest credits of 6.26% for 2000
and 6% thereafter, pension eligible pay increases 4% per year, the Social
Security wage base increases 3.5% per year, and the Pension Plan continues
unchanged until the projection date. Actual benefits will vary. Mr. Huber's
annual pension benefit expressed as a single life annuity commencing at age 63
(his age at the time of his resignation from former Aetna) is $331,613. Mr.
Coyle's annual pension benefit expressed as a single life annuity commencing at
age 48 (his age at the time of his resignation from the Company) is $31,783. Mr.
Donaldson's annual pension benefit expressed as a single life annuity commencing
at age 69 (his age at the time of his retirement from the Company) is $41,568.
The estimated benefits for Messrs. Shaw and Weber and benefits for Messrs.
Huber, Coyle and Donaldson do not take into account any reduction for joint and
survivorship payments, any offset for Social Security benefits to be received by
the employee, or payment of lump sum benefits of up to 50% of the employee's
cash balance account at the election of the employee. Dr. Rowe is not currently
eligible to participate in the Pension Plan.
The Code limits the maximum annual benefit that may be accrued under and paid
from a tax-qualified plan such as the Pension Plan. As a result, the Company has
established a supplemental pension plan to provide benefits (included in the
amounts listed in the preceding paragraph) that would exceed the Code limit. The
supplemental pension plan also is used to pay other pension benefits not
otherwise payable under the Pension Plan, including additional years of credited
service beyond years actually served, additional years of age, and covered
compensation in excess of that permitted under the Pension Plan.
Other Agreements
The Company administers a Severance and Salary Continuation Benefits Plan (the
Severance Plan) under which employees, including the Company's executive
officers, terminated by the Company without cause may receive up to two weeks of
continuing salary for every credited full year of employment to a maximum of one
year's salary. In addition, when an employee's job is eliminated due to
reengineering, reorganization or staff reduction efforts, employees, including
the Company's executive officers, are eligible for an additional 13 weeks of
salary continuation and outplacement assistance. Under certain circumstances,
determined on a case-by-case basis, additional severance pay benefits may be
granted for the purposes of inducing employment of senior officers or rewarding
past service. Certain benefits continue during the severance pay and salary
continuation periods. As a result of the Transaction, the Severance Plan will be
noncancelable until December 13, 2002.
Prior to the Transaction, former Aetna entered into certain agreements with Mr.
Donaldson, Dr. Rowe and Messrs. Weber, Shaw and Huber. The obligations of former
Aetna under these agreements, which are described below, were assumed by the
Company upon the completion of the Transaction.
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In connection with Mr. Donaldson's employment with former Aetna as its Chairman,
President and Chief Executive Officer, former Aetna entered into an agreement
with Mr. Donaldson, whereby it agreed to provide Mr. Donaldson with a salary of
$1,000,000, annual bonus opportunity of up to $2,000,000 for calendar year 2000
under the Annual Incentive Plan and an additional bonus as determined by the
Committee on Compensation and Organization. Upon completion of the Transaction,
the Company assumed former Aetna's obligations under its agreement with Mr.
Donaldson. On February 29, 2000, Mr. Donaldson was granted stock options that
have converted into stock options for 1,038,720 shares of the Company's Common
Stock. The exercise price per share is $19.7960 for 623,232 shares, $26.4749 for
207,744 shares and $31.2885 for 207,744 shares. Mr. Donaldson was also granted
100,000 shares of restricted Common Stock of former Aetna. The options and
restricted Common Stock vested upon completion of the Transaction. In accordance
with his agreement with the Company, upon Mr. Donaldson's retirement as Chairman
of the Company, he will be paid a pro rata bonus for 2001 of $500,000. The
Company has agreed generally to make Mr. Donaldson whole for any excise taxes
incurred as a result of payments made under his employment arrangement or
otherwise.
The Company has entered into an agreement with Dr. Rowe, pursuant to which he
will serve as Chief Executive Officer of the Company and, not later than
December 31, 2001, Chairman of the Board of Directors. Dr. Rowe will become
Chairman of the Board of Directors of the Company effective April 1, 2001. Under
the agreement, which is for a term of three years, with two one-year extensions,
Dr. Rowe is entitled to an annual salary of not less than $1,000,000, a target
annual bonus opportunity of $1,500,000 and a maximum annual bonus opportunity of
$3,000,000. Dr. Rowe is entitled to minimum annual bonus payments for 2000 and
2001 of $375,000 and $1,000,000, respectively. Dr. Rowe received a sign-on bonus
of $2,000,000 and, on July 3, 2001, will receive a retention bonus of
$1,400,000, subject to continued employment. The amount of the sign-on bonus and
the retention bonus were determined primarily to make Dr. Rowe whole for
deferred and other compensation that Dr. Rowe forfeited by joining the Company.
Effective September 15, 2000, Dr. Rowe was granted restricted stock units by
former Aetna that converted into 51,936 restricted stock units of the Company
upon completion of the Transaction. Dr. Rowe also was granted stock options
that, upon completion of the Transaction, were converted into stock options for
1,038,720 shares of the Company's Common Stock. The option exercise price is
$26.3245 (the fair market value of a share of former Aetna Common Stock on
September 15, 2000, as equitably adjusted to reflect the Transaction) for
623,232 shares and $35.0116 for 415,488 shares. The options and the restricted
stock units will vest in three equal annual installments commencing September
15, 2001 (with accelerated vesting upon a change in control, excluding the
Transaction, and upon certain terminations of employment). Upon completion of
the Transaction, Dr. Rowe was granted additional stock options for 207,744
shares of the Company's Common Stock with an exercise price of $35.0116 per
share. In addition to certain other benefits, Dr. Rowe will be entitled (subject
to vesting in five equal annual installments) to a minimum annual pension of
$300,000 commencing at age 65.
If Dr. Rowe's employment is terminated by the Company other than for "cause,"
death or disability, or by Dr. Rowe for "good reason," he will be entitled to
104 weeks (156 weeks, if such termination is within two years following a change
in control) of cash compensation (calculated as annual base salary and target
annual bonus), his pro rata bonus for the year of termination and, if not
previously paid, his retention bonus. If the Company does not renew Dr. Rowe's
agreement for a one-year term on December 31, 2003 or 2004, he will be entitled
to a cash payment of $3,000,000 or $1,500,000, respectively. The Company has
agreed generally to make Dr. Rowe whole for any excise taxes incurred as a
result of payments made under his agreement or otherwise.
Mr. Weber has entered into an agreement with the Company that provides that if,
during the two-year period following the Transaction, his employment is
terminated by the Company without cause or he terminates his employment for any
reason (other than in circumstances that would constitute cause), in lieu of
participation
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in the Company's severance plan, he will be entitled to 156 weeks of cash
compensation (calculated as annual base salary and target annual bonus amount).
Mr. Weber's pension benefits are vested under the Company's pension plan. The
Company has agreed to make certain minimum contributions to Mr. Weber's cash
balance pension account, which the Company believes are not greater than the
value of the pension benefits forgone by Mr. Weber as a result of his departure
from his previous employer. The Company has agreed generally to make Mr. Weber
whole for any excise taxes incurred as a result of payments made under his
agreement or otherwise.
The Company has entered into an agreement with Mr. Shaw. Under this agreement,
which runs through December 31, 2003, Mr. Shaw is entitled to an annual salary
of not less than $525,000 and, for 2000 and 2001, a guaranteed annual bonus
equal to his target annual bonus opportunity of $420,000.
Mr. Shaw was granted stock options that, upon completion of the Transaction,
were converted into stock options for 103,872 shares of the Company's Common
Stock with an option exercise price of $26.6554 per share (the fair market value
of a share of former Aetna Common Stock on the grant date, as adjusted to
reflect the Transaction). The options will vest in three equal annual
installments (with accelerated vesting upon a change in control, other than the
Transaction, and upon certain terminations of employment).
Under this agreement, if Mr. Shaw's employment is terminated by the Company
other than for "cause," death or disability, Mr. Shaw will be entitled to 156
weeks of cash compensation (calculated as annual base salary and target annual
bonus), and continued health and dental benefits. Mr. Shaw may elect special
retirement on or after January 2002, in which case he will be entitled to 50% of
his current base salary and target annual bonus for the balance of the agreement
term and continued health and dental benefits. The Company has agreed generally
to make Mr. Shaw whole for any excise taxes incurred as a result of payments
made under his agreement or otherwise.
In connection with Mr. Huber's termination of employment with former Aetna
effective as of February 25, 2000, he received a lump sum payment of $3,384,000
(based on 88 weeks of salary ($1,000,000 annually) and target annual bonus
($1,000,000 annually)) in exchange for his agreement generally not to compete
with the Company. The Company also will provide Mr. Huber with an office and
administrative support until November 2, 2001 to accommodate his transition
needs. Mr. Huber is eligible for enhanced pension rights and certain other
benefits offered to employees who retire from the Company.
The Board of Directors has approved provisions to protect certain benefits of
Company employees upon a change-in-control of the Company (as defined). The
provisions provide that the Severance Plan shall become noncancelable for a
period of two years following a change-in-control. All previously granted stock
options that have not yet vested will become vested and immediately exercisable.
Upon a change-in-control, bonuses payable under the Company's Annual Incentive
Plan will become payable based on the target award for participants. Provision
has been made to maintain the aggregate value of specified benefits for one year
following a change-in-control. Provision also has been made to permit funding of
a trust to protect supplemental retirement benefits (pension and 401(k)) and
deferred compensation upon a change-in-control or potential change-in-control
(each as defined) of an affiliate of the Company.
REPORT OF THE COMMITTEE ON COMPENSATION AND ORGANIZATION
The 2000 Compensation program described in this Proxy Statement was established
by the Committee on Compensation and Organization of former Aetna. The current
members of the Company's Committee on Compensation and Organization are the same
as the members of the former Aetna Committee on Compensation and Organization.
During 2000, the compensation program was impacted by the sale to ING of former
Aetna's financial services and international businesses and the spin-off of the
Company to shareholders of former Aetna (the Transaction).
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What was the compensation philosophy during 2000?
The executive compensation program was designed to:
- - attract and retain high-performing executives;
- - focus executives on increasing shareholder value by awarding them stock-based
compensation directly linked to improvements in shareholder return;
- - compensate executives based on the Company's performance relative to its
competitors and improvements in the Company's performance over time; and
- - create a performance-oriented environment in which executives can earn
increased levels of compensation by achieving superior annual and long-term
business results.
What was the structure of the executive compensation program?
The compensation program for executive officers consisted of four principal
elements:
- - salaries;
- - annual incentive bonuses;
- - stock options; and
- - long-term incentive awards.
The compensation program was designed to set total compensation opportunity
(salary, annual bonus, stock options and long-term incentive award) at a level
relative to the median level of total compensation paid to similarly positioned
executives at companies in a comparison group selected for each position (the
Comparison Group). The program was designed to achieve a mix of cash and
long-term incentive awards appropriate for each position. Executive officers
also were eligible for other employee benefits as set forth in the Summary
Compensation Table (see page 17).
How were salaries determined?
Salaries are reviewed annually by the Committee. Salaries are based on the
competitive marketplace for comparable jobs. Individual salaries were determined
by the former Aetna Committee after evaluating the executive's experience, level
and scope of responsibility, and individual performance.
How were bonuses determined?
The annual bonus program is designed to incent executive officers to achieve
specific financial and strategic goals.
Annual Incentive Plan. The Annual Incentive Plan (the Plan) applies to
executives named in the Company's Proxy Statement. Under the Plan, specific
goals are established by the Committee at the beginning of each performance year
and bonuses are linked directly to their achievement. The goals established in
relation to 2000 are described in further detail below. If 100% of either goal
is met, the maximum award permitted under the Plan may be paid. If neither of
these goals is met at the 100% level, the maximum bonus payable is
proportionately reduced. The Committee has discretion to pay less than the
maximum amount permitted by the Plan. For 2000, the two goals established for
the Chairman, the Chief Executive Officer, the Vice Chairman and the General
Counsel were measured by (i) corporate net income (adjusted by the Committee to
exclude unplanned capital gains and losses, as well as certain items identified
at the start of the performance year and determined to be unusual, nonrecurring
or beyond management's control) and (ii) Company revenues. The two goals
established for the Vice President, Business Operations were measured by (i)
income -- 75% on the business unit's operating earnings (measured by income from
continuing operations before realized capital gains and losses) and 25% on
corporate net income (measured
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by income from continuing operations before realized capital gains and losses)
and (ii) Company revenues. The goals were met at less than a 100% level, so the
maximum bonus payable under the Plan was proportionately reduced.
Management Incentive Plan. Executive officers who do not participate in the
Annual Incentive Plan participate in the Company's Management Incentive Plan
(MIP). Under MIP, the Committee sets the amount of a staff or business unit's
bonus pool funding based on various levels of financial and strategic
performance for each business unit or staff area. Twenty-five percent of a
business unit's bonus pool depends on overall Company results and 75% depends on
the business unit's own financial performance, measured by operating earnings,
return on invested capital and achievement of identified operational priorities.
Twenty-five percent to 40% of a staff unit's bonus pool depends on Company
operating earnings and 60%-75% depends on the unit's own financial performance,
measured by actual expense level versus budget, and by achievement of other
relevant performance objectives. Examples of these other performance objectives
include measurable improvements in the quality of customer service, management
of human resources, diversity and effective resolution of legal, regulatory or
other important issues affecting the Company.
Under MIP, if 100% of the goal is met, up to 100% of the target bonus pool is
funded. If 70% of the goal is met, up to 30% of the bonus pool is funded. If the
goal is exceeded, up to 200% of the bonus pool is funded.
In connection with the change-in-control associated with the Transaction, the
MIP bonus pools were funded at the greater of actual or target performance.
Individual bonuses were determined based on individual contributions to business
or staff unit results.
How were stock option and restricted stock awards determined?
The Company awards stock options to align the interests of its executive
officers with those of its shareholders in increasing shareholder value. Stock
options are granted at not less than 100% of the fair market value of the
Company's Common Stock on the date of grant. Because stock options provide value
only in the event of share price appreciation, the Committee believes stock
options represent an important component of the Company's executive compensation
program.
Given the uncertainty facing former Aetna early in 2000, former Aetna granted
stock options to essentially all Company employees to strengthen retention and
to further incent executives to achieve Company objectives, including increased
stock price. The number of option shares granted was determined by reference to
the number of option shares granted to such employees in October 1999.
From time to time the Company also grants stock options or restricted stock in
connection with hiring, promotions or other situations where the Committee
believes the circumstances warrant a stock option or restricted stock award. The
amount granted in these instances is determined by the Committee based on the
individual circumstances.
What was the basis for the payout of the long-term incentive awards?
Long-term incentive awards issued under the former Aetna Stock Plan provided
that upon a change-in-control of former Aetna, outstanding awards would vest. In
addition, the award agreements stated that if the award was in the final two
years of a performance cycle, the full award would be paid at the greater of
target or actual performance through the date of the change-in-control. If the
award was in the first two years of a performance cycle, the award agreements
provided that a prorated award would be paid equal to the greater of target or
actual performance through the date of the change-in-control. The Transaction
constituted a change-in-control of former Aetna under the award agreements. As a
result, outstanding long-term awards issued for the 1997-2000 performance cycle
and the 1999-2002 performance cycle paid out in accordance with the terms of the
agreements.
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How did the Transaction impact stock options and restricted stock held by
executive officers?
The Transaction constituted a change-in-control of former Aetna under the stock
option and restricted stock agreements. As a result, former Aetna stock options
held by executive officers were equitably converted into options of the Company
with adjustments made to both the number of options and exercise prices to
maintain the intrinsic in- or out-of-the-money value of the former Aetna
options. In addition, stock options held by executive officers (other than Dr.
Rowe's stock options and certain of Mr. Shaw's stock options), vested.
Restricted stock held by Mr. Donaldson and Mr. Weber also vested. Restricted
stock units held by Dr. Rowe did not vest but were equitably adjusted to reflect
the Transaction and converted to restricted stock units of the Company.
How has the Company responded to IRS limits on deductibility of compensation?
Section 162(m) of the Code limits the tax deductibility of compensation in
excess of $1 million paid to certain executive officers, unless the payments are
made under plans that satisfy the technical requirements of the Code. The
Committee believes that performance-based pay over $1 million is, in some
circumstances, necessary to attract and retain executives in a competitive
marketplace. Stock options and Incentive Units granted under the Company's 2000
Stock Plan and annual bonuses paid under the Annual Incentive Plan are designed
so that the compensation paid will be tax deductible by the Company. The
Committee believes that there are circumstances under which it is appropriate
for the Committee to elect to forgo deductibility to maintain flexibility or to
continue to pay competitive compensation. Some of the payouts made under the
Long-Term Incentive Program due to the Transaction will not be deductible under
sec.162(m) because the payout did not meet the requirements of sec.162(m).
What was the basis for Mr. Donaldson's 2000 compensation?
Mr. Donaldson was hired as Chairman, President and Chief Executive Officer of
former Aetna on February 25, 2000. The total compensation opportunity outlined
in Mr. Donaldson's employment agreement (salary, equity awards, annual bonus and
special bonus awards) was determined by the Committee, in consultation with an
outside compensation consultant, after a review of the total compensation
opportunity for chief executive officers of the companies included in the Morgan
Stanley Healthcare Payor Index and a review of the total compensation
opportunity provided to chief executive officers of other major corporations
hired in corporate restructuring situations.
Salary. Mr. Donaldson's salary was determined by the Committee by reference to
the salary that was paid to the then departing Chairman, President and Chief
Executive Officer of former Aetna.
Bonus. As part of his employment agreement, the Board of Directors specified
six criteria against which Mr. Donaldson would be evaluated for purposes of
determining his annual bonus award and eligibility for an additional special
bonus award. The six criteria identified by the Board were: (i) implementation
of strategic decisions; (ii) unlocking shareholder value; (iii) achieving the
Company's operating plan (adjusted to reflect strategic decisions); (iv)
executing divestitures; (v) restoring public/brand image and (vi) positioning
the Company for the CEO's successor. The Committee reviewed Mr. Donaldson's
performance against each of these criteria and determined that he had not only
achieved each of the criteria, but in many instances more than exceeded
expectations. During 2000, former Aetna completed the sale of its financial
services and international businesses to ING and achieved total shareholder
value of $10.9 billion (combined year-end market capitalization of the Company
and cash proceeds paid to shareholders as part of the Transaction). This is
substantially higher than the $5.6 billion market value of former Aetna at the
time when Mr. Donaldson assumed the position of Chairman and CEO. During 2000,
the Company also began the process of restructuring its health business around
the key themes of choice, flexibility, quality and responsiveness, and improving
the Company's competitiveness with a series of strategic initiatives. At the
same time, under Mr. Donaldson's direction, the Company introduced new patient
management and health delivery strategies and policies which positioned the
Company for significantly strengthened relations with
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health care providers. Finally, Mr. Donaldson successfully positioned the
Company for the appointment of Dr. John W. Rowe, as Chief Executive Officer. Mr.
Donaldson assumed leadership of the Company under difficult circumstances and
the significant progress made by the Company over the past year is a direct
result of his efforts, together with the efforts of all Company employees.
Accordingly, the Committee determined to award Mr. Donaldson a bonus of
$1,996,000 under the Company's Annual Incentive Plan, the maximum bonus payable
under the Plan. The bonus was determined based on the level of achievement of
the Plan's specified goals (described above) and the achievement of the six
performance criteria.
Mr. Donaldson's employment agreement provided that he would be eligible for
consideration for a discretionary, special bonus award for fiscal year 2000 in
addition to the annual bonus under the Annual Incentive Plan. Under his
employment agreement, Mr. Donaldson's special bonus was to be determined based
upon the level of achievement of the six performance criteria described above.
The Committee awarded Mr. Donaldson a special bonus of $4,004,000. This amount
was determined by the Committee after a review of Mr. Donaldson's performance
against the specified criteria and after review of material prepared by an
outside compensation consultant (which included bonus amounts paid to chief
executive officers of other major corporations hired in corporate restructuring
situations).
Equity Awards. As part of his employment agreement, Mr. Donaldson was awarded a
stock option for 500,000 shares(1) (200,000 of which were granted at a strike
price above the market price at the time of grant) and 100,000 shares of
restricted stock. These equity awards were determined after a review of the
equity incentives provided to chief executive officers hired by other major
corporations in corporate restructuring situations and to replace the income
opportunity Mr. Donaldson would forfeit as a result of assuming the position
with Company. The Committee also believed it important to provide an immediate
incentive for Mr. Donaldson to increase shareholder value.
What was the basis for Dr. Rowe's 2000 compensation?
Salary. Dr. Rowe was hired on September 15, 2000. Dr. Rowe's salary was
determined by the Committee, in consultation with an outside compensation
consultation, after a review of the total compensation opportunity for chief
executive officers of the companies included in the Morgan Stanley Healthcare
Payor Index. In order to recruit Dr. Rowe to the Company, his total future
compensation opportunity (salary, annual bonus, future stock option grants and
long-term incentives) was established by the Committee at a level slightly
higher than the median.
Annual Incentive Bonus. As part of his employment agreement, Dr. Rowe was
guaranteed a bonus of $375,000 for 2000. Dr. Rowe's bonus reflected this
guaranteed amount.
Equity Awards. Under the terms of his employment agreement, Dr. Rowe was
granted a stock option for 500,000 shares(1) of former Aetna (200,000 of which
were granted at a strike price above the market price at the time of grant) and
207,744 shares of the Company. These options did not vest as a result of the
Transaction. In addition, Dr. Rowe was granted restricted stock units
representing 25,000 shares of former Aetna. These restricted stock units were
converted to Company stock units as a result of the Transaction. These equity
awards were determined after consultation with an outside compensation
consultant to provide Dr. Rowe with an immediate incentive to increase
shareholder value.
Miscellaneous. As part of his employment agreement, Dr. Rowe was provided an
immediate sign-on bonus of $2,000,000. This amount was determined primarily to
make Dr. Rowe whole for deferred and other compensation from his prior employer
that he forfeited by joining the Company.
- ---------------
(1) The former Aetna options granted to Mr. Donaldson and Dr. Rowe were
equitably adjusted to reflect the Transaction. The grants for each were
converted to an option for 1,038,720 Company shares.
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What was the basis for Mr. Huber's compensation in 2000?
Mr. Huber's severance arrangements were negotiated in connection with his
departure from the Company in February of 2000. The amounts were determined by
the Committee and the Board after consultation with an outside compensation
consultant and a review of severance arrangements provided to senior executives
of other major corporations. In addition, the severance arrangement required Mr.
Huber to enter into an agreement not to compete with the Company.
The Committee on Compensation and Organization
Michael H. Jordan, Chairman
Betsy Z. Cohen
Jack D. Kuehler
Gerald Greenwald
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in its oversight of the
Company's systems of internal control, the Company's preparation of its
consolidated financial statements, the activities of the Company's Internal
Audit Department, the conduct of the annual audit of the Company and the
relationship between the Company and its independent accountants. The Board of
Directors of former Aetna, in its business judgment, in April 2000 determined
that all members of the Committee are "independent," as required by the
applicable listing standards of the New York Stock Exchange. The Board of
Directors (with the assistance of the Committee) has the ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace the
independent accountants (or to nominate the independent accountants to be
proposed for shareholder approval in any proxy statement). The Committee
operates pursuant to a Charter that was last amended and restated by the Board
on February 23, 2001, a copy of which is attached to this Proxy Statement as
Appendix A. As set forth in the Charter, management of the Company is
responsible for the preparation, presentation and integrity of the Company's
financial statements. Management and the Internal Audit Department are
responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
independent accountants are responsible for planning and carrying out proper
annual audits and quarterly reviews of the Company's financial statements. The
independent accountants express an opinion as to the conformity of the annual
financial statements with accounting principles generally accepted in the United
States of America and also provide a review report regarding the Company's
interim financial statements.
In the performance of its oversight function, the Committee has reviewed and
discussed the audited financial statements with management and the independent
accountants. The Committee has also discussed with the independent accountants
the matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The Committee has
also received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1.
Independence Discussions with Audit Committees, as currently in effect,
including disclosures with respect to information technology consulting services
relating to financial information systems design and implementation, and other
non-audit services provided by the independent accountants. The Committee has
considered whether the provision of all non-audit services by the independent
accountants to the Company is compatible with maintaining the independent
accountants' independence and has discussed with them their independence.
Members of the Committee are not employees of the Company and, as such, it is
not the duty or responsibility of the Committee or its members to conduct
auditing or accounting reviews or procedures. In performing their oversight
responsibility, members of the Committee rely on information, opinions, reports
or statements, including financial statements and other financial data prepared
or presented by officers or employees of the
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35
Company, legal counsel, independent accountants or other persons with
professional or expert competence. Accordingly, the Audit Committee's oversight
does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles, policies,
or appropriate internal control and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to above do not assure
that the audit of the Company's financial statements by the Company's
independent accountants has been carried out in accordance with auditing
standards generally accepted in the United States of America, that the financial
statements are presented in accordance with accounting principles generally
accepted in the United States of America or that the Company's independent
accountants are in fact "independent."
Based upon the reports, review and discussions described in this Report, and
subject to the limitations on the role and responsibilities of the Committee,
certain of which are referred to above and in the Charter, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000 to be filed with the Securities and Exchange Commission.
The Audit Committee
Barbara Hackman Franklin, Chairman
Jeffrey E. Garten
Earl G. Graves
Ellen M. Hancock
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36
CORPORATE PERFORMANCE GRAPHS
The following graph compares the cumulative total shareholder return on the
Company's Common Stock (assuming reinvestment of dividends) with the cumulative
total return on the published Standard & Poor's 500 Stock Index (S&P 500) and
the cumulative total return on the published Morgan Stanley Healthcare Payor
Index (currently 12 companies) (MSHPI) from the date of the Transaction, when it
was first traded publicly, until the end of 2000. The graph assumes a $100
investment in shares of the Company's Common Stock on December 13, 2000. For
information concerning former Aetna's cumulative total shareholder return from
December 31, 1995 to December 13, 2000, see the additional graph on page 32.
CUMULATIVE TOTAL RETURN FROM DECEMBER 13, 2000 TO
DECEMBER 31, 2000 OF AETNA COMMON STOCK,
S&P 500 AND MORGAN STANLEY HEALTHCARE PAYOR INDEX
[LINE GRAPH]
MORGAN STANLEY HEALTHCARE
AETNA, INC. S&P 500 PAYOR INDEX
----------- ------- -------------------------
12/13/00 $100.00 $100.00 $100.00
12/31/00 122.98 97.12 103.98
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37
The following graph, included for informational purposes, compares the
cumulative total shareholder return on former Aetna's Common Stock (assuming
reinvestment of dividends) with the cumulative total return on the S&P 500 and
the cumulative total return on the MSHPI* over the preceding five-calendar-year
period, concluding on December 13, 2000, the last day of trading of former Aetna
Common Stock. The graph assumes a $100 investment in shares of former Aetna
Common Stock on December 31, 1995.
FIVE-YEAR CUMULATIVE TOTAL RETURN
FORMER AETNA COMMON STOCK, S&P 500
AND MORGAN STANLEY HEALTHCARE PAYOR INDEX
[LINE GRAPH]
MORGAN STANLEY HEALTHCARE
FORMER AETNA, INC S&P 500 PAYOR INDEX
----------------- ------- -------------------------
12/31/95 $100.00 $100.00 $100.00
12/31/96 118.53 122.86 106.04
12/31/97 105.55 163.86 103.44
12/31/98 118.90 210.64 116.96
12/31/99 85.32 254.97 110.70
12/13/00 105.64 238.62 129.36
* The MSHPI was created in January 1996. In order to report performance back to
December 31, 1995, the Company used the companies currently included in the
MSHPI (as of December 13, 2000) as its peer group. The companies included are:
former Aetna, CIGNA Corporation, Coventry Corporation, First Health Group Corp.,
Health Net, Inc., Humana Inc., MidAtlantic Medical Services, Inc., Oxford Health
Plans, Inc., PacifiCare Health Systems, Inc., Trigon Healthcare, Inc., United
Healthcare Corporation and Wellpoint Health Networks, Inc. Cumulative total
return calculations were provided by SNL Securities LC.
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II. APPOINTMENT OF AUDITORS
Following the recommendation of its Audit Committee, the Company's Board of
Directors has appointed and recommends shareholder approval of KPMG LLP as the
Company's independent auditors for the current calendar year. The firm has acted
as independent auditors for the Company and its predecessors since 1972.
Representatives of the firm are expected to be available at the Annual Meeting
to make a statement if the firm desires and to respond to appropriate questions.
FEES INCURRED RELATING TO 2000 SERVICES PERFORMED BY KPMG LLP
- --------------------------------------------------------------------------------
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS(1) TOTAL
---------- -------------- -----------
AUDIT FEES(2) $3,340,600 $ 677,638 $ 4,018,238
---------- ---------- -----------
FINANCIAL INFORMATION SYSTEMS DESIGN AND
IMPLEMENTATION FEES 0 300,000 300,000
---------- ---------- -----------
ALL OTHER FEES:
Statutory and Other Audits(3) 1,777,729 1,883,228 3,660,957
ING Transaction Related Services(4) 817,926 0 817,926
Tax Services 0 233,150 233,150
Registration Statements(5) 0 134,660 134,660
Other 1,210,115 337,470 1,547,585
---------- ---------- -----------
Total All Other Fees $3,805,770 $2,588,508 $ 6,394,278
---------- ---------- -----------
Total Fees $7,146,370 $3,566,146 $10,712,516
========== ========== ===========
- --------------------------------------------------------------------------------
(1) Represents fees for services performed by KPMG that are attributable to the
domestic financial services and international operations of former Aetna
that were merged into a subsidiary of ING Groep N.V. on December 13, 2000 as
part of the Transaction, currently reported in the Company's financial
statements as discontinued operations.
(2) Represents fees for the Company's annual audit and reviews of former Aetna's
financial statements for all interim periods in 2000.
(3) Represents fees for audits performed on statutory financial statements of
the Company's and former Aetna's subsidiaries, mutual funds, separate
accounts, trust funds, employee benefit plans, and other financial
statements of the Company's subsidiaries, businesses or invested assets.
(4) Represents fees for one-time services associated with the Transaction.
(5) Represents fees for services rendered in association with registration
statements of insurance and investment products.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
CURRENT CALENDAR YEAR.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF KPMG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE CURRENT CALENDAR YEAR. UNLESS DIRECTED TO THE
CONTRARY, THE SHARES REPRESENTED BY A PROPERLY COMPLETED PROXY WILL BE VOTED FOR
THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE CURRENT CALENDAR
YEAR.
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III. SHAREHOLDER PROPOSAL TO IMPLEMENT CUMULATIVE VOTING IN ELECTION OF
DIRECTORS
Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave. N.W., Suite 215,
Washington, D.C. 20037 (owner of 100 shares of Common Stock), has advised the
Company that she plans to present the following proposal at the Annual Meeting.
The proposal is included in this Proxy Statement pursuant to the rules of the
Securities and Exchange Commission.
"RESOLVED: That the stockholders of Aetna, assembled in Annual Meeting in person
and by proxy, hereby request the Board of Directors to take the necessary steps
to provide for cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be elected, and
he or she may cast all of such votes for a single candidate, or any two or more
of them as he or she may see fit.
"REASONS: Many states have mandatory cumulative voting, so do National Banks.
"In addition, many corporations have adopted cumulative voting.
"Last year the owners of 43,013,011 shares, representing OVER 41% of shares
voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
THE FOREGOING PROPOSAL.
THE BOARD OF DIRECTORS WILL OPPOSE THIS PROPOSAL IF IT IS INTRODUCED AT THE 2001
ANNUAL MEETING AND RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING
REASONS:
The Board of Directors continues to believe that the present system of voting
for Directors provides the best assurance that the decisions of the Directors
will be in the interests of all shareholders, as opposed to the interests of
special interest groups.
Cumulative voting is one of those issues that favors special interest groups.
Cumulative voting would make it possible for such a group to elect one or more
Directors beholden to the group's narrow interests. This could increase the
likelihood of factionalism and discord within the Board, which may undermine its
ability to work effectively as a governing body on behalf of the common
interests of all shareholders. The present system of voting utilized by the
Company and by most leading corporations prevents the "stacking" of votes behind
potentially partisan Directors. The present system thus promotes the election of
a more effective Board in which each Director represents the shareholders as a
whole.
The Board of Directors would not be able to implement cumulative voting upon
adoption of this proposal by the shareholders, because cumulative voting is
prohibited by the Company's articles of incorporation. Under Pennsylvania law
and the Company's articles of incorporation, an amendment to the Company's
articles of incorporation to delete this provision would require shareholder
approval at a subsequent shareholder meeting, following adoption of a resolution
by the Board approving the proposed amendment.
The Board continues to believe that this proposal is not in the best interests
of the Company or its shareholders.
UNLESS DIRECTED TO THE CONTRARY, THE SHARES REPRESENTED BY A PROPERLY COMPLETED
PROXY WILL BE VOTED AGAINST THE FOREGOING PROPOSAL.
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VOTING OF OTHER MATTERS
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the persons named as
proxies on the enclosed proxy card and acting thereunder will have discretion to
vote on those matters according to their best judgment to the same extent as the
person delivering the proxy card or Internet or telephone vote would be entitled
to vote.
At this time, the Board of Directors is not aware of any matters that may be
properly presented for consideration at the Annual Meeting, other than those
outlined in the Notice of Annual Meeting of Shareholders.
OTHER INFORMATION
Shareholder Proposals for 2002 Annual Meeting
To be included in the 2002 Proxy Statement and on the 2002 proxy card,
shareholder proposals must be received by the Company not later than November
23, 2001. Such proposals must comply with all applicable Securities and Exchange
Commission rules and regulations. Proposals should be sent to the Corporate
Secretary, Aetna Inc., 151 Farmington Avenue, Hartford, Connecticut 06156.
Multiple Copies of Annual Report
The Company's 2000 Annual Report to Shareholders is being mailed to shareholders
in advance of or together with this Proxy Statement. If you hold Aetna shares in
your own name and you received more than one copy of the Annual Report at your
address and you wish to reduce the number of reports you receive and save the
Company the cost of producing and mailing these reports, we will discontinue the
mailing of reports on the accounts you select if you mark the designated box on
the appropriate proxy card(s), or follow the instructions provided when you vote
over the Internet or by telephone.
At least one account at your address must continue to receive an annual report,
unless you elect to review future annual reports over the Internet. Mailing of
dividends, dividend reinvestment statements, proxy materials and special notices
will not be affected by your election to discontinue duplicate mailings of
annual reports. Registered shareholders may discontinue or resume the mailing of
an annual report to an account by calling the Company's Transfer Agent at
1-800-446-2617.
If you own shares through a broker, bank or other holder of record and received
more than one Aetna Annual Report, please contact the holder of record to
eliminate duplicate mailings.
Electronic Access to Proxy Materials and Annual Report
The Notice of Annual Meeting and Proxy Statement and the 2000 Annual Report are
available on Aetna's Internet site at http://www.aetna.com/investor/2001proxy/
and http://www.aetna.com/00annualrpt/, respectively. Under current Pennsylvania
law, the Company must provide shareholders with written notice of its annual
meeting. As of the date of this Proxy Statement, the Pennsylvania legislature is
considering an amendment that would allow the Company to provide shareholders
with electronic notice of its annual meetings. If this change to the law is
passed, most shareholders will be able to elect to view future notices of annual
meetings, proxy statements and annual reports over the Internet instead of
receiving paper copies in the mail.
If you are a shareholder of record, you can choose this option in advance and
save the Company the cost of producing and mailing these documents in the future
by following the instructions provided if you vote over the Internet or by
telephone. If you hold your shares through a broker, bank or other holder of
record, check the information provided by that entity for instructions on how to
elect to view future notices of annual meetings, proxy statements and annual
reports over the Internet.
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41
If you are a shareholder of record and choose to view future notices of annual
meetings, proxy statements and annual reports over the Internet, following the
change to Pennsylvania law described above, you will receive notification by
e-mail when those materials are posted, with instructions containing the
Internet address of those materials.
In the event of the change to Pennsylvania law described above, most
shareholders who hold their shares through a broker, bank or other holder of
record and who elect electronic access will receive an e-mail when those
materials are posted containing the Internet address to access Aetna's notice of
annual meeting, proxy statement and annual report.
By order of the Board of Directors,
/s/ William J. Casazza
William J. Casazza
Vice President and Corporate Secretary
March 23, 2001
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42
APPENDIX A
AETNA INC.
AUDIT COMMITTEE CHARTER
AUDIT COMMITTEE
There shall be an Audit Committee of the Board of Directors, composed of at
least three Directors, appointed annually by the Board of Directors, each of
whom shall have no relationship to the Company that may interfere with the
exercise of his or her independence from management and the Company and shall
otherwise satisfy the applicable membership requirements under the rules of the
New York Stock Exchange, Inc., as such requirements are interpreted by the Board
of Directors in its business judgment.
RESPONSIBILITIES
The Committee shall assist the Board of Directors in its oversight of the
Company's systems of internal control, the Company's preparation of its
consolidated financial statements, the activities of the Company's Internal
Audit Department, the conduct of the annual audit of the Company and the
relationship between the Company and its independent accountants. The Company's
independent accountants shall be ultimately accountable to the Board of
Directors (as assisted by the Committee). The Board of Directors (with the
assistance of the Committee) has the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the independent accountants (or
to nominate the independent accountants to be proposed for shareholder approval
in any proxy statement).
The Committee shall provide a forum for private and direct communications
between Committee members and the Company's independent accountants, Internal
Audit Department and senior financial management. The Committee also shall serve
as a channel of communication to the Board of Directors for the Company's
independent accountants and Internal Audit Department. The Committee also shall,
upon request, provide prompt access for the independent accountants and Internal
Audit Department to meet directly with the Board of Directors.
The function of the Audit Committee is oversight. The management of the Company
is responsible for the preparation, presentation and integrity of the Company's
financial statements. Management and the Internal Audit Department are
responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
independent accountants are responsible for planning and carrying out proper
annual audits and quarterly reviews of the Company's financial statements. In
fulfilling their responsibilities hereunder, it is recognized that members of
the Committee are not full-time employees of the Company and, as such, it is not
the duty or responsibility of the Committee or its members to conduct auditing
or accounting reviews or procedures. Each member of the Committee shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data prepared or presented by officers
or employees of the Company, legal counsel, independent accountants or other
persons with professional or expert competence.
AUTHORITY
The Committee is authorized to perform each of the specific duties attached
hereto and any other duties it considers necessary or advisable to carry out its
responsibilities and its specific duties. To the extent relevant to carrying out
its responsibilities and duties, the Committee is empowered to recommend that
any activity of the Company be investigated and, in appropriate circumstances,
the Committee is empowered to investigate any activity of the Company. The
Committee may perform other functions as requested or approved by the Board of
Directors. The Committee is empowered to recommend that the Company retain
persons having special competence as necessary to assist it in fulfilling its
responsibilities and duties and, in appropriate circumstances, the Committee is
empowered to retain such persons.
A-1
43
SPECIFIC DUTIES
In discharging its responsibilities, the Committee shall perform the following
duties:
Relationship with Independent Accountants
a. Annually review the qualifications of and provide advice to the Board of
Directors regarding the appointment of independent accountants for the
Company. In conducting this review, the Committee shall inquire as to the
results of the independent accountants' latest peer review, the status
generally of any significant litigation against it and review the audit and
non-audit fees paid to and services performed by the independent
accountants. Proposed non-audit services by the independent accountants for
fees in excess of a level determined by the Committee, are subject to the
Committee's prior approval. Periodically obtain a formal written statement
from the independent accountants as required by applicable auditing
standards delineating all relationships between the independent accountants
and the Company, actively engage in a dialogue with the independent
accountants with respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent accountants, and
recommend that the Board of Directors take appropriate action in response to
the independent accountants' report to satisfy itself of the independent
accountants' independence.
b. Meet in private session with the independent accountants.
c. Review with the independent accountants the scope of their examination with
emphasis on accounting and financial areas where the Committee, management
or the accountants believe special attention should be directed.
d. Review with the independent accountants:
1. results of their audit, including their opinion on the financial
statements,
2. their consideration of the internal control structure and their
evaluation regarding the adequacy of those controls over the financial
reporting process, including computer controls and security,
3. significant disputes, if any, with management,
4. cooperation received from management in the conduct of the audit,
5. time constraints on the independent accountants, and
6. other matters related to the conduct of the annual audit or the review of
quarterly financial results required to be communicated to the Committee
under applicable auditing standards or other professional accounting
standards.
e. Confer with management and the internal auditors in reviewing the
performance of the independent accountants.
Relationship with Internal Audit Department
a. Review and consult with management in management's appointment, replacement,
reassignment and dismissal of the Director of Internal Audit.
b. Meet in private session with the Director of Internal Audit.
c. Review the Internal Audit Department's objectives, resources and
effectiveness, its organizational position and status within the Company,
and its annual audit plan, including its coordination with the examination
performed by the independent accountants.
d. Review the results of the Internal Audit activities for the year. Review
their consideration of the internal control structure and their evaluation
regarding the adequacy of those controls over the financial reporting
process, including computer controls and security.
A-2
44
e. Review periodically the Internal Audit Department's written charter and
inquire whether the Department is in compliance with relevant professional
standards.
Relationship with Management
a. Meet in private session with management.
b. Review their consideration of the internal control structure and their
evaluation regarding the adequacy of those controls over the financial
reporting process, including computer controls and security.
c. Before publication, review and discuss with management and the independent
accountants the annual financial statements, related footnotes and related
disclosures, including accompanying management's discussion and analysis of
operations. Review and discuss with management and the independent
accountants quarterly financial results.
d. Discuss any significant changes in accounting principles proposed by
management.
e. Discuss significant accounting accruals, reserves or other estimates made by
management, including reviewing the actuarial reports concerning the annual
actuarial opinions.
f. Discuss the significant accounting, reporting and other developments
affecting the Company's annual and quarterly financial statements, related
footnotes and related disclosures.
g. Inquire whether a second opinion regarding a significant accounting matter
had been sought and, if so, discuss the accounting method selected.
h. Review significant management letter comments received and management's
response to implementation of those comments.
i. Periodically review with the General Counsel significant litigation
involving the Company and review with the General Counsel and independent
accountants related disclosures made in the annual financial statements and
related footnotes.
Other
a. Consider whether there are any emerging issues, which the Committee should
become involved with in the future.
b. Discuss periodically with the independent accountants, management and
Internal Audit Department significant financial risk exposures and the steps
management has taken to monitor, control and report such exposures.
c. Discuss periodically with management the program that management establishes
to monitor compliance with the Company's code of conduct and laws and
regulations.
d. Review and reassess annually the adequacy of this Audit Committee Charter
and recommend any changes to the Board of Directors.
e. Meet during each meeting in executive session.
f. Meet at least four times a year.
g. Report periodically on the Committee's activities and findings to the Board
of Directors.
h. Prepare any report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
A-3
45
151 Farmington Avenue
Hartford, Connecticut 06156
Printed on recycled paper.
46
[X] Please mark your
votes as in this
example.
This Proxy, when properly executed, will be voted in the manner directed herein
by the shareholder. If no direction is made, this Proxy will be voted FOR Items
1 and 2 and AGAINST Item 3.
The Board of Directors recommends
a vote FOR Items 1 and 2.
1. Election of FOR WITHHELD 2. Approval of KPMG FOR AGAINST ABSTAIN
Directors. [ ] [ ] LLP as Independent [ ] [ ] [ ]
(See reverse Auditors
side)
For, except vote withheld from the following nominee(s):
_________________________________________________________
The Board of Directors recommends
a vote AGAINST Item 3.
3. Shareholder proposal FOR AGAINST ABSTAIN
on cumulative voting [ ] [ ] [ ]
[ ] Mark this box if you have more than one account and
want to discontinue receiving multiple copies of
future Annual Reports.
[ ] Mark this box if you plan to attend the Annual
Meeting.
SIGNATURE(S) ________________________________________ DATE _____________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, or for a
corporation, please give your title.
PLEASE SIGN AND DATE HERE, DETACH AND RETURN IN ENCLOSED ENVELOPE OR VOTE BY
TELEPHONE OR THE INTERNET.
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed, and returned your proxy card. To
vote by phone or Internet, please follow these easy steps:
TO VOTE BY PHONE
Call toll free 1-877-PRX-VOTE (1-877-779-8683) on a touch tone telephone.
Shareholders residing outside the United States, Canada and Puerto Rico should
call 1-201-536-8073. Telephone voting will be available until 11:59 p.m.,
Eastern time, on April 26, 2001.
Use the Control Number located in the box above, just below the perforation.
Enter the Control Number and pound signs (#) exactly as they appear.
Follow the recorded instructions.
TO VOTE BY INTERNET
Log onto http://www.eproxyvote.com/aet which will be available until 11:59 p.m.,
Eastern time, on April 26, 2001.
Follow the instructions on the screen.
You can also elect to receive future shareholder materials electronically at
this web site.
TO ATTEND THE ANNUAL MEETING
If you plan to attend the Annual Meeting, you should either mark the box
provided on the above proxy card or signify your intention to attend when you
access the telephone or Internet voting system.
An admission card will then be mailed to you.
THANK YOU FOR VOTING!
47
AETNA INC.
P The undersigned hereby appoints Barbara Hackman Franklin, Michael H. Jordan
R and Jack D. Kuehler, and each of them, the proxies of the undersigned, with
O full power of substitution, to vote the shares of the undersigned at the
X Annual Meeting of Shareholders of Aetna Inc. to be held April 27, 2001 and
Y at any adjournment or postponement thereof, and directs said proxies to
vote as specified herein on the three items specified in this Proxy, and in
their discretion on any other matters that may properly come before the
meeting or any adjournment or postponement thereof.
NOMINEES FOR TERMS EXPIRING AT 2004 ANNUAL MEETING
01. Barbara Hackman Franklin 03. Gerald Greenwald
02. Earl G. Graves 04. Michael H. Jordan
THIS PROXY IS SOLICITED ON BEHALF OF AETNA'S BOARD OF DIRECTORS.
To vote by telephone or Internet, please see the reverse of this card. To vote
by mail, please sign and date the above proxy card on the reverse, tear off at
the perforation, and mail promptly in the enclosed postage-paid envelope.
SHAREHOLDER ACCOUNT INQUIRIES
Aetna's Transfer Agent, EquiServe Trust Company, N.A., maintains a
telephone response center to service shareholder accounts. Registered
owners of Aetna shares may call the center at 1-800-446-2617 to inquire
about replacement dividend checks, address changes, stock transfers and
other account matters or to inquire about EquiServe's DirectSERVICE
Investment Program.
For direct deposit of dividends, registered shareholders may call EquiServe
at 1-800-870-2340.
Registered shareholders with e-mail addresses can send account inquiries
electronically to EquiServe at equiserve@equiserve.com.
Registered shareholders can also access their Aetna accounts via the
Internet through EquiServe's web site at http://www.equiserve.com.
48
- -------------------------------------------------------------------------------
Please mark
your vote as [X]
indicated in
this example
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
- -------------------------------------------------------------------------------
1) Election of Directors (Mark only one)
Nominees for terms expiring at 2004 Annual Meeting:
01 - Barbara Hackman Franklin FOR WITHHELD
02 - Earl G. Graves [ ] [ ]
03 - Gerald Greenwald
04 - Michael H. Jordan
(INSTRUCTIONS: To withhold authority to vote for particular nominee(s),
strike a line through those nominees' names in the list above)
FOR AGAINST ABSTAIN
2) Approval of KPMG LLP as Independent Auditors [ ] [ ] [ ]
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3) Shareholder proposal on cumulative voting [ ] [ ] [ ]
- --------------------------------------------------------------------------------
Mark this box if you plan to attend the Annual Meeting. [ ]
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF MELLON BANK, N.A.
Signature(s) Signature(s) Date
------------------ --------------------- -------
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE
[GRAPHIC OF TELEPHONE] QUICK * EASY * IMMEDIATE [GRAPHIC OF TELEPHONE]
AVAILABLE 24 HOURS A DAY * SEVEN DAYS A WEEK
1-800-840-1208
Your telephone vote authorizes the named Trustee to vote your shares in the same
manner as if you marked, signed, and returned your voting instruction card. If
you vote by telephone, there is no need to return your voting instruction card.
TO VOTE BY TELEPHONE
Call toll free 1-800-840-1208 on a touch tone telephone by 4:00 p.m., Eastern
time, on April 20, 2001. Use the Control Number located in the box in the lower
right hand corner. Enter the Control Number and follow the recorded
instructions.
TO ATTEND THE ANNUAL MEETING
If you plan to attend the Annual Meeting, you should either mark the box
provided on the above voting instruction card or signify your intention to
attend when you access the telephone voting system. An admission card will then
be mailed to you.
THANK YOU FOR VOTING.
49
AETNA INC.
TO: PARTICIPANTS IN THE AETNA INCENTIVE SAVINGS PLAN
Mellon Bank, N.A., the Trustee under the Aetna Incentive Savings Plan (the
Plan), has been instructed to solicit your instructions on how to vote the
shares of Aetna Common Shares held by the Trustee on your behalf in accordance
with the terms of the Plan and to vote those shares in accordance with your
instructions at the Annual Meeting of Shareholders of Aetna Inc. to be held on
April 27, 2001 and at any adjournment or postponement thereof. Please indicate
by checking the appropriate box how you want these shares voted by the Trustee
and return this card to the Trustee in the envelope provided. Alternatively,
you may vote by telephone by following the instructions outlined on the reverse
side of this card. We would like to remind you that your individual voting
instructions are held in strictest confidence and will not be disclosed to the
Corporation. IF YOU FAIL TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE BY 4:00
P.M., EASTERN TIME, ON APRIL 20, 2001 EITHER BY TELEPHONE OR BY COMPLETING,
SIGNING AND RETURNING THIS CARD, YOUR SHARES WILL BE VOTED BY THE TRUSTEE IN
THE SAME MANNER AND PROPORTION AS THOSE SHARES FOR WHICH THE TRUSTEE RECEIVES
PROPER AND TIMELY INSTRUCTIONS.
TO VOTE BY TELEPHONE, PLEASE SEE THE REVERSE SIDE OF THIS CARD. TO VOTE BY
MAIL, PLEASE SIGN AND DATE THIS CARD ON THE REVERSE SIDE, TEAR OFF AT THE
PERFORATION, AND MAIL PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY PHONE
QUICK - EASY - IMMEDIATE
IF YOU VOTED BY TELEPHONE DO NOT MAIL YOUR INSTRUCTION CARD
Note: Participants who received the 2001 Proxy Statement of Aetna Inc. over
the Internet and who would like a printed copy may call 1-800-237-4273.