EXHIBIT 4.2
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT (the
"Guarantee"), dated as of , 1994, is executed and
delivered by Aetna Life and Casualty Company, a Connecticut
insurance corporation ("Aetna") for the benefit of the
Holders (as defined below) from time to time of the
Preferred Securities (as defined below) of Aetna Capital
L.L.C., a Delaware limited liability company (the "Issuer").
WHEREAS, the Issuer intends to issue its common
limited liability company interests (the "Common
Securities") to and receive related capital contributions
from Aetna and Aetna Capital Holdings, Inc. (the "Common
Securities Payments") and to issue and sell from time to
time, in one or more series, preferred limited liability
company interests (the "Preferred Securities") with such
rights, preferences, privileges, limitations and
restrictions as are set forth in a written resolutions or
resolutions by the Managing Members (as defined below)
providing for the issue of such series;
WHEREAS, the Issuer will purchase the Debentures
(as defined below) issued pursuant to the Subordinated
Indenture (as defined below) with the proceeds from the
issuance and sale of the Preferred Securities and with the
proceeds from the issuance and sale of the Common Securities
Payments; and
WHEREAS, Aetna desires hereby to irrevocably and
unconditionally agree to the extent set forth herein to pay
to the Holders the Guarantee Payments (as defined below) and
to make certain other payments on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the purchase
by each Holder of the Preferred Securities, which purchase
Aetna hereby agrees shall benefit Aetna and which purchase
Aetna acknowledges will be made in reliance upon the
execution and delivery of this Guarantee, Aetna executes and
delivers this Guarantee for the benefit of the Holders.
ARTICLE I
As used in this Guarantee, the terms set forth
below shall have the following meanings:
"Debenture" shall mean the debentures issued by
Aetna to the Issuer pursuant to the Subordinated Indenture
that will evidence the loans to be made by the Issuer to
Aetna from time to time of the proceeds received by the
Issuer from the issuance and sale of the Preferred
Securities and the Common Securities Payments.
"Guarantee Payments" shall mean, with respect to
any series of Preferred Securities, the following payments,
without duplication, to the extent not paid by the Issuer:
(i) any accumulated and unpaid dividends which have been
theretofore declared on the Preferred Securities of such
series out of funds legally available therefor, (ii) the
redemption price (including all accumulated and unpaid
dividends) payable out of funds legally available therefor with
respect to any Preferred Securities of such series called
for redemption by the Issuer and (iii) upon the liquidation
of the Issuer, the lesser of (a) the Liquidation
Distribution (as defined below) with respect to such series
and (b) the amount of assets of the Issuer legally available
for distribution to Holders of Preferred Securities of such
series in liquidation.
"Holder" shall mean any member of the Issuer from
time to time holding any Preferred Securities of any series;
provided, however, that in determining whether the Holders
of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder,
"Holder" shall not include Aetna or any entity owned 50% or
more by Aetna, either directly or indirectly.
"Liquidation Distribution" shall mean, with
respect to any series of Preferred Securities, the aggregate
of the stated liquidation preference of such series of
Preferred Securities and all accumulated and unpaid
dividends (whether or not declared) with respect to such
series to the date of payment.
"L.L.C. Agreement" shall mean the Issuer's Limited
Liability Company Agreement dated as of March , 1994, as
amended from time to time.
"Managing Members" shall mean Aetna and Aetna
Capital Holdings, Inc., in their capacity as the members of
the Issuer that hold all of the Issuer's outstanding Common
Securities.
"Redemption Price" shall mean, with respect to any
series of Preferred Securities, the aggregate stated
liquidation preference of all Preferred Securities of such
series plus accumulated and unpaid dividends (whether or not
declared) with respect to such series to the date fixed for
redemption.
"Subordinated Indenture" shall mean the
subordinated indenture dated as of , 1994 between
Aetna and , as trustee.
ARTICLE II
Section 2.01. Aetna irrevocably and
unconditionally agrees, to the extent set forth herein, to pay in
full, to the Holders of each series of Preferred Securities
the Guarantee Payments with respect to such series of
Preferred Securities, as and when due (except to the extent
paid by the Issuer or paid by Aetna to any trustee appointed
by such Holders pursuant to Article VIII of the Issuer's
L.L.C. Agreement), regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert.
This Guarantee is continuing, irrevocable, unconditional and
absolute.
Section 2.02. Aetna hereby waives notice of
acceptance of this Guarantee and of any liability to which
it applies or may apply, presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
Section 2.03. The obligations, covenants,
agreements and duties of Aetna under this Guarantee shall in
no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the release or waiver, by operation of law or
otherwise, of the performance or observance by the
Issuer of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the
Issuer of all or any portion of the dividends,
redemption price, liquidation distributions or any
other sums payable under the terms of the Preferred
Securities or the extension of time for the performance
of any other obligation under, arising out of, or in
connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of
diligence on the part of the Holders to enforce, assert
or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency
in, any of the Preferred Securities; or
(f) the settlement or compromise of any
obligation guaranteed hereby or hereby incurred.
There shall be no obligation of the Holders to give notice
to, or obtain consent of, Aetna with respect to the
happening of any of the foregoing.
Section 2.04. This is a guarantee of payment and
not of collection. A Holder may enforce this Guarantee
directly against Aetna, and Aetna waives any right or remedy
to require that any action be brought against the Issuer or
any other person or entity before proceeding against Aetna.
Subject to Section 2.05 hereof, all waivers herein contained
shall be without prejudice to the Holders' right at the
Holders' option to proceed against the Issuer, whether by
separate action or by joinder.
Section 2.05. Aetna shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect
of any amounts paid to the Holders by Aetna under this
Guarantee and shall have the right to waive payment of any
amount of dividends in respect of which payment has been
made to the Holders by Aetna pursuant to Section 2.01
hereof; provided, however, that Aetna shall not (except to
the extent required by mandatory provisions of law) exercise
any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under
this Guarantee. If any amount shall be paid to Aetna in
violation of the preceding sentence, Aetna agrees to pay
over such amount to the Holders.
Section 2.06. Aetna acknowledges that its
obligations hereunder are independent of the obligations of
the Issuer with respect to the Preferred Securities and that
Aetna shall be liable as principal and sole debtor hereunder
to make Guarantee Payments pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (f), inclusive, of
Section 2.03 hereof.
ARTICLE III
Section 3.01. So long as any Preferred Securities
of any series remain outstanding, Aetna shall not declare or
pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital
stock or make any guarantee payments with respect to the
foregoing (other than (i) payments under this Guarantee,
(ii) acquisitions of shares of Aetna's common stock in
connection with the satisfaction by Aetna of its obligations
under any employee benefit plans and (iii) redemptions of
any share purchase rights issued by Aetna pursuant to
Aetna's Share Purchase Rights Plan adopted on October 27,
1989, as amended from time to time or the declaration of a
dividend of similar share purchase rights in the future), if
at such time Aetna shall be in default with respect to its
payment obligations hereunder or there shall have occurred
and be continuing an Event of Default under the Debentures.
Section 3.02. So long as any Preferred Securities
of any series remain outstanding, Aetna shall: (i) not cause
or permit any Common Securities to be transferred; (ii)
maintain direct or indirect 100% ownership of all
outstanding securities of the Issuer other than the
Preferred Securities of any series and any other securities
permitted to be issued by the Issuer that would not cause it
to become an "investment company" under the Investment
Company Act of 1940, as amended; (iii) cause at least 21% of
the total value of the Issuer and at least 21% of all
interests in the capital, income, gain, loss, deduction and
credit of the Issuer to be represented by Common Securities;
(iv) not voluntarily dissolve, wind up, liquidate or
terminate the Issuer or either of the Managing Members; (v)
cause Aetna and Aetna Capital Holdings, Inc. to remain the
Managing Members of the Issuer and timely perform all of
their respective duties as Managing Members (including the
duty to declare and pay dividends on the Preferred
Securities); and (vi) use reasonable efforts to cause the
Issuer to remain a limited liability company and otherwise
continue to be treated as a partnership for United States
federal income tax purposes.
Section 3.03. The Guarantee will constitute an
unsecured obligation of Aetna and will rank (i) subordinate
and junior in right of payment to all other liabilities of
Aetna, (ii) pari passu with the most senior preferred stock
now or hereafter issued by Aetna and with any guarantee now
or hereafter entered into by Aetna in respect of any
preferred or preference stock of any affiliate of Aetna and
(iii) senior to Aetna's common stock.
ARTICLE IV
This Guarantee shall terminate and be of no
further force and effect as to any series of Preferred
Securities upon full payment of the Redemption Price of such
series, and shall terminate completely upon full payment of
the amounts payable to Holders upon liquidation of the
Issuer; provided, however, that this Guarantee shall
continue to be effective or shall be reinstated, as the case
may be, if at any time any Holder must restore payment of
any sums paid under the Preferred Securities of such series
or under this Guarantee for any reason whatsoever. Aetna
agrees to indemnify each Holder and hold it harmless against
any loss it may suffer in such circumstances.
ARTICLE V
Section 5.01. All guarantees and agreements
contained in this Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of Aetna
and shall inure to the benefit of the Holders. Aetna shall
not assign its obligations hereunder without the prior
approval of Holders of not less than a majority in
liquidation preference of all Preferred Securities of all
series then outstanding voting as a single class.
Section 5.02. Except with respect to any changes
which do not adversely affect the rights of Holders (in
which cases no vote will be required), this Guarantee may
only be amended by instrument in writing signed by Aetna
with the prior approval of the Holders of not less than a
majority in stated liquidation preference of all Preferred
Securities of all series then outstanding voting as a single
class. Such approval shall be obtained in the manner set
forth in Article VIII of the L.L.C. Agreement.
Section 5.03. Any notice, request or other
communication required or permitted to be given hereunder to
Aetna shall be given in writing by delivering the same
against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to Aetna, as follows
(and if so given, shall be deemed given when mailed or upon
receipt of an answer-back, if sent by telex), to wit:
Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile No.:
Attention:
Any notice, request or other communication
required or permitted to be given hereunder to the Holders
shall be given by Aetna in the same manner as notices sent
by the Issuer to the Holders.
Section 5.04. The masculine and neuter genders
used herein shall include the masculine, feminine and neuter
genders.
Section 5.05. This Guarantee is solely for the
benefit of the Holders and is not separately transferable
from the Preferred Securities.
Section 5.06. THIS GUARANTEE SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
THIS GUARANTEE is executed as of the day and year
first above written.
Aetna Life and Casualty
Company
By _____________________
Name:
Title: