SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Amendment No. 2
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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|_| Definitive Additional Materials Rule 14a-6(e)(2))
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Rule 14a-11(c) or Rule 14a-12
AETNA INC.
(Name of Registrant as Specified in Its Charter)
Providence Investors, LLC
(Name of Persons Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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PROXY STATEMENT
Dated April 5, 2002
of
PROVIDENCE INVESTORS, LLC
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IN OPPOSITION TO ONE MANAGEMENT NOMINEE TO THE BOARD OF DIRECTORS
OF
AETNA INC.
for use at the
ANNUAL MEETING OF STOCKHOLDERS OF
AETNA INC.
to be held
April 26, 2002
This Proxy Statement is being furnished to holders of common stock,
par value $.01 per share (the "Common Stock"), of Aetna Inc., a Pennsylvania
corporation (the "Company"), with principal executive offices at 151 Farmington
Avenue, Hartford, Connecticut, in connection with a proxy solicitation by
Providence Investors, LLC ("Providence"). Such proxies are to be used at the
annual meeting of stockholders of the Company to be held at the Company's
Headquarters in Hartford, Connecticut, on Friday, April 26, 2002, at 9:30 a.m.,
local time, and at any adjournment thereof (the "Annual Meeting"). The close of
business on February 22, 2002, has been fixed as the record date (the "Record
Date") for the determination of stockholders entitled to receive notice of and
to vote at the Annual Meeting. This Proxy Statement is first being furnished to
stockholders on or about April [ ], 2002.
PARTICIPANTS IN THE SOLICITATION
Providence and its affiliates in the aggregate beneficially own
16,800 shares of the issued and outstanding shares of Common Stock of the
Company. For all of the reasons as described in detail below, Providence is
soliciting proxies to elect Lawrence G. Schafran (the "Stockholder Nominee") to
the Company's Board of Directors, to serve as a director until his successor is
duly elected and qualified.
Providence Investors, LLC, a Delaware limited liability company, is
a New York domiciled investment company, of which Herbert A. Denton is a
managing member. Providence Investors, LLC is an affiliate of, and has the same
principal business address as, Providence Capital, Inc. Providence Capital,
Inc., a Delaware corporation, is a private investment firm and an independent
NASD registered broker-dealer based in New York, with a principal business
address of 730 Fifth Avenue, Suite 2102, New York, New York 10019. Herbert A.
Denton is the President and majority stockholder.
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Providence Capital, LLC, a Delaware limited liability company,
invests in publicly traded companies using applied corporate governance
strategies developed by Herbert A. Denton, the controlling stockholder.
The Stockholder Nominee is described in detail below. The
Stockholder Nominee is not a member of the present Board of Directors of the
Company. The Stockholder Nominee is a citizen of the United States.
Information relating to the number of shares of the Company's Common
Stock beneficially owned, directly or indirectly, by Providence and the
Stockholder Nominee, as of April 2, 2002 is set forth in Appendix A.
Information relating to all purchases and sales of shares of the
Company's Common Stock by Providence and the Stockholder Nominee during the past
two years is set forth in Appendix B.
CERTAIN BACKGROUND INFORMATION
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. As a result, each
shareholder of record of Former Aetna as of the close of business December 13,
2000 received approximately $35.33 in cash in exchange for each of their
existing Former Aetna shares and one share of common stock of the newly spun-off
health care company ("New Aetna").
Throughout the remainder of this document, when we refer to Former Aetna, we are
describing the Connecticut corporation as it existed prior to December 13, 2000.
The Company, or just "Aetna", or "New Aetna", refers to the Pennsylvania
corporation that currently trades on the NYSE under the ticker symbol AET.
WHY YOU SHOULD ELECT THE STOCKHOLDER NOMINEE
This proxy contest is about corporate governance. In the post-Enron era and as a
matter of principle, Providence hereby offers Aetna's shareholders the choice of
electing a shareholder-nominated director.
Here are Providence's reasons why:
o We believe that the Board has an unacceptable attitude toward
corporate governance that leaves it unfairly entrenched and
inadequately accountable to shareholders;
o We believe that the Board and management have failed to deliver
acceptable operating results; and
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o We believe that the Board has made several major decisions in the
last two years that, we believe, have decreased all shareholders'
wealth.
Providence believes that Aetna's corporate governance inappropriately entrenches
management, and inadequately provides for the Board's and management's
accountability to shareholders. In addition to fostering more accountability to
shareholders, we believe that good corporate governance ultimately leads to
better company operating results and stock performance.
We cite a recent study released in February 2002 entitled "Corporate Governance
and Equity Prices" authored by Paul A. Gompers, Harvard Business School, Joy L.
Ishii, Harvard University, and Andrew Metrick, from The Wharton School of the
University of Pennsylvania(1). The study examined corporate governance at
approximately 1,500 public companies (greater than 93% of the market
capitalization in all of the U.S. stock markets) in the period beginning
September 1990 - December 1999. The authors of the study created a Governance
Index that tracked 24 corporate governance provisions. The index was created by
adding one point for each governance provision that increased managerial power
versus shareholders (G-score), and was calculated for all 1,500 companies.
Companies with a G-score of less than or equal to 5 were placed in the
"Democracy Portfolio," which represents companies with the strongest shareholder
rights. Companies with a G-score of greater than or equal to 14 were included in
the "Dictatorship Portfolio," which represents companies with the weakest
shareholder rights. The study found that companies in the Democracy Portfolio
outperformed the Dictatorship Portfolio by over 9% per year during the 1990's.
The report demonstrated that "Dictatorship" companies "earned significantly
lower returns, were valued lower, had poorer operating performance, and engaged
in greater capital expenditure and takeover activity". We note that one caveat
presented with the study is that causality between governance and either firm
value or performance has not yet been established.
According to Professor Gompers, as of March 15, 2002, Aetna had a G-score of 14
which, if a similar sample were taken today, would place Aetna in the
Dictatorship Portfolio.
Since September 2000, Providence has encouraged Former Aetna's Board and, later,
Aetna's Board to modify its corporate governance to improve accountability.
Nevertheless, both Boards have rejected each and every one of Providence's
recommendations and further, have made a number of major decisions which
Providence believes to be questionable and not in the best interests of Aetna's
shareholders. Therefore, Providence has decided to offer Aetna's shareholders an
alternative shareholder-nominated director who supports management
accountability to shareholders.
Specifically, despite Providence's correspondence and discussion with management
and directors (including members of Aetna's Nominating and Corporate Governance
Committee), Former Aetna's Board and Aetna's Board have adopted and maintained a
corporate governance structure that, we believe, detracts from accountability to
shareholders. Various features include the following:
o Shareholder Rights Plan ("poison pill")
o Super-majority voting required to amend certain bylaws
o Classified Board of Directors (to be declassified in 2004)
o No ability for shareholders to call a special meeting
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(1) Dr. Gompers has given us permission to quote from this study in this proxy
statement. We note that Aetna Director Dr. Judith Rodin is President of the
University of Pennsylvania.
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o No ability for shareholders to act by written consent
o Pennsylvania incorporation
Aetna's filings state that the Company's Articles, Bylaws and the Rights
Agreement ("poison pill") contain certain provisions that could delay or make
more difficult the acquisition of Aetna by means of a tender offer, a proxy
contest or otherwise. These filings also state that the inability of Aetna's
shareholders to act by written consent, together with provisions prohibiting
shareholders from calling shareholder meetings, may have the effect of delaying
consideration of a shareholder proposal until the next annual meeting. These
filings also state that these provisions could prevent the holders of a majority
of the voting power of the voting shares from using the written consent
procedure to take shareholder action. Furthermore, these filings state that if
shareholders want to amend provisions relating to approval of business
combinations, the classified board of directors, and other transactions, the
affirmative vote of the holders of two-thirds of the outstanding voting power of
Aetna will be required. Finally, the Company states that if shareholders would
like to amend provisions relating to the calling of special meetings of
shareholders, and the advance notice provision for shareholder nominations and
shareholder proposals, it will require the approval of at least 80% of the
outstanding voting power of Aetna.
The Company says that its rationale for implementing this corporate governance
structure is to enable Aetna to develop its business in a manner that will
foster long-term growth without disruption caused by the threat of a takeover
not deemed by the Aetna Board to be in the best interests of Aetna and its
shareholders.
Ironically, we note that the last time there was a threat of a takeover, at a
79.5% premium to the last sale on February 14, 2000(2), Former Aetna's
shareholders were subsequently rewarded with $35.33 per share in cash plus stock
in the "New Aetna" that closed on April 1, 2002 at $38.66. Thus, shareholders
enjoyed a greater than 90% gain in the value of their Aetna shares-- from an
eight year low of $39 just prior to the takeover threat, to $35.33 in cash plus
$38.66 per share in the New Aetna, for a total equaling $73.99(3) per share
today.
Providence believes that the freedom the Aetna Board has sought from worrying
about a possible takeover threat and any ensuing disruption comes at too great a
cost to Aetna's shareholders. Providence believes that the Board should worry
if, because of the Company's performance, the stock price is so low that an
acquirer is willing to put its money on the line to buy the Company at a premium
price. We believe shareholders should be free to accept such a bid without the
artificial barricade of a "poison pill."
In our view, Aetna's corporate governance unreasonably and unjustifiably
entrenches management and provides an inadequate level of accountability on the
part of management and the Board to Aetna's shareholders, thus undermining
fundamental concepts of corporate democracy. Specifically:
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(2) Former Aetna closed at $39.00 on February 14, 2000. On February 24, 2000,
Former Aetna received a confidential letter from WellPoint Health Networks Inc.
and ING America Insurance Holdings, Inc. proposing a business combination with
Former Aetna for $70 per share (approximately $10.4 billion in stock and cash).
(3) $35.33 + $38.66 = $73.99
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o "Poison Pill"
We believe that shareholders, after taking into account management's
recommendation, should be entitled to decide what a fair price is
for their holdings. It is our view that the best defenses against an
unwanted takeover are superior operating results and a high stock
price. However, we believe that as a consequence of the "poison
pill", combined with Aetna's other anti-takeover devices, potential
acquiors of Aetna are effectively discouraged from taking their
offer directly to the shareholders. Furthermore, we believe that
"poison pills" may have the unintended consequence of discouraging
communication between two or more large shareholders due to their
concern of inadvertently triggering the "poison pill" (by arguably
constituting a "group" and thereby being required to file a Schedule
13D) which could allow the Board to effectively confiscate a portion
of their stock. We believe this may inhibit large shareholders from
communicating any of their shared interests or concerns to the Board
in a coordinated way. We note that the top five shareholders of
Aetna control approximately 30% of the shares, well over the 15%
trigger threshold of Aetna's "poison pill."
o Super-majority Voting
We believe that with regard to the shareholders' ability to amend
bylaws, a basic tenet of corporate democracy is that the majority
rules, not a super-majority vote.
o Classified Board
We believe that Aetna's classified board reduces the Board's
accountability to shareholders. Shareholders, in our view, ought to
have the right to hold the entire Board to account on an annual
basis. Although Aetna has committed to declassifying the Company's
Board in 2004, in the context of Aetna's multifaceted anti-takeover
defenses, we see no compelling reason why this is not done now.
o Special Meetings
We believe shareholders ought to have the ability to call a special
meeting if a minimum percentage, say 20%, wish to do so. We believe
that companies who do not allow for their shareholders to call a
special meeting insulate themselves from addressing critical issues
that shareholders may wish to raise between annual meetings.
o Shareholder Action by Written Consent
We believe that the owners of a majority of the issued and
outstanding shares ought to have the ability to act by written
consent. We believe that if a majority of shareholders desire a
certain action to be taken, no compelling purpose is served by
requiring the formality of holding a shareholder meeting.
o Pennsylvania Incorporation
We view Pennsylvania domiciled companies as among the least
favorable for recognizing shareholder rights. Aetna is incorporated
in Pennsylvania whereas Former Aetna was incorporated in
Connecticut.
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We believe this thicket of shareholder-unfriendly measures makes Aetna
excessively well-defended against a threat of a takeover not deemed by the Board
to be in the shareholders' best interests. Critically, we believe this
represents excess protection and comes at the expense of the Board's and
management's accountability to shareholders. We have attempted to convince
Former Aetna and Aetna to reform its corporate governance and become more
accountable to shareholders. Specifically, on September 25, 2000, after
reviewing New Aetna's Registration Statement (Form 10-12B filed on September 9,
2000), we wrote to then Former Aetna's Chairman, President and CEO, William H.
Donaldson(4), and urged him to address a number of corporate governance
mechanisms that we perceived as disenfranchising shareholders. These included:
o Shareholder Rights Plan ("Poison pill")
o No shareholder ability to act by written consent;
o No shareholder ability to call a special meeting, and;
o Certain corporate actions requiring a two-thirds or even an 80%
super-majority vote.
On October 18, 2000, the New Aetna filed an Amended 10-12B/A. We were surprised
to discover Aetna had not only failed to address any of our concerns, but added
a "Classified Board" structure for good measure. However, the Board has
committed to declassifying the Board at 2004 Annual Meeting and thereafter. Lest
anyone be tempted to argue that Former Aetna's shareholders voted affirmatively
in favor of this corporate governance structure without other mitigating
factors, we note that in order to approve the plan of restructuring and get the
$35.33 per share cash distribution(5), shareholders had to accept Aetna's new
governance structure. In other words, we believe Aetna's governance was "crammed
down."
More recently, on January 18, 2002, we wrote to Dr. John W. Rowe, Aetna's
Chairman of the Board and Chief Executive Officer:
"As previously communicated, I am writing to remind you that
Providence Capital is considering submitting to Aetna's shareholders
an alternative slate
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(4) Mr. Donaldson became Chairman, President and Chief Executive Officer of "New
Aetna" 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 December 13,
2000.
(5) Aetna reorganized by spinning-off its domestic healthcare business to its
shareholders (the "New Aetna"), and selling its financial services and
international businesses to ING Groep N.V. As a result, each shareholder of
record as of the close of business December 13, 2000 received approximately
$35.33 in exchange for each of their existing Former Aetna shares and one share
of common stock of the newly spun-off health care company (New Aetna).
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of director nominees to reconstitute Aetna's Board of Directors and
corporate governance practices. As you can imagine, the recent
events at Enron Corporation have inflamed the institutional investor
community with respect to the accountability of management. With
Enron's blood in their eyes, these institutions will demand more
independence on boards and fewer shareholder-unfriendly corporate
governance mechanisms including: poison pills, staggered boards,
super-majority voting and the inability for shareholders to call a
special meeting or act by written consent."
On February 6, 2002, at a meeting with Aetna's Nominating and Corporate
Governance Committee, Providence offered that if Aetna would remove just one of
its shareholder-unfriendly mechanisms, the Company's "poison pill", we would not
contest Aetna Inc.'s nominee directors(6). Finally, on March 27, 2002 we offered
to withdraw our slate if Aetna Inc. would put the issue of its poison pill up to
a binding shareholder's vote. Even this was promptly rejected by Aetna Inc. on
March 29, 2002.
The Board's refusal to accept our "pin-point" offer confirmed to us our opinion
regarding the necessity to nominate and elect an independent director not
nominated by the current Board or management, in order to improve Aetna's
corporate governance.
Why Aetna?
Why have we selected Aetna? First, as discussed earlier, Dr. Gompers' work would
place Aetna's corporate governance structure in the lowest decile for
shareholder rights among the 1,500 companies studied. Second, over the last two
years, Aetna's Board (and Former Aetna's Board) made several major decisions
that, we believe, have decreased all shareholders' wealth and reflect a pattern
of poor business judgments. Furthermore, we believe some of these decisions have
benefited Aetna's Board and management (and Former Aetna's Board and management)
to the detriment of shareholders and demonstrate the need for more
accountability. To wit:
1. Compensation: Mr. Donaldson's Stock Options, Salary & Bonus
On February 14, 2000, Former Aetna's stock price closed at $39.00--
an 8-year low and down from a recent high of $99.25 reached on May
10, 1999. Ten days later on February 24, 2000, Former Aetna received
a confidential letter from WellPoint Health Networks Inc. and ING
America Insurance Holdings, Inc. proposing a business combination
with Former Aetna for $70 per share in stock and cash. On February
25, 2000, Former Aetna appointed William H. Donaldson, a Director of
Former Aetna and its predecessors since 1977, as Chairman, President
and CEO to replace Richard L. Huber. On February 29, 2000, while the
WellPoint/ING offer had not been made public, and while the Former
Aetna's shares were trading, in Providence's view, at an unduly
depressed level, Former Aetna granted Mr. Donaldson a stock option
for 500,000 shares of Former Aetna common stock (closing price
February 29, 2000 was $41.125). The exercise price per share was
$41.125 for 300,000 shares, $55.00 for 100,000 shares and $65.00 for
100,000 shares. Mr. Donaldson was also granted 100,000 shares of
restricted Former Aetna common stock. When the $70 per share offer
became public the very next day on March 1, 2000, Former Aetna's
stock immediately jumped and climbed as high as
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(6) Mr. Herbert A. Denton and Providence's nominee, Mr. Lawrence G. Schafran,
met with Aetna Board Members William H. Donaldson, Gerald Greenwald, Barbara H.
Franklin, and Michael H. Jordan.
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$58.69 by March 10, 2000, leaving most of Mr. Donaldson's options
well in-the-money (to be exact, excluding time value, the 500,000
options alone were intrinsically worth a total of $5,638,500 as of
the close March 10, 2000). The 100,000 restricted shares were worth
an additional $5,869,000 for an aggregate value of $11,507,500 to
Mr. Donaldson.
On March 12, 2000, Former Aetna announced it had rejected the $70
offer of financial consideration from WellPoint and ING. Mr.
Donaldson, in a company press release on March 12, 2000, stated
that, "The financial consideration mentioned in the ING/WellPoint
letter, even if taken at face value, significantly understates the
value of our company and does not reflect the current value or
future potential of our core businesses." Further, in 2000, Mr.
Donaldson also earned a $1 million salary and $6 million bonus even
though Mr. Donaldson's tenure as CEO of Former Aetna lasted less
than eleven months (from February 25, 2000 until December 13, 2000).
Providence believes that if $70 was dismissed as too low a price
for the Aetna shares, perhaps the Board should have struck all of
Mr. Donaldson's options at no less than $70.
Mr. Donaldson's options and restricted stock vested on December 13,
2000, when the spin-off to New Aetna and the sale of the financial
services and international businesses to ING were closed. Mr.
Donaldson's tenure as Chairman of Aetna terminated on April 1, 2001.
In our view, the implementation of this compensation package by the
Board was highly questionable in light of:
o the grant of 300,000 Former Aetna options at an unduly
depressed strike price reflecting last sale of $41.125
when a premium offer at $70 had been received the day
before and had not been made public. Providence believes
the 300,000 options should have been struck at higher
prices, such as $70.
o In Providence's view the Board transferred wealth from
Former Aetna's shareholders to Mr. Donaldson under
disadvantageous circumstances to Former Aetna's
shareholders. Indeed, by granting other options to Mr.
Donaldson with substantially higher strike prices, the
Board, in Providence's opinion, implicitly recognized
this issue; and
o a situation wherein Mr. Donaldson found his replacement
as CEO of the Former Aetna within seven months of his
appointment. We believe that the size of the options
award and the $7 million in salary and bonus were not
commensurate with the service that was expected to be
performed.
Providence believes Aetna's Board did not exercise proper business
judgment with respect to this transfer of wealth from shareholders
to Mr. Donaldson.
2. Strategic Decision: Rejection of Premium Offer
The Board's decision to reject a premium offer of $70 per share for
the Former Aetna from WellPoint Health Networks Inc. and ING America
Insurance Holdings, Inc. was
8
subsequently followed by a different strategic plan(7) that, two
years later, has resulted in a total value of $73.99(8) to Aetna's
long-term shareholders. A portion of that $73.99 return consists of
New Aetna stock. Aetna continues to lose money with shrinking
revenues and, in Providence's opinion, with uncertain prospects of a
turnaround (see, for example, the headline, "Aetna Losses Mount As
CEO Seeks Right Turnaround Formula" - Bloomberg News February 21,
2002).
In contrast, we note that part of the consideration in the $70 offer
made by WellPoint Health Networks Inc. and ING America Insurance
Holdings, Inc. was to be paid in the form of WellPoint common stock.
Since the original offer (February 24, 2000), WellPoint's share
price has risen from the mid $60's(9) level to the split adjusted
$120 level today implying that had Aetna's Board accepted the offer,
without any negotiation for a better price, Providence believes that
Aetna's shareholders today might have had total value of
approximately $90 - $100 per share, with part of that value
reflected in a profitable and growing enterprise. Of course,
Providence notes that had the above mentioned transaction been
completed, there is no assurance that WellPoint's operating
performance or stock performance would have been similar.
Given WellPoint's demonstrated history of growth and profitability
in the health care arena versus Aetna's performance, what was the
Board thinking? Now, two years later, Aetna is still losing money.
Providence believes the Board of Former Aetna failed to understand
the severity of Aetna's healthcare business problems.
3. Leadership Decision
We believe the Former Aetna Board's decision to hire Dr. John W.
Rowe(10) as CEO of "New Aetna" in September 2000, a person with no
executive experience at a public company, was not a prudent exercise
of business judgment, and we said so when he was hired. As we stated
to Bloomberg News ("Aetna Health-Care Chief to Face Investor
Concerns") on September 6, 2000:
"It'll certainly be interesting to see if Mr. Rowe can elicit
the support of Wall Street, given his lack of experience in
running a public company -- especially one badly in need of a
turnaround in its bottom line and in its culture."
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(7) Aetna reorganized by spinning-off its domestic healthcare business to its
shareholders (the "New Aetna"), and selling its financial services and
international businesses to ING Groep N.V. As a result, each shareholder of
record as of the close of business December 13, 2000 received approximately
$35.33 in exchange for each of their existing shares and one share of common
stock of the newly spun-off health care company (New Aetna).
(8) Aetna's close April 1, 2002 was $38.66, plus the payment of $35.33 in cash
equals $73.99.
(9) WellPoint's stock closed at $67.50 as of February 29, 2000 before the public
announcement and $57.00 after the announcement on March 6, 2000.
(10) Dr. Rowe became President and Chief Executive Officer of the "New Aetna" on
September 15, 2000, when the Company was Former Aetna's health and related
benefits subsidiary, and continued in that role following the spin-off when "New
Aetna" became an independent public company. Dr. Rowe was also an executive
officer of Former Aetna from September 15, 2000 until December 13, 2000.
9
Providence believes Dr. Rowe's appointment is even more puzzling
when you consider that Aetna was, and still is, in need of a massive
financial turnaround.
Further adding to our concern, Aetna reported in its March 5, 2002
Proxy Statement that: "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;" however, as reported in the N.Y. Times on December
2, 2001:
"...the merged medical centers of Mount Sinai and New Your
University seem to share little else these days but $700
million in debt and lots of resentment...Though merged in
name, the two institutions, on Manhattan's East Side, have
already severed their boards, kept their schools and
departments apart and started separate advertising campaigns.
Some involved say that were it not for the debt linking the
two, the institutions would have already split...Last year,
N.Y.U. cleared $22.7 million in profit, while Mount Sinai had
operating losses of $26.4 million and has called in a
budget-slashing consultant that has staff members fearing
lay-offs."
Furthermore, within four months of Dr. Rowe leaving as CEO of the
merged entities, serious financial liquidity problems that,
Providence believes, had developed under Dr. Rowe's watch, became
acute. In a research report dated April 19, 2001, by Lebenthal
Municipal Research(11) stated:
"Moody's placed Mount Sinai-NYU Medical Center & Health System
Obligated Group on a watch list for a downgrade on April 6,
2001. The reason: the 2000 audit revealed cash balances to be
materially lower than levels anticipated at time of the 2000
bond closing."
"Moody's indicated that it [Mount Sinai-NYU Medical Center &
Health System Obligated Group] expected to have 120 days cash
on hand rather than the 60 days cash on hand per the audited
financial statements."
Providence believes that the apparent failure of the Mount Sinai and
NYU Medical Center merger provides Providence grounds for
significant concerns over the Board's selection to effect a
large-scale financial turnaround of Aetna. How could the Board
conclude that Dr. Rowe had the necessary qualifications and
experience to lead a public company through an operational and
financial turnaround? Again, Providence believes the Board
underestimated the seriousness of Aetna's healthcare problems and
chose a CEO that was unqualified for the task at hand.
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(11) We have not asked for, nor have we received, Lebenthal Municipal Research's
permission to utilize the referenced quotes.
10
4. Operating Results
According to the Company's 10-K405 filed February 25, 2002, "Loss
before income tax benefit and equity in earnings of affiliates, net"
totaled negative $299.3 million during fiscal 2001. Aetna has lost
money in each of the last four quarters. Although the Aetna
turnaround may still be in the works, Providence believes that Aetna
remains in intensive care.
In a Merrill Lynch research report(12) dated February 21, 2002,
analyst Roberta W. Goodman wrote that:
"...we view the sequential deterioration in results not to be
supportive of an imminent turnaround."
"Enrollment attrition was stunning (down 11% vs. prior year
and 348,000 sequentially)."
"...what we hear from the marketplace about Aetna's operating
and claims processing capabilities (that the company is in
"turmoil" at the regional level and that an above-industry
proportion of its claims are being paid late or incorrectly or
not at all) suggests to us that despite good intentions, it is
likely that the company really does not have a handle on the
medical cost experience for the book of business generally,
let alone segmented by retained vs. departing members."
"We would remind investors that the "plan" for 2002 is much
the same as that which failed to deliver during 2001... With
the massive enrollment churn we are seeing and in light of the
company's numerous strategic shifts over the last several
years, we think it unlikely that AET will be competitive any
time soon relative to other national or regional players."
However, in 2001, Aetna reported that Dr. Rowe received a $1 million
salary, $1 million bonus and $1.5 million in "other compensation."
Although we believe the jury is still out for Dr. Rowe's turnaround,
it will soon be time for the Board to make its judgment about Dr.
Rowe's suitability to lead Aetna. What will the Board be thinking
this time next year if Aetna continues to lose money?
5. Aetna's Stock Performance
During 2001, Aetna was included in the Council of Institutional
Investors' annual Focus List of underperforming companies. The Focus
List is derived annually using data form S&P's Compustat service.
Companies that were included in the 2001 Focus List, including
Aetna, had underperformed their respective broad market index
----------
(12) We have not asked for, nor have we received, Merrill Lynch's permission to
utilize the referenced quotes.
11
and their S&P industry peer group over the one-, three- and
five-year periods ending June 29, 2001.
The following is a chart comparing Aetna Inc.'s stock price with the Morgan
Stanley Healthcare Payor Index from the date of spin-off (December 13, 2000)
to April 1, 2002.
Percentage
Increase
During the
December 13, 2000 April 1, 2002 Indicated Period
----------------- ------------- ----------------
Aetna Inc. $34.125 $38.66 13.3%
Morgan Stanley Healthcare
Payor Index* $429.49 $512.94 19.4%
* The companies currently included in the Morgan Stanley Healthcare Payor Index
are: Aetna Inc., CIGNA Corporation, Coventry Health Care, Inc., First Health
Group Corp., Health Net, Inc., Humana Inc., MidAtlantic Medical Services, Inc.,
Oxford Health Plans, Inc., PacifiCare Health Systems, Inc., Trigon Healthcare,
Inc., UnitedHealth Group Incorporated and Wellpoint Health Networks, Inc.
So in conclusion, despite the distinguished backgrounds of Aetna's Board
members, Providence contends certain key decisions have cost Aetna's
shareholders dearly and, if the Board continues along unfettered by better
accountability to Aetna's shareholders, it is uncertain whether the Board, based
on its track record, will increase shareholders' wealth.
WHAT OUR NOMINEE EXPECTS TO DO
The Stockholder Nominee, Lawrence G. Schafran, is an individual of substantial
business experience and integrity. The Stockholder Nominee is wholly
independent of management and is committed to the maximization of shareholder
value through better corporate governance. The following description outlines
pertinent portions of Mr. Schafran's background: Mr. Schafran, as a
shareholder-nominated director of COMSAT Corporation, maximized shareholder
value through COMSAT's acquisition by Lockheed Martin Corporation. Currently,
Mr. Schafran, as Chairman, Interim CEO and President of Banyan Strategic Realty
Trust (NMS: BSRTS) is concluding its liquidation in order to maximize
shareholder value.
The Stockholder Nominee intends to immediately ask to have the Board conduct a
thorough review of the Company's corporate governance and will seek to improve
Aetna's corporate governance in order to hold management and the Board more
accountable to shareholders. He intends to begin by addressing, and seeking to
change or eliminate, the corporate governance features described above which we
believe to be contrary to the best interests of the Aetna Inc. shareholders.
If elected, the Stockholder Nominee is committed to acting in the best interests
of Aetna's stockholders and, subject to his fiduciary duty as a Director of
Aetna, intends to pursue diligently and promptly the actions described above. No
assurance can be given that he will be successful in these efforts or that, if
successful, Aetna's profitability will be restored. We believe that election of
the Stockholder Nominee is critical to stockholders interested in making Aetna
more accountable to its shareholders.
THE STOCKHOLDER NOMINEE AS A DIRECTOR
The Board of Directors of the Company currently is composed of twelve Directors.
The company announced in its Proxy Statement filed with the SEC on March 5, 2002
that one Director, William H. Donaldson, is retiring from the Board as of the
Annual Meeting because he has reached the mandatory retirement age. Under the
terms of Aetna's By-Laws, the Board has reduced the size of the Board to eleven
members effective immediately prior to the opening of the Annual Meeting. In the
future the Board may increase the size of the board and appoint new Directors.
12
The terms of office for the Directors elected at the 2002 Annual Meeting will
run until the Annual Meeting in 2004 and until their successors are duly elected
and qualified. The three Directors elected at the 2002 Annual Meeting, together
with the eight Directors whose terms continue beyond the 2002 Annual Meeting,
will comprise the Board. Aetna Inc. has stated that at and after its Annual
Meeting in 2004, shareholders will elect all Directors annually for a one-year
term.
Under Pennsylvania corporation law, the approval of any corporate action taken
at a shareholder meeting is based on the votes cast. "Votes cast" means votes
actually cast "for" or "against" a particular proposal, whether by proxy or in
person. Directors are elected by a plurality (i.e., the greatest number) of
votes cast. When you return the Stockholder Participants GREEN proxy card, you
are voting for the Stockholder Nominee. The Stockholder Nominee has consented in
writing to being named as a nominee for election as a director and, if elected,
has consented to serve as a director.
If you wish to vote for the Stockholder Nominee, you must submit the enclosed
GREEN proxy card and must NOT submit the Company's proxy card, even if you wish
to vote for any of the Company nominees. For additional information, see
"Eligible Shares and Vote Required" and "Voting and Proxy Procedures."
The following information concerning age, principal occupation, business
experience during the last five years and directorships of other publicly owned
companies has been furnished to Providence by the Stockholder Nominee, who has
expressed his willingness to serve on the Board of Directors of the Company.
13
Lawrence G. Schafran (age 63). Since 1984, Mr. Schafran has served
as the Managing General Partner of L. G. Schafran & Associates, a private
investment, advisory and development firm. Mr. Schafran is also Managing
Director and COO of CancerAdvisors, Inc., since 2001, a privately held provider
of comprehensive information to cancer patients and associated oncologists that
matches patients to clinical trials. Mr. Schafran also serves as Chairman,
Interim CEO and President of Banyan Strategic Realty Trust. Since 1996, Mr.
Schafran has also served as Chairman and Co-CEO of Delta-Omega Technologies,
Inc. a specialty chemical company and is a Director of PubliCard, Inc., Tarragon
Realty Investors, Inc., Vertex Interactive, Inc. and WorldSpace, Inc. Mr.
Schafran's principle business address is at Banyan Strategic Realty Trust, 2625
Butterfield Road, Oak Brook, IL 60512.
Except as set forth in this Proxy Statement or in the Appendices
attached hereto, none of the Stockholder Participants, the Stockholder Nominee,
nor any associate of any of the foregoing persons (i) owns beneficially,
directly or indirectly, or has the right to acquire, any securities of the
Company or any parent or subsidiary of the Company, (ii) owns any securities of
the Company of record but not beneficially, (iii) has purchased or sold any
securities of the Company within the past two years, (iv) has incurred
indebtedness for the purpose of acquiring or holding securities of the Company,
(v) is or has been a party to any contract, arrangement or understanding with
any person with respect to any securities of the Company within the past year,
(vi) has been indebted to the Company or any of its subsidiaries since the
beginning of the Company's last fiscal year or (vii) has any arrangement or
understanding with respect to future employment by the Company or with respect
to any future transactions to which the Company or any of its affiliates will or
may be a party. In addition, except as set forth in this Proxy Statement or in
the Appendices hereto, none of Stockholder Participants, the Stockholder
Nominee, nor any associate or immediate family member of any of the foregoing
persons has had or is to have a direct or indirect material interest in any
transaction with the Company since the beginning of the Company's last fiscal
year, or any proposed transaction, to which the Company or any of its affiliates
was or is a party.
None of the corporations or organizations in which the Stockholder
Nominee has conducted his principal occupation or employment is a parent,
subsidiary or other affiliate of the Company, and the Stockholder Nominee does
not hold any position or office with the Company. Nor does he have any family
relationship with any executive officer or director of the Company, or has he
been involved in any legal proceedings of the type required to be disclosed by
the rules governing this solicitation other than as described herein.
RATIFICATION OF APPOINTMENT OF AUDITORS
Providence has no objection to the ratification of the appointment
of KPMG LLP as the Company's independent auditors for the fiscal year ending
December 31, 2002.
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
Providence has no comment concerning the approval of the Employee
Stock Purchase Plan and will abstain.
14
SHAREHOLDER PROPOSAL TO IMPLEMENT CUMULATIVE VOTING IN THE
ELECTION OF DIRECTORS
Providence affirmatively supports the shareholder submitted proposal
for cumulative voting. Aetna's Board objects to cumulative voting because they
believe it "...is one of those issues that favors special interest groups."
Aetna's Board states that "cumulative voting would make it possible for such a
group to elect one or more Directors beholden to the group's narrow interests."
In our view, any shareholder gaining enough of the vote through
cumulative voting is entitled to Board representation and cannot so easily be
dismissed as being a "special interest." An investor, or a united group of
investors, with that much money invested in Aetna has a right to representation
at Board meetings alongside company-designated directors who will likely
have, in aggregate, far less capital at stake.
Furthermore, we believe that cumulative voting is another important corporate
governance factor that is directly related to company success(13).
SHAREHOLDER PROPOSAL RELATING TO
SHAREHOLDER RIGHTS PLANS
Providence affirmatively supports the shareholder submitted proposal
for shareholder rights plans. Providence believes that, at a minimum, before the
Company implements a shareholder rights (ie "Poison Pill") plan, it should seek
shareholder approval. See "Why You Should Elect the Stockholder Nominee" above.
YOUR VOTE IS IMPORTANT
To vote for the Stockholder Nominee, you must submit the enclosed
GREEN proxy card and must NOT submit the Company's proxy card, even if you wish
to vote for any of the Company nominees.
o If you believe Aetna is overly protected from the threat
of a possible takeover at the expense of accountability
to shareholders, vote the GREEN card for change.
o If you agree with the reasons for Providence's
solicitation set forth herein, and believe that the
election of the Stockholder Nominee to the Board of
Directors can make a difference, we urge you to vote for
the election of the Stockholder Nominee,
----------
(13) "Studies linking cumulative voting practices to company success date back
to 1984. A study produced that year by University of Utah professors Sanjai
Bhagat and James Brickley found that "cumulative voting can have a positive
effect on firm value" and, conversely, that efforts to restrict cumulative
voting rights-- and as such to inhibit non-management shareholders' activity--
were associated with negative stock price reactions. The study ("Cumulative
Voting: The Value of Minority Shareholder Voting Rights") was published in the
Journal of Law and Economics (Vol.27 October 1984), and summarized in the
Council of Institutional Investors' 1994 collection of studies, Does Ownership
Add Value?" IRRC Corporate Governance Service 2001 Background Report F:
Cumulative Voting, by Glenn Davis, Feb.1, 2001, page 11: Economic Impact of
Cumulative Voting.
15
no matter how many or how few shares you own, by
signing, dating and mailing the enclosed GREEN proxy
card.
o If you are concerned that Aetna's Board may be prone to
offering excessive compensation to Aetna's management,
vote the GREEN card for change.
o If you are concerned that Aetna's Board may be prone to
making an error of judgment in the future concerning
Aetna's leadership, vote the GREEN card for fresh
thinking.
o If, in the post-Enron environment, you wish to
signal Aetna specifically, and Corporate America
generally, to take their fiduciary duties to
shareholders more seriously, vote the GREEN card for
change.
Providence urges you NOT to sign any proxy card sent to you by the
Company. ONLY YOUR LATEST DATED PROXY WILL COUNT AT THE ANNUAL MEETING.
* IMPORTANT *
If your shares are held in the name of a brokerage firm, bank or
nominee, only they can vote such shares and only upon receipt of your specific
instructions. Accordingly, please contact the person responsible for your
account and give instructions for such shares to be voted.
If you have any questions or need assistance in voting your shares,
please call Providence's representative:
[Insert Proxy Solicitation Firm]
ELIGIBLE SHARES AND VOTE REQUIRED
Only holders of Common Stock of record on the Record Date will be
entitled to vote at the Annual Meeting. Holders of record of shares of Common
Stock on the Record Date are urged to submit a proxy even if such shares have
been sold after the Record Date. A majority of shares of Common Stock
outstanding as of the close of business on February 22, 2002 must be present in
person or by proxy for the Company to hold the Annual meeting and transact
business. This is referred to as a quorum. Both abstentions and broker non-votes
are counted as present for the purpose of determining a quorum. Each share of
Common Stock entitles its owner to one vote. For information concerning voting
procedures at the Annual Meeting, see "Voting and Proxy Procedures."
Each nominee for election as a director requires a plurality of the
votes cast in order to be elected. A plurality means that the nominees with the
largest number of votes are elected as directors up to the maximum number of
directors to be elected at the Annual Meeting. The affirmative vote of a
majority of shares entitled to vote and present in person or by proxy at the
Annual Meeting is required for approval of any other matters submitted to a vote
of the stockholders. In the election of directors, an abstention or broker
non-vote will have no effect on the outcome. In the case of any other matter,
abstention from voting will have the practical effect of voting against such
matter.
16
Broker non-votes will be included in determining the presence of a quorum at the
Annual Meeting but will have no effect on the outcome of any matters, other than
to reduce the number of "FOR" votes necessary to approve such matters.
SOLICITATION EXPENSES
Providence has retained [proxy solicitation firm] to assist in the
solicitation of proxies and for related services. Providence will pay [proxy
solicitation firm XXX] a fee of up to $_______ and has agreed to reimburse it
for its reasonable out-of-pocket expenses. XXX, Inc. ("XXX"), will use
approximately [ ] persons in its solicitation efforts. In addition to the use of
the mails, solicitations of proxies may be made by means of personal calls upon,
or telephonic communications to or with, stockholders or their personal
representatives by Providence, employees or members of Providence and by XXX.
Copies of Providence's soliciting materials will be furnished to banks,
brokerage houses, fiduciaries and other nominees for forwarding to beneficial
owners of shares and Providence will reimburse them for their reasonable
out-of-pocket expenses for forwarding such materials.
The entire expense of preparing, assembling, printing, and mailing
this Proxy Statement and related materials and the cost of soliciting proxies
will be borne by Providence. Although no precise estimate can be made at the
present time, Providence currently estimates that the total expenditures
relating to the proxy solicitation incurred by Providence will be approximately
$[ ] of which $[ ] has been incurred to date. If Providence's Nominees are
elected to the Board, Providence intends to seek reimbursement of the costs of
this solicitation from the Company.
VOTING SECURITIES OUTSTANDING;
INFORMATION ABOUT THE COMPANY
There were 144,908,566 shares of Common Stock reported outstanding
by the Company in its Schedule 14A Proxy Statement filed with the SEC on March
5, 2002. Each share of Common Stock entitles its owner to one vote.
Stockholders are referred to the Company's proxy statement
containing certain information regarding the Company's Common Stock, the
beneficial ownership of Company Common Stock held by Company directors,
nominees, management and 5% shareholders, other information concerning the
Company's management and the procedures for submitting proposals for
consideration at the next Annual Meeting of stockholders. Providence has no
independent knowledge as to, and assumes no responsibility for, the accuracy of
the Company's proxy statement.
VOTING AND PROXY PROCEDURES
For the proxy solicited hereby to be voted, the enclosed GREEN proxy
card must be signed, dated and returned to Providence, c/o XXX Inc., ADDRESS,
CITY, STATE ZIP CODE in the enclosed envelope in time to be voted at the Annual
Meeting. If you wish to vote for the Stockholder Nominee, you must submit the
enclosed GREEN proxy card and must NOT submit the Company's proxy card, even if
you wish to vote for any of the Company nominees. If you have already returned
the Company's proxy card to the Company, you have the right to revoke it
17
as to all matters covered thereby and may do so by subsequently signing, dating
and mailing the enclosed GREEN proxy card. ONLY YOUR LATEST DATED PROXY WILL
COUNT AT THE ANNUAL MEETING.
Execution of a GREEN proxy card will not affect your right to attend
the Annual Meeting and to vote in person. Any proxy may be revoked as to all
matters covered thereby at any time prior to the time a vote is taken by (i)
filing with the Secretary of the Company a later dated written revocation, (ii)
submitting a duly executed proxy bearing a later date to the Secretary of the
Company or (iii) attending and voting at the Annual Meeting in person.
Attendance at the Annual Meeting will not in and of itself constitute a
revocation.
Shares of Common Stock represented by a valid, unrevoked GREEN proxy
card will be voted as specified. You may vote FOR the election of the
Stockholder Nominee or withhold authority to vote for the election of the
Stockholder Nominee by marking the proper box on the GREEN proxy card. You may
also withhold your vote from the Stockholder Nominee by writing the name of such
nominee in the space provided on the GREEN proxy card. In addition, you may
withhold authority to vote for one or more additional Company nominees by
writing the name(s) of such Company nominee(s) in the space provided on the
GREEN proxy card. Stockholders are referred to the proxy statement distributed
by the Company for the names, background, qualifications and other information
concerning the Company nominees. If no specification is made, such shares will
be voted FOR the election of the Stockholder Nominee, FOR the election of Judith
Rodin and Joseph P. Newhouse (Ms. Rodin and Dr. Newhouse are Aetna Inc. nominee
directors), FOR the implementation of cumulative voting in the election of
directors, FOR the shareholder proposal relating to shareholders' rights plans,
if presented to the meeting, and will be voted FOR KPMG LLP, as auditors. Such
shares will abstain on the vote to approve the proposed Employee Stock Purchase
Plan.
Except as set forth in this Proxy Statement, Providence is not aware
of any other matter to be considered at the Annual Meeting. However, if
Providence learns of any other proposals made at a reasonable time before the
Annual Meeting, Providence will either supplement this Proxy Statement and
provide an opportunity to stockholders to vote by proxy directly on such matter
or will not exercise discretionary authority with respect thereto. If other
proposals are made thereafter, the person named as proxy on the enclosed GREEN
proxy card will vote proxies solicited hereby in his discretion.
If your shares are held in the name of a brokerage firm, bank or
nominee, only they can vote such shares and only upon receipt of your specific
instructions. Accordingly, please contact the person responsible for your
account and instruct that person to execute on your behalf the GREEN proxy card.
Only holders of record of Common Stock on the Record Date will be
entitled to vote at the Annual Meeting. If you are a Stockholder of record on
the Record Date, you will retain the voting rights in connection with the Annual
Meeting even if you sell such shares after the Record Date. Accordingly, it is
important that you vote the shares of Common Stock held by you on the Record
Date, or grant a proxy to vote such shares on the GREEN proxy card, even if you
sell such shares after such date.
18
Providence believes that it is in your best interest to elect the
Stockholder Nominee as a director at the Annual Meeting. PROVIDENCE STRONGLY
RECOMMENDS A VOTE FOR THE STOCKHOLDER NOMINEE.
April 5, 2002 PROVIDENCE INVESTORS, LLC
19
Appendix A
The table below sets forth the shares of Common Stock of the Company
beneficially owned, directly and indirectly, by each of the Shareholder
Participants and the Shareholder Nominee as of April 1, 2002. Their transactions
in the Company's stock during the past two years is set forth in Appendix B.
Amount and Nature
of Beneficial Percent of
Name Ownership Class
-------------------------------------------------------------------------------------
Providence Investors, LLC ................. 5,000 *
Providence Capital, LLC ................... 10,000 *
Chris C. Riedel ........................... 800 *
Lawrence G. Schafran** .................... 1,000 *
----------
* Less than one percent (1%).
** Lawrence G. Schafran beneficially owns 1,000 shares in a joint account
with his wife, Lynn H. Schafran. Lynn H. Schafran is an investor in
Providence Investors, LLC.
Appendix B
The following table sets forth information with respect to all purchases and
sales of shares of Common Stock of the Company by Stockholder Participants and
the Stockholder Nominee during the past two years:
Transactions in Common Stock by Providence Investors, LLC, of which Herbert A.
Denton is a managing member, are as follows. All such transactions comprise open
market purchases of Common Stock.
Purchase and Sales of Securities in the Past Two Years
Transactions by:
Providence Investors, LLC
--------------------------------------------------------------------------------
Date Purchase/Sale Quantity
---- ------------- --------
--------------------------------------------------------------------------------
02/23/00 P 2,000
--------------------------------------------------------------------------------
03/07/00 S 1,000
--------------------------------------------------------------------------------
03/08/00 S 1,000
--------------------------------------------------------------------------------
03/09/00 P 2,000
--------------------------------------------------------------------------------
03/13/00 P 1,000
--------------------------------------------------------------------------------
03/13/00 S 1,000
--------------------------------------------------------------------------------
03/27/00 P 2,000
--------------------------------------------------------------------------------
04/10/00 S 1,400
--------------------------------------------------------------------------------
04/13/00 S 2,500
--------------------------------------------------------------------------------
04/14/00 P 2,000
--------------------------------------------------------------------------------
04/24/00 S 2,000
--------------------------------------------------------------------------------
05/26/00 S 100
--------------------------------------------------------------------------------
06/26/00 P 1,000
--------------------------------------------------------------------------------
06/27/00 P 1,000
--------------------------------------------------------------------------------
06/28/00 S 5,000
--------------------------------------------------------------------------------
06/28/00 P 5,000
--------------------------------------------------------------------------------
06/30/00 S 1,000
--------------------------------------------------------------------------------
07/05/00 S 1,000
--------------------------------------------------------------------------------
07/17/00 P 500
--------------------------------------------------------------------------------
07/20/00 S 500
--------------------------------------------------------------------------------
12/27/01 P 1,000
--------------------------------------------------------------------------------
03/18/02 P 4,000
--------------------------------------------------------------------------------
Balance: 5,000
Transactions in Common Stock by US Value Investment Company plc, of which
Herbert A. Denton, a managing member of Providence Investors LLC, is also a
managing member, are as follows. All such transactions comprise open market
purchases of Common Stock.
--------------------------------------------------------------------------------
Date Purchase/Sale Quantity
---- ------------- --------
--------------------------------------------------------------------------------
02/23/00 P 3,000
--------------------------------------------------------------------------------
02/25/00 P 20,000
--------------------------------------------------------------------------------
03/06/00 S 15,000
--------------------------------------------------------------------------------
03/07/00 S 4,000
--------------------------------------------------------------------------------
03/08/00 S 3,000
--------------------------------------------------------------------------------
03/09/00 P 8,000
--------------------------------------------------------------------------------
03/13/00 S 4,000
--------------------------------------------------------------------------------
03/13/00 P 4,000
--------------------------------------------------------------------------------
03/27/00 P 4,000
--------------------------------------------------------------------------------
03/28/00 P 5,000
--------------------------------------------------------------------------------
03/2900 P 5,000
--------------------------------------------------------------------------------
04/10/00 S 8,000
--------------------------------------------------------------------------------
04/11/00 S 5,000
--------------------------------------------------------------------------------
04/13/00 S 5,000
--------------------------------------------------------------------------------
04/14/00 P 8,000
--------------------------------------------------------------------------------
04/24/00 S 8,000
--------------------------------------------------------------------------------
04/27/00 S 5,000
--------------------------------------------------------------------------------
05/26/00 S 400
--------------------------------------------------------------------------------
06/02/00 P 5,000
--------------------------------------------------------------------------------
06/06/00 S 5,000
--------------------------------------------------------------------------------
06/26/00 P 9,000
--------------------------------------------------------------------------------
06/27/00 P 4,000
--------------------------------------------------------------------------------
06/30/00 S 4,000
--------------------------------------------------------------------------------
07/05/00 S 9,000
--------------------------------------------------------------------------------
07/17/00 P 4,500
--------------------------------------------------------------------------------
07/18/00 P 10,000
--------------------------------------------------------------------------------
07/20/00 S 14,500
--------------------------------------------------------------------------------
Balance: 0
Transactions in Common Stock by Providence Capital, LLC, of which Herbert A.
Denton, a managing member of Providence Investors LLC, is also a managing
member, are as follows. All such transactions comprise open market purchases of
Common Stock.
--------------------------------------------------------------------------------
Date Purchase/Sale Quantity
---- ------------- --------
--------------------------------------------------------------------------------
03/18/02 P 5,000
--------------------------------------------------------------------------------
03/20/02 P 5,000
--------------------------------------------------------------------------------
Balance: 10,000
Transactions in Common Stock by Lawrence G. Schafran and his wife, Lynn H.
Schafran, are as follows. All such transactions comprise open market purchases
of Common Stock.
--------------------------------------------------------------------------------
Date Purchase/Sale Quantity
---- ------------- --------
--------------------------------------------------------------------------------
03/21/02 P 1,000
--------------------------------------------------------------------------------
Transactions in Common Stock by Chris C. Riedel are as follows. All such
transactions comprise open market purchases of Common Stock.
--------------------------------------------------------------------------------
Date Purchase/Sale Quantity
---- ------------- --------
--------------------------------------------------------------------------------
03/11/02 P 800
--------------------------------------------------------------------------------