<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 19, 1996
___________________
Aetna Inc.
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut
_______________________________________________________________________
(State or other jurisdiction of incorporation)
1-11913 02-0488491
______________________________________________________________________
(Commission File Number) (I.R.S. Employer
Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
_______________________________________________________________________
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (860) 273-0123
__________________
Not Applicable
_______________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
TABLE OF CONTENTS
_________________
Page
____
Item 2. Acquisition or Disposition of Assets. 3
Item 7(a). Financial Statements. 4
Item 7(b). Pro Forma Financial Information. 6
Item 7(c). Exhibits. 14
Signatures 15
<PAGE> 3
Item 2. Acquisition or Disposition of Assets.
On July 19, 1996, Aetna Services, Inc. ("Aetna") (formerly Aetna Life and
Casualty Company) and U.S. Healthcare, Inc. ("U.S. Healthcare")
respectively merged (respectively, the "Aetna Sub Merger" and the "U.S.
Healthcare Sub Merger", and collectively, the "Mergers") with separate
subsidiaries of a new holding company, Aetna Inc. ("Parent") and both
Aetna and U.S. Healthcare became wholly-owned subsidiaries of Parent.
The Mergers were effected pursuant to a definitive agreement, dated as of
March 30, 1996, as amended by Amendment No. 1 thereto dated as of May 30,
1996 (as so amended, the "Merger Agreement") among Aetna, U.S.
Healthcare, Parent and such subsidiaries.
In the Mergers, (i) each share of common stock, par value $0.005 per
share, of U.S. Healthcare ("USH Common Stock") and each share of Class B
Stock, par value $0.005 per share, of U.S. Healthcare ("USH Class B
Stock") outstanding as of the effective time of the Mergers (other than
shares held by U.S. Healthcare as treasury stock, certain shares held by
Aetna or its subsidiaries and shares for which dissenting shareholders'
rights are being properly exercised and perfected) was converted into the
right to receive 0.2246 shares of common stock, par value $0.01 per
share, of Parent, together with 0.2246 Parent Rights (as such term is
defined in the Merger Agreement) (collectively, the "Parent Common
Stock"); the right to receive 0.0749 shares of 6.25% Class C Voting
Preferred Stock, par value $0.01 per share, of Parent ("mandatorily
convertible preferred stock"); and the right to receive in cash without
interest an amount equal to $34.20 (collectively, the "U.S. Healthcare
Merger Consideration") and (ii) each share of Aetna common stock, without
par value ("Aetna Common Stock"), outstanding as of the effective time of
the Mergers (other than shares held by Aetna as treasury stock, shares
held by U.S. Healthcare or its subsidiaries and shares for which
objecting shareholders' rights are being properly exercised and
perfected) was converted into one share of Parent Common Stock.
Fractional shares of Parent Common Stock and mandatorily convertible
preferred stock will not be issued in connection with the Mergers. Any
holder of USH Common Stock and USH Class B Stock otherwise entitled to a
fractional share of Parent Common Stock or mandatorily convertible
preferred stock will receive a cash payment representing such holder's
proportionate interest in the net proceeds from the sale on behalf of all
holders of the aggregate fractional shares of Parent Common Stock and
mandatorily convertible preferred stock which would otherwise have been
issued. The Parent Common Stock is traded on the New York Stock
Exchange, under the symbol "AET" and the Parent mandatorily convertible
preferred stock is traded on the New York Stock Exchange under the symbol
"AET Pr C".
The terms of the Merger Agreement, including the consideration to be
received by Aetna and U.S. Healthcare shareholders, were determined
pursuant to arms-length negotiations between the parties.
The aggregate $5.3 billion cash consideration paid to U.S. Healthcare
shareholders as a result of the Mergers was financed with $3.9 billion
from the net proceeds received from the sale of Aetna's property-casualty
operations and funds made available from the issuance of $1.4 billion of
commercial paper by Aetna.
The business of Parent initially consists of the businesses conducted by
Aetna and U.S. Healthcare and their respective subsidiaries immediately
prior to the consummation of the Mergers. In this regard, Parent intends
to continue to devote the assets associated with these businesses to
generally the same purposes as these assets were employed prior to the
consummation of the Mergers.
The Mergers were approved by the stockholders of Aetna and
U.S. Healthcare at meetings held on July 18, 1996.
<PAGE> 4
Item 7(a). Financial Statements.
1. Consolidated financial statements for Aetna Services, Inc.
and Subsidiaries.
a. Unaudited condensed consolidated financial statements for
the six-month periods ended June 30, 1996 and 1995,
incorporated herein by reference to Aetna Services, Inc.'s
Quarterly Report on Form 10-Q filed on July 26, 1996.
b. Audited consolidated financial statements for each of the
years in the three-year period ended December 31, 1995,
incorporated herein by reference to Aetna Services, Inc.'s
(formerly named Aetna Life and Casualty Company) Annual
Report on Form 10-K filed on February 26, 1996.
2. Consolidated financial statements for U.S. Healthcare and
Subsidiaries
a. Unaudited condensed consolidated financial statements for
the quarters and three-month periods ended March 31,
1996 and 1995, incorporated herein by reference to
U.S. Healthcare's Quarterly Report on Form 10-Q filed on
May 15, 1996.
b. Audited consolidated financial statements for the each of
the years in the three-year period ended December 31, 1995,
incorporated herein by reference to U.S. Healthcare's
Annual Report on Form 10-K filed on March 30, 1996 (as
amended by Amendments filed on Form 10K/A on April 30, 1996
and June 12, 1996).
3. The following is Aetna Inc. and Subsidiaries' unaudited
consolidated balance sheet and related notes as of
June 30, 1996:
AETNA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
Assets:
Cash $ 2,000
_______
Total assets $ 2,000
_______
_______
Stockholders' equity:
Common stock, (par value $1.00 per share; 20,000 shares authorized;
2,000 shares issued and 1,000 shares outstanding) $ 2,000
Additional paid-in capital 1,000
Treasury stock, at cost (1,000 shares) (1,000)
_______
Total stockholders' equity $ 2,000
_______
_______
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheet.
<PAGE> 5
AETNA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
1. Background of Organization:
Aetna Inc. was incorporated under the Stock Corporation Act of the
state of Connecticut on March 25, 1996 for the purpose of
effectuating the combination of Aetna Services, Inc. - (formerly
Aetna Life and Casualty Company) ("Aetna") and U.S. Healthcare, Inc.
("U.S. Healthcare") in accordance with the terms of the Agreement and
Plan of Merger dated as of March 30, 1996 (the "Merger Agreement").
Aetna Inc. is equally owned by Aetna and U.S. Healthcare. Since its
formation, Aetna Inc. has organized two wholly-owned subsidiaries in
accordance with the Merger Agreement and has not conducted business
or activity other than in connection with the Merger Agreement
(related expenses are the responsibility of Aetna and U.S.
Healthcare). Aetna Inc. has no contingent liabilities.
2. Stockholders' Equity:
The initial authorized capital stock of Aetna Inc. consists of
20,000 shares of Common Stock, par value $1.00 per share. Two
thousand shares have been issued, 1,000 shares are held in treasury
and 1,000 shares are outstanding.
3. Subsequent Event - Merger with U.S. Healthcare:
Aetna's merger transaction with U.S. Healthcare was consummated on
July 19, 1996. As a result of the merger, Aetna and U.S. Healthcare
are each direct, wholly-owned subsidiaries of Aetna Inc. Pursuant to
the merger, each outstanding share of Aetna's common stock became a
share of common stock of Aetna Inc. and each outstanding share of
U.S. Healthcare common stock and Class B Stock became a right to
receive $34.20 in cash, 0.2246 shares of Aetna Inc. common stock and
0.0749 shares of Aetna Inc. 6.25% Class C Voting Preferred Stock
("mandatorily convertible preferred stock"). As a result,
approximately 35 million shares of Aetna Inc. common stock and
12 million shares of Aetna Inc. mandatorily convertible preferred
stock were issued to U.S. Healthcare shareholders. Aetna Inc.
common stock and mandatorily convertible preferred stock are traded
on the New York Stock Exchange. As a result of the merger, Aetna
Inc. will have stockholders' equity of approximately $10.9 billion.
The aggregate $5.3 billion cash consideration paid to U.S. Healthcare
shareholders as a result of the merger was financed with $3.9 billion
from the net proceeds received from the sale of Aetna's property-
casualty operations and funds made available from the issuance of
$1.4 billion of commercial paper by Aetna.
<PAGE> 6
Item 7(b). Pro Forma Financial Information.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
income of Parent for the six months ended June 30, 1996 and the twelve
months ended December 31, 1995 present results for Parent as if each of
the following had occurred as of January 1, 1996 and January 1, 1995,
respectively: (i) the consummation of the sale by Aetna of its property-
casualty operations to an affiliate of Travelers (the "Property-Casualty
Sale") and (ii) the consummation of the Mergers (including associated
borrowings and related transactions). The accompanying unaudited pro
forma condensed consolidated balance sheet for Parent as of June 30, 1996
gives effect to the Mergers (including associated borrowings and related
transactions) as if they had occurred as of June 30, 1996.
The U.S. Healthcare Sub Merger was accounted for under the purchase
method of accounting. Accordingly, the amount of the consideration paid
in the U.S. Healthcare Sub Merger will be allocated to assets acquired
and liabilities assumed based on their estimated fair values. The excess
of such consideration over the estimated fair value of such assets and
liabilities has been preliminarily allocated to certain identifiable
intangible assets and goodwill. The purchase price allocation may be
adjusted upon completion of the final valuations of U.S. Healthcare's
assets and liabilities and the effect of any such adjustment could be
significant. The Aetna Sub Merger was treated as a reorganization with
no change in the recorded amount of Aetna's assets and liabilities. The
pro forma condensed consolidated financial statements do not give effect
to any synergies which may be realized as a result of the Mergers.
Additionally, except as indicated in the notes thereto, the pro forma
condensed consolidated financial statements do not reflect any
nonrecurring/unusual restructuring charges that may be incurred as a
result of the integration of Aetna's and U.S. Healthcare's combined
health operations (the "Combined Health Operations"). The amount of such
charges related to the integration of the Combined Health Operations
cannot be reasonably determined at this time.
The unaudited pro forma condensed consolidated financial statements are
provided for informational purposes only and do not purport to represent
what Parent's financial position or results of operations actually would
have been had the Property-Casualty Sale and the Mergers in fact occurred
on the dates indicated, or to project Parent's financial position or
results of operations for any future date or period.
The unaudited pro forma condensed consolidated financial statements are
based on the historical consolidated financial statements of Aetna and
U.S. Healthcare and should be read in conjunction with such historical
financial statements, and the notes thereto, which are included in the
annual reports on Form 10-K of Aetna and Form 10-K, as amended, of U.S.
Healthcare for the year ended December 31, 1995 and the quarterly reports
on Form 10-Q of Aetna for the quarter ended June 30, 1996 and U.S.
Healthcare for the quarter ended March 31, 1996 (see also information
regarding factors affecting forward looking information included in such
reports).
<PAGE> 7
Aetna Inc.
Unaudited Pro Forma Condensed Consolidated Statement Of Income
For the Six Months Ended June 30, 1996
(in millions, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Aetna Pro Forma Aetna U.S.
Services, Property- Services, U.S. Healthcare Aetna
Inc. Casualty Sale Inc. Healthcare Merger Inc.(m)
Historical Adjustments(d) As Adjusted Historical Adjustments(e) As Adjusted
__________ ______________ ___________ ___________ ______________ ___________
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Premiums $ 3,554.7 $ - $ 3,554.7 $ 2,095.5 $ - $ 5,650.2
Net investment income, including
net realized capital gains 1,846.5 - (a) 1,846.5 41.8 (46.7)(f) 1,841.6
Fees and other income 1,066.3 - 1,066.3 48.5 - 1,114.8
_____________________________________________________________________________
Total revenue 6,467.5 - 6,467.5 2,185.8 (46.7) 8,606.6
_______________________________________________________________________________________________________________
Benefits and Expenses:
Current and future benefits 4,296.3 - 4,296.3 1,614.9 - 5,911.2
Operating expenses 1,591.2 - 1,591.2 271.0 4.3 (g) 1,897.1
58.0 (h)
(27.4)(l)
Amortization of deferred policy
acquisition costs 75.1 - 75.1 - - 75.1
Amortization of identifiable
intangible assets and goodwill - - - - 178.6 (j) 178.6
Reduction of loss on discontinued
products (170.0) - (170.0) - - (170.0)
Facilities and severance charges 392.7 - 392.7 - - (k) 392.7
_____________________________________________________________________________
Total benefits and expenses 6,185.3 - 6,185.3 1,885.9 213.5 8,284.7
_______________________________________________________________________________________________________________
Income from continuing operations
before income taxes (benefits)
and preferred stock dividends 282.2 - 282.2 299.9 (260.2) 321.9
Income taxes (benefits) 92.4 - (a) 92.4 120.3 (16.7)(f) 144.7
(1.6)(g)
(20.3)(h)
2.5 (l)
(31.9)(j)
_____________________________________________________________________________
Income from continuing operations 189.8 - 189.8 179.6 (192.2) 177.2
Dividends on mandatorily
convertible preferred stock - - - - (28.1)(i) (28.1)
______________________________________________________________________________
Income from continuing operations
attributable to common ownership $ 189.8 $ - $ 189.8 $ 179.6 $ (220.3) $ 149.1
_____________________________________________________________________________
_____________________________________________________________________________
Results Per Common Share:
Primary:
Income from continuing
operations $ 1.63 $ 1.63 $ 0.98
__________ __________ __________
__________ __________ __________
Weighted average common shares
and share equivalents
outstanding 116,297,376 116,297,376 151,765,356*
___________ ___________ ___________
* Pro forma weighted average common shares outstanding reflects Aetna's second quarter 1996
weighted average common shares outstanding and the issuance by Parent of 35,467,980
shares of Parent Common Stock in connection with the U.S. Healthcare Sub Merger, as
though all such shares were issued and outstanding on January 1, 1996. No conversion of
mandatorily convertible preferred stock issued in connection with the Mergers is assumed.
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
<PAGE> 8
Aetna Inc.
Unaudited Pro Forma Condensed Consolidated Statement Of Income
For the Year Ended December 31, 1995
(in millions, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Aetna Pro Forma Aetna U.S.
Services, Property- Services, U.S. Healthcare Aetna
Inc. Casualty Sale Inc. Healthcare Merger Inc.(m)
Historical Adjustments(d) As Adjusted Historical Adjustments(e) As Adjusted
__________ ______________ ___________ ___________ ______________ ___________
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Premiums $ 7,431.4 $ - $ 7,431.4 $ 3,462.0 $ - $ 10,893.4
Net investment income, including
net realized capital gains 3,622.3 - (a) 3,622.3 91.9 - (f) 3,714.2
Fees and other income 1,924.3 - 1,924.3 55.8 - 1,980.1
______________________________________________________________________________
Total revenue 12,978.0 - 12,978.0 3,609.7 - 16,587.7
_______________________________________________________________________________________________________________
Benefits and Expenses:
Current and future benefits 9,027.2 - 9,027.2 2,577.8 - 11,605.0
Operating expenses 3,087.5 17.0 (b) 3,104.5 412.9 18.2 (g) 3,651.6
116.0 (h)
Amortization of deferred policy
acquisition costs 137.1 - 137.1 - - 137.1
Amortization of identifiable
intangible assets and goodwill - - - - 358.4 (j) 358.4
Restructuring costs - - (c) - - - (k) -
______________________________________________________________________________
Total benefits and expenses 12,251.8 17.0 12,268.8 2,990.7 492.6 15,752.1
_______________________________________________________________________________________________________________
Income from continuing operations
before income taxes (benefits)
and preferred stock dividends 726.2 (17.0) 709.2 619.0 (492.6) 835.6
Income taxes (benefits) 252.3 (5.9)(b) 246.4 238.3 (7.0)(g) 373.2
(40.6)(h)
(63.9)(j)
______________________________________________________________________________
Income from continuing operations 473.9 (11.1) 462.8 380.7 (381.1) 462.4
Dividends on mandatorily
convertible preferred stock - - - - (56.2)(i) (56.2)
_______________________________________________________________________________
Income from continuing operations
attributable to common
ownership $ 473.9 $ (11.1) $ 462.8 $ 380.7 $ (437.3) $ 406.2
______________________________________________________________________________
______________________________________________________________________________
Results Per Common Share:
Primary:
Income from continuing
operations $ 4.16 $ 4.06 $ 2.71
__________ __________ __________
__________ __________ __________
Weighted average common shares
and share equivalents
outstanding 113,897,633 113,897,633 149,365,613*
___________ ___________ ___________
* Pro forma weighted average common shares outstanding reflects Aetna's 1995 weighted
average common shares outstanding and the issuance by Parent of 35,467,980 common shares
in connection with the U.S. Healthcare Sub Merger, as though all such shares were issued
and outstanding on January 1, 1995. No conversion of the Parent Mandatorily Convertible
Preferred Stock is assumed.
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
<PAGE> 9
Aetna Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996
(in millions)
<TABLE>
<CAPTION>
Pro Forma
Aetna U.S.
Services, U.S. Healthcare Aetna
Inc. Healthcare Merger Inc.(m)
Historical Historical Adjustments As Adjusted
__________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Assets:
Investments:
Marketable securities $ 32,782.0 $ 966.4 $ - $ 33,748.4
Other investments 10,062.9 - - 10,062.9
_________________________________________________
Total investments 42,844.9 966.4 - 43,811.3
___________________________________________________________________________________
Cash and cash equivalents 4,253.5 418.4 (3,900.0)(o) 771.9
Goodwill - - 6,934.6 (q) 6,934.6
Identifiable intangible assets - - 1,525.0 (q) 1,525.0
Deferred federal and foreign
income taxes 538.9 - 26.2 (p) 570.4
- 5.3 (n)
Separate accounts assets 32,281.0 - - 32,281.0
Other assets 4,799.1 462.3 (69.8)(p) 5,191.6
_________________________________________________
Total assets $ 84,717.4 $ 1,847.1 $ 4,521.3 $ 91,085.8
___________________________________________________________________________________
___________________________________________________________________________________
Liabilities:
Future policy benefits $ 18,322.2 $ - $ - $ 18,322.2
Other policy liabilities 1,657.8 629.2 - 2,287.0
Policyholders' funds left
with the company 20,711.4 - - 20,711.4
_________________________________________________
Total insurance liabilities 40,691.4 629.2 - 41,320.6
Debt 1,020.8 - 1,450.0 (o) 2,470.8
Accounts payable and
other liabilities 3,169.5 115.4 533.8 (q) 3,858.7
40.0 (n)
Separate Accounts liabilities 32,218.4 - - 32,218.4
_________________________________________________
Total liabilities 77,100.1 744.6 2,023.8 79,868.5
___________________________________________________________________________________
Minority interest in preferred
securities of subsidiary 275.0 - - 275.0
___________________________________________________________________________________
Shareholders' Equity:
Common Capital Stock 1,499.6 0.7 2,700.0 (o) 4,187.5
(0.7)(q)
(12.1)(m)
Class B Stock - 0.1 (0.1)(q) -
Mandatorily convertible
preferred stock - - 900.0 (o) 900.0
Additional paid-in capital - 232.6 (232.6)(q) -
Net unrealized capital gains
(losses) 103.2 (17.5) 17.5 (q) 103.2
Retained earnings 5,751.6 1,217.2 (1,217.2)(q) 5,751.6
Treasury stock, at cost (12.1) (311.8) 311.8 (q) -
12.1 (m)
Unearned portion of restricted
common stock - (18.8) 18.8 (q) -
_________________________________________________
Total shareholders' equity 7,342.3 1,102.5 2,497.5 10,942.3
___________________________________________________________________________________
Total liabilities,
minority interest and
shareholders' equity $ 84,717.4 $ 1,847.1 $ 4,521.3 $ 91,085.8
___________________________________________________________________________________
___________________________________________________________________________________
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
<PAGE> 10
Aetna Inc.
Notes To Unaudited Pro Forma
Condensed Consolidated Financial Statements
Pro Forma Adjustments Related to the Property-Casualty Sale:
____________________________________________________________
a. No adjustment has been made to reflect interest income for the
period January 1, 1996 through April 2, 1996 at 4.93% and a full
year of interest income at 5.49% in 1995 (average 3 month Treasury
bill rates for the periods) on net proceeds from the Property-
Casualty Sale (after giving effect to the payment of transaction
costs and liabilities associated with the sale) of approximately
$3.9 billion. The amount of such adjustments (after-tax) would
approximate $31.3 million for the for the period January 1, 1996
through April 2, 1996 and $139.2 million for the twelve months
ended December 31, 1995.
b. Pro forma adjustment to reflect a full year of interest expense (an
additional 11.2 months) at 6.01% in 1995 (average commercial paper
rate for the period), and related income tax benefits, on the
capital contribution by Aetna of $303 million to the property-
casualty operations. Such capital contribution was actually made on
December 6, 1995.
c. No adjustment has been made to give effect to the restructuring
charges related to the Property-Casualty Sale, including CityPlace
and other facility and severance charges. Such charges
($362.7 million pre-tax, $235 million after tax) were recorded by
Aetna in the second quarter of 1996.
d. No adjustment has been made to reflect the historical results of
Aetna's discontinued property-casualty operations. Such results
were $182.2 million (or $1.57 per Common Share) of net income for
the period January 1, 1996 through April 2, 1996 and $222.2 million
of a net loss (or $1.95 per Common Share) for the twelve months
ended December 31, 1995.
Pro Forma Adjustments Related to the Mergers:
_____________________________________________
e. No adjustment has been made to give effect to any synergies which
may be realized as a result of the Mergers.
f. Pro forma adjustment to reflect a reduction in interest income for
the period April 2, 1996 through June 30, 1996 on that portion of
the cash consideration paid at closing of the U.S. Healthcare Sub
Merger from the Property-Casualty Sale proceeds. No such adjustment
has been made for the period January 1, 1996 through April 2, 1996
and 1995 since such interest income is not reflected in the
pro forma financial statements (see adjustment a).
g. Pro forma adjustment to conform the U.S. Healthcare accounting
policies with those of Aetna related to expensing rather than
capitalizing costs primarily relating to purchased and internally
developed software, printed and other promotional items, and the
related income tax effect (see adjustment p).
h. Pro forma adjustment to reflect assumed interest expense of 8.0% on
$1.45 billion of assumed bank debt or commercial paper anticipated
to be borrowed to fund a portion of the cash consideration to be
paid at closing of the U.S. Healthcare Sub Merger (see
adjustment o), and the related income tax effect.
<PAGE> 11
Aetna Inc.
Notes To Unaudited Pro Forma
Condensed Consolidated Financial Statements
Pro Forma Adjustments Related to the Mergers (Continued):
_________________________________________________________
i. Pro forma adjustment to reflect the dividends on the $900 million of
the mandatorily convertible preferred stock issued in connection
with the Mergers (see adjustment o). In determining pro forma
earnings per share, the mandatorily convertible preferred stock is
not considered a common stock equivalent and is antidilutive.
Pursuant to the terms of the mandatorily convertible preferred
stock, the dividend rate on the mandatorily convertible preferred
stock was subject to a one-time increase if the dividend rate on the
Parent Common Stock initially after the Merger Date is greater than
$0.83 per share. No such increase has been reflected in this pro
forma adjustment because the common stock dividend was initially set
at $.80 per share.
j. Pro forma adjustment to reflect the amortization of the
approximately $8.0 billion excess of the purchase price over the
estimated fair value of the net assets acquired using a range of
estimated useful lives for identifiable intangible assets of 5 to
25 years and a 40 year useful life for goodwill (37 year weighted
average life), and the related income tax effect on intangibles
other than goodwill.
k. No adjustment has been made to give effect to any non-
recurring/unusual restructuring charges that may be incurred as a
result of the integration of the Combined Health Operations. The
amount of such charges cannot be reasonably determined at this time.
Also, no adjustment has been made to give effect to any nonrecurring
charges that may be incurred as a result of an Agreement with the
Principal Shareholder of U.S. Healthcare (the "Agreement with
Principal Shareholder") and any employment agreements with U.S.
Healthcare executives (the "Employment Agreements")(see
adjustment n).
l. Pro forma adjustment to remove the effect of merger related costs
incurred by U.S. Healthcare in the first six months of 1996 and the
related income tax effect.
m. Reflects the conversion of Aetna common stock into Parent common
stock (including the cancellation of shares held in treasury).
<PAGE> 12
Aetna Inc.
Notes To Unaudited Pro Forma
Condensed Consolidated Financial Statements
Pro Forma Adjustments Related to the Mergers:
_____________________________________________
n. Pro forma adjustment to reflect estimated liabilities assumed by
Aetna, and the related tax effects, as a result of the Agreement
with Principal Shareholder and Employment Agreements.
<TABLE>
(in millions)
____________________________________________________________________
<S> <C>
Establishment of Principal Shareholder and
Employment Agreement liabilities $ 40.0
Less: related tax benefits (5.3)
_________
$ 34.7
_________
_________
</TABLE>
o. Pro forma adjustment to reflect payment and financing of the
U.S. Healthcare Merger Consideration and transaction costs paid at
closing (based on price of Aetna Common Stock of 76 1/8 at the date
the merger was announced and transaction costs of $50 million).
<TABLE>
(in millions)
____________________________________________________________________
<S> <C>
Cash $ 3,900.0
Borrowings from banks or commercial paper 1,450.0
Issuance of Parent Common Stock 2,700.0
Issuance of Parent Mandatorily Convertible
Preferred Stock 900.0
_________
$ 8,950.0
_________
_________
</TABLE>
p. Pro forma adjustment to conform the U.S. Healthcare accounting
policies with those of Aetna related to expensing rather than
capitalizing certain assets, to reflect an airplane transferred to
the principal shareholder of U.S. Healthcare, to write-off certain
assets, and to reflect the related deferred tax effect. Adjustment
reflects a change in accounting principle which would be appropriate
for U.S. Healthcare as a separate company and does not reflect a
change in the estimated future benefits of the assets. Such assets,
and the related deferred taxes, consisted of the following:
<TABLE>
(in millions)
____________________________________________________________________
<S> <C>
Conforming Accounting Policies:
Computer software $ 30.6
Printed and other promotional items 9.1
Airplane 19.1
Write-off of Assets:
Organization costs and goodwill 6.6
Licenses 1.6
Other 2.8
_________
69.8
Less: related tax effect (26.2)
_________
$ 43.6
_________
_________
</TABLE>
<PAGE> 13
Aetna Inc.
Notes To Unaudited Pro Forma
Condensed Consolidated Financial Statements
Pro Forma Adjustments Related to the Mergers (Continued):
_________________________________________________________
q. Pro forma adjustment to reflect the excess of the purchase price
over net assets acquired resulting from the U.S. Healthcare Sub
Merger, and the related deferred tax effect. The purchase price
allocation is based on current available information and may be
adjusted upon the completion of the final valuations of
U.S. Healthcare's assets and liabilities. Although such adjustment
could be material, based on current information it is not expected
to be material.
<TABLE>
(in millions)
____________________________________________________________________
<S> <C>
Purchase price $ 8,950.0
Less: U.S. Healthcare's shareholders' equity as follows:
Common stock .7
Class B stock .1
Additional paid-in capital 232.6
Net unrealized capital losses (17.5)
Retained earnings 1,217.2
Treasury stock, at cost (311.8)
Unearned portion of restricted common stock (18.8)
_________
7,847.5
Plus: the effect of adjustment p above 43.6
the effect of adjustment n above 34.7
_________
Purchase price in excess of the estimated fair value
of net assets acquired $ 7,925.8*
_________
_________
* Allocated as follows:
Identifiable Intangibles:
Customer lists $ 800.0
Provider networks 600.0
Software/Workforce 100.0
Convenant not to compete 25.0
_________
1,525.0
Less: related tax effect (533.8)
_________
991.2
Goodwill 6,934.6
_________
$ 7,925.8
_________
_________
</TABLE>
<PAGE> 14
Item 7(c). Exhibits.
Exhibit 2.1 Agreement and Plan of Merger, dated as of
March 30, 1996, among Aetna Life and
Casualty Company, U.S. Healthcare, Inc.,
Aetna Inc. (formerly known as
Butterfly, Inc.), Antelope Sub, Inc. and
New Merger Corporation (U.S. Healthcare,
Inc. Form 8-K, filed April 2, 1996
Exhibit 99.1)
Exhibit 2.2 Amendment No. 1, dated as of May 30, 1996,
Agreement and Plan of Merger, dated as of
March 30, 1996, among Aetna Life and
Casualty Company, U.S. Healthcare, Inc.,
Aetna Inc. (formerly known as Aetna Inc.
(formerly known as Butterfly, Inc.),
Antelope Sub, Inc. and New Merger
Corporation (Aetna Inc. Form S-4, filed
June 12, 1996 Exhibit 2.2)
Exhibit 4.1 Designations, Rights and Preferences of
6.25% Class C Voting Preferred Stock
Exhibit 4.2 Aetna Inc. Rights Agreement
Exhibit 15.1 Letter of KPMG Peat Marwick LLP re:
Unaudited Interim Financial Information
Exhibit 23.1 Consent of KPMG Peat Marwick LLP re:
Aetna Services, Inc. (formerly Aetna Life
and Casualty Company)
Exhibit 23.2 Consent of Ernst & Young LLP
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
Aetna Inc.
____________________________
(Registrant)
Date July 26, 1996 By /s/ Robert J. Price
____________________________
(Signature)
Robert J. Price
Vice President and
Corporate Controller
(Chief Accounting Officer)
<PAGE> 1
Provisions Applicable to the
15,000,000 Authorized Shares of
Class B Voting Preferred Stock
The 15,000,000 shares of authorized Class B Voting Preferred Stock,
$.01 par value per share, of the Company shall constitute a
single class with the following terms, limitations and relative
rights and preferences:
1. Dividends. The holders of any series of the Class B
Voting Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, preferential dividends at
such rates and payable on such dividend payment dates in each year
as shall be established for such series, such dividends to be
payable to holders of the Class B Voting Preferred Stock of record
on such dates as may be fixed by said Board, but not more than 70
days before each dividend payment date; provided, however, that
dividends shall not be declared or paid on any Class B Voting
Preferred Stock for any dividend period unless dividends have been
or are contemporaneously declared or paid to the same pro rata
extent on the outstanding preferred stock of all series of all
classes ranking on a parity with the Class B Voting Preferred
Stock as to payment of dividends for all dividend periods
terminating on the same or an earlier date.
Dividends on each share of any series of the Class B
Voting Preferred Stock shall accrue and be cumulative, if so
provided for in such series, from the date of issue thereof or
from such other date as may be provided for in such series.
Whenever dividends payable on the Class B Voting
Preferred Stock as provided herein are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Class B Voting Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(a) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock;
(b) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Class B Voting Preferred Stock except dividends paid
ratably on the Class B Voting Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled; or
(c) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for
<PAGE> 2
shares of any stock of the Company ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the
Class B Voting Preferred Stock.
2. Liquidation. The holders of shares of any series of
the Class B Voting Preferred Stock shall receive upon any
voluntary or involuntary liquidation, dissolution or winding up of
the Company the respective amounts established for such series.
If the net assets of the Company shall be insufficient to pay said
amounts in full together with the aggregate liquidation preference
for the outstanding shares of preferred stock of all other classes
ranking on a parity with the Class B Voting Preferred Stock as to
payments upon liquidation, then the entire net assets of the
Company shall be distributed among the holders of preferred stock
of all such classes, who shall receive a common percentage of the
full respective preferential amounts. Neither the consolidation
nor the merger of the Company with or into another corporation or
corporations, nor the sale or transfer by the Company of all or
any part of its assets, shall be deemed a liquidation, dissolution
or winding up of the Company.
3. Redemption and Purchase. Subject to any restriction
contained in the terms of any particular series of the Class B
Voting Preferred Stock, all or any part of any series of the Class
B Voting Preferred Stock at any time outstanding may be called for
redemption at any time at the applicable redemption price provided
for in such series and in the manner herein below provided. All
or any part of any series of the Class B Voting Preferred Stock
may be called for redemption in accordance with the terms of such
series without calling any part or all of any other series of the
Class B Voting Preferred Stock. If less than all of any such
series of the Class B Voting Preferred Stock is so called, the
shares of such series of the Class B Voting Preferred Stock to be
called shall be selected by lot or pro rata or by any other means
the Board of Directors deems equitable, all as determined by the
Board of Directors.
Except for a mandatory redemption provided for in any
series of the Class B Voting Preferred Stock, (i) no call for
redemption of less than all of the Class B Voting Preferred Stock
outstanding shall be made without paying or setting aside for
payment an amount equal to the cumulative dividends accrued and
unpaid to the last preceding dividend date on all of the Class B
Voting Preferred Stock then outstanding and not called and (ii) no
redemption of less than all of the Class B Voting Preferred Stock
outstanding shall be made without paying or setting aside for
payment an amount equal to the cumulative dividends accrued and
unpaid to the dividend date that coincides with or last precedes
such redemption date on all the Class B Voting Preferred Stock
then outstanding and not called.
Except as otherwise provided in any series of the
Class B Voting Preferred Stock, notice of each such call,
specifying the shares called for redemption, the redemption date
and the place where the redemption price of the stock so called is
payable, and, if any series of such stock is convertible, the date
upon which the conversion rights of the shares of such series
being redeemed will expire, shall be mailed by or on behalf of the
Company not less than 30 days before the redemption date or the
date upon
<PAGE> 3
which conversion rights of such shares will expire when
called for redemption, whichever is earlier, to each holder of
stock so called at such holder's address as it appears upon the
books of the Company.
If notice of such call shall have been duly given as
aforesaid and if, on or before the redemption date designated in
such notice, the funds necessary for the redemption shall have
been set aside so as to be and continue to be available therefor,
then notwithstanding that any certificate of the Class B Voting
Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the dividends thereon shall cease to
accrue from and after the date of redemption so designated, and
all rights with respect to the shares of the Class B Voting
Preferred Stock so called for redemption shall forthwith after
such redemption date cease and terminate, except only the right of
the holders thereof to receive the redemption price of such shares
without interest.
The Company may, however, at any time prior to the
redemption date specified in the notice of redemption deposit in
trust, for the account of the holders of the shares of the Class B
Voting Preferred Stock to be redeemed, with a bank or trust
company in good standing named in the notice of redemption, all
funds necessary for the redemption, and deliver in writing
irrevocable instructions and authority directing such bank or
trust company on behalf of and at the expense of the Company to
cause notice of such redemption to be duly mailed as provided
above promptly after receipt of such irrevocable instructions and
authority and to pay the redemption price to the holders of the
shares of the Class B Voting Preferred Stock to be redeemed, and
thereupon, notwithstanding that any certificate for the shares of
the Class B Voting Preferred Stock so called for redemption shall
not have been surrendered for cancellation, all shares of the
Class B Voting Preferred Stock with respect to which the deposit
shall have been made shall no longer be deemed outstanding and all
rights with respect to such shares shall cease and terminate,
except only the right of the holders thereof to receive from such
bank or trust company the redemption price of such shares without
interest, and with respect to any series of such stock entitled to
conversion rights, to exercise such conversion rights. Any moneys
so deposited for the redemption of shares of the Class B Voting
Preferred Stock which shall be converted prior to the redemption
date shall be repaid to the Company immediately following such
conversion. Any amount earned on funds so deposited shall be paid
to the Company from time to time.
Any funds so set aside or deposited, as the case may
be, and unclaimed at the end of six years from such redemption
date shall be released and repaid to the Company upon its request
after which the holders of the shares so called for redemption
shall look only to the Company for the payment thereof without
interest.
4. Conversion. Shares of any series of the Class B
Voting Preferred Stock may be convertible into or exchangeable for
Common Stock or other securities or assets of the Company or any
other issuer to the extent, but only to the extent, if any, as may
be provided for in such series.
<PAGE> 4
5. Voting Rights. Subject to the provision for
adjustment hereinafter set forth, each share of Class B Voting
Preferred Stock shall entitle the holder thereof to 100 votes on
all matters submitted to a vote of the shareholders of the
Company. In the event the Company shall at any time after July
19, 1996 (a) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (b) split up or
divide the outstanding shares of Common Stock, (c) combine the
outstanding shares of Common Stock into a smaller number of
shares, or (d) issue any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock are then
issued or outstanding, the number of votes per share to which each
holder of shares of Class B Voting Preferred Stock would be
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
Except as otherwise provided herein or by law, the
holders of shares of Class B Voting Preferred Stock and the
holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of shareholders of the Company.
Except as set forth herein, or as required by law,
holders of Class B Voting Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.
The Certificate of Incorporation shall not be amended
in any manner which would materially alter or change the powers,
preferences or special rights of the Class B Voting Preferred
Stock so as to affect them adversely without the affirmative vote
of the holders of at least a majority of the outstanding shares of
Class B Voting Preferred Stock, voting separately as a class.
6. Consolidation, Merger, Etc. (a) In case the Company
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Class B Voting
Preferred Stock shall at the same time be similarly exchanged for
or changed into an amount per share, subject to the provision for
adjustment set forth in subsection (b) of this Section 6, equal to
100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or
exchanged.
(b) In the event the Company shall at any time after
July 19, 1996 (i) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (ii) split up or
divide the outstanding shares of Common Stock, (iii)
<PAGE> 5
combine the outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue any shares of its capital stock in
a reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock are then
issued or outstanding, the amount per share to which each holder
of shares of Class B Voting Preferred Stock would be entitled
immediately prior to such event under subsection (a) of this
Section 6 shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
7. Transfer Agent. The Company shall always have at
least one transfer agent for the Class B Voting Preferred Stock,
which may be the Company or a bank or trust company in good
standing.
Provisions Applicable to the
Class B Voting Preferred Stock, Series A
There is hereby established a series of the Company's Class B
Voting Preferred Stock, par value $.01 per share, designated and
hereinafter referred to as "Class B Voting Preferred Stock, Series
A," the authorized number of shares of which series shall be
5,000,000 and the terms of which series shall be as follows:
1. Dividends. (a) The holders of shares of Class B
Voting Preferred Stock, Series A shall be entitled to receive
cumulative quarterly dividends payable in cash (or in kind to the
extent provided below) on the fifteenth day of March, June,
September and December in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance
of a share of Class B Voting Preferred Stock, Series A (the "First
Quarterly Dividend Payment Date"), in an amount per share (rounded
to the nearest cent), subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock
on or since the immediately preceding Quarterly Dividend
Declaration Date, as defined below, or, with respect to the first
Quarterly Dividend Declaration Date, since the first issuance of
any share of Class B Voting Preferred Stock, Series A. In the
event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Declaration Date and the next subsequent Quarterly Dividend
Declaration Date, the holders of shares of Class B Voting
Preferred Stock, Series A shall be entitled to receive a dividend
of $0.01 per share on the next subsequent Quarterly Dividend
Payment Date. The Company shall declare a dividend on the Class B
Voting Preferred Stock, Series A on the fifth day of March, June,
September and December of
<PAGE> 6
each year (each such date being referred to herein as a "Quarterly
Dividend Declaration Date"), commencing on the first Quarterly
Dividend Declaration Date after the first issuance of a share of
Class B Voting Preferred Stock, Series A. In the event the
Company shall at any time after July 19, 1996 (i) declare a
dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) split up or divide the outstanding
shares of Common Stock, (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of the
outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation),
then, in each such case, and regardless of whether any shares of
Class B Voting Preferred Stock, Series A are then issued or
outstanding, the amount per share to which each holder of shares
of Class B Voting Preferred Stock, Series A would be entitled
immediately prior to such event under the first sentence of this
Section 1(a) shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Dividends shall begin to accrue and be
cumulative on outstanding shares of Class B Voting Preferred
Stock, Series A from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares: (i) unless the date
of issue of such shares is prior to the record date for the First
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of the first issuance
of a share of Class B Voting Preferred Stock, Series A; or (ii)
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Class B Voting Preferred Stock, Series A entitled to
receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Class B Voting Preferred Stock,
Series A in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding. The board of Directors may fix a record date
for the determination of holders of shares of Class B Voting
Preferred Stock, Series A entitled to receive payment of a
dividend or distribution declared thereon, which record date shall
be not more than 70 calendar days prior to the date fixed for the
payment thereof.
2. Redemption. The shares of Class B Voting Preferred
Stock, Series A shall not be redeemable.
3. Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, no
distribution or payment shall be made (a) to the holders of Common
Stock or any other shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock, Series A, unless prior thereto,
the holders of shares of Class B Voting Preferred Stock, Series A
<PAGE> 7
shall have received an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times
the aggregate amount to be distributed per share to holders of
Common Stock, plus an amount equal to all accrued and unpaid
dividends and distributions thereon, whether or not declared, to
the date of such payment, or (b) to the holders of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Class B Voting Preferred
Stock, Series A, except distributions made ratably on the Class B
Voting Preferred Stock, Series A and all other such parity stock
in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time after July
19, 1996 (a) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (b) split up or
divide the outstanding shares of Common Stock, (c) combine the
outstanding shares of Common Stock into a smaller number of
shares, or (d) issue any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock, Series A are
then issued or outstanding, the aggregate amount per share to
which each holder of shares of Class B Voting Preferred Stock,
Series A would be entitled immediately prior to such event under
the provision in clause (a) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
4. No Conversion Rights. Holders of shares of Class B
Voting Preferred Stock, Series A shall have no right to convert
such shares into or exchange them for shares of Common Stock, or
other securities or assets of the Company or any other issuer.
5. Reacquired Shares. Any shares of Class B Voting
Preferred Stock, Series A purchased or otherwise acquired by the
Company in any manner whatsoever shall not be cancelled but shall
be held as treasury shares until retired, cancelled or reissued by
action of the Board of Directors.
Provisions Applicable to the 15,000,000
Authorized Shares of 6.25% Class C Voting Preferred Stock
1. Designation and Amount. The designation of the series
of Class C Voting Preferred Stock created by this Article 1 shall
be "6.25% Class C Voting Preferred Stock" (the "PACS"). The
authorized number of shares constituting the PACS shall be
15,000,000 and the PACS shall have the following terms,
limitations and relative rights and preferences.
<PAGE> 8
2. Dividends. (a) The holders of outstanding shares of
PACS shall be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of funds legally available
therefor, cumulative preferential dividends from July 19, 1996, at
the rate per share of $4.7578 per annum, in cash payable quarterly
in equal amounts (other than with respect to the initial dividend
period) on May 15th, August 15th, November 15th, and February 15th
of each year (each such date being hereinafter referred to as a
"Dividend Payment Date"), or, if any Dividend Payment Date is not
a business day, then the Dividend Payment Date shall be the next
succeeding business day; provided, however, that with respect to
________ _______
any dividend period during which a redemption occurs, the Company
may, at its option, declare accrued dividends to, and pay such
dividends on, the redemption date, in which case such dividends
would be payable on the redemption date in cash to the holders of
the shares of PACS as of the record date for such dividend payment
and such accrued dividends would not be included in the
calculation of the related Call Price (as hereinafter defined).
Each dividend on the shares of PACS shall be payable to holders of
record as they appear on the stock register of the Corporation on
such record date, not less than 10 nor more than 70 days preceding
the payment dates thereof, as shall be fixed by the Board of
Directors of the Company. The first dividend payment shall be for
the period from July 19, 1996 to August 15, 1996 and the first
dividend will be payable on August 15, 1996. Dividends (or
amounts equal to accrued and unpaid dividends) payable on shares
of PACS for any period less than a full quarterly dividend period
will be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in any period less
than one month.
Dividends on the shares of PACS will accrue on a daily
basis beginning on the date immediately following a Dividend
Payment Date (except that, with respect to the initial Dividend
Payment Date, dividends on the shares of PACS will accrue
beginning on July 19, 1996) whether or not there are funds legally
available for the payment of such dividends and whether or not
such dividends are declared. Accumulated unpaid dividends shall
not bear interest. Dividends will cease to accrue in respect of
shares of PACS on the Mandatory Conversion Date (as hereinafter
defined) or on the date of their earlier conversion or redemption.
(b) So long as any shares of PACS are outstanding,
no dividends or other distributions (other than dividends payable
in Junior Securities (as defined below) or warrants, rights or
options exercisable for or convertible into Junior Securities,
together with cash in lieu of fractional shares of Junior
Securities or fractional interests in any such warrants, rights or
options), and no redemption, purchase or other acquisition for
value (other than redemptions, purchases or acquisitions payable
in Junior Securities or warrants, rights or options exercisable
for or convertible into Junior Securities, together with cash in
lieu of fractional shares of Junior Securities or fractional
interests in any such warrants, rights or options), shall be paid
or made, as the case may be, with respect to, nor may any funds be
set aside or made available for any sinking fund for the purchase
or redemption of, (a) the Common Stock, $.01 par value per share,
of the Company ("Common Stock") or any other class or series of
the Company's capital stock ranking junior to the PACS with
respect to dividends or liquidation preferences (such capital
<PAGE> 9
stock, including the Common Stock, collectively "Junior
Securities") or (b) Parity Preferred Stock (as defined below)
until cumulative dividends on the PACS and Parity Preferred Stock
in the full amounts owing for all dividend periods ending, and all
amounts payable upon redemption or conversion of PACS and Parity
Preferred Stock, on or prior to the date on which the proposed
dividend or distribution is paid, or the proposed redemption,
purchase or other acquisition is effected, have been, in the case
of dividends, declared and, in all cases, paid or set apart for
payment.
(c) If any dividends are not paid or set apart in
full, as aforesaid, with respect to shares of PACS and any Parity
Preferred Stock, all dividends declared with respect to shares of
PACS and any Parity Preferred Stock shall be declared pro rata
based on the number of shares so that the amount of dividends
declared per share on shares of PACS and such Parity Preferred
Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on shares of PACS and such Parity
Preferred Stock bear to each other. Holders of the shares of PACS
shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends as
provided in Section (2) (a).
(d) Subject to the foregoing provisions of this
Section (2), the Board of Directors may declare and the Company
may pay or set apart for payment dividends and other distributions
on any of the Junior Securities and Parity Preferred Stock and may
redeem, purchase or otherwise acquire any Junior Securities and
Parity Preferred Stock, in either case from time to time, and the
holders of the shares of PACS shall not be entitled to share
therein.
(e) Any dividend payment made on shares of PACS
shall first be credited against the earliest accrued but unpaid
dividend due with respect to shares of PACS.
(f) All dividends paid with respect to shares of
PACS pursuant to this Section (2) shall be paid pro rata to the
holders entitled thereto.
3. Redemption and Conversion. (a) Mandatory Conversion.
On July 19, 2000 (the "Mandatory Conversion Date"), subject to (x)
the right of the Company to redeem the shares of PACS on or after
July 19, 1999 (the "Initial Redemption Date") and prior to the
Mandatory Conversion Date, as described below, and (y) the
conversion of the shares of PACS at the option of the holder at
any time prior to the Mandatory Conversion Date, as described
below, each outstanding share of PACS shall convert automatically
(the "Mandatory Conversion") into
(i) shares of Common Stock at the Common
Equivalent Rate (as hereinafter defined) in effect
on the Mandatory Conversion Date; and
<PAGE> 10
(ii) the right to receive an amount in cash equal to
all accrued and unpaid dividends on such share of
PACS (the "Accrued Dividend Amount") (other than
previously declared dividends payable to a
different holder of record on a prior date) to the
Mandatory Conversion Date, whether or not
declared, out of funds legally available for the
payment of dividends. The Common Equivalent Rate
is initially one share of Common Stock for each
share of PACS and is subject to adjustment
as set forth below (the "Common Equivalent Rate").
(b) Redemption by the Company.
(i) Right to Redeem. Shares of PACS are
_______________
not redeemable by the Company prior to the Initial
Redemption Date. At any time and from time to
time on or after the Initial Redemption Date and
prior to the Mandatory Conversion Date, the
Company shall have the right to redeem, in whole
or in part, the outstanding shares of PACS. Upon
any such redemption, the Company shall deliver to
the holders of shares of PACS in exchange for
each share so redeemed, the greater of (A) a
number of shares of Common Stock equal to the Call
Price (as hereinafter defined) in effect on the
redemption date, divided by the Current Market
Price of the Common Stock determined as of the
second trading day immediately preceding the
Notice Date (as hereinafter defined) or
(B) .8197 of a share of Common Stock (each a
"Redemption Rate")(subject to adjustment as set
forth below). The public announcement of any call
for redemption shall be made prior to, or at the
time of, the mailing of the notice of such call to
holders of shares of PACS as described below. If
fewer than all the outstanding shares of PACS are
to be redeemed, shares of PACS to be redeemed
shall be selected by the Company from outstanding
shares of PACS not previously redeemed by lot or
pro rata (as nearly as may be practicable). As
used in this subparagraph (b), the term "Notice
Date" with respect to any notice given by the
Company in connection with a redemption of shares
of PACS means the date on which first occurs
either the public announcement of such redemption
or the commencement of mailing of such notice to
the holders of shares of PACS.
(ii) Notice of Redemption. The Company shall provide
____________________
notice of any redemption of the shares of PACS
pursuant to this subparagraph (b) to holders of
record of PACS to be called for redemption not
less than 15 days nor more than 60 days prior to
the date fixed for such redemption. The earliest
Notice Date for any call for redemption of shares
of PACS is not earlier than May 20, 1999.
<PAGE> 11
Such notice shall be provided by mailing notice of
such redemption, first class postage prepaid, to
each holder of record of shares of PACS to be
redeemed, at such holder's address as it appears
on the stock register of the Company; provided
________
that neither failure to give such notice nor any
defect therein shall affect the validity of the
proceeding for the redemption of any shares of
PACS to be redeemed except as to the holders to
whom the Company has failed to give said notice or
whose notice was defective.
Each such notice shall state, as appropriate, the
following and may contain such other information
as the Company deems advisable:
(A) the redemption date;
(B) that all outstanding shares of PACS are to
redeemed or, in the case of a call for redemption
of fewer than all outstanding shares of PACS, the
number of such shares held by such holder to be
redeemed;
(C) the number of shares of Common Stock
deliverable upon redemption of each share of PACS
to be redeemed and, if applicable, the Redemption
Rate and the Current Market Price used to
calculate such number of shares of Common Stock;
(D) the place or places where certificates for
such shares are to be surrendered for redemption;
and
(E) that dividends on the shares of PACS to be
redeemed shall cease to accrue on such redemption
date (except as otherwise provided herein).
(c) Procedures Upon Conversion and Redemption.
(i) Deposit of Shares and Funds. The Company's
___________________________
obligation to deliver shares of Common Stock and
provide funds upon redemption in accordance with
Sections 3(a) and 3(b) shall be deemed fulfilled
if, on or before the Mandatory Conversion Date or
a redemption date, as applicable, the Company
shall irrevocably deposit, with a bank or trust
company, or an affiliate of a bank or trust
company, having an office or agency in New York
City, or shall set aside or make other reasonable
provision for the issuance of such number of
shares of Common Stock as are required to be
delivered by the Company pursuant to Section 3(a)
or 3(b), as the case may be, upon the occurrence
of the Mandatory Conversion or the related
redemption (and for the payment of cash in lieu of
the issuance of fractional
<PAGE> 12
share amounts and accrued and unpaid dividends
payable in cash on the shares to be redeemed as
and to the extent provided by Section 3(a) or
3(b), as the case may be). Any interest accrued
on such funds shall be paid to the Company from
time to time. Subject to applicable laws, any
shares of Common Stock or funds so deposited
and unclaimed at the end of two years from such
redemption date shall be repaid and released to
the Company, after which time the holder or
holders of such shares of PACS so converted or
called for redemption shall look only to the
Company for delivery of such shares of Common
Stock or funds.
(ii) Surrender of Certificates; Status. Each holder of
_________________________________
shares of PACS to be converted or redeemed
pursuant to Section 3(a) or 3(b), as the case may
be, shall surrender the certificates evidencing
such shares (properly endorsed or assigned for
transfer, if the Board of Directors shall so
require and the notice shall so state) to the
Company at the place designated by the Company and
shall thereupon be entitled to receive
certificates evidencing shares of Common Stock and
to receive any funds payable pursuant to Sections
3(a) or 3(b), as the case may be, following such
surrender and following the date of such
conversion or redemption. In case fewer than all
the shares represented by any such surrendered
certificate are called for redemption, a new
certificate shall be issued at the expense
of the Company representing the unredeemed shares.
If, on the Mandatory Conversion Date, or, in the
event of a redemption, on the date fixed for
redemption, as the case may be, shares of
Common Stock and funds necessary for such
Mandatory Conversion or redemption, as applicable,
shall have been irrevocably either set aside by
the Company separate and apart from its other
funds or assets in trust for the account of the
holders of the shares to be converted or to be
redeemed (and so as to be and continue to be
available therefor) or deposited with a bank or
trust company or an affiliate thereof or the
Company shall have made other reasonable provision
therefor, then, notwithstanding that the
certificates evidencing any shares of PACS so
converted or called for redemption shall not have
been surrendered, the shares of PACS represented
thereby so converted or called for redemption
shall be deemed no longer outstanding, dividends
with respect to the shares so converted or called
for redemption shall cease to accrue on the
Mandatory Conversion Date or the date fixed for
redemption, as applicable, (except that holders of
shares of PACS at the close of business on a
record date for any payment of dividends shall be
entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares
following such record date and prior to
<PAGE> 13
such Dividend Payment Date) and all rights with
respect to the shares so converted or called for
redemption shall forthwith after such date cease
and terminate, except for the rights of the
holders to receive the shares of Common Stock and
funds, if any, payable pursuant to Sections 3(a)
or 3(b) without interest upon surrender of their
certificates therefor (unless the Company defaults
on the delivery of such shares or the payment of
such funds). Holders of shares of PACS that are
converted or redeemed shall not be entitled to
receive dividends declared and paid on such shares
of Common Stock, and such shares of Common Stock
shall not be entitled to vote, until such shares
of Common Stock are issued upon the surrender of
the certificates representing such shares of
PACS and upon such surrender such holders shall be
entitled to receive such dividends declared and
paid on such shares of Common Stock subsequent to
such redemption date or Mandatory Conversion Date
with interest thereon. Amounts payable in cash in
respect of shares of PACS or shares of Common
Stock shall not bear interest.
(d) Conversion at Option of Holder. Shares of PACS
are convertible, in whole or in part, at the option of the holder
thereof, at any time prior to the Mandatory Conversion Date,
unless previously redeemed, into shares of Common Stock at a rate
of .8197 of a share of Common Stock for each share of PACS (the
"Optional Conversion Rate"), subject to adjustment as set forth
below. The right to convert shares of PACS called for redemption
shall terminate immediately prior to the close of business on the
redemption date with respect to such shares.
Conversion of shares of PACS at the option of the
holder may be effected by delivering certificates evidencing such
shares, together with written notice of conversion and a proper
assignment of such certificates to the Company or in blank, to the
office or agency to be maintained by the Company for that purpose
(and, if applicable, cash payment of an amount equal to the
dividend payable on such shares), and otherwise in accordance with
conversion procedures established by the Company. Each optional
conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the foregoing
requirements shall have been satisfied. The conversion shall be
at the Optional Conversion Rate in effect at such time and on such
date.
Holders of shares of PACS at the close of business on
a record date for any payment of declared dividends shall be
entitled to receive the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the conversion
of such shares following such record date and prior to the
corresponding Dividend Payment Date. However, shares of PACS
surrendered for conversion after the close of business on a record
date for any payment of dividends and before the opening of
business on the next succeeding Dividend Payment Date must be
accompanied by payment to the Company in cash of an amount equal
to the dividend thereon which is to be paid on such Dividend
<PAGE> 14
Payment Date (unless such shares have been called for redemption
on a redemption date between such record date and such Dividend
Payment Date). A holder of shares of PACS called for redemption
on July 19, 1999 or any other Dividend Payment Date thereafter
will receive the dividend on such shares payable on that date
without paying an amount equal to such dividend to the Company
upon conversion. Except as provided above, upon any optional
conversion of shares of PACS, the Company shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on
converted shares of PACS or for previously declared dividends or
distributions on the shares of Common Stock issued upon such
conversion.
(e) Adjustments of the Common Equivalent Rate,
Optional Conversion Rate and Redemption Rate. The Common
Equivalent Rate, the Optional Conversion Rate and the Redemption
Rates (collectively, the "Rates") shall be each subject to
adjustment from time to time as provided below in this section
(e).
(i) If the Company shall, after July 19, 1996:
(A) pay a stock dividend or make a
distribution with respect to its Common
Stock in shares of such Common Stock,
(B) subdivide or split its outstanding Common
Stock into a greater number of shares,
(C) combine its outstanding shares of Common
Stock into a smaller number of shares, or
(D) issue by reclassification of its shares of
Common Stock any shares of common stock of
the Company;
then, in any such event, the Rates in effect
immediately prior to such event shall each be
adjusted so that the holder of any shares of
PACS shall thereafter be entitled to receive,
upon Mandatory Conversion or upon conversion at
the option of the holder or redemption, the
number of shares of Common Stock of the Company
which such holder would have owned or been
entitled to receive immediately following any
event described above had such shares of PACS
been converted immediately prior to such event
or any record date with respect thereto. Such
adjustment shall become effective at the
opening of business on the business day next
following the record date for determination of
stockholders entitled to receive such dividend
or distribution, in the case of a dividend or
distribution, and shall become effective
immediately after the effective date,
<PAGE> 15
in the case of a subdivision, split,
combination or reclassification. Such
adjustments shall be made successively.
(ii) If the Company shall, after July 19, 1996, issue
rights or warrants to all holders of its
Common Stock (other than Rights issued pursuant to
any Rights Plan of the Company) entitling them to
subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market
Price at the time of such issue, then, in any such
event unless such rights or warrants are issued to
holders of shares of PACS on a pro rata basis with
the shares of Common Stock based on the Common
Equivalent Rate on the date immediately preceding
such issuance, each Rate shall be adjusted by
multiplying such Rate, in effect immediately prior
to the date of issuance of such rights or
warrants, by a fraction, of which the numerator
shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights
or warrants, immediately prior to such
issuance, plus the number of additional shares of
Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which
the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance
of such rights or warrants, immediately prior to
such issuance, plus the number of additional
shares of Common Stock which the aggregate
offering price of the total number of shares of
Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would
purchase at such Current Market Price (determined
by multiplying such total number of shares by the
exercise price of such rights or warrants and
dividing the product so obtained by such Current
Market Price). Such adjustment shall become
effective at the opening of business on the
business day next following the record date for
the determination of stockholders entitled to
receive such rights or warrants. To the extent
that shares of Common Stock are not delivered
after the expiration of such rights or warrants,
each Rate shall be readjusted to the applicable
Rate which would then be in effect had the
adjustments been made upon the issuance of such
rights or warrants upon the basis of delivery of
only the number of shares of Common Stock
actually delivered. Such adjustment shall be made
successively.
(iii) If the Company shall after July 19, 1996, pay a
dividend or make a distribution to all holders of
its Common Stock of evidences of its indebtedness,
cash or other assets (including capital stock of
the Company or any subsidiary of the Company, but
excluding (x) the Company's regular quarterly cash
dividend and (y) dividends
<PAGE> 16
referred to in subparagraph (i) above) or shall
issue to all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its
securities (other than Rights issued pursuant to
any Rights Plan of the Company and those referred
to in subparagraph (ii) above), then unless such
dividend is paid or distribution is made
to each holder of shares of PACS on a pro rata
basis with the shares of Common Stock based on the
Common Equivalent Rate on the date immediately
preceding such payment or distribution, in any
such event, each Rate shall be adjusted by
multiplying such Rate in effect on the record date
mentioned below, by a fraction of which the
numerator shall be the Current Market Price per
share of the Common Stock on the record date for
the determination of stockholders entitled to
receive such dividend or distribution, and of
which the denominator shall be such Current Market
Price per share of Common Stock less the fair
market value (as determined in good faith by the
Board of Directors, whose good faith determination
shall be conclusive, and described in a resolution
adopted with respect thereto) as of such record
date of the portion of the assets or evidences of
indebtedness so distributed or of such
subscription rights or warrants applicable to one
share of Common Stock. Such adjustment shall
become effective on the opening of business on the
business day next following the record date for
the determination of stockholders entitled to
receive such dividend or distribution. Such
adjustment shall be made successively.
(iv) Any shares of Common Stock issuable in payment of
a dividend or other distribution shall be deemed
to have been issued immediately prior to the close
of business on the record date for such dividend
or other distribution for purposes of calculating
the number of outstanding shares of Common Stock
under subsection (ii) above.
(v) The Company shall also be entitled to make upward
adjustments in the Common Equivalent Rate, the
Optional Conversion Rate, the Redemption Rate and
the Call Price, as it in its sole discretion shall
determine to be advisable, in order that any stock
dividends, subdivisions of shares, distribution of
rights to purchase stock or securities, or
distribution of securities convertible into or
exchangeable for stock (or any transaction which
could be treated as any of the foregoing
transactions pursuant to Section 305 of the
Internal Revenue Code of 1986, as amended) made by
the Company to its stockholders after July 19,
1996 shall not be taxable.
(vi) In any case in which subsection 3(e) shall require
that an adjustment as a result of any event
becomes effective at the opening of business
<PAGE> 17
on the business day next following a record date
and the date fixed for conversion pursuant to
subsection 3(a) or redemption pursuant to
subsection 3(b) or 3(d) occurs after such record
date, but before the occurrence of such event, the
Company may, in its sole discretion, elect to
defer the following until after the occurrence of
such event: (A) issuing to the holder of any
converted or redeemed shares of PACS the
additional shares of Common Stock issuable upon
such conversion or redemption over the shares of
Common Stock issuable before giving effect to such
adjustments and (B) paying to such holder any
amount in cash in lieu of a fractional share of
Common Stock pursuant to subsection 3(j).
(vii) All adjustments to the Rates shall be calculated
to the nearest 1/100th of a share of Common
Stock. No adjustment in the Rates shall be
required unless such adjustment would require an
increase or decrease of at least one percent
therein; provided, however, that any adjustment
which by reason of this subsection (vii) is not
required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(f) Adjustment for Consolidation or Merger. In
case of any consolidation or merger to which the Company is a
party (other than a merger or consolidation in which the Company
is the surviving or continuing corporation and in which the Common
Stock outstanding immediately prior to the merger or consolidation
remains unchanged), or in the case of any sale or transfer to
another corporation of the property of the Company as an entirety
or substantially as an entirety, proper provisions shall be made
so that each share of PACS shall, after consummation of such
transaction, be subject to (i) conversion at the option of the
holder into the kind and amount of securities, cash or other
property receivable upon consummation of such transaction by a
holder of the number of shares of Common Stock into which such
share of PACS might have been converted immediately prior to
consummation of such transaction, (ii) conversion on the Mandatory
Conversion Date into the kind and amount of securities, cash or
other property receivable upon consummation of such transaction by
a holder of the number of shares of Common Stock into which such
shares of PACS would have converted if the conversion on the
Mandatory Conversion Date had occurred immediately prior to the
date of consummation of such transaction, plus the right to
receive cash in an amount equal to all accrued and unpaid
dividends on such shares of PACS (other than previously declared
dividends payable to a holder of record as of a prior date), and
(iii) redemption on any redemption date in exchange for the kind
and amount of securities, cash or other property receivable upon
consummation of such transaction by a holder of the number of
shares of Common Stock that would have been issuable at the
Redemption Rate in effect on such redemption date upon a
redemption of such share immediately prior to consummation of such
transaction, assuming in each case that such holder of Common
Stock failed to exercise rights of election, if any, as to the
kind or amount of securities, cash or other property receivable
upon consummation of such transaction (provided that if
<PAGE> 18
the kind or amount of securities, cash or other property
receivable upon consummation of such transaction is not the same
for each non-electing share, then the kind and amount of
securities, cash or other property receivable upon consummation of
such transaction for each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the
non-electing shares). The kind and amount of securities into or
for which the shares of PACS shall be convertible or redeemable after
consummation of such transaction shall be subject to adjustment as
described in Section 3(e) following the date of consummation of such
transaction. The Company may not become a party to any such transaction
unless (A) the terms thereof are consistent with the foregoing or (B)
the holders of shares of PACS shall have approved other terms in
accordance with the provisions of Section 5(c).
For purposes of the immediately preceding paragraph,
any sale or transfer to another corporation of property of the
Company which did not account for at least 50% of the consolidated
net income of the Company for its most recent fiscal year ending
prior to the consummation of such transaction shall not in any
event be deemed to be a sale or transfer of the property of the
Company as an entirety or substantially as an entirety.
(g) Notices of Adjustments. (i) Whenever the Rates
are adjusted as herein provided, the Company shall:
(A) forthwith compute the adjusted Rates in accordance
herewith and prepare a certificate signed by
an officer of the Company setting forth the
adjusted Rates, the method of calculation thereof
in reasonable detail and the facts requiring such
adjustment and upon which such adjustment is
based, which certificate shall be conclusive,
final and binding evidence of the correctness of
the adjustment, and file such certificate
forthwith with the transfer agent for the shares
of PACS and the Common Stock; and
(B) make a prompt public announcement and mail a
notice to the holders of the outstanding shares of
PACS stating that the Rates have been adjusted,
the facts requiring such adjustment and upon which
such adjustment is based and setting forth the
adjusted Rates, such notice to be mailed at or
prior to the time the Company mails an interim
statement to its stockholders covering the fiscal
quarter during which the facts requiring such
adjustment occurred, but in any event within 45
days of the end of such fiscal quarter.
(ii) In case, at any time while any of the shares of
PACS are outstanding,
(A) the Company shall declare a dividend
(or any other distribution) on its Common Stock,
excluding any cash dividends; or
<PAGE> 19
(B) the Company shall authorize the issuance to all
holders of its Common Stock of rights or warrants
to subscribe for or purchase shares of its Common
Stock or of any other subscription rights or
warrants; or
(C) the Company shall authorize any reclassification,
subdivision or split of its Common Stock (other
than a subdivision or combination thereof) or any
consolidation or merger to which the Company is a
party and for which approval of any stockholders
of the Company is required (except for a merger
of the Company into one of its subsidiaries solely
for the purpose of changing the corporate domicile
of the Company to another state of the United
States and in connection with which there is no
substantive change in the rights or privileges of
any securities of the Company other than changes
resulting from differences in the corporate
statutes of the then existing and the new state of
domicile), or the sale or transfer to another
corporation of the property of the Company as an
entirety or substantially as an entirety; or
(D) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of PACS,
and shall cause to be mailed to the holders of shares of PACS at
their last addresses as they shall appear on the stock register,
at least 10 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event that more
than one date is specified), a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants
are to be determined, or (B) the date on which any such
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common
Stock for securities or other property (including cash), if any,
deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up. The
failure to give or receive the notice required by this subsection
(g)(ii) or any defect therein shall not affect the legality or
validity of such dividend, distribution, right or warrant or other
action.
(h) Effect of Conversions and Redemptions. The person
or persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon any conversion
or redemption shall be deemed to have become on the date of any
such conversion or redemption the holder or holders of record of
the shares represented thereby; provided, however, that any such
surrender on any date when the stock transfer books of the Company
shall be closed shall constitute the person or persons
<PAGE> 20
in whose name or names the certificate or certificates for such
shares are to be issued as the record holder or holders thereof
for all purposes at the opening of business on the next succeeding
day on which such stock transfer books are open.
(i) No Fractional Shares. No fractional shares or
scrip representing fractional shares of Common Stock shall be
issued upon the redemption or conversion of any shares of PACS.
In lieu of any fractional share otherwise issuable in respect of
the aggregate number of shares of PACS of any holder which are
redeemed or converted on any redemption date or upon Mandatory
Conversion or any optional conversion, such holder shall be
entitled to receive an amount in cash (computed to the nearest
cent) equal to the value of such fractional shares based on the
(i) Current Market Price as of the second Trading Date immediately
preceding the Notice Date, in the case of redemption, or (ii)
Closing Price of the Common Stock determined (A) as of the fifth
Trading Date immediately preceding the Mandatory Conversion Date,
in the case of Mandatory Conversion, or (B) as of the second
Trading Date immediately preceding the effective date of
conversion, in the case of an optional conversion by a holder. If
more than one share shall be surrendered for conversion or
redemption at one time by or for the same holder, the number of
full shares of Common Stock issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of PACS
so surrendered or redeemed.
(j) Reissuance. Shares of PACS that have been
issued and reacquired in any manner, including shares purchased,
exchanged, redeemed or converted, shall not be reissued as part of
PACS and shall (upon compliance with any applicable provisions of
the laws of the State of Connecticut) have the status of
authorized and unissued shares of preferred stock of the Company
("Preferred Stock") undesignated as to series and may be
redesignated and reissued as part of any series of Preferred
Stock.
(k) Definitions. As used in these provisions
applicable to the PACS:
(i) the term "business day" shall mean
any day other than a Saturday, Sunday, or a day on
which banking institutions in the State of New
York or the State of Connecticut are authorized or
obligated by law or executive order to close or
are closed because of a banking moratorium or
otherwise;
(ii) the term "Call Price" of each share
of PACS shall be the sum of (x) $76 1/8 and (y)
all accrued and unpaid dividends thereon to but
not including the redemption date (other than
previously declared dividends payable to a holder
of record as of a prior date);
(iii) the term "Closing Price" on any day
shall mean the last reported sales price on such
day or, in case no such sale takes place on such
day, the average of the reported closing high
and low quotations, in either case on the
principal national securities exchange on which
<PAGE> 21
the Common Stock is listed or admitted to
trading (as reported on the NYSE Composite Tape
or a similar reporting system) or, if the
Common Stock is not listed or admitted to
trading on a national securities exchange, on
the NASDAQ National Market System, or, if
the Common Stock is not listed or admitted to
trading on a national securities exchange or the
NASDAQ National Market System, the average of
the high bid and low-asked quotations of the
Common Stock in the over-the-counter market on
the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly
generally accepted reporting service, or, if no
such quotations are available, the fair market
value of the Common Stock as determined by any
New York Stock Exchange member firm selected
from time to time by the Board of Directors for
such purpose;
(iv) the term "Current Market Price" per share of
Common Stock at any date shall be deemed to be
the lesser of (x) the average of the daily
Closing Prices for the twenty consecutive
Trading Dates ending on and including the date
in question or (y) the Closing Price of the
Common Stock for such date of determination;
provided, that, if any event that results
________
in an adjustment of the Common Equivalent Rate
occurs during such twenty day period, the
Current Market Price as determined pursuant
to the foregoing shall be appropriately adjusted
to reflect the occurrence of such event;
(v) the term "Parity Preferred Stock" means the
Company's Class A Voting Preferred Stock, $.01 par
value per share, Class B Voting Preferred Stock,
$.01 par value per share, and Class D Non-Voting
Preferred Stock, $.01 par value per share, and any
other class or series of the Company's Preferred
Stock that by its terms ranks on a parity as to
both the payment of dividends and distribution of
assets upon a liquidation of the Company; and
(vi) the term "Trading Date" shall mean a date on which
the New York Stock Exchange (or any successor
thereto) is open for the transaction of business.
(l) Payment of Taxes. The Company shall pay any and
all documentary, stamp or similar issue or transfer taxes payable
in respect of the issue or delivery of shares of Common Stock on
the redemption or conversion of shares of PACS pursuant to this
Section 3; provided, however, that the Company shall not be
________ _______
required to pay any tax which may be payable in respect of any
registration of transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the registered
holder of shares of PACS redeemed or converted or to be redeemed
or converted, and no such issue or
<PAGE> 22
delivery shall be made unless and until the person requesting such
issue has paid to the Company the amount of any such tax or has
established, to the satisfaction of the Company, that such tax has
been paid.
(m) Reservation of Common Stock. The Company shall
at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued Common
Stock and/or its issued Common Stock held in its treasury, for the
purpose of effecting any Mandatory Conversion of the shares of
PACS or any conversion of the shares of PACS at the option of the
holder, the full number of shares of Common Stock then deliverable
upon any such conversion of all outstanding shares of PACS.
4. Liquidation Rights. (a) In the event of the
liquidation, dissolution, or winding up of the business of the
Company, whether voluntary or involuntary, the holders of shares
of PACS then outstanding, after payment or provision for payment
of the debts and other liabilities of the Company and the payment
or provision for payment of any distribution on any shares of the
Company having a preference and a priority over the shares of PACS
on liquidation, and before any distribution to the holders of
Junior Securities, shall be entitled to be paid out of the assets
of the Company available for distribution to its stockholders an
amount per share of PACS in cash equal to the sum of (i) $76 1/8
plus (ii) all accrued and unpaid dividends thereon. All amounts
paid in respect of such liquidation, dissolution or winding up
shall be paid pro rata to the holders of PACS entitled thereto.
In the event the assets of the Company available for distribution
to the holders of the shares of PACS upon any dissolution,
liquidation or winding up of the Company shall be insufficient to
pay in full the liquidation payments payable to the holders of
outstanding shares of PACS and of all other series of Parity
Securities, the holders of shares of PACS and of all series of
Parity Securities shall share ratably in such distribution of
assets in proportion to the amount which would be payable on such
distribution if the amounts to which the holders of outstanding
shares of PACS and the holders of outstanding shares of such
Parity Preferred Stock were paid in full. Except as provided in
this Section 4, holders of PACS shall not be entitled to any
distribution in the event of liquidation, dissolution or winding
up of the affairs of the Company.
(b) For the purposes of this Section 4, none of the
following shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company:
(i) the sale, transfer, lease or exchange of the
assets of the Company as an entirety or
substantially as an entirety; or
(ii) the consolidation or merger of the Company
with one or more other corporations (whether
or not the Company is the corporation
surviving such consolidation or merger).
<PAGE> 23
5. Voting Rights. (a) The holders of record of shares
of PACS shall have the right with the holders of Common Stock to
vote in the election of directors and upon each other matter
coming before any meeting of the stockholders on the basis of 4/5
of a vote for each share held. The holders of shares of PACS and
the holders of Common Stock shall vote together as one class
except as otherwise set forth herein or as otherwise provided by
law or elsewhere in the Certificate of Incorporation.
(b) For so long as any shares of PACS are
outstanding, if at any time dividends payable on the shares of
PACS or any other series of Preferred Stock are in arrears and
unpaid in an aggregate amount equal to or exceeding the aggregate
amount of dividends payable thereon for six quarterly dividend
periods, or if any other series of Preferred Stock shall be
entitled for any other reason to exercise voting rights, separate
from the Common Stock, to elect any Directors of the Company
("Preferred Stock Directors"), the holders of the shares of PACS,
voting separately as a class with the holders of all other series
of Preferred Stock upon which like voting rights have been
conferred and are exercisable, with each share of PACS entitled to
vote on this and other matters upon which holders of Preferred
Stock vote as a group, shall have the right to vote for the
election of two Preferred Stock Directors of the Company, such
Directors to be in addition to the number of Directors
constituting the Board of Directors immediately prior to the
accrual of such right. Such right of the holders of shares of
PACS to elect two Preferred Stock Directors shall, when vested,
continue until all dividends in arrears on the shares of PACS and
such other series of Preferred Stock shall have been paid in full
and the right of any other series of Preferred Stock to exercise
voting rights, separate from the Common Stock, to elect Preferred
Stock Directors shall terminate or have terminated and, when so
paid, and any such termination occurs or has occurred, such right
of the holders of shares of PACS to elect two Preferred Stock
Directors separately as a class shall cease, subject always to the
same provisions for the vesting of such right of the holders of
the shares of PACS to elect two Preferred Stock Directors in the
case of future dividend defaults.
The term of office of each Director elected pursuant
to the preceding paragraph shall terminate on the earlier of (i)
the next annual meeting of stockholders at which a successor shall
have been elected and qualified or (ii) the termination of the
right of the holders of shares of PACS and such other series of
Preferred Stock to vote for Directors pursuant to the preceding
paragraph. Vacancies on the Board of Directors resulting from the
death, resignation or other cause of any such Director shall be
filled exclusively by no less than two-thirds of the remaining
Directors and the Director so elected shall hold office until a
successor is elected and qualified.
(c) For as long as any shares of PACS remain
outstanding, the affirmative consent of the holders of at least
two-thirds thereof actually voting (voting separately as a class)
given in person or by proxy, at any annual meeting or special
meeting of the shareholders called for such purpose, shall be
necessary to (i) amend, alter or repeal any of the provisions of
the Certificate of Incorporation of the Company which would
adversely affect the powers, preferences or rights of the holders
of the shares of PACS then outstanding or reduce the minimum time
required for any notice to which holders of shares of PACS then
<PAGE> 24
outstanding may be entitled; provided, however, that any such
________ _______
amendment, alteration or repeal that would authorize, create or
increase the authorized amount of any additional shares of Junior
Securities or any other shares of stock (whether or not already
authorized) ranking on a parity with the shares of PACS shall be
deemed not to adversely affect such powers, preferences or rights
and shall not be subject to approval by the holders of shares of
PACS; and provided further that clause (i) shall not be applicable
________ _______
to the amendment, alteration or repeal of any provisions of the
Certificate of Incorporation of the Company approved at a meeting
of the shareholders the record date of which is prior to the
issuance of any shares of PACS; (ii) authorize or create, or
increase the authorized amount of, any capital stock, or any
security convertible into capital stock, of any class ranking
senior to PACS as to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up of the Company;
or (iii) merge or consolidate with or into any other corporation,
unless each holder of the shares of PACS immediately preceding
such merger or consolidation shall have the right either to (A)
receive or continue to hold in the resulting corporation the same
number of shares, with substantially the same rights and
preferences, as correspond to the shares of PACS so held or (B)
convert into shares of Common Stock at the Common Equivalent Rate
in effect on the date immediately preceding the announcement of
any such merger or consolidation.
There is no limitation on the issuance by the Company
of Parity Preferred Stock or of any class ranking junior to the
shares of PACS.
Notwithstanding the provisions summarized in the
preceding two paragraphs, however, no such approval described
therein of the holders of the shares of PACS shall be required to
authorize an increase in the number of authorized shares of
Preferred Stock or if, at or prior to the time when such
amendment, alteration, or repeal is to take effect or when the
authorization, creation or increase of any such senior stock or
security is to be made, or when such consolidation or merger,
liquidation, dissolution or winding up is to take effect, as the
case may be, provision is made for the redemption of all shares of
PACS at the time outstanding.
6. Preemptive Rights. The holders of shares of PACS
shall have no preemptive rights, including rights with respect to
any shares of capital stock or other securities of the Company
convertible into or carrying rights or options to purchase any
such shares.
7. Limitations. Except as may otherwise be required by
law, the shares of PACS shall not have any terms, limitations, and
relative rights and preferences other than those specifically set
forth herein.
__________________________________________________________________
AETNA INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
RIGHTS AGREEMENT
Dated as of June 28, 1996
__________________________________________________________________
TABLE OF CONTENTS
RECITALS.........................................................1
________
Section 1. Certain Definitions..................................1
____________________
Section 2. Appointment of Rights Agent..........................8
____________________________
Section 3. Issue of Right Certificates..........................8
____________________________
Section 4. Form of Right Certificates...........................9
___________________________
Section 5. Countersignature and Registration...................10
__________________________________
Section 6. Transfer, Split Up, Combination and Exchange
____________________________________________
of Right Certificates; Mutilated, Destroyed,
____________________________________________
Lost or Stolen Right Certificates...................11
__________________________________
Section 7. Exercise of Rights; Purchase Price;
___________________________________
Expiration Date of Rights...........................12
__________________________
Section 8. Cancellation and Destruction of Right
______________________________________
Certificates........................................14
_____________
Section 9. Company Covenants Concerning Shares and Rights......14
_______________________________________________
Section 10. Merger Date........................................16
____________
Section 11. Adjustment of Purchase Price, Number and
_________________________________________
Type of Shares or Number of Rights.................17
___________________________________
Section 12. Certificate of Adjusted Purchase Price or
__________________________________________
Number of Shares...................................28
_________________
Section 13. Consolidation, Merger or Sale or Transfer of
____________________________________________
Assets or Earning Power............................28
________________________
Section 14. Fractional Rights and Fractional Shares............32
________________________________________
Section 15. Rights of Action...................................34
_________________
Section 16. Agreement of Rights Holders........................35
____________________________
Section 17. Right Certificate Holder Not Deemed a
______________________________________
Shareholder........................................36
____________
Section 18. Concerning the Rights Agent........................36
____________________________
Section 19. Merger or Consolidation or Change of Name of
____________________________________________
Rights Agent.......................................37
_____________
Section 20. Duties of Rights Agent.............................38
_______________________
Section 21. Change of Rights Agent.............................40
_______________________
Section 22. Issuance of New Right Certificates.................41
___________________________________
Section 23. Redemption.........................................41
___________
Section 24. Notice of Certain Events...........................42
_________________________
Section 25. Notices............................................44
________
Section 26. Supplements and Amendments.........................44
___________________________
Section 27. Successors; Certain Covenants......................45
______________________________
Section 28. Benefits of this Agreement.........................45
___________________________
Section 29. Severability.......................................46
_____________
Section 30. Governing Law......................................46
______________
Section 31. Counterparts.......................................46
_____________
Section 32. Descriptive Headings...............................46
_____________________
<PAGE> 1
RIGHTS AGREEMENT
________________
This RIGHTS AGREEMENT, dated as of June 28, 1996 (this
"Agreement"), is made and entered into by and between Aetna Inc.,
a Connecticut corporation (the "Company"), and First Chicago Trust
Company of New York, a New York corporation (the "Rights Agent").
RECITALS
________
WHEREAS, on June 6, 1996, the Board of Directors of the
Company authorized and directed the issuance of one Right
("Right") with each Common Share (as hereinafter defined) issued
in connection with the Mergers contemplated by and defined in the
Agreement and Plan of Merger, dated as of March 30, 1996 (as
amended from time to time, the "Merger Agreement"), among Aetna
Life and Casualty Company, U.S. Healthcare, Inc., the Company,
Antelope Sub, Inc. and New Merger Corporation, each Right
initially representing the right to purchase one one-hundredth of
a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and further authorized
and directed the issuance of one Right with respect to each Common
Share issued or delivered by the Company (whether originally
issued or delivered from the Company's treasury) (a) after the
Merger Date, as hereinafter defined, but prior to the earlier of
the Distribution Date (as hereinafter defined) and the Expiration
Date (as hereinafter defined) and (b) unless otherwise
specifically provided in a resolution adopted by the Board of
Directors of the Company prior to the Distribution Date, after the
Distribution Date but prior to the Expiration Date upon (i)
exercise of employee stock options or awards granted under any
Company incentive or compensation plan prior to the Distribution
Date or (ii) the conversion of convertible securities issued by
the Company prior to the Distribution Date (provided, however,
that the Board of Directors shall not have the authority to adopt
any such resolution with respect to the Company's 6.25% Class C
Voting Preferred Stock);
NOW THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Certain Definitions.
___________________
For purposes of this Agreement, the following terms shall
have the meanings indicated:
<PAGE> 2
(a) "Acquiring Person" shall mean (i) any Person
(other than the Company or any Related Person) who or which,
together with all Affiliates and Associates of such Person,
shall be the Beneficial Owner of 15% or more of the Common
Shares then outstanding or (ii) any Adverse Person;
provided, however, that a Person shall not be deemed to have
become an Acquiring Person solely as a result of a reduction
in the number of Common Shares outstanding, unless and until
(A) such Person or any Affiliate or Associate of such Person
shall thereafter become the Beneficial Owner of any
additional Common Shares other than as a result of a stock
dividend, stock split or similar transaction effected by the
Company in which all holders of Common Shares are treated
equally or (B) any other Person who is the Beneficial Owner
of any Common Shares shall thereafter become an Affiliate or
Associate of such Person.
(b) "Adverse Person" shall mean any Person (other
than the Company or any Related Person) who or which shall
(i) make a tender offer for, or a request or invitation for
tenders of, enter into any agreement to exchange securities
for, seek to acquire, or acquire, in the open market or
otherwise, Common Shares if, after consummation thereof,
such Person would be the Beneficial Owner of 10% or more of
the Common Shares then outstanding and (ii) be declared by
the Board of Directors of the Company to be an Adverse
Person upon a determination that (A) upon completion of the
proposed acquisition, any subsidiary of the Company would
not be able to satisfy the requirements for the issuance of
a license to write each of the lines of insurance for which
it was licensed prior to such acquisition; (B) the financial
condition of such Person is such as might jeopardize the
financial stability of the Company or prejudice the
interests of the policyholders of any Subsidiary of the
Company or the interests of any of the Company's
securityholders (other than such Person and its Affiliates
and Associates); (C) if a tender or exchange offer is
contemplated, the terms thereof are not fair and/or
equitable to the securityholders of the Company (other than
such Person and its Affiliates and Associates); (D) the
plans or proposals which such Person has to liquidate, sell
any assets of, merge, consolidate or make any other material
change in the business or corporate structure or the
management of the Company or of any of its Subsidiaries are
not fair and/or equitable to the policyholders of any
Subsidiary of the Company or to the securityholders of the
Company (other than such
<PAGE> 3
Person and its Affiliates and Associates); (E) the
competence, experience or integrity of the Person is such
that it would not be in the interests of the policyholders
or the securityholders of the Company (other than such
Person and its Affiliates and Associates) or in the public
interest for such offer, request, invitation, agreement or
acquisition to be made; or (F) such offer, request,
invitation, agreement or acquisition is (1) intended to
cause the Company to repurchase the Common Shares
beneficially owned by such Person or any Affiliate or
Associate of such Person, or (2) intended or may reasonably
be anticipated to cause pressure on the Company to take
action or enter into a transaction or series of transactions
to provide such Person or any Affiliate or Associate of such
Person with short-term financial gain under circumstances
that would not serve the best long-term interests of the
Company and its shareholders (other than such Person and its
Affiliates and Associates), or (3) intended or may
reasonably be anticipated to permit such Person or any
Affiliate or Associate of such Person to acquire control of
or a controlling influence over the Company, as a result of
such beneficial ownership or one or more subsequent actions
or transactions, in a manner or pursuant to one or more
actions or transactions that would be inadequate, unfair or
coercive (other than to such Person and its Affiliates and
Associates), or (4) otherwise not in the best interests of
the Company; provided, however, that if such Person shall
not be the Beneficial Owner of 10% or more of the Common
Shares outstanding at the time such Person is declared by
the Board of Directors of the Company to be an Adverse
Person, such Person shall not be deemed an Adverse Person
unless and until such Person shall thereafter become the
Beneficial Owner of 10% or more of the Common Shares then
outstanding. In determining whether any such offer,
request, invitation, agreement or acquisition is in the best
interests of the Company, the Board of Directors of the
Company shall consider (i) the long-term as well as the
short-term interests of the Company, (ii) the interests of
the Company's shareholders, long-term as well as short-term,
including the possibility that those interests may be best
served by the continued independence of the Company, (iii)
the interests of the Company's employees, customers,
creditors and suppliers, and (iv) community and societal
considerations, including those of any community in which
any office or other facility of the Company is located. A
Director of the Company may also
<PAGE> 4
in his discretion consider any other factors he reasonably
considers appropriate in determining what he reasonably
believes to be in the best interests of the Company.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as
in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own" and have
"beneficial ownership" of, any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (whether
or not in writing), or upon the exercise of conversion
rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether
or not in writing); or
(iii) of which any other Person is the
Beneficial Owner if such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in
writing) with such other Person (or any of such other
Person's Affiliates or Associates) with respect to
acquiring, holding, voting or disposing of any
securities of the Company;
provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security
(A) if such Person has the right to vote such security
pursuant to an agreement, arrangement or understanding
(whether or not in writing) which (1) arises solely from a
revocable proxy given to such Person in response to a
public proxy or consent solicitation made pursuant to, and
in accordance with, the applicable rules and regulations of
the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange
<PAGE> 5
Act (or any comparable or successor report), or (B) if such
beneficial ownership arises solely as a result of such
Person's status as a "clearing agency," as defined in
Section 3(a)(23) of the Exchange Act; and provided,
further, that nothing in this paragraph shall cause a
Person engaged in business as an underwriter of securities
to be the Beneficial Owner of any securities acquired
through such Person's participation in good faith in an
underwriting syndicate pursuant to an agreement to which
the Company is a party until the expiration of 40 calendar
days after the date of such acquisition or such later date
as the Board of Directors may determine in any specific
case.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in
the States of Connecticut or New York (or such other state
in which the principal office of the Rights Agent is
located) are authorized or obligated by law or executive
order to close.
(f) "Close of Business" on any given date shall mean
5:00 P.M., Eastern time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00
P.M., Eastern time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the
Company shall mean the Common Stock, par value $.01 per
share, of the Company; provided, however, that, if the
Company is the continuing or surviving corporation in a
transaction described in Section 11(a)(ii) or Section
13(a)(ii) hereof, "Common Shares" when used with reference
to the Company shall mean the capital stock or equity
security with the greatest aggregate voting power of the
Company. "Common Shares" when used with reference to any
corporation or other legal entity, other than the Company,
including an Issuer (as defined in Section 13(b) hereof),
shall mean the capital stock or equity security with the
greatest aggregate voting power of such corporation or
other legal entity.
(h) "Company" shall mean Aetna Inc., a Connecticut
corporation.
(i) "Distribution Date" shall mean the earlier of:
(i) the Close of Business on the tenth calendar day (or,
unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board
of Directors of the Company) after the Share Acquisition
Date and (ii) the Close of Business on the tenth calendar
day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the
<PAGE> 6
Board of Directors of the Company) after the date of the
commencement of a tender or exchange offer by any Person
(other than the Company or any Related Person), the
consummation of which could result in beneficial ownership
by such Person of 15% or more of the outstanding Common
Shares (including any such date which is after the date of
this Agreement and prior to the issuance of the Rights);
provided, however, that if the earlier of such dates would
otherwise occur prior to the Merger Date, the Distribution
Date shall mean the Close of Business on the Merger Date.
(j) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(k) "Expiration Date" shall mean the earlier of (i)
the Close of Business on the Final Expiration Date and (ii)
the time at which the Rights are redeemed as provided in
Section 23 hereof.
(l) "Final Expiration Date" shall mean November 7,
1999.
(m) "Flip-in Event" shall mean any event described in
Section 11(a)(ii) hereof.
(n) "Flip-over Event" shall mean any event described
in subsections (i), (ii) or (iii) of Section 13(a) hereof.
(o) "Issuer" shall have the meaning set forth in
Section 13(b) of this Agreement.
(p) "Merger Agreement" shall have the meaning set
forth in the Recitals to this Agreement.
(q) "Merger Date" shall mean the date of the
consummation of the Mergers contemplated by the Merger
Agreement.
(r) "NASDAQ" shall mean the National Association of
Securities Dealers, Inc. Automated Quotation System.
(s) "Person" shall mean any individual, firm,
corporation, limited liability company, limited liability
partnership, partnership or other legal entity, and shall
include any successor (by merger or otherwise) of such
entity.
(t) "Preferred Shares" shall mean shares of Class B
Voting Preferred Stock, Series A, par value $.01 per share,
of the Company having the rights and preferences set forth
in Exhibit A to this Agreement.
<PAGE> 7
(u) "Purchase Price" shall mean initially $200.00 per
one one-hundredth of a Preferred Share and shall be subject
to adjustment from time to time as provided in this
Agreement.
(v) "Redemption Price" shall mean $0.01 per Right,
subject to adjustment by resolution of the Board of
Directors of the Company to reflect any stock split, stock
dividend or similar transaction occurring after the date
hereof.
(w) "Related Person" shall mean (i) any Subsidiary of
the Company or (ii) any employee benefit or stock ownership
plan of the Company or any entity holding Common Shares of
the Company for or pursuant to the terms of any such plan.
(x) "Right" shall have the meaning set forth in the
Recitals to this Agreement.
(y) "Right Certificates" shall mean certificates
evidencing the Rights, in substantially the form of Exhibit
B attached hereto.
(z) "Rights Agent" shall mean First Chicago Trust
Company of New York, and its successors and assigns.
(aa) "Securities Act" shall mean the Securities Act of
1933, as amended.
(bb) "Share Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring
Person (by press release, filing made with the Securities
and Exchange Commission or otherwise) that an Acquiring
Person has become such.
(cc) "Subsidiary" of any Person shall mean any
corporation or other legal entity of which a majority of
the voting power of the voting equity securities or
equity interests is owned, directly or indirectly, by such
Person; provided, however, that for purposes of Section
13(b), "Subsidiary" of any Person shall mean any
corporation or other legal entity of which at least 20% of
the voting power of the voting equity securities or equity
interests is owned, directly or indirectly, by such Person.
(dd) "Trading Day" shall mean any day on which the
principal national securities exchange on which the Common
Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, a Business Day.
(ee) "Triggering Event" shall mean any Flip-in Event
or Flip-over Event.
<PAGE> 8
Section 2. Appointment of Rights Agent.
____________________________
The Company hereby appoints the Rights Agent to act as agent
for the Company and the holders of the Rights (who, in accordance
with Section 3 hereof, shall also be, prior to the Distribution
Date, the holders of the Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts
such appointment and hereby certifies that it complies with the
requirements of the New York Stock Exchange governing transfer
agents and registrars. The Company may from time to time act as
Co-Rights Agent or appoint such Co-Rights Agents as it may deem
necessary or desirable. Any actions which may be taken by the
Rights Agent pursuant to the terms of this Agreement may be taken
by any such Co-Rights Agent. To the extent that any Co-Rights
Agent takes any action pursuant to this Agreement, such Co-Rights
Agent shall be entitled to all of the rights and protections
afforded to, and subject to all of the applicable duties and
obligations imposed upon, the Rights Agent pursuant to the terms
of this Agreement.
Section 3. Issue of Right Certificates.
____________________________
(a) Until the Distribution Date, (i) the Rights will be
evidenced by the certificates representing Common Shares
registered in the names of the record holders thereof (which
certificates representing Common Shares shall also be deemed to be
Right Certificates) and not by separate Right Certificates, (ii)
the Rights will be transferable only in connection with the
transfer of the underlying Common Shares, and (iii) the transfer
of any certificates evidencing Common Shares in respect of which
Rights have been issued shall also constitute the transfer of the
Rights associated with the Common Shares evidenced by such
certificates.
(b) Rights will be issued by the Company in respect of all
Common Shares issued or delivered by the Company (whether
originally issued or delivered from the Company's treasury) on
and/or after the Merger Date but prior to the earlier of the
Distribution Date and the Expiration Date. Unless otherwise
specifically provided in a resolution adopted by the Board of
Directors of the Company prior to the Distribution Date, Rights
will also be issued or delivered in respect of all Common Shares
(other than Common Shares issued or delivered upon the exercise of
any Right) issued or delivered by the Company prior to the
Expiration Date upon (i) the exercise of employee stock options or
other awards granted under any Company incentive or
<PAGE> 9
compensation plan prior to the Merger Date or (ii) the conversion
of the convertible securities issued by the Company prior to the
Merger Date (provided, however, that the Board of Directors shall
not have the authority to adopt any such resolution with respect
to the Company's 6.25% Class C Voting Preferred Stock).
Certificates evidencing such Common Shares shall bear the
following legend or such similar legend as the Company may deem
appropriate and as is not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law
or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or transaction reporting
system on which the Rights may from time to time be listed or
quoted, or to conform to usage:
This Certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a
Rights Agreement between Aetna Inc. and First Chicago
Trust Company of New York, dated as of , 1996
_______
(the "Rights Agreement"), the terms of which are
incorporated herein by this reference and a copy of
which is on file at the principal executive offices of
Aetna Inc. Under certain circumstances, as set forth
in the Rights Agreement, such Rights may be redeemed,
may expire, may be amended or may be evidenced by
separate certificates and no longer be evidenced by
this Certificate. Aetna Inc. will mail to the
registered holder of this Certificate a copy of the
Rights Agreement without charge within five business
days after receipt of a written request therefor.
Under certain circumstances, as set forth in the
Rights Agreement, Rights beneficially owned by an
Acquiring Person or any Affiliate or Associate of an
Acquiring Person (as such terms are defined in the
Rights Agreement) may become null and void.
(c) As soon as practicable after the Distribution Date,
the Rights Agent shall send, by first-class, insured, postage
prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, a Right Certificate,
evidencing one Right for each Common Share so held, subject to
adjustment. As of and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
Section 4. Form of Right Certificates.
___________________________
The Right Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof)
shall be substantially in the form set forth as Exhibit B hereto
with
<PAGE> 10
such changes, marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with
any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or
transaction reporting system on which the Common Shares or Rights
may from time to time be listed or quoted, or to conform to usage.
Subject to Sections 11(i) and 22 hereof, the Right Certificates,
whenever issued, shall be dated as of the Distribution Date, and
on their face shall entitle the holders thereof to purchase such
number of one one-hundredths of a Preferred Share as shall be set
forth therein at the Purchase Price set forth therein, provided,
however, the Purchase Price and the number and type of securities,
if any, purchasable upon exercise of each Right, and the number of
Rights outstanding, shall be subject to adjustment as provided
herein.
Section 5. Countersignature and Registration.
__________________________________
(a) The Right Certificates shall be executed on behalf of
the Company by an authorized officer of the Company, either
manually or by facsimile signature, and shall have affixed thereto
the Company's seal or a facsimile thereof which shall be attested
by the Corporate Secretary or an Assistant Corporate Secretary of
the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent
and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, and issued
and delivered by the Company with the same force and effect as
though the person who signed such Right Certificates had not
ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at the principal office of the Rights
Agent designated for such purpose and at such other offices as may
be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of
any stock exchange or any transaction reporting system
<PAGE> 11
on which the Common Shares or the Rights may from time to time be
listed or quoted, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Right Certificates,
the number of Rights evidenced on the face of each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
________________________________________________
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
_______________________________________________________________
Certificates.
_____________
(a) Subject to Sections 7(d) and 14 hereof, at any time
after the Close of Business on the Distribution Date and prior to
the Expiration Date, any Right Certificate or Right Certificates
representing exercisable Rights may be transferred, split up,
combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like
number of Preferred Shares (or other securities, as the case may
be) as the Right Certificate or Right Certificates surrendered
then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate
shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the principal
office of the Rights Agent designated for such purpose. The
Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the
Rights Agent of all reasonable expense incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will execute and deliver a
new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of
the Right Certificate so lost, stolen, destroyed or mutilated.
<PAGE> 12
Section 7. Exercise of Rights; Purchase Price; Expiration
_______________________________________________
Date of Rights.
_______________
(a) Except as otherwise provided herein, the registered
holder of any Right Certificate may exercise the Rights evidenced
thereby in whole or in part at any time after the Distribution
Date and prior to the Expiration Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at an office of
the Rights Agent designated for such purpose, together with an
amount in cash, in lawful money of the United States of America,
equal to the sum of (i) the aggregate Purchase Price for the
number of one one-hundredths of a Preferred Share as to which such
surrendered Rights are exercised or, if applicable, the product of
(x) the number of Rights being surrendered for exercise and (y)
the exercise price per Right specified in Sections 11(a)(ii) or
13(a) hereof, as the case may be, and (ii) any applicable transfer
tax required to be paid by the holder of such Right Certificate in
accordance with Section 9 hereof. The registered holder of any
Right Certificate evidencing exercisable Rights may, at its
option, exercise the Rights evidenced thereby in whole or in part
as aforesaid without delivering to the Rights Agent the cash
payment referred to in the immediately preceding sentence;
provided that a Triggering Event shall have theretofore occurred;
and provided, further, that, in any such case, the number of
Common Shares, Substitute Securities or other securities, or the
amount of cash, as the case may be, which such holder would
otherwise be entitled to receive upon the exercise of such Rights
shall be reduced to the extent required to result in the aggregate
current market value thereof being reduced by an amount equal to
the amount of cash that otherwise would have been payable pursuant
to the immediately preceding sentence. For purposes of this
Section 7(a), (i) the current market value of any security shall
be the current market price thereof (determined pursuant to the
applicable provisions of Section 11(d)(i) hereof in the case of
Common Shares, and determined in a similar manner in the case of
any other security) on the Trading Day immediately preceding the
date of the first occurrence of any Triggering Event and (ii) the
current market value-of cash shall be the face amount thereof.
(b) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly
executed, and accompanied by payment as described above, the
Rights Agent shall promptly (i) requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) certificates representing the number
of Preferred Shares to be purchased and the Company hereby
irrevocably authorizes its transfer
<PAGE> 13
agent to comply with all such requests, or, if the Company shall
have elected to deposit Preferred Shares issuable upon exercise of
the Rights hereunder with a depository agent, requisition from the
depositary agent depositary receipts representing such number of
one one-hundredths of a Preferred Share as are to be purchased and
the Company will direct the depositary agent to comply with such
request, (ii) after receipt of such certificates (or depositary
receipts, as the case may be), cause the same to be delivered to
or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated
by such holder, (iii) when appropriate, requisition from the
Company or any transfer agent therefor (or make available if the
Rights Agent is the transfer agent) certificates representing the
number of Common Shares to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such
requests, (iv) after receipt of such certificates, cause the same
to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may be
designated by such holder, (v) when appropriate, requisition from
the Company or any transfer agent therefor (or make available, if
the Rights Agent is the transfer agent) certificates representing
the number of Substitute Securities to be issued in lieu of the
issuance of Common Shares in accordance with the provisions of
Section 11(a)(iii) hereof and the Company hereby authorizes its
transfer agent to comply with all such requests, (vi) when
appropriate, after receipt of such certificates, cause the same to
be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be
designated by such holder, (vii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of the
issuance of fractional shares in accordance with Section 14 hereof
or in lieu of the issuance of Common Shares in accordance with
Section 11(a)(iii) hereof, (viii) when appropriate, after receipt,
deliver such cash to or upon the order of the registered holder of
such Right Certificate, and (ix) when appropriate, deliver any due
bill or other instrument provided to the Rights Agent by the
Company for delivery to the registered holder of such Right
Certificate as provided by Section 11(l) hereof.
(c) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall, subject to Section 14 hereof, be
issued by the Rights Agent to the registered holder of such Right
Certificate or to his duly authorized assigns.
<PAGE> 14
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to any purported
transfer, split-up, combination or exchange of any Rights
Certificate pursuant to Section 6 hereof or exercise of a Right
Certificate as set forth in this Section 7 unless the registered
holder of such Right Certificate shall have (i) completed and
signed the certificate following the form of assignment or
election to purchase set forth on the reverse side of the Right
Certificate surrendered for such transfer, split-up, combination,
exchange or exercise and (ii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall
reasonably request.
(e) Notwithstanding anything in this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction
if the requisite qualification or registration in such
jurisdiction shall not have been effected or the exercise of the
Rights shall not be permitted under applicable law.
Section 8. Cancellation and Destruction of Right
______________________________________
Certificates.
_____________
All Right Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange shall, if
surrendered to the Company or to any of its stock transfer agents,
be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by
it, and no Right Certificates shall be issued in lieu thereof
except as expressly permitted by this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall-so cancel and retire, any other Right
Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Right
Certificates and deliver a certificate of destruction thereof to
the Company.
Section 9. Company Covenants Concerning Shares and Rights.
_______________________________________________
The Company covenants and agrees that:
(a) It will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any Preferred
Shares held in its treasury, a number of Preferred Shares that
will be sufficient to permit the exercise pursuant to Section 7
hereof of all outstanding Rights.
<PAGE> 15
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other
securities as provided herein) issuable and deliverable upon the
exercise of the Rights may be listed on a national securities
exchange, it will endeavor to cause, from and after such time as
the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of
issuance.
(c) It will take all such action as may be necessary to
ensure that all Preferred Shares (and, following the occurrence of
a Triggering Event, Common Shares and/or other securities)
delivered upon exercise of Rights, at the time of delivery of the
certificates or depository receipts for such securities, shall be
(subject to payment of the Purchase Price) duly and validly
authorized and issued, fully paid and nonassessable shares.
(d) It will pay when due and payable any and all federal
and state transfer taxes and charges that may be payable in
respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares and/or other securities,
as the case may be) upon the exercise of Rights; provided,
however, it will not be required to pay any transfer tax or charge
which may be payable in respect of any transfer or delivery of
Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts representing
Preferred Shares (or Common Shares and/or other securities, as the
case may be) in a name other than that of, the registered holder
of the Right Certificate evidencing Rights surrendered for
exercise, or to issue or deliver any certificates or depository
receipts representing Preferred Shares (or Common Shares and/or
other securities, as the case may be) upon the exercise of any
Rights until any such tax or charge shall have been paid (any such
tax or charge being payable by the holder of such Right
Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is
due.
(e) It will use its best efforts to (i) file on an
appropriate form, as soon as practicable following the
Distribution Date, a registration statement under the Securities
Act with respect to the securities purchasable upon exercise of
the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii)
cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B)
<PAGE> 16
the Expiration Date. The Company will also take such action as
may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection
with the exercisability of the Rights. The Company may
temporarily suspend the exercisability of the Rights in order to
prepare and file such registration statement and permit it to
become effective and upon any such suspension, the Company will
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution
Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been
declared effective and, upon any such suspension, the Company will
issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in
effect.
(f) Notwithstanding anything in this Agreement to the
contrary, the Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23
or Section 26 hereof, take (or permit any Subsidiary to take) any
action if at the time such action is taken it is reasonably
foreseeable that such action will diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
(g) In the event that the Company is obligated to issue
other securities of the Company, pay cash and/or distribute other
property pursuant to Sections 11, 13 or 14 hereof, it will make
all arrangements necessary so that such other securities, cash
and/or property are available for distribution by the Rights
Agent, if and when appropriate.
Section 10. Record Date.
____________
Each Person in whose name any certificate or depository
receipt representing Preferred Shares (or Common Shares and/or
other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares (or Common Shares and/or
other securities, as the case may be) represented thereby on, and such
certificate or depository receipt shall be dated, the date upon
which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable
transfer taxes) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred
Shares (or Common Shares and/or other
<PAGE> 17
securities, as the case may be) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of
such securities on, and such certificate or depository receipt shall be
dated, the next succeeding Business Day on which the Preferred Shares
(or Common Shares and/or other securities, as the case may be) transfer
books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a shareholder of the Company with
respect to securities for which the Rights shall be exercisable,
including without limitation the right to vote, receive dividends
or other distributions or exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Type
______________________________________________
of Shares or Number of Rights.
______________________________
The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the
Preferred Shares payable in Preferred Shares, (B) split up
or divide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of
shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving
corporation), the Purchase Price in effect at the time of
the record date for such dividend or of the effective date
of such split-up or division or combination or
reclassification, and/or the number and/or kind of shares of
capital stock issuable on such date upon exercise of a
Right, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to
receive upon payment of the Purchase Price then in effect
the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to
such date and at a time when the Preferred Shares transfer
books of the Company were open, he or she would have owned
upon such exercise and been entitled to receive by virtue of
such dividend, split-up, division, combination or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof or Section 13 hereof,
<PAGE> 18
the adjustment provided for in this Section 11(a)(i) shall
be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) or Section
13 hereof.
(ii) In the event that
(A) any Person (other than the Company or any Related
Person), together with all Affiliates and Associates of
such Person, shall at any time after the date of this
Agreement, become the Beneficial Owner of 15% or more of
the Common Shares then outstanding (other than pursuant to
any transaction set forth in Section 13(a). hereof);
provided, however, that a Person shall not be deemed to
have become the Beneficial Owner of 15% or more of the
Common Shares then outstanding for the purposes of this
Section 11(a)(ii)(A) solely as a result of a reduction in
the number of Common Shares outstanding, unless and until
(1) such Person or any Affiliate or Associate of such
Person shall thereafter become the Beneficial Owner of any
additional Common Shares other than as a result of a stock
dividend, stock split or similar transaction effected by
the Company in which all holders of Common Shares are
treated equally or (2) any other Person who is the
Beneficial Owner of any Common Shares shall thereafter
become an Affiliate or Associate of such Person, or
(B) any Person, at any time after the date of this
Agreement, shall become an Adverse Person, or
(C) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of
this Agreement at which for any reason the adjustments
provided for in this Section 11(a)(ii) shall not have been
theretofore effected and then be continuing in effect
pursuant to Section 11(a)(ii)(A) or 11(a)(ii)(B) hereof,
directly or indirectly, shall (1) merge into the Company
or otherwise combine with the Company and the Company
shall be the continuing or surviving corporation of such
merger or combination (other than in a transaction subject
to Section 13 hereof), (2) merge or otherwise combine with
any Subsidiary of the Company, (3) in one or more
transactions (other than in connection with the exercise
of Rights or the exercise or conversion of securities
exercisable for or convertible into capital stock of the
Company or any of its Subsidiaries) transfer any assets to
the Company or any of its Subsidiaries in exchange (in
whole or in part) for shares of any class of capital stock
of the Company or any of its Subsidiaries or for
securities exercisable
<PAGE> 19
for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries, or
otherwise obtain from the Company or any of its
Subsidiaries, with or without consideration, any
additional shares of any class of capital stock of the
Company or any of its Subsidiaries or securities
exercisable for or convertible into shares of any
class of capital stock of the Company or any of its
Subsidiaries (other than as part of a pro rata
distribution to all holders of such shares of any class of
capital stock of the Company or any of its Subsidiaries),
(4) sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of (in one or more
transactions) any assets (including securities), to, from,
with or of, as the case may be, the Company or any of its
Subsidiaries (other than in a transaction subject to
Section 13 hereof), (5) receive any compensation from the
Company or any of its Subsidiaries other than compensation
as a Director or for full-time employment as a regular
employee, in either case, at rates in accordance with the
Company's (or its Subsidiaries') past practices, (6)
receive the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any
tax credits or other tax advantage provided by the Company
or any of its Subsidiaries, or (7) through its nominees or
representatives or otherwise, cause the Company to effect
any reclassification of securities (including any reverse
stock split) or recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of
transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise
involving an Acquiring Person), other than a transaction
subject to Section 13 hereof, which has the effect,
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class
of equity securities or of securities exercisable for or
convertible into equity securities of the Company or any
of its Subsidiaries of which an Acquiring Person or any
Associate or Affiliate of an Acquiring Person is the
Beneficial Owner,
then, and in each such case, proper provision shall be
made so that each holder of a Right, except as provided
below, shall thereafter have a right to receive, upon
exercise thereof in accordance with the terms of this
Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by
the number of one one-hundredths
<PAGE> 20
of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of such Flip-in
Event, in lieu of Preferred Shares, such number of Common
Shares as shall equal the result obtained by multiplying
the then-current Purchase Price by the number of one one-
hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of
such Flip-in Event, and dividing that product by 50% of
the current per share market price of the Common Shares
(determined pursuant to Section 11(d) hereof) on the date
of the first occurrence of any such Flip-in Event.
Notwithstanding anything in this Agreement to the
contrary, from and after the later of the Distribution
Date and the first occurrence of a Flip-in Event, (1) any
Rights that are or were acquired or beneficially owned by
any Acquiring Person (or any Affiliate or Associate of
such Acquiring Person) shall be void and any holder of
such Rights shall thereafter have no right to exercise
such Rights under any provision of this Agreement, (2) no
Right Certificate shall be issued pursuant to this
Agreement that represents Rights beneficially owned by an
Acquiring Person or any Affiliate or Associate thereof,
(3) no Right Certificate shall be issued at any time upon
the transfer of any Rights to an Acquiring Person or any
Affiliate or Associate thereof or to any nominee of such
Acquiring Person or Affiliate or Associate thereof, and
(4) any Right Certificate delivered to the Rights Agent
for transfer to an Acquiring Person or any Affiliate or
Associate thereof shall be canceled.
(iii) Upon the occurrence of a Flip-in Event, if there
shall not be sufficient Common Shares authorized but
unissued or issued but not outstanding to permit the
issuance of all the Common Shares issuable in accordance
with subsection (ii) hereof upon exercise of a Right, the
Board of Directors of the Company shall use its best efforts
promptly to authorize and, subject to the provisions of
Section 9(e) hereof, make available for issuance other
equity securities of the Company having an equivalent value
(as determined in good faith by the Board of Directors of
the Company) to the Common Shares (the "Substitute
Securities"). In such event, upon the exercise of a Right
in accordance with Section 7 hereof, the registered holder
shall be entitled to receive (A) Common Shares, to the
extent any are available and (B) a number of Substitute
Securities, which the Board of Directors shall have
determined in good faith to have a value equivalent to the
excess of (x) the aggregate current per share market value
of all the Common Shares issuable in accordance
<PAGE> 21
with subsection (ii) hereof upon the exercise of a Right
(the "Exercise Value") over (y) the aggregate current per
share market value of any Common Shares available for
issuance upon the exercise of such Right; provided, however,
that if at any time after 90 calendar days after the first
occurrence of a Flip-in Event, there shall not be sufficient
Common Shares and/or Substitute Securities available for
issuance upon the exercise of a Right, then the Company
shall be obligated to deliver, upon the surrender of such
Right and without requiring payment of the Purchase Price,
Common Shares (to the extent available), Substitute
Securities (to the extent available) and then cash (to the
extent permitted by applicable law and any agreements or
instruments to which the Company is a party in effect
immediately prior to the first occurrence of any Flip-in
Event), which securities and cash shall have an aggregate
value equal to the excess of (1) the Exercise Value over (2)
the product of the then-current Purchase Price multiplied by
the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to the first
occurrence of a Triggering Event. To the extent that any
legal or contractual restrictions prevent the Company from
paying the full amount of cash payable in accordance with
the foregoing sentence, the Company shall pay to holders of
the Rights as to which such payments are payable all amounts
which are not then restricted on a pro rata basis and shall
continue to make payments on a pro rata basis as funds
become available until the full amount due to each such
Right holder has been paid.
(b) In the event that the Company shall fix a record
date for the issuance of rights, options or warrants to all
holders of Preferred Shares entitling them (for a period
expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or securities
having equivalent rights, privileges and preferences as the
Preferred Shares ("equivalent preferred shares")) or
securities convertible into Preferred Shares or equivalent
preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per
share, if a security convertible into Preferred Shares or
equivalent preferred shares) less than the current per share
market price of the Preferred Shares (as determined pursuant
to Section 11(d) hereof) on such record date, the Purchase
Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which
<PAGE> 22
shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the
aggregate offering price of the total number of Preferred
Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at
such current per share market price and the denominator of
which shall be the number of Preferred Shares outstanding on
such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In
case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed;
and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In the event that the Company shall fix a record
date for the making of a distribution to all holders of
Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of
evidences of indebtedness, cash (other than a regular
periodic cash dividend at a rate not in excess of 125% of
the rate of the highest regular periodic cash dividend paid
during the immediately preceding two years), assets, stock
(other than a dividend payable in Preferred Shares) or
subscription rights, options or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to
be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which
shall be the current per share market price of the Preferred
Shares (as determined pursuant to Section 11(d) hereof) on
such record date or, if earlier, the date on which Preferred
Shares begin to trade on an ex-dividend or when-issued basis
with respect to such distribution, less the fair market
value (as determined in good faith by the Board of Directors
of the Company, whose determination
<PAGE> 23
shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets, stock or
evidences of indebtedness so to be distributed (in the case
of periodic cash dividends, only that portion in excess of
125% of the rate of the highest regular periodic cash
dividend paid during the immediately preceding two years) or
of such subscription rights, options or warrants applicable
to one Preferred Share, and the denominator of which shall
be such current per share market price of the Preferred
Shares. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, the
"current per share market price" of Common Shares on any
date shall be deemed to be the average of the daily closing
prices per share of such Common Shares for the 30
consecutive Trading Days immediately prior to such date;
provided, however, that in the event that the current per
share market price of the Common Shares is determined during
a period following the announcement by the issuer of such
Common Shares of (A) a dividend or distribution on such
Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights)
or (B) any subdivision, combination or reclassification of
such Common Shares, and prior to the expiration of 30
Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such
case, the current per share market price shall be
appropriately adjusted to take into account ex-dividend
trading or to reflect the current per share market price per
Common Share equivalent. The closing price for each day
shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common
Shares are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities exchange on
which the Common Shares are listed or admitted to trading
or, if the Common Shares are not listed or admitted to
trading on any national securities
<PAGE> 24
exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-
the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common
Shares selected by the Board of Directors of the Company.
If the Common Shares are not publicly held or not so listed
or traded, or not the subject of available bid and asked
quotes, "current per share market price" shall mean the fair
value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares
shall be determined in the same manner as set forth above
for Common Shares in Section 11(d)(i), other than the last
sentence thereof. If the current per share market price of
the Preferred Shares cannot be determined in the manner
provided above, the current per share market price of the
Preferred Shares shall be conclusively deemed to be an
amount equal to the current per share market price of the
Common Shares multiplied by one hundred (as such number may
be appropriately adjusted to reflect events such as stock
splits, stock dividends, recapitalizations or similar
transactions relating to the Common Shares occurring after
the date of this Agreement). If neither the Common Shares
nor the Preferred Shares are publicly held or so listed or
traded, or the subject of available bid and asked quotes,
"current per share market price" of the Preferred Shares
shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent. For all purposes of this Agreement, the
current per share market price of one one-hundredth of a
Preferred Share shall be equal to the current per share
market price of one Preferred Share divided by 100.
(e) Except as set forth below, no adjustment in the
Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any
subsequent
<PAGE> 25
adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest one-thousandth of
a Common Share or other share or one hundred-thousandth of a
Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction
which requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any
Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in this Section 11
and the provisions of Sections 7, 9, 10, 13 and 14 hereof
with respect to the Preferred Shares shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of Preferred Shares
purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i) hereof, upon each
adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) hereof and Section 11(c)
hereof made with respect to a distribution of subscription
rights, options or warrants applicable to Preferred Shares,
each Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the
nearest one hundred-thousandth of a Preferred Share)
obtained by (i) multiplying the number of one one-hundredths
of a Preferred Share covered by a Right immediately prior to
this adjustment by the Purchase Price in effect immediately
prior to such adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase
Price.
<PAGE> 26
(i) The Company may elect, on or after the date of
any adjustment of the Purchase Price, to adjust the number
of Rights in substitution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment
of the number of Rights shall be exercisable for the number
of one one-hundredths of a Preferred Share for which a Right
was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number
of Rights shall become that number of Rights (calculated to
the nearest one-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at
least 10 calendar days later than the date of the public
announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of
Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result
of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held
by such holders prior to the date of adjustment, and upon
surrender thereof if required by the Company, new Right
Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders
of record of Right Certificates on the record date specified
in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number or kind of shares issuable upon
the exercise of the Rights, the Right Certificates
theretofore
<PAGE> 27
and thereafter issued may continue to express the Purchase
Price and the number of shares which were expressed in the
initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the aggregate
par value, if any, of the securities issuable upon exercise
of a Right, the Company shall take any corporate action
which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully
paid and nonassessable securities at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised
after such record date the number of Preferred Shares or
other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of
Preferred Shares or other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares,
capital stock or securities upon the occurrence of the event
requiring such adjustment.
(m) Notwithstanding anything in this Agreement to the
contrary, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in
order that any (i) consolidation or subdivision of the
Preferred Shares, (ii) issuance wholly for cash of Preferred
Shares at less than the current per share market price
therefor, (iii) issuance wholly for cash of Preferred Shares
or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Company to holders of
its Preferred Shares shall not be taxable to such
shareholders.
(n) Notwithstanding anything in this Agreement to the
contrary, in the event that the Company shall at any time
after the date of this Agreement and prior to the
Distribution Date (i) declare a dividend on the outstanding
Common Shares payable in Common Shares,
<PAGE> 28
(ii) split up or divide the outstanding Common Shares, (iii)
combine the outstanding Common Shares into a smaller number
of shares, or (iv) issue any shares of its capital stock in
a reclassification of the outstanding Common Shares
(including any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), the number of Rights
associated with each Common Share then outstanding, or
issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number
of Rights thereafter associated with each Common Share
following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common
Share immediately prior to such event by a fraction the
numerator of which shall be the total number of Common
Shares outstanding immediately prior to the occurrence of
the event and the denominator of which shall be the total
number of Common Shares outstanding immediately following
the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or
_________________________________________
Number of Shares.
_________________
Whenever an adjustment is made as provided in Section 11 or
Section 13(a) hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (b) promptly file with
the Rights Agent and with each transfer agent for the Common
Shares and the Preferred Shares, a copy of such certificate, and
(c) if such adjustment is made after the Distribution Date, mail a
brief summary of such adjustment to each holder of a Right
Certificate in accordance with Section 25 hereof.
Section 13. Consolidation, Merger or Sale or Transfer of
_____________________________________________
Assets or Earning Power.
________________________
(a) In the event that, following the Share Acquisition
Date, directly or indirectly,
(i) the Company shall consolidate with, or merge with
or into, any other Person and the Company shall not be the
continuing or surviving corporation of such consolidation or
merger, or
(ii) any Person shall consolidate with the Company, or
merge with or into the Company and the Company shall be the
continuing or surviving corporation of such merger or
consolidation and, in connection with such merger or
consolidation, all or part of the
<PAGE> 29
Common Shares shall be changed into or exchanged for stock
or other securities of such other Person or cash or any
other property, or
(iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning
power (including without limitation securities creating any
obligation on the part of the Company and/or any of its
Subsidiaries) representing in the aggregate more than 50% of
the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons,
then, and in each such case, proper provision shall be made
so that (A) except as provided below, each holder of a Right
shall thereafter have the right to receive, upon the
exercise thereof in accordance with the terms of this
Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which
a Right was exercisable immediately prior to the first
occurrence of any Flip-over Event (or, if a Flip-in Event
has occurred prior to the first occurrence of a Flip-over
Event, at an exercise price per Right equal to the product
of the Purchase Price in effect immediately prior to the
first occurrence of a Flip-in Event multiplied by the number
of one one-hundredths of a Preferred Share for which a Right
was exercisable immediately prior to the first occurrence of
a Flip-in Event), such number of validly authorized and
issued, fully paid, nonassessable and freely tradable Common
Shares of the Issuer, free and clear of any liens,
encumbrances and other adverse claims and not subject to any
rights of call or first refusal, as shall be equal to the
result obtained by multiplying the then-current Purchase
Price by the number of one one-hundredths of a Preferred
Share for which a Right is exercisable immediately prior to
the first occurrence of any Flip-over Event (or, if a Flip-
in Event has occurred prior to the first occurrence of a
Flip-over Event, multiplying the number of one one-
hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a
Flip-in Event by the Purchase Price in effect immediately
prior to such first occurrence) and dividing that product by
50% of the current per share market price of the Common
Shares of the Issuer (determined pursuant to Section 11(d)
hereof), on the date of consummation of such Flip-over
Event; (B) the Issuer shall thereafter be liable for, and
shall assume, by virtue of such Flip-over Event, all the
obligations and duties of the Company
<PAGE> 30
pursuant to this Agreement; (C) the term "Company" shall
thereafter be deemed to refer to the Issuer; and (D) the
Issuer shall take such steps (including without limitation
the reservation of a sufficient number of its Common Shares
to permit the exercise of all outstanding Rights) in
connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be possible, in
relation to its Common Shares thereafter deliverable upon
the exercise of the Rights.
(b) For purposes of this Section 13, "Issuer" shall
mean (i) in the case of any Flip-over Event described in
Sections 13(a)(i) or (ii) above, the Person that is the
continuing, surviving, resulting or acquiring Person
(including the Company as the continuing or surviving
corporation of a transaction described in Section 13(a)(ii)
above), and (ii) in the case of any Flip-over Event
described in Section 13(a)(iii) above, the Person that is
the party receiving the greatest portion of the assets or
earning power (including without limitation securities
creating any obligation on the part of the Company and/or
any of its Subsidiaries) transferred pursuant to such
transaction or transactions; provided, however, that, in any
such case, (A) if (1) no class of equity security of such
Person is, at the time of such merger, consolidation or
transaction and has been continuously over the preceding 12-
month period, registered pursuant to Section 12 of the
Exchange Act, and (2) such Person is a Subsidiary, directly
or indirectly, of another Person, a class of equity security
of which is and has been so registered, the term "Issuer"
shall mean such other Person; and (B), in case such Person
is a Subsidiary, directly or indirectly, of more than one
Person, a class of equity security of two or more of which
are and have been so registered, the term "Issuer" shall
mean whichever of such Persons is the issuer of the equity
security having the greatest aggregate market value.
Notwithstanding the foregoing, if the Issuer in any of the
Flip-over Events listed above is not a corporation or other
legal entity having outstanding equity securities, then, and
in each such case, (i) if the Issuer is directly or
indirectly wholly owned by a corporation or other legal
entity having outstanding equity securities, then all
references to Common Shares of the Issuer shall be deemed to
be references to the Common Shares of the corporation or
other legal entity having outstanding equity securities
which ultimately controls the Issuer, and (ii) if there is
no such corporation or other legal entity having
<PAGE> 31
outstanding equity securities, (Y) proper provision shall be
made so that the Issuer shall create or otherwise make
available for purposes of the exercise of the Rights in
accordance with the terms of this Agreement, a type or types
of security or securities having a fair market value at
least equal to the economic value of the Common Shares which
each holder of a Right would have been entitled to receive
if the Issuer had been a corporation or other legal entity
having outstanding equity securities; and (Z) all other
provisions of this Agreement shall apply to the issuer of
such securities as if such securities were Common Shares.
(c) The Company shall not consummate any Flip-over
Event unless the Issuer shall have a sufficient number of
authorized Common Shares (or other securities as
contemplated in Section 13(b) above) which have not been
issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and
unless prior to such consummation the Company and the Issuer
shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in
subsections (a) and (b) of this Section 13 and further
providing that as soon as practicable after the consummation
of any Flip-over Event, the Issuer will
(i) prepare and file a registration statement
under the Securities Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon
as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of
the Securities Act) until the Expiration Date;
(ii) take all such action as may be appropriate
under, or to ensure compliance with, the securities or "blue
sky" laws of the various states in connection with the
exercisability of the Rights; and
(iii) deliver to holders of the Rights historical
financial statements for the Issuer and each of its
Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
(d) The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or
other transfers. In the event that a Flip-over Event occurs
at any
<PAGE> 32
time after the occurrence of a Flip-in Event, exercisable
Rights which have not theretofore been exercised shall
thereafter be exercisable in the manner described in this
Section 13.
Section 14. Fractional Rights and Fractional Shares.
________________________________________
(a) The Company shall not issue fractions of Rights
or distribute Right Certificates which evidence fractional
Rights. In lieu of issuing fractional Rights or
distributing Rights Certificates which evidence fractional
Rights, the Company may (i) pay as promptly as practicable
to any Person to whom or which such fractional Rights would
otherwise be issuable or to whom or which Rights
Certificates evidencing fractional Rights would otherwise be
distributable, an amount in cash equal to the same fraction
of the current market value of one Right or (ii) take such
other action permissible under applicable law as the Board
of Directors of the Company deems appropriate. For the
purposes of this Section 14(a), the current market value of
one Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such
fractional Rights would otherwise have been issuable. The
closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted
to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in
use or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is
making a market in the Rights the fair value of the Rights
on such date as determined in good faith by the Board of
Directors of the Company shall be used and shall be
conclusive for all purposes.
<PAGE> 33
(b) The Company shall not issue fractions of
Preferred Shares upon exercise of the Rights or distribute
certificates which evidence fractional Preferred Shares.
Fractions of Preferred Shares in integral multiples of one
one-hundredth of a Preferred Share may, at the election of
the Company, be evidenced by depositary receipts pursuant to
an appropriate agreement between the Company and a
depositary selected by it, provided that such agreement
shall provide that the holders of such depositary receipts
shall have all the rights, privileges and preferences to
which they are entitled as beneficial owners of the
Preferred Shares represented by such depositary receipts and
that such depositary receipts are exchangeable for Preferred
Shares only in amounts calling for one or more whole
Preferred Shares. In lieu of issuing fractional Preferred
Shares or distributing certificates which evidence
fractional Preferred Shares, the Company may (i) pay as
promptly as practicable to any Person to whom or which
fractional Preferred Shares would otherwise be issuable or
to whom or which certificates evidencing fractional
Preferred Shares would otherwise be distributable, an amount
in cash equal to the same fraction of the current market
value of one Preferred Share or (ii) take such other action
permissible under applicable law as the Board of Directors
of the Company deems appropriate. For purposes of this
Section 14(b), the current market value of one Preferred
Share shall be the closing price of the Preferred Shares
(determined in the same manner as set forth for Common
Shares in the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of such
exercise; provided, however, that if the closing price of
the Preferred Shares cannot be so determined, the closing
price of the Preferred Shares for such Trading Day shall be
conclusively deemed to be an amount equal to the closing
price of the Common Shares (determined pursuant to the
second sentence of Section 11(d)(i) hereof) for such Trading
Day multiplied by one hundred (as such number may be
appropriately adjusted to reflect events such as stock
splits, stock dividends, recapitalizations or similar
transactions relating to the Common Shares occurring after
the date of this Agreement); and provided further, however,
that if neither the Common Shares nor the Preferred Shares
are publicly held or listed or admitted to trading on any
national securities exchange, or the subject of available
bid and asked quotes, the current market value of one
Preferred Share shall be determined in
<PAGE> 34
good faith by the Board of Directors of the Company, whose
determination shall be conclusive for all purposes.
(c) Following the occurrence of a Triggering Event,
the Company shall not issue fractions of Common Shares or
other securities issuable upon exercise of the Rights or
distribute certificates which evidence any such fractional
securities. In lieu of issuing any such fractional
securities or distributing certificates which evidence any
such fractional securities, the Company may (i) pay as
promptly as practicable to any Person to whom or which any
such fractional securities would otherwise be issuable or
to whom or which certificates evidencing any such fractional
securities would otherwise be distributable, an amount in
cash equal to the same fraction of the current market value
of one such security or (ii) take such other action
permissible under applicable law as the Board of Directors
of the Company deems appropriate. For purposes of this
Section 14(c), the current market value of one Common Share
or other security issuable upon the exercise of Rights shall
be the closing price thereof (determined in the same manner
as set forth for Common Shares in the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise; provided, however, that
if the Common Shares or such other securities, as
applicable, are not publicly held or not listed or admitted
to trading on any national securities exchange, or not the
subject of available bid and asked quotes, the current
market value of one Common Share or such other security
shall be determined in good faith by the Board of Directors
of the Company.
Section 15. Rights of Action.
_________________
All rights of action in respect of this Agreement, excepting
the rights of action given to the Rights Agent under Section 18
hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered
holder of any Right Certificate (or, prior to the Distribution
Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), may in his own
behalf and for his own benefit enforce, and may institute and
maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Right Certificate or Common Share
certificate in the manner provided in such Right
<PAGE> 35
Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations
under this Agreement, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to
this Agreement.
Section 16. Agreement of Rights Holders.
____________________________
Every holder of a Right by accepting the same consents and
agrees with the Company and the Rights Agent and with every other
holder of a Right that:
(a) the Rights will not be exercisable prior to the
Distribution Date or after the Expiration Date;
(b) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of the
Common Shares;
(c) after the Distribution Date, the Right
Certificates will be transferable only on the registry books
of the Rights Agent if surrendered at the principal office
of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
(d) the Company and the Rights Agent may deem and
treat the Person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Share
certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificate
or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary;
(e) the holder expressly waives any right to receive
any fractional rights or any fractional shares upon exercise
of a Right, except as otherwise provided in Section 14
hereof;
(f) the Rights will at all times be subject to all of
the terms, provisions and conditions of this Agreement, as
the same may be amended from time to time; and
(g) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall
have any liability to any holder of a Right or other Person
as a
<PAGE> 36
result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation;
provided, however, that the Company shall use its best
efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a
______________________________________
Shareholder.
____________
No holder, as such, of any Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose
the holder of the Preferred Shares or any other securities of the
Company which may at any time be issuable upon the exercise of the
Rights represented thereby, nor shall anything contained herein or
in any Right Certificate be construed to confer upon the holder of
any Right Certificate, as such, any of the rights of a shareholder
of the Company or any right to vote for the election of Directors
or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have
been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
____________________________
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability, suit, action, proceeding or
expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses
of defending against any claim of liability arising therefrom,
directly or indirectly.
<PAGE> 37
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any Right Certificate or certificate
evidencing Preferred Shares or other securities of the Company,
instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons.
Section 19. Merger or Consolidation or Change of Name of
____________________________________________
Rights Agent.
____________
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall
have been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver Right
Certificates so countersigned; and in case at that time any of the
Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior
name or in its changed name; and
<PAGE> 38
in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
_______________________
The Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to
the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by any one of the Chairman
of the Board, the President or any Vice President of the Company
and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution and delivery hereof by
the Rights Agent) or in respect of the validity or execution of
any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment
required under the provisions of
<PAGE> 39
Section 11 or Section 13 hereof (including any adjustment which
results in Rights becoming void) or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except
with respect to the exercise of Rights evidenced by Right
Certificates after actual notice of any such adjustment or
voidance); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation
of any shares of stock or other securities to be issued pursuant
to this Agreement or any Right Certificate or as to whether any
shares of stock or other securities will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the Vice
Chairman, the President or any Vice President of the Company, and
to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken
or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may
be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(I) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company
<PAGE> 40
resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and
continued employment thereof. The Rights Agent shall not be under
any duty or responsibility to insure compliance with any
applicable federal or state securities laws in connection with the
issuance, transfer or exchange of Right Certificates.
(j) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise, transfer, split up, combination
or exchange, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 or
2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise, transfer, split up,
combination or exchange without first consulting with the Company.
Section 21. Change of Rights Agent.
_______________________
The Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 calendar days'
notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the
Common Shares and Preferred Shares by registered or certified
mail, and to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 calendar days after giving
notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for inspection by
the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the
United States or of the States of Connecticut or New York (or of
any other state of the United States so long as such corporation
is authorized to do business as a banking institution in the
States of Connecticut or New York), in good standing, having a
principal office in the States
<PAGE> 41
of Connecticut or New York, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject
to supervision or examination by federal or state authority and
which has, or is a Subsidiary of another entity that has, at the
time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million and which shall otherwise meet any
requirements imposed by the New York Stock Exchange on transfer
agents and registrars. After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any
property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent of the Common
Shares and Preferred Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates. Failure to
give any notice provided for in this Section 21, or any defect
therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
___________________________________
Notwithstanding any of the provisions of this Agreement or
of the Rights to the contrary, the Company may, at its option,
issue new Right Certificates evidencing Rights in such form as may
be approved by the Board of Directors of the Company to reflect
any adjustment or change in the Purchase Price per share and the
number or kind or class of shares or other securities or property
purchasable under the Right Certificates made in accordance with
the provisions of this Agreement.
Section 23. Redemption.
___________
(a) The Rights may be redeemed by action of the Board of
Directors of the Company pursuant to Section 23(b) hereof and
shall not be redeemed in any other manner.
(b) The Board of Directors of the Company may, at its
option, redeem all but not less than all of the then-outstanding
Rights at the Redemption Price at any time prior to the Close of
Business on the later of (i) the Distribution Date and (ii) the
Share Acquisition Date. At any time
<PAGE> 42
following the Share Acquisition Date, the Board of Directors of
the Company may relinquish the right to redeem the Rights under
this Section 23(b) by duly adopting a resolution to that effect.
Immediately upon adoption of such resolution, the right of the
Board of Directors of the Company to redeem the Rights under this
Section 23(b) shall terminate without further action and without
any notice. Promptly after adoption of such a resolution, the
Company shall publicly announce such action; provided, however,
that the failure to give, or any defect in, any such notice shall
not affect the validity of the action of the Board of Directors.
(c) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights pursuant to
Section 23(b) hereof, and without any further action and without
any notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. Promptly after the action of the
Board of Directors of the Company ordering the redemption of the
Rights pursuant to Section 23(b) hereof, the Company shall
publicly announce such action and within 10 calendar days
thereafter shall give notice of redemption to the holders of the
then-outstanding Rights by mailing such notice to all such holders
at their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice;
provided, however, that the failure to give, or any defect in, any
such notice shall not affect the validity of the redemption of the
Rights. The notice of redemption mailed to the holders of the
Rights will state the method by which the payment of the
Redemption Price will be made. The Company may, at its option,
pay the Redemption Price in cash, Common Shares (based upon the
current per share market price of the Common Shares (determined
pursuant to Section 11(d) hereof) at the time of redemption) or
any other form of consideration deemed appropriate by the Board of
Directors of the Company (based upon the fair market value of such
other consideration (determined by the Board of Directors of the
Company in good faith) at the time of redemption) or any
combination thereof.
Section 24. Notice of Certain Events.
_________________________
(a) In case, after the Distribution Date, the Company shall
propose (i) to pay any dividend payable in stock of any class to
the holders of Preferred Shares or to make any other distribution
to the holders of Preferred Shares (other than a regular periodic
cash dividend at a rate not in
<PAGE> 43
excess of 125% of the rate of the highest regular periodic cash
dividend paid during the immediately preceding two years), (ii) to
offer to the holders of Preferred Shares rights, options or
warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the
split-up or division of outstanding Preferred Shares, (iv) to
effect any consolidation or merger into or with, or to effect any
sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more
transactions, of assets or earning power (including without
limitation securities creating any obligation on the part of the
Company and/or any of its Subsidiaries) representing more than 50%
of the assets and earning power of the Company and its
Subsidiaries, taken as a whole, to any other Person or Persons,
(v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a split-up or
division or combination or reclassification of the Common Shares,
then, in each such case, the Company shall give to each holder of
a Right Certificate, in accordance with Section 25 hereof, a
notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, distribution or
offering of rights, options or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the Preferred
Shares, if any such date is to be fixed, and such notice shall be
so given, in the case of any action covered by clause (i) or (ii)
above, at least 10 calendar days prior to the record date for
determining holders of the Preferred Shares for purposes of such
action, and, in the case of any such other action, at least 10
calendar days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the
Preferred Shares, whichever shall be the earlier.
(b) In case any Triggering Event shall occur, then, in each
such case, the Company shall as soon as practicable thereafter
give to the Rights Agent and each holder of a Right Certificate,
in accordance with Section 25 hereof, a notice of the occurrence
of such event, which shall specify the event and the consequences
of the event to holders of Rights.
<PAGE> 44
Section 25. Notices.
________
(a) Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or
made if sent by first-class mail, postage prepaid, or by
commercial expedited delivery service, delivery charges prepaid,
addressed (until another address is filed in writing with the
Rights Agent) as follows:
Aetna Inc.
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Corporate Secretary
(b) Subject to the provisions of Section 21 hereof, any
notice or demand authorized by this Agreement to be given or made
by the Company or by the holder of any Right Certificate to or on
the Rights Agent shall be sufficiently given or made if sent by
first-class mail, postage prepaid, or by commercial expedited
delivery service, delivery charges prepaid, addressed (until
another address is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard, Suite 4660
Jersey City, New Jersey 07310
Attention: Tenders and Exchanges Administration
(c) Notices or demands authorized by this Agreement to be
given or made by the Company or the Rights Agent to or on the
holder of any Right Certificate shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to
such holder at the address of such holder as shown on the registry
books of the Rights Agent.
Section 26. Supplements and Amendments.
___________________________
Prior to the Distribution Date and subject to the last
sentence of this Section 26, if the Company so directs, the
Company and the Rights Agent shall supplement or amend any
provision of this Agreement in any manner which the Company may
deem desirable without the approval of any holders of Rights or
certificates representing Common Shares. From and after the
<PAGE> 45
Distribution Date and subject to the last sentence of this Section
26, if the Company so directs, the Company and the Rights Agent
shall supplement or amend this Agreement without the approval of
any holders of Rights or Certificates representing Common Shares
in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or
lengthen any time period hereunder, or (iv) to supplement or amend
the provisions hereunder in any manner which the Company may deem
desirable, including without limitation the addition of other
events requiring adjustment to the Rights under Sections 11 or 13
or procedures relating to the redemption of the Rights, which
supplement or amendment shall not, in the good faith determination
of the Board of Directors of the Company, adversely affect the
interests of the holders of Rights Certificates (other than an
Acquiring Person or an Affiliate or Associate of any such
Acquiring Person). Upon the delivery of a certificate from an
officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 26,
the Rights Agent shall execute such supplement or amendment;
provided, however, that the failure or refusal of the Rights Agent
to execute such supplement or amendment shall not affect the
validity or effective date of any supplement or amendment adopted
by the Company. Notwithstanding anything in this Agreement to the
contrary, no supplement or amendment shall be made which decreases
the stated Redemption Price.
Section 27. Successors; Certain Covenants.
______________________________
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns
hereunder.
Section 28. Benefits of this Agreement.
___________________________
Nothing in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or
claim under this Agreement; this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares).
<PAGE> 46
Section 29. Severability.
_____________
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
Section 30. Governing Law.
______________
This Agreement and each Right Certificate issued hereunder
shall be deemed to be a contract made under the internal
substantive laws of the State of Connecticut and for all purposes
shall be governed by and construed in accordance with the internal
substantive laws of such State applicable to contracts to be made
and performed entirely within such State, except for Sections 18,
19, 20 and 21, which shall be governed and construed in accordance
with the internal substantive laws of the State of New York.
Section 31. Counterparts.
_____________
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 32. Descriptive Headings.
_____________________
Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions
hereof.
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year
first above written.
[SEAL]
Attest: AETNA INC.
By /s/ Paige L. Falasco By /s/ Richard L. Huber
_______________________ ______________________
Its Assistant Secretary Its Vice Chairman
___________________ __________________
[SEAL]
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By James Kuzmick By Michael J. Kane
_______________________ ______________________
Its C.S.O. Its A.V.P.
___________________ __________________
Exhibit A
Provisions Applicable to the
15,000,000 Authorized Shares of
Class B Voting Preferred Stock
The 15,000,000 shares of authorized Class B Voting Preferred
Stock, $.01 par value per share, of the Company shall constitute a
single class with the following terms, limitations and relative
rights and preferences:
1. Dividends. The holders of any series of the Class B
Voting Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, preferential dividends at
such rates and payable on such dividend payment dates in each year
as shall be established for such series, such dividends to be
payable to holders of the Class B Voting Preferred Stock of record
on such dates as may be fixed by said Board, but not more than 70
days before each dividend payment date; provided, however, that
dividends shall not be declared or paid on any Class B Voting
Preferred Stock for any dividend period unless dividends have been
or are contemporaneously declared or paid to the same pro rata
extent on the outstanding preferred stock of all series of all
classes ranking on a parity with the Class B Voting Preferred
Stock as to payment of dividends for all dividend periods
terminating on the same or an earlier date.
Dividends on each share of any series of the Class B
Voting Preferred Stock shall accrue and be cumulative, if so
provided for in such series, from the date of issue thereof or
from such other date as may be provided for in such series.
Whenever dividends payable on the Class B Voting
Preferred Stock as provided herein are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Class B Voting Preferred Stock
outstanding shall have been paid in full, the Company shall not:
(a) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock;
(b) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Class B Voting Preferred Stock except dividends paid
ratably on the Class B Voting Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are
then entitled; or
(c) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
<PAGE> A-2
Company ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Class B Voting
Preferred Stock.
2. Liquidation. The holders of shares of any series of
the Class B Voting Preferred Stock shall receive upon any
voluntary or involuntary liquidation, dissolution or winding up of
the Company the respective amounts established for such series.
If the net assets of the Company shall be insufficient to pay said
amounts in full together with the aggregate liquidation preference
for the outstanding shares of preferred stock of all other classes
ranking on a parity with the Class B Voting Preferred Stock as to
payments upon liquidation, then the entire net assets of the
Company shall be distributed among the holders of preferred stock
of all such classes, who shall receive a common percentage of the
full respective preferential amounts. Neither the consolidation
nor the merger of the Company with or into another corporation or
corporations, nor the sale or transfer by the Company of all or
any part of its assets, shall be deemed a liquidation, dissolution
or winding up of the Company.
3. Redemption and Purchase. Subject to any restriction
contained in the terms of any particular series of the Class B
Voting Preferred Stock, all or any part of any series of the Class
B Voting Preferred Stock at any time outstanding may be called for
redemption at any time at the applicable redemption price provided
for in such series and in the manner herein below provided. All
or any part of any series of the Class B Voting Preferred Stock
may be called for redemption in accordance with the terms of such
series without calling any part or all of any other series of the
Class B Voting Preferred Stock. If less than all of any such
series of the Class B Voting Preferred Stock is so called, the
shares of such series of the Class B Voting Preferred Stock to be
called shall be selected by lot or pro rata or by any other means
the Board of Directors deems equitable, all as determined by the
Board of Directors.
Except for a mandatory redemption provided for in any
series of the Class B Voting Preferred Stock, (i) no call for
redemption of less than all of the Class B Voting Preferred Stock
outstanding shall be made without paying or setting aside for
payment an amount equal to the cumulative dividends accrued and
unpaid to the last preceding dividend date on all of the Class B
Voting Preferred Stock then outstanding and not called and (ii) no
redemption of less than all of the Class B Voting Preferred Stock
outstanding shall be made without paying or setting aside for
payment an amount equal to the cumulative dividends accrued and
unpaid to the dividend date that coincides with or last precedes
such redemption date on all the Class B Voting Preferred Stock
then outstanding and not called.
Except as otherwise provided in any series of the Class
B Voting Preferred Stock, notice of each such call, specifying the
shares called for redemption, the redemption date and the place
where the redemption price of the stock so called is payable, and,
if any series of such stock is convertible, the date upon which
the conversion rights of the shares of such series being redeemed
will expire, shall be mailed by or on behalf of the Company not
less than 30 days before the redemption date or the date upon
which conversion rights of such shares will expire when called for
redemption, whichever is earlier, to each holder of stock so
called at such holder's address as it appears upon the books of
the Company.
<PAGE> A-3
If notice of such call shall have been duly given as
aforesaid and if, on or before the redemption date designated in
such notice, the funds necessary for the redemption shall have
been set aside so as to be and continue to be available therefor,
then notwithstanding that any certificate of the Class B Voting
Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the dividends thereon shall cease to
accrue from and after the date of redemption so designated, and
all rights with respect to the shares of the Class B Voting
Preferred Stock so called for redemption shall forthwith after
such redemption date cease and terminate, except only the right of
the holders thereof to receive the redemption price of such shares
without interest.
The Company may, however, at any time prior to the
redemption date specified in the notice of redemption deposit in
trust, for the account of the holders of the shares of the Class B
Voting Preferred Stock to be redeemed, with a bank or trust
company in good standing named in the notice of redemption, all
funds necessary for the redemption, and deliver in writing
irrevocable instructions and authority directing such bank or
trust company on behalf of and at the expense of the Company to
cause notice of such redemption to be duly mailed as provided
above promptly after receipt of such irrevocable instructions and
authority and to pay the redemption price to the holders of the
shares of the Class B Voting Preferred Stock to be redeemed, and
thereupon, notwithstanding that any certificate for the shares of
the Class B Voting Preferred Stock so called for redemption shall
not have been surrendered for cancellation, all shares of the
Class B Voting Preferred Stock with respect to which the deposit
shall have been made shall no longer be deemed outstanding and all
rights with respect to such shares shall cease and terminate,
except only the right of the holders thereof to receive from such
bank or trust company the redemption price of such shares without
interest, and with respect to any series of such stock entitled to
conversion rights, to exercise such conversion rights. Any moneys
so deposited for the redemption of shares of the Class B Voting
Preferred Stock which shall be converted prior to the redemption
date shall be repaid to the Company immediately following such
conversion. Any amount earned on funds so deposited shall be paid
to the Company from time to time.
Any funds so set aside or deposited, as the case may
be, and unclaimed at the end of six years from such redemption
date shall be released and repaid to the Company upon its request
after which the holders of the shares so called for redemption
shall look only to the Company for the payment thereof without
interest.
4. Conversion. Shares of any series of the Class B Voting
Preferred Stock may be convertible into or exchangeable for Common
Stock or other securities or assets of the Company or any other
issuer to the extent, but only to the extent, if any, as may be
provided for in such series.
5. Voting Rights. Subject to the provision for adjustment
hereinafter set forth, each share of Class B Voting Preferred
Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the shareholders of the Company. In the
event the Company shall at any time after [closing date] (a)
declare a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (b) split up or divide the
outstanding shares of Common Stock, (c) combine the outstanding
shares of Common Stock into a smaller number of
<PAGE> A-4
shares, or (d) issue any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock are then
issued or outstanding, the number of votes per share to which each
holder of shares of Class B Voting Preferred Stock would be
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
Except as otherwise provided herein or by law, the
holders of shares of Class B Voting Preferred Stock and the
holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of shareholders of the Company.
Except as set forth herein, or as required by law,
holders of Class B Voting Preferred Stock shall have no special
voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock
as set forth herein) for taking any corporate action.
The Certificate of Incorporation shall not be amended
in any manner which would materially alter or change the powers,
preferences or special rights of the Class B Voting Preferred
Stock so as to affect them adversely without the affirmative vote
of the holders of at least a majority of the outstanding shares of
Class B Voting Preferred Stock, voting separately as a class.
6. Consolidation, Merger, Etc. (a) In case the Company
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for
or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Class B Voting
Preferred Stock shall at the same time be similarly exchanged for
or changed into an amount per share, subject to the provision for
adjustment set forth in subsection (b) of this Section 6, equal to
100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or
exchanged.
(b) In the event the Company shall at any time after
[closing date] (i) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (ii) split up or
divide the outstanding shares of Common Stock, (iii) combine the
outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock are then
issued or outstanding, the amount per share to which each holder
of shares of Class B Voting Preferred Stock would be entitled
immediately prior to such event under subsection (a) of this
Section 6 shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of
Common Stock
<PAGE> A-5
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Transfer Agent. The Company shall always have at least
one transfer agent for the Class B Voting Preferred Stock, which
may be the Company or a bank or trust company in good standing.
Provisions Applicable to the
Class B Voting Preferred Stock, Series A
There is hereby established a series of the Company's Class B
Voting Preferred Stock, par value $.01 per share, designated and
hereinafter referred to as "Class B Voting Preferred Stock, Series
A," the authorized number of shares of which series shall be
5,000,000 and the terms of which series shall be as follows:
1. Dividends. (a) The holders of shares of Class B Voting
Preferred Stock, Series A shall be entitled to receive cumulative
quarterly dividends payable in cash (or in kind to the extent
provided below) on the fifteenth day of March, June, September and
December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a
share of Class B Voting Preferred Stock, Series A (the "First
Quarterly Dividend Payment Date"), in an amount per share (rounded
to the nearest cent), subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock
on or since the immediately preceding Quarterly Dividend
Declaration Date, as defined below, or, with respect to the first
Quarterly Dividend Declaration Date, since the first issuance of
any share of Class B Voting Preferred Stock, Series A. In the
event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Declaration Date and the next subsequent Quarterly Dividend
Declaration Date, the holders of shares of Class B Voting
Preferred Stock, Series A shall be entitled to receive a dividend
of $0.01 per share on the next subsequent Quarterly Dividend
Payment Date. The Company shall declare a dividend on the Class B
Voting Preferred Stock, Series A on the fifth day of March, June,
September and December of each year (each such date being referred
to herein as a "Quarterly Dividend Declaration Date"), commencing
on the first Quarterly Dividend Declaration Date after the first
issuance of a share of Class B Voting Preferred Stock, Series A.
In the event the Company shall at any time after [closing date]
(i) declare a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) split up or divide the
outstanding shares of Common Stock, (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock in a reclassification of the
outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation),
then, in each such case, and regardless of whether any shares of
Class B Voting Preferred Stock, Series A are then issued or
outstanding, the amount per share to which each holder of shares
of Class B Voting Preferred Stock, Series A would be entitled
immediately
<PAGE> A-6
prior to such event under the first sentence of this Section 1(a)
shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Dividends shall begin to accrue and be cumulative
on outstanding shares of Class B Voting Preferred Stock, Series A
from the Quarterly Dividend Payment Date next preceding the date
of issue of such shares: (i) unless the date of issue of such
shares is prior to the record date for the First Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of the first issuance of a
share of Class B Voting Preferred Stock, Series A; or (ii) unless
the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of
shares of Class B Voting Preferred Stock, Series A entitled to
receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin
to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Class B Voting Preferred Stock,
Series A in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the
time outstanding. The board of Directors may fix a record date
for the determination of holders of shares of Class B Voting
Preferred Stock, Series A entitled to receive payment of a
dividend or distribution declared thereon, which record date shall
be not more than 70 calendar days prior to the date fixed for the
payment thereof.
2. Redemption. The shares of Class B Voting Preferred
Stock, Series A shall not be redeemable.
3. Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, no
distribution or payment shall be made (a) to the holders of Common
Stock or any other shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Voting Preferred Stock, Series A, unless prior thereto,
the holders of shares of Class B Voting Preferred Stock, Series A
shall have received an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times
the aggregate amount to be distributed per share to holders of
Common Stock, plus an amount equal to all accrued and unpaid
dividends and distributions thereon, whether or not declared, to
the date of such payment, or (b) to the holders of stock ranking
on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Class B Voting Preferred
Stock, Series A, except distributions made ratably on the Class B
Voting Preferred Stock, Series A and all other such parity stock
in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Company shall at any time after
[closing date] (a) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (b) split up or
divide the outstanding shares of Common Stock, (c) combine the
outstanding shares of Common Stock into a smaller number of
shares, or (d) issue any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case, and regardless of
whether any shares of Class B Voting Preferred Stock,
<PAGE> A-7
Series A are then issued or outstanding, the aggregate amount per
share to which each holder of shares of Class B Voting Preferred
Stock, Series A would be entitled immediately prior to such event
under the provision in clause (a) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
4. No Conversion Rights. Holders of shares of Class B
Voting Preferred Stock, Series A shall have no right to convert
such shares into or exchange them for shares of Common Stock, or
other securities or assets of the Company or any other issuer.
5. Reacquired Shares. Any shares of Class B Voting
Preferred Stock, Series A purchased or otherwise acquired by the
Company in any manner whatsoever shall not be cancelled but shall
be held as treasury shares until retired, cancelled or reissued by
action of the Board of Directors.
Exhibit B
_________
(Form of Right Certificate]
Certificate No. R- Rights
___________
NOT EXERCISABLE AFTER NOVEMBER 7, 1999
OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $0.01 PER RIGHT ON THE
TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SPECIFIED IN THE RIGHTS
AGREEMENT, RIGHTS BENEFICIALLY OWNED
BY AN ACQUIRING PERSON OR AN AFFILIATE
OR AN ASSOCIATE OF AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) MAY BECOME NULL AND VOID.
Right Certificate
AETNA INC.
This certifies that , or registered
______________________
assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the
terms, provisions and conditions of the Rights Agreement dated as
of , 1996 (the "Rights Agreement") between Aetna Inc., a
______
Connecticut corporation (the "Company"), and First Chicago Trust
Company of New York, a New York corporation (the "Rights Agent"),
to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior
to 5:00 P.M. (Eastern time) on November 7, 1999 at the principal
office of
<PAGE> B-2
the Rights Agent, in New York, New York or its successor as Rights
Agent, one one-hundredth of a fully paid nonassessable share of
the Class B Voting Preferred Stock, Series A, par value $.01 per
share (the "Preferred Shares"), of the Company, at a purchase
price of $200.00 per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of Preferred Shares which may be
purchased upon exercise thereof) set forth above, and the Purchase
Price per one one-hundredth of a Preferred Share set forth above,
are the number and Purchase Price as of , 1996. No Right is
______
exercisable at any time prior to the Distribution Date.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are
subject to modification and adjustment upon the happening of
certain events, and the Rights are subject to amendment,
redemption and certain other events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent.
Pursuant to the Rights Agreement, from and after the later
of the Distribution Date and the first occurrence of a Flip-in
Event (as such term is defined in the Rights Agreement), (i) any
Rights that are or were acquired or beneficially owned by any
Acquiring Person (or any Affiliate or Associate of such Acquiring
Person) shall be void and any holder of such Rights shall
thereafter have no right to exercise such Rights under any
provision of the Rights Agreement, (ii) no Right Certificate shall
be issued pursuant to the Rights Agreement that represents Rights
beneficially owned by any Acquiring Person or any Affiliate or
Associate thereof, (iii) no Right Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person or
any Affiliate or Associate thereof or to any nominee of such
Acquiring Person or Affiliate or Associate thereof, and (iv) any
Right Certificate delivered to the Rights Agent for transfer to an
Acquiring Person or any Affiliate or Associate thereof shall be
canceled.
<PAGE> B-3
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights
Agent in New York, New York, may be transferred, split up,
combined or exchanged for another Right Certificate or Right
Certificates entitling the holder to purchase a like aggregate
number of Preferred Shares (or other securities, as the case may
be) as the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the
Rights evidenced by this Certificate may be redeemed by the
Company at its option at a redemption price of $0.01 per Right.
No fractional Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby. Fractions of
Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced
by depositary receipts. In lieu of issuing fractional Preferred
Shares, the Company may make a cash payment, as provided in the
Rights Agreement, or take such other action permissible under
applicable law as the Company's Board of Directors deems
appropriate.
No holder of this Right Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any Purpose
the holder of the Preferred Shares or of any other securities of
the Company which may at any time be issuable on the exercise of
the Right or Rights represented hereby, nor shall anything
contained herein or in the Rights Agreement be construed to confer
upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights
Agent.
WITNESS the facsimile signature of the proper officers of
the Company and its corporate seal. Dated as of [the issuance
date].
<PAGE> B-4
ATTEST: AETNA INC.
By
_______________________ _______________________
Secretary Title:
Countersigned:
By
_______________________
Authorized Signature
<PAGE> B-5
(Form of Reverse Side of Right Certificate)
FORM OF ASSIGNMENT
__________________
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, hereby
____________________________________
sells, assigns and transfers unto
________________________________
__________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________
this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the
________________________________
within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: , 19
________________ ___
___________________________
Signature
Signature Guaranteed:
<PAGE> B-6
CERTIFICATE
___________
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are
[ ] are not being sold, assigned, transferred, split up,
combined or exchanged by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Person
(as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Right Certificate from any Person who is, was or
subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: , 19
________________ ___
___________________________
Signature
Signature Guaranteed:
NOTICE
______
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement
or any change whatsoever.
<PAGE> B-7
FORM OF ELECTION TO PURCHASE
____________________________
(To be executed if holder desires to
exercise the Right Certificate)
To Aetna Inc.:
The undersigned hereby irrevocably elects to exercise
_________
Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such shares be issued in the name
of:
Please insert social security
or other identifying number
__________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and
delivered to:
Please insert social security
or other identifying number
__________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________
Dated: , 19
________________ ___
___________________________
Signature
Signature Guaranteed:
<PAGE> B-8
CERTIFICATE
___________
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Right Certificate [ ]
are [ ] are not being exercised by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights
evidenced by this Right Certificate from any Person who is, was or
subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: , 19
________________ ___
___________________________
Signature
Signature Guaranteed:
NOTICE
______
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face
of this Right Certificate in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE> 1
Exhibit 15.1
Letter Re: Unaudited Interim Financial Information
Aetna Services, Inc.
Hartford, Connecticut
Gentlemen:
With respect to the Current Report on Form 8-K of Aetna Inc.,
we acknowledge our awareness of the incorporation by reference
of our report dated July 25, 1996 related to our review of
interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered a part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7
and 11 of the Act.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 25, 1996
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Aetna Services, Inc.:
We consent to the incorporation by reference of our report in the
Current Report on Form 8-K of Aetna Inc. of our report dated
February 6, 1996, relating to the consolidated balance sheets of
Aetna Services, Inc. (formerly Aetna Life and Casualty Company)
and Subsidiaries (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of income, shareholders'
equity and cash flows for each of the years in the three-year
period ended December 31, 1995, which report is incorporated by
reference in the December 31, 1995 Annual Report on Form 10-K of
Aetna Services, Inc. Our report refers to changes in 1993 in the
and 11 of the Act.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 25, 1996
<PAGE> 1
Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Aetna Inc.'s Current
Report on Form 8-K of our report dated February 2, 1996, with respect to
the consolidated financial statements of U.S. Healthcare, Inc.
incorporated by reference in U.S. Healthcare, Inc.'s Annual Report (Form
10-K, as amended) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
July 25, 1996
