<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1996
REGISTRATION NO. 333-07169
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
PREEFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AETNA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CONNECTICUT 02-0488491
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
151 FARMINGTON AVENUE
HARTFORD, CT 06156
(860)273-0123
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LUCILLE NICKERSON
CORPORATE SECRETARY
AETNA INC.
151 FARMINGTON AVENUE
HARTFORD, CT 06156
(860)273-0123
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
Howard G. Godwin, Jr., Esq. William J. Casazza, Esq. David L. Caplan, Esq.
Brown & Wood LLP Aetna Life and Casualty Company Davis Polk & Wardwell
One World Trade Center 151 Farmington Avenue 450 Lexington Avenue
New York, NY 10048 Hartford, CT 06156 New York, NY 10017
(212) 839-5300 (860) 273-0123 (212) 450-4000
</TABLE>
Approximate date of commencement of proposed sale to the public: from time
to time after the effective date of this Registration Statement
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share............. 3,473,607 shares (3) (3) (3)*
- ----------------------------------------------------------------------------------------------------------------------------
Preferred Stock Purchase Rights.................... 3,473,607 rights (3) (3) (3)*
- ----------------------------------------------------------------------------------------------------------------------------
6.25% Class C Voting Preferred Stock, par value
$.01 per share................................... 1,146,397 shares (3) (3) (3)*
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share issuable
upon conversion of the 6.25% Class C Voting
Preferred Stock, par value $.01 per share........ (2) (3) (3) (3)*
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the assumed number of shares that may be issued to Leonard
Abramson (the "Selling Shareholder") in the mergers described herein and the
number of shares that may be received by the Selling Shareholder pursuant to
the agreement with principal shareholder described herein. Such assumed
number is based upon (A) the number of shares of (i) Common Stock, par value
$.01 per share, of the Registrant ("Common Stock") expected to be issued to
the Selling Shareholder on the closing date of the mergers based on the
exchange ratio of 0.2246 shares of Common Stock for each share of common
stock, par value $0.005 per share, of U.S. Healthcare, Inc. ("U.S.
Healthcare Common Stock") and for each share of Class B Stock, par value
$0.005 per share, of U.S. Healthcare, Inc. ("U.S. Healthcare Class B Stock"
and, together with the U.S. Healthcare Common Stock, the "U.S. Healthcare
Stock") and (ii) 6.25% Class C Voting Preferred Stock, par value $.01 per
share, of the Registrant ("Mandatorily Convertible Preferred Stock")
expected to be issued to the Selling Shareholder on the closing date of the
mergers based on the exchange ratio of 0.0749 shares of Mandatorily
Convertible Preferred Stock for each share of U.S. Healthcare Stock and (B)
$2,500,000 (the amount to be received by the Selling Shareholder pursuant to
the agreement with principal shareholder) divided by the average of the last
reported sales prices per share of the common stock of Aetna Life and
Casualty Company on the New York Stock Exchange from June 21, 1996 to July
12, 1996.
(2) There are being registered hereunder such presently indeterminate number of
shares of Common Stock into which shares of Mandatorily Convertible
Preferred Stock may be converted and for which no separate consideration
will be received.
(3) Estimated solely for the purpose of computing the registration fee. Computed
in accordance with Rule 457(f)(1), (2) and (3) under the Securities Act of
1933, as amended, on the basis of 1/29th of 1% of the sum of (a) the product
of (i) 54 5/8 (the average of the high and low prices of U.S. Healthcare
Common Stock on June 26, 1996 on the NASDAQ Stock Market) times (ii)
15,305,710 (the aggregate number of shares of U.S. Healthcare Common Stock
and U.S. Healthcare Class B Stock to be exchanged by the Selling Shareholder
for Common Stock and Mandatorily Convertible Preferred Stock pursuant to the
mergers) and (b) $2,500,000 minus the product of (i) $34.20 times (ii)
15,305,710 (the aggregate number of shares of U.S. Healthcare Common Stock
and U.S. Healthcare Class B Stock to be exchanged by the Selling Shareholder
for Common Stock and Mandatorily Convertible Preferred Stock pursuant to the
mergers).
* Has been previously paid.
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 16, 1996
AETNA INC.
3,473,607 SHARES OF COMMON STOCK
3,473,607 PREFERRED STOCK PURCHASE RIGHTS
1,146,397 SHARES OF 6.25% CLASS C VOTING PREFERRED STOCK
This Prospectus relates to the offer and sale from time to time by Leonard
Abramson (the "Selling Shareholder"), or certain other persons, of a total of up
to 3,473,607 shares of Common Stock ("Common Stock"), par value $.01 per share,
of Aetna Inc., a Connecticut corporation ("Parent"), together with rights (each,
a "Right") issued pursuant to a Rights Agreement (the "Rights Agreement") to be
entered into by Parent and First Chicago Trust Company of New York, as Rights
Agent, effective on the date of the consummation of the Mergers (as defined
herein) (the "Merger Date"), and up to 1,146,397 shares of 6.25% Class C Voting
Preferred Stock ("Mandatorily Convertible Preferred Stock"), par value $.01 per
share, of Parent (and a presently indeterminate number of shares of Common Stock
into which shares of Preferred Stock may be converted). Parent will not receive
any of the proceeds from the sale of the Common Stock and the Mandatorily
Convertible Preferred Stock offered hereby. The shares of Common Stock and
Mandatorily Convertible Preferred Stock offered hereby are referred to herein as
the "Offered Securities".
Subject to the immediately following sentence, each share of Mandatorily
Convertible Preferred Stock will have an annual dividend rate of $4.7578 per
share. The dividend rate with respect to such Mandatorily Convertible Preferred
Stock is subject to a one-time increase in accordance with a specified formula
in the event that the initial annual dividend per share on Common Stock on the
Merger Date is more than $0.83 per share. Each share of Mandatorily Convertible
Preferred Stock is convertible at any time at the option of the holder thereof
into 0.8197 shares of Common Stock (subject to adjustments). Parent may redeem
shares of Mandatorily Convertible Preferred Stock at any time after the third
anniversary of the Merger Date for shares of Common Stock based on specified
formulas. On the fourth anniversary of the Merger Date, each outstanding share
of Mandatorily Convertible Preferred Stock will convert automatically into one
share of Common Stock (subject to adjustments). See "Description of Capital
Stock -- Mandatorily Convertible Preferred Stock".
Unless the context otherwise requires, all references in this Prospectus to
Common Stock shall include the corresponding Rights issued pursuant to the
Rights Agreement.
The Selling Shareholder or certain other persons, directly or through
agents, brokers, dealers or underwriters designated from time to time, may sell
Offered Securities from time to time, including sales for short account, on
terms to be determined at the time of sale. See "Plan of Distribution." To the
extent required, the names of any such agents, brokers, dealers or underwriters
and any other required information with respect to any particular offer will be
set forth in this Prospectus under the caption "Plan of Distribution" or any
accompanying Prospectus Supplement.
Parent has agreed to bear all expenses of registration of the Offered
Securities under federal and state securities laws and to indemnify the Selling
Shareholder and certain agents, dealers and underwriters against certain civil
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The Common Stock and the Mandatorily Convertible Preferred Stock have been
approved for listing on the New York Stock Exchange, subject to official notice
of issuance.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1996.
<PAGE> 3
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR IN AN APPLICABLE PROSPECTUS SUPPLEMENT IN
CONNECTION WITH ANY OFFER MADE THROUGH THIS PROSPECTUS OR SUCH PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY PARENT OR ANY UNDERWRITER, DEALER,
AGENT OR OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF PARENT AND ITS SUBSIDIARIES SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
AVAILABLE INFORMATION
Parent is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 5th Street, N.W., Washington, D.C. 20549. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 5th
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such information with
respect to Parent may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
Parent has filed with the Commission a Registration Statement on Form S-3
(together with all amendments, documents incorporated by reference and exhibits,
the "Registration Statement") under the Securities Act, with respect to the
Common Stock and Mandatorily Convertible Preferred Stock offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement and exhibits thereto filed by Parent with the Commission under the
Securities Act as permitted by the rules and regulations of the Commission. The
Registration Statement, including any amendments, schedules and exhibits filed
or incorporated by reference as a part thereof, is available for inspection and
copying as set forth above. Statements contained in this Prospectus or in any
document incorporated herein by reference as to the contents of any contract or
other document referred to herein or therein are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, and
each statement shall be deemed qualified in its entirety by such reference. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants,
including Parent, that file electronically with the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed with the Commission (Commission
file number 1-5704) by Aetna Life and Casualty Company ("Aetna") pursuant to the
Exchange Act are incorporated by reference in this Prospectus:
1. Aetna's Annual Report on Form 10-K for the year ended December 31,
1995;
2. Aetna's Current Reports on Form 8-K dated April 1, 1996, April 15,
1996, June 28, 1996 and July 16, 1996; and
3. Aetna's Quarterly Report on Form 10-Q for the three month period
ended March 31, 1996.
The following documents previously filed with the Commission (Commission
file number 0-11531) by U.S. Healthcare, Inc. ("U.S. Healthcare") pursuant to
the Exchange Act are incorporated by reference in this Prospectus:
1. U.S. Healthcare's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. U.S. Healthcare's Current Report on Form 8-K dated April 2, 1996;
2
<PAGE> 4
3. U.S. Healthcare's Amendments to its Annual Report on Form 10-K/A,
dated April 26, 1996 and June 11, 1996; and
4. U.S. Healthcare's Quarterly Report on Form 10-Q for the three month
period ended March 31, 1996.
The information relating to Parent, Aetna and U.S. Healthcare contained in
this Prospectus does not purport to be comprehensive and should be read together
with the information in the documents incorporated by reference herein.
All documents subsequently filed by Parent, Aetna or U.S. Healthcare
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference into this Prospectus and any
accompanying Prospectus Supplement and to be a part hereof and thereof from the
date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein or therein shall be deemed to be modified or
superseded for purposes of this Prospectus and any accompanying Prospectus
Supplement to the extent that a statement contained herein or therein (or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein and therein) modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed except, as so modified
or superseded, to constitute part of this Prospectus and any accompanying
Prospectus Supplement except as so modified or superseded.
Parent will furnish without charge to each person to whom this Prospectus
and any accompanying Prospectus Supplement is delivered upon written or oral
request, a copy of any or all of the documents incorporated by reference (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference herein). Requests should be directed to: Aetna Inc.,
151 Farmington Avenue, Hartford, CT 06156-7505, Attention: Lucille Nickerson,
Corporate Secretary, telephone number (860) 273-0123.
3
<PAGE> 5
AETNA INC.
AETNA INC.
Parent, a Connecticut corporation, was formed by Aetna and U.S. Healthcare
in March 1996 in connection with the Agreement and Plan of Merger, 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,
Antelope Sub, Inc., a Connecticut corporation and a wholly-owned subsidiary of
Parent ("Aetna Sub"), and New Merger Corporation, a Pennsylvania corporation and
a wholly-owned subsidiary of Parent ("U.S. Healthcare Sub"). Pursuant to such
Merger Agreement and subject to the conditions contained therein, including the
approval and adoption of the Merger Agreement by the shareholders of Aetna and
U.S. Healthcare at shareholder meetings to be held on July 18, 1996, Aetna Sub
will be merged with and into Aetna (the "Aetna Sub Merger") and U.S. Healthcare
Sub will be merged with and into U.S. Healthcare (the "U.S. Healthcare Sub
Merger" and, together with the Aetna Sub Merger, the "Mergers"), with the result
that Aetna and U.S. Healthcare will become wholly-owned subsidiaries of Parent.
Accordingly, upon consummation of the Mergers, the businesses of Parent through
its wholly-owned subsidiaries, Aetna and U.S. Healthcare, initially will be the
businesses currently conducted by Aetna and U.S. Healthcare and their respective
subsidiaries. The U.S. Healthcare Sub Merger will be accounted for under the
purchase method of accounting and the Aetna Sub Merger will be treated as a
reorganization with no change in the recorded amount of Aetna's assets and
liabilities. If approved by the shareholders of Aetna and U.S. Healthcare at
such shareholder meetings and if the other conditions to the Mergers set forth
in the Merger Agreement are satisfied, it is currently expected that the Mergers
will be consummated during the third quarter of 1996. Parent has not conducted
any business activities to date, other than those incident to its formation, its
execution of the Merger Agreement and related agreements and in connection with
the Mergers.
Parent's principal executive offices are located at 151 Farmington Avenue,
Hartford, CT 06156-7505. Parent's telephone number is (860) 273-0123.
AETNA LIFE AND CASUALTY COMPANY
Aetna was organized in 1967 as a Connecticut insurance company. Aetna and
its subsidiaries constitute one of the nation's largest insurance and financial
services organizations, centered around three core businesses: Aetna Health
Plans ("AHP"), Aetna Retirement Services ("ARS") and Aetna International.
AHP consists of Health, Specialty Health and Group Insurance businesses.
The Health business provides a full spectrum of managed care and traditional
indemnity plans, providing its members with a choice of health plans to meet
their individual needs. AHP's managed care products vary with respect to the
extent to which health care costs and utilization are managed and range from
preferred provider organization plans to point-of-service and health maintenance
organization plans. Aetna also owns and manages physician practices for use by
its members and other consumers. Specialty Health products include behavioral
health, pharmacy and dental plans, which provide managed care or indemnity
features. The Group Insurance business provides life insurance, disability,
including managed disability, and long-term care plans.
AHP products and services are marketed primarily to employers for the
benefit of employees and their dependents. Plans may be insured, whereby Aetna
assumes all or a portion of health care costs and utilization risk, or
self-funded, whereby employers assume all or a significant portion of such
risks. AHP also provides administrative and claim services and, in many cases,
partial insurance protection, for an appropriate fee or premium charge.
ARS markets and services two principal types of products: (1) financial
services and (2) life insurance.
The financial services products include individual and group annuity
contracts which offer a variety of funding and distribution options for personal
and employer-sponsored retirement plans that qualify under Sections 401, 403,
408 and 457 of the Internal Revenue Code of 1986, as amended (the "Code"), and
individual and group nonqualified annuity contracts.
4
<PAGE> 6
ARS's life insurance products include universal life, variable universal
life, interest-sensitive whole life and term insurance. These products are
offered primarily to individuals, small businesses, employer-sponsored groups
and executives of Fortune 2000 companies.
Aetna International, through subsidiaries and joint venture operations,
sells primarily life insurance and financial services products in non-U.S.
markets including Canada, Mexico, Taiwan, Chile, Malaysia, Hong Kong, New
Zealand, Peru, Argentina and Indonesia.
On April 2, 1996, Aetna completed the previously announced sale of its
property-casualty operations to an affiliate of The Travelers Insurance Group
Inc. ("Travelers") for total consideration of approximately $4.1 billion.
In connection with the approval by shareholders of Aetna of the Mergers
pursuant to which each of Aetna and U.S. Healthcare will become wholly-owned
subsidiaries of Parent, the shareholders of Aetna will also be asked to approve
an amendment to Aetna's Certificate of Incorporation to change its name to Aetna
Services, Inc. See "Aetna Inc." above.
U.S. HEALTHCARE, INC.
U.S. Healthcare is a Pennsylvania corporation, incorporated in 1982. U.S.
Healthcare is one of the largest managed care companies in the United States. As
of December 31, 1995, U.S. Healthcare's health maintenance organization ("HMO")
service network included approximately 13,400 primary care physicians, 40,600
specialists, 441 hospitals and 7,000 pharmacies.
U.S. Healthcare provides comprehensive managed health care services through
HMOs it owns and operates in Pennsylvania, New Jersey, New York, Delaware,
Connecticut, Massachusetts, New Hampshire, Maryland, Georgia, Virginia, Rhode
Island, North Carolina, South Carolina and the District of Columbia. The
services of U.S. Healthcare's HMOs are marketed primarily to employer groups and
are provided through networks of independent health care providers, including
selected primary care physicians who coordinate each member's individual medical
care. In addition to comprehensive primary physician care, specialist care and
hospital services, U.S. Healthcare makes available home health care and other
outpatient services as well as optional prescription drug, vision care and
dental plans. U.S. Healthcare contracts with independent primary care physicians
who are reimbursed under prospective payment arrangements.
U.S. Healthcare's health plans consist of HMO plans and indemnity-type
plans offered both on a fully-insured and an employer-funded basis. Under
fully-insured health plans, U.S. Healthcare charges a premium and bears the risk
for medical costs incurred. Under employer-funded health plans, U.S. Healthcare
charges a fee for providing administrative services and the employer bears
substantially all risk for medical costs incurred. Under fully-insured HMO
plans, members receive comprehensive medical coverage in exchange for a fixed
monthly premium. In addition, U.S. Healthcare also offers a number of
supplemental benefit coverages to employers, either as supplements to HMO plans
or as stand-alone products, including dental plans, prescription drug plans,
vision plans, employee assistance programs and wellness programs.
U.S. Healthcare offers network-based workers compensation case management
and network-based managed disability services, quality and outcome measurement
and improvement programs and health care data analysis systems for providers and
purchasers of health care. U.S. Healthcare provides assistance to multi-state
employers by coordinating their relationships with other HMO's.
USE OF PROCEEDS
Parent will not receive any of the proceeds from the sale of the Offered
Securities, but will bear certain of the expenses thereof. See "Plan of
Distribution".
5
<PAGE> 7
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Parent will consist of 500,000,000 shares
of Common Stock, 15,000,000 shares of Mandatorily Convertible Preferred Stock,
15,000,000 shares of Class A Voting Preferred Stock of Parent, $.01 par value
per share, 15,000,000 shares of Class B Voting Preferred Stock of Parent, $.01
par value per share, and 15,000,000 shares of Class D Non-Voting Preferred Stock
of Parent, par value $.01 per share. The following description of Parent's
capital stock does not purport to be complete and is qualified in its entirety
by reference to the Connecticut Stock Corporation Act (the "Connecticut Law")
and Parent's Certificate of Incorporation (including the Form of Designations,
Rights and Preferences of the 6.25% Class C Voting Preferred Stock). See
"Description of Rights" for a description of Rights to be issued to holders of
Common Stock.
COMMON STOCK
The shares of Common Stock to be issued in the Mergers, when issued
pursuant to the Merger Agreement, will be fully paid and nonassessable. Each
holder of Common Stock is entitled to one vote per share in the election of
directors and on all other matters submitted to a vote of shareholders. Subject
to the rights and preferences of Mandatorily Convertible Preferred Stock and
such shares, if any, of Class A Voting Preferred Stock, Class B Voting Preferred
Stock and Class D Non-Voting Preferred Stock as may be issued in the future,
each share of Common Stock will have an equal and ratable right to receive
dividends as may be declared by the Board of Directors of Parent out of funds
legally available therefor and to share equally and ratably in all assets
available for distribution to shareholders upon dissolution or liquidation. No
holder of Common Stock has any preemptive right to subscribe for any securities
of Parent.
MANDATORILY CONVERTIBLE PREFERRED STOCK
Dividends. The holders of outstanding shares of Mandatorily Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of Parent, out of funds legally available therefor,
cumulative preferential dividends from the Merger Date, at the rate per share of
$4.7578 per annum or if the annual dividend for the Common Stock at the Merger
Date is set at a level above $0.83 per share at a rate per annum equal to
$4.7578 + (the annual dividend per share on Common Stock as of the Merger
Date -- $0.83) x 0.8197, in cash payable quarterly in equal amounts (other than
with respect to the initial dividend period) 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 will be the
next succeeding business day; provided, however, that with respect to any
dividend period during which a redemption occurs, Parent 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 Mandatorily Convertible Preferred Stock 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 defined below). Each
dividend on the shares of Mandatorily Convertible Preferred Stock will be
payable to holders of record as they appear on the stock register of Parent on
such record date, not less than 10 nor more than 70 days preceding the payment
dates thereof, as shall be fixed by the Parent's Board of Directors. The first
dividend payment will be for the period from the Merger Date to the first
regularly-scheduled quarterly dividend date and the first dividend will be
payable on the first regularly-scheduled quarterly dividend date. Dividends (or
amounts equal to accrued and unpaid dividends) payable on shares of Mandatorily
Convertible Preferred Stock 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 Mandatorily Convertible Preferred Stock 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 Mandatorily Convertible Preferred Stock will accrue
beginning on the Merger Date) 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 will not bear interest. Dividends will
cease to accrue in respect of shares of Mandatorily Convertible Preferred Stock
on the Mandatory Conversion Date (as defined below) or on the date of their
earlier conversion or redemption.
6
<PAGE> 8
So long as any shares of Mandatorily Convertible Preferred Stock 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) Common Stock or any other class or series of Parent's
capital stock ranking junior to Mandatorily Convertible Preferred Stock with
respect to dividends or liquidation preferences (such capital stock, including
the Common Stock, collectively "Junior Securities") or (b) Parity Preferred
Stock (as defined below) until cumulative dividends on Mandatorily Convertible
Preferred Stock and Parity Preferred Stock in the full amounts owing for all
dividend periods ending, and all amounts payable upon redemption or conversion
of Mandatorily Convertible Preferred Stock 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.
If any dividends are not paid or set apart in full, as aforesaid, with
respect to shares of Mandatorily Convertible Preferred Stock and any Parity
Preferred Stock, all dividends declared with respect to shares of Mandatorily
Convertible Preferred Stock 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 Mandatorily Convertible Preferred Stock and such Parity
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on shares of Mandatorily Convertible Preferred Stock
and such Parity Preferred Stock bear to each other. Holders of the shares of
Mandatorily Convertible Preferred Stock will not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends as described in the first paragraph under "Dividends."
Subject to the provisions described under "Dividends", the Parent Board of
Directors may declare and Parent 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 Mandatorily Convertible Preferred Stock will not be entitled to share
therein.
Any dividend payment made on shares of Mandatorily Convertible Preferred
Stock will first be credited against the earliest accrued but unpaid dividend
due with respect to shares of Mandatorily Convertible Preferred Stock. All
dividends paid with respect to shares of Mandatorily Convertible Preferred Stock
described under "Dividends" will be paid pro rata to the holders entitled
thereto.
Mandatory Conversion. On the fourth anniversary of the Merger Date (the
"Mandatory Conversion Date"), subject to (x) the right of Parent to redeem the
shares of Mandatorily Convertible Preferred Stock on or after the third
anniversary of the Merger Date (the "Initial Redemption Date") and prior to the
Mandatory Conversion Date, as described below, and (y) the conversion of the
shares of Mandatorily Convertible Preferred Stock at the option of the holder at
any time prior to the Mandatory Conversion Date, as described below, each
outstanding share of Mandatorily Convertible Preferred Stock will convert
automatically (the "Mandatory Conversion") into (i) shares of Common Stock at
the Common Equivalent Rate (as defined below) in effect on the Mandatory
Conversion Date; and (ii) the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of Mandatorily Convertible Preferred
Stock (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 Mandatorily Convertible Preferred Stock and is
subject to adjustment as described below (the "Common Equivalent Rate").
7
<PAGE> 9
Optional Redemption by Parent Shares of Mandatorily Convertible Preferred
Stock are not redeemable by Parent 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, Parent will have the right to redeem, in whole or
in part, the outstanding shares of Mandatorily Convertible Preferred Stock. Upon
any such redemption, Parent will deliver to the holders of shares of Mandatorily
Convertible Preferred Stock in exchange for each share so redeemed, the greater
of (i) a number of shares of Common Stock equal to the Call Price in effect on
the redemption date, divided by the Current Market Price (as defined below) of
the Common Stock determined as of the second trading day immediately preceding
the Notice Date (as defined below) or (ii) .8197 of a share of Common Stock
(each a "Redemption Rate") (subject to adjustment as described below). The
public announcement of any call for redemption will be made prior to, or at the
time of, the mailing of the notice of such call to holders of shares of
Mandatorily Convertible Preferred Stock as described below. If fewer than all
the outstanding shares of Mandatorily Convertible Preferred Stock are to be
redeemed, shares of Mandatorily Convertible Preferred Stock to be redeemed will
be selected by Parent from outstanding shares of Mandatorily Convertible
Preferred Stock not previously redeemed by lot or pro rata (as nearly as may be
practicable). "Notice Date" with respect to any notice given by Parent in
connection with a redemption of shares of Mandatorily Convertible Preferred
Stock 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 Mandatorily Convertible Preferred Stock.
Parent will provide notice of any redemption of the shares of Mandatorily
Convertible Preferred Stock pursuant to the provisions described under "Optional
Redemption by Parent," to holders of record of Mandatorily Convertible Preferred
Stock 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 Mandatorily Convertible Preferred Stock is not
earlier than 60 days prior to the third anniversary of the Merger Date. Such
notice will be provided by mailing notice of such redemption, first class
postage prepaid, to each holder of record of shares of Mandatorily Convertible
Preferred Stock to be redeemed, at such holder's address as it appears on the
stock register of Parent; provided that neither failure to give such notice nor
any defect therein will affect the validity of the proceeding for the redemption
of any shares of Mandatorily Convertible Preferred Stock to be redeemed except
as to the holders to whom Parent has failed to give said notice or whose notice
was defective.
Each holder of shares of Mandatorily Convertible Preferred Stock to be
converted or redeemed pursuant to the provisions described under "Mandatory
Conversion" and "Optional Redemption by Parent", as the case may be, shall
surrender the certificates evidencing such shares (properly endorsed or assigned
for transfer, if the Parent Board of Directors shall so require and the notice
shall so state) to Parent at the place designated by Parent and shall thereupon
be entitled to receive certificates evidencing shares of Common Stock and to
receive any funds payable pursuant to the provisions described under "Mandatory
Conversion" and "Optional Redemption by Parent", as the case may be, following
such surrender and following the date of such conversion or redemption.
Conversion at Option of Holder. Shares of Mandatorily Convertible Preferred
Stock 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 Mandatorily Convertible Preferred Stock (the "Optional Conversion
Rate"), subject to adjustment as set forth below. The right to convert shares of
Mandatorily Convertible Preferred Stock called for redemption will terminate
immediately prior to the close of business on the redemption date with respect
to such shares.
Conversion of shares of Mandatorily Convertible Preferred Stock 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 Parent or in blank, to the office or agency to be
maintained by Parent 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 Parent. Each optional
conversion will be deemed to have been effected immediately prior to the close
of business on the date on which the foregoing
8
<PAGE> 10
requirements will have been satisfied. The conversion will be at the Optional
Conversion Rate in effect at such time and on such date.
Holders of shares of Mandatorily Convertible Preferred Stock at the close
of business on a record date for any payment of declared dividends will 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 Mandatorily Convertible Preferred Stock 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 Parent in cash of an amount equal to the dividend
thereon which is to be paid on such Dividend 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 Mandatorily Convertible
Preferred Stock called for redemption on the third anniversary of the Merger
Date 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 Parent upon conversion. Except as described above, upon any optional
conversion of shares of Mandatorily Convertible Preferred Stock, Parent will
make no payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares of Mandatorily Convertible Preferred Stock or for previously
declared dividends or distributions on the shares of Common Stock issued upon
such conversion.
Certain Definitions. For purposes of the Mandatorily Convertible Preferred
Stock, the term "business day" means 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.
The term "Call Price" of each share of Mandatorily Convertible Preferred
Stock 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);
The term "Closing Price" on any day as used herein means 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 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 Parent Board
of Directors for such purpose;
The term "Current Market Price" per share of Common Stock at any date will
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 will be appropriately adjusted to
reflect the occurrence of such event;
The term "Parity Preferred Stock" as used herein means Parent's Class A
Voting Preferred Stock, $.01 par value per share, Class B Voting Preferred
Stock, $.01 par value per share, Class D Non-Voting Preferred Stock, $.01 par
value per share, and any other class or series of Parent'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 Parent; and
The term "Trading Date" as used herein means a date on which the New York
Stock Exchange (or any successor thereto) is open for the transaction of
business.
Enhanced Dividend Yield; Less Equity Appreciation Than Common
Stock. Dividends will accrue on the shares of Mandatorily Convertible Preferred
Stock at a higher rate than the rate at which dividends are
9
<PAGE> 11
anticipated to be paid to the holders of Common Stock immediately after the
Merger Date. The opportunity for equity appreciation afforded by an investment
in shares of Mandatorily Convertible Preferred Stock is less than that afforded
by an investment in the Common Stock because the Call Price may be lower than
the Current Market Price of the Common Stock on the redemption date and Parent
may, at its option, redeem the shares of Mandatorily Convertible Preferred Stock
at any time on or after the third anniversary of the Merger Date, and prior to
the Mandatory Conversion Date, and may be expected to do so if, among other
circumstances, the Current Market Price of the Common Stock after the third
anniversary of the Merger Date exceeds the Call Price for a share of Mandatorily
Convertible Preferred Stock. In such event, a holder of a share of Mandatorily
Convertible Preferred Stock will receive less than one share of Common Stock per
share of Mandatorily Convertible Preferred Stock, but not less than .8197 of a
share of Common Stock, subject to adjustment as described herein. A holder may
also surrender for conversion any shares of Mandatorily Convertible Preferred
Stock called for redemption up to the close of business on the redemption date,
and a holder that so elects will receive .8197 of a share of Common Stock,
subject to adjustment as described herein. The per share value of Common Stock
received by holders of shares of Mandatorily Convertible Preferred Stock may be
more or less than the $76 1/8 assumed nominal value of each share of Mandatorily
Convertible Preferred Stock to be issued pursuant to the U.S. Healthcare Sub
Merger, due to market fluctuations in the price of the Common Stock.
As a result of these provisions, holders of shares of Mandatorily
Convertible Preferred Stock would be expected to realize no equity appreciation
if the Current Market Price of the Common Stock is below the Call Price, and
less than all of such appreciation, if any, if the Current Market Price of the
Parent Common Stock is above the Call Price. Holders of shares of Mandatorily
Convertible Preferred Stock generally will realize the entire decline in equity
value if the market price of the Common Stock is less than the $76 1/8 assumed
nominal value of a share of Mandatorily Convertible Preferred Stock.
Adjustments of the Common Equivalent Rate, Optional Conversion Rate and
Redemption Rates. The Common Equivalent Rate, the Optional Conversion Rate and
the Redemption Rates (collectively, the "Rates") will be each subject to
adjustment from time to time as described below in this section.
If Parent, after the Merger Date (i) pays a stock dividend or makes a
distribution with respect to Common Stock in shares of Common Stock, (ii)
subdivides or splits outstanding Common Stock into a greater number of shares,
(iii) combines outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues by reclassification of shares of Common Stock any shares
of common stock of Parent; then, in any such event, the Rates in effect
immediately prior to such event will each be adjusted so that the holder of any
shares of Mandatorily Convertible Preferred Stock will 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 which such holder
would have owned or been entitled to receive immediately following any event
described above had such shares of Mandatorily Convertible Preferred Stock been
converted immediately prior to such event or any record date with respect
thereto. Such adjustment will become effective at the opening of business on the
business day next following the record date for determination of shareholders
entitled to receive such dividend or distribution, in the case of a dividend or
distribution, and will become effective immediately after the effective date, in
the case of a subdivision, split, combination or reclassification. Such
adjustments will be made successively.
If Parent, after the Merger Date, issues rights or warrants to all holders
of Common Stock (other than Rights issued pursuant to any Rights Plan of Parent,
including the Rights Plan, as the same may be amended from time to time, or any
other similar type of plan adopted by Parent from time to time) 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 Mandatorily
Convertible Preferred Stock 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 will 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 will 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
10
<PAGE> 12
denominator will 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 will become effective at the
opening of business on the business day next following the record date for the
determination of shareholders 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 will 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 will be made successively.
If Parent, after the Merger Date, pays a dividend or makes a distribution
to all holders of its Common Stock of evidences of its indebtedness, cash or
other assets (including capital stock of Parent or any subsidiary of Parent, but
excluding (x) Parent's regular quarterly cash dividend and (y) dividends
referred to in the second paragraph under "Adjustments of the Common Equivalent
Rate, Optional Conversion Rate and Redemption Rate") or will issue to all
holders of Common Stock rights or warrants to subscribe for or purchase any of
its securities (other than Rights issued pursuant to any Rights Plan of Parent
(including the Parent Rights Plan, as the same may be amended from time to time,
or any other similar type of plan adopted by Parent from time to time) and those
referred to in the immediately preceding paragraph), then unless such dividend
is paid or distribution is made to each holder of shares of Mandatorily
Convertible Preferred Stock 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 will be adjusted by
multiplying such Rate in effect on the record date mentioned below, by a
fraction of which the numerator will be the Current Market Price per share of
the Common Stock on the record date for the determination of shareholders
entitled to receive such dividend or distribution, and of which the denominator
will 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 will 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 will become
effective on the opening of business on the business day next following the
record date for the determination of shareholders entitled to receive such
dividend or distribution. Such adjustment will be made successively.
Any shares of Common Stock issuable in payment of a dividend or other
distribution will 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
the third paragraph under "Adjustments of the Common Equivalent Rate, Optional
Conversion Rate and Redemption Rate".
Parent will 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 will 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 Code) made by Parent to
its shareholders after the Merger Date will not be taxable.
In any case in which the provisions described under "Adjustments of the
Common Equivalent Rate, Optional Conversion Rate and Redemption Rate" shall
require that an adjustment as a result of any event becomes effective at the
opening of business on the business day next following a record date and the
date fixed for conversion pursuant to the provisions described under "Mandatory
Conversion" or redemption pursuant to the provisions described under "Optional
Redemption by Parent or "Conversion at Option of Holder" occurs after such
record date, but before the occurrence of such event, Parent 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
Mandatorily Convertible Preferred Stock the additional shares of Common
11
<PAGE> 13
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 the provisions described under "No Fractional Shares."
All adjustments to the Rates will be calculated to the nearest 1/100th of a
share of Common Stock. No adjustment in the Rates will 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 the
provisions described in this paragraph is not required to be made will be
carried forward and taken into account in any subsequent adjustment.
Adjustment for Consolidation or Merger. In case of any consolidation or
merger to which Parent is a party (other than a merger or consolidation in which
Parent 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
Parent as an entirety or substantially as an entirety, proper provisions will be
made so that each share of Mandatorily Convertible Preferred Stock will, 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 Mandatorily Convertible
Preferred Stock 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 Mandatorily Convertible Preferred Stock 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
Mandatorily Convertible Preferred Stock (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 shares 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 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 will 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 Mandatorily Convertible Preferred Stock will be convertible or
redeemable after consummation of such transaction will be subject to adjustment
as described under "Adjustment of the Common Equivalent Rate, Optional
Conversion Rate and Redemption Rates" following the date of consummation of such
transaction. Parent 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 Mandatorily Convertible Preferred Stock will have approved other terms in
accordance with the provisions described in the fourth paragraph under "Voting
Rights."
For purposes of the immediately preceding paragraph, any sale or transfer
to another corporation of property of Parent which did not account for at least
50% of the consolidated net income of Parent for its most recent fiscal year
ending prior to the consummation of such transaction will not in any event be
deemed to be a sale or transfer of the property of Parent as an entirety or
substantially as an entirety.
No Fractional Shares. No fractional shares or scrip representing fractional
shares of Common Stock will be issued upon the redemption or conversion of any
shares of Mandatorily Convertible Preferred Stock. In lieu of any fractional
share otherwise issuable in respect of the aggregate number of shares of
Mandatorily Convertible Preferred Stock of any holder which are redeemed or
converted on any redemption date or upon Mandatory Conversion or any optional
conversion, such holder will 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
12
<PAGE> 14
Price as of the second Trading Date immediately preceding the Notice Date, in
the case of redemption, or (ii) Closing Price of 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 will 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 will be computed on
the basis of the aggregate number of shares of Mandatorily Convertible Preferred
Stock so surrendered or redeemed.
Liquidation Rights. In the event of the liquidation, dissolution, or
winding up of the business of Parent, whether voluntary or involuntary, the
holders of shares of Mandatorily Convertible Preferred Stock then outstanding,
after payment or provision for payment of the debts and other liabilities of
Parent and the payment or provision for payment of any distribution on any
shares of Parent having a preference and a priority over the shares of
Mandatorily Convertible Preferred Stock on liquidation, and before any
distribution to the holders of Junior Securities, will be entitled to be paid
out of the assets of Parent available for distribution to its shareholders an
amount per share of Mandatorily Convertible Preferred Stock 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 will be
paid pro rata to the holders of Mandatorily Convertible Preferred Stock entitled
thereto. In the event the assets of Parent available for distribution to the
holders of the shares of Mandatorily Convertible Preferred Stock upon any
dissolution, liquidation or winding up of Parent shall be insufficient to pay in
full the liquidation payments payable to the holders of outstanding shares of
Mandatorily Convertible Preferred Stock and of all other series of Parity
Securities, the holders of shares of Mandatorily Convertible Preferred Stock and
of all series of Parity Securities will 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 Mandatorily
Convertible Preferred Stock and the holders of outstanding shares of such Parity
Securities were paid in full. Except as described under "Liquidation Rights,"
holders of Mandatorily Convertible Preferred Stock will not be entitled to any
distribution in the event of liquidation, dissolution or winding up of the
affairs of Parent.
For the purposes of the provisions described under "Liquidation Rights,"
none of the following are deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of Parent, (i) the sale, transfer, lease or exchange
of the assets of Parent as an entirety or substantially as an entirety; or (ii)
the consolidation or merger of Parent with one or more other corporations
(whether or not Parent is the corporation surviving such consolidation or
merger).
Voting Rights. The holders of shares of Mandatorily Convertible Preferred
Stock 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 shareholders on the basis of 4/5 of a vote for each share held. The holders
of shares of Mandatorily Convertible Preferred Stock 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 of
Parent.
For so long as any shares of Mandatorily Convertible Preferred Stock are
outstanding, if at any time dividends payable on the shares of Mandatorily
Convertible Preferred Stock 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 Parent ("Preferred Stock Directors"), the holders of the shares of
Mandatorily Convertible Preferred Stock, 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 Mandatorily Convertible
Preferred Stock entitled to vote on this and other matters upon which holders of
Preferred Stock vote as a group, will have the right to vote for the election of
two Preferred Stock Directors of Parent, such directors to be in addition to the
number of directors constituting the Parent Board of Directors immediately prior
to the accrual of such right. Such right of the holders of shares of Mandatorily
Convertible Preferred Stock to elect two Preferred Stock Directors will, when
vested, continue until all dividends in arrears on the shares of Mandatorily
Convertible Preferred Stock and such other series of Preferred Stock will have
been paid in full and the right of any other
13
<PAGE> 15
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 Mandatorily Convertible Preferred Stock to elect two
Preferred Stock Directors separately as a class will cease, subject always to
the same provisions for the vesting of such right of the holders of the shares
of Mandatorily Convertible Preferred Stock to elect two Preferred Stock
Directors in the case of future dividend defaults.
The term of office of each director elected pursuant to the provisions
described in the immediately preceding paragraph will terminate on the earlier
of (i) the next annual meeting of shareholders at which a successor will have
been elected and qualified or (ii) the termination of the right of the holders
of shares of Mandatorily Convertible Preferred Stock and such other series of
Preferred Stock to vote for Directors pursuant to the immediately preceding
paragraph. Vacancies on the Board of Directors resulting from the death,
resignation or other cause of any such director will be filled exclusively by no
less than two-thirds of the remaining directors and the director so elected will
hold office until a successor is elected and qualified.
For as long as any shares of Mandatorily Convertible Preferred Stock 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, will be necessary to (i) amend, alter or repeal any of the
provisions of the certificate of incorporation of Parent which would adversely
affect the powers, preferences or rights of the holders of the shares of
Mandatorily Convertible Preferred Stock then outstanding or reduce the minimum
time required for any notice to which holders of shares of Mandatorily
Convertible Preferred Stock then 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 Mandatorily Convertible Preferred Stock will be deemed
not to adversely affect such powers, preferences or rights and will not be
subject to approval by the holders of shares of Mandatorily Convertible
Preferred Stock; and provided further that the provisions described in this
clause (i) will not be applicable to the amendment, alteration or repeal of any
provisions of the certificate of incorporation of Parent approved at a meeting
of the shareholders the record date of which is prior to the issuance of any
shares of Mandatorily Convertible Preferred Stock; (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 Mandatorily
Convertible Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up of Parent; or (iii) merge or
consolidate with or into any other corporation, unless each holder of the shares
of Mandatorily Convertible Preferred Stock 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 Mandatorily Convertible
Preferred Stock 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 Parent of Parity Preferred Stock
or of any class ranking junior to the shares of Mandatorily Convertible
Preferred Stock.
Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the shares of
Mandatorily Convertible Preferred Stock will 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 Mandatorily Convertible Preferred Stock
at the time outstanding.
Preemptive Rights. The holders of shares of Mandatorily Convertible
Preferred Stock will have no preemptive rights, including rights with respect to
any shares of capital stock or other securities of Parent convertible into or
carrying rights or options to purchase any such shares.
14
<PAGE> 16
CLASS A AND CLASS B VOTING PREFERRED STOCK AND CLASS D NON-VOTING PREFERRED
STOCK
The Parent Board of Directors will be authorized to issue shares of Class A
Voting Preferred Stock, par value $.01 per share, of Parent (the "Class A
Preferred Stock"), Class B Voting Preferred Stock, par value $.01 per share, of
Parent (the "Class B Preferred Stock") and Class D Non-Voting Preferred Stock,
par value $.01 per share, of Parent ("Class D Preferred Stock"), in one or more
series, and to fix for each such series or class the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption, as permitted by the
Connecticut Stock Corporation Act. The Parent Board of Directors could authorize
the issuance of shares of Class A Preferred Stock, Class B Preferred Stock or
Class D Preferred Stock with terms and conditions which could discourage a
takeover or other transaction that holders of some or a majority of shares of
Common Stock might believe to be in their best interests or in which such
holders might receive a premium for their shares of stock over the then market
price of such shares. As of the date hereof, no shares of Class A Preferred
Stock, Class B Preferred Stock or Class D Preferred Stock are outstanding and
the Parent Board of Directors has no present intent to issue any shares of Class
A Preferred Stock, Class B Preferred Stock or Class D Preferred Stock after the
Merger Date other than any such issuance in connection with the Rights
Agreement.
DESCRIPTION OF RIGHTS
The following description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
incorporated by reference herein.
It is intended that each share of Common Stock outstanding immediately
after the Merger Date will have attached thereto a Right issued pursuant to the
Rights Agreement. Each Right entitles the registered holder to purchase from
Parent one-hundredth of a share of Class B Voting Preferred Stock, Series A, par
value $.01 per share (the "Series A Preferred Stock"), of Parent at a price of
$200.00 per one one-hundredth of a share of Series A Preferred Stock (the
"Purchase Price"), subject to adjustment.
Until the earlier to occur of the following dates (the earlier of such
dates being hereinafter called the "Distribution Date"):
(i) the close of business on the tenth calendar day (or such later
date as may be specified by the Parent Board of Directors) following a
public announcement that (a) a person or group of affiliated or associated
persons (other than Parent or a related person) (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Common Stock or (b) a person (other than
Parent or a related person) has acquired, or obtained the right to acquire,
beneficial ownership of 10% or more of the outstanding shares of Common
Stock and such person has been declared by the Parent Board of Directors to
be an adverse person (an "Adverse Person", and, additionally, an "Acquiring
Person") (an Adverse Person declaration may be made by the Parent Board of
Directors with respect to any person who acquires or proposes to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock if, in general, the Parent Board of Directors determines that such
acquisition or proposed acquisition is not in the best interests of Parent,
its shareholders and/or its policyholders, provided that such person shall
not become an Adverse Person unless and until beneficial ownership of 10%
or more of the outstanding shares of Common Stock is acquired by such
person); and
(ii) the close of business on the tenth calendar day (or such later
date as may be specified by the Parent Board of Directors) following the
commencement of a tender offer or exchange offer by a person (other than
Parent or a related person), the consummation of which could result in
beneficial ownership by such person of 15% or more of the outstanding
shares of Common Stock;
the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Merger Date, by such Common Stock
certificates.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with shares of Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the
15
<PAGE> 17
Rights), new Common Stock certificates issued after the Merger Date upon
transfer or new issuance of shares of Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the surrender for transfer of
any certificates for shares of Common Stock outstanding as of the Merger Date
will also constitute the transfer of the Rights associated with the shares of
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights (the "Right
Certificates") will be mailed to holders of record of shares of Common Stock as
of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
No Right is exercisable at any time prior to the Distribution Date. The
Rights will expire on November 7, 1999 (the "Final Expiration Date"), unless
earlier redeemed by Parent as described below. Until a Right is exercised, the
holder thereof, as such, will have no rights as a shareholder of Parent,
including without limitation the right to vote or to receive dividends. The
Purchase Price payable and the number of shares of Series A Preferred Stock or
other securities or property issuable upon exercise of the Rights, and the
number of Rights outstanding, are subject to customary antidilution provisions.
Shares of Series A Preferred Stock purchased upon exercise of the Rights
will not be redeemable. Each share of Series A Preferred Stock will be entitled
to a quarterly dividend payment equal to the greater of (i) $0.01 and (ii) an
amount equal to 100 times the dividend declared per share of Common Stock for
such quarter. In the event of liquidation, the holders of shares of Series A
Preferred Stock will be entitled to a preferential liquidation payment in an
amount equal to 100 times the liquidation payment to be made per share of Common
Stock. Each share of Series A Preferred Stock will have 100 votes, voting
together with Common Stock. Finally, in the event of any merger, consolidation
or other transaction in which Common Stock is exchanged, each share of Series A
Preferred Stock will be entitled to receive 100 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions. Because of the nature of the Series A Preferred Stock dividend,
voting and liquidation rights, the value of the one one-hundredth interest in a
share of Series A Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
In the event that (i) any person or group of affiliated or associated
persons (other than Parent or a related person) becomes the beneficial owner of
15% or more of the outstanding shares of Common Stock, (ii) any person becomes
an Adverse Person, or (iii) any Acquiring Person merges into or combines with
Parent and Parent is the surviving corporation or any Acquiring Person effects
certain other transactions with Parent or causes Parent to effect certain
transactions, as described in the Rights Agreement, proper provision shall be
made so that each holder of a Right, other than Rights that are or were owned
beneficially by an Acquiring Person (which, from and after the later of the
Distribution Date and the date of the earliest of any such events, will be
void), will thereafter have the right to receive, upon exercise thereof at the
then-current Purchase Price of the Rights, that number of shares of Parent
Common Stock (or, under certain circumstances, an economically equivalent
security or securities of Parent) having a market value of two times the
Purchase Price of the Right. To illustrate the operation of such an adjustment,
at a Purchase Price of $200.00, assuming the current market price (as determined
pursuant to the provisions of the Rights Agreement) per share of Common Stock
were $100.00, each Right not owned beneficially by an Acquiring Person at or
after the time of such an occurrence would entitle its holder to purchase (after
the Distribution Date) from Parent four shares of Common Stock (having a market
value of $400.00) for $200.00. Under certain circumstances in which there were
not sufficient shares of Parent Common Stock (or economically equivalent
securities of Parent) available for issuance upon the exercise of a Right as
described above, such Right would entitle its holder to receive from Parent upon
the surrender of such Right and without payment of the Purchase Price,
securities and/or cash having an aggregate value equal to the net value that
such holder otherwise would have received upon the exercise of such Right as
described above.
In the event that, following the first date of public announcement that a
person has become an Acquiring Person, (i) Parent merges with or into any person
and Parent is not the surviving corporation, (ii) any person merges with or into
Parent and Parent is the surviving corporation, but its shares of Common Stock
are changed or exchanged, or (iii) 50% or more of Parent assets or earning
power, including without limitation securities creating obligations of Parent,
are sold, proper provision shall be made so that each holder of a Right
16
<PAGE> 18
(other than Rights which have become void) will thereafter have the right to
receive, upon the exercise thereof at the then-current Purchase Price, that
number of shares of common stock (or, under certain circumstances, an
economically equivalent security or securities) of the other party to such
transaction which at the time of such transaction would have a market value of
two times the Purchase Price of the Right. To illustrate the operation of such
an adjustment, at a Purchase Price of $200.00, assuming the current market price
(as determined pursuant to the provisions of the Rights Agreement) per share of
common stock of such other person were $25.00, each Right would entitle its
holder to purchase (after the Distribution Date) sixteen shares of such other
person's common stock (having a market value of $400.00) for $200.00.
Following the occurrence of any event described in either of the two
immediately preceding paragraphs, Rights may be exercised, at the option of the
holder thereof, without the payment of the Purchase Price that would otherwise
be payable. In any such case, the number of securities which such person would
otherwise be entitled to receive upon the exercise of such Rights will be
reduced as provided in the Rights Agreement. With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
require an adjustment in the Purchase Price of at least 1%. No fractional shares
of Series A Preferred Stock will be issued. Fractions which are integral
multiples of one one-hundredth of a share of Series A Preferred Stock, may, at
the option of Parent, be evidenced by depositary receipts. In lieu of issuing
fractional shares of Series A Preferred Stock, Parent may make a payment in cash
or take such other action permissible under applicable law as the Parent Board
of Directors deems appropriate.
Parent may redeem the Rights in whole, but not in part, at a price of $0.01
per Right (the "Redemption Price"), at any time prior to the close of business
on the later of (i) the Distribution Date and (ii) the first date of public
announcement that a person has become an Acquiring Person. At any time following
the first date of public announcement that a person has become an Acquiring
Person, the Parent Board of Directors may relinquish the right to redeem the
Rights by adopting a resolution to that effect.
Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price. Parent will give notice of such redemption to the
holders of the then-outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear on the registry books of the
rights agent under the Rights Agreement or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Stock.
The Rights Agreement may be amended without the approval of any holders of
Right Certificates prior to the Distribution Date in any manner which the Parent
Board of Directors may deem desirable. From and after the Distribution Date, the
Rights Agreement may be amended without the approval of any holders of Right
Certificates in any manner which the Parent Board of Directors may deem
desirable and which will not, as determined by the Parent Board of Directors,
adversely affect the interests of the holders of the Right Certificates (other
than an Acquiring Person). Notwithstanding the foregoing, no amendment to the
Rights Agreement may be made which will decrease the stated Redemption Price.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Parent on
terms not approved by the Parent Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Parent Board of Directors since (subject to the limitations described above) the
Rights may be redeemed by Parent at the Redemption Price prior to the time that
the Rights would otherwise become exercisable or, if later, the time that a
person or group becomes an Acquiring Person.
The Rights are substantially similar to Aetna's existing rights issued
pursuant to Aetna's amended Share Purchase Rights Plan.
THE SELLING SHAREHOLDER
The Selling Shareholder has been the principal executive officer and a
director of U.S. Healthcare and its predecessor entity since 1982. The Selling
Shareholder is expected to be appointed to the Board of Directors of Parent
within sixty days after the Mergers are consummated. If either of the two
persons initially designated
17
<PAGE> 19
by U.S. Healthcare to serve on the Board of Directors of Parent prior to the
Merger Date is unable or unwilling to serve on the Board of Directors of Parent
during the two year period after the Merger Date, the successor or successors
will be selected by the Selling Shareholder.
Upon consummation of the Mergers, the Selling Shareholder will own
3,239,609 shares of Common Stock or approximately 2.1% of the Common Stock and
1,080,350 shares of Mandatorily Convertible Preferred Stock or approximately
9.1% of the Mandatorily Convertible Preferred Stock. In addition, the Selling
Shareholder will receive approximately 35,946 shares of Common Stock on the
Merger Date pursuant to an Amended and Restated Agreement (the "Agreement with
Principal Shareholder"), dated as of May 30, 1996, between the Selling
Shareholder and Parent equal to $2,500,000 divided by the average of the last
reported sale prices per share of the common stock of Aetna during the 15
trading days immediately preceding the Merger Date on the New York Stock
Exchange. All of the shares of Common Stock and Mandatorily Convertible
Preferred Stock owned by the Selling Shareholder comprise Offered Securities.
Upon consummation of the Mergers, trusts for the benefit of members of Mr.
Abramson's family are expected to own up to 198,052 shares of Common Stock and
up to 66,047 shares of Mandatorily Convertible Preferred Stock, as to which
shares Mr. Abramson disclaims beneficial ownership. Such shares may also be
offered and sold pursuant to this Prospectus.
PLAN OF DISTRIBUTION
Offered Securities may be sold from time to time to purchasers directly by
the Selling Shareholder or by a direct or indirect counterparty with whom the
Selling Shareholder or a direct counterparty enters into derivatives
transactions relating to the Offered Securities. Alternatively, from time to
time, the Selling Shareholder or, in the case of sales by a counterparty to a
derivatives transaction with the Selling Shareholder or another counterparty,
such counterparty may offer Offered Securities through underwriters, brokers,
dealers or agents, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the seller and/or the purchasers for
whom they may act as agents or to whom they may sell as principals. Sales by any
such counterparty may include short sales. A Prospectus Supplement, if required,
will describe the method of sale in greater detail. In addition, any of the
Offered Securities which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
The Selling Shareholder or, in the case of sales by a counterparty to a
derivatives transaction, such counterparty and any such underwriters, brokers,
dealers or agents that participate in the distribution of the Offered Securities
may be deemed to be "underwriters" within the meaning of the Securities Act, and
any profits on the sale of Offered Securities by them and any associated
discounts, commissions or concessions that are received may be deemed to be
underwriting compensation under the Securities Act.
Offered Securities may be sold from time to time on or through one or more
exchanges or in the over-the-counter market or otherwise in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale, or at prices related to the then current
market price or at negotiated prices. If applicable, such prices will be
determined by agreement between the Selling Shareholder and any such
underwriters or dealers. The Selling Shareholder or such counterparty may, from
time to time, authorize dealers, acting as the Selling Shareholder's or such
counterparty's agents, to solicit offers to purchase Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement.
Under the securities laws of certain states, the Offered Securities may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in certain states the Offered Securities may not be sold unless the
Offered Securities have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
Parent will pay all of the expenses incident to the registration, offering
and sale of the Offered Securities to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
Parent has agreed to indemnify the Selling Shareholder and certain agents,
dealers and underwriters against certain liabilities, including liabilities
under the Securities Act.
18
<PAGE> 20
EXPERTS
The consolidated financial statements and schedules of Aetna Life and
Casualty Company and Subsidiaries as of December 31, 1995 and 1994, and for each
of the years in the three-year period ended December 31, 1995 which are
incorporated by reference in Aetna's Annual Report on Form 10-K for the year
ended December 31, 1995, have been incorporated by reference in this Prospectus
in reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, and upon the authority of said firm as experts in accounting
and auditing. The reports of KPMG Peat Marwick LLP covering the December 31,
1995 consolidated financial statements and schedules of Aetna Life and Casualty
Company and Subsidiaries refers to Aetna's changes in 1993 in its method of
accounting for certain investments in debt and equity securities, post
employment benefits, workers' compensation life table indemnity reserves and
retrospectively rated reinsurance contracts.
The consolidated balance sheet of Aetna Inc. as of April 22, 1996 which is
included in Aetna's Current Report on Form 8-K, dated June 28, 1996 has been
incorporated by reference in this Prospectus in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information of Aetna Life
and Casualty Company incorporated by reference in this Prospectus and to be
incorporated by reference in this Prospectus, the independent certified public
accountants have reported and may report that they applied limited procedures in
accordance with professional standards for a review of such information.
However, any separate report included in Parent's or Aetna's Quarterly Reports
on Form 10-Q and incorporated by reference herein states and will state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on any report on such
information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions
of Section 11 of the Securities Act for any report on the unaudited interim
financial information because that report is not a "report" or a "part" of the
Registration Statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of U.S. Healthcare, Inc. incorporated
by reference in U.S. Healthcare, Inc.'s Annual Report on Form 10-K, as amended,
for the year ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Common Stock (including related Preferred Stock Purchase Rights)
and Mandatorily Convertible Preferred Stock offered hereby will be passed upon
by Day, Berry & Howard.
19
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered. Except for the SEC
Registration Fee, all amounts shown are estimates.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $118,347
Accounting Fees and Expenses...................................... 110,000
Legal Fees and Expenses........................................... 350,000
Blue Sky Fees and Expenses........................................ 15,000
Printing and Engraving Expenses................................... 65,000
Miscellaneous..................................................... 21,653
---------
Total................................................... $680,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is a Connecticut corporation. Section 33-320a of the
Connecticut General Statutes ("C.G.S.") provides that a Connecticut corporation
shall, under certain circumstances indemnify its shareholders, directors,
officers, employees, agents and certain other persons.
Subsection (b) of C.G.S. Section 33-320a provides that a corporation shall
indemnify any director or officer of the corporation or an eligible outside
party, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses (including attorneys' fees) actually incurred
by such person in connection with such action, suit or proceeding, provided (1)
that such person was successful on the merits in the defense of such action,
suit or proceeding, or (2) that it shall be concluded that such person acted in
good faith and in a manner he or she reasonably believed to be in the best
interests of the corporation and, with respect to any criminal action or
proceeding, provided that such person had no reason to believe his or her
conduct was unlawful, or (3) a court shall have determined that in view of all
the circumstances such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine; except that,
in connection with an alleged claim based upon the purchase or sale of
securities, the corporation shall only indemnify such person after a court shall
have determined that in view of all the circumstances, he or she is fairly and
reasonably entitled to be indemnified, and then for such amount as the court
shall determine.
Subsection (c) of C.G.S. Section 33-320a provides that, where a director or
officer was or is a party or was threatened to be made a party to a proceeding
by or in the right of the corporation, the corporation shall indemnify him or
her against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the proceeding or any appeal therein,
in relation to matters as to which he or she is finally adjudged not to have
breached his or her duty to the corporation. The corporation shall also
indemnify a director or officer if a court determines that in view of all the
circumstances such person is fairly and reasonably entitled to be indemnified;
however, in such a situation, the individual shall only be indemnified for such
amount as the court determines to be appropriate. Furthermore, the statute
provides that the corporation shall not indemnify a director or officer for
amounts paid to the corporation, to a plaintiff or to counsel for a plaintiff in
settling or otherwise disposing of a threatened or pending action, with or
without court approval, or for expenses incurred in defending a threatened
action or a pending action which is settled or otherwise disposed of without
court approval.
C.G.S. Section 33-320a is an exclusive statute. A corporation cannot
indemnify a director or officer to an extent either greater or less than that
authorized by the statute; provided, however, that the statute specifically
authorizes a corporation to procure insurance providing greater indemnification
rights than those set out in C.G.S. Section 33-320a.
II-1
<PAGE> 22
Consistent with the statute, the Registrant has procured insurance from
several carriers for its directors and officers which supplements the
indemnification rights provided to those individuals by C.G.S. Section 33-320s.
Unlike the statute, these policies do not require and after-the-fact
determination of good faith in order for the insured director or officer to
receive the benefits provided under the policies nor do they require affirmative
judicial or corporate action as a prerequisite to the insurance company's duty
to defend (and pay for the defense of) the insured director or officer under the
policies. Furthermore, the insurance policies cover directors and officers for
any acts not specifically excluded for which the director or officer is not
eligible for indemnification under C.G.S. Section 33.320a to the extent such
coverage does not violate public policy.
As permitted under Connecticut law, the Registrant's Certificate of
Incorporation limits the personal liability of directors for monetary damages to
the Registrant and its shareholders for a breach of their fiduciary duty as
directors to the amount of their compensation for serving the Registrant as
directors during the year of the violation. These provisions do not eliminate
the liability of a director if such breach (i) involved a knowing and culpable
violation of law by the director, (ii) enabled the director or an associate (as
defined) to receive an improper personal gain, (iii) showed a lack of good faith
and a conscious disregard for the duty of the director to the Registrant under
circumstances in which the director was aware that his or her conduct or
omission created an unjustifiable risk of serious injury to the Registrant, (iv)
constituted a sustained and unexcused pattern of inattention that amounted to an
abdication of the director's duty to the Registrant or (v) created liability
under C.G.S. Section 33-321 (relating to the distribution of assets of the
Registrant, whether by dividend, purchase or redemption of shares or otherwise,
in violation of the Connecticut corporation law).
ITEM 16. EXHIBITS.
The following is a list of exhibits to the Registration Statement:
<TABLE>
<S> <C>
4.1 Form of Designations, Rights and Preferences of 6.5% Class C Voting Preferred
Stock (Aetna Inc. Form S-4 filed June 12, 1995, 1996, Exhibit 4.1)*
4.2 Aetna Inc. Amended and Restated Certificate of Incorporation (Aetna Inc. Form
S-4 filed June 12, 1995, 1996 Exhibit 3.1)*
4.3 Aetna Inc. Bylaws (Aetna Inc. Form S-4 filed June 12, 1995, 1996 Exhibit 3.2)*
4.4 Aetna Inc. Rights Plan (Aetna Inc. Form S-4 filed June 12, 1995, 1996 Exhibit
4.2)*
5.1 Opinion of Day, Berry & Howard as to legality of Common Shares and Preferred
Shares
15.1 Letter of KPMG Peat Marwick LLP re: Unaudited Interim Financial Information
23.1 Consent of KPMG Peat Marwick LLP re: Aetna Life and Casualty Company
23.2 Consent of KPMG Peat Marwick LLP re: Aetna Inc.
23.3 Consent of Ernst & Young LLP
23.3 Consent of Day, Berry & Howard (included in Item 5.1)
25.1 Powers of Attorney**
28.1 Information from reports furnished to state insurance regulatory authorities
(Aetna Life and Casualty Company 1995 Form 10-K, filed February 26, 1996
Exhibit 28)*
</TABLE>
- ---------------
* Exhibit is being incorporated by reference as indicated.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
II-2
<PAGE> 23
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that subparagraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from Registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
Registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED PERSONS, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HARTFORD, STATE OF CONNECTICUT, ON JULY 16, 1996.
AETNA INC.
By /s/ LUCILLE M. NICKERSON
------------------------------------
Name: Lucille M. Nickerson
Title: Vice President and Corporate
Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-
EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING OFFICERS AND DIRECTORS OF AETNA INC. IN THE CAPACITIES INDICATED ON
JULY 16, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------- ------------------------------
<C> <S> <C>
* Chairman, President and
- -------------------------------------------- Director (Principal Executive
RONALD E. COMPTON Officer)
* Vice Chairman for Strategy and
- -------------------------------------------- Finance and Director
RICHARD L. HUBER (Principal Financial and
Accounting Officer)
* Director
- --------------------------------------------
JAMES H. DICKERSON, JR.
* Director
- --------------------------------------------
DAVID F. SIMON
*By /s/ WILLIAM J. CASAZZA
- --------------------------------------------
(ATTORNEY-IN-FACT)
</TABLE>
II-4
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ------------------------------------------------------------------- ------------
<S> <C> <C>
4.1 Form of Designations, Rights and Preferences of 6.5% Class C Voting
Preferred Stock (Aetna Inc. Form S-4 filed June 12, 1995, 1996,
Exhibit 4.1)*......................................................
4.2 Aetna Inc. Amended and Restated Certificate of Incorporation (Aetna
Inc. Form S-4 filed June 12, 1995, 1996 Exhibit 3.1)*..............
4.3 Aetna Inc. Bylaws (Aetna Inc. Form S-4 filed June 12, 1995, 1996
Exhibit 3.2)*......................................................
4.4 Aetna Inc. Rights Plan (Aetna Inc. Form S-4 filed June 12, 1995,
1996 Exhibit 4.2)*.................................................
5.1 Opinion of Day, Berry & Howard as to legality of Common Shares and
Preferred Shares...................................................
15.1 Letter of KPMG Peat Marwick LLP re: Unaudited Interim Financial
Information........................................................
23.1 Consent of KPMG Peat Marwick LLP re: Aetna Life and Casualty
Company............................................................
23.2 Consent of KPMG Peat Marwick LLP re: Aetna Inc.....................
23.3 Consent of Ernst & Young LLP.......................................
23.3 Consent of Day, Berry & Howard (included in Item 5.1)..............
25.1 Powers of Attorney**...............................................
28.1 Information from reports furnished to state insurance regulatory
authorities (Aetna Life and Casualty Company 1995 Form 10-K, filed
February 26, 1996 Exhibit 28)*.....................................
</TABLE>
- ---------------
* Exhibit is being incorporated by reference as indicated.
** Previously filed.
<PAGE> 1
Exhibit 5.1
July 16, 1996
Aetna Inc.
151 Farmington Avenue
Hartford, CT 06156
Dear Ladies and Gentlemen:
We have acted as Connecticut counsel to Aetna Inc., a Connecticut
corporation (the "Company"), with respect to certain matters of Connecticut law
in connection with the Registration Statement on Form S-3, as amended, No.
333-07169 ("the Registration Statement"), filed by the Company with the
Securities and Exchange Commission. The Registration Statement relates to
3,473,607 shares (the "Common Shares") of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), 3,473,607 preferred stock purchase
rights (the "Rights") issued with the Common Shares pursuant to a Rights
Agreement to be entered into by the Company, and 1,146,397 shares (the
"Preferred Shares") of the Company's 6.25% Class C Voting Preferred Stock, par
value $.01 per share, to be issued in the transactions described in the
Registration Statement, and such presently indeterminate number of shares of
Common Stock into which the Preferred Shares may be converted.
The Rights will be issued pursuant to a Rights Agreement to be dated as
of the date of the consummation of the Mergers (the "Rights Agreement") between
the Company and First Chicago Trust Company of New York, as Rights Agent. The
Rights permit each holder of a Right to purchase one one-hundredth of a share of
Class B Voting Preferred Stock, Series A, $.01 par value per share, of the
Company. However, from and after the later to occur of the Distribution Date and
the first occurrence of a Flip-in Event, the Rights held by the person or group
whose actions resulted in the occurrence of the Flip-in Event will become void.
(Terms used in this letter with initial capital letters which are defined in the
Rights Agreement are used herein as so defined.)
In rendering this opinion, we have examined and relied upon originals
or copies, certified or otherwise identified to our satisfaction, of such
records, documents, certificates and other instruments, including, but not
limited to, the form of the Amended and Restated Certificate of Incorporation of
<PAGE> 2
Aetna, Inc.
July 16, 1996
Page 2
Amendment thereto (the "Preferred Stock Amendment") to establish the terms of
the Preferred Shares and the Company's Class B Voting Preferred Stock, Series A,
as both are intended to be filed with the Secretary of the State of Connecticut
prior to the consummation of the Mergers, the Bylaws of the Company, certain
minutes of the corporate proceedings of the Board of Directors and the
shareholders of the Company, the Registration Statement, the Merger Agreement as
defined in the Registration Statement, and the form of the Rights Agreement, and
have made such investigations and examinations of matters of law as in our
judgment are necessary or advisable to enable us to render the opinions
expressed below.
We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents submitted to us as
copies. We have also assumed that the forms of the Company's Amended and
Restated Certificate of Incorporation and the Preferred Stock Amendment which we
have examined will be filed with the Secretary of the State prior to the
consummation of the Mergers and that the form of the Rights Agreement we have
examined will be executed and delivered prior to the consummation of the
Mergers.
We have also noted that other large publicly held corporations
chartered in Connecticut have adopted rights agreements and issued rights
similar to the Rights Agreement and the Rights. In addition, we have noted that
the Rights would operate in a way similar to rights issued by numerous other
corporations incorporated in Connecticut and in other states.
For purposes of this opinion we have assumed that the Board of
Directors of the Company, after fully informing itself with respect to the
Rights Agreement and the Rights and after giving due consideration to all
relevant matters, determined that the execution and delivery of the Rights
Agreement and the issuance of the Rights thereunder would be in the best
interests of the Company and its shareholders, that such action by the Board of
Directors was not contrary to its fiduciary obligations and that the Rights
Agreement will be duly authorized, executed and delivered by the Rights Agent.
The Connecticut Stock Corporation Act (the "Act") provides a board of
directors with broad authority and empowers a Connecticut corporation to issue
or grant rights or options entitling the holders thereof to purchase from the
corporation authorized shares of any class or classes on such terms and at such
times as the board of directors may determine. Section 33-340(b) of the Act
provides that shares are not of the same class unless they are identical except
as to specified variations among different series in the class.
<PAGE> 3
Aetna, Inc.
July 16, 1996
Page 3
A number of courts construing similar provisions of the corporation
laws of states other than Connecticut have upheld the issuance of rights
substantially similar to the Rights. On the other hand, a number of courts
construing similar provisions of the corporation laws of other states have
invalidated rights similar to the Rights on the basis that the provisions
pursuant to which rights held by certain persons could become void violated the
requirements that shares of the same class and series be identical. Courts
sustaining the issuance of rights have distinguished between discrimination
among shares and discrimination among shareholders, and determined that the
relevant statutory authority does not prohibit the latter form of
discrimination. The Act requires in effect that all shares of the same class be
identical, with specified exceptions. However, the Act does not say whether this
requirement applies to provisions of rights that have been issued in respect of
shares of a particular class or to shareholders or holders of rights who take
specified actions resulting in those rights become void. There is no published
judicial decision interpreting Section 33-340 or other provisions of the Act in
the context of the issuance of rights similar to the Rights.
We also note that the Connecticut legislature has added provisions to
the Act which evidence concern for fair treatment of shareholders and other
constituencies in light of the prevalence of abusive takeover tactics. These
enactments indicate public policy support for the objectives which the Rights
are designed to further, which we think would be persuasive to a court faced
with a case questioning the validity of the Rights.
The opinion set forth below with respect to the Rights is limited to
the authorization of the Rights Agreement by the Board and the issue of Rights
pursuant to the Rights Agreement, and does not extend to any subsequent action
or inaction by the Board with respect to the Rights Agreement, including any
decision relating to redemption of the Rights or amendment of the Rights
Agreement, which would need to be evaluated in light of all relevant facts,
circumstances and legal precedents applicable at that time.
Based upon and subject to the foregoing, including the factual
background, legal analysis, assumptions and limitations referred to above, we
are of the opinion that:
1. the Common Shares and the Preferred Shares, when issued in
accordance with the terms of the Merger Agreement and as otherwise described in
the Registration Statement, will be validly issued, fully paid and
non-assessable;
2. although there is no Connecticut case law or express statutory
provision dispositive of the issue and the matter thus is not entirely free from
doubt, the Rights,
<PAGE> 4
Aetna, Inc.
July 16, 1996
Page 4
when issued in accordance with the terms of the Merger Agreement and the Rights
Agreement, will be validly issued; and
3. the shares of Common Stock when issued upon, and in accordance with
the terms for, conversion of the Preferred Shares will be validly issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, including all amendments thereto, and to the references
to us in the Registration Statement and Prospectus. In giving such consent,
however, we do not hereby admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ DAY, BERRY & HOWARD
DAY, BERRY & HOWARD
WHC
<PAGE> 1
EXHIBIT 15.1
LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
Aetna Life and Casualty Company
Hartford, Connecticut
Gentlemen:
With respect to Pre-effective Amendment No. 1 to the Registration Statement
on Form S-3 of Aetna Inc. for the registration of securities to be offered and
sold by Leonard Abramson, we acknowledge our awareness of the incorporation by
reference of our report dated April 25, 1996 related to our review of interim
financial information of Aetna Life and Casualty Company and Subsidiaries.
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 16, 1996
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aetna Life and Casualty Company:
We consent to incorporation by reference in Pre-effective Amendment No. 1
to the Registration Statement on Form S-3 of Aetna Inc. for the registration of
securities to be offered and sold by Leonard Abramson of our reports dated
February 6, 1996, relating to the consolidated balance sheets of 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 and related schedules for each of the years in the three-year
period ended December 31, 1995, which reports appear in or are incorporated by
reference in the December 31, 1995 annual report on Form 10-K of Aetna Life and
Casualty Company. Our reports refer to changes in 1993 in the Company's method
of accounting for certain investments in debt and equity securities,
postemployment benefits, workers' compensation life table indemnity reserves and
retrospectively rated reinsurance contracts.
We also consent to the reference to our firm under the heading "Experts" in
the Prospectus.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 16, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aetna Inc.:
We consent to incorporation by reference in Pre-effective Amendment No. 1
to the Registration Statement on Form S-3 of Aetna Inc. for the registration of
securities to be offered and sold by Leonard Abramson of our report dated April
23, 1996, relating to the consolidated balance sheet of Aetna Inc. as of April
22, 1996, which report appears in the Aetna Life and Casualty Company's Current
Report on Form 8-K dated June 28, 1996.
We also consent to the reference to our firm under the heading "Experts" in
the Prospectus.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 16, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Aetna Inc. for the
registration of 3,473,607 shares of Common Stock; 3,473,607 Preferred Stock
Purchase Rights; 1,146,397 shares of 6.25% Class C Voting Preferred Stock; and a
presently indeterminate number of shares of Common Stock issuable upon the
conversion of the 6.25% Class C Voting Preferred Stock; and to the incorporation
by reference therein of our reports dated February 2, 1996, with respect to the
consolidated financial statements of U.S. Healthcare, Inc. incorporated by
reference in its Annual Report (Form 10-K, as amended) for the year ended
December 31, 1995 and the related financial statement schedule included therein,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
July 15, 1996
